N-CSR 1 d418610dncsr.htm HARDING, LOEVNER FUNDS, INC. Harding, Loevner Funds, Inc.
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number            811-07739                         

                                  Harding, Loevner Funds, Inc.                                 

(Exact name of registrant as specified in charter)

400 Crossing Boulevard

Fourth Floor

                    Bridgewater, NJ 08807                    

(Address of principal executive offices) (Zip code)

Marcia Y. Lucas

The Northern Trust Company

333 South Wabash Avenue

Chicago, IL 60604

With a copy to:

Stephen H. Bier, Esq.

Dechert LLP

1095 Avenue of the Americas

                New York, NY 10036                

(Name and address of agent for service)

Registrant’s telephone number, including area code: (877) 435-8105

Date of fiscal year end: 10/31

Date of reporting period: 10/31/2021


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Item 1. Reports to Stockholders.

 

(a)

The following is a copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1)


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LOGO

 

     Global Equity Portfolio   Institutional Emerging Markets Portfolio   Global Equity Research Portfolio
     International Equity Portfolio   Emerging Markets Portfolio   International Equity Research Portfolio
     International Small Companies Portfolio       Frontier Emerging Markets Portfolio   Emerging Markets Research Portfolio
     Chinese Equity Portfolio    


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Harding Loevner Funds

Global equity investing is Harding Loevner’s exclusive focus. Through Harding Loevner Funds it offers distinct global strategies based on its quality-and-growth investment philosophy. It seeks to purchase shares of growing, financially strong, well-managed companies at favorable prices. Harding Loevner manages each of the Funds’ Portfolios according to a disciplined, research-based investment process. It identifies companies with sustainable competitive advantages and assesses the durability of their earnings growth by conducting in-depth fundamental research into global industries. In constructing portfolios, Harding Loevner diversifies carefully to limit risk.

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Table of Contents

Table of Contents

 

 

 

 

4

 

   Letter to Our Shareholders
  

 

6

 

   Global Equity Portfolio
  

 

10

 

   International Equity Portfolio
  

 

14

 

   International Small Companies Portfolio
  

 

18

 

   Emerging Markets Portfolio
  

 

22

 

   Chinese Equity Portfolio
  

 

26

 

   Frontier Emerging Markets Portfolio
  

 

30

 

   Global Equity Research Portfolio
  

 

34

 

   International Equity Research Portfolio
  

 

38

 

   Emerging Markets Research Portfolio

Contact

 

 

 

Harding, Loevner Funds, Inc.        
c/o Northern Trust        
Attn: Funds Center, Floor 38        
333 South Wabash Avenue        
Chicago, IL 60604        
Phone: (877) 435-8105        
Fax: (312) 267-3657         Must be preceded or accompanied by a current Prospectus.
www.hardingloevnerfunds.com         Quasar Distributors, LLC, Distributor

 

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Letter To Our Shareholders

    

October 31, 2021

    

         

 

LOGO

David Loevner, CFA, CIC

Chairman of the Funds

and Chief Executive Officer of the Adviser

Ferrill Roll, CFA

Chief Investment Officer of the Adviser

Simon Hallett, CFA

Vice Chairman of the Adviser

The fiscal year just ended began with two market-moving events that continue to reverberate: one, the approval of the first COVID-19 vaccine, delivered a positive shock. It launched an immediate resurgence in the stocks of more cyclical, more leveraged, and slower-growing companies whose beaten-down share prices had fallen far behind those of rapidly growing, high-quality companies since the onset of the pandemic, but whose prospects now brightened. We wrote in our letter to you a year ago of our skepticism concerning the much-ballyhooed demise of value investing but could not have anticipated how quickly the tables would turn. The renewed attention to cheaper stocks of companies with murky growth prospects has been a headwind for our investment strategies for much of these last twelve months, with returns of the respective “value” indexes significantly outpacing those of the corresponding “growth” indexes. We have delivered a mixed set of results relative to the strong returns of the broad market benchmarks in the year. But, given the headwinds for our growth-oriented investment style, turning in results close to those of the benchmarks, let alone modest outperformance, is a welcome relief.

The other event was a negative shock to markets: the eleventh-hour quashing by China’s regulators of the huge initial public offering of Ant Financial, the fintech affiliate of e-commerce giant Alibaba. Though not apparent at the time, the scuppering of Ant’s IPO turned out to be the first of a succession of jump scares in the shape of unexpected Chinese governmental interventions that progressively soured sentiment toward Chinese stocks. The regulatory assault on the for-profit tutoring industry vaporized the equity value of an entire industry in the summer. Anti-trust sanctions, data security requirements, and tighter restrictions on online gaming by minors came hard and fast in the following months, hitting the shares of many of China’s previous market darlings in e-commerce, ridesharing, online games, and social media.

The property sector has played an outsized role in China’s economy for many years, as a key driver of capital spending and employment growth and as a major store of wealth, accounting for 70% to 80% of household wealth according to Moody’s. (Even in the home-ownership-obsessed US, the comparable figure is only 50%.) The government’s efforts to de-emphasize fixed asset investment as the main source of economic growth, including shrinking its bloated property sector, may yet deliver the biggest horror scene of all. A tightening of financial regulations in December 2020 finally caught up with Chinese property developers. China Evergrande, the country’s second-largest developer by sales and a poster child for excessive leverage, was left scrambling to meet its obligations by the end of September (and ultimately defaulted), with the effects rippling out to building supply chains, the financial and industrial sectors, and retail spending.

Naturally, such perturbing of the economy and consequent roiling of the Chinese stock and credit markets brought out a mix of opinions in the investor community, from cries of Communist Party treachery to post hoc social justifications for the swingeing actions taken by government actors. As those who know our investment culture would expect, our colleagues offered their own wide range of opinion and analysis. Our embrace of dissent is displayed in a panel discussion among six colleagues in August, as well as in the Third Quarter 2021 investment reports for eight of our strategies.

We have resisted any temptation to follow those critics who have advised turning away from China as an investment destination. We made our view of the long-term opportunity clear by launching the Chinese Equity Portfolio, our first single-country fund, last year; the events of this year have, if anything, reinforced our view that some investors will want the means to regulate their exposure to the opportunities and risks in the largest emerging market independently.

The irony is that amid the disquieting regulatory changes we are finding more high-quality businesses in China that meet our investment criteria now than at any point in our firm’s history. Descriptions of such companies are sprinkled throughout the commentaries collected in this report. What the turmoil has done is renewed our analysts’ investigation of the forces—including regulatory forces—shaping the competitive industry structures for the Chinese companies we research and own. We’ve spent time trying to grasp the long-term goals behind the regulatory interventions and concluded that a number of these goals—reducing wealth disparities, promoting healthier lifestyles, curbing the lopsided economic power for the very largest and most disruptive companies in China that might challenge the political power centers and social norms—would not, on their face, be out of place in the US or other developed markets. In short, we view the parsing of issues and risks for Chinese companies as problems of analysis that are common to varying degrees to all companies. Many businesses

 

 

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worldwide are subject to regulatory fiat in one form or another and thus exposed to shifts in the regulatory winds; we believe that our fundamental process acquits itself well in discriminating between degrees of risk. Whether intentional or not, Chinese regulators have certainly succeeded in blowing the froth off the top of the Chinese stock market. We believe the more risk-aware environment in China should reward our sustained quest to identify companies with resilient businesses and strong growth prospects.

With widening access to vaccines and new drug treatments fostering a return to more normal economic activity in many countries, and the spread between the prices of the most- and

least-expensive quintiles of stocks diminishing in most markets, there are indications that indifference to price and risk may be losing its fizz globally as well. Assuming the style headwinds eventually settle down, this more grounded approach to assessing value should advantage our focus on the business fundamentals enabling companies’ long-term growth. Still, with the challenge of nascent inflation and the potential for central banks acting to counter it, not to mention the pandemic’s undiminished ability to deliver unpleasant surprises, we look ahead to the coming year with a cautious eye.

As always, we thank you for your trust in us.

 

 

  Sincerely,      
     LOGO    LOGO    LOGO
David R. Loevner, CFA, CIC        Ferrill D. Roll, CFA        Simon Hallett, CFA

Opinions expressed are those of Harding Loevner and are not intended to be forecasts of future events, a guarantee of future results, nor investment advice. Please read the separate disclosure page for important information, including the risks of investing in the Portfolios. Past performance is not a guarantee of future results.

 

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Global Equity Portfolio

    

Institutional Investors: HLMVX & HLGZX | Individual Investors: HLMGX

    

         

 

Portfolio Management Team

 

LOGO       

Peter Baughan, CFA

Co-Lead Portfolio Manager

 

Jingyi Li

Co-Lead Portfolio Manager

 

Scott Crawshaw

Portfolio Manager

 

Christopher Mack, CFA

Portfolio Manager

 

Richard Schmidt, CFA

Portfolio Manager

Performance Summary

For the Global Equity Portfolio, the Institutional Class gained 34.57%, the Institutional Class Z gained 34.66%, and the Advisor Class gained 34.28% (net of fees and expenses) in the twelve-month period ended October 31, 2021. The Portfolio’s benchmark, the MSCI All Country World Index, gained 37.28% (net of source taxes).

Fund Facts at October 31, 2021

 

 

 

Total Net Assets   $1,788.2M
Sales Charge   None
Number of Holdings   72
Turnover (5 Yr. Avg.)   48%
Dividend Policy   Annual
  Institutional Investors   Individual Investors  
    Inst. Class       Inst. Class Z     Advisor Class
     
Ticker   HLMVX   HLGZX   HLMGX
     
CUSIP   412295602   412295727   412295206
     
Inception Date   11/3/2009   8/1/2017   12/1/1996
     
Minimum Investment1   $100,000   $10,000,000   $5,000
     
Net Expense Ratio2   0.88%3   0.80%4   1.07%5
     
Gross Expense Ratio2   0.88%   0.83%   1.07%

1Lower minimums available through certain brokerage firms. 2As of the most recent Prospectus and based on expenses for the fiscal year end. 3Harding Loevner has contractually agreed to cap the expense ratio at 0.90% through February 28, 2022. The expense ratio (without cap) is applicable to investors. 4The Net Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2022. Harding Loevner’s contractual agreement caps the expense ratio at 0.80%. The Net Expense Ratio is applicable to investors. 5Harding Loevner has contractually agreed to cap the expense ratio at 1.20% through February 28, 2022. The expense ratio (without cap) is applicable to investors.

 

 

Market Review

Global stock markets increased in the twelve months ended October 31, with all sectors and regions finishing in positive territory.

The period began with a dramatic rise in global stock markets as vaccinations were approved and rolled out, unleashing demand that had been pent up throughout the pandemic. In the first three months of 2021, US retail sales climbed to the strongest level on record. The incoming Biden administration also passed a colossal US$1.9 trillion relief package, sending direct payments to millions of Americans and extending unemployment insurance. In China, electricity generation and rail cargo volume rose substantially year over year, though consumer spending remained subdued despite much of daily life having returned to normal. The European Union (EU) approved an 800 billion recovery fund aimed at infrastructure investment and support for businesses.

But while the economic recovery continued for most of the period several underlying pressures came to the fore during its final few months. Inflation expectations ballooned as tight labor markets, pandemic-mangled supply chains, and the resumption of more normal consumer and business activity led to shortages across industries. Additionally, commodity prices accelerated as economic

activity increased. In response to these inflationary pressures, central banks began to signal the impending end of unprecedented monetary support and, in some cases, acted by reducing bond buying or raising interest rates. Meanwhile, an aggressive series of interventions by Chinese regulators heightened the regulatory malaise. The crackdowns, which began in November 2020 with the tabling of the Ant Financial initial public offering (IPO), expanded with the remanding of the entire after-school tutoring sector to non-for-profit status, the adoption of anti-monopoly measures against the country’s internet giants, and new rules to limit the time spent by minors playing video games, among other provisions. Combined with the apparent impending debt default (later avoided) by the property giant Evergrande—itself the result of policy moves designed to force the heavily indebted sector to de-lever—the regulatory sweep savaged Chinese share prices, leaving them down 9% for the period.

On a sector basis, Energy was the strongest performer, surging in lockstep with rising oil prices. Financials also performed strongly, aided by a steepening yield curve and surprisingly low credit defaults. Information Technology (IT) also outperformed despite heightened scrutiny from regulators in Europe, China, and the US. Less-cyclical sectors—Consumer Staples, Health Care, and Utilities—all underperformed for the period.

 

 

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Performance (% Total Return)

 

    For periods ended September 30, 2021   For periods ended October 31, 2021
         
    1   3   5   10    Since Inception*   1   3   5   10   Since Inception*
     Year   Years   Years   Years     Nov-09     Aug-17     Dec-96    Year   Years   Years   Years    Nov-09     Aug-17     Dec-96 
               
Global Equity Portfolio – Inst Class     24.93     15.83     16.48     13.99    12.10             34.57     22.00     18.22     13.51    12.51        
               
Global Equity Portfolio – Inst Class Z   25.02   15.92     –        14.95       34.66   22.08     –        16.07    
               
Global Equity Portfolio - Advisor Class   24.67   15.60   16.23   13.72            8.42   34.28   21.76   17.97   13.24            8.62
               
MSCI All Country World Index   27.44   12.58   13.20   11.90    10.25   11.87     37.28   17.47   14.72   11.32    10.64   12.94  

Returns are annualized for periods greater than 1 year. *Inception of the Institutional Class, November 3, 2009. Inception of the Institutional Class Z, August 1, 2017. Inception of the Advisor Class, December 1, 1996. Index performance prior to January 1, 2001 cannot be shown since it relies on back-filled data.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Portfolio may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 435-8105 or visiting www.hardingloevnerfunds.com.

 

Viewed by geography, the eurozone outperformed as some of the countries hit hardest by the virus, such as Spain and Italy, began to recover. Canada performed strongly, helped by its large weighting in banks and Energy. Japan significantly underperformed as the country instituted a new, more stringent state of emergency in response to another virus wave in late summer and early fall. Emerging Markets (EMs) underperformed due to the weakness in China following its regulatory crackdowns.

Performance Attribution

The Portfolio underperformed due to both poor stock selection and negative sector and regional allocations. Weak stocks in Communication Services, Materials, and Real Estate detracted the most during the period. In Communication Services, Polish video game producer, CD Projekt, declined as the highly anticipated launch of Cyberpunk 2077 late in 2020 was marred by bugs and as a ransomware attack delayed the company’s efforts to patch the game. In Materials, German flavors and fragrance supplier Symrise lagged as the company experienced slower organic sales growth in its beverage and sweets segments and faced rising raw material prices. In Real Estate, Country Garden Services, a leading Chinese property manager, detracted as China’s regulatory crackdowns and turmoil in the sector left few companies unscathed. The Portfolio’s underweight in Energy and overweight in Health Care also weighed on relative returns.

Strong stocks in Industrials and Health Care contributed. In Industrials, shares of Protolabs, a US-based provider of 3D printing and other rapid prototyping and mold machining services, soared early in January after the company announced an acquisition of another on-demand digital manufacturing platform. In Health Care, shares of US-based life science products and services company Illumina gained as the company announced strong first-quarter results accompanied by upbeat forward guidance for 2021. The Portfolio’s underweights in Consumer Staples and Utilities were also helpful.

Geographically, weak stocks in EMs (Poland, Brazil, and China) and the eurozone (Germany) dragged on relative returns. In

Total Return Based on a $100,000 Investment

Institutional Class

 

LOGO

Total Return Based on a $10,000,000 Investment

Institutional Class Z

 

LOGO

Total Return Based on a $10,000 Investment

Advisor Class

 

LOGO

The charts above illustrate the hypothetical return of an investment made in the corresponding share classes. Investment return reflects waivers in effect. Absent such waivers, total return would be reduced. The performance provided in the table and charts above do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares.

 

 

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China, e-commerce giant Alibaba faced a slew of regulatory headwinds, starting with the blocking of its Ant Group IPO and ultimately encompassing guidelines on the utilization of user data and restricting the exclusivity arrangements it could demand from merchants on its platform. In the eurozone, German provider of remote connectivity software TeamViewer detracted as investors reacted negatively to the company’s results for the quarter ended in September. The Portfolio’s small cash weight also dragged on relative performance. Strong stocks in the US contributed, particularly SVB Financial Group and First Republic Bank. SVB, which focuses on the tech and biotech communities, benefited from rising expectations for increased deal activity, higher interest rates, and strong loan and deposit growth. The company also reported exceptional earnings growth during the period. First Republic, with its focus on high-net-worth individuals, posted strong earnings during the period, benefiting from its low levels of underperforming loans, the ongoing economic rebound, and the prospect of higher rates.

Perspective and Outlook

In our 2020 first quarter letter, at the early stage of the global pandemic, we marveled at the resiliency of the Chinese stock market, which we ascribed to the country’s success in containing the domestic spread of the coronavirus through draconian lockdowns, whose efficacy was made possible by its authoritarian political system. Eighteen months later, a similarly authoritarian intervention has left investors reeling. While government intervention is not uncommon in China, the scale and pace of this latest crop of reforms is unprecedented. Is Xi Jinping, China’s most powerful leader since Chairman Mao, revealing his allegiance to a collectivist ideology long thought to be discredited? Or is he boldly grasping the nettle of reform to redress economic imbalances and social ills before they become more entrenched and undermine the Chinese Communist Party’s (CCP’s) legitimacy?

Despite headlines conjuring memories of the CCP’s gruesome past, we accept that on balance the policy changes are intended to benefit the long-term health of Chinese society and economy, especially its middle class. The message the Party is sending to business leaders across China is clear: compete on a level playing field and pay a fair wage. For instance, much of the coverage of Ant Group’s canceled IPO focused on the ostensible desire of the CCP to clip the wings of its tech oligarchs. More persuasive in our view is that having observed and learned from the West’s subprime debacle a decade prior, Chinese financial regulators are not keen to allow loan origination to be divorced from the underlying credit risks of the loans—a source of moral hazard that would potentially destabilize a financial system still dominated by lumbering state-owned banks with weak credit cultures and poor management systems. Antitrust interventions targeting the largest e-commerce platforms echo the statements (if not yet the achievements) of many Western policymakers to improve competition by increasing the bargaining power of smaller businesses versus the giants.

Meanwhile, although the gutting of the private educational tutoring sector may seem disproportionate, it has with the stroke of a pen stigmatized one of the educational advantages of affluence while

inhibiting the exam preparation arms race that many middle-class families feel has spiraled out of control. Actions taken to strengthen the data privacy protections of social media companies, tighten local ownership of Macau casinos, and rein in speculation in the high-end liquor market would not be out of place in Europe or the US. Not to minimize the serious consequences of these abrupt and radical reforms for private businesses; as investors we are viewing these actions mainly as problems requiring further analysis rather than as indications that China has become too unpredictable to be investable.

More troubling for China’s long-term prospects (although less of an immediate danger to our portfolio) is the near-collapse of Evergrande. For years, the Chinese government has promised to wean the economy from fixed asset investments in favor of consumption, with little to show for the rhetoric. Regional governments have continued to rely on a red-hot property sector to provide their funding and achieve their mandated growth targets. Alarmed by the outsized role of property development in the economy, and the associated risks to the financial system of too much property speculation, the central government pushed through a series of policies last year to force the property sector to deleverage. Evergrande’s plight looks like the direct consequence

Portfolio Positioning (% Weight) at October 31, 2021

 

Geography    Portfolio              Benchmark1
Canada      0.0      2.9
Emerging Markets      15.0      11.5
Europe EMU      5.7      8.3
Europe ex-EMU      8.0      7.9
Frontier Markets2      0.0     
Japan      2.5      5.7
Middle East      0.0      0.2
Pacific ex-Japan      1.5      2.9
United States      65.4      60.6
Cash      1.9     
Sector    Portfolio      Benchmark1
Comm Services      12.7      8.9
Consumer Discretionary      8.0      12.8
Consumer Staples      1.0      6.6
Energy      2.1      3.6
Financials      13.7      14.5
Health Care      23.1      11.5
Industrials      11.1      9.6
Information Technology      24.1      22.7
Materials      0.0      4.6
Real Estate      1.8      2.6
Utilities      0.5      2.6
Cash      1.9     

1MSCI All Country World Index; 2Includes countries with less-developed markets outside the index.

 

 

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of those blunt top-down mandates as the heavily indebted company started to find itself cut off from its usual credit lines. While the government may be happy to make an example of the company, the spillover effects to the rest of the economy will be hard to contain and likely to require yet more interventions.

Equally disturbing to us are the rolling power outages afflicting as many as 20 provinces. Dueling top-down mandates with competing objectives seem to be playing a role here. Earlier in the year, the central government renewed its commitment to “dual control,” a mandate to curb carbon emissions by limiting both energy usage and the intensity (i.e., the amount of energy used per unit of GDP). That directive was issued, however, without anticipating this year’s spike in industrial output, whose emissions far exceed those from less energy-intensive sectors. Once they met their local growth targets, regional administrators rushed to institute power shutdowns to avoid breaching stipulated emission ceilings. To be sure, there are other factors contributing to the power crisis—not least, skyrocketing coal prices whose rise was exacerbated by China’s boycott of Australian coal imports in retaliation for that country’s insistence on re-opening the inquiry into the origins of the COVID-19 virus—but the policy disconnects didn’t help.

Nobel Prize-winning economist Friedrich Hayek would have predicted that the Chinese government would ultimately fail to manage its economy by mandate, because officials can’t foresee and prevent every unintended consequence of their own actions. If China’s growth slows further, more such shortcomings are likely to surface. The Chinese authorities exhibited competence at virus management, but even when their intentions are good, leaders inevitably miscalculate. When the views of authoritarians are subjected to little debate and their mandates are implemented without checks and balances, miscalculations can have outsized consequences. It’s unclear to us when a greater trust in the spontaneous order spawned by private actors and market forces, however well-mitigated by regulation and taxation, will take hold in China. Likely not as soon as we had hoped.

Portfolio Highlights

The prospects for our Chinese holdings have recently dominated our internal debates and garnered a disproportionate share of client questions. In China we face a somewhat daunting paradox. Despite the disquieting regulatory changes, we are finding more high-quality growing businesses that meet our investment criteria in China than at any point in our firm’s history.

During the period we sold Alibaba and bought Baidu. Alibaba has withstood several rounds of regulatory change in the past, but the expanded regulatory focus now puts almost every aspect of its business in the line of fire. Smaller, faster-growing competitors such as JD.com, Meituan, and Pinduoduo have been quick to adapt to the new standards while continuing to grow their market share at Alibaba’s expense. Rivalry, in both its core e-commerce business and in new business areas such as community-based purchasing, it seems will only be getting fiercer. In contrast, Baidu undertook and is now emerging from a much-needed branching out from

Ten Largest Holdings by Weight at October 31, 2021

 

Company   Sector   Market   %
First Republic Bank   Financials   US   3.9
Alphabet   Comm Services   US   3.6
SVB Financial Group   Financials   US   3.4
Amazon.com   Cons Discretionary   US   2.9
John Deere   Industrials   US   2.5
Microsoft   Info Technology   US   2.5
Adobe Systems   Info Technology   US   2.2
Illumina   Health Care   US   2.2
Nike   Cons Discretionary   US   2.2
Wuxi Biologics   Health Care   China   2.2

its original business of internet search, which has faced waves of regulatory threats and ferocious competition from other new online ad formats. Over the past several years it has invested heavily in the next long-term growth opportunities in AI, what it sees as its real core competency. Baidu’s AI initiatives—including in autonomous driving, which has led to a robo electric taxi service that has already taken to the streets in four Chinese cities—should be viewed favorably by regulators because they align with overarching central government objectives around technology leadership and reducing carbon emissions.

The growing importance of AI across industries, the increasing uptake of electric vehicles, and broad adoption of the internet of things (IoT) and fifth-generation (5G) mobile networks are all enabled by advanced semiconductors. In addition to Taiwan-based semiconductor manufacturer TSMC and South Korea’s Samsung Electronics, the Portfolio also holds positions in several companies that supply the pair of dominant foundries. These include Dutch semiconductor lithography company ASML, US-based computer-aided design software company Synopsys, and US-based specialized semiconductor equipment manufacturer Applied Materials. Furthermore, the proliferation of devices using chips, whether EVs, “things” in IoT, or embedded systems more generally, results in the generation of oceans of data that need to be processed and analyzed. NVIDIA, the US-based chip designer known for its graphic processing units, is at the forefront of harnessing the foundries’ most advanced fabrication technologies to provide the platforms needed to analyze the full potential of all that data.

During the period we sold cosmetic producer Estée Lauder, which we bought in March 2020. As the stock has since appreciated, the resulting valuation now leaves no room for error, such as a potential shift of Chinese consumers’ tastes away from US brands. We purchased US-based CoStar, the dominant player in information services for the commercial real estate industry and online classified ads for commercial property. Its online marketplace business owns valuable websites including Apartments.com and the business listing service LoopNet. Over 80% of its revenue is recurring, as its offerings are typically integrated with the workflow of its customers.

Please read the separate disclosures page for important information, including the risks of investing in the Portfolio.

 

 

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International Equity Portfolio

    

Institutional Investors: HLMIX & HLIZX | Individual Investors: HLMNX

    

         

 

Portfolio Management Team

 

LOGO       

Ferrill Roll, CFA

Co-Lead Portfolio Manager

 

Andrew West, CFA

Co-Lead Portfolio Manager

 

Bryan Lloyd, CFA

Portfolio Manager

 

Babatunde Ojo, CFA

Portfolio Manager

 

Patrick Todd, CFA

Portfolio Manager

Performance Summary

For the International Equity Portfolio, the Institutional Class gained 30.16%, the Institutional Class Z gained 30.25%, and the Investor Class gained 29.74% (net of fees and expenses) in the twelve-month period ended October 31, 2021. The Portfolio’s benchmark, the MSCI All Country World ex-US Index, gained 29.66% (net of source taxes).

Market Review

International stock markets increased in the twelve months ended October 31, with all sectors and regions finishing in positive territory.

The period began with a dramatic rise in global stock markets as vaccinations were approved and rolled out, unleashing demand that had been pent up throughout the pandemic. In the first three months of 2021, US retail sales climbed to the strongest level on record and restaurant bookings and the number of airline passengers improved. The incoming Biden administration also passed a colossal US$1.9 trillion relief package, sending direct payments to millions of Americans and extending unemployment insurance. In China, electricity generation and rail cargo volume rose substantially year over year, though consumer spending remained subdued despite much of daily life having returned to normal. The EU approved an 800 billion recovery fund aimed at infrastructure investment and support for businesses.

But while the economic recovery continued at a steady (albeit regionally uneven) pace for most of the period, several underlying pressures came to the fore in the period’s final few months. Inflation expectations, which had hit rock bottom in May 2020, ballooned

Fund Facts at October 31, 2021

 

 

 

Total Net Assets   $21,912.8 M
Sales Charge   None
Number of Holdings   60
Turnover (5 yr. avg.)   17%
Dividend Policy   Annual
  Institutional Investors   Individual Investors    
    Inst. Class       Inst. Class Z     Investor Class
     
Ticker   HLMIX   HLIZX   HLMNX
     
CUSIP   412295107   412295719   412295503
     
Inception Date   5/11/1994   7/17/2017   9/30/2005
     
Minimum Investment1   $100,000   $10,000,000   $5,000
     
Expense Ratio2   0.81%3   0.73%4   1.13%5

1Lower minimums available through certain brokerage firms; 2As of the most recent Prospectus and based on expenses for the fiscal year end. The Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2022. 3Harding Loevner’s contractual agreement caps the Net Expense Ratio at 1.00%. 4Harding Loevner’s contractual agreement caps the net expense ratio at 0.80%. 5Harding Loevner’s contractual agreement caps the net expense ratio at 1.25%. The Expense Ratio (without cap) is applicable to investors.

as tight labor markets, pandemic-mangled supply chains, and the resumption of more normal consumer and business activity led to shortages across industries. Additionally, commodity prices—particularly those linked with industrial activity such as copper and Brent crude—accelerated as economic activity increased. In response to these inflationary pressures, central banks turned more hawkish. Many began to signal the impending end of unprecedented monetary support and, in some cases, acted by reducing bond buying or raising interest rates. Meanwhile, an aggressive series of interventions by Chinese regulators heightened the regulatory malaise. The crackdowns, which began in November 2020 with the tabling of the IPO for Alibaba subsidiary Ant Group, expanded with the remanding of the entire after-school tutoring sector to not-for-profit status, the adoption of anti-monopoly measures against the country’s internet giants, and new rules to strengthen the data security of social media platforms and limit the time spent by minors playing video games, among other provisions. Combined with the apparent impending debt default (later avoided) by the property giant Evergrande—itself the result of policy moves designed to force the heavily indebted sector to de-lever—the regulatory sweep savaged Chinese share prices, leaving them down 9% for the period.

On a sector basis, Energy was the strongest performer, surging in lockstep with rising oil prices. Financials also performed strongly, aided by a steepening yield curve and surprisingly low credit defaults. Information Technology (IT) also outperformed despite heightened scrutiny from regulators in Europe, China, and the US. Less-cyclical sectors—Consumer Staples, Health Care, and Utilities—all underperformed for the period.

 

 

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Performance (% Total Return)

 

    For periods ended September 30, 2021   For periods ended October 31, 2021
         
    1   3   5   10    Since Inception*     1   3   5   10       Since Inception*  
     Year   Years   Years   Years     May-94     Jul-17     Sep-05    Year   Years   Years   Years    May-94     Jul-17     Sep-05 
               
Intl. Equity Portfolio – Inst. Class     20.50     9.93     10.78     9.98    6.83              30.16     15.42     12.26     9.35    6.96         
               
Intl. Equity Portfolio – Inst. Class Z   20.58   10.01     –        9.47        30.25   15.51     –        10.30     
               
Intl. Equity Portfolio – Investor Class   20.09   9.57   10.40   9.62            7.22    29.74   15.04   11.89   8.98            7.44
               
MSCI All Country World ex-US Index   23.91   8.03   8.94   7.48    –    6.96    5.25    29.66   12.00   9.77   6.66    –    7.41    5.37

Returns are annualized for periods greater than 1 year. *Inception of the Institutional Class, May 11, 1994. Inception of the Institutional Class Z, July 17, 2017. Inception of the Investor Class, September 30, 2005. Index performance prior to January 1, 2001 cannot be shown since it relies on back-filled data.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Portfolio may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 435-8105 or visiting www.hardingloevnerfunds.com.

 

Viewed by geography, the eurozone outperformed as some of the countries hit hardest by the virus, such as Spain and Italy, began to recover. Canada also performed strongly, helped by its large weighting in banks and Energy. Japan significantly underperformed as the country instituted a new, more stringent state of emergency in response to another virus wave in late summer and early fall. Emerging Markets (EMs) also underperformed due to the weakness in China following its regulatory crackdowns.

Performance Attribution

The Portfolio outperformed due to both strong stock selection and positive sector allocation. Strong stocks in Health Care, Consumer Staples, and Industrials contributed the most during the period. In Health Care, Swiss hearing aid manufacturer Sonova Holding benefitted; business rebounded strongly from 2020’s lockdown as management raised earnings guidance for 2021. Sonova also announced the acquisition of the consumer audio division of Sennheiser, intended as a line of defense against the recent entry into the hearing aid market by Bose and potentially other consumer audio brands. In Consumer Staples, French cosmetics manufacturer L’Oréal rose as the company has continued to demonstrate strong sales growth in both its e-commerce segment and in China. In Industrials, Swedish manufacturer of heat transfer and fluid separation machines Alfa Laval contributed; strong order growth through September suggests its business momentum is accelerating. The Portfolio’s underweight in Consumer Discretionary and overweight in IT were also helpful.

Poor stocks in Consumer Discretionary and Materials detracted. In Consumer Discretionary, shares of Chinese e-commerce company Alibaba fell as the company faced both increased industry rivalry and regulatory pressures throughout the year. In Materials, Australia-based BHP—which engages in the exploration, development, production, and processing of iron ore, metallurgical coal, and copper—detracted as plummeting iron ore prices in the third quarter weighed on the company’s stock.

Geographically, strong stocks in Emerging Markets (EMs) and the eurozone boosted relative returns. In the former, shares of Russian oil and gas company Lukoil were helped by surging energy prices.

 

Total Return Based On a $100,000 Investment

Institutional Class

 

LOGO

Total Return Based On a $10,000,000 Investment

Institutional Class Z

 

LOGO

Total Return Based On a $10,000 Investment

Investor Class

 

LOGO

The charts above illustrate the hypothetical return of an investment made in the corresponding share classes. Investment return reflects waivers in effect. Absent such waivers, total return would be reduced. The performance provided in the table and charts above do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares.

 

 

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In the eurozone, Spanish bank BBVA benefitted as the company announced the sale of its anemic US business for a healthy price. Additionally, the bank’s Mexican subsidiary proved resilient due to generous loss provisions front-loaded into first and second quarters of 2021, and to recovering transaction and lending activity. Weak stocks in Japan detracted, especially manufacturer of hygiene and household cleaning products Unicharm. Shares declined in response to rising input costs (like oil) and a market style shift to stocks of more-cyclical companies. The Portfolio’s underweight in Canada and small cash weight also dragged on relative performance.

Perspective and Outlook

In our 2020 first quarter letter, at the early stage of the global pandemic, we marveled at the resiliency of the Chinese stock market, which we ascribed to the country’s success in containing the domestic spread of the coronavirus through draconian lockdowns, whose efficacy was made possible by its authoritarian political system. Eighteen months later, a similarly authoritarian intervention has left investors reeling. While government intervention is not uncommon in China, the scale and pace of this latest crop of reforms is unprecedented. Is Xi Jinping, China’s most powerful leader since Chairman Mao, revealing his allegiance to a collectivist ideology long thought to be discredited? Or is he boldly grasping the nettle of reform to redress economic imbalances and social ills before they become more entrenched and undermine the Chinese Communist Party’s (CCP’s) legitimacy?

Despite headlines conjuring memories of the CCP’s gruesome past, we accept that on balance the policy changes are intended to benefit the long-term health of Chinese society and economy, especially its middle class. The message the Party is sending to business leaders across China is clear: compete on a level playing field and pay a fair wage. For instance, much of the coverage of Ant Group’s canceled IPO focused on the ostensible desire of the CCP to clip the wings of its tech oligarchs. More persuasive in our view is that having observed and learned from the West’s subprime debacle a decade prior, Chinese financial regulators are not keen to allow loan origination to be divorced from the underlying credit risks of the loans—a source of moral hazard that would potentially destabilize a financial system still dominated by lumbering state-owned banks with weak credit cultures and poor management systems. Antitrust interventions targeting the largest e-commerce platforms echo the statements (if not yet the achievements) of many Western policymakers to improve competition by increasing the bargaining power of smaller businesses versus the giants.

Meanwhile, although the gutting of the private educational tutoring sector may seem disproportionate, it has with the stroke of a pen stigmatized one of the educational advantages of affluence while inhibiting the exam preparation arms race that many middle-class families feel has spiraled out of control.

Actions taken to strengthen the data privacy protections of social media companies, tighten local ownership of Macau casinos, and rein in speculation in the high-end liquor market would not be out of place in Europe or the US. Not to minimize the serious consequences of these abrupt and radical reforms for private businesses; as investors we are viewing these actions mainly as problems requiring further analysis rather than as indications that China has become too unpredictable to be investable.

More troubling for China’s long-term prospects (although less of an immediate danger to our portfolio) is the near-collapse of Evergrande. For years, the Chinese government has promised to wean the economy from fixed asset investments in favor of consumption, with little to show for the rhetoric. Regional governments have continued to rely on a red-hot property sector to provide their funding and achieve their mandated growth targets. Alarmed by the outsized role of property development in the economy, and the associated risks to the financial system of too much property speculation, the central government pushed through a series of policies last year to force the property sector to deleverage. Evergrande’s plight looks like the direct consequence of those blunt top-down mandates as the heavily indebted company

Portfolio Positioning (% Weight) at October 30, 2021

 

Geography    Portfolio              Benchmark
Canada      2.1      7.4
Emerging Markets      25.2      29.2
Europe EMU      21.5      21.2
Europe ex-EMU      26.0      20.1
Frontier Markets2      0.0     
Japan      12.6      14.5
Middle East      1.2      0.4
Pacific ex-Japan      7.2      7.2
Other3      1.1     
Cash      3.1     
Sector    Portfolio      Benchmark1
Comm Services      5.3      6.2
Consumer Discretionary      2.4      12.9
Consumer Staples      12.5      8.5
Energy      3.4      5.0
Financials      15.8      19.5
Health Care      13.7      9.4
Industrials      16.2      12.1
Information Technology      18.5      13.1
Materials      8.2      7.9
Real Estate      0.0      2.4
Utilities      0.9      3.0
Cash      3.1     

1MSCI All Country World ex-US Index; 2Includes countries with less-developed markets outside the index. 3Includes companies classified in countries outside the index.

 

 

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started to find itself cut off from its usual credit lines. While the government may be happy to make an example of the company, the spillover effects to the rest of the economy will be hard to contain and likely to require yet more interventions.

Equally disturbing to us are the rolling power outages afflicting as many as 20 provinces. Dueling top-down mandates with competing objectives seem to be playing a role here. Earlier in the year, the central government renewed its commitment to “dual control,” a mandate to curb carbon emissions by limiting both energy usage and the intensity (i.e., the amount of energy used per unit of GDP). That directive was issued, however, without anticipating this year’s spike in industrial output, whose emissions far exceed those from less energy-intensive sectors. Once they met their local growth targets, regional administrators rushed to institute power shutdowns to avoid breaching stipulated emission ceilings. To be sure, there are other factors contributing to the power crisis—not least, skyrocketing coal prices whose rise was exacerbated by China’s boycott of Australian coal imports in retaliation for that country’s insistence on re-opening the inquiry into the origins of the COVID-19 virus—but the policy disconnects didn’t help.

Nobel Prize-winning economist Friedrich Hayek would have predicted that the Chinese government would ultimately fail to manage its economy by mandate, because officials can’t foresee and prevent every unintended consequence of their own actions. If China’s growth slows further, more such shortcomings are likely to surface. The Chinese authorities exhibited competence at virus management, but even when their intentions are good, leaders inevitably miscalculate. When the views of authoritarians are subjected to little debate and their mandates are implemented without checks and balances, miscalculations can have outsized consequences. It’s unclear to us when a greater trust in the spontaneous order spawned by private actors and market forces, however well-mitigated by regulation and taxation, will take hold in China. Likely not as soon as we had hoped.

Portfolio Highlights

Although our Chinese holdings comprise only 8% of the portfolio, their prospects have recently been dominating our internal discourse and sparking a disproportionate share of clients’ questions. In China, we face a daunting paradox. Despite disquieting regulatory changes, we are finding more high-quality growing businesses that meet our investment criteria than at any point in our firm’s history. Our persistent underweight over the past 12 years has reflected, in part, our effort to limit portfolio risk from that source. But as other investors appear to be waking up to Chinese country risk, our inclination is to invest in otherwise-solid Chinese companies on share price weakness. To mitigate the potential impact of stricter regulation or reprisals on any one company or sector, we maintain substantial stock-level and industry-level diversification within China. And even while hunting for new opportunities, we are scrutinizing our existing Chinese holdings to make sure they continue to meet our investment criteria.

Ten Largest Holdings by Weight at October 30, 2021

 

Company   Sector   Market   %
Atlas Copco   Industrials   Sweden   3.6
L’Oréal   Cons Staples   France   3.4
TSMC   Info Technology   Taiwan   3.4
Infineon Technologies   Info Technology   Germany   3.4
Tencent   Comm Services   China   3.2
Samsung Electronics   Info Technology   South Korea   3.1
Adyen   Info Technology   Netherlands   2.8
Roche   Health Care   Switzerland   2.8
AIA Group   Financials   Hong Kong   2.7
Schneider Electric   Industrials   France   2.7

One of the high-quality, growing companies we identified is Sanhua Intelligent Controls, a Chinese manufacturer of thermal management components. Its main business is making parts for home appliances, particularly HVAC systems, where it has scale and technological advantages in higher-value valves, pumps, and high-efficiency components. These advantages are also flowing into its smaller, but faster-growing, automotive parts business, which is growing explosively in heating and cooling systems for electric vehicles. We expect rising volumes to lead this division to achieve 30% annualized revenue growth for years to come.

To put the size of our exposure to China in perspective, our approximate 8% weight is exceeded by our 11% weight in Switzerland and similar to our weights in each of France, Germany, and Sweden. Our notional exposure to these countries is a byproduct of the multinational companies domiciled in these countries that we’ve identified for investment. No doubt these companies chose to remain in their historical birthplaces in large part because of the stable and hospitable business climate provided by their home countries. We are very rarely asked about the political and regulatory risks that companies based in these countries face—likely because these risks stem primarily from their operations outside their borders.

Our three Swedish industrial companies—Atlas Copco, Alfa Laval, Epiroc—each derive less than 5% of their global sales in Sweden; they have used their stable domestic environment as a base from which to expand their technological and competitive advantages abroad. Our other Swedish holding, SE Banken, generates most of its revenues domestically, but mostly by serving the banking needs of multinational corporations headquartered in Sweden. Our six Swiss companies also generate an inordinate amount of their sales outside the country. Contract drug manufacturer Lonza is the most domestically focused, generating 10% of its revenues in Switzerland, while the other five each generate less than 5% at home.

Please read the separate disclosures page for important information, including the risks of investing in the Portfolio.

 

 

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International Small Companies Portfolio

    

Institutional Investors: HLMRX | Individual Investors: HLMSX

    

         

 

Portfolio Management Team

 

LOGO

Jafar Rizvi, CFA

Co-Lead Portfolio Manager

Anix Vyas, CFA

Co-Lead Portfolio Manager

 

Performance Summary

For the International Small Companies Equity Portfolio, the Institutional Class gained 33.16% and the Investor Class gained 32.84% (net of fees and expenses) in the twelve-month period ended October 31, 2021. The Portfolio’s benchmark, the MSCI ACWI ex-US Small Cap Index, gained 38.83% (net of source taxes).

Fund Facts at October 31, 2021

 

 

 

Total Net Assets   $599.7M
Sales Charge   None
Number of Holdings   81
Turnover (5 Yr. Avg.)   30%
Dividend Policy   Annual
  Institutional Investors   Individual Investors  
    Institutional Class   Investor Class
   
Ticker   HLMRX   HLMSX
   
CUSIP   412295875   412295883
   
Inception Date   6/30/2011   3/26/2007
   
Minimum Investment1   $100,000   $5,000
   
Net Expense Ratio2   1.15%3   1.40%4
   
Gross Expense Ratio2   1.18%   1.50%

1Lower minimums available through certain brokerage firms; 2As of the most recent Prospectus and based on the fiscal year ended October 31, 2021. The Net Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2022. 3Harding Loevner’s contractual agreement caps the net expense ratio at 1.15%. 4Harding Loevner’s contractual agreement caps the net expense ratio at 1.40%. The Net Expense Ratio is applicable to investors.

 

 

Market Review

International small cap shares rose strongly in the 12 months ended October 31, buoyed by easy monetary policy, worldwide fiscal stimulus, and steady vaccine rollouts worldwide that facilitated a return to relative normalcy. Investors were also optimistic about the ability of corporate capital expenditures to underpin a global economic rebound. Much of this newf investment has been expected to come from spending on information technology (IT); The Economist projected that IT capital spending for 2021 would eclipse 2019’s figures by 42 percent.

The pace of economic recovery slowed toward the end of the fund year, however, due to the spread of the COVID-19 Delta variant and supply chain bottlenecks including a semiconductor shortage that hobbled automobile and consumer electronics manufacturers. Labor shortages contributed to a surge in inflation and brought forward the inevitable prospect of higher interest rates. In response, central banks began signaling the impending end of unprecedented monetary support and, in some cases, acted by reducing bond buying (European Central Bank) or directly raising interest rates (Norway, Brazil, and Russia). The US Federal Reserve also adopted a more hawkish tone following its September 2021 meeting, suggesting it could soon begin to scale back its monthly bond purchases.

 

 

Every region posted large positive returns. Europe, both inside and outside the monetary union, was a key outperformer, with some of the markets most impacted by the pandemic last year surging after vaccines became available. Emerging Markets (EMs) was also among the strongest regions, despite the underperformance of Chinese stocks in the wake of sweeping new regulations and investor concerns over its heavily leveraged real estate sector. Japan, which struggled to contain COVID cases in the lead-up to the postponed Summer Olympics, was the weakest-performing region. Its market has begun bouncing back in recent months, however, in reaction to an increased focus on vaccination and expectations that newly appointed prime minister Fumio Kishida would continue predecessor Shinzō Abe’s fiscal stimulus and structural reforms.

Every sector posted positive returns during the period, with Energy, Industrials, and Financials leading. Financials companies, particularly banks based in emerging markets, enjoyed strong economic recoveries in their home markets, bolstered by monetary policy support. Energy company stocks surged due to a spike in oil prices, with Brent crude trading just over US$80 at the end of October, the highest price since 2018. Consumer Staples stocks lagged as public uncertainty over the spread of the Delta variant hampered the retail sector in the second half of the fund year.

 

 

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Performance (% Total Return)

 

    For periods ended September 30, 2021   For periods ended October 31, 2021
         
    1   3   5   10    Since Inception*     1   3   5   10    Since Inception  
     Year   Years   Years   Years    Jun-11   Mar-07   Year   Years   Years   Years    Jun-11   Mar-07
           
Intl Small Companies Portfolio – Inst Class     26.92     12.11     12.61     11.52    8.68          33.16     17.40     13.79     10.94    8.93     
           
Intl Small Companies Portfolio – Investor Class   26.60   11.84   12.34   11.24        7.60    32.84   17.10   13.52   10.67        7.78 
           
MSCI All Country World ex-US Small Cap Index   33.07   10.33   10.28   9.44    6.84    –    38.83   14.75   11.21   8.72    6.94    – 

Returns are annualized for periods greater than 1 year. *Inception of the Institutional Class, June 30, 2011. Inception of the Investor Class, March 26, 2007. Index performance prior to June 1, 2007 cannot be shown since it relies on back-filled data.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Portfolio may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 435-8105 or visiting www.hardingloevnerfunds.com.

The charts below illustrate the hypothetical return of an investment made in the corresponding share classes. Investment return reflects waivers in effect. Absent such waivers, total return would be reduced. The performance provided in the table and charts above do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares.

 

Total Return Based On a $100,000 Investment

Institutional Class

 

LOGO

Total Return Based On a $10,000 Investment

Investor Class

 

LOGO

 

 

 

Performance Attribution

The Portfolio trailed the index in this 12-month period primarily due to weak holdings in Consumer Staples and Communication Services. In the former, Japanese manufacturer of seasoning products Ariake suffered from deteriorating restaurant sales caused by extended lockdowns in its home country, with sales of its home meal kits in supermarkets and convenience stores failing to offset this decline. In Communication Services, shares of Swedish videogame maker Paradox Interactive fell as it continued to work through the repercussions of delayed and cancelled rollouts earlier this year. Recent controversies in the video game industry also weighed on the company, as reports describing toxic workplace cultures at high-profile rivals Activision Blizzard and Ubisoft paralleled a scandal surrounding Paradox’s CEO, Fredrik Wester, who apologized for an incident of self-described “inappropriate behavior” from 2018.

We had strong relative returns in Materials due to Vietnamese steelmaker Hoa Phat Group, which benefited from a combination of rising global steel prices, strong demand inside Vietnam, and a new, state-of-the-art production complex that is helping the company grow export sales to China.

 

By region, holdings in the Economic and Monetary Union (EMU) and EMs detracted the most. In Germany, software company TeamViewer saw the COVID-19-related tailwind for its remote work products abate. In France, Rubis, a storage terminal and petroleum products distributor, detracted as sales fell in several regions where tourism rates remain low due to the pandemic, especially the Caribbean. In EMs, Malaysian oil & gas services provider Dialog Group Berhad fell as it was unable to continue the development of its Pengerang refinery due to COVID restrictions. The stock of Polish videogame developer CD Projekt was weighed down by its botched December rollout of the much-anticipated Cyberpunk 2077, which included the game being pulled from the PlayStation Store due to technical issues.

In ex-EMU countries, where our stock selection fared slightly better, Swiss distributor of fasteners Bossard reported strong sales growth, driven in part by newly won customer projects in the railway, construction, and medical technology industries. Shares of UK-based aerospace technology producer Senior rose sharply in late May after a private equity firm made an unsuccessful offer to purchase the company.

 

 

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Perspective and Outlook

Semiconductor chip shortages have resulted in automotive production cuts around the globe. Toyota’s recently announced 40% cut in production follows similar cuts by established carmakers Volkswagen, General Motors, and Nissan, as well as newer entrants such as China’s Nio. As dramatic as its effects have been, the chip shortage should be transitory: we expect that the worst of the backlogs should be cleared by mid-2022. We are more focused on fundamental changes like the adoption of electric vehicles (EVs) and autonomous driving that could impact the structure of the industry.

The legacy auto industry has benefited from massive economies of scale, including steep capital requirements, learning curves, and design costs, which historically have represented significant barriers to entry for new auto component suppliers. But the shift to EVs, while creating opportunity for existing suppliers, also opens the door to new entrants specializing in components previously not used in cars. The pace of adoption of autonomous driving is hard to predict given its earlier stage of development, but we estimate that increasingly stringent emissions regulations could drive EV unit sales to 50% of total industry sales within 15 years. Suppliers stand to benefit from a combination of faster overall segment growth and increased fragmentation in their customer base as aspirants seek to enter the auto manufacturing business.

As small cap investors looking for durable growth, we focus on identifying leading makers of components that are critical but nonetheless represent only a small portion of an end-product’s total bill of materials, which better insulates them from pricing pressure. We insist on management foresight and financial strength since they underpin a company’s ability to navigate significant market changes.

Fuchs Petrolub is an example of a longtime auto supplier whose management is investing to extend its competitive advantage. The company, headquartered in Germany, makes lubricants for automotive and other industrial applications and is the largest wholly dedicated lubricant supplier in the world. Fuchs’s legacy automotive products, which represent about 30% of its total sales, were developed for use in internal combustion engines (ICEs). However, the company is expanding its focus to EVs, having opened a new plant in Germany to produce polyurea grease, a specialty product with the high-temperature, noise-reducing properties needed in EV lubricants.

Historically, the company’s competitive advantages have been its dense distribution networks around its plants and its close relationships with customers in niche product areas too small to attract big rivals like the major oil companies. Fuchs has invested to secure this advantage in recent years. Its new German plant is the final piece of a US$350 million investment program launched in 2016 to expand and update its manufacturing and R&D facilities worldwide, including in the US, China, Australia, and Sweden.

Not everything changes in the transition to EVs: all cars need things like tires and lights. Japan-based Stanley Electric has been

manufacturing headlamps and tail lamps for 100 years. Originally part of the vertically integrated auto supply chain for Honda (which still owns 5.3% of Stanley and buys 40% of its output), Stanley has diversified its customer base over the years. It now ranks second (with a 26% share) in the Japanese car lamp market.

A rule of thumb among automotive suppliers is that prices for their products decline 5% a year on average. But car lamps are one of the few components that have risen in average price as light sources have evolved for greater energy efficiency and, more recently, for features such as adaptive driving beams (ADB) that rotate or shine brighter in the direction the car signals it is about to turn. Stanley’s key competitive advantages—its relationships with auto manufacturers and its technical know-how—position it as a partner to its customers as they seek to develop the next generation of head and tail lamps. For example, in order to optimize EVs’ battery life, there will be great pressure for the lights to get smaller and even more efficient. ADBs, already valued by safety-conscious end consumers, should become an important frontier in

Portfolio Positioning (% Weight) at October 31, 2021

 

Geography    Portfolio              Benchmark1
Canada      2.1      6.8
Emerging Markets      18.8      24.2
Europe EMU      20.7      14.5
Europe ex-EMU      31.3      23.9
Frontier Markets2      7.5     
Japan      13.7      18.9
Middle East      1.8      2.1
Pacific ex-Japan      0.4      9.6
Other3      1.0     
Cash      2.7     
Sector    Portfolio      Benchmark1
Communication Services      8.8      4.2
Consumer Discretionary      4.3      11.8
Consumer Staples      8.9      5.5
Energy      1.4      2.8
Financials      6.6      10.5
Health Care      12.7      7.3
Industrials      18.9      21.2
Information Technology      26.1      12.2
Materials      7.2      10.6
Real Estate      0.9      10.5
Utilities      1.5      3.4
Cash      2.7     

1MSCI All Country World ex-US Small Cap Index; 2Includes countries with less-developed markets outside the index; 3Includes companies classified in countries outside the index.

 

 

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the development of self-driving cars, since lights occupy the four corners of a vehicle, meaning that future generations of lights could also incorporate sensors.

Where headlamps help the driver see better, sensors help the car see better. Sensata Technologies is a leader in the US$10 billion automotive market for high-value sensors, where it has about 20% market share. In some niches within the sensor market, Sensata has extremely high market share, such as its 70% share of the market for tire pressure sensors, which are still needed in EVs. In the short term, Sensata expects the number of its existing sensors per vehicle to increase as car makers respond to stricter fuel standards and the rising demand for safety and comfort-related control systems including electronic stability control and driver assistance.

The US-based1 company also plans to meet the need for new products and already has more content per vehicle on EVs than it does on Internal Combustion Engine (ICE) cars. For example, the transition from traditional hydraulic brakes to EVs’ electromechanical braking and regenerative braking systems requires more, and different types of, pressure and force sensing. The company recently acquired adjacent technologies with which it can expand its product line. In 2018, it acquired Gigavac, a leading manufacturer of high-voltage contactors, a mechanical device used in EV powertrains. The acquisition gives Sensata visibility at the early stage of EV development into new sensor types and enabling technologies—and an additional route to engage in that process.

LEM Holdings, though not widely viewed as an “automotive supplier,” is taking advantage of its core competency to grab a share of what it, too, sees as a major long-term growth opportunity. The Swiss company’s main product, transducers, are used for measuring and regulating electrical parameters such as current and voltage. They have a wide range of applications, including renewable energy systems, but the automotive industry represents about 30% of LEM’s sales, of which transducers for electric and hybrid powertrains represent the vast majority of revenues. EVs are full of transducers: motor control transducers calibrate the voltage and current sent to the motor, while other transducers help manage the high voltages of the battery. In 2020, LEM introduced transducers for EV charging stations that support advanced integrated functions, including more accurate measurement—for billing purposes—of the amount of electricity used. Charging infrastructure represents a large, addressable market for LEM, as most countries are just beginning to address the coming need.

Portfolio Highlights

Beside the global chip shortage and its impact on supply chains, another focus for global investors has been the changing economic environment in China. Following several years of rapid economic growth and expansion of its property and internet sectors, which

 

 

1Though headquartered in the US, Sensata’s extensive operations and share of its revenue generated in Brazil, Europe, and Asia qualify it for classification in our rubric as “international.”

Ten Largest Holdings by Weight at October 31, 2021

 

Company   Sector   Market   %
Reply   Info Technology   Italy   3.9
Hoa Phat Group   Materials   Vietnam   3.8
STRATEC   Health Care   Germany   2.7
Dechra   Health Care   UK   2.6
TOMRA   Industrials   Norway   2.4
Alten   Info Technology   France   2.4
Globant   Info Technology   Argentina   2.2
Bechtle   Info Technology   Germany   2.2
Abcam   Health Care   UK   2.2
Senior   Industrials   UK   2.2

have led China’s stock market to be among the world’s best performing, the spate of national policy changes since the end of 2020 has rattled Chinese stocks. But the sell-off has mostly affected large cap stocks, especially those directly in the regulatory crosshairs. There has been less of an impact on small cap stocks, where China represents a smaller portion globally. In our own small cap Portfolio, the exposure to China is lower still.

In recent years, rich valuations of high-quality Chinese growth companies, both in an absolute and relative sense, have been the biggest impediment to our adding to our exposure. Sharply lower valuations in the wake of the recent regulatory actions have caused us to reassess the trade-offs between risk and prospective returns for existing and new holdings, potentially changing that picture. In most cases, the reforms have little direct adverse impact on small companies and may even improve their competitive positioning vis-a-vis larger rivals. But that is not to say small companies aren’t feeling adverse indirect effects. Haitian International is the leading plastic injection molding equipment company in China. The company has been gaining market share from higher-end German and Japanese firms through steady improvement of its machines, whose increasing energy efficiency also aligns nicely with China’s carbon emission reduction goals. Yet, knock-on effects of recent policy changes like the rolling power curbs and the Evergrande collapse have dented consumer and manufacturer confidence. After a sharp uptick in new orders over the past year, Haitan’s business may cool down and could be in for a few bumpy quarters, a concern that has weighed on its stock price.

Our aim is to construct a well-diversified portfolio that can withstand the full spectrum of unknowns. We do this by investing in businesses, like Haitian, that have durable competitive advantages in industries we understand, the financial strength to weather unforeseen challenges, and management teams that operate with incentives that are aligned with sustained long-term returns. With their valuations looking more attractive, we expect to add more such businesses in China. In the meantime, we adjusted our internal guidelines by raising the ceiling for permitted exposure to China, from 10% to 20%.

Please read the separate disclosures page for important information, including the risks of investing in the Portfolio.

 

 

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Emerging Markets Portfolio

    

Institutional Investors: HLMEX & HLEZX | Individual Investors: HLEMX

    

         

 

Portfolio Management Team

 

LOGO       

Scott Crawshaw

Co-Lead Portfolio Manager

 

Craig Shaw, CFA

Co-Lead Portfolio Manager

 

Pradipta Chakrabortty

Portfolio Manager

 

Richard Schmidt, CFA

Portfolio Manager

 

The Institutional Emerging Markets Portfolio (Institutional Class and Institutional Class Z) and the Emerging Markets Portfolio (Advisor Class)—collectively, the “Portfolios”—are both managed in strict accordance with Harding Loevner’s Emerging Markets Equity strategy model portfolio. Therefore, the Portfolios have highly similar holdings and characteristics. We have provided a single commentary to cover both Portfolios. The specific performance and characteristics of each are presented separately in the tables that follow.

Fund Facts at October 31, 2021

 

 

 

Sales Charge   None
Number of Holdings   78
Dividend Policy   Annual
    Institutional Investors   Individual Investors
   
Total Net Assets   $6,493.9M   $3,813.3M
   
Turnover (5 Yr. Avg.)   19%   19%
     
    Inst. Class       Inst. Class Z     Advisor
     
Ticker   HLMEX   HLEZX   HLEMX
     
CUSIP   412295701   412295693   412295305
     
Inception Date   10/17/2005   3/5/2014   11/9/1998
     
Minimum Investment1   $500,000   $10,000,000   $5,000
     
Net Expense Ratio2   1.10%3   1.00%4   1.20%5
     
Gross Expense Ratio2   1.12%   1.04%   1.20%

1Lower minimums available through certain brokerage firms; 2As of the most recent Prospectus and based on expenses for the fiscal year end; The Net Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2023; ³Harding Loevner’s contractual agreement caps the net expense ratio at 1.10%; 4Harding Loevner’s contractual agreement caps the net expense ratio at 1.00%; 5Harding Loevner’s contractual agreement caps the net expense ratio at 1.30%. The Net Expense Ratio is applicable to investors.

 

 

Performance Summary

For the Institutional Emerging Markets Portfolio, the Institutional Class rose 21.03% and Class Z rose 21.11% (net of fees and expenses) in the twelve-month period ended October 31, 2021. For the Emerging Markets Portfolio, the Advisor Class rose 21.04% (net of fees and expenses). The Portfolios’ benchmark, the MSCI Emerging Markets Index, rose 16.96% (net of source taxes).

Market Review

Stocks in Emerging Markets (EMs) surged upward in the first four months of the fiscal year, sustaining their remarkable recovery from the sharp decline in early 2020 caused by the initial shock of the COVID-19 outbreak. The discovery and broadening global distribution of effective vaccines helped accelerate economic activity, which boosted commodity prices and stoked enthusiasm for EM assets.

Investor enthusiasm for EMs appeared to wane after February 2021 due to the new threat posed by the COVID-19 Delta variant and then due to increasing concern about regulatory changes in China. These regulatory actions have included pushing to increase competition among internet businesses, new proposals to rein in private tutoring, curtailing the country’s cryptocurrency industry (including measures to prohibit banks from transacting in them), and restricting video game playing by young people.

 

Inflation concerns also weighed on EMs. Sporadic flare-ups of the COVID-19 Delta variant impeded a full recovery in global supply chains, causing acute shortages in shipping capacity and raw materials. Long-dated bond yields increased across EM countries, particularly those where inflation inflamed by pandemic-related costs collided with fiscal weakness. Central banks in several major countries, including Brazil, Russia, Mexico, and the Czech Republic, raised interest rates.

Europe (especially Russia) and the Middle East were the strongest regions in the index, buoyed by the increasing demand for oil and other refined products. Brent crude prices rose nearly 120% during the past twelve months to just above US$80 per barrel, with support from continued supply discipline by OPEC+ and expectations of increasing oil demand. The CE3 markets (Poland, Hungary, and the Czech Republic) also soared amid evidence of a European economic recovery.

Asia lagged the index, largely due to China’s significant decline in a year when many markets enjoyed double-digit returns. New regulations were a threat to the growth prospects of multiple industries and companies, including the country’s giant internet platforms. Revelations late in the fiscal year of financial stress at Evergrande, one of China’s largest property companies, also hurt sentiment. By contrast, the other large Asian markets—South Korea, Taiwan, and India—all rallied.

 

 

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Performance (% Total Return)

 

    For periods ended September 30, 2021   For periods ended October 31, 2021
         
    1   3   5   10    Since Inception*   1   3   5   10    Since Inception*
     Year   Years   Years   Years     Oct-05     Mar-14     Nov-98    Year   Years   Years   Years     Oct-05     Mar-14     Nov-98 
               
Inst. Emerging Markets Portfolio – Inst. Class     21.01     8.28     8.18     7.44    7.16              21.03     12.63     8.63     6.32    7.21         
               
Inst. Emerging Markets Portfolio – Class Z   21.09   8.43   8.36   –        6.01        21.11   12.77   8.81   –        6.12     
               
Emerging Markets Portfolio – Advisor Class   20.99   8.15   8.05   7.32            10.74    21.04   12.54   8.52   6.20            10.76 
               
MSCI Emerging Markets Index   18.20   8.58   9.23   6.09    6.98    6.10    –    16.96   12.30   9.39   4.88    7.00    6.17    – 

Returns are annualized for periods greater than 1 year. *Inception of Institutional Class, October 17, 2005. Inception of Class Z, March 5, 2014. Inception of the Advisor Class, November 9, 1998. Index performance prior to January 1, 2001 cannot be shown since it relies on back-filled data.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Portfolio may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 435-8105 or visiting www.hardingloevnerfunds.com.

 

The cyclical Energy and Materials sectors were the leading performers thanks to higher prices for oil, industrial metals, agricultural products, and other commodities. In addition, Information Technology (IT) outperformed, helped by semiconductor and other hardware manufacturers.

Consumer Discretionary was the weakest sector, reflecting sharp declines by ecommerce stocks in the large markets of China and Brazil. Also, Chinese regulators’ demands in July 2021 that tutoring companies operate as non-profits caused a collapse in shares of the country’s education companies. The Real Estate sector, dominated by Chinese developers, was weighed down by the prospect of China’s tightening liquidity conditions and Evergrande’s travails.

Performance Attribution

The Portfolio’s outperformance in the year was primarily due to strong stocks in IT, Energy, and Consumer Staples. Allocation effects were also helpful, particularly our overweight in IT and underweight in the lagging Consumer Discretionary sector.

In IT, technology services company EPAM benefitted from elevated demand for digital transformation projects while Silergy, a manufacturer of power management circuits for a variety of consumer electronics and specialized industrial applications, also reported strong results. Moreover, the company has been capitalizing on the global chip shortage to gain a bigger foothold in the automotive supply chain. Shares of two Russian Energy holdings, gas producer Novatek and integrated oil-and-gas giant Lukoil, surged alongside energy prices. And in Consumer Staples, Coca-Cola HBC benefitted from continued strength in Nigeria and Russia. The company’s energy drinks category posted impressive year-over-year revenue growth of nearly 70% in the first half of 2021.

The Portfolio lagged within Industrials, where Brazil’s leading rental-car agency Localiza faced higher costs and struggled to meet demand due to supply-chain issues that made it difficult to obtain new cars. The Portfolio’s lack of holdings in the strong Materials sector also hurt.

Total Return Based On a $500,000 Investment

Institutional Emerging Markets Portfolio – Institutional Class

 

LOGO

Total Return Based On a $10,000,000 Investment

Institutional Emerging Markets Portfolio – Inst. Class Z

 

LOGO

Total Return Based On a $10,000 Investment

Emerging Markets Portfolio – Advisor Class

 

LOGO

The charts above illustrate the hypothetical return of an investment made in the corresponding share classes. Investment return reflects waivers in effect. Absent such waivers, total return would be reduced. The performance provided in the table and charts above do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares.

 

 

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By region, the Portfolio’s allocations were the main sources of outperformance. Our underweight in China and overweight in Russia were especially helpful. The Portfolio’s lack of investments in the Middle East was a detractor.

Perspective and Outlook

China’s economic advancement over the past 20 years has been an outstanding humanitarian success. GDP growth averaging a remarkable 9% per annum has elevated nearly 800 million Chinese out of poverty. But sustaining this progress will require the country to overcome formidable challenges, including an inevitable decline in returns on investment, a rapidly aging population, and soured international relations. Another hurdle is the massive public and private debt accumulated for infrastructure and real estate development since the 2008 global financial crisis.

China’s leaders are acutely aware of these obstacles to growth and are planning meticulously to overcome them. A central component of their strategy is to use regulation to foster more competition in key sectors, thereby guiding markets to send capital to those firms that the government considers to be most productive and innovative. Another core focus is the promotion of “common prosperity,” a reaction to the capture by a small, ultra-wealthy cohort of so much of the wealth created in the country in recent years. These intersecting objectives have drawn the country’s internet services giants into the glower of state authorities, leading many of the companies and their CEOs and founders to pledge billions of dollars toward common prosperity initiatives.

Another item on the government’s agenda is receiving less attention: the extension of the state’s tentacles more deeply into private businesses. There’s evidence that state-owned enterprises (SOEs) have increasingly been taking direct equity stakes in private businesses, such as Bytedance, the parent company of TikTok and domestic short-video app Douyin. The state’s stealthy intrusion into private enterprises, combined with the rapid-fire regulatory actions, have led some to wonder if the investment risks in the largest EM now outweigh the possible rewards.

We believe China presents varied attractive opportunities for long-term investors. Our analysts have identified more than 50 businesses across industries that meet our quality and durable growth criteria. We are not in denial about risks to industries and individual businesses of seismic policy change. For example, early this year as evidence mounted that regulatory changes in the conduct of for-profit tutoring were in the cards—a risk that was later realized—we sold our holding in New Oriental Education.

More often, signs of policy change risk are less definitive and simply add an extra layer of fuzziness to the already challenging task of forecasting business fundamentals. Sometimes policy changes may even put some businesses on more positive trajectories. Two elements of China’s economic reform agenda that we foresee increasing opportunities, or at least not posing existential threats, are data reform and the push for industrial innovation.

China is intent on significantly reforming the digital economy by setting new, world-leading standards for data collection and dissemination to fuel more productive capital allocation in internet-based industries. The walls of the major online gardens, most significantly those of Alibaba and Tencent, are to be breached, providing greater access to consumer data to foster competition. (Sadly, a side effect will be greater access to consumer data by regulators or state entities.) The exclusive network effects that Alibaba and Tencent enjoy from their closed platforms, among their key competitive advantages, will be blunted by new rules around customer data, as well as companion directives that will allow users to jump to competitors’ apps more easily.

In the past, both Alibaba and Tencent have proven highly capable in reacting to regulatory challenges. Their cultures of innovation and technological leadership, reinforced with gargantuan economies of scale, provide solid bases on which to sustain long-term growth and respectable returns on capital. The fact that their giant platforms play valuable roles within the fabric of the economy and could not be replicated other than in the lax regulatory climate in which they

Portfolio Positioning (% Weight) at October 31, 2021

 

Geography  

Institutional

HLMEX / HLEZX

   

    Advisor

HLEMX

        Benchmark1
Brazil     5.7       5.7     4.0
China + Hong Kong2     29.7       30.0     34.7
India     8.9       9.0     12.0
Mexico     5.6       5.7     1.9
Russia     10.2       10.3     4.0
South Africa     1.6       1.6     3.1
South Korea     8.0       8.1     12.2
Taiwan     11.6       11.6     14.7
Small Emerging Markets3     6.6       6.6     13.4
Frontier Markets4     1.7       1.7    
Developed Markets Listed5     8.1       8.1    
Cash     2.3       1.6    
Sector  

Institutional

HLMEX / HLEZX

   

Advisor

HLEMX

    Benchmark1
Comm Services     8.9       9.0     10.6
Consumer Discretionary     13.0       13.0     15.6
Consumer Staples     8.3       8.4     5.8
Energy     6.2       6.2     5.8
Financials     23.0       23.2     19.6
Health Care     3.0       3.0     4.6
Industrials     9.6       9.6     4.7
Information Technology     23.5       23.7     20.6
Materials     0.0       0.0     8.5
Real Estate     0.6       0.7     2.0
Utilities     1.6       1.6     2.2
Cash     2.3       1.6    

1MSCI Emerging Markets Index; 2The Benchmark does not include Hong Kong; 3Includes the remaining emerging markets which, individually, comprise less than 5% of the index; 4Includes countries with less-developed markets outside the 5Includes emerging markets or frontier markets companies listed in developed markets.

 

 

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were born and matured suggests that regulators do not intend to exterminate them.

In more material domains, China is doubling down on its long-term manufacturing strategy—unveiled in 2015 as the “Made in China 2025” (MIC25) plan—to improve its capabilities in critical technology sectors where it feels vulnerable amid the ongoing conflict with the US. Policymakers are also wary of a too-rapid tilt away from manufacturing toward services that has been the downfall of many EMs as they sought to advance beyond middle-income status. A revised plan that supersedes the MIC25 roadmap targets nine emerging industries, including biotech, new energy, advanced materials, and environmental protection, that will receive government subsidies and loans to promote investment. In early July 2021, a joint announcement from six Chinese ministries detailed the country’s aim to develop “hidden champions,” small- and medium-sized companies that potentially can forge dominant global positions in their industrial niches. So, while tax incentives and subsidies enjoyed by some internet-enabled service companies are expected to be withdrawn, the manufacturing sector should continue to receive the government’s full support.

Sanhua Intelligent Controls, China’s global leader in thermal controls, is an example of such a hidden champion. Its technical know-how and local low-cost advantage have allowed it to build a dominant global position supplying home-appliance manufacturers while steadily increasing its share in the auto sector. It recently won a patent infringement case in South Korea where a competitor had copied the design of one of Sanhua’s high-specification components, a sign of its technological leadership in this niche industry. Electric vehicles (EVs) represent a massive growth opportunity for Sanhua because they need more thermal control components than vehicles with internal combustion engines. In manufactured products the threat of state meddling is secondary to the threat of increasing competition. We expect Sanhua will undoubtedly face a slew of competitors given the large scale of the market opportunity. However, we believe Sanhua is set to take the lion’s share of the potential profit.

We remain intently focused on the evolution of individual businesses and their industries. We don’t have foresight into future policy changes or know how long this current burst of regulatory action in China will continue, although we suspect that its pace will abate. It is almost a cliché that the Chinese government’s highest goal is to preserve social stability, but we don’t think there should be official interest in maintaining a state of regulatory flux and economic turmoil if the main objective is to facilitate more productive capital allocation.

Portfolio Highlights

During this year, our bottom-up investment decisions have shifted the portfolio’s largest overweight from Financials to Industrials, which has now reached 10% of the portfolio. Our Industrials holdings represent diverse businesses, including airport operations, optical sorting machines, express delivery, and power tools. In a world where industrial manufacturing continues to leap ahead through innovation and the adoption of new technologies, we favor industry leaders leveraging their competitive advantages into

Ten Largest Holdings by Weight at October 31, 2021

 

Company   Sector   Market  

Institutional

HLMEX / HLEZX

 

Advisor

HLEMX

TSMC   Info Technology   Taiwan   5.4   5.4
Samsung Electronics   Info Technology   South Korea     4.6   4.6
EPAM   Info Technology   US   4.5   4.5
Tencent   Comm Services   China   3.8   3.8
Alibaba   Cons Discretionary   China   3.4   3.4
Sberbank   Financials   Russia   2.9   2.9
HDFC Corp   Financials   India   2.6   2.6
Novatek   Energy   Russia   2.6   2.6
Lukoil   Energy   Russia   2.6   2.6
Techtronic   Industrials   Hong Kong   2.5   2.6

expanded growth opportunities. One of them is AirTAC, Taiwan-listed but with extensive operations in China, which produces pneumatic components commonly used in factory automation. In the past year AirTAC has successfully navigated COVID-19 outbreaks and supply chain shortages. The accelerating trend toward automation of manufacturing represents a long-tailed opportunity for AirTAC to create cost-effective solutions for diverse industries. Other Industrials purchases this year include Sanhua, discussed above, and Meyer Optoelectronic, China’s leading supplier of dental imaging equipment and automated sorting systems for food. That may seem a strange combination, but they both leverage Meyer’s core competency: building optical sensor systems governed by custom software. We see a good long-term growth prospects, with a big opportunity for Meyer’s machine vision and sorting technologies in recycling facilities.

Rapid advances in industrial and manufacturing technology are occurring worldwide. The portfolio’s Brazilian holdings include two innovative Industrials businesses: WEG, Brazil’s dominant manufacturer of industrial motors and generators for power plants, and Localiza, the country’s largest car rental and fleet management company. WEG’s initiatives include leveraging its experience in industrial-scale solar energy farms to develop distributed solar energy systems for households. WEG has also applied its expertise in energy systems to make a line of EV charging stations, which, helped by the cost advantages of WEG’s local integrated manufacturing platform, is capturing significant market share.

Localiza is using digital technology to enhance the customer experience in the country’s rental car industry while also reducing costs. For example, it has installed smart telematics equipment in thousands of its rental cars to provide real-time information about vehicle status, such as the vehicle’s location and battery health. The company has also been developing an AI system that can predict when a car is at risk of being stolen and then deactivate the vehicle. Localiza has also launched a cost-effective car rental subscription service that provides access to a diverse fleet of vehicles, which has been particularly popular with ride-sharing drivers.

 

 

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Chinese Equity Portfolio

    

Institutional Investors: HLMCX

    

         

 

Portfolio Management Team

 

LOGO

Pradipta Chakrabortty

Lead Portfolio Manager

Jingyi Li

Portfolio Manager

Wenting Shen, CFA

Portfolio Manager

Performance Summary

The Chinese Equity Portfolio was launched on December 16, 2020. The Institutional Class fell 6.40% (net of fees and expenses) since launch through October 31, 2021. The Portfolio’s benchmark, the MSCI China All Shares Index, fell 5.22% in this period (net of source taxes).

Market Review

The most extensive series of regulatory changes in years made the 10 months since the Portfolio’s inception turbulent for businesses across China. Among other reforms, policymakers mandated that most of the after-school tutoring industry become not-for-profit, pressed antitrust and labor regulations against online businesses, limited the time children could spend playing online games, and lowered government procurement prices for medical products. The sectors most affected—Consumer Discretionary, Communication Services, and Real Estate—all underperformed the broad China market. Industrials, relatively unscathed by the new regulations, fared better. Utilities, Materials, and Energy rose strongly, buoyed by increased industrial demand for power and commodities such as oil, steel, lithium, and aluminum.

Policies implemented since the start of 2021 to curb an overheated real estate market brought Evergrande, China’s second-largest real estate developer, to the brink of default. Markets quickly priced in contagion risk for other property developers, banks, building-materials suppliers, and to the consumer sectors, which are exposed to the knock-on effects of a potential fall in home prices.

Fund Facts at October 31, 2021

 

 

 

Total Net Assets   $3.9M
Sales Charge   None
Number of Holdings   38
Turnover (5 Yr. Avg.)  
Dividend Policy   Annual
 
    Institutional Class
 
Ticker   HLMCX
 
CUSIP   412295685
 
Inception Date   12/16/2020
 
Minimum Investment1   $100,000
 
Net Expense Ratio2   1.15%
 
Gross Expense Ratio2   4.75%

1Lower minimums available through certain brokerage firms; 2As of the most recent Prospectus. The Net Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2022; Harding Loevner’s contractual agreement caps the expense ratio at 1.15%. The Net Expense Ratio is applicable to investors.

What has tied many of the government’s wide-ranging regulatory policies together are its renewed focus on achieving “common prosperity,” and its pursuit of a more inclusive development model—goals critical to its plan for achieving a high-enough per capita GDP to become a moderately developed country by 2035. Policymakers appear especially focused on ensuring that the middle class enjoys rising disposable income, a key ingredient for consumption-led growth, which has faltered due to structural impediments such as high real estate prices. Persistent income inequality higher than that of any major developed market, as well as social spending and fiscal redistribution below those of even many emerging markets, have begun to threaten social mobility and stability.

While attention has been largely focused on the recent torrent of regulations, several key areas have seen significant deregulation in line with the government’s long-term policy objectives. This was particularly the case in the sizable financial and automotive sectors. In early September 2021, for example, President Xi Jinping announced the creation of a new stock exchange in Beijing to help smaller companies access capital markets, the third such platform created in recent years to lower hurdles for public listing of relatively small businesses.

Such financial reforms follow a series of actions over the past couple of years loosening restrictions on foreign investment at the corporate level. In August, Tesla, the first foreign automaker to have a wholly owned China business, designated its Shanghai

 

 

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Performance (% Total Return)

 

     For periods ended September 30, 2021      For periods ended October 31, 2021  
   
              Calendar YTD          1 Year      Since Inception*               Calendar YTD          1 Year      Since Inception*  
   
Chinese Equity Portfolio – Institutional Class      -11.81               -7.40         -10.86               -6.40  
   
MSCI China All Shares Index      -10.65               -7.78         -8.17               -5.22  

Returns are annualized for periods greater than 1 year. *Inception date: December 16, 2020.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Portfolio may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 435-8105 or visiting www.hardingloevnerfunds.com.

 

Gigafactory as its new primary global export hub, taking over from its original factory in Fremont, California, in supplying most of the completed vehicles bound for markets lacking their own production facilities. Tesla now makes in China three times as many cars as it sells locally, taking advantage of China’s extensive supply chain, readily available engineering talent, and lower manufacturing costs—without having to share those economics with a joint venture partner. The rise of an export market for Chinese-made automobiles expands the addressable market dramatically for Chinese parts suppliers, several of which are owned in the Portfolio.

Performance Attribution

The Portfolio trailed behind the index this reporting period primarily due to lagging holdings in Consumer Discretionary and our overweight to the sector. Weak stocks in Industrials and the Portfolio’s lack of holdings in Materials and Energy also hurt. Relative returns were helped by strong holdings in Health Care and Information Technology (IT) and by the Portfolio’s overweight in Industrials.

In Consumer Discretionary, shares of e-commerce giant Alibaba were weighed down by the expanded regulatory focus on many of its businesses. Shares of tutoring company New Oriental Education collapsed as regulators in July moved to remand the industry to non-profit status. We sold the holding before the hammer fell. Meanwhile, custom-wardrobe manufacturer Suofeiya struggled to make progress on its product expansion into kitchen cabinets. The shares were also dampened by the reports of financial trouble at Evergrande, a major customer.

In Industrials, holdings in two transportation-related companies were significant detractors. Despite improving cash flows from a modest recovery in international traffic, Shanghai International Airport suffered from domestic travel curbs, as well as a temporary shutdown of its air-cargo operations in August, due to sporadic COVID-19 outbreaks. Shares of delivery and logistics business SF Holding dropped after it unexpectedly announced

net losses in first quarter 2021 caused, in part, by greater transportation costs due to the company’s increased investments in high-frequency truck routes.

The key contributors in Health Care included contract development and manufacturing organizations (CDMOs) WuXi AppTec and WuXi Biologics and contract research organization (CRO) Tigermed. WuXi Biologics added new capacity and capabilities as its project backlog has grown. In IT, Silergy, a semiconductor manufacturer that makes power management integrated circuits, saw increasing demand from a variety of end markets, including a new foothold in automotive.

Perspective and Outlook

Though the lack of Western-style public debate around proposed regulations and the suddenness with which they can be implemented in China can be destabilizing to companies and entire industries, we do not believe these recent regulatory changes are capricious or random. Reforms in areas such as carbon emissions, data security, and social equality are consistent with Beijing’s desire to shift the economy toward more sustainable growth, with an explicit focus on balancing social and environmental goals.

We routinely integrate regulatory risks and impacts into our assessment of the growth and profitability potential of individual businesses and their industries no matter the country. In particular, we closely examine their effects on the level of rivalry and competitive landscape, the threat of new entrants, the ease with which a company’s products might be substituted, and the bargaining power of a company’s buyers and its suppliers, which together form Harvard professor Michael Porter’s “Five Forces,” our workhorse template for analyzing business strategy.

Below, we offer illustrations of how our analysts are using the Porter framework to evaluate the impact of the latest regulatory changes on companies in three industries that have been most affected.

 

 

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E-commerce

The e-commerce industry, among the first to be scrutinized by Chinese regulators, has been under pressure on multiple fronts. Antitrust investigations resulted late last year in fines against several companies—most notably Alibaba (to the tune of US$2.8 billion)—for requiring exclusivity arrangements from the merchants on their platforms. We had been worried about the escalating rivalry Alibaba faced from other large companies such as Pinduoduo, Meituan, and JD.com. But by forcing the unwinding of exclusivity, regulators also toppled a key barrier to a group of smaller players gaining access to Alibaba-featured merchants. Antitrust investigators also concluded that market leaders in community group buying (CGB),1 such as Meituan, used illegal subsidies and deceptive pricing to lure customers from local brick-and-mortar stores onto their platforms. The irony here is that, in addition to raising industry rivalry from incumbent brick-and-mortar retailers, the unwinding of these practices could help Alibaba and JD.com, which have been looking to increase their toeholds in online grocery.

 

LOGO  

The irony is that, in addition to raising industry rivalry from incumbent brick-and-mortar retailers, the unwinding of antitrust practices against online grocery leader Meituan could help Alibaba and JD.com, which have been looking to increase their toeholds in the area.

We have maintained a position in Alibaba, though we trimmed our exposure toward the end of the period. The company remains the market leader in e-commerce and has several other attractive and fast-growing businesses such as cloud services with significant scale advantages compared to rivals. We expect Alibaba to generate more than 15% cash flow returns on investment over the next five years. And after its recent price decline, its shares looked attractive relative to our assessment of their fair value.

Online Games

Over the past several years, Chinese regulators concerned with the ill effects of online games on kids have issued a series of rules governing how children can access games and the amount of time they can spend playing them. During this period the government took more radical action by limiting minors’ playing time to a maximum of three hours per week and their in-game weekly purchases (the largest source of game revenue) to US$30–60, depending on the player’s age.

 

 

1CGB is a popular new business model whereby shoppers’ online grocery orders are aggregated and delivered in bulk to neighborhood pickup locations, allowing economies of scale and cheaper prices.

Looking at these changes through the Porter framework, we see a significant increase in buyer power (that is, the bargaining power of the children playing the games, as they will be operating on a strict time budget), relative to the pricing power of industry participants. The regulations also include antitrust elements that may prevent large firms from continuing to gobble up small studios, which would increase the threat of new entrants and intensify rivalry. Stricter data security regulations will also likely make it harder for game companies to collect personal data, and lead to higher compliance costs. Moreover, the industry’s effective tax rates will likely increase as China claws back certain favorable tax arrangements.

In our Portfolio, we own Tencent and NetEase, two of China’s largest companies developing and operating online games. The unfavorable regulatory changes will likely slow growth for both firms. But while we have reduced our exposure, the slowdown does not negate the fact that these remain high-quality businesses whose management should be able to continue taking advantage of growth opportunities. For instance, NetEase’s latest blockbuster release, Harry Potter: Magic Awakened, has been more successful than projected earlier this summer, a testament to either the enduring adult appeal of Harry Potter or enduring ability of certain games to catch fire.

Portfolio Positioning (% Weight) at October 31, 2021

 

Market    Portfolio              Benchmark1
Mainland China + Hong Kong      88.9      100.0
Other Emerging Markets      6.8     
Cash      4.3     
Sector    Portfolio      Benchmark1
Comm Services      10.6      11.6
Consumer Discretionary      23.2      23.3
Consumer Staples      5.6      9.1
Energy      0.0      1.6
Financials      5.1      15.1
Health Care      15.3      8.5
Industrials      19.3      9.3
Information Technology      13.0      9.6
Materials      0.0      6.2
Real Estate      1.8      3.2
Utilities      1.8      2.5
Cash      4.3     

1MSCI China All Shares Index.

 

 

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Health Care

The overarching purposes of regulatory actions in health care are two-fold: to increase affordability through expanding access to generic drugs, and to encourage the local biotech and pharmaceutical industries to innovate more in order to compete more effectively with their Western competitors. As China expands public health care coverage, the government has been using centralized procurement programs and bulk bargaining power to drive down health care costs, including prices for generics. In the first half of this year, China conducted two rounds of large-scale open tenders covering more than 100 drugs and devices, which on average have resulted in prices for the tendered drugs being cut by over half. For Jiangsu Hengrui Medicine, the effect of centralized procurement has significantly compressed sales for the company’s generic drugs: revenues for six of them dropped by 57% in the first half of this year.

We have remained invested in Hengrui because of its impressive research and development (R&D) pipeline in innovative new drugs. The company’s new-drug revenue grew over 43% in the first half of 2021 and now accounts for nearly 40% of its total sales. This part of its business actually benefits from some of the recent regulations, which raise the bar for what is considered an innovative new drug. The new rules will also benefit contract development and manufacturing organizations (CDMOs) and contract research organizations (CROs), including WuXi Apptec, WuXi Biologics, and Tigermed, which comprise 80% of our Portfolio’s Health Care investments. Not only are such companies spared the pricing compression seen in generics, but they stand to benefit from the increased pressure on their customers to develop world-class drugs.

Portfolio Highlights

Taking a long-term perspective of the blizzard of regulatory changes, we cannot help but view the heightened risks against the background of new investment opportunities in China arising from innovation and economic growth. We have generally become less constructive on the largest internet companies in the index, and the Portfolio is now underweight online media, entertainment, and e-commerce, a notable difference from the beginning of this year. Outside of e-commerce, we sold our position in Suofeiya, a maker of custom wardrobes and kitchen cabinets, because we saw its growth potentially slowing due to the disruption in the new-home market caused by Evergrande’s financial woes.

We have maintained our large overweight in Industrials, which reflects the superior opportunities in a sector that is less affected and, in some respects, directly aided by recent regulatory action. Several companies in the sector, such as Inovance and AirTAC, are domestic leaders expected to benefit from the increasing penetration of industrial automation in China, as well as from increasing global market share due to their competitive cost structures and customized service offerings.

Ten Largest Holdings by Weight at October 31, 2021

 

Company   Sector   Market   %
Tencent   Comm Services   Mainland China   5.7
WuXi Biologics   Health Care   Mainland China   5.2
Alibaba   Cons Discretionary   Mainland China   4.7
China Tourism Group Duty Free   Cons Discretionary   Mainland China   4.5
Techtronic Industries   Industrials   Hong Kong   4.2
WuXi AppTec   Health Care   Mainland China   4.0
Silergy   Info Technology   Taiwan   3.6
Sunny Optical   Info Technology   Mainland China   3.5
AIA Group   Financials   Hong Kong   3.2
AirTAC   Industrials   Taiwan   3.2

This period we also purchased new positions in high-quality companies whose long-term structural growth outlooks have recently improved.

For instance, we bought Hong Kong Exchanges (HKEx), the highly profitable holding company that operates the stock exchange, futures exchange, and securities clearinghouse of its namesake city, including the Stock Connect program that links to the primary exchanges in Shanghai and Shenzhen trading in mainland-listed (“A-share”) stocks. The potential expansion of HKEx’s fixed income and currency trading businesses, as well as new products such as A-share index futures, should help support the company’s long-term growth.

We also bought ANTA Sports, China’s largest sportswear company, which holds the Chinese marketing rights for Fila among other brands. The company’s ongoing transition from a wholesaler-driven distribution to a direct-to-consumer strategy should improve efficiency and facilitate more premium product sales at its own stores. We think a cultural shift toward health and wellness also has the potential to sustain ANTA’s domestic growth. The government is not just forcing kids off their video games—it has made more regular exercise an explicit national goal, supported by higher spending on fitness-related infrastructure.

Fuyao Glass is China’s largest automotive-glass manufacturer and the leading player in a global glass oligopoly. Its integrated supply chain and economies of scale provide Fuyao with a cost advantage over peers that leads to superior margins. Fuyao’s long-term growth should be aided by increasing penetration of automobile ownership in China from a current level of around 20%, compared to 80% penetration in developed countries such as the US.

Please read the separate disclosures page for important information, including the risks of investing in the Portfolio.

 

 

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Frontier Emerging Markets Portfolio

    

Institutional Investors: HLFMX & HLFFX | Individual Investors: HLMOX

    

         

 

Portfolio Management Team

 

LOGO

Pradipta Chakrabortty

Co-Lead Portfolio Manager

Babatunde Ojo, CFA

Co-Lead Portfolio Manager

Performance Summary

For the Frontier Emerging Markets Portfolio, the Institutional Class I gained 31.74%, the Institutional Class II gained 32.18%, and the Investor Class gained 31.14% (net of fees and expenses) in the twelve-month period ended October 31, 2021. The Portfolio’s benchmark, the MSCI Frontier Emerging Markets Index, gained 23.72% (net of source taxes).

Market Review

Frontier Emerging Markets (FEMs) posted strong overall performances for the trailing 12 months ended October 31, with much of these returns concentrated in the beginning and end of the period. In the first three months, markets surged in response to the discovery and broadening global distribution of effective vaccines; in the last three months, FEM performance was lifted by the easing of pandemic-related restrictions and the further surge in oil prices. In the middle six months of the period, however, FEMs declined, held back in part by concerns over vaccine access in developing countries.

The strongest-performing region by far in the fund year was Europe, which experienced less pandemic-related and political hiccups than other regions in the index. Kazakhstan was up triple digits, boosted by the oil price rebound. Prices of Brent Crude rose over 120% in the trailing 12 months to just over US$80 per barrel. Latin America outperformed, with Colombian markets also buoyed by the oil price. Peru, however, faltered. In June 2021, it elected leftist president Pedro Castillo in a bitterly contested race; Castillo has vowed to change Peru’s constitution to increase government royalties on mining and energy companies and has been in constant battle with the opposition-dominated legislature, diminishing hopes for stimulus and reform needed to lift the country out of its economic doldrums.

Fund Facts at October 31, 2021

 

 

 

Total Net Assets   $224.1M
Sales Charge   None
Number of Holdings   57
Turnover (5 Yr. Avg.)   26%
Dividend Policy   Annual
  Institutional Investors   Individual Investors
    Inst. Class I       Inst. Class II       Investor Class
     
Ticker   HLFMX   HLFFX   HLMOX
     
CUSIP   412295867   412295735   412295859
     
Inception Date   5/27/2008   3/1/2017   12/31/2010
     
Minimum Investment1   $100,000   $10,000,000   $5,000
     
Net Expense Ratio2   1.68%3   1.35%4   2.00%5
     
Gross Expense Ratio2   1.68%   1.60%   2.12%

1Lower minimums available through certain brokerage firms. 2As of the most recent Prospectus and based on expenses for the fiscal year end. 3Harding Loevner has contractually agreed to cap the expense ratio at 1.75% through February 28, 2022. The expense ratio (without cap) is applicable to investors. 4The Net Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2022. Harding Loevner’s contractual agreement caps the expense ratio at 1.35%. The Net Expense Ratio is applicable to investors. 5The Net Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2022. Harding Loevner’s contractual agreement caps the expense ratio at 2.00%. The Net Expense Ratio is applicable to investors.

The Asian region lagged FEMs overall, primarily due to the Philippines, which represents over 25% of the index by weight. COVID-19 had an especially severe impact on the economy of this densely populated country of over 7,600 islands, including widespread shutdowns of major manufacturers and transportation networks. The tiny Middle East region was the poorest performer. The collapse of the Lebanese market that began in March 2020, when the country defaulted on its foreign debt obligations, continued. In February 2021, MSCI removed Lebanon from the FEM Index.

Energy was the strongest sector this period, reflecting the sharp rise in oil prices over the past year. Information Technology (IT) outperformed due to Argentine software company Globant, which reported strong revenue growth on broad-based demand from its consumer retail, manufacturing, and financial services segments. Rising commodity prices boosted the Materials sector. Real Estate and Consumer Staples shares fell behind the broad market. Real estate was dragged by Philippines real estate companies as the severe pandemic-related lockdown in the country adversely impacted traffic to malls and their ability to sell new residential properties. Similarly, consumer staples companies in the Philippines and Vietnam were impacted by weak consumption because of the COVID-19 lockdowns.

 

 

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Performance (% Total Return)

 

    For periods ended September 30, 2021   For periods ended October 31, 2021
         
    1   3   5   10    Since Inception*    1   3   5   10    Since Inception*
     Year   Years   Years   Years     May-08     Mar-17     Dec-10    Year   Years   Years   Years     May-08     Mar-17     Dec-10
               
Frontier EM Portfolio – Inst. Class I   25.90   4.15   4.57   4.52    -0.07            31.74   7.29   5.72   4.49    0.28         
               
Frontier EM Portfolio – Inst. Class II   26.22   4.43     –        4.95        32.18   7.65     –        5.93     
               
Frontier EM Portfolio – Investor Class   25.30   3.73   4.21   –            1.64    31.14   6.93   5.36   4.10            2.07
               
MSCI Frontier EM Index   20.13   2.94   3.32   3.65    –    3.42    1.52    23.72   6.14   4.56   3.63    –    4.49    1.98

Returns are annualized for periods greater than 1 year. *Inception of the Institutional Class I, May 27, 2008. Inception of the Institutional Class II, March 1, 2017. Inception of the Investor Class, December 31, 2010. Index performance prior to December 2, 2008 cannot be shown since it relies on back-filled data.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Portfolio may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 435-8105 or visiting www.hardingloevnerfunds.com.

 

Performance Attribution

By sector, strong stock selection in Materials and Financials was a key reason for the Portfolio’s outperformance in the trailing 12 months. In Materials, Vietnamese steelmaker Hoa Phat Group benefitted from rising steel prices and a stimulus-aided domestic building boom. The company also reaped operating efficiencies from a new state-of-the-art manufacturing plant. In Financials, Georgian banks TBC Bank and Bank of Georgia both generated returns on equity of over 20%. Their duopoly—a joint 74% market share of the country’s highly consolidated banking industry—has kept their rivalry in check and resulted in healthy profitability over the past few years.

Stocks in Consumer Staples hurt relative returns, as several Vietnamese food & beverage companies, including Vietnam Dairy Products and Sabeco, suffered from outbreaks of the Delta variant in their home country and resulting supply-chain issues. The Portfolio’s overweight in this sector was also a detractor.

By region, Asian holdings were the biggest source of strength for the Portfolio. In the Philippines, big-box furniture retailer Wilcon Depot proved to be an outlier among the Delta-battered consumer companies in Southeast Asia. In spite of occasional restrictions on mobility due to outbreaks of the virus, domestic demand for its products rose from do-it-yourselfers and small contractors, which made up for continued weakness in larger-scale construction activity. Another strong performer in the Southeast Asian country was Jollibee Foods; stock of the fast-food restaurant company rose after the Philippine government eased COVID-19 restrictions in Metro Manila and adjacent provinces. Strong stocks in Latin America also contributed; Colombian oil company Ecopetrol was one of the key beneficiaries of the rise in oil prices over the course of 2021.

Weak stocks in Africa detracted from performance over the past 12 months. Egyptian packaged snack food company Edita Food Industries is still recovering from the closure of Egyptian schools and universities from March to October of last year, which severed it from its youthful customer base.

Total Return Based on a $100,000 Investment

Institutional Class I

 

LOGO

Total Return Based on a $10,000,000 Investment

Institutional Class II

 

LOGO

Total Return Based on a $10,000 Investment

Investor Class

 

LOGO

The charts above illustrate the hypothetical return of an investment made in the corresponding share classes. Investment return reflects waivers in effect. Absent such waivers, total return would be reduced. The performance provided in the table and charts above do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares.

 

 

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Perspective and Outlook

In FEMs, many people and small businesses do not participate in the formal financial system. They transact primarily in cash and have no access to bank credit. Even bank customers often have limited choices between providers and pay high fees. At the same time, mobile phones have become ubiquitous, now possessed by more than 65% of the FEM population. E-commerce, online payments, and digital lending are emerging and consolidating—as they did in China—into shopping and banking “super apps.” The ease of use, speed, and convenience of these apps is driving near-ubiquitous adoption.

Banks that fail to keep up with innovation are under ever-increasing competitive threat from such developments. But the type of banks we own in our FEM portfolio have powerful advantages to leverage in this race to adapt. Indonesia’s Bank Central Asia (BCA) is an example of a company that has seized the opportunity to disrupt itself and raise the ceiling for its business.

BCA has established a wide network of branches, ATMs, and cash recycling machines in high-trafficked malls, campuses, and supermarkets, as well as strong online and mobile banking capabilities that came in handy during the pandemic, when it signed up 1.6 million new digital customers and handled 83% of its transactions virtually. By making it easy for customers to transact anytime and anywhere, BCA has built the leading deposit franchise in Indonesia and a mountain of low-interest deposits. These cheap deposits comprise approximately 80% of its total deposit base, the highest among its peers. This translates into the lowest funding cost, which in turn allows the bank to be more selective in its lending.

According to a recent report, 92 million Indonesians—more than a third of the population—either had no bank account or minimal access to banking services as of 2019.1 At the same time, the country is young (over half of population is under the age of 30), increasingly urbanized, and attuned to technology, with smartphone adoption exceeding 74%. Not coincidentally, Indonesia has become home to several tech juggernauts centered around super apps. These include ride-hailing and food delivery app Grab, online retailer Shopee, e-commerce portal Bukalapak, and the biggest of all: Go-To, which has 100 million monthly active customers, two million registered drivers, and more than 11 million merchants on its platform.

When an e-commerce platform wants to start operating as a bank, it’s not as simple as adding features. The company must secure a banking license and offer customers high-interest, zero-fee deposit accounts to attract enough new users to build up their deposit base, which can cut deeply into margins before lending activity scales. This is where a large bank like BCA, entering the fintech space from the other direction, has a distinct advantage. It already has a large established presence and deposit base, giving it an important leg up.

1Google, Temasek, Bain & Company.

BCA has been circling around the opportunity for several years, working as the back-end banking partner with a handful of e-commerce super apps. Then in July, BCA launched Blu, a digitally native bank targeting young Indonesians and small merchants, to establish a branded presence within the super app ecosystem of its e-commerce partners. In less than two months, Blu gained over 100,000 verified customers with 350 billion rupia (~US$25 million) of deposits. Blu pays higher interest rates on deposit than BCA but, thanks to the halo effect of the BCA brand, lower rates than what most digital-only banks must offer. Blu, like its parent, can also choose to be more selective with its lending, skimming off the top tier of the unbanked market with lower rates on borrowing.

Our new portfolio holding, Kaspi Bank, the third largest bank in Kazakhstan, is also on the forefront of the fintech revolution in FEMs. As with Indonesia, the super app model has also taken hold in Kazakhstan. Kaspi began laying the groundwork for its super app a decade ago when it set up kiosks in electronics stores and other big-ticket merchant locations where customers could quickly finance their purchases. Consumers’ affinity for the service helped the bank sign up more merchants and broaden its offerings to include bill pay and online shopping. Over the last few years Kaspi transitioned most of this activity to its mobile app.

Portfolio Positioning (% Weight) at October 31, 2021

 

Geography    Portfolio              Benchmark1
Africa      20.3      15.8
Asia      39.2      42.8
Europe      13.2      14.3
Gulf States      6.2      4.8
Latin America      11.6      21.6
Middle East      0.0      0.7
Developed Markets Listed2      8.4     
Cash      1.1     
Sector    Portfolio      Benchmark1
Communication Services      5.8      7.9
Consumer Discretionary      8.3      1.2
Consumer Staples      13.5      6.7
Energy      4.1      5.2
Financials      35.2      34.5
Health Care      5.5      2.9
Industrials      5.1      13.2
Information Technology      11.9      6.4
Materials      4.5      8.5
Real Estate      5.0      10.9
Utilities      0.0      2.6
Cash      1.1     

1MSCI Frontier Emerging Markets Index; 2Includes frontier or small emerging markets companies listed in developed markets.

 

 

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The move from in-person kiosk to self-serve app has ironically raised the credit quality of Kaspi’s loans. As consumers make payments and transact on the app’s e-commerce marketplace, Kaspi collects a huge amount of proprietary data, which it pairs with traditional credit bureau information to assess a prospective borrower’s creditworthiness. Coupled with a low average consumer loan maturity of seven months and fraud prevention systems utilizing biometric and face recognition, this data helps Kaspi keep credit risk in check.

Today, Kaspi’s super app is used by more than 10 million Kazakhs who complete an average of 39 transactions per user monthly, among the highest rates of super-app engagement in the world. Importantly, the bank has achieved this without becoming mired in logistics. Instead, the company lets third-party providers do the heavy lifting (and driving) while making them plug into Kaspi’s back-end tech so that the company still has visibility into package tracking and delivery times, and ultimate control over the customer experience.

Two years ago, the bank launched another feature: a proprietary QR-based payment solution that charges merchants a fee of just 0.95% of each transaction vs. the 2%-3% charged by Visa- or Mastercard-branded cards. Within a year, Kaspi captured 66% of electronic payments in Kazakhstan.

Portfolio Highlights

The opportunities we have identified at BCA and Kaspi are illustrative of a significant change in our portfolio over the past three years. We increasingly find that many of the best opportunities for investing in high-quality, faster-growing companies fall into new economy industries like IT services, e-commerce, digital payments, mobile commerce, and fintech. Over 17% of the Portfolio is currently invested in these digital businesses, up from 7% in 2018.

Safaricom, the leading Kenyan telecommunication services company, has carved out a unique exposure to mobile commerce and fintech through its pioneering mobile payment system, M-Pesa. Safaricom customers with M-Pesa accounts can send money to one another instantaneously, pay bills, and purchase goods and services from merchants. The company has a network of about 250,000 M-Pesa agents, typically mom-and-pop shops, to handle the cash for its 28 million customers’ deposits and withdrawals, and it has been broadening the scope of its financial offerings to include savings, loans, insurance, and wealth management products. Safaricom launched the M-Pesa app in June; within three months, the super app had recorded about 4 million downloads, and management intends to roll out M-Pesa across Africa.

Like Safaricom, Network International, a UAE-based digital payment processor present across the Middle East and Africa, is positioned to benefit from the rapid secular growth in digital payments in the region. Even with the gains of Safaricom, the Middle East and Africa are the most underpenetrated digital payments markets in the world, with cash still dominating daily transactions. But

Ten Largest Holdings by Weight at October 31, 2021

 

Company   Sector   Market   %
EPAM   Info Technology   US   4.9
Commercial International Bank   Financials   Egypt   4.6
Globant   Info Technology   Argentina   4.5
Hoa Phat Group   Materials   Vietnam   4.3
Safaricom   Comm Services   Kenya   4.0
Wilcon Depot   Cons Discretionary   Philippines   3.9
Halyk Savings Bank   Financials   Kazakhstan   3.8
Banca Transilvania   Financials   Romania   3.5
Vietcombank   Financials   Vietnam   3.5
Ecopetrol   Energy   Colombia   3.1

government-led financial inclusion initiatives, like a recent central bank financing of point-of-sales machines in rural areas of Egypt, together with increasing access to the internet and smartphones, the rapid growth of e-commerce, and a young population, are beginning to speed up the transition.

In recent months, we also established a position in another new economy champion in Allegro, the dominant online retailer in Poland. Its 36% market share, ten times the size of its next largest competitor, allows it to offer the broadest selection and lowest prices in Poland as well as some of the fastest delivery times, including free delivery to the subscribers of its SMART program. With Amazon’s recent launch of its signature Prime offering in Poland, competition is set to intensify. Allegro’s management has spent several years preparing for Amazon’s entry into the market, beefing up its delivery capabilities and introduced Saturday delivery and a nationwide network of pick-up/drop-off lockers. It has also launched an in-house payment platform, Allegro Pay, that makes it easier for customers to pay for purchases, process returns, and (if desired) obtain financing. There is a misperception that Amazon has taken over in every market it has entered. We think that Allegro’s strong user experience and deep customer engagement could make Poland another exception.

 

 

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Global Equity Research Portfolio

    

Institutional Investors: HLRGX

    

         

 

Portfolio Management Team

 

LOGO

Moon Surana, CFA

Portfolio Manager

Andrew West, CFA

Portfolio Manager

Performance Summary

For the Global Equity Research Portfolio, the Institutional Class gained 33.45% (net of fees and expenses) in the twelve-month period ended October 31, 2021. The Portfolio’s benchmark, the MSCI All Country World Index, gained 37.28% (net of source taxes).

Market Review

Global stock markets increased in the twelve months ended October 31, with all sectors and regions finishing in positive territory.

The period began with a dramatic rise in global stock markets as vaccinations were approved and rolled out, unleashing demand that had been pent up throughout the pandemic. In the first three months of 2021, US retail sales climbed to the strongest level on record. The incoming Biden administration also passed a colossal US$1.9 trillion relief package, sending direct payments to millions of Americans and extending unemployment insurance. In China, electricity generation and rail cargo volume rose substantially year over year, though consumer spending remained subdued despite much of daily life having returned to normal. The EU approved an 800 billion recovery fund aimed at infrastructure investment and support for businesses.

But while the economic recovery continued for most of the period several underlying pressures came to the fore during its final few months. Inflation expectations ballooned as tight labor markets, pandemic-mangled supply chains, and the resumption of more normal consumer and business activity led to shortages across industries. Additionally, commodity prices accelerated as economic

Fund Facts at October 31, 2021

 

 

 

Total Net Assets   $9.9M
Sales Charge   None
Number of Holdings   326
Turnover (5 Yr. Avg.)  
Dividend Policy   Annual
 
    Institutional Investors
 
Ticker   HLRGX
 
CUSIP   412295792
 
Inception Date   12/19/2016
 
Minimum Investment1   $100,000
 
Net Expense Ratio2   0.80%3
 
Gross Expense Ratio2   2.04%

1Lower minimums available through certain brokerage firms; 2The Expense Ratios are as of the most recent Prospectus and are based on expenses for the most recent fiscal year end. The Net Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2022. 3Harding Loevner’s contractual agreement caps the net expense ratio at 0.80%. The Net Expense Ratio is applicable to investors.

activity increased. In response to these inflationary pressures, central banks began to signal the impending end of unprecedented monetary support and, in some cases, acted by reducing bond buying or raising interest rates. Meanwhile, an aggressive series of interventions by Chinese regulators heightened the regulatory malaise. The crackdowns, which began in November 2020 with the tabling of the Ant Financial IPO, expanded with the remanding of the entire after-school tutoring sector to not-for-profit status, the adoption of anti-monopoly measures against the country’s internet giants, and new rules to limit the time spent by minors playing video games, among other provisions. Combined with the apparent impending debt default (later avoided) by the property giant Evergrande—itself the result of policy moves designed to force the heavily indebted sector to de-lever—the regulatory sweep savaged Chinese share prices, leaving them down 9% for the period.

On a sector basis, Energy was the strongest performer, surging in lockstep with rising oil prices. Financials also performed strongly, aided by a steepening yield curve and surprisingly low credit defaults. Information Technology (IT) also outperformed despite heightened scrutiny from regulators in Europe, China, and the US. Less-cyclical sectors—Consumer Staples, Health Care, and Utilities—all underperformed for the period.

Viewed by geography, the eurozone outperformed as some of the countries hit hardest by the virus, such as Spain and Italy, began to recover. Canada performed strongly, helped by its large weighting

 

 

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Table of Contents

Performance (% Total Return)

    For periods ended September 30, 2021     For periods ended October 31, 2021  
   
         Calendar YTD       1 Year       3 Years     Since Inception*          Calendar YTD       1 Year       3 Years     Since Inception*  
   
Global Equity Research Portfolio – Institutional Class     8.97       26.11       13.17       15.24        13.63       33.45       17.82       15.95  
   
MSCI All Country World Index     11.12       27.44       12.58       13.52        16.79       37.28       17.47       14.43  

Returns are annualized for periods greater than 1 year. *Inception date: December 19, 2016.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Portfolio may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 435-8105 or visiting www.hardingloevnerfunds.com.

The chart below illustrates the hypothetical return of an investment made in the Institutional share class. Investment return reflects waivers in effect. Absent such waivers, total return would be reduced. The performance provided in the table and chart do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares.

 

in banks and Energy. Japan significantly underperformed as the country instituted a new, more stringent state of emergency in response to another virus wave in late summer and early fall. Emerging Markets (EMs) underperformed due to the weakness in China following its regulatory crackdowns.

Performance Attribution

The Portfolio’s underperformance was caused primarily by weak stocks and negative effects of regional allocations. By sector, Consumer Discretionary was by far the largest detractor as some of our companies were hit by various supply chain issues. Rinnai, a Japanese gas appliances manufacturer, was impacted by the rise in the price of copper, a key input cost; since first soaring in March, copper prices have remained over 33% higher than they were at the start of the fund year. Also in Consumer Discretionary, Japanese manufacturing company Stanley Electric, a large exporter of automobile lighting and instruments, grappled with a shortage of, and a rise in freight rates for, shipping containers. Weak stocks in Energy also detracted; Dutch chemicals storage company Vopak took a sizeable impairment charge on its Panama storage terminals and suffered further from subdued management outlooks throughout the fund year.

By region, Japan was the largest drag on relative returns, with aforementioned supply-chain issues heavily impacting importers and exporters of consumer durables. Also in Japan, disposable hygiene products manufacturer Unicharm saw a decline in the sales of masks and wet wipes from last year as worldwide COVID-19 containment measures eased. Eurozone countries detracted to a lesser extent; French storage terminal and petroleum products distributor Rubis detracted as it experienced a lull in sales across several tourism-dependent regions, especially the Caribbean. The Portfolio’s underweight in US companies also detracted from relative returns.

EMs were a bright spot in terms of stock selection, with good stocks in China contributing to performance. Hong Kong-listed Chinese energy distributor ENN Energy reported strong growth across its businesses in 2021 due to higher gas volumes and increased pricing as the country rebounded from last year’s pandemic-related pressures.

Total Return Based On a $100,000 Investment

Institutional Class

 

LOGO

Perspective and Outlook

In our 2020 first quarter report for our sister Global Equity strategy, at the early stage of the global pandemic, we marveled at the resiliency of the Chinese stock market, which we ascribed to the country’s success in containing the domestic spread of the coronavirus through draconian lockdowns, whose efficacy was made possible by its authoritarian political system. Eighteen months later, a similarly authoritarian intervention has left investors reeling. While government intervention is not uncommon in China, the scale and pace of this latest crop of reforms is unprecedented. Is Xi Jinping, China’s most powerful leader since Chairman Mao, revealing his allegiance to a collectivist ideology long thought to be discredited? Or is he boldly grasping the nettle of reform to redress economic imbalances and social ills before they become more entrenched and undermine the Chinese Communist Party’s (CCP’s) legitimacy?

Despite headlines conjuring memories of the CCP’s gruesome past, we accept that on balance the policy changes are intended to benefit the long-term health of Chinese society and economy, especially its middle class. The message the Party is sending to business leaders across China is clear: compete on a level playing field and pay a fair wage. For instance, much of the coverage of Ant Group’s canceled IPO focused on the ostensible desire of the CCP to clip the wings of its tech oligarchs. More persuasive in our view is that having observed and learned from

 

 

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the West’s subprime debacle a decade prior, Chinese financial regulators are not keen to allow loan origination to be divorced from the underlying credit risks of the loans—a source of moral hazard that would potentially destabilize a financial system still dominated by lumbering state-owned banks with weak credit cultures and poor management systems. Antitrust interventions targeting the largest e-commerce platforms echo the statements (if not yet the achievements) of many Western policymakers to improve competition by increasing the bargaining power of smaller businesses versus the giants.

Meanwhile, although the gutting of the private educational tutoring sector may seem disproportionate, it has with the stroke of a pen stigmatized one of the educational advantages of affluence while inhibiting the exam preparation arms race that many middle-class families feel has spiraled out of control. Actions taken to strengthen the data privacy protections of social media companies, tighten local ownership of Macau casinos, and rein in speculation in the high-end liquor market would not be out of place in Europe or the US. Not to minimize the serious consequences of these abrupt and radical reforms for private businesses; as investors we are viewing these actions mainly as problems requiring further analysis rather than as indications that China has become too unpredictable to be investable.

More troubling for China’s long-term prospects (although less of an immediate danger to our portfolio) is the near-collapse of Evergrande. For years, the Chinese government has promised to wean the economy from fixed asset investments in favor of consumption, with little to show for the rhetoric. Regional governments have continued to rely on a red-hot property sector to provide their funding and achieve their mandated growth targets. Alarmed by the outsized role of property development in the economy, and the associated risks to the financial system of too much property speculation, the central government pushed through a series of policies last year to force the property sector to deleverage. Evergrande’s plight looks like the direct consequence of those blunt top-down mandates as the heavily indebted company started to find itself cut off from its usual credit lines. While the government may be happy to make an example of the company, the spillover effects to the rest of the economy will be hard to contain and likely to require yet more interventions.

Equally disturbing to us are the rolling power outages afflicting as many as 20 provinces. Dueling top-down mandates with competing objectives seem to be playing a role here. Earlier in the year, the central government renewed its commitment to “dual control,” a mandate to curb carbon emissions by limiting both energy usage and the intensity (i.e., the amount of energy used per unit of GDP). That directive was issued, however, without anticipating this year’s spike in industrial output, whose emissions far exceed those from less energy-intensive sectors. Once they met their local growth targets, regional

administrators rushed to institute power shutdowns to avoid breaching stipulated emission ceilings. To be sure, there are other factors contributing to the power crisis—not least, skyrocketing coal prices whose rise was exacerbated by China’s boycott of Australian coal imports in retaliation for that country’s insistence on re-opening the inquiry into the origins of the COVID-19 virus—but the policy disconnects didn’t help.

Nobel Prize-winning economist Friedrich Hayek would have predicted that the Chinese government would ultimately fail to manage its economy by mandate, because officials can’t foresee and prevent every unintended consequence of their own actions. If China’s growth slows further, more such shortcomings are likely to surface. The Chinese authorities exhibited competence at virus management, but even when their intentions are good, leaders inevitably miscalculate. When the views of authoritarians are subjected to little debate and their mandates are implemented without checks and balances, miscalculations can have outsized consequences. It’s unclear to us when a greater trust in the spontaneous order spawned by private actors and market forces, however well-mitigated by regulation and taxation, will take hold in China. Likely not as soon as we had hoped.

Portfolio Positioning (% Weight) at October 31, 2021

 

Geography    Portfolio              Benchmark1
Canada      1.1      2.9
Emerging Markets      21.0      11.5
Europe EMU      12.3      8.3
Europe ex-EMU      11.6      7.9
Frontier Markets2      0.8     
Japan      9.0      5.7
Middle East      0.3      0.2
Pacific ex-Japan      2.6      2.9
United States      40.2      60.6
Cash      1.1     
Sector    Portfolio      Benchmark1
Comm Services      5.9      8.9
Consumer Discretionary      11.7      12.8
Consumer Staples      6.4      6.6
Energy      4.2      3.6
Financials      13.2      14.5
Health Care      17.6      11.5
Industrials      15.1      9.6
Information Technology      19.6      22.7
Materials      4.3      4.6
Real Estate      0.5      2.6
Utilities      0.4      2.6
Cash      1.1     

1MSCI All Country World Index; 2Includes countries with less-developed markets outside the index.

 

 

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Portfolio Highlights

The Global Equity Research portfolio’s holdings follow analysts’ recommendations from Harding Loevner’s collection of researched companies. During this twelve-month period ending October 31, 2021, Portfolio turnover was 39%, driven by analyst recommendations, recent analyst promotions and new analysts joining the team, as well as new small cap holdings. We ended the fund year with 326 holdings in the Portfolio. This increase in small cap holdings has led us to implement new portfolio construction rules to manage valuation risk and our exposure to small cap holdings; companies below US$5 billion in market cap are now allowed to enter the portfolio only if they score in the cheaper half of relative valuations using our proprietary value rankings.

During the period, the Portfolio’s exposure in Consumer Staples declined the most, due in equal parts to analyst recommendations and market movements. Meanwhile, we purchased several new positions in Consumer Discretionary companies due to analyst upgrades. By region, our exposure to the eurozone increased the most, due to analyst recommendations, while our exposure to the US decreased the most, due to analyst concerns about elevated valuations.

In Consumer Staples, we sold several holdings, including Japan-based household and personal care manufacturer Kao, whose growth prospects are being challenged from several directions. Chinese diaper sales, once among the company’s largest drivers of growth, have slumped in the face of stiffer competition (both from other international and Chinese home-grown players) while facing an even more uncertain future from China’s declining birth rates. Our analyst is also skeptical that Kao’s new global cosmetics platform will be able to gain traction against stronger multi-national brands such as Shiseido. We also sold several positions due to excessive valuations, including Japanese drug store operator Cosmos Pharmaceutical, Japanese infant care products manufacturer Pigeon, Germany-based plant breeder KWS, and South Korea-based cosmetics conglomerate Amorepacific. Additionally, we trimmed our positions in Proctor & Gamble, Walmart de México, Church & Dwight (the US-based maker of Arm & Hammer), and Colgate-Palmolive due to valuation concerns.

In Consumer Discretionary, we purchased several new positions due to analyst upgrades. One new addition was Haier Smart Home, one of the world’s largest home-appliance makers. Though it has yet to establish a strong presence in the high-end consumer market outside of its home country of China, the company’s lean manufacturing and growing strength in design and innovation should help it expand its global share in this area. We also purchased NITORI, Japan’s largest home furnishing retailer. The analyst upgraded the stock after a period of underperformance, believing that it was an opportune time to buy given the company’s more attractive valuation and the expansion of its retail footprint through its recent acquisition of competitor Shimachu, which should drive sales.

Ten Largest Holdings by Weight at October 31, 2021

 

Company   Sector   Market   %
Teradyne   Info Technology   US   1.2
Microsoft   Info Technology   US   1.2
Thermo Fisher Scientific   Health Care   US   1.1
Broadcom   Info Technology   US   1.1
JPMorgan Chase   Financials   US   1.1
Alphabet   Comm Services   US   1.1
UnitedHealth Group   Health Care   US   1.0
AbbVie   Health Care   US   1.0
ExxonMobil   Energy   US   1.0
Applied Materials   Info Technology   US   0.9

In the US, industrial automation conglomerate Rockwell and Domino’s, the pizza chain, were sold after downgrades by analysts due to valuation concerns following strong performance. We also trimmed our positions in online shopping and payments solutions provider eBay, specialty chemicals manufacture Ecolab, and medical technology company Edwards Lifesciences due to elevated valuations.

Our increased investments in the eurozone were largely the result of purchasing newly eligible smaller-cap holdings such as Nemetschek, a provider of specialty software for the architect, engineering, and construction community, and Germany-based IT consultancy Bechtle. We also had analyst upgrades of larger-cap companies, including Spanish airline-reservation-management software business Amadeus, German household products manufacturer Henkel, and French energy storage and distribution company Rubis.

Please read the separate disclosures page for important information, including the risks of investing in the Portfolio.

 

 

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International Equity Research Portfolio

    

Institutional Investors: HLIRX

    

         

 

Portfolio Management Team

 

LOGO

Moon Surana, CFA

Portfolio Manager

Andrew West, CFA

Portfolio Manager

Performance Summary

For the International Equity Research Portfolio, the Institutional Class gained 26.76% (net of fees and expenses) in the twelve-month period ended October 31, 2021. The Portfolio’s benchmark, the MSCI All Country World ex-US Index, gained 29.66% (net of source taxes).

Market Review

International stock markets increased in the twelve months ended October 31, with all sectors and regions finishing in positive territory.

The period began with a dramatic rise in global stock markets as vaccinations were approved and rolled out, unleashing demand that had been pent up throughout the pandemic. In the first three months of 2021, US retail sales climbed to the strongest level on record and restaurant bookings and the number of airline passengers improved. The incoming Biden administration also passed a colossal US$1.9 trillion relief package, sending direct payments to millions of Americans and extending unemployment insurance. In China, electricity generation and rail cargo volume rose substantially year over year, though consumer spending remained subdued despite much of daily life having returned to normal. The EU approved an 800 billion recovery fund aimed at infrastructure investment and support for businesses.

But while the economic recovery continued at a steady (albeit regionally uneven) pace for most of the period, several underlying pressures came to the fore in the period’s final few months. Inflation expectations, which had hit rock bottom in May 2020, ballooned as tight labor markets, pandemic-mangled supply chains, and the

Fund Facts at October 31, 2021

 

 

 

Total Net Assets   $15.3M
Sales Charge   None
Number of Holdings   229
Turnover (5 yr. avg.)   46%
Dividend Policy   Annual
 
    Institutional Investors
 
Ticker   HLIRX
 
CUSIP   412295826
 
Inception Date   12/17/2015
 
Minimum Investment1   $100,000
 
Net Expense Ratio2   0.75%3
 
Gross Expense Ratio2   1.40%

1Lower minimums available through certain brokerage firms. 2As of the most recent Prospectus and based on expenses for the most recent fiscal year end. 3The Net Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2022. Harding Loevner’s contractual agreement caps the net expense ratio at 0.75%. The Net Expense Ratio is applicable to investors.

resumption of more normal consumer and business activity led to shortages across industries. Additionally, commodity prices—particularly those linked with industrial activity such as copper and Brent crude—accelerated as economic activity increased. In response to these inflationary pressures, central banks turned more hawkish. Many began to signal the impending end of unprecedented monetary support and, in some cases, acted by reducing bond buying or raising interest rates. Meanwhile, an aggressive series of interventions by Chinese regulators heightened the regulatory malaise. The crackdowns, which began in November 2020 with the tabling of the IPO for Alibaba subsidiary Ant Group, expanded with the remanding of the entire after-school tutoring sector to not-for-profit status, the adoption of anti-monopoly measures against the country’s internet giants, and new rules to strengthen the data security of social media platforms and limit the time spent by minors playing video games, among other provisions. Combined with the apparent impending debt default (later avoided) by the property giant Evergrande—itself the result of policy moves designed to force the heavily indebted sector to de-lever—the regulatory sweep savaged Chinese share prices, leaving them down 9% for the period.

On a sector basis, Energy was the strongest performer, surging in lockstep with rising oil prices. Financials also performed strongly, aided by a steepening yield curve and surprisingly low credit

 

 

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Performance (% Total Return)

 

    For periods ended September 30, 2021     For periods ended October 31, 2021  
   
         1 Year           3 Years           5 Years     Since Inception*         1 Year           3 Years           5 Years     Since Inception*  
   
Intl. Equity Research Portfolio – Institutional Class     21.97       8.97       9.85       10.78       26.76       13.35       10.75       11.03  
   
MSCI All Country World ex-US Index     23.91       8.03       8.94       8.86       29.66       12.00       9.77       9.17  

Returns are annualized for periods greater than 1 year. *Inception date: December 17, 2015.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Portfolio may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 435-8105 or visiting www.hardingloevnerfunds.com.

The chart below illustrates the hypothetical return of an investment made in the Institutional share class. Investment return reflects waivers in effect. Absent such waivers, total return would be reduced. The performance provided in the table and chart do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares.

 

Total Return Based on a $100,000 Investment

Institutional Class

 

LOGO

defaults. Information Technology (IT) also outperformed despite heightened scrutiny from regulators in Europe, China, and the US. Less-cyclical sectors—Consumer Staples, Health Care, and Utilities—all underperformed for the period.

Viewed by geography, the eurozone outperformed as some of the countries hit hardest by the virus, such as Spain and Italy, began to recover. Canada also performed strongly, helped by its large weighting in banks and Energy. Japan significantly underperformed as the country instituted a new, more stringent state of emergency in response to another virus wave in late summer and early fall. Emerging Markets (EMs) also underperformed due to the weakness in China following its regulatory crackdowns.

Performance Attribution

The Portfolio underperformed due largely to weak stock selection. Stocks in Materials, Consumer Staples, and Energy detracted the most during the period. In the former, Danish natural food ingredients producer Chr. Hansen, which had outperformed during the start of the pandemic, gave back some of those gains during the closing months of 2020. In Consumer Staples, Unicharm, a Japanese

manufacturer of hygiene and household cleaning products, fell in response to rising input costs (like oil) and year-over-year decline in sales in Japan. In Energy, Dutch energy storage and handling company Vopak fell as lower occupancy rates for the company’s storage business (due to energy production shortages during the period) led to muted profit and revenue growth. The Portfolio’s underweight in Financials and overweight in Consumer Staples also hurt relative returns.

Strong stocks in Health Care and Financials contributed. In Health Care, Japanese pharmaceuticals manufacturer Shionogi gained due to positive results for its COVID-19 antiviral medication and to rising hopes for its reformulated COVID-19 vaccine. In Financials, shares of Spanish bank BBVA rose following the announcement of the sale of its lackluster US business for a healthy premium. The Portfolio’s underweight in Communication Services was also helpful.

Geographically, weak stocks in the eurozone and Japan detracted from relative performance. In the eurozone, shares of German provider of remote connectivity software TeamViewer declined as the company announced a string of disappointing earnings in 2021 and lowered guidance for the year. In Japan, drug and consumer goods manufacturer Kobayashi Pharma detracted as sales suffered from the collapse of tourism (pre-pandemic, Kobayashi derived around 10% of its sales from mainland China and from Chinese tourists visiting Japan and loading up on the company’s cosmetics, hygiene, and other products) and management offered weak 2021 guidance. The Portfolio’s underweight in Canada also hurt. Strong stocks in EMs contributed, particularly Silergy, a Taiwanese manufacturer of power management integrated circuits for a variety of specialized industries. The company has taken advantage of more established suppliers’ inability to keep up with automotive industry demand during the chip shortage, which has allowed Silergy to gain a foothold in an important new segment. Our holdings in Europe outside the eurozone were also helpful, especially UK-incorporated oil and gas producer Royal Dutch Shell, which benefitted as energy prices surged during the period due to rising worldwide demand and natural gas shortages.

 

 

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Perspective and Outlook

In our 2020 first quarter letter, at the early stage of the global pandemic, we marveled at the resiliency of the Chinese stock market, which we ascribed to the country’s success in containing the domestic spread of the coronavirus through draconian lockdowns, whose efficacy was made possible by its authoritarian political system. Eighteen months later, a similarly authoritarian intervention has left investors reeling. While government intervention is not uncommon in China, the scale and pace of this latest crop of reforms is unprecedented. Is Xi Jinping, China’s most powerful leader since Chairman Mao, revealing his allegiance to a collectivist ideology long thought to be discredited? Or is he boldly grasping the nettle of reform to redress economic imbalances and social ills before they become more entrenched and undermine the Chinese Communist Party’s (CCP’s) legitimacy?

Despite headlines conjuring memories of the CCP’s gruesome past, we accept that on balance the policy changes are intended to benefit the long-term health of Chinese society and economy, especially its middle class. The message the Party is sending to business leaders across China is clear: compete on a level playing field and pay a fair wage. For instance, much of the coverage of Ant Group’s canceled IPO focused on the ostensible desire of the CCP to clip the wings of its tech oligarchs. More persuasive in our view is that having observed and learned from the West’s subprime debacle a decade prior, Chinese financial regulators are not keen to allow loan origination to be divorced from the underlying credit risks of the loans—a source of moral hazard that would potentially destabilize a financial system still dominated by lumbering state-owned banks with weak credit cultures and poor management systems. Antitrust interventions targeting the largest e-commerce platforms echo the statements (if not yet the achievements) of many Western policymakers to improve competition by increasing the bargaining power of smaller businesses versus the giants.

Meanwhile, although the gutting of the private educational tutoring sector may seem disproportionate, it has with the stroke of a pen stigmatized one of the educational advantages of affluence while inhibiting the exam preparation arms race that many middle-class families feel has spiraled out of control. Actions taken to strengthen the data privacy protections of social media companies, tighten local ownership of Macau casinos, and rein in speculation in the high-end liquor market would not be out of place in Europe or the US. Not to minimize the serious consequences of these abrupt and radical reforms for private businesses; as investors we are viewing these actions mainly as problems requiring further analysis rather than as indications that China has become too unpredictable to be investable.

More troubling for China’s long-term prospects (although less of an immediate danger to our Portfolio) is the near-collapse of Evergrande. For years, the Chinese government has promised to wean the economy from fixed asset investments in favor of consumption, with little to show for the rhetoric. Regional governments have continued to rely on a red-hot property sector to provide their funding and achieve their mandated growth

targets. Alarmed by the outsized role of property development in the economy, and the associated risks to the financial system of too much property speculation, the central government pushed through a series of policies last year to force the property sector to deleverage. Evergrande’s plight looks like the direct consequence of those blunt top-down mandates as the heavily indebted company started to find itself cut off from its usual credit lines. While the government may be happy to make an example of the company, the spillover effects to the rest of the economy will be hard to contain and likely to require yet more interventions.

Equally disturbing to us are the rolling power outages afflicting as many as 20 provinces. Dueling top-down mandates with competing objectives seem to be playing a role here. Earlier in the year, the central government renewed its commitment to “dual control,” a mandate to curb carbon emissions by limiting both energy usage and the intensity (i.e., the amount of energy used per unit of GDP). That directive was issued, however, without anticipating this year’s spike in industrial output, whose emissions far exceed those from less energy-intensive sectors. Once they met their local growth targets, regional administrators rushed to institute power shutdowns to avoid breaching stipulated emission ceilings. To be sure, there are other factors contributing to the power crisis—not

Portfolio Positioning (%) at October 31, 2021

 

Geography    Portfolio              Benchmark1
Canada      1.9      7.4
Emerging Markets      31.6      29.2
Europe EMU      22.2      21.2
Europe ex-EMU      21.4      20.1
Frontier Markets2      1.1     
Japan      14.8      14.5
Middle East      0.3      0.4
Pacific ex-Japan      5.0      7.2
Cash      1.7     
Sector    Portfolio      Benchmark1
Communication Services      5.4      6.2
Consumer Discretionary      11.8      12.9
Consumer Staples      9.4      8.5
Energy      4.3      5.0
Financials      16.4      19.5
Health Care      12.9      9.4
Industrials      19.4      12.1
Information Technology      11.5      13.1
Materials      5.4      7.9
Real Estate      1.1      2.4
Utilities      0.7      3.0
Cash      1.7     

1MSCI All Country World ex-US Index; 2Includes countries with less-developed markets outside the index.

 

 

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Table of Contents

least, skyrocketing coal prices whose rise was exacerbated by China’s boycott of Australian coal imports in retaliation for that country’s insistence on re-opening the inquiry into the origins of the COVID-19 virus—but the policy disconnects didn’t help.

Nobel Prize-winning economist Friedrich Hayek would have predicted that the Chinese government would ultimately fail to manage its economy by mandate, because officials can’t foresee and prevent every unintended consequence of their own actions. If China’s growth slows further, more such shortcomings are likely to surface. The Chinese authorities exhibited competence at virus management, but even when their intentions are good, leaders inevitably miscalculate. When the views of authoritarians are subjected to little debate and their mandates are implemented without checks and balances, miscalculations can have outsized consequences. It’s unclear to us when a greater trust in the spontaneous order spawned by private actors and market forces, however well-mitigated by regulation and taxation, will take hold in China. Likely not as soon as we had hoped.

Portfolio Highlights

The International Equity Research Portfolio’s holdings follow analysts’ recommendations from Harding Loevner’s collection of researched companies. During this twelve-month period ending October 31, 2021, Portfolio turnover was 38%, driven by analyst recommendations, recent analyst promotions and new analysts joining the team, as well as new small cap holdings; we ended the fund year with 229 holdings in the Portfolio. This increase in small cap holdings has led us to implement new portfolio construction rules to manage valuation risk and our exposure to small cap holdings; companies below US$5 billion in market cap are now allowed to enter the Portfolio only if they score in the cheaper half of relative valuations using our proprietary value rankings.

During the period, the Portfolio’s exposure in Consumer Staples declined the most, due in equal parts to analyst recommendations and market movements. The Portfolio’s exposure to Financials increased the most (largely due to market movements), and analyst recommendations also led to an increase in exposure in Communication Services. By region, our exposure in Japan declined the most, due to both analyst recommendations and market movements. Our exposure to the eurozone increased the most, due to analyst recommendations.

In Consumer Staples, we sold several holdings, including Japan-based household and personal care manufacturer Kao, whose growth prospects are being challenged from several directions. Chinese diaper sales, once among the company’s largest drivers of growth, have slumped in the face of stiffer competition (both from other international and Chinese home-grown players) while facing an even more uncertain future from China’s declining birth rates. Our analyst is also skeptical that Kao’s new global cosmetics platform will be able to gain traction against stronger multi-national brands such as Shiseido. We also sold several positions due to excessive valuations, including Japanese drug store

Ten Largest Holdings by Weight at October 31, 2021

 

Company   Sector   Market   %
SE Banken   Financials   Sweden   1.2
DBS Group   Financials   Singapore   1.1
Reply   Info Technology   Italy   1.1
ASML   Info Technology   Netherlands   1.1
OCBC Bank   Financials   Singapore   1.0
Alfa Laval   Industrials   Sweden   1.0
Genmab   Health Care   Denmark   1.0
Hakuhodo   Comm Services   Japan   1.0
Alcon   Health Care   Switzerland   1.0
Diploma   Industrials   UK   1.0

operator Cosmos Pharmaceutical, Japanese infant care products manufacturer Pigeon, Germany-based plant breeder KWS SAAT, and South Korea-based cosmetics conglomerate Amorepacific. Additionally, we trimmed our positions in French cosmetic maker L’Oréal, Mexican grocery retail chain Walmart de México, Indian consumer goods company Godrej Consumer, Chinese alcoholic beverage producers Wuliangye Yibin and Jiangsu Yanghe Brewery, and Kobayashi Pharmaceutical due to valuation concerns.

In Communication Services, we purchased several new positions because of analyst upgrades, including two online real estate portals, Germany’s Scout24 and UK-based Rightmove. Scout24 operates the leading real estate platform in Germany where agents, landlords, and individual sellers can list and display their properties for sale or rent. (Think of it as a mashup of Realtor.com, Apartments. com, and Craigslist.) The company has over 70% market share and enjoys a strong network effect. In a similar vein, Rightmove is the UK’s leading real estate portal, with around 90% market share of users in the UK. As the dominant player in the market, the company has historically utilized its pricing power to sell its customers on additional products and increase prices for subscription packages. Rightmove’s low capital intensity and high level of free cash flow generation further add to the attractiveness of the business.

In Japan, we sold our positions in factory-materials supplier MonotaRO and machine-vision specialist Keyence due to valuation concerns following strong performance. We also trimmed our positions in economic research and consulting firm Nomura Research Institute and retail chain operator Fast Retailing due to valuation concerns. Our increased investments in the eurozone were largely the result of purchasing newly eligible smaller-cap holdings such as Germany-based IT consultancy Bechtle. We also had analyst upgrades of larger-cap companies, including Spanish airline-reservation-management software business Amadeus, German household products manufacturer Henkel, and French energy storage and distribution company Rubis.

 

 

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Table of Contents

Emerging Markets Research Portfolio

    

Institutional Investors: HLREX

    

         

 

Portfolio Management Team

 

LOGO

Moon Surana CFA

Portfolio Manager

Andrew West, CFA

Portfolio Manager

Performance Summary

For the Emerging Markets Research Portfolio, the Institutional Class rose 19.18% (net of fees and expenses) in the twelve-month period ended October 31, 2021. The Portfolio’s benchmark, the MSCI Emerging + Frontier Markets Index, rose 17.13% (net of source taxes).

Market Review

Stocks in Emerging Markets (EMs) surged upward in the first four months of the fiscal year, sustaining their remarkable recovery from the sharp decline in early 2020 caused by the initial shock of the COVID-19 outbreak. The discovery and broadening global distribution of effective vaccines helped accelerate economic activity, which boosted commodity prices and stoked enthusiasm for EM assets.

Investor enthusiasm for EMs appeared to wane after February 2021 due to the new threat posed by the COVID-19 Delta variant and then due to increasing concern about regulatory changes in China. These regulatory actions have included pushing to increase competition among internet businesses, new proposals to rein in private tutoring, curtailing the country’s cryptocurrency industry (including measures to prohibit banks from transacting in them), and restricting video game playing by young people.

Inflation concerns also weighed on EMs. Sporadic flare-ups of the COVID-19 Delta variant impeded a full recovery in global supply chains, causing acute shortages in shipping capacity and raw materials. Long-dated bond yields increased across EM countries, particularly those where inflation inflamed by pandemic-related

Fund Facts at October 31, 2021

 

 

 

Total Net Assets   $9.1M
Sales Charge   None
Number of Holdings   135
Turnover (5 Yr. Avg.)  
Dividend Policy   Annual
 
    Institutional Investors
 
Ticker   HLREX
 
CUSIP   412295776
 
Inception Date   12/19/2016
 
Minimum Investment1   $100,000
 
Net Expense Ratio2   1.15%3
 
Gross Expense Ratio2   2.40%

1Lower minimums available through certain brokerage firms. 2The Expense Ratios are are as of the most recent Prospectus and are based on expenses for the most recent fiscal year end. The Net Expense Ratio is shown net of Harding Loevner’s contractual agreement through February 28, 2022. 3Harding Loevner’s contractual agreement caps the Net Expense Ratio at 1.15%. The Net Expense Ratio is applicable to investors.

costs collided with fiscal weakness. Central banks in several major countries, including Brazil, Russia, Mexico, and the Czech Republic, raised interest rates.

Europe (especially Russia) and the Middle East were the strongest regions in the index, buoyed by the increasing demand for oil and other refined products. The CE3 markets (Poland, Hungary, and the Czech Republic) also soared amid evidence of a European economic recovery.

Asia lagged the index, largely due to China’s significant decline in a year when many markets enjoyed double-digit returns. New regulations were a threat to the growth prospects of multiple industries and companies, including the country’s giant internet platforms. Revelations late in the fiscal year of financial stress at Evergrande, one of China’s largest property companies, also hurt sentiment. By contrast, the other large Asian markets—South Korea, Taiwan, and India—all rallied.

The cyclical Energy and Materials sectors were the leading performers thanks to higher prices for oil and other commodities. Brent crude prices rose nearly 120% during the past twelve months to just above US$80 per barrel. Prices of industrial metals, agricultural products, and other commodities also made significant gains. In addition, Information Technology (IT) outperformed, helped by semiconductor and other hardware manufacturers.

 

 

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Performance (% Total Return)

 

    For periods ended September 30, 2021     For periods ended October 31, 2021  
   
             1 Year           3 Years     Since Inception*              1 Year           3 Years       Since Inception*  
   
Emerging Markets Research Portfolio – Instl. Class     19.86       8.84       10.69        19.18       11.90       10.65  
   
MSCI Emerging + Frontier Markets Index     18.31       8.60       10.97        17.13       12.28       11.00  

Returns are annualized for periods greater than 1 year. *Inception date: December 19, 2016.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Portfolio may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (877) 435-8105 or visiting www.hardingloevnerfunds.com.

The chart below illustrates the hypothetical return of an investment made in the Institutional share class. Investment return reflects waivers in effect. Absent such waivers, total return would be reduced. The performance provided in the table and chart do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares.

 

Consumer Discretionary was the weakest sector, reflecting sharp declines by ecommerce stocks in the large markets of China and Brazil. Also, Chinese regulators’ demands in July 2021 that tutoring companies operate as non-profits caused a collapse in shares of the country’s education companies. The Real Estate sector, dominated by Chinese developers, was weighed down by the prospect of China’s tightening liquidity conditions and Evergrande’s travails.

Performance Attribution

Strong stocks in the Consumer Discretionary and Financials sectors were key contributors to the Portfolio’s outperformance in the trailing 12 months. The Portfolio’s underweight in the former and overweight in the latter, as well our underweight in Communication Services, were also beneficial.

In Consumer Discretionary, Taiwan-based Eclat Textile, a leader in the development and manufacturing of performance-based fabrics, benefited from a recent wave of supplier consolidation and strong consumer demand for athleisure apparel (e.g., yoga pants). The Portfolio’s relatively low weight versus the index in ecommerce giant Alibaba (which we discuss further in the next section) was also helpful. In Financials, Thailand’s Siam Commercial Bank (SCB) and Russia’s Sberbank were strong contributors. Shares of SCB rallied on news of a corporate restructuring to accelerate growth of its fintech businesses.

We had poor stock selection in IT, where Taiwanese mobile-device lens manufacturer Largan Precision posted sluggish revenue growth as mobile phone camera lens specifications weren’t upgraded as quickly as expected; such delays can increase competitive intensity and weaken margins. Our underweights in IT and Materials also weighed on relative returns.

Regionally, we had strong holdings in Latin America, where the re-mobilization of consumers helped revive the shares of Mexican beverage producer FEMSA and Brazilian convenience store operator CBD. The Portfolio’s investments in Frontier Emerging Markets further boosted returns, led by Vietnamese steelmaker Hoa Phat

Total Return Based On a $100,000 Investment

Institutional Class

 

LOGO

Group as demand for steel in Vietnam remained high, while the company’s new production complex has helped it grow export sales to China.

Weak stocks in South Korea dragged down returns in Asia. Shares of video game producer NCSOFT slid following underwhelming sales of its new game Blade and Soul 2. Consumer products company LG Household and Health Care has seen slowing growth of its WHOO brand and declining cosmetic sales in China. The Portfolio’s underweights in the strong markets of Taiwan and India also dampened relative returns, though this effect was mitigated by our underweight in China.

Perspective and Outlook

China’s economic advancement over the past 20 years has been an outstanding humanitarian success. GDP growth averaging a remarkable 9% per annum has elevated nearly 800 million Chinese out of poverty. But sustaining this progress will require the country to overcome formidable challenges, including an inevitable decline in returns on investment, a rapidly aging population, and the massive public and private debt accumulated for infrastructure and real estate development since the 2008 global financial crisis.

 

 

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China’s leaders are acutely aware of these obstacles to growth and are planning meticulously to overcome them. A central component of their strategy is to use regulation to foster more competition in key sectors, thereby guiding markets to send capital to those firms that the government considers to be most productive and innovative. Another core focus is the promotion of “common prosperity,” a reaction to the capture by a small, ultra-wealthy cohort of so much of the wealth created in the country in recent years. These intersecting objectives have drawn the country’s internet services giants into the glower of state authorities, leading many of the companies and their CEOs and founders to pledge billions of dollars toward common prosperity initiatives. The rapid-fire regulatory actions have led some to wonder if the investment risks in the largest EM now outweigh the possible rewards.

We believe China presents varied attractive opportunities for long-term investors. Our analysts have identified more than 50 businesses across industries that meet our quality and durable growth criteria. We are not in denial about risks to industries and individual businesses of seismic policy change. For example, during this period as evidence mounted that regulatory changes in the conduct of for-profit tutoring were in the cards—a risk that was later realized—we sold our holding in New Oriental Education.

More often, signs of policy change risk are less definitive and simply add an extra layer of fuzziness to the already challenging task of forecasting business fundamentals. Sometimes policy changes may even put some businesses on more positive trajectories. Two elements of China’s economic reform agenda that we foresee increasing opportunities, or at least not posing existential threats, are data reform and the push for industrial innovation.

China is intent on significantly reforming the digital economy by setting new, world-leading standards for data collection and dissemination to fuel more productive capital allocation in internet-based industries. The walls of the major online gardens, most significantly those of Alibaba and Tencent, are to be breached, providing greater access to consumer data to foster competition. (Sadly, a side effect will be greater access to consumer data by regulators or state entities.) The exclusive network effects that Alibaba and Tencent enjoy from their closed platforms, among their key competitive advantages, will be blunted by new rules around customer data, as well as companion directives that will allow users to jump to competitors’ apps more easily.

In the past, both Alibaba and Tencent have proven highly capable in reacting to regulatory challenges. Their cultures of innovation and technological leadership, reinforced with gargantuan economies of scale, provide solid bases on which to sustain long-term growth and respectable returns on capital. The fact that their giant platforms play valuable roles within the fabric of the economy and could not be replicated other than in the lax

regulatory climate in which they were born and matured suggests that regulators do not intend to exterminate them.

In more material domains, China is doubling down on its long-term manufacturing strategy—unveiled in 2015 as the “Made in China 2025” (MIC25) plan—to improve its capabilities in critical technology sectors where it feels vulnerable amid the ongoing conflict with the US. Policymakers are also wary of a too-rapid tilt away from manufacturing toward services that has been the downfall of many EMs as they sought to advance beyond middle-income status. A revised plan that supersedes the MIC25 roadmap targets nine emerging industries, including biotech, new energy, advanced materials, and environmental protection, that will receive government subsidies and loans to promote investment. In early July 2021, a joint announcement from six Chinese ministries detailed the country’s aim to develop “hidden champions,” small- and medium-sized companies that potentially can forge dominant global positions in their industrial niches. So, while tax incentives and subsidies enjoyed by some internet-enabled service companies are expected to be withdrawn, the manufacturing sector should continue to receive the government’s full support.

Portfolio Positioning (% Weight) at October 31, 2021

 

Geography    Portfolio              Benchmark1
Brazil      5.3      3.9
China + Hong Kong2      29.6      34.3
India      8.0      11.8
Mexico      4.2      1.9
Russia      6.1      4.0
South Africa      0.8      3.1
South Korea      7.7      12.1
Taiwan      11.2      14.5
Small Emerging Markets3      18.1      13.2
Frontier Markets      7.4      1.2
Cash      1.6     
Sector    Portfolio      Benchmark1
Communication Services      7.2      10.6
Consumer Discretionary      16.1      15.3
Consumer Staples      11.2      5.9
Energy      6.7      5.8
Financials      22.3      19.9
Health Care      5.6      4.6
Industrials      8.8      4.8
Information Technology      14.9      20.4
Materials      3.9      8.5
Real Estate      1.7      2.1
Utilities      0.0      2.1
Cash      1.6     

1MSCI Emerging + Frontier Markets Index; 2The Emerging Markets Research Portfolio’s end weight in China at October 31, 2021 is 29.6% and Hong Kong is 0.0%. The Benchmark does not include Hong Kong; 3Includes the remaining emerging markets which, individually, comprise less than 5% of the index.

 

 

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Sanhua Intelligent Controls, China’s global leader in thermal controls, is an example of such a hidden champion. Its technical know-how and local low-cost advantage have allowed it to build a dominant global position supplying home-appliance manufacturers while steadily increasing its share in the auto sector. It recently won a patent infringement case in South Korea where a competitor had copied the design of one of Sanhua’s high-specification components, a sign of its technological leadership in this niche industry. Electric vehicles (EVs) represent a massive growth opportunity for Sanhua because they need more thermal control components than vehicles with internal combustion engines. In manufactured products the threat of state meddling is secondary to the threat of increasing competition. We expect Sanhua will undoubtedly face a slew of competitors given the large scale of the market opportunity. However, we believe Sanhua is set to take the lion’s share of the potential profit.

We remain intently focused on the evolution of individual businesses and their industries. We don’t have foresight into future policy changes or know how long this current burst of regulatory action in China will continue, although we suspect that its pace will abate. It is almost a cliché that the Chinese government’s highest goal is to preserve social stability, but we don’t think there should be official interest in maintaining a state of regulatory flux and economic turmoil if the main objective is to facilitate more productive capital allocation.

Portfolio Highlights

The Emerging Markets Equity Research Portfolio’s holdings are directly determined by analysts’ recommendations among Harding Loevner’s collection of researched companies. In addition to responding to changes in analysts’ ratings, we also adjust individual position weights to maintain our desired risk profile (moderately lower expected volatility compared with the benchmark and constrained tracking error). We ended the year with 135 holdings in the Portfolio, an increase of 12, driven by upgrades and new companies added to our research universe. The Portfolio’s turnover in the period was 45%.

By sector, the Portfolio’s allocation to Energy and Industrials increased the most, while Consumer Staples fell the most. By geography, the Portfolio’s weights increased the most in Russia and Taiwan and decreased the most in China and India.

In Energy, we added to our holdings Russian-based oil giant, Lukoil, and Colombian integrated oil-and-gas company, Ecopetrol, due to their attractive valuations. In Industrials, we made several purchases, including Sanhua and Hongfa Technology, the largest global maker of electoral relays used in multiple applications including EVs. Similar to Sanhua, Hongfa should benefit from the transition away from internal combustion engines.

Our exposure to Consumer Staples fell due to net sales in the sector. Walmart de México was trimmed due to relatively high

Top Ten Holdings by Weight at October 31, 2021

 

Company   Sector   Market   %
NCSOFT   Comm Services   South Korea   2.2
Lukoil   Energy   Russia   2.1
AirTAC   Industrials   Taiwan   2.0
FEMSA   Cons Staples   Mexico   1.9
Sberbank   Financials   Russia   1.9
Hon Hai Precision   Info Technology   Taiwan   1.9
Hoa Phat Group   Materials   Vietnam   1.9
TSMC   Info Technology   Taiwan   1.9
Chipbond Technology   Info Technology   Taiwan   1.8
Hero Motocorp   Cons Discretionary   India   1.8

valuations and a low growth profile. We sold Amorepacific, a South Korean cosmetics company, and Dabur, an Indian consumer goods distributor, when the analyst downgraded the stocks on valuation grounds.

Russia was one of the best-performing countries in the Portfolio. Along with increasing our position in Lukoil, in the first half of the year we added to our holding of Sberbank, whose shares went on to outperform.

We modestly increased the Portfolio’s number of investments in China, where our analysts continue to identify numerous attractive investment candidates even amid the fraught regulatory environment. Recent additions include, alongside Sanhua and Hongfa Technology, Haier Smart Home, which is among the world’s largest home-appliance makers, though it has yet to establish a strong presence in the high-end market outside of China. Haier’s lean manufacturing and growing strength in design and innovation should help it expand its global share. Meyer Optoelectronic makes systems incorporating optical sensors and software algorithms to accomplish things that human eyes and hands cannot. Already the leading supplier of dental-imaging equipment and food-sorting systems in China, the company has a significant long-term growth opportunity in recycling, where machine vision has yet to be deployed at scale. Shandong Sinocera makes nano-sized ceramics used in dental implants and in multilayer ceramic capacitors (MLCCs). The latter are sometimes referred to as the “blood vessels” of electric vehicles, smartphones, computers, and industrial automation equipment. The company has 70-90% share of the dental ceramic and MLCC markets in mainland China and 20-30% share of the markets globally, generating superior margins due to its proprietary synthesis process that is considerably more efficient than those of most competitors.

In India, HDFC Corp., Max Financial, and Dabur were sold after the analyst downgraded them on valuation concerns. We also trimmed Asian Paints and Tata Consultancy Services due to elevated relative valuations.

 

 

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Disclosures

 

The Portfolios invest in foreign securities, which will involve greater volatility and political, economic, and currency risks and differences in accounting methods. They also invest in emerging markets, which involve unique risks, such as exposure to economies less diverse and mature than the US or other more established foreign markets. Economic and political instability may cause larger price changes in emerging markets securities than other foreign securities.

Investments in small- and mid-cap companies involve additional risks such as limited liquidity and greater volatility.

Diversification does not guarantee a profit or prevent a loss in a declining market.

Long-term earnings growth and earnings per share growth are not a forecast of the Portfolios’ future performance.

The value of securities may fluctuate in response to various factors including, but not limited to, public health risks; these may be magnified if conditions and events adversely impact the global economy.

Companies held in the Portfolios at the end of the fiscal year appear in bold type; only the first reference to a particular holding appears in bold. The Portfolios are actively managed; therefore holdings shown may not be current. Portfolio holdings and top ten holdings should not be considered recommendations to buy or sell any security. Please refer to the Portfolios of Investments in this report for complete Portfolio holdings. Current and future Portfolio holdings are subject to risk.

While the Portfolios have no sales charge, management fees and other expenses still apply. Please see the Prospectus for further details.

Sector & Geographic Positioning data is sourced from: Northern Trust, Harding Loevner Funds Portfolios, and MSCI Barra.

Expense Ratios: Differences may exist between the commentary data and similar information reported in the financial statements due to timing differences. Unless otherwise stated, the expense ratios presented are shown as of the most recent Prospectus date, February 28, 2021.

Five year average turnover data is calculated using a simple average of annual turnover figures for the past five fiscal years. These annual turnover figures utilize purchase, sales, and market value data which is not reflective of adjustments required pursuant to Generally Accepted Accounting Principles (GAAP). Accordingly, differences may exist between this data and similar information reported in the financial statements.

Quasar Distributors, LLC, Distributor.

Index Definitions

The MSCI All Country World Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets. The Index consists of 49 developed and emerging market countries. Net dividends reinvested.

The MSCI All Country World ex-US Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets, excluding the US. The index consists of 48 developed and emerging market countries. Net dividends reinvested.

The MSCI All Country World ex-US Small Cap Index is a free-float market capitalization index that is designed to measure small cap developed and emerging market equity performance. The index consists of 49 developed and emerging market countries, and is comprised of companies that fall within a market capitalization range of USD 34-12,128 million (as of September 30, 2021). You cannot invest directly in this index.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The index consists of 26 emerging market countries. Net dividends reinvested.

The MSCI China All Shares Index is a free float-adjusted market capitalization index that is designed to reflect an opportunity set capturing large and mid-cap China share classes listed in Hong Kong, Shanghai, Shenzhen, and outside of China.

The MSCI Emerging + Frontier Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets and frontier markets. The index consists of 26 emerging markets countries and 28 frontier markets countries. Net dividends reinvested.

The MSCI Frontier Emerging Markets Index is a free float-adjusted market capitalization index designed to measure equity market performance in all countries from the MSCI Frontier Markets Index and the lower size spectrum of the MSCI Emerging Markets Index. The index consists of 28 frontier markets and 6 emerging markets. Net dividends reinvested.

The S&P 500 Index is an unmanaged index commonly used to measure performance of US stocks.

You cannot invest directly in these indexes.

Term Definitions

Basis points are a common measurement used chiefly for interest rates and other percentages in finance. A basis point is one hundredth of one percent.

Dividend yield is the annual dividends per share divided by current price per share, expressed as a percent.

Economies of scale is the cost advantage that arises with increased output of a product.

Gross Domestic Product (GDP) is the monetary value of all finished goods and services produced within a country’s borders in a specific time period (usually calculated on an annual basis).

Market Capitalization is the total dollar market value of all of a company’s outstanding shares.

Return on Capital (ROC) is a calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments.

Tracking Error is a measure of how closely a portfolio follows the index to which it is benchmarked.

Turnover is calculated by dividing the lesser of Purchases or Sales by Average Capital.

 

 

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Table of Contents

LOGO

 

Global Equity Portfolio   Institutional Emerging Markets Portfolio   Global Equity Research Portfolio
International Equity Portfolio   Emerging Markets Portfolio   International Equity Research Portfolio
International Small Companies Portfolio   Frontier Emerging Markets Portfolio   Emerging Markets Research Portfolio
Chinese Equity Portfolio    


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Table of Contents

Harding, Loevner Funds, Inc.

 

Table of Contents

 

 

Expense Example

     2  

Portfolio of Investments

     4  

Global Equity Portfolio

     4  

International Equity Portfolio

     7  

International Small Companies Portfolio

     10  

Institutional Emerging Markets Portfolio

     13  

Emerging Markets Portfolio

     16  

Frontier Emerging Markets Portfolio

     19  

Global Equity Research Portfolio

     22  

International Equity Research Portfolio

     31  

Emerging Markets Research Portfolio

     38  

Chinese Equity Portfolio

     43  

Statements of Assets and Liabilities

     45  

Statements of Operations

     48  

Statements of Changes in Net Assets

     50  

Financial Highlights

     54  

Notes to Financial Statements

     72  

Report of Independent Registered Public Accounting Firm

     86  

Supplemental Tax Information

     87  

Approval of Investment Advisory Agreement

     88  

Privacy Notice

     93  

Directors and Principal Officers

     94  

Supplemental Information

     99  

For use only when preceded or accompanied by a prospectus. Read the prospectus carefully before you invest or send money.


Table of Contents

Harding, Loevner Funds, Inc.

 

Expense Example

October 31, 2021 (unaudited)

 

As a shareholder of a Harding Loevner Portfolio, you incur ongoing costs, including management fees; to the extent applicable, distribution (12b-1) fees and/or shareholder services fees; and other fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars and cents) of investing in a Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of a six month period and held through the period ended October 31, 2021.

Actual Expenses

The first line under each Portfolio in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your Portfolio under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line under each Portfolio in the table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second line under each Portfolio in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

 

Portfolio   

Beginning

Account Value
May 1, 2021

     Ending
Account Value
October 31, 2021
     Annualized
Expense Ratio
    Expenses Paid
During Period*
(May 1, 2021 to
October 31, 2021)
 

Global Equity Portfolio — Institutional Class

          

Actual

   $ 1,000.00      $ 1,084.90        0.87   $ 4.57  

Hypothetical (5% annual return before expenses)

     1,000.00        1,020.82        0.87       4.43  

Global Equity Portfolio — Institutional Class Z

          

Actual

     1,000.00        1,085.30        0.80       4.20  

Hypothetical (5% annual return before expenses)

     1,000.00        1,021.17        0.80       4.08  

Global Equity Portfolio — Advisor Class

          

Actual

     1,000.00        1,083.80        1.08       5.67  

Hypothetical (5% annual return before expenses)

     1,000.00        1,019.76        1.08       5.50  

International Equity Portfolio — Institutional Class

          

Actual

     1,000.00        1,047.40        0.80       4.13  

Hypothetical (5% annual return before expenses)

     1,000.00        1,021.17        0.80       4.08  

International Equity Portfolio — Institutional Class Z

          

Actual

     1,000.00        1,047.80        0.72       3.72  

Hypothetical (5% annual return before expenses)

     1,000.00        1,021.58        0.72       3.67  

International Equity Portfolio — Investor Class

          

Actual

     1,000.00        1,045.40        1.13       5.83  

Hypothetical (5% annual return before expenses)

     1,000.00        1,019.51        1.13       5.75  

International Small Companies Portfolio — Institutional Class

          

Actual

     1,000.00        1,088.80        1.14       6.00  

Hypothetical (5% annual return before expenses)

     1,000.00        1,019.46        1.14       5.80  

* Expenses are calculated using each Portfolio’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days), and divided by the number of days in the year (365 days).

 

2


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Harding, Loevner Funds, Inc.

 

Expense Example (continued)

October 31, 2021 (unaudited)

 

 

Portfolio    Beginning
Account Value
May 1, 2021
     Ending
Account Value
October 31, 2021
     Annualized
Expense Ratio
    Expenses Paid
During Period*
(May 1, 2021 to
October 31, 2021)
 

International Small Companies Portfolio — Investor Class

          

Actual

   $ 1,000.00      $  1,087.40        1.40   $ 7.37  

Hypothetical (5% annual return before expenses)

     1,000.00        1,018.15        1.40       7.12  

Institutional Emerging Markets Portfolio — Institutional Class

          

Actual

     1,000.00        967.80        1.12       5.56  

Hypothetical (5% annual return before expenses)

     1,000.00        1,019.56        1.12       5.70  

Institutional Emerging Markets Portfolio — Institutional Class Z

          

Actual

     1,000.00        967.90        1.04       5.16  

Hypothetical (5% annual return before expenses)

     1,000.00        1,019.96        1.04       5.30  

Emerging Markets Portfolio — Advisor Class

          

Actual

     1,000.00        968.60        1.25       6.20  

Hypothetical (5% annual return before expenses)

     1,000.00        1,018.90        1.25       6.36  

Frontier Emerging Markets Portfolio — Institutional Class I

          

Actual

     1,000.00        1,128.30        1.67       8.96  

Hypothetical (5% annual return before expenses)

     1,000.00        1,016.79        1.67       8.49  

Frontier Emerging Markets Portfolio — Institutional

          

Class II

          

Actual

     1,000.00        1,130.20        1.35       7.25  

Hypothetical (5% annual return before expenses)

     1,000.00        1,018.40        1.35       6.87  

Frontier Emerging Markets Portfolio — Investor Class

          

Actual

     1,000.00        1,126.30        2.00       10.72  

Hypothetical (5% annual return before expenses)

     1,000.00        1,015.12        2.00       10.16  

Global Equity Research Portfolio — Institutional Class

          

Actual

     1,000.00        1,058.70        0.80       4.15  

Hypothetical (5% annual return before expenses)

     1,000.00        1,021.17        0.80       4.08  

International Equity Research Portfolio — Institutional Class

          

Actual

     1,000.00        1,017.30        0.75       3.81  

Hypothetical (5% annual return before expenses)

     1,000.00        1,021.42        0.75       3.82  

Emerging Markets Research Portfolio — Institutional Class

          

Actual

     1,000.00        975.50        1.15       5.73  

Hypothetical (5% annual return before expenses)

     1,000.00        1,019.41        1.15       5.85  

Chinese Equity Portfolio — Institutional Class

          

Actual

     1,000.00        873.10        1.15       5.43  

Hypothetical (5% annual return before expenses)

     1,000.00        1,019.41        1.15       5.85  

* Expenses are calculated using each Portfolio’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days), and divided by the number of days in the year (365 days).

 

 

3


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 98.1%              

Australia - 0.5%

     

Xero Ltd. (Software & Services)*†

     81,937        $9,266,805  

Brazil - 0.5%

     

XP Inc., Class A (Diversified Financials)*

     294,800        9,672,388  

China - 9.4%

     

Baidu Inc. - Sponsored ADR (Media & Entertainment)*

     115,235        18,695,726  

Country Garden Services Holdings Co., Ltd. (Real Estate)†

     4,129,000        31,969,036  

ENN Energy Holdings Ltd. (Utilities)†

     497,400        8,619,958  

NetEase Inc. (Media & Entertainment)†

     1,108,300        21,675,887  

Sangfor Technologies Inc., Class A (Software & Services)†

     437,450        13,860,950  

Tencent Holdings Ltd. (Media & Entertainment)†

     304,200        18,886,636  

WuXi AppTec Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

     757,200        16,315,843  

Wuxi Biologics Cayman Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*^†

     2,531,500        38,663,867  
        168,687,903  

Denmark - 0.9%

     

Genmab A/S (Pharmaceuticals, Biotechnology & Life Sciences)*†

     35,549        16,003,404  

Finland - 0.8%

     

Neste OYJ (Energy)†

     250,852        14,006,067  

France - 2.2%

     

L’Oreal SA (Household & Personal Products)†

     40,554        18,544,993  

Schneider Electric SE (Capital Goods)†

     118,642        20,521,785  
            39,066,778  

Hong Kong - 1.0%

     

AIA Group Ltd. (Insurance)†

     1,553,605        17,557,037  

India - 1.2%

     

HDFC Bank Ltd. - ADR (Banks)

     292,805        21,055,608  

Indonesia - 1.2%

     

Bank Central Asia Tbk PT (Banks)†

     39,356,270        20,769,712  

Japan - 2.5%

     

Chugai Pharmaceutical Co., Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

     328,800        12,262,270  
     Shares      Value  
COMMON STOCKS - 98.1% (continued)              

Japan - 2.5% (continued)

     

MISUMI Group Inc. (Capital Goods)†

     215,800        $9,034,870  

Sysmex Corp. (Health Care Equipment & Services)†

     195,065        24,245,720  
        45,542,860  

Netherlands - 2.7%

     

Adyen NV (Software & Services)*^†

     7,135        21,552,705  

ASML Holding NV, Reg S (Semiconductors & Semiconductor Equipment)

     33,522        27,249,363  
        48,802,068  

Poland - 0.8%

     

CD Projekt SA (Media & Entertainment)†

     312,222        13,623,026  

Sweden - 1.8%

     

Atlas Copco AB, Class A (Capital Goods)†

     280,145        17,971,273  

Epiroc AB, Class A (Capital Goods)†

     563,184        13,991,417  
        31,962,690  

Switzerland - 3.4%

     

Alcon Inc. (Health Care Equipment & Services)

     250,559        20,886,598  

Roche Holding AG, Genusschein (Pharmaceuticals, Biotechnology & Life Sciences)†

     57,381        22,230,140  

VAT Group AG (Capital Goods)^†

     35,744        17,028,902  
        60,145,640  

Taiwan - 1.9%

     

Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & Semiconductor Equipment)†

     542,000        11,470,153  

Taiwan Semiconductor Manufacturing Co., Ltd. - Sponsored ADR (Semiconductors & Semiconductor Equipment)

     198,565        22,576,841  
        34,046,994  

United Kingdom - 1.9%

     

Abcam plc (Pharmaceuticals, Biotechnology & Life Sciences)*†

     1,080,470        24,581,518  

Spirax-Sarco Engineering plc (Capital Goods)†

     45,918        9,811,303  
        34,392,821  

United States - 65.4%

     

Accenture plc, Class A (Software & Services)

     72,243        25,920,066  

Adobe Inc. (Software & Services)*

     59,947        38,987,131  
 

 

See Notes to Financial Statements

 

4


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 98.1% (continued)  

United States - 65.4% (continued)

     

Align Technology Inc. (Health Care Equipment & Services)*

     48,684        $30,396,829  

Alphabet Inc., Class A (Media & Entertainment)*

     21,560        63,837,435  

Amazon.com Inc. (Retailing)*

     15,262        51,470,027  

AMETEK Inc. (Capital Goods)

     123,657        16,372,187  

Apple Inc. (Technology Hardware & Equipment)

     128,180        19,201,364  

Applied Materials Inc. (Semiconductors & Semiconductor Equipment)

     131,553        17,976,717  

CME Group Inc. (Diversified Financials)

     113,963        25,134,540  

CoStar Group Inc. (Commercial & Professional Services)*

     205,061        17,645,499  

Danaher Corp. (Health Care Equipment & Services)

     84,337        26,293,747  

Deere & Co. (Capital Goods)

     131,824        45,124,673  

eBay Inc. (Retailing)

     404,869        31,061,550  

Edwards Lifesciences Corp. (Health Care Equipment & Services)*

     174,477        20,905,834  

EPAM Systems Inc. (Software & Services)*

     28,579        19,240,526  

Etsy Inc. (Retailing)*

     88,971        22,304,140  

Facebook Inc., Class A (Media & Entertainment)*

     118,862        38,460,177  

First Republic Bank (Banks)

     319,796        69,181,469  

Illumina Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*

     93,570        38,837,164  

Intuitive Surgical Inc. (Health Care Equipment & Services)*

     56,556        20,424,068  

IQVIA Holdings Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*

     65,246        17,056,609  

Mastercard Inc., Class A (Software & Services)

     39,865        13,375,505  

Microsoft Corp. (Software & Services)

     134,690        44,665,898  

Netflix Inc. (Media & Entertainment)*

     32,640        22,531,718  

NIKE Inc., Class B (Consumer Durables & Apparel)

     231,125        38,664,901  

NVIDIA Corp. (Semiconductors & Semiconductor Equipment)

     90,365        23,103,620  

PayPal Holdings Inc. (Software & Services)*

     135,090        31,420,583  

Pinterest Inc., Class A (Media & Entertainment)*

     303,069        13,529,000  

Roper Technologies Inc. (Capital Goods)

     31,613        15,423,034  
     Shares      Value  
COMMON STOCKS - 98.1% (continued)  

United States - 65.4% (continued)

     

salesforce.com Inc. (Software & Services)*

     96,617        $28,955,149  

Schlumberger NV (Energy)

     724,532        23,373,402  

SVB Financial Group (Banks)*

     84,239        60,433,059  

Synopsys Inc. (Software & Services)*

     79,841        26,601,424  

Thermo Fisher Scientific Inc. (Pharmaceuticals, Biotechnology & Life Sciences)

     53,583        33,921,790  

Trade Desk Inc., Class A (Software & Services)*

     229,758        17,211,172  

Tradeweb Markets Inc., Class A (Diversified Financials)

     232,848        20,746,757  

UnitedHealth Group Inc. (Health Care Equipment & Services)

     47,169        21,719,909  

Verisk Analytics Inc. (Commercial & Professional Services)

     71,873        15,112,736  

Vertex Pharmaceuticals Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*

     156,849        29,006,086  

Walt Disney Co. (Media & Entertainment)*

     93,264        15,768,145  

Workday Inc., Class A (Software & Services)*

     65,479        18,987,600  
     
                1,170,383,240  
   

Total Common Stocks (Cost $1,129,898,935)

 

     $1,754,985,041  
     
SHORT TERM INVESTMENTS - 3.1%         

Northern Institutional Funds - Treasury Portfolio (Premier Shares), 0.01% (Money Market Funds)

     54,785,140        54,785,140  
   

Total Short Term Investments (Cost $54,785,140)

 

     $54,785,140  
                   
     

Total Investments — 101.2%

                 
     

(Cost $1,184,684,075)

              $1,809,770,181  

Liabilities Less Other Assets - (1.2)%

        (21,587,929
     

Net Assets — 100.0%

 

             

 

$1,788,182,252

 

 

 

 

 

See Notes to Financial Statements

 

5


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

Summary of Abbreviations

ADR    American Depositary Receipt
Reg S    Security sold outside United States without registration under the Securities Act of 1933.
*    Non-income producing security.
   Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.
^    Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 4.3% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.

 

Industry     
Percentage of
Net Assets
 
 

Banks

     9.6

Capital Goods

     9.2  

Commercial & Professional Services

     1.8  

Consumer Durables & Apparel

     2.2  

Diversified Financials

     3.1  

Energy

     2.1  

Health Care Equipment & Services

     9.2  

Household & Personal Products

     1.0  

Insurance

     1.0  

Media & Entertainment

     12.7  

Pharmaceuticals, Biotechnology & Life Sciences

     13.9  

Real Estate

     1.8  

Retailing

     5.9  

Semiconductors & Semiconductor Equipment

     5.7  

Software & Services

     17.3  

Technology Hardware & Equipment

     1.1  

Utilities

     0.5  

Money Market Fund

     3.1  
   

Total Investments

     101.2  

Liabilities Less Other Assets

     (1.2
   

Net Assets

     100.0
 

 

 

See Notes to Financial Statements

 

6


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 95.4%              

Australia - 2.1%

     

BHP Group Ltd. - Sponsored ADR (Materials)

     8,481,846        $465,144,435  

Brazil - 1.2%

     

Ambev SA - ADR (Food Beverage & Tobacco)

     77,019,760        227,978,490  

XP Inc., Class A (Diversified Financials)*

     1,233,298        40,464,512  
        268,443,002  

Canada - 2.1%

     

Alimentation Couche-Tard Inc., Class B (Food & Staples Retailing)

     5,754,000        215,821,493  

Canadian National Railway Co. (Transportation)

     1,848,879        245,734,508  
        461,556,001  

China - 8.2%

     

Alibaba Group Holding Ltd. - Sponsored ADR (Retailing)*

     1,425,164        235,066,550  

CSPC Pharmaceutical Group Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

     242,388,000        253,987,507  

ENN Energy Holdings Ltd. (Utilities)†

     11,842,100        205,223,976  

Ping An Insurance Group Co. of China Ltd., Class H (Insurance)†

     25,894,500        186,467,091  

Tencent Holdings Ltd. (Media & Entertainment)†

     11,176,100        693,882,108  

Zhejiang Sanhua Intelligent Controls Co., Ltd., Class A (Capital Goods)†

     62,770,197        232,076,628  
        1,806,703,860  

Denmark - 1.0%

     

Novozymes A/S, Class B (Materials)†

     2,870,178        210,945,371  

France - 8.6%

     

Air Liquide SA (Materials)†

     1,168,470        195,314,971  

Dassault Systemes SE (Software & Services)†

     5,910,801        344,729,273  

L’Oreal SA (Household & Personal Products)†

     1,651,739        755,325,926  

Schneider Electric SE (Capital Goods)†

     3,384,935        585,500,149  
        1,880,870,319  

Germany - 8.5%

     

Allianz SE, Reg S (Insurance)†

     2,035,068        473,269,455  

Infineon Technologies AG (Semiconductors & Semiconductor Equipment)†

     15,982,779        747,051,531  

SAP SE - Sponsored ADR (Software & Services)

    
2,217,149
 
     320,998,832  
     Shares      Value  
COMMON STOCKS - 95.4% (continued)         

Germany - 8.5% (continued)

     

Symrise AG (Materials)†

     2,291,077        $316,755,252  
        1,858,075,070  

Hong Kong - 2.7%

     

AIA Group Ltd. (Insurance)†

     52,362,074        591,735,288  

India - 3.0%

     

HDFC Bank Ltd. - ADR (Banks)

     3,667,640        263,739,993  

ICICI Bank Ltd. - Sponsored ADR (Banks)

     18,510,015        391,486,817  
        655,226,810  

Indonesia - 1.2%

     

Telkom Indonesia Persero Tbk PT (Telecommunication Services)†

     956,064,400        256,316,402  

Israel - 1.2%

     

Check Point Software Technologies Ltd. (Software & Services)*

     2,165,126        258,949,070  

Japan - 12.6%

     

Chugai Pharmaceutical Co., Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

     8,230,600        306,952,056  

FANUC Corp. (Capital Goods)†

     830,300        163,168,464  

Keyence Corp. (Technology Hardware & Equipment)†

     541,454        326,502,189  

Komatsu Ltd. (Capital Goods)†

     10,102,800        263,900,748  

Kubota Corp. (Capital Goods)†

     15,924,600        339,506,685  

Nitori Holdings Co., Ltd. (Retailing)†

     1,605,200        294,556,010  

Shionogi & Co., Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

     4,784,800        311,535,760  

Sysmex Corp. (Health Care

     

Equipment & Services)†

     2,916,007        362,446,828  

Unicharm Corp. (Household & Personal Products)†

     9,666,700        389,934,619  
        2,758,503,359  

Mexico - 1.0%

     

Fomento Economico Mexicano SAB de CV - Sponsored ADR (Food Beverage & Tobacco)

     2,813,363        231,230,305  

Netherlands - 2.8%

     

Adyen NV (Software & Services)*^†

     206,040        622,385,323  

Russia - 3.0%

     

LUKOIL PJSC - Sponsored ADR (Energy)

     4,282,336        436,926,742  

Yandex NV, Class A (Media & Entertainment)*

     2,611,431        216,330,944  
        653,257,686  
 

 

See Notes to Financial Statements

 

7


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 95.4% (continued)         

Singapore - 2.4%

     

DBS Group Holdings Ltd. (Banks)†

     22,272,808        $519,012,230  

South Korea - 2.7%

     

Samsung Electronics Co., Ltd. - GDR, Reg S (Technology Hardware & Equipment)†

     390,767        586,573,157  

Spain - 1.5%

     

Banco Bilbao Vizcaya Argentaria SA (Banks)†

     48,229,674        338,377,902  

Sweden - 8.3%

     

Alfa Laval AB (Capital Goods)†

     9,227,284        394,410,346  

Atlas Copco AB, Class A (Capital Goods)†

     12,211,093        783,340,375  

Epiroc AB, Class A (Capital Goods)†

     14,175,655        352,171,769  

Skandinaviska Enskilda Banken AB, Class A (Banks)†

     18,760,548        293,713,518  
        1,823,636,008  

Switzerland - 10.9%

     

Alcon Inc. (Health Care Equipment & Services)

     4,029,065        335,862,858  

Lonza Group AG, Reg S (Pharmaceuticals, Biotechnology & Life Sciences)†

     646,184        530,716,446  

Nestle SA - Sponsored ADR (Food Beverage & Tobacco)

     3,331,543        439,163,998  

Roche Holding AG, Genusschein (Pharmaceuticals, Biotechnology & Life Sciences)†

     1,591,501        616,568,033  

SGS SA, Reg S (Commercial & Professional Services)†

     60,922        179,974,599  

Sonova Holding AG, Reg S (Health Care Equipment & Services)†

     699,576        289,641,010  
        2,391,926,944  

Taiwan - 3.4%

     

Taiwan Semiconductor Manufacturing Co., Ltd. - Sponsored ADR (Semiconductors & Semiconductor Equipment)

     6,602,163        750,665,933  

United Kingdom - 5.9%

     

Diageo plc (Food Beverage & Tobacco)†

     5,027,090        250,263,790  

Rio Tinto plc (Materials)†

     5,639,733        351,404,360  

Royal Dutch Shell plc, Class B (Energy)†

     13,015,400        298,463,976  

Standard Chartered plc (Banks)†

     21,912,063        148,529,324  

Unilever plc (Household & Personal Products)†

     4,398,019        235,367,205  
        1,284,028,655  
     Shares      Value  
COMMON STOCKS - 95.4% (continued)         

United States - 1.1%

     

Linde plc (Materials)†

 

    

 

757,760

 

 

 

    

 

$244,100,273

 

 

 

Total Common Stocks (Cost $13,083,365,390)

 

     $20,917,663,403  
  
PREFERRED STOCKS - 1.5%              

Brazil - 1.0%

     

Itau Unibanco Holding SA - Sponsored ADR, 0.78% (Banks)+

     53,417,626        217,409,738  

Germany^^ - 0.0%

     

FUCHS PETROLUB SE, 2.41% (Materials)+†

     131,733        6,311,177  

South Korea - 0.5%

     

Samsung Electronics Co., Ltd. - GDR, Reg S, 2.18% (Technology Hardware & Equipment)+†

 

    

 

74,447

 

 

 

    

 

102,539,357

 

 

 

   

Total Preferred Stocks (Cost $223,530,423)

 

     $326,260,272  
  
SHORT TERM INVESTMENTS - 2.9%         

Northern Institutional Funds - Treasury Portfolio (Premier Shares), 0.01% (Money Market Funds)

 

    

 

626,589,387

 

 

 

    

 

626,589,387

 

 

 

Total Short Term Investments (Cost $626,589,387)

              $626,589,387  
                   

Total Investments — 99.8%

                 

(Cost $13,933,485,200)

              $21,870,513,062  

Other Assets Less Liabilities - 0.2%

              42,276,627  

Net Assets — 100.0%

              $21,912,789,689  
 

 

See Notes to Financial Statements

 

8


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

Summary of Abbreviations
ADR    American Depositary Receipt
GDR    Global Depositary Receipt
Reg S    Security sold outside United States without registration under the Securities Act of 1933.
*    Non-income producing security.
   Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.
^    Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 2.8% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.
+    Current yield is disclosed. Dividends are calculated based on a percentage of the issuer’s net income.
^^    Amount is less than 0.005%.

 

Industry     
Percentage of
Net Assets
 
 

Banks

     9.9

Capital Goods

     14.2  

Commercial & Professional Services

     0.8  

Diversified Financials

     0.2  

Energy

     3.4  

Food & Staples Retailing

     1.0  

Food Beverage & Tobacco

     5.2  

Health Care Equipment & Services

     4.5  

Household & Personal Products

     6.3  

Insurance

     5.7  

Materials

     8.2  

Media & Entertainment

     4.2  

Pharmaceuticals, Biotechnology & Life Sciences

     9.2  

Retailing

     2.4  

Semiconductors & Semiconductor Equipment

     6.8  

Software & Services

     7.1  

Technology Hardware & Equipment

     4.6  

Telecommunication Services

     1.2  

Transportation

     1.1  

Utilities

     0.9  

Money Market Fund

     2.9  

Total Investments

     99.8  

Other Assets Less Liabilities

     0.2  

Net Assets

     100.0
 

 

See Notes to Financial Statements

 

9


Table of Contents

Harding, Loevner Funds, Inc.

 

International Small Companies Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 97.3%              

Argentina - 2.2%

     

Globant SA (Software & Services)*

     42,310        $13,504,928  

Bangladesh - 0.7%

     

Square Pharmaceuticals Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

     1,648,840        4,190,835  

Canada - 2.1%

     

Kinaxis Inc. (Software & Services)*

     79,700        12,369,729  

China - 1.1%

     

Haitian International Holdings Ltd. (Capital Goods)†

     2,167,000        6,344,150  

Denmark - 0.6%

     

SimCorp A/S (Software & Services)†

     28,498        3,445,557  

Egypt - 1.4%

     

Edita Food Industries SAE (Food Beverage & Tobacco)†

     9,945,617        4,424,680  

Integrated Diagnostics Holdings plc (Health Care Equipment & Services)^†

     3,199,577        3,960,154  
        8,384,834  

Finland - 2.0%

     

Vaisala OYJ, Class A (Technology Hardware & Equipment)†

     220,524        11,727,851  

France - 4.6%

     

Alten SA (Software & Services)†

     89,652        14,453,866  

LISI (Capital Goods)†

     130,962        3,643,452  

Rubis SCA (Utilities)†

     289,797        9,280,973  
        27,378,291  

Germany - 9.7%

     

Bechtle AG (Software & Services)†

     176,395        13,215,388  

FUCHS PETROLUB SE (Materials)†

     262,673        9,666,587  

KWS Saat SE & Co. KGaA (Food Beverage & Tobacco)†

     89,081        7,600,456  

Pfeiffer Vacuum Technology AG (Capital Goods)†

     22,805        5,694,124  

STRATEC SE (Health Care Equipment & Services)†

     102,250        16,312,603  

TeamViewer AG (Software & Services)*^†

     372,836        5,560,619  
        58,049,777  

Hong Kong - 0.5%

     

ASM Pacific Technology Ltd. (Semiconductors & Semiconductor Equipment)†

     252,400        2,739,698  

 

     Shares      Value  
COMMON STOCKS - 97.3% (continued)         

India - 2.1%

     

Max Financial Services Ltd. (Insurance)*†

     662,751        $8,621,085  

SH Kelkar & Co., Ltd. (Materials)^†

     1,914,241        4,072,574  
        12,693,659  

Indonesia - 2.0%

     

Sarana Menara Nusantara Tbk PT (Telecommunication Services)†

     110,023,100        9,014,177  

Tower Bersama Infrastructure Tbk PT (Telecommunication Services)†

     15,395,900        3,198,205  
        12,212,382  

Israel - 1.8%

     

CyberArk Software Ltd. (Software & Services)*

     58,673        10,567,594  

Italy - 3.9%

     

Reply SpA (Software & Services)†

     120,451        23,399,438  

Japan - 13.7%

     

ABC-Mart Inc. (Retailing)†

     30,000        1,437,456  

Ariake Japan Co., Ltd. (Food Beverage & Tobacco)†

     147,900        9,623,115  

BML Inc. (Health Care Equipment & Services)†

     121,000        4,249,266  

Cosmos Pharmaceutical Corp. (Food & Staples Retailing)†

     47,100        7,206,021  

Infomart Corp. (Software & Services)†

     787,900        7,697,750  

JCU Corp. (Materials)†

     173,900        6,967,244  

MISUMI Group Inc. (Capital Goods)†

     73,000        3,056,281  

Nihon M&A Center Holdings Inc. (Commercial & Professional Services)†

     117,900        3,614,131  

Pigeon Corp. (Household & Personal Products)†

     35,800        829,626  

Rinnai Corp. (Consumer Durables & Apparel)†

     36,900        3,784,816  

Rohto Pharmaceutical Co., Ltd. (Household & Personal Products)†

     106,000        3,237,130  

Santen Pharmaceutical Co., Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

     528,200        7,432,526  

SMS Co., Ltd. (Commercial & Professional Services)†

     306,200        11,899,529  

Solasto Corp. (Health Care Equipment & Services)†

     274,800        3,326,380  

Stanley Electric Co., Ltd. (Automobiles & Components)†

     306,900        7,739,862  
        82,101,133  
 

 

See Notes to Financial Statements

 

10


Table of Contents

Harding, Loevner Funds, Inc.

 

International Small Companies Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 97.3% (continued)         

Kuwait - 0.9%

     

Mabanee Co. KPSC (Real Estate)†

     2,011,426        $5,252,389  

Lithuania - 1.8%

     

Siauliu Bankas AB (Banks)†

     12,084,014        10,800,661  

Malaysia - 1.2%

     

Dialog Group Bhd. (Energy)†

     5,460,640        3,734,956  

TIME dotCom Bhd. (Telecommunication Services)†

     3,289,500        3,590,977  
        7,325,933  

Mexico - 1.6%

     

Grupo Herdez SAB de CV (Food Beverage & Tobacco)

     2,703,638        4,971,815  

Megacable Holdings SAB de CV (Media & Entertainment)

     1,650,600        4,863,289  
        9,835,104  

Norway - 2.4%

     

Tomra Systems ASA (Commercial & Professional Services)†

     225,628        14,585,571  

Poland - 0.4%

     

CD Projekt SA (Media & Entertainment)†

     58,864        2,568,383  

Romania - 0.3%

     

Societatea Nationala de Gaze Naturale ROMGAZ SA (Energy)†

     241,357        2,102,683  

Saudi Arabia - 1.0%

     

Jarir Marketing Co. (Retailing)†

     105,890        5,723,359  

South Africa - 0.6%

     

Clicks Group Ltd. (Food & Staples Retailing)†

     90,627        1,656,842  

Discovery Ltd. (Insurance)*†

     210,024        1,932,548  
        3,589,390  

South Korea - 1.4%

     

Cheil Worldwide Inc. (Media & Entertainment)†

     407,840        8,352,188  

Spain - 0.6%

     

Bankinter SA (Banks)†

     664,201        3,664,539  

Sweden - 2.7%

     

Intrum AB (Commercial & Professional Services)†

     219,400        6,216,471  

Paradox Interactive AB (Media & Entertainment)†

     396,384        5,830,059  

Thule Group AB (Consumer Durables & Apparel)^†

     69,398        4,004,890  
        16,051,420  

Switzerland - 4.8%

     

Bossard Holding AG, Class A, Reg S (Capital Goods)†

     30,282        11,115,383  
     Shares      Value  
COMMON STOCKS - 97.3% (continued)         

Switzerland - 4.8% (continued)

     

LEM Holding SA, Reg S (Technology Hardware & Equipment)†

     4,425        $10,751,518  

VAT Group AG (Capital Goods)^†

     15,186        7,234,806  
        29,101,707  

Taiwan - 2.0%

     

Advantech Co., Ltd. (Technology Hardware & Equipment)†

     236,645        3,097,666  

Chipbond Technology Corp. (Semiconductors & Semiconductor Equipment)†

     2,484,700        5,776,713  

Eclat Textile Co., Ltd. (Consumer Durables & Apparel)†

     154,909        3,391,263  
        12,265,642  

Ukraine - 0.8%

     

Kernel Holding SA (Food Beverage & Tobacco)†

     321,186        4,861,365  
     

United Arab Emirates - 0.8%

     

Agthia Group PJSC (Food Beverage & Tobacco)†

     3,039,785        4,920,631  

United Kingdom - 20.8%

     

Abcam plc (Pharmaceuticals, Biotechnology & Life Sciences)*†

     578,702        13,165,913  

Bank of Georgia Group plc (Banks)†

     477,398        9,930,384  

Clarkson plc (Transportation)†

     153,393        8,411,223  

Cranswick plc (Food Beverage & Tobacco)†

     84,691        4,011,846  

Dechra Pharmaceuticals plc (Pharmaceuticals, Biotechnology & Life Sciences)†

     218,633        15,331,283  

Diploma plc (Capital Goods)†

     279,804        11,537,336  

EMIS Group plc (Health Care Equipment & Services)†

     439,550        8,122,320  

HomeServe plc (Commercial & Professional Services)†

     285,907        3,353,801  

Keywords Studios plc (Software & Services)†

     300,772        11,676,249  

Network International Holdings plc (Software & Services)*^†

     1,440,921        6,377,571  

Rathbone Brothers plc (Diversified Financials)†

     161,351        4,358,246  

Rightmove plc (Media & Entertainment)†

     532,092        5,038,342  

Senior plc (Capital Goods)*†

     5,959,386        13,079,284  

YouGov plc (Media & Entertainment)†

     566,247        10,239,464  
        124,633,262  

United States - 1.0%

     

Core Laboratories NV (Energy)

     103,535        2,692,945  
 

 

See Notes to Financial Statements

 

11


Table of Contents

Harding, Loevner Funds, Inc.

 

International Small Companies Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 97.3% (continued)       

United States - 1.0% (continued)

     

Sensata Technologies Holding
plc (Capital Goods)*

   60,940      $3,357,794  
        6,050,739  

Vietnam - 3.8%

     

Hoa Phat Group JSC
(Materials)†

   9,076,696      22,788,368  
     
     

Total Common Stocks (Cost $397,269,653)

          $583,583,190  
     
SHORT TERM INVESTMENTS - 2.7%       

Northern Institutional Funds -
Treasury Portfolio (Premier
Shares), 0.01% (Money
Market Funds)

   16,367,527      16,367,527  
     
     

Total Short Term Investments

(Cost $16,367,527)

          $16,367,527  
               
     

Total Investments — 100.0%

             

(Cost $413,637,180)

          $599,950,717  

Liabilities Less Other Assets - (0.0)%^^

          (298,505

Net Assets — 100.0%

          $599,652,212  

Summary of Abbreviations

 

Reg S

Security sold outside United States without registration under the Securities Act of 1933.

 

*

Non-income producing security.

 

Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.

 

^

Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 5.2% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.

 

^^

Amount is less than 0.005%.

 

Industry

   Percentage of
Net Assets
 

Automobiles & Components

     1.3

Banks

     4.1  

Capital Goods

     10.8  

Commercial & Professional Services

     6.6  

Consumer Durables & Apparel

     1.9  

Diversified Financials

     0.7  

Energy

     1.4  

Food & Staples Retailing

     1.5  

Food Beverage & Tobacco

     6.7  

Health Care Equipment & Services

     6.0  

Household & Personal Products

     0.7  

Insurance

     1.8  

Materials

     7.3  

Media & Entertainment

     6.1  

Pharmaceuticals, Biotechnology & Life Sciences

     6.7  

Real Estate

     0.9  

Retailing

     1.2  

Semiconductors & Semiconductor Equipment

     1.4  

Software & Services

     20.4  

Technology Hardware & Equipment

     4.3  

Telecommunication Services

     2.6  

Transportation

     1.4  

Utilities

     1.5  

Money Market Fund

     2.7  
   

Total Investments

     100.0  

Liabilities Less Other Assets

     (0.0 )^^ 
   

Net Assets

     100.0

^^  Amount is less than 0.005%.

  
 

 

See Notes to Financial Statements

 

12


Table of Contents

Harding, Loevner Funds, Inc.

 

Institutional Emerging Markets Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 95.6%          

Brazil - 4.6%

         

Ambev SA - ADR (Food Beverage & Tobacco)

       21,639,901        $64,054,107  

B3 SA - Brasil Bolsa Balcao (Diversified Financials)

       18,988,800        40,071,691  

Cia Brasileira de Distribuicao - ADR (Food & Staples Retailing)

       1,301,993        5,937,088  

Localiza Rent a Car SA (Transportation)

       5,585,870        44,835,024  

Lojas Renner SA (Retailing)

       3,800,700        21,704,625  

Magazine Luiza SA (Retailing)*

       12,256,500        23,475,808  

Ultrapar Participacoes SA (Energy)

       6,647,078        15,369,852  

WEG SA (Capital Goods)

       6,425,292        42,123,357  

XP Inc., Class A (Diversified Financials)*

       1,235,316        40,530,713  
            298,102,265  

Chile - 0.2%

         

Banco Santander Chile - ADR (Banks)

       823,352        14,589,797  

China - 24.1%

         

51job Inc. - ADR (Commercial & Professional Services)*

       596,059        35,501,274  

Alibaba Group Holding Ltd. (Retailing)*†

       6,992,516        144,670,111  

Alibaba Group Holding Ltd. - Sponsored ADR (Retailing)*

       454,828        75,019,330  

Baidu Inc., Class A (Media & Entertainment)*†

       2,388,258        48,850,565  

China Tourism Group Duty Free Corp., Ltd., Class A (Retailing)†

       1,479,100        61,733,074  

Country Garden Services Holdings Co., Ltd. (Real Estate)†

       5,358,504        41,488,547  

CSPC Pharmaceutical Group Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       69,154,080        72,463,457  

ENN Energy Holdings Ltd. (Utilities)†

       6,017,300        104,280,003  

Fuyao Glass Industry Group Co., Ltd., Class H (Automobiles & Components)^†

       11,549,400        66,936,503  

Hefei Meiya Optoelectronic Technology Inc., Class A (Capital Goods)†

       8,134,816        51,148,055  

Jiangsu Hengrui Medicine Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       2,500,920        19,206,989  

Midea Group Co., Ltd., Class A (Consumer Durables & Apparel)†

       9,391,364        100,417,915  
     Shares    Value  
COMMON STOCKS - 95.6% (continued)

China - 24.1% (continued)

         

Ping An Insurance Group Co. of China Ltd., Class H (Insurance)†

       9,886,000        $71,189,390  

Sangfor Technologies Inc., Class A (Software & Services)†

       1,431,100        45,345,538  

SF Holding Co., Ltd., Class A (Transportation)†

       3,107,800        31,294,013  

Shenzhou International Group Holdings Ltd. (Consumer Durables & Apparel)†

       3,844,000        83,347,974  

Sino Biopharmaceutical Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       23,978,135        17,787,095  

Sunny Optical Technology Group Co., Ltd. (Technology Hardware & Equipment)†

       3,304,700        89,118,228  

Tencent Holdings Ltd. (Media & Entertainment)†

       3,937,300        244,452,181  

Wuxi Biologics Cayman Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*^†

       5,523,500        84,360,998  

Zhejiang Sanhua Intelligent Controls Co., Ltd., Class A (Capital Goods)†

       17,324,383        64,052,442  

ZTO Express Cayman Inc. - ADR (Transportation)

       424,155        12,440,466  
            1,565,104,148  

Czech Republic - 0.8%

         

Komercni banka AS (Banks)*†

       1,280,874        49,681,952  

Egypt - 0.6%

         

Commercial International Bank Egypt SAE - GDR, Reg S (Banks)*†

       12,353,866        38,293,155  

Hong Kong - 5.6%

         

AIA Group Ltd. (Insurance)†

       13,291,215        150,201,860  

ASM Pacific Technology Ltd. (Semiconductors & Semiconductor Equipment)†

       4,569,869        49,604,040  

Techtronic Industries Co., Ltd. (Capital Goods)†

       8,034,301        165,086,239  
            364,892,139  

India - 8.9%

         

HDFC Bank Ltd. - ADR (Banks)

       1,036,826        74,558,158  

Housing Development Finance Corp., Ltd. (Banks)†

       4,420,226        168,350,975  

Kotak Mahindra Bank Ltd. (Banks)†

       3,612,258        97,793,890  

Maruti Suzuki India Ltd. (Automobiles & Components)†

       758,255        75,847,008  
 

 

See Notes to Financial Statements

 

13


Table of Contents

Harding, Loevner Funds, Inc.

 

Institutional Emerging Markets Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 95.6% (continued)

India - 8.9% (continued)

         

Tata Consultancy Services Ltd. (Software & Services)†

       3,558,150        $161,638,971  
            578,189,002  

Indonesia - 2.8%

         

Astra International Tbk PT (Automobiles & Components)†

       81,567,800        34,743,454  

Bank Central Asia Tbk PT (Banks)†

       129,373,665        68,275,114  

Bank Rakyat Indonesia Persero Tbk PT (Banks)†

       259,836,900        77,669,073  
            180,687,641  

Italy - 0.8%

         

Tenaris SA - ADR (Energy)

       2,373,565        52,883,028  

Kenya - 1.3%

         

East African Breweries Ltd. (Food Beverage & Tobacco)*†

       6,241,665        9,318,726  

Safaricom plc (Telecommunication Services)†

       195,778,327        75,188,707  
            84,507,433  

Mexico - 5.6%

         

Fomento Economico Mexicano SAB de CV - Sponsored ADR (Food Beverage & Tobacco)

       1,025,025        84,246,805  

Grupo Aeroportuario del Sureste SAB de CV - ADR (Transportation)

       342,345        69,033,869  

Grupo Financiero Banorte SAB de CV, Series O (Banks)

       16,899,200        106,994,886  

Wal-Mart de Mexico SAB de CV (Food & Staples Retailing)

       30,197,000        105,325,752  
            365,601,312  

Panama - 0.4%

         

Copa Holdings SA, Class A (Transportation)*

       370,214        27,381,027  

Poland - 0.4%

         

CD Projekt SA (Media & Entertainment)†

       586,190        25,576,934  

Russia - 10.3%

         

LUKOIL PJSC - Sponsored ADR (Energy)

       1,631,755        166,487,963  

Novatek PJSC - Sponsored GDR, Reg S (Energy)†

       660,418        167,891,424  

Sberbank of Russia PJSC - Sponsored ADR (Banks)†

       9,325,033        187,014,237  

Yandex NV, Class A (Media & Entertainment)*

       1,736,204        143,827,139  
            665,220,763  

South Africa - 1.6%

         

Discovery Ltd. (Insurance)*†

       6,221,961        57,251,739  
     Shares    Value  
COMMON STOCKS - 95.6% (continued)

South Africa - 1.6% (continued)

         

Standard Bank Group Ltd. (Banks)†

       5,372,816        $47,744,933  
            104,996,672  

South Korea - 7.7%

         

Amorepacific Corp. (Household & Personal Products)†

       137,340        21,419,951  

Coway Co., Ltd. (Consumer Durables & Apparel)†

       678,915        46,250,671  

LG Household & Health Care Ltd. (Household & Personal Products)†

       115,872        116,315,005  

NCSoft Corp. (Media & Entertainment)†

       72,687        39,070,456  

Samsung Electronics Co., Ltd. - GDR, Reg S (Technology Hardware & Equipment)†

       185,170        277,955,282  
            501,011,365  

Taiwan - 11.6%

         

Airtac International Group (Capital Goods)†

       2,627,633        78,911,455  

Eclat Textile Co., Ltd. (Consumer Durables & Apparel)†

       4,912,031        107,534,020  

Hon Hai Precision Industry Co., Ltd. (Technology Hardware & Equipment)†

       26,538,031        102,690,124  

Largan Precision Co., Ltd. (Technology Hardware & Equipment)†

       552,000        41,264,719  

Silergy Corp. (Semiconductors & Semiconductor Equipment)†

       436,122        72,013,598  

Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & Semiconductor Equipment)†

       16,414,277        347,369,509  
            749,783,425  

Thailand - 1.1%

         

Siam Commercial Bank pcl, Reg S (Banks)†

       18,694,470        70,986,310  

United Kingdom - 2.7%

         

Bank of Georgia Group plc (Banks)†

       713,964        14,851,207  

Coca-Cola HBC AG - CDI (Food Beverage & Tobacco)*†

       3,834,085        133,019,114  

Network International Holdings plc (Software & Services)*^†

       6,717,463        29,731,746  
            177,602,067  

United States - 4.5%

         

EPAM Systems Inc. (Software & Services)*

 

      

 

434,114

 

 

      

 

292,262,909

 

 

 

Total Common Stocks (Cost $4,020,831,459)

 

     $ 6,207,353,344
 

 

See Notes to Financial Statements

 

14


Table of Contents

Harding, Loevner Funds, Inc.

 

Institutional Emerging Markets Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
PREFERRED STOCKS - 2.2%

Brazil - 1.2%

         

Banco Bradesco SA - ADR (Banks)*

       5,946,797        $20,813,790  

Itau Unibanco Holding SA - Sponsored ADR, 0.78% (Banks)+

       12,956,121        52,731,412  
            73,545,202  

Colombia - 0.7%

         

Bancolombia SA - Sponsored ADR, 0.68% (Banks)+

       1,271,207        45,674,467  

South Korea - 0.3%

         

Samsung Electronics Co., Ltd. - GDR, Reg S, 2.18% (Technology Hardware & Equipment)+†

 

      

 

14,823

 

 

      

 

20,416,416

 

 

 

Total Preferred Stocks (Cost $123,221,242)

 

       $139,636,085
         
RIGHTS^^ - 0.0%

Brazil^^ - 0.0%

         

Ultrapar Participacoes SA (Energy)*

       476,424        $844  
                       

Total Rights (Cost $0)

 

       $844
         
SHORT TERM INVESTMENTS - 2.5%

Northern Institutional Funds - Treasury Portfolio (Premier Shares), 0.01% (Money Market Funds)

 

      

 

164,486,140

 

 

      

 

164,486,140

 

 

 

Total Short Term Investments
(Cost $164,486,140)

 

       $164,486,140
                       

Total Investments — 100.3%

 

          

(Cost $4,308,538,841)

 

       $6,511,476,413

Liabilities Less Other Assets - (0.3)%

                  (17,590,372

Net Assets — 100.0%

 

       $6,493,886,041

 

 

Summary of Abbreviations

 

ADR    American Depositary Receipt
CDI    Chess Depositary Interest
GDR    Global Depositary Receipt
Reg S    Security sold outside United States without registration under the Securities Act of 1933.
*    Non-income producing security.
   Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.
^    Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 2.8% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.
+    Current yield is disclosed. Dividends are calculated based on a percentage of the issuer’s net income.
^^    Amount is less than 0.005%.

 

Industry     
Percentage of
Net Assets
 
 

Automobiles & Components

     2.7

Banks

     17.5  

Capital Goods

     6.2  

Commercial & Professional Services

     0.6  

Consumer Durables & Apparel

     5.2  

Diversified Financials

     1.2  

Energy

     6.2  

Food & Staples Retailing

     1.7  

Food Beverage & Tobacco

     4.5  

Household & Personal Products

     2.1  

Insurance

     4.3  

Media & Entertainment

     7.7  

Pharmaceuticals, Biotechnology & Life Sciences

     3.0  

Real Estate

     0.6  

Retailing

     5.0  

Semiconductors & Semiconductor Equipment

     7.2  

Software & Services

     8.2  

Technology Hardware & Equipment

     8.2  

Telecommunication Services

     1.2  

Transportation

     2.9  

Utilities

     1.6  

Money Market Fund

     2.5  
   

Total Investments

     100.3  

Liabilities Less Other Assets

     (0.3
   

Net Assets

     100.0
 

 

See Notes to Financial Statements

 

15


Table of Contents

Harding, Loevner Funds, Inc.

 

Emerging Markets Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 96.2%          

Brazil - 4.6%

         

Ambev SA - ADR (Food Beverage & Tobacco)

       12,806,554        $37,907,400  

B3 SA - Brasil Bolsa Balcao (Diversified Financials)

       11,112,600        23,450,701  

Cia Brasileira de Distribuicao - ADR (Food & Staples Retailing)

       764,265        3,485,048  

Localiza Rent a Car SA (Transportation)

       3,305,755        26,533,666  

Lojas Renner SA (Retailing)

       2,228,800        12,727,989  

Magazine Luiza SA (Retailing)*

       7,201,000        13,792,624  

Ultrapar Participacoes SA (Energy)

       3,901,800        9,022,022  

WEG SA (Capital Goods)

       3,802,560        24,929,076  

XP Inc., Class A (Diversified Financials)*

       722,927        23,719,245  
            175,567,771  

Chile - 0.2%

         

Banco Santander Chile - ADR (Banks)

       482,839        8,555,907  

China - 24.3%

         

51job Inc. - ADR (Commercial & Professional Services)*

       352,749        21,009,730  

Alibaba Group Holding Ltd. (Retailing)*†

       4,138,164        85,615,628  

Alibaba Group Holding Ltd. - Sponsored ADR (Retailing)*

       269,168        44,396,570  

Baidu Inc., Class A (Media & Entertainment)*†

       1,461,794        29,900,229  

China Tourism Group Duty Free Corp., Ltd., Class A (Retailing)†

       869,007        36,269,673  

Country Garden Services Holdings Co., Ltd. (Real Estate)†

       3,159,000        24,458,752  

CSPC Pharmaceutical Group Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       40,924,560        42,883,010  

ENN Energy Holdings Ltd. (Utilities)†

       3,560,700        61,707,046  

Fuyao Glass Industry Group Co., Ltd., Class H (Automobiles & Components)^†

       6,834,900        39,612,820  

Hefei Meiya Optoelectronic Technology Inc., Class A (Capital Goods)†

       4,797,734        30,165,988  

Jiangsu Hengrui Medicine Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       1,467,960        11,273,888  

Midea Group Co., Ltd., Class A (Consumer Durables & Apparel)†

       5,557,768        59,426,881  
     Shares    Value  
COMMON STOCKS - 96.2% (continued)          

China - 24.3% (continued)

         

Ping An Insurance Group Co. of China Ltd., Class H (Insurance)†

       5,850,500        $42,129,630  

Sangfor Technologies Inc., Class A (Software & Services)†

       847,000        26,837,866  

SF Holding Co., Ltd., Class A (Transportation)†

       1,822,500        18,351,676  

Shenzhou International Group Holdings Ltd. (Consumer Durables & Apparel)†

       2,275,000        49,327,950  

Sino Biopharmaceutical Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       14,190,182        10,526,345  

Sunny Optical Technology Group Co., Ltd. (Technology Hardware & Equipment)†

       1,955,700        52,739,589  

Tencent Holdings Ltd. (Media & Entertainment)†

       2,330,100        144,667,165  

Wuxi Biologics Cayman Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*^†

       3,269,000        49,927,782  

Zhejiang Sanhua Intelligent Controls Co., Ltd., Class A (Capital Goods)†

       10,217,610        37,776,980  

ZTO Express Cayman Inc. - ADR (Transportation)

       248,737        7,295,456  
            926,300,654  

Czech Republic - 0.8%

         

Komercni banka AS (Banks)*†

       758,025        29,401,925  

Egypt - 0.6%

         

Commercial International Bank Egypt SAE - GDR, Reg S (Banks)*†

       7,204,169        22,330,691  

Hong Kong - 5.7%

         

AIA Group Ltd. (Insurance)†

       7,863,789        88,867,402  

ASM Pacific Technology Ltd. (Semiconductors & Semiconductor Equipment)†

       2,694,423        29,246,848  

Techtronic Industries Co., Ltd. (Capital Goods)†

       4,755,000        97,704,214  
            215,818,464  

India - 9.0%

         

HDFC Bank Ltd. - ADR (Banks)

       613,597        44,123,760  

Housing Development Finance Corp., Ltd. (Banks)†

       2,615,902        99,630,574  

Kotak Mahindra Bank Ltd. (Banks)†

       2,137,744        57,874,687  

Maruti Suzuki India Ltd. (Automobiles & Components)†

       447,066        44,719,281  
 

 

See Notes to Financial Statements

 

16


Table of Contents

Harding, Loevner Funds, Inc.

 

Emerging Markets Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 96.2% (continued)

India - 9.0% (continued)

         

Tata Consultancy Services Ltd. (Software & Services)†

       2,105,723        $95,658,390  
            342,006,692  

Indonesia - 2.8%

         

Astra International Tbk PT (Automobiles & Components)†

       47,833,900        20,374,644  

Bank Central Asia Tbk PT (Banks)†

       76,563,550        40,405,326  

Bank Rakyat Indonesia Persero Tbk PT (Banks)†

       153,772,190        45,964,770  
            106,744,740  

Italy - 0.8%

         

Tenaris SA - ADR (Energy)

       1,394,535        31,070,240  

Kenya - 1.3%

         

East African Breweries Ltd. (Food Beverage & Tobacco)*†

       3,663,850        5,470,082  

Safaricom plc (Telecommunication Services)†

       115,862,201        44,496,902  
            49,966,984  

Mexico - 5.7%

         

Fomento Economico Mexicano SAB de CV - Sponsored ADR (Food Beverage & Tobacco)

       606,613        49,857,522  

Grupo Aeroportuario del Sureste SAB de CV - ADR (Transportation)

       202,601        40,854,492  

Grupo Financiero Banorte SAB de CV, Series O (Banks)

       10,000,940        63,319,532  

Wal-Mart de Mexico SAB de CV (Food & Staples Retailing)

       17,870,700        62,332,182  
            216,363,728  

Panama - 0.4%

         

Copa Holdings SA, Class A (Transportation)*

       219,094        16,204,192  

Poland - 0.4%

         

CD Projekt SA (Media & Entertainment)†

       340,158        14,841,943  

Russia - 10.3%

         

LUKOIL PJSC - Sponsored ADR (Energy)

       958,701        97,816,263  

Novatek PJSC - Sponsored GDR, Reg S (Energy)†

       389,212        98,945,451  

Sberbank of Russia PJSC - Sponsored ADR (Banks)†

       5,518,580        110,675,536  

Yandex NV, Class A (Media & Entertainment)*

       1,027,490        85,117,272  
            392,554,522  

South Africa - 1.6%

         

Discovery Ltd. (Insurance)*†

       3,682,174        33,881,740  
     Shares    Value  
COMMON STOCKS - 96.2% (continued)

South Africa - 1.6% (continued)

         

Standard Bank Group Ltd. (Banks)†

       3,179,647        $28,255,580  
            62,137,320  

South Korea - 7.8%

         

Amorepacific Corp. (Household & Personal Products)†

       81,278        12,676,356  

Coway Co., Ltd. (Consumer Durables & Apparel)†

       401,784        27,371,291  

LG Household & Health Care Ltd. (Household & Personal Products)†

       68,574        68,836,174  

NCSoft Corp. (Media & Entertainment)†

       42,488        22,837,997  

Samsung Electronics Co., Ltd. - GDR, Reg S (Technology Hardware & Equipment)†

       109,283        164,042,702  
            295,764,520  

Taiwan - 11.6%

         

Airtac International Group (Capital Goods)†

       1,555,023        46,699,493  

Eclat Textile Co., Ltd. (Consumer Durables & Apparel)†

       2,907,216        63,644,676  

Hon Hai Precision Industry Co., Ltd. (Technology Hardware & Equipment)†

       15,705,136        60,771,741  

Largan Precision Co., Ltd. (Technology Hardware & Equipment)†

       327,001        24,444,935  

Silergy Corp. (Semiconductors & Semiconductor Equipment)†

       258,000        42,601,631  

Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & Semiconductor Equipment)†

       9,713,637        205,566,247  
            443,728,723  

Thailand - 1.1%

         

Siam Commercial Bank pcl, Reg S (Banks)†

       11,063,500        42,010,126  

United Kingdom - 2.7%

         

Bank of Georgia Group plc (Banks)†

       419,094        8,717,599  

Coca-Cola HBC AG - CDI (Food Beverage & Tobacco)*†

       2,269,022        78,721,076  

Network International Holdings plc (Software & Services)*^†

       3,975,414        17,595,333  
            105,034,008  

United States - 4.5%

         

EPAM Systems Inc. (Software & Services)*

 

      

 

256,537

 

 

      

 

172,710,970

 

 

 

Total Common Stocks (Cost $2,129,445,502)

 

     $ 3,669,114,120
 

 

See Notes to Financial Statements

 

17


Table of Contents

Harding, Loevner Funds, Inc.

 

Emerging Markets Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
PREFERRED STOCKS - 2.2%

Brazil - 1.2%

         

Banco Bradesco SA - ADR (Banks)*

       3,480,166        $12,180,581  

Itau Unibanco Holding SA - Sponsored ADR, 0.78% (Banks)+

       7,667,469        31,206,599  
            43,387,180  

Colombia - 0.7%

         

Bancolombia SA - Sponsored ADR, 0.68% (Banks)+

       752,304        27,030,283  

South Korea - 0.3%

         

Samsung Electronics Co., Ltd. - GDR, Reg S, 2.18% (Technology Hardware & Equipment)+†

       8,692        11,971,900  
                       

Total Preferred Stocks (Cost $65,243,076)

 

       $82,389,363
         
RIGHTS^^ - 0.0%          

Brazil^^ - 0.0%

         

Ultrapar Participacoes SA (Energy)*

 

      

 

279,659

 

 

      

 

$496

 

 

 

Total Rights (Cost $0)

 

       $496
         
SHORT TERM INVESTMENTS - 1.9%     

Northern Institutional Funds - Treasury Portfolio (Premier Shares), 0.01% (Money Market Funds)

       72,004,554        72,004,554  
                       

Total Short Term Investments (Cost $72,004,554)

 

       $72,004,554
                       

Total Investments — 100.3%

 

          

(Cost $2,266,693,132)

 

       $3,823,508,533

Liabilities Less Other Assets - (0.3)%

                  (10,177,686)  

Net Assets — 100.0%

 

       $3,813,330,847

 

Summary of Abbreviations

 

ADR    American Depositary Receipt
CDI    Chess Depositary Interest
GDR    Global Depositary Receipt
Reg S    Security sold outside United States without registration under the Securities Act of 1933.
*    Non-income producing security.
   Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.
^    Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 2.8% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.
+    Current yield is disclosed. Dividends are calculated based on a percentage of the issuer’s net income.
^^    Amount is less than 0.005%.

 

Industry       
Percentage of
Net Assets
 
 

Automobiles & Components

       2.8 %

Banks

       17.6

Capital Goods

       6.2

Commercial & Professional Services

       0.6

Consumer Durables & Apparel

       5.2

Diversified Financials

       1.2

Energy

       6.2

Food & Staples Retailing

       1.7

Food Beverage & Tobacco

       4.5

Household & Personal Products

       2.1

Insurance

       4.3

Media & Entertainment

       7.8

Pharmaceuticals, Biotechnology & Life Sciences

       3.0

Real Estate

       0.7

Retailing

       5.1

Semiconductors & Semiconductor Equipment

       7.3

Software & Services

       8.2

Technology Hardware & Equipment

       8.2

Telecommunication Services

       1.2

Transportation

       2.9

Utilities

       1.6

Money Market Fund

       1.9

Total Investments

       100.3

Liabilities Less Other Assets

       (0.3 )

Net Assets

       100.0 %
 

 

See Notes to Financial Statements

 

18


Table of Contents

Harding, Loevner Funds, Inc.

 

Frontier Emerging Markets Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 95.9%          

Argentina - 4.5%

         

Globant SA (Software & Services)*

       31,511        $10,057,996  

Bangladesh - 2.4%

         

GrameenPhone Ltd. (Telecommunication Services)†

       147,326        611,251  

Square Pharmaceuticals Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       1,853,645        4,711,385  
            5,322,636  

Colombia - 3.5%

         

Cementos Argos SA - Sponsored ADR (Materials)#†

       31,227        263,284  

Ecopetrol SA - Sponsored ADR (Energy)

       457,446        6,930,307  

Grupo Nutresa SA (Food Beverage & Tobacco)

       123,147        719,771  
            7,913,362  

Croatia - 0.2%

         

Ericsson Nikola Tesla (Technology Hardware & Equipment)†

       1,848        512,617  

Egypt - 6.2%

         

Commercial International Bank Egypt SAE - GDR, Reg S (Banks)*†

       3,320,346        10,292,043  

Edita Food Industries SAE (Food Beverage & Tobacco)†

       2,214,224        985,081  

Integrated Diagnostics Holdings plc (Health Care Equipment & Services)^†

       2,211,271        2,736,916  
            14,014,040  

Iceland - 1.1%

         

Marel HF (Capital Goods)^†

       363,387        2,435,835  

Indonesia - 2.9%

         

Bank Central Asia Tbk PT (Banks)†

       12,188,200        6,432,149  

Kazakhstan - 5.7%

         

Halyk Savings Bank of Kazakhstan JSC - GDR, Reg S (Banks)†

       475,701        8,566,788  

Kaspi.KZ JSC - GDR, Reg S (Diversified Financials)†

       28,725        4,162,622  
            12,729,410  

Kenya - 5.8%

         

East African Breweries Ltd. (Food Beverage & Tobacco)*†

       620,700        926,697  

Equity Group Holdings plc (Banks)*†

       7,080,400        3,163,623  
     Shares    Value  
COMMON STOCKS - 95.9% (continued)     

Kenya - 5.8% (continued)

         

Safaricom plc (Telecommunication Services)†

       23,403,550        $8,988,138  
            13,078,458  

Morocco - 2.7%

         

Itissalat Al-Maghrib (Telecommunication Services)†

       159,501        2,513,451  

Societe d’Exploitation des Ports (Transportation)†

       111,050        3,488,994  
            6,002,445  

Nigeria - 5.6%

         

Guaranty Trust Holding Co., plc (Banks)

       48,903,727        3,386,324  

Nestle Nigeria plc (Food Beverage & Tobacco)

       1,394,492        4,718,523  

Zenith Bank plc (Banks)

       71,417,980        4,358,439  
            12,463,286  

Pakistan - 0.6%

         

MCB Bank Ltd. (Banks)†

       1,169,700        1,120,342  

Oil & Gas Development Co., Ltd. (Energy)†

       515,000        256,500  
            1,376,842  

Peru - 0.7%

         

Alicorp SAA (Food Beverage & Tobacco)

       750,417        1,212,959  

Cementos Pacasmayo SAA (Materials)

       222,899        276,501  
            1,489,460  

Philippines - 19.3%

         

Bank of the Philippine Islands (Banks)†

       2,562,954        4,420,771  

BDO Unibank Inc. (Banks)†

       1,222,448        3,013,378  

International Container Terminal Services Inc. (Transportation)†

       794,670        2,835,558  

Jollibee Foods Corp. (Consumer Services)†

       1,247,030        5,813,234  

Robinsons Retail Holdings Inc. (Food & Staples Retailing)†

       1,646,340        2,033,209  

Security Bank Corp. (Banks)†

       1,388,080        3,331,576  

SM Prime Holdings Inc. (Real Estate)†

       10,483,500        6,893,599  

Universal Robina Corp. (Food Beverage & Tobacco)†

       2,211,740        6,057,896  

Wilcon Depot Inc. (Retailing)†

       14,205,000        8,798,227  
            43,197,448  

Poland - 0.7%

         

Allegro.eu SA (Retailing)*^†

       61,608        696,973  

CD Projekt SA (Media & Entertainment)†

       22,412        977,892  
            1,674,865  
 

 

See Notes to Financial Statements

 

19


Table of Contents

Harding, Loevner Funds, Inc.

 

Frontier Emerging Markets Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 95.9% (continued)     

Romania - 4.4%

         

Banca Transilvania SA (Banks)†

       13,420,913        $7,870,196  

Societatea Nationala de Gaze Naturale ROMGAZ SA (Energy)†

       228,909        1,994,237  
            9,864,433  

Saudi Arabia - 2.7%

         

Bupa Arabia for Cooperative Insurance Co. (Insurance)†

       41,163        1,586,725  

Jarir Marketing Co. (Retailing)†

       37,555        2,029,849  

Mouwasat Medical Services Co. (Health Care Equipment & Services)†

       52,337        2,511,204  
            6,127,778  

Slovenia - 1.1%

         

Krka dd Novo mesto (Pharmaceuticals, Biotechnology & Life Sciences)†

       18,539        2,378,039  

Sri Lanka - 0.1%

         

Commercial Bank of Ceylon plc (Banks)†

       313,399        137,906  

Thailand - 0.5%

         

Home Product Center pcl, Reg S (Retailing)†

       2,620,494        1,152,994  

United Arab Emirates - 3.4%

         

Agthia Group PJSC (Food Beverage & Tobacco)†

       2,119,592        3,431,075  

Emaar Properties PJSC (Real Estate)†

       3,886,103        4,250,144  
            7,681,219  

United Kingdom - 3.5%

         

Bank of Georgia Group plc (Banks)†

       70,511        1,466,703  

Network International Holdings plc (Software & Services)*^†

       1,159,338        5,131,274  

TBC Bank Group plc (Banks)†

       54,947        1,180,522  
            7,778,499  

United States - 4.9%

         

EPAM Systems Inc. (Software & Services)*

       16,424        11,057,294  

Vietnam - 13.4%

         

Bank for Foreign Trade of Vietnam JSC (Banks)†

       1,798,010        7,742,974  

Hoa Phat Group JSC (Materials)†

       3,838,862        9,638,022  

Sai Gon Cargo Service Corp. (Transportation)†

       449,970        2,649,175  

Saigon Beer Alcohol Beverage Corp. (Food Beverage & Tobacco)†

       467,910        3,299,053  
     Shares    Value  
COMMON STOCKS - 95.9% (continued)     

Vietnam - 13.4% (continued)

         

Vietnam Dairy Products JSC (Food Beverage & Tobacco)†

       1,698,094        $6,770,052  
                    30,099,276  

Total Common Stocks (Cost $154,587,050)

 

       $214,978,287
         
PREFERRED STOCKS - 2.9%          

Colombia - 2.9%

         

Bancolombia SA - Sponsored ADR, 0.68% (Banks)+

       183,280        6,585,250  
                       

Total Preferred Stocks (Cost $5,340,087)

 

       $6,585,250
         
SHORT TERM INVESTMENTS - 1.2%     

Northern Institutional Funds - Treasury Portfolio (Premier Shares), 0.01% (Money Market Funds)

       2,557,487        2,557,487  
                       

Total Short Term Investments (Cost $2,557,487)

 

       $2,557,487
                       

Total Investments — 100.0%

                     

(Cost $162,484,624)

                  $224,121,024

Other Assets Less Liabilities - 0.0%^^

 

       14,777  

Net Assets — 100.0%

                  $224,135,801

 

Summary of Abbreviations

 

ADR    American Depositary Receipt
GDR    Global Depositary Receipt
Reg S    Security sold outside United States without registration under the Securities Act of 1933.
*    Non-income producing security.
   Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.
#    Security valued at fair value as determined in good faith under policies and procedures established by and under the supervision of the Portfolio’s Board of Directors as disclosed in Note 2 of the Notes to Financial Statements.
^    Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 4.9% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.
+    Current yield is disclosed. Dividends are calculated based on a percentage of the issuer’s net income.
^^    Amount is less than 0.005%.
 

 

See Notes to Financial Statements

 

20


Table of Contents

Harding, Loevner Funds, Inc.

 

Frontier Emerging Markets Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

Industry       
Percentage of
Net Assets
 
 

Banks

       32.6 %

Capital Goods

       1.1

Consumer Services

       2.6

Diversified Financials

       1.9

Energy

       4.1

Food & Staples Retailing

       0.9

Food Beverage & Tobacco

       12.6

Health Care Equipment & Services

       2.3

Insurance

       0.7

Materials

       4.5

Media & Entertainment

       0.4

Pharmaceuticals, Biotechnology & Life Sciences

       3.2

Real Estate

       5.0

Retailing

       5.7

Software & Services

       11.7

Technology Hardware & Equipment

       0.2

Telecommunication Services

       5.4

Transportation

       4.0

Money Market Fund

       1.1

Total Investments

       100.0

Other Assets Less Liabilities

       0.0 ^^

Net Assets

       100.0 %

^^      Amount is less than 0.005%.    

    

 

 

See Notes to Financial Statements

 

21


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Research Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 98.0%            

Australia - 0.3%

           

BHP Group Ltd. (Materials)†

       676          $18,543  

Cochlear Ltd. (Health Care Equipment & Services)†

       83          13,823  
              32,366  

Brazil - 1.1%

           

Ambev SA - ADR (Food Beverage & Tobacco)

       7,484          22,153  

B3 SA - Brasil Bolsa Balcao (Diversified Financials)

       7,000          14,772  

Cia Brasileira de Distribuicao - ADR (Food & Staples Retailing)

       2,433          11,095  

Localiza Rent a Car SA (Transportation)

       1,100          8,829  

Magazine Luiza SA (Retailing)*

       3,900          7,470  

Raia Drogasil SA (Food & Staples Retailing)*

       2,500          10,299  

Ultrapar Participacoes SA - Sponsored ADR (Energy)

       6,271          14,611  

WEG SA (Capital Goods)

       1,600          10,489  

XP Inc., Class A (Diversified Financials)*

       394          12,924  
              112,642  

Canada - 1.1%

           

Alimentation Couche-Tard Inc. (Food & Staples Retailing)

       1,600          60,892  

Imperial Oil Ltd. (Energy)

       1,500          50,784  
              111,676  

Chile - 0.2%

           

Banco Santander Chile - ADR (Banks)

       1,149          20,360  

China - 7.1%

           

51job Inc. - ADR (Commercial & Professional Services)*

       150          8,934  

AAC Technologies Holdings Inc. (Technology Hardware & Equipment)†

       5,670          24,872  

Baidu Inc., Class A (Media & Entertainment)*†

       1,050          21,477  

China Tourism Group Duty Free Corp., Ltd., Class A (Retailing)†

       500          20,869  

Country Garden Services Holdings Co., Ltd. (Real Estate)†

       2,000          15,485  

CSPC Pharmaceutical Group Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       15,360          16,095  

Fuyao Glass Industry Group Co., Ltd., Class H (Automobiles & Components)^†

       3,600          20,864  

Glodon Co., Ltd., Class A (Software & Services)†

       2,000          23,206  
     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

China - 7.1% (continued)

           

Gree Electric Appliances Inc. of Zhuhai, Class A (Consumer Durables & Apparel)†

       2,600          $14,833  

Haier Smart Home Co., Ltd., Class H (Consumer Durables & Apparel)†

       4,000          14,927  

Hangzhou Tigermed Consulting Co., Ltd., Class H (Pharmaceuticals, Biotechnology & Life Sciences)^†

       700          13,664  

Hefei Meiya Optoelectronic Technology Inc., Class A (Capital Goods)†

       1,800          11,318  

Hongfa Technology Co., Ltd., Class A (Capital Goods)†

       2,700          31,278  

Inner Mongolia Yili Industrial Group Co., Ltd., Class A (Food Beverage & Tobacco)†

       2,600          17,517  

JD.com Inc., Class A (Retailing)*†

       414          16,260  

Jiangsu Expressway Co., Ltd., Class H (Transportation)†

       12,000          11,344  

Jiangsu Hengrui Medicine Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       2,408          18,493  

Jiangsu Yanghe Brewery Joint-Stock Co., Ltd., Class A (Food Beverage & Tobacco)†

       600          17,349  

Kweichow Moutai Co., Ltd., Class A (Food Beverage & Tobacco)†

       100          28,585  

Meituan, Class B (Retailing)*^†

       300          10,466  

Midea Group Co., Ltd., Class A (Consumer Durables & Apparel)†

       1,200          12,831  

NetEase Inc. - ADR (Media & Entertainment)

       205          20,006  

Ping An Insurance Group Co. of China Ltd., Class H (Insurance)†

       2,000          14,402  

Qingdao Haier Biomedical Co., Ltd., Class A (Health Care Equipment & Services)†

       900          13,231  

Sangfor Technologies Inc., Class A (Software & Services)†

       400          12,674  

SF Holding Co., Ltd., Class A (Transportation)†

       1,900          19,132  

Shandong Sinocera Functional Material Co., Ltd., Class A (Materials)†

       2,000          13,305  

Shanghai International Airport Co., Ltd., Class A (Transportation)*†

       2,300          18,956  
 

 

See Notes to Financial Statements

 

22


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

China - 7.1% (continued)

           

Shenzhen Inovance Technology Co., Ltd., Class A (Capital Goods)†

       1,350          $13,692  

Shenzhou International Group Holdings Ltd. (Consumer Durables & Apparel)†

       1,000          21,683  

Sino Biopharmaceutical Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       13,500          10,014  

Songcheng Performance Development Co., Ltd., Class A (Consumer Services)†

       4,200          9,153  

Sunny Optical Technology Group Co., Ltd. (Technology Hardware & Equipment)†

       600          16,180  

Suofeiya Home Collection Co., Ltd., Class A (Consumer Durables & Apparel)†

       4,000          10,611  

Tencent Holdings Ltd. (Media & Entertainment)†

       200          12,417  

TravelSky Technology Ltd., Class H (Software & Services)†

       11,000          20,600  

Trip.com Group Ltd. (Consumer Services)*†

       514          14,826  

Wuliangye Yibin Co., Ltd., Class A (Food Beverage & Tobacco)†

       500          16,964  

WuXi AppTec Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       686          14,782  

Wuxi Biologics Cayman Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*^†

       1,500          22,910  

Yonyou Network Technology Co., Ltd., Class A (Software & Services)†

       3,500          17,329  

Zhejiang Sanhua Intelligent Controls Co., Ltd., Class A (Capital Goods)†

       4,400          16,268  
              699,802  

Colombia - 0.9%

           

Cementos Argos SA (Materials)

       9,486          15,996  

Ecopetrol SA - Sponsored ADR (Energy)

       3,708          56,176  

Grupo Nutresa SA (Food Beverage & Tobacco)

       2,782          16,260  
              88,432  

Czech Republic - 0.2%

           

Komercni banka AS (Banks)*†

       493          19,122  
     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

Denmark - 0.9%

           

Ambu A/S, Class B (Health Care Equipment & Services)†

       494          $14,122  

Chr Hansen Holding A/S (Materials)†

       129          10,264  

Coloplast A/S, Class B (Health Care Equipment & Services)†

       193          31,476  

Genmab A/S (Pharmaceuticals, Biotechnology & Life Sciences)*†

       39          17,557  

Novozymes A/S, Class B (Materials)†

       254          18,668  
              92,087  

Egypt - 0.2%

           

Commercial International Bank Egypt SAE - GDR, Reg S (Banks)*†

       6,085          18,862  

Finland - 0.3%

           

Kone OYJ, Class B (Capital Goods)†

       211          14,361  

Neste OYJ (Energy)†

       314          17,532  
              31,893  

France - 3.9%

           

Air Liquide SA (Materials)†

       330          55,161  

Dassault Systemes SE (Software & Services)†

       650          37,909  

IPSOS (Media & Entertainment)†

       1,082          50,869  

Kering SA (Consumer Durables & Apparel)†

       60          45,016  

LISI (Capital Goods)†

       1,514          42,121  

L’Oreal SA (Household & Personal Products)†

       49          22,407  

Rubis SCA (Utilities)†

       1,135          36,349  

Safran SA (Capital Goods)†

       327          43,968  

Sartorius Stedim Biotech (Pharmaceuticals, Biotechnology & Life Sciences)†

       41          22,638  

Schneider Electric SE (Capital Goods)†

       159          27,503  
              383,941  

Germany - 3.6%

           

adidas AG (Consumer Durables & Apparel)†

       60          19,650  

Allianz SE, Reg S (Insurance)†

       230          53,488  

Bayerische Motoren Werke AG (Automobiles & Components)†

       778          78,477  

Bechtle AG (Software & Services)†

       246          18,430  

Brenntag SE (Capital Goods)†

       257          24,436  

Carl Zeiss Meditec AG (Bearer) (Health Care Equipment & Services)†

       134          26,947  
 

 

See Notes to Financial Statements

 

23


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

Germany - 3.6% (continued)

           

Evotec SE (Pharmaceuticals, Biotechnology & Life Sciences)*†

       458          $22,159  

FUCHS PETROLUB SE (Materials)†

       375          13,800  

HelloFresh SE (Retailing)*†

       213          17,237  

Infineon Technologies AG (Semiconductors & Semiconductor Equipment)†

       438          20,472  

SAP SE - Sponsored ADR (Software & Services)

       110          15,926  

Scout24 SE (Media & Entertainment)^†

       235          16,355  

Symrise AG (Materials)†

       160          22,121  

TeamViewer AG (Software & Services)*^†

       366          5,459  
              354,957  

Hong Kong - 0.9%

           

AIA Group Ltd. (Insurance)†

       1,600          18,082  

ASM Pacific Technology Ltd. (Semiconductors & Semiconductor Equipment)†

       1,800          19,538  

Techtronic Industries Co., Ltd. (Capital Goods)†

       2,500          51,369  
              88,989  

Iceland - 0.2%

           

Marel HF (Capital Goods)^†

       2,669          17,891  

India - 1.5%

           

Asian Paints Ltd. (Materials)†

       460          19,064  

Godrej Consumer Products Ltd. (Household & Personal Products)*†

       1,225          15,705  

HDFC Bank Ltd. - ADR (Banks)

       204          14,670  

Hero MotoCorp Ltd. (Automobiles & Components)†

       419          14,901  

ICICI Bank Ltd. - Sponsored ADR (Banks)

       1,034          21,869  

Kotak Mahindra Bank Ltd. (Banks)†

       608          16,460  

Marico Ltd. (Household & Personal Products)†

       2,072          15,773  

Pidilite Industries Ltd. (Materials)†

       572          17,711  

Tata Consultancy Services Ltd. (Software & Services)†

       327          14,855  
              151,008  

Indonesia - 0.6%

           

Astra International Tbk PT (Automobiles & Components)†

       33,400          14,226  

Bank Central Asia Tbk PT (Banks)†

       35,000          18,471  

Bank Rakyat Indonesia Persero Tbk PT (Banks)†

       53,600          16,022  
     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

Indonesia - 0.6% (continued)

           

Unilever Indonesia Tbk PT (Household & Personal Products)†

       38,500          $12,019  
              60,738  

Israel - 0.3%

           

CyberArk Software Ltd. (Software & Services)*

       140          25,215  

Italy - 0.9%

           

Amplifon SpA (Health Care Equipment & Services)†

       387          19,679  

DiaSorin SpA (Health Care Equipment & Services)†

       82          18,520  

FinecoBank Banca Fineco SpA (Banks)*†

       1,194          22,828  

Reply SpA (Software & Services)†

       131          25,449  
              86,476  

Japan - 9.0%

           

ABC-Mart Inc. (Retailing)†

       700          33,541  

Benefit One Inc. (Commercial & Professional Services)†

       1,000          50,576  

BML Inc. (Health Care Equipment & Services)†

       1,100          38,630  

Chugai Pharmaceutical Co., Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       600          22,376  

FANUC Corp. (Capital Goods)†

       100          19,652  

Fast Retailing Co., Ltd. (Retailing)†

       20          13,286  

Hakuhodo DY Holdings Inc. (Media & Entertainment)†

       3,100          50,703  

Kakaku.com Inc. (Media & Entertainment)†

       500          16,569  

Kobayashi Pharmaceutical Co., Ltd. (Household & Personal Products)†

       150          12,009  

Komatsu Ltd. (Capital Goods)†

       900          23,509  

Kubota Corp. (Capital Goods)†

       2,600          55,431  

M3 Inc. (Health Care Equipment & Services)†

       300          17,704  

Makita Corp. (Capital Goods)†

       1,200          55,036  

MISUMI Group Inc. (Capital Goods)†

       700          29,307  

Nitori Holdings Co., Ltd. (Retailing)†

       400          73,400  

Nomura Research Institute Ltd. (Software & Services)†

       890          35,752  

Rinnai Corp. (Consumer Durables & Apparel)†

       540          55,387  

Shimano Inc. (Consumer Durables & Apparel)†

       80          22,295  
 

 

See Notes to Financial Statements

 

24


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

Japan - 9.0% (continued)

           

Shionogi & Co., Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       900          $58,598  

Shiseido Co., Ltd. (Household & Personal Products)†

       300          19,984  

SMC Corp. (Capital Goods)†

       40          23,923  

Stanley Electric Co., Ltd. (Automobiles & Components)†

       2,600          65,571  

Sugi Holdings Co., Ltd. (Food & Staples Retailing)†

       500          35,854  

Sysmex Corp. (Health Care Equipment & Services)†

       200          24,859  

Unicharm Corp. (Household & Personal Products)†

       900          36,304  
              890,256  

Kazakhstan - 0.5%

           

Halyk Savings Bank of Kazakhstan JSC - GDR, Reg S (Banks)†

       1,120          20,170  

Kaspi.KZ JSC - GDR, Reg S (Diversified Financials)†

       170          24,635  
              44,805  

Mexico - 0.7%

           

Fomento Economico Mexicano SAB de CV - Sponsored ADR (Food Beverage & Tobacco)

       192          15,780  

Grupo Financiero Banorte SAB de CV, Series O (Banks)

       3,300          20,894  

Wal-Mart de Mexico SAB de CV (Food & Staples Retailing)

       8,100          28,252  
              64,926  

Netherlands - 1.6%

           

Adyen NV (Software & Services)*^†

       8          24,166  

ASM International NV (Semiconductors & Semiconductor Equipment)†

       37          16,766  

ASML Holding NV, Reg S (Semiconductors & Semiconductor Equipment)

       90          73,159  

Koninklijke Vopak NV (Energy)†

       653          25,985  

Prosus NV (Retailing)*†

       166          14,707  
              154,783  

Norway - 0.2%

           

Tomra Systems ASA (Commercial & Professional Services)†

       375          24,242  

Pakistan - 0.4%

           

MCB Bank Ltd. (Banks)†

       10,800          10,344  
     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

Pakistan - 0.4% (continued)

           

Oil & Gas Development Co., Ltd. (Energy)†

       48,700          $24,256  
              34,600  

Philippines - 1.3%

           

Bank of the Philippine Islands (Banks)†

       12,490          21,544  

BDO Unibank Inc. (Banks)†

       10,070          24,823  

International Container Terminal Services Inc. (Transportation)†

       4,970          17,734  

Robinsons Retail Holdings Inc. (Food & Staples Retailing)†

       10,510          12,980  

Security Bank Corp. (Banks)†

       4,340          10,416  

SM Prime Holdings Inc. (Real Estate)†

       27,500          18,083  

Universal Robina Corp. (Food Beverage & Tobacco)†

       6,400          17,529  
              123,109  

Poland - 0.4%

           

Allegro.eu SA (Retailing)*^†

       908          10,272  

ING Bank Slaski SA (Banks)*†

       426          29,049  
              39,321  

Russia - 0.9%

           

LUKOIL PJSC - Sponsored ADR (Energy)

       278          28,364  

Novatek PJSC - Sponsored GDR, Reg S (Energy)†

       89          22,626  

Sberbank of Russia PJSC - Sponsored ADR (Banks)†

       1,278          25,630  

Yandex NV, Class A (Media & Entertainment)*

       188          15,574  
              92,194  

Saudi Arabia - 1.0%

           

Al Rajhi Bank (Banks)†

       631          23,317  

Jarir Marketing Co. (Retailing)†

       252          13,621  

Saudi National Bank (Banks)†

       3,383          59,451  
              96,389  

Singapore - 1.4%

           

DBS Group Holdings Ltd. (Banks)†

       2,418          56,345  

Oversea-Chinese Banking Corp., Ltd. (Banks)†

       9,224          80,944  
              137,289  

Slovenia - 0.2%

           

Krka dd Novo mesto (Pharmaceuticals, Biotechnology & Life Sciences)†

       152          19,714  

South Africa - 0.2%

           

Discovery Ltd. (Insurance)*†

       1,831          16,848  
 

 

See Notes to Financial Statements

 

25


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

South Korea - 0.8%

           

Cheil Worldwide Inc. (Media & Entertainment)†

       1,001          $20,500  

Coway Co., Ltd. (Consumer Durables & Apparel)†

       184          12,535  

LG Household & Health Care Ltd. (Household & Personal Products)†

       9          9,034  

NAVER Corp. (Media & Entertainment)†

       55          19,251  

NCSoft Corp. (Media & Entertainment)†

       38          20,426  
              81,746  

Spain - 1.6%

           

Amadeus IT Group SA (Software & Services)*†

       248          16,619  

Banco Bilbao Vizcaya Argentaria SA (Banks)†

       6,148          43,134  

Banco Santander SA - Sponsored ADR (Banks)

       14,529          55,065  

Bankinter SA (Banks)†

       8,132          44,866  
              159,684  

Sweden - 2.6%

           

Alfa Laval AB (Capital Goods)†

       887          37,914  

Assa Abloy AB, Class B (Capital Goods)†

       664          19,479  

Atlas Copco AB, Class A (Capital Goods)†

       544          34,898  

Epiroc AB, Class A (Capital Goods)†

       1,467          36,445  

Evolution AB (Consumer Services)^†

       112          18,138  

Hexagon AB, Class B (Technology Hardware & Equipment)†

       1,890          30,465  

Intrum AB (Commercial & Professional Services)†

       1,097          31,082  

Skandinaviska Enskilda Banken AB, Class A (Banks)†

       1,670          26,145  

Thule Group AB (Consumer Durables & Apparel)^†

       390          22,507  
              257,073  

Switzerland - 2.9%

           

Alcon Inc. (Health Care Equipment & Services)

       661          55,101  

Cie Financiere Richemont SA, Class A, Reg S (Consumer Durables & Apparel)†

       244          30,254  

Lonza Group AG, Reg S (Pharmaceuticals, Biotechnology & Life Sciences)†

       60          49,278  

SGS SA, Reg S (Commercial & Professional Services)†

       8          23,633  
     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

Switzerland - 2.9% (continued)

           

Sonova Holding AG, Reg S (Health Care Equipment & Services)†

       68          $28,154  

Straumann Holding AG, Reg S (Health Care Equipment & Services)†

       15          31,227  

Temenos AG, Reg S (Software & Services)†

       98          14,967  

VAT Group AG (Capital Goods)^†

       96          45,736  

Vifor Pharma AG (Pharmaceuticals, Biotechnology & Life Sciences)†

       91          11,753  
              290,103  

Taiwan - 2.2%

           

Advantech Co., Ltd. (Technology Hardware & Equipment)†

       999          13,077  

Airtac International Group (Capital Goods)†

       418          12,553  

Chipbond Technology Corp. (Semiconductors & Semiconductor Equipment)†

       14,000          32,549  

Eclat Textile Co., Ltd. (Consumer Durables & Apparel)†

       600          13,135  

Hon Hai Precision Industry Co., Ltd. (Technology Hardware & Equipment)†

       17,000          65,782  

Largan Precision Co., Ltd. (Technology Hardware & Equipment)†

       100          7,475  

Silergy Corp. (Semiconductors & Semiconductor Equipment)†

       200          33,025  

Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & Semiconductor Equipment)†

       2,000          42,325  
              219,921  

Thailand - 0.2%

           

Siam Commercial Bank pcl, Reg S (Banks)†

       6,200          23,542  

Turkey - 0.2%

           

BIM Birlesik Magazalar AS (Food & Staples Retailing)†

       2,570          16,614  

United Arab Emirates - 0.4%

           

Agthia Group PJSC (Food Beverage & Tobacco)†

       8,681          14,052  

Emaar Properties PJSC (Real Estate)†

       18,834          20,599  
              34,651  

United Kingdom - 4.9%

           

Coca-Cola HBC AG - CDI (Food Beverage & Tobacco)*†

       751          26,055  
 

 

See Notes to Financial Statements

 

26


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

United Kingdom - 4.9% (continued)

           

Compass Group plc (Consumer Services)*†

       967          $20,540  

Dechra Pharmaceuticals plc (Pharmaceuticals, Biotechnology & Life Sciences)†

       780          54,696  

Diploma plc (Capital Goods)†

       1,860          76,694  

Grafton Group plc (Capital Goods)†

       2,919          53,638  

HomeServe plc (Commercial & Professional Services)†

       3,499          41,045  

Intertek Group plc (Commercial & Professional Services)†

       242          16,178  

Reckitt Benckiser Group plc (Household & Personal Products)†

       152          12,329  

Rightmove plc (Media & Entertainment)†

       2,075          19,648  

Rio Tinto plc (Materials)†

       1,083          67,480  

Royal Dutch Shell plc, Class B - Sponsored ADR (Energy)

       790          36,214  

Spirax-Sarco Engineering plc (Capital Goods)†

       154          32,905  

Standard Chartered plc (Banks)†

       3,634          24,633  
              482,055  

United States - 40.2%

           

Abbott Laboratories (Health Care Equipment & Services)

       390          50,267  

AbbVie Inc. (Pharmaceuticals, Biotechnology & Life Sciences)

       847          97,125  

ABIOMED Inc. (Health Care Equipment & Services)*

       55          18,262  

Accenture plc, Class A (Software & Services)

       70          25,115  

Adobe Inc. (Software & Services)*

       90          58,532  

Air Products and Chemicals Inc. (Materials)

       253          75,852  

Align Technology Inc. (Health Care Equipment & Services)*

       32          19,980  

Allegion plc (Capital Goods)

       136          17,449  

Alphabet Inc., Class A (Media & Entertainment)*

       36          106,593  

Altair Engineering Inc., Class A (Software & Services)*

       277          21,548  

Amazon.com Inc. (Retailing)*

       14          47,214  

AMETEK Inc. (Capital Goods)

       147          19,463  

Amphenol Corp., Class A (Technology Hardware & Equipment)

       288          22,110  

ANSYS Inc. (Software & Services)*

       78          29,607  

Apple Inc. (Technology Hardware & Equipment)

       260          38,948  
     Shares    Value  
COMMON STOCKS - 98.0% (continued)          

United States - 40.2% (continued)

         

Applied Materials Inc. (Semiconductors & Semiconductor Equipment)

       670        $91,556  

Atlassian Corp. plc, Class A (Software & Services)*

       117        53,601  

Automatic Data Processing Inc. (Software & Services)

       92        20,653  

BorgWarner Inc. (Automobiles & Components)

       919        41,419  

Broadcom Inc. (Semiconductors & Semiconductor Equipment)

       208        110,587  

Church & Dwight Co., Inc. (Household & Personal Products)

       214        18,695  

Cisco Systems Inc. (Technology Hardware & Equipment)

       907        50,765  

CME Group Inc. (Diversified Financials)

       88        19,408  

Cognex Corp. (Technology Hardware & Equipment)

       230        20,146  

Cognizant Technology Solutions Corp., Class A (Software & Services)

       263        20,538  

Colgate-Palmolive Co. (Household & Personal Products)

       231        17,600  

CoStar Group Inc. (Commercial & Professional Services)*

       220        18,931  

Danaher Corp. (Health Care Equipment & Services)

       80        24,942  

Deere & Co. (Capital Goods)

       200        68,462  

eBay Inc. (Retailing)

       259        19,870  

Ecolab Inc. (Materials)

       84        18,666  

Edwards Lifesciences Corp. (Health Care Equipment & Services)*

       212        25,402  

Elanco Animal Health Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*

       585        19,235  

Electronic Arts Inc. (Media & Entertainment)

       143        20,056  

Emerson Electric Co. (Capital Goods)

       188        18,238  

EnerSys (Capital Goods)

       200        16,008  

EPAM Systems Inc. (Software & Services)*

       31        20,870  

Estee Lauder Cos., Inc., Class A (Household & Personal Products)

       60        19,460  

Etsy Inc. (Retailing)*

       183        45,876  

Exponent Inc. (Commercial & Professional Services)

       167        19,172  

Exxon Mobil Corp. (Energy)

       1,474        95,029  

Facebook Inc., Class A (Media & Entertainment)*

       270        87,364  
 

 

See Notes to Financial Statements

 

27


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

United States - 40.2% (continued)

         

First Republic Bank (Banks)

   119          $25,743  

Guidewire Software Inc. (Software & Services)*

   152          19,111  

Healthcare Services Group Inc. (Commercial & Professional Services)

   622          11,936  

HEICO Corp. (Capital Goods)

   290          40,423  

IDEXX Laboratories Inc. (Health Care Equipment & Services)*

   70          46,630  

Illumina Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*

   60          24,904  

Intuitive Surgical Inc. (Health Care Equipment & Services)*

   63          22,751  

IPG Photonics Corp. (Technology Hardware & Equipment)*

   95          15,106  

IQVIA Holdings Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*

   100          26,142  

Jack Henry & Associates Inc. (Software & Services)

   115          19,145  

Johnson & Johnson (Pharmaceuticals, Biotechnology & Life Sciences)

   501          81,603  

JPMorgan Chase & Co. (Banks)

   641          108,899  

Linde plc (Materials)†

   169          54,441  

Malibu Boats Inc., Class A (Consumer Durables & Apparel)*

   517          36,505  

Mastercard Inc., Class A (Software & Services)

   52          17,447  

McDonald’s Corp. (Consumer Services)

   85          20,872  

Merck & Co., Inc. (Pharmaceuticals, Biotechnology & Life Sciences)

   734          64,629  

Mettler-Toledo International Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*

   19          28,137  

Microsoft Corp. (Software & Services)

   363          120,378  

Monster Beverage Corp. (Food Beverage & Tobacco)*

   204          17,340  

Netflix Inc. (Media & Entertainment)*

   76          52,464  

Neurocrine Biosciences Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*

   445          46,907  

NIKE Inc., Class B (Consumer Durables & Apparel)

   156          26,097  
     Shares      Value  
COMMON STOCKS - 98.0% (continued)            

United States - 40.2% (continued)

         

Ollie’s Bargain Outlet Holdings Inc. (Retailing)*

   815          $55,143  

Palo Alto Networks Inc. (Software & Services)*

   52          26,473  

PayPal Holdings Inc. (Software & Services)*

   161          37,447  

Penumbra Inc. (Health Care Equipment & Services)*

   62          17,146  

Pinterest Inc., Class A (Media & Entertainment)*

   290          12,946  

Planet Fitness Inc., Class A (Consumer Services)*

   203          16,149  

Procter & Gamble Co. (Household & Personal Products)

   137          19,590  

Reinsurance Group of America Inc. (Insurance)

   697          82,302  

Republic Services Inc. (Commercial & Professional Services)

   185          24,901  

ResMed Inc. (Health Care Equipment & Services)

   81          21,296  

Rollins Inc. (Commercial & Professional Services)

   1,132          39,880  

Roper Technologies Inc. (Capital Goods)

   47          22,930  

salesforce.com Inc. (Software & Services)*

   130          38,960  

Schlumberger NV (Energy)

   698          22,517  

Sensata Technologies Holding plc (Capital Goods)*

   328          18,073  

ServiceNow Inc. (Software & Services)*

   54          37,679  

Signature Bank (Banks)

   150          44,673  

Starbucks Corp. (Consumer Services)

   578          61,308  

Stryker Corp. (Health Care Equipment & Services)

   73          19,423  

SVB Financial Group (Banks)*

   102          73,175  

Synopsys Inc. (Software & Services)*

   269          89,625  

Teradyne Inc. (Semiconductors & Semiconductor Equipment)

   877          121,236  

Texas Instruments Inc. (Semiconductors & Semiconductor Equipment)

   115          21,560  

Texas Pacific Land Corp. (Energy)

   13          16,558  

Thermo Fisher Scientific Inc. (Pharmaceuticals, Biotechnology & Life Sciences)

   176          111,420  

UnitedHealth Group Inc. (Health Care Equipment & Services)

   220          101,303  
 

 

See Notes to Financial Statements

 

28


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 98.0% (continued)          

United States - 40.2% (continued)

         

Verisk Analytics Inc. (Commercial & Professional Services)

       103        $21,658  

Vertex Pharmaceuticals Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*

       433        80,075  

Visa Inc., Class A (Software & Services)

       76        16,095  

Walt Disney Co. (Media & Entertainment)*

       98        16,569  

Workday Inc., Class A (Software & Services)*

       140        40,597  

Zoetis Inc. (Pharmaceuticals, Biotechnology & Life Sciences)

       261        56,428  
                    3,963,359  

Total Common Stocks (Cost $6,971,091)

                  $9,663,681
         
PREFERRED STOCKS - 0.9%

Brazil - 0.2%

         

Itau Unibanco Holding SA - Sponsored ADR, 0.78% (Banks)+

       3,374        13,732  

Colombia - 0.1%

         

Bancolombia SA - Sponsored ADR, 0.68% (Banks)+

       360        12,935  

Germany - 0.4%

         

Henkel AG & Co. KGaA, 2.34% (Household & Personal Products)+†

       187        16,728  

Sartorius AG, 0.12% (Health Care Equipment & Services)+†

       33        21,415  
            38,143  

South Korea - 0.2%

         

Samsung Electronics Co., Ltd. - GDR, Reg S, 2.18% (Technology Hardware & Equipment)+†

       17        23,415  
                       

Total Preferred Stocks (Cost $78,138)

                  $88,225
         
SHORT TERM INVESTMENTS - 1.0%

Northern Institutional Funds - Treasury Portfolio (Premier Shares), 0.01% (Money Market Funds)

       93,132        93,132  
                       
     Shares    Value  
SHORT TERM INVESTMENTS - 1.0% (continued)

Total Short Term Investments (Cost $93,132)

                  $93,132
                       

Total Investments — 99.9%

                     

(Cost $7,142,361)

                  $9,845,038

Other Assets Less Liabilities - 0.1%

                  11,351  

Net Assets — 100.0%

                  $9,856,389

 

Summary of Abbreviations
ADR    American Depositary Receipt
CDI    Chess Depositary Interest
GDR    Global Depositary Receipt
Reg S        Security sold outside United States without registration under the Securities Act of 1933.
   Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.
*    Non-income producing security.
^    Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 2.3% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.
+    Current yield is disclosed. Dividends are calculated based on a percentage of the issuer’s net income.
 

 

See Notes to Financial Statements

 

29


Table of Contents

Harding, Loevner Funds, Inc.

 

Global Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

Industry    Percentage of
Net Assets
 

Automobiles & Components

     2.4

Banks

     10.6  

Capital Goods

     11.0  

Commercial & Professional Services

     3.4  

Consumer Durables & Apparel

     3.6  

Consumer Services

     1.6  

Diversified Financials

     0.7  

Energy

     4.2  

Food & Staples Retailing

     1.8  

Food Beverage & Tobacco

     2.1  

Health Care Equipment & Services

     7.3  

Household & Personal Products

     2.5  

Insurance

     1.9  

Materials

     4.3  

Media & Entertainment

     5.9  

Pharmaceuticals, Biotechnology & Life Sciences

     10.3  

Real Estate

     0.5  

Retailing

     4.1  

Semiconductors & Semiconductor Equipment

     5.9  

Software & Services

     10.4  

Technology Hardware & Equipment

     3.3  

Transportation

     0.8  

Utilities

     0.4  

Money Market Fund

     0.9  
   

Total Investments

     99.9  

Other Assets Less Liabilities

     0.1  
   

Net Assets

     100.0
 

 

See Notes to Financial Statements

 

30


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Research Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 96.3%          

Australia - 1.2%

         

BHP Group Ltd. (Materials)†

       4,069        $111,611  

Cochlear Ltd. (Health Care Equipment & Services)†

       427        71,115  
            182,726  

Brazil - 1.8%

         

Ambev SA - ADR (Food Beverage & Tobacco)

       13,956        41,310  

B3 SA - Brasil Bolsa Balcao (Diversified Financials)

       14,500        30,599  

Cia Brasileira de Distribuicao - ADR (Food & Staples Retailing)

       6,733        30,703  

Localiza Rent a Car SA (Transportation)

       3,100        24,882  

Magazine Luiza SA (Retailing)*

       10,200        19,537  

Raia Drogasil SA (Food & Staples Retailing)*

       6,500        26,777  

Ultrapar Participacoes SA - Sponsored ADR (Energy)

       10,307        24,015  

WEG SA (Capital Goods)

       6,200        40,646  

XP Inc., Class A (Diversified Financials)*

       1,029        33,761  
            272,230  

Canada - 1.9%

         

Alimentation Couche-Tard Inc. (Food & Staples Retailing)

       3,600        137,007  

Imperial Oil Ltd. (Energy)

       4,500        152,351  
            289,358  

Chile - 0.3%

         

Banco Santander Chile - ADR (Banks)

       2,474        43,839  

China - 10.7%

         

51job Inc. - ADR (Commercial & Professional Services)*

       694        41,335  

AAC Technologies Holdings Inc. (Technology Hardware & Equipment)†

       8,500        37,285  

Baidu Inc., Class A (Media & Entertainment)*†

       2,200        45,000  

China Tourism Group Duty Free Corp., Ltd., Class A (Retailing)†

       800        33,390  

Country Garden Services Holdings Co., Ltd. (Real Estate)†

       4,000        30,970  

CSPC Pharmaceutical Group Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       37,600        39,399  

Fuyao Glass Industry Group Co., Ltd., Class H (Automobiles & Components)^†

       6,800        39,411  

Glodon Co., Ltd., Class A (Software & Services)†

       3,480        40,379  
     Shares      Value  
COMMON STOCKS - 96.3% (continued)            

China - 10.7% (continued)

           

Gree Electric Appliances Inc. of Zhuhai, Class A (Consumer Durables & Apparel)†

       8,600          $49,063  

Haier Smart Home Co., Ltd., Class H (Consumer Durables & Apparel)†

       10,800          40,304  

Hangzhou Tigermed Consulting Co., Ltd., Class H (Pharmaceuticals, Biotechnology & Life Sciences)^†

       1,700          33,183  

Hefei Meiya Optoelectronic Technology Inc., Class A (Capital Goods)†

       4,800          30,180  

Hongfa Technology Co., Ltd., Class A (Capital Goods)†

       4,400          50,972  

Inner Mongolia Yili Industrial Group Co., Ltd., Class A (Food Beverage & Tobacco)†

       10,100          68,046  

JD.com Inc., Class A (Retailing)*†

       1,176          46,188  

Jiangsu Expressway Co., Ltd., Class H (Transportation)†

       32,000          30,250  

Jiangsu Hengrui Medicine Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       5,564          42,731  

Jiangsu Yanghe Brewery Joint-Stock Co., Ltd., Class A (Food Beverage & Tobacco)†

       1,100          31,806  

Kweichow Moutai Co., Ltd., Class A (Food Beverage & Tobacco)†

       100          28,585  

Meituan, Class B (Retailing)*^†

       900          31,397  

Midea Group Co., Ltd., Class A (Consumer Durables & Apparel)†

       3,400          36,355  

NetEase Inc. - ADR (Media & Entertainment)

       571          55,724  

Ping An Insurance Group Co. of China Ltd., Class H (Insurance)†

       6,000          43,206  

Qingdao Haier Biomedical Co., Ltd., Class A (Health Care Equipment & Services)†

       2,400          35,284  

Sangfor Technologies Inc., Class A (Software & Services)†

       1,100          34,854  

SF Holding Co., Ltd., Class A (Transportation)†

       3,800          38,264  

Shandong Sinocera Functional Material Co., Ltd., Class A (Materials)†

       5,300          35,259  

Shanghai International Airport Co., Ltd., Class A (Transportation)*†

       5,100          42,033  
 

 

See Notes to Financial Statements

 

31


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 96.3% (continued)          

China - 10.7% (continued)

         

Shenzhen Inovance Technology Co., Ltd., Class A (Capital Goods)†

       4,050        $41,075  

Shenzhou International Group Holdings Ltd. (Consumer Durables & Apparel)†

       2,000        43,365  

Sino Biopharmaceutical Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       54,500        40,428  

Songcheng Performance Development Co., Ltd., Class A (Consumer Services)†

       11,800        25,716  

Sunny Optical Technology Group Co., Ltd. (Technology Hardware & Equipment)†

       1,700        45,844  

Suofeiya Home Collection Co., Ltd., Class A (Consumer Durables & Apparel)†

       11,600        30,773  

Tencent Holdings Ltd. (Media & Entertainment)†

       600        37,252  

TravelSky Technology Ltd., Class H (Software & Services)†

       23,000        43,073  

Trip.com Group Ltd. (Consumer Services)*†

       1,251        36,085  

Wuliangye Yibin Co., Ltd., Class A (Food Beverage & Tobacco)†

       800        27,142  

WuXi AppTec Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       1,790        38,570  

Wuxi Biologics Cayman Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*^†

       2,500        38,183  

Yonyou Network Technology Co., Ltd., Class A (Software & Services)†

       7,700        38,123  

Zhejiang Sanhua Intelligent Controls Co., Ltd., Class A (Capital Goods)†

       11,900        43,997  
            1,640,479  

Colombia - 0.9%

         

Cementos Argos SA (Materials)

       26,196        44,173  

Ecopetrol SA - Sponsored ADR (Energy)

       3,713        56,252  

Grupo Nutresa SA (Food Beverage & Tobacco)

       7,328        42,831  
            143,256  

Czech Republic - 0.4%

         

Komercni banka AS (Banks)*†

       1,394        54,070  
     Shares    Value  
COMMON STOCKS - 96.3% (continued)          

Denmark - 2.3%

         

Ambu A/S, Class B (Health Care Equipment & Services)†

       1,023        $29,246  

Chr Hansen Holding A/S (Materials)†

       702        55,855  

Coloplast A/S, Class B (Health Care Equipment & Services)†

       377        61,484  

Genmab A/S (Pharmaceuticals, Biotechnology & Life Sciences)*†

       350        157,563  

Novozymes A/S, Class B (Materials)†

       598        43,950  
            348,098  

Egypt - 0.7%

         

Commercial International Bank Egypt SAE - GDR, Reg S (Banks)*†

       33,598        104,143  

Finland - 0.5%

         

Kone OYJ, Class B (Capital Goods)†

       601        40,904  

Neste OYJ (Energy)†

       665        37,130  
            78,034  

France - 5.6%

         

Air Liquide SA (Materials)†

       723        120,853  

Dassault Systemes SE (Software & Services)†

       975        56,864  

IPSOS (Media & Entertainment)†

       2,185        102,726  

Kering SA (Consumer Durables & Apparel)†

       104        78,028  

LISI (Capital Goods)†

       3,059        85,103  

L’Oreal SA (Household & Personal Products)†

       100        45,729  

Rubis SCA (Utilities)†

       3,120        99,920  

Safran SA (Capital Goods)†

       590        79,331  

Sartorius Stedim Biotech (Pharmaceuticals, Biotechnology & Life Sciences)†

       103        56,870  

Schneider Electric SE (Capital Goods)†

       737        127,481  
            852,905  

Germany - 7.6%

         

adidas AG (Consumer Durables & Apparel)†

       99        32,422  

Allianz SE, Reg S (Insurance)†

       531        123,488  

Bayerische Motoren Werke AG (Automobiles & Components)†

       1,486        149,893  

Bechtle AG (Software & Services)†

       1,176        88,105  

Brenntag SE (Capital Goods)†

       1,528        145,284  

Carl Zeiss Meditec AG (Bearer) (Health Care Equipment & Services)†

       256        51,482  
 

 

See Notes to Financial Statements

 

32


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 96.3% (continued)          

Germany - 7.6% (continued)

         

Evotec SE (Pharmaceuticals, Biotechnology & Life Sciences)*†

       948        $45,865  

FUCHS PETROLUB SE (Materials)†

       2,480        91,266  

HelloFresh SE (Retailing)*†

       415        33,584  

Infineon Technologies AG (Semiconductors & Semiconductor Equipment)†

       1,274        59,548  

SAP SE - Sponsored ADR (Software & Services)

       717        103,807  

Scout24 SE (Media & Entertainment)^†

       1,132        78,784  

Symrise AG (Materials)†

       935        129,269  

TeamViewer AG (Software & Services)*^†

       1,749        26,085  
            1,158,882  

Hong Kong - 1.7%

         

AIA Group Ltd. (Insurance)†

       8,600        97,187  

ASM Pacific Technology Ltd. (Semiconductors & Semiconductor Equipment)†

       9,600        104,204  

Techtronic Industries Co., Ltd. (Capital Goods)†

       2,500        51,369  
            252,760  

Iceland - 0.2%

         

Marel HF (Capital Goods)^†

       5,278        35,379  

India - 2.7%

         

Asian Paints Ltd. (Materials)†

       998        41,360  

Godrej Consumer Products Ltd. (Household & Personal Products)*†

       3,680        47,178  

HDFC Bank Ltd. - ADR (Banks)

       541        38,903  

Hero MotoCorp Ltd. (Automobiles & Components)†

       1,194        42,464  

ICICI Bank Ltd. - Sponsored ADR (Banks)

       3,149        66,602  

Kotak Mahindra Bank Ltd. (Banks)†

       1,697        45,943  

Marico Ltd. (Household & Personal Products)†

       5,430        41,335  

Pidilite Industries Ltd. (Materials)†

       1,367        42,327  

Tata Consultancy Services Ltd. (Software & Services)†

       1,001        45,473  
            411,585  

Indonesia - 1.2%

         

Astra International Tbk PT (Automobiles & Components)†

       122,700        52,264  

Bank Central Asia Tbk PT (Banks)†

       93,000        49,079  

Bank Rakyat Indonesia Persero Tbk PT (Banks)†

       141,200        42,207  
     Shares    Value  
COMMON STOCKS - 96.3% (continued)          

Indonesia - 1.2% (continued)

         

Unilever Indonesia Tbk PT (Household & Personal Products)†

       147,500        $46,046  
            189,596  

Israel - 0.3%

         

CyberArk Software Ltd. (Software & Services)*

       241        43,407  

Italy - 2.0%

         

Amplifon SpA (Health Care Equipment & Services)†

       767        39,001  

DiaSorin SpA (Health Care Equipment & Services)†

       281        63,466  

FinecoBank Banca Fineco SpA (Banks)*†

       2,153        41,163  

Reply SpA (Software & Services)†

       866        168,234  
            311,864  

Japan - 14.7%

         

ABC-Mart Inc. (Retailing)†

       1,740        83,372  

Benefit One Inc. (Commercial & Professional Services)†

       1,200        60,692  

BML Inc. (Health Care Equipment & Services)†

       2,300        80,771  

Chugai Pharmaceutical Co., Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       2,500        93,235  

FANUC Corp. (Capital Goods)†

       350        68,781  

Fast Retailing Co., Ltd. (Retailing)†

       40        26,571  

Hakuhodo DY Holdings Inc. (Media & Entertainment)†

       9,490        155,215  

Kakaku.com Inc. (Media & Entertainment)†

       2,700        89,472  

Kobayashi Pharmaceutical Co., Ltd. (Household & Personal Products)†

       800        64,047  

Komatsu Ltd. (Capital Goods)†

       4,740        123,816  

Kubota Corp. (Capital Goods)†

       6,400        136,446  

M3 Inc. (Health Care Equipment & Services)†

       500        29,506  

Makita Corp. (Capital Goods)†

       2,400        110,073  

MISUMI Group Inc. (Capital Goods)†

       2,000        83,734  

Nitori Holdings Co., Ltd. (Retailing)†

       800        146,801  

Nomura Research Institute Ltd. (Software & Services)†

       1,106        44,429  

Rinnai Corp. (Consumer Durables & Apparel)†

       1,200        123,083  

Shimano Inc. (Consumer Durables & Apparel)†

       170        47,377  
 

 

See Notes to Financial Statements

 

33


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 96.3% (continued)          

Japan - 14.7% (continued)

         

Shionogi & Co., Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       2,300        $149,752  

Shiseido Co., Ltd. (Household & Personal Products)†

       600        39,967  

SMC Corp. (Capital Goods)†

       160        95,693  

Stanley Electric Co., Ltd. (Automobiles & Components)†

       4,615        116,388  

Sugi Holdings Co., Ltd. (Food & Staples Retailing)†

       1,655        118,676  

Sysmex Corp. (Health Care Equipment & Services)†

       500        62,148  

Unicharm Corp. (Household & Personal Products)†

       2,600        104,879  
            2,254,924  

Kazakhstan - 0.6%

         

Halyk Savings Bank of Kazakhstan JSC - GDR, Reg S (Banks)†

       2,211        39,817  

Kaspi.KZ JSC - GDR, Reg S (Diversified Financials)†

       338        48,981  
            88,798  

Mexico - 1.0%

         

Fomento Economico Mexicano SAB de CV - Sponsored ADR (Food Beverage & Tobacco)

       655        53,835  

Grupo Financiero Banorte SAB de CV, Series O (Banks)

       9,600        60,781  

Wal-Mart de Mexico SAB de CV (Food & Staples Retailing)

       11,100        38,716  
            153,332  

Netherlands - 3.0%

         

Adyen NV (Software & Services)*^†

       18        54,373  

ASM International NV (Semiconductors & Semiconductor Equipment)†

       172        77,939  

ASML Holding NV, Reg S (Semiconductors & Semiconductor Equipment)

       201        163,389  

Koninklijke Vopak NV (Energy)†

       2,522        100,359  

Prosus NV (Retailing)*†

       710        62,902  
            458,962  

Norway - 0.3%

         

Tomra Systems ASA (Commercial & Professional Services)†

       804        51,974  

Pakistan - 0.4%

         

MCB Bank Ltd. (Banks)†

       32,100        30,746  
     Shares    Value  
COMMON STOCKS - 96.3% (continued)          

Pakistan - 0.4% (continued)

         

Oil & Gas Development Co., Ltd. (Energy)†

       47,100        $23,458  
            54,204  

Philippines - 2.2%

         

Bank of the Philippine Islands (Banks)†

       27,440        47,331  

BDO Unibank Inc. (Banks)†

       18,870        46,515  

International Container Terminal Services Inc. (Transportation)†

       14,190        50,633  

Robinsons Retail Holdings Inc. (Food & Staples Retailing)†

       39,680        49,004  

Security Bank Corp. (Banks)†

       19,210        46,107  

SM Prime Holdings Inc. (Real Estate)†

       83,300        54,775  

Universal Robina Corp. (Food Beverage & Tobacco)†

       14,560        39,879  
            334,244  

Poland - 0.6%

         

Allegro.eu SA (Retailing)*^†

       2,455        27,774  

ING Bank Slaski SA (Banks)*†

       980        66,825  
            94,599  

Russia - 1.5%

         

LUKOIL PJSC - Sponsored ADR (Energy)

       603        61,524  

Novatek PJSC - Sponsored GDR, Reg S (Energy)†

       190        48,302  

Sberbank of Russia PJSC - Sponsored ADR (Banks)†

       3,389        67,967  

Yandex NV, Class A (Media & Entertainment)*

       541        44,816  
            222,609  

Saudi Arabia - 0.9%

         

Al Rajhi Bank (Banks)†

       1,801        66,551  

Jarir Marketing Co. (Retailing)†

       724        39,132  

Saudi National Bank (Banks)†

       2,214        38,908  
            144,591  

Singapore - 2.2%

         

DBS Group Holdings Ltd. (Banks)†

       7,414        172,765  

Oversea-Chinese Banking Corp., Ltd. (Banks)†

       18,238        160,044  
            332,809  

Slovenia - 0.3%

         

Krka dd Novo mesto (Pharmaceuticals, Biotechnology & Life Sciences)†

       303        39,298  

South Africa - 0.2%

         

Discovery Ltd. (Insurance)*†

       4,148        38,168  
 

 

See Notes to Financial Statements

 

34


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 96.3% (continued)            

South Korea - 1.3%

           

Cheil Worldwide Inc. (Media & Entertainment)†

       2,148          $43,989  

Coway Co., Ltd. (Consumer Durables & Apparel)†

       524          35,697  

LG Household & Health Care Ltd. (Household & Personal Products)†

       29          29,111  

NAVER Corp. (Media & Entertainment)†

       111          38,853  

NCSoft Corp. (Media & Entertainment)†

       105          56,439  
              204,089  

Spain - 2.5%

           

Amadeus IT Group SA (Software & Services)*†

       528          35,382  

Banco Bilbao Vizcaya Argentaria SA (Banks)†

       17,279          121,229  

Banco Santander SA - Sponsored ADR (Banks)

       36,306          137,600  

Bankinter SA (Banks)†

       15,831          87,343  
              381,554  

Sweden - 6.0%

           

Alfa Laval AB (Capital Goods)†

       3,699          158,110  

Assa Abloy AB, Class B (Capital Goods)†

       4,911          144,069  

Atlas Copco AB, Class A (Capital Goods)†

       998          64,021  

Epiroc AB, Class A (Capital Goods)†

       5,084          126,304  

Evolution AB (Consumer Services)^†

       550          89,071  

Hexagon AB, Class B (Technology Hardware & Equipment)†

       2,300          37,074  

Intrum AB (Commercial & Professional Services)†

       2,391          67,746  

Skandinaviska Enskilda Banken AB, Class A (Banks)†

       11,998          187,840  

Thule Group AB (Consumer Durables & Apparel)^†

       769          44,378  
              918,613  

Switzerland - 5.0%

           

Alcon Inc. (Health Care Equipment & Services)

       1,857          154,799  

Cie Financiere Richemont SA, Class A, Reg S (Consumer Durables & Apparel)†

       502          62,244  

Lonza Group AG, Reg S (Pharmaceuticals, Biotechnology & Life Sciences)†

       117          96,093  

SGS SA, Reg S (Commercial & Professional Services)†

       25          73,854  
     Shares      Value  
COMMON STOCKS - 96.3% (continued)            

Switzerland - 5.0% (continued)

           

Sonova Holding AG, Reg S (Health Care Equipment & Services)†

       140          $57,963  

Straumann Holding AG, Reg S (Health Care Equipment & Services)†

       29          60,373  

Temenos AG, Reg S (Software & Services)†

       306          46,733  

VAT Group AG (Capital Goods)^†

       207          98,617  

Vifor Pharma AG (Pharmaceuticals, Biotechnology & Life Sciences)†

       928          119,854  
              770,530  

Taiwan - 2.5%

           

Advantech Co., Ltd. (Technology Hardware & Equipment)†

       2,998          39,244  

Airtac International Group (Capital Goods)†

       1,046          31,413  

Chipbond Technology Corp. (Semiconductors & Semiconductor Equipment)†

       21,000          48,823  

Eclat Textile Co., Ltd. (Consumer Durables & Apparel)†

       2,000          43,784  

Hon Hai Precision Industry Co., Ltd. (Technology Hardware & Equipment)†

       9,000          34,826  

Largan Precision Co., Ltd. (Technology Hardware & Equipment)†

       300          22,426  

Silergy Corp. (Semiconductors & Semiconductor Equipment)†

       500          82,561  

Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & Semiconductor Equipment)†

       4,000          84,651  
              387,728  

Thailand - 0.4%

           

Siam Commercial Bank pcl, Reg S (Banks)†

       16,000          60,755  

Turkey - 0.2%

           

BIM Birlesik Magazalar AS (Food & Staples Retailing)†

       4,402          28,458  

United Arab Emirates - 0.7%

           

Agthia Group PJSC (Food Beverage & Tobacco)†

       23,110          37,409  

Emaar Properties PJSC (Real Estate)†

       70,076          76,641  
              114,050  

United Kingdom - 7.8%

           

Coca-Cola HBC AG - CDI (Food Beverage & Tobacco)*†

       1,189          41,251  
 

 

See Notes to Financial Statements

 

35


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 96.3% (continued)          

United Kingdom - 7.8% (continued)

         

Compass Group plc (Consumer Services)*†

       1,938        $41,164  

Dechra Pharmaceuticals plc (Pharmaceuticals, Biotechnology & Life Sciences)†

       1,894        132,814  

Diploma plc (Capital Goods)†

       3,718        153,307  

Grafton Group plc (Capital Goods)†

       5,899        108,397  

HomeServe plc (Commercial & Professional Services)†

       9,439        110,723  

Intertek Group plc (Commercial & Professional Services)†

       804        53,749  

Reckitt Benckiser Group plc (Household & Personal Products)†

       736        59,699  

Rightmove plc (Media & Entertainment)†

       8,520        80,675  

Rio Tinto plc (Materials)†

       1,881        117,203  

Royal Dutch Shell plc, Class B - Sponsored ADR (Energy)

       3,282        150,447  

Spirax-Sarco Engineering plc (Capital Goods)†

       248        52,990  

Standard Chartered plc (Banks)†

       12,421        84,195  
                    1,186,614  

Total Common Stocks (Cost $11,369,652)

                  $14,733,514
         
PREFERRED STOCKS - 2.0%          

Brazil - 0.2%

         

Itau Unibanco Holding SA - Sponsored ADR, 0.78% (Banks)+

       7,362        29,963  

Colombia - 0.4%

         

Bancolombia SA - Sponsored ADR, 0.68% (Banks)+

       1,501        53,931  

Germany - 1.0%

         

Henkel AG & Co. KGaA, 2.34% (Household & Personal Products)+†

       1,274        113,968  

Sartorius AG, 0.12% (Health Care Equipment & Services)+†

       70        45,426  
            159,394  

South Korea - 0.4%

         

Samsung Electronics Co., Ltd. - GDR, Reg S, 2.18% (Technology Hardware & Equipment)+†

       42        57,849  
                       

Total Preferred Stocks (Cost $283,475)

                  $301,137
     Shares    Value  
SHORT TERM INVESTMENTS - 1.5%     

Northern Institutional Funds - Treasury Portfolio (Premier Shares), 0.01% (Money Market Funds)

 

      

 

232,005

 

 

      

 

$232,005

 

 

 

Total Short Term Investments (Cost $232,005)

 

       $232,005
                       

Total Investments — 99.8%

                     

(Cost $11,885,132)

                  $15,266,656

Other Assets Less Liabilities - 0.2%

                  28,115  

Net Assets — 100.0%

                  $15,294,771

 

Summary of Abbreviations
ADR    American Depositary Receipt
CDI    Chess Depositary Interest
GDR    Global Depositary Receipt
Reg S    Security sold outside United States without registration under the Securities Act of 1933.
   Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.
*    Non-income producing security.
^    Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 3.9% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.
+    Current yield is disclosed. Dividends are calculated based on a percentage of the issuer’s net income.
 

 

See Notes to Financial Statements

 

36


Table of Contents

Harding, Loevner Funds, Inc.

 

International Equity Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

Industry       
Percentage of
Net Assets
 
 

Automobiles & Components

       2.6 %

Banks

       13.7

Capital Goods

       15.2

Commercial & Professional Services

       3.0

Consumer Durables & Apparel

       4.4

Consumer Services

       1.3

Diversified Financials

       0.7

Energy

       4.3

Food & Staples Retailing

       2.8

Food Beverage & Tobacco

       2.7

Health Care Equipment & Services

       5.5

Household & Personal Products

       3.9

Insurance

       2.0

Materials

       5.4

Media & Entertainment

       5.4

Pharmaceuticals, Biotechnology & Life Sciences

       7.3

Real Estate

       1.1

Retailing

       3.6

Semiconductors & Semiconductor Equipment

       4.1

Software & Services

       5.7

Technology Hardware & Equipment

       1.8

Transportation

       1.2

Utilities

       0.6

Money Market Fund

       1.5

Total Investments

       99.8

Other Assets Less Liabilities

       0.2

Net Assets

       100.0 %
 

 

See Notes to Financial Statements

 

37


Table of Contents

Harding, Loevner Funds, Inc.

 

Emerging Markets Research Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares      Value  
COMMON STOCKS - 95.8%            

Argentina - 0.7%

           

Globant SA (Software & Services)*

       207          $66,072  

Bangladesh - 0.5%

           

GrameenPhone Ltd. (Telecommunication Services)†

       5,493          22,790  

Square Pharmaceuticals Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       10,847          27,570  
              50,360  

Brazil - 4.9%

           

Ambev SA - ADR (Food Beverage & Tobacco)

       20,505          60,695  

B3 SA - Brasil Bolsa Balcao (Diversified Financials)

       55,900          117,965  

Cia Brasileira de Distribuicao - ADR (Food & Staples Retailing)

       8,181          37,305  

Localiza Rent a Car SA (Transportation)

       3,800          30,501  

Magazine Luiza SA (Retailing)*

       20,300          38,882  

Raia Drogasil SA (Food & Staples Retailing)*

       8,000          32,956  

Ultrapar Participacoes SA - Sponsored ADR (Energy)

       15,872          36,982  

WEG SA (Capital Goods)

       7,200          47,202  

XP Inc., Class A (Diversified Financials)*

       1,254          41,152  
              443,640  

Chile - 0.9%

           

Banco Santander Chile - ADR (Banks)

       4,584          81,229  

China - 29.6%

           

51job Inc. - ADR (Commercial & Professional Services)*

       764          45,504  

AAC Technologies Holdings Inc. (Technology Hardware & Equipment)†

       18,500          81,151  

Baidu Inc., Class A (Media & Entertainment)*†

       3,200          65,454  

China Tourism Group Duty Free Corp., Ltd., Class A (Retailing)†

       1,700          70,953  

Country Garden Services Holdings Co., Ltd. (Real Estate)†

       5,000          38,713  

CSPC Pharmaceutical Group Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       132,080          138,401  

Fuyao Glass Industry Group Co., Ltd., Class H (Automobiles & Components)^†

       8,400          48,684  
     Shares      Value  
COMMON STOCKS - 95.8% (continued)            

China - 29.6% (continued)

           

Glodon Co., Ltd., Class A (Software & Services)†

       3,400          $39,450  

Gree Electric Appliances Inc. of Zhuhai, Class A (Consumer Durables & Apparel)†

       21,000          119,805  

Haier Smart Home Co., Ltd., Class H (Consumer Durables & Apparel)†

       30,400          113,448  

Hangzhou Tigermed Consulting Co., Ltd., Class H (Pharmaceuticals, Biotechnology & Life Sciences)^†

       2,100          40,991  

Hefei Meiya Optoelectronic Technology Inc., Class A (Capital Goods)†

       3,700          23,264  

Hongfa Technology Co., Ltd., Class A (Capital Goods)†

       5,300          61,398  

Inner Mongolia Yili Industrial Group Co., Ltd., Class A (Food Beverage & Tobacco)†

       11,300          76,130  

JD.com Inc., Class A (Retailing)*†

       3,552          139,508  

Jiangsu Expressway Co., Ltd., Class H (Transportation)†

       60,000          56,719  

Jiangsu Hengrui Medicine Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       6,480          49,766  

Jiangsu Yanghe Brewery Joint-Stock Co., Ltd., Class A (Food Beverage & Tobacco)†

       2,200          63,612  

Kweichow Moutai Co., Ltd., Class A (Food Beverage & Tobacco)†

       100          28,585  

Meituan, Class B (Retailing)*^†

       1,200          41,862  

Midea Group Co., Ltd., Class A (Consumer Durables & Apparel)†

       15,600          166,804  

NetEase Inc. - ADR (Media & Entertainment)

       684          66,752  

Ping An Insurance Group Co. of China Ltd., Class H (Insurance)†

       20,000          144,021  

Qingdao Haier Biomedical Co., Ltd., Class A (Health Care Equipment & Services)†

       2,900          42,634  

Sangfor Technologies Inc., Class A (Software & Services)†

       1,400          44,360  

SF Holding Co., Ltd., Class A (Transportation)†

       5,900          59,410  

Shandong Sinocera Functional Material Co., Ltd., Class A (Materials)†

       6,300          41,911  
 

 

See Notes to Financial Statements

 

38


Table of Contents

Harding, Loevner Funds, Inc.

 

Emerging Markets Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 95.8% (continued)          

China - 29.6% (continued)

         

Shanghai International Airport Co., Ltd., Class A (Transportation)*†

       6,400        $52,748  

Shenzhen Inovance Technology Co., Ltd., Class A (Capital Goods)†

       4,800        48,682  

Shenzhou International Group Holdings Ltd. (Consumer Durables & Apparel)†

       3,000        65,048  

Sino Biopharmaceutical Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       45,000        33,381  

Songcheng Performance Development Co., Ltd., Class A (Consumer Services)†

       19,100        41,626  

Sunny Optical Technology Group Co., Ltd. (Technology Hardware & Equipment)†

       2,000        53,934  

Suofeiya Home Collection Co., Ltd., Class A (Consumer Durables & Apparel)†

       13,700        36,344  

Tencent Holdings Ltd. (Media & Entertainment)†

       800        49,669  

TravelSky Technology Ltd., Class H (Software & Services)†

       23,000        43,073  

Trip.com Group Ltd. (Consumer Services)*†

       2,161        62,333  

Wuliangye Yibin Co., Ltd., Class A (Food Beverage & Tobacco)†

       1,400        47,498  

WuXi AppTec Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       3,727        80,308  

Wuxi Biologics Cayman Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*^†

       3,000        45,819  

Yonyou Network Technology Co., Ltd., Class A (Software & Services)†

       9,600        47,529  

Zhejiang Sanhua Intelligent Controls Co., Ltd., Class A (Capital Goods)†

       16,800        62,114  
            2,679,396  

Colombia - 2.2%

         

Cementos Argos SA (Materials)

       15,277        25,761  

Ecopetrol SA - Sponsored ADR (Energy)

       9,800        148,470  

Grupo Nutresa SA (Food Beverage & Tobacco)

       3,657        21,374  
            195,605  

Czech Republic - 0.3%

         

Komercni banka AS (Banks)*†

       706        27,384  
     Shares    Value  
COMMON STOCKS - 95.8% (continued)          

Egypt - 0.5%

         

Commercial International Bank Egypt SAE - GDR, Reg S (Banks)*†

       15,603        $48,364  

Iceland - 0.2%

         

Marel HF (Capital Goods)^†

       3,210        21,517  

India - 8.0%

         

Asian Paints Ltd. (Materials)†

       1,186        49,151  

Godrej Consumer Products Ltd. (Household & Personal Products)*†

       3,039        38,961  

HDFC Bank Ltd. - ADR (Banks)

       2,301        165,465  

Hero MotoCorp Ltd. (Automobiles & Components)†

       4,698        167,082  

ICICI Bank Ltd. - Sponsored ADR (Banks)

       4,443        93,969  

Kotak Mahindra Bank Ltd. (Banks)†

       1,950        52,792  

Marico Ltd. (Household & Personal Products)†

       3,148        23,964  

Pidilite Industries Ltd. (Materials)†

       2,034        62,979  

Tata Consultancy Services Ltd. (Software & Services)†

       1,502        68,233  
            722,596  

Indonesia - 2.1%

         

Astra International Tbk PT (Automobiles & Components)†

       116,400        49,580  

Bank Central Asia Tbk PT (Banks)†

       108,000        56,996  

Bank Rakyat Indonesia Persero Tbk PT (Banks)†

       164,300        49,112  

Unilever Indonesia Tbk PT (Household & Personal Products)†

       105,000        32,778  
            188,466  

Kazakhstan - 0.7%

         

Halyk Savings Bank of Kazakhstan JSC - GDR, Reg S (Banks)†

       1,819        32,758  

Kaspi.KZ JSC - GDR, Reg S (Diversified Financials)†

       198        28,693  
            61,451  

Kenya - 0.3%

         

Safaricom plc (Telecommunication Services)†

       62,300        23,926  

Malaysia - 0.5%

         

Dialog Group Bhd. (Energy)†

       63,800        43,638  
 

 

See Notes to Financial Statements

 

39


Table of Contents

Harding, Loevner Funds, Inc.

 

Emerging Markets Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 95.8% (continued)          

Mexico - 4.2%

         

Fomento Economico Mexicano SAB de CV - Sponsored ADR (Food Beverage & Tobacco)

       2,132        $175,229  

Grupo Financiero Banorte SAB de CV, Series O (Banks)

       25,600        162,083  

Wal-Mart de Mexico SAB de CV (Food & Staples Retailing)

       13,300        46,390  
            383,702  

Morocco - 0.5%

         

Attijariwafa Bank (Banks)†

       430        23,181  

Itissalat Al-Maghrib (Telecommunication Services)†

       1,491        23,495  
            46,676  

Nigeria - 0.5%

         

Guaranty Trust Holding Co., plc (Banks)

       261,863        18,133  

Zenith Bank plc (Banks)

       414,394        25,289  
            43,422  

Pakistan - 0.4%

         

MCB Bank Ltd. (Banks)†

       17,600        16,857  

Oil & Gas Development Co., Ltd. (Energy)†

       41,800        20,819  
            37,676  

Panama - 0.5%

         

Copa Holdings SA, Class A (Transportation)*

       607        44,894  

Philippines - 3.7%

         

Bank of the Philippine Islands (Banks)†

       13,720        23,665  

BDO Unibank Inc. (Banks)†

       30,810        75,948  

International Container Terminal Services Inc. (Transportation)†

       18,410        65,691  

Jollibee Foods Corp. (Consumer Services)†

       6,330        29,508  

Robinsons Retail Holdings Inc. (Food & Staples Retailing)†

       24,910        30,764  

Security Bank Corp. (Banks)†

       10,700        25,681  

SM Prime Holdings Inc. (Real Estate)†

       88,800        58,392  

Universal Robina Corp. (Food Beverage & Tobacco)†

       8,270        22,651  
            332,300  

Poland - 0.7%

         

Allegro.eu SA (Retailing)*^†

       2,942        33,283  

ING Bank Slaski SA (Banks)*†

       505        34,436  
            67,719  

Romania - 0.6%

         

Banca Transilvania SA (Banks)†

       38,734        22,714  
     Shares      Value  
COMMON STOCKS - 95.8% (continued)            

Romania - 0.6% (continued)

           

Societatea Nationala de Gaze Naturale ROMGAZ SA (Energy)†

       3,372          $29,377  
              52,091  

Russia - 6.1%

           

LUKOIL PJSC - Sponsored ADR (Energy)

       1,859          189,674  

Novatek PJSC - Sponsored GDR, Reg S (Energy)†

       531          134,991  

Sberbank of Russia PJSC - Sponsored ADR (Banks)†

       8,719          174,860  

Yandex NV, Class A (Media & Entertainment)*

       681          56,414  
              555,939  

Saudi Arabia - 2.7%

           

Al Rajhi Bank (Banks)†

       2,128          78,634  

Bupa Arabia for Cooperative Insurance Co. (Insurance)†

       621          23,938  

Jarir Marketing Co. (Retailing)†

       1,292          69,833  

Mouwasat Medical Services Co. (Health Care Equipment & Services)†

       471          22,599  

Saudi National Bank (Banks)†

       2,666          46,851  
              241,855  

Slovenia - 0.3%

           

Krka dd Novo mesto (Pharmaceuticals, Biotechnology & Life Sciences)†

       179          23,216  

South Africa - 0.8%

           

Discovery Ltd. (Insurance)*†

       7,600          69,932  

South Korea - 5.9%

           

Cheil Worldwide Inc. (Media & Entertainment)†

       3,865          79,152  

Coway Co., Ltd. (Consumer Durables & Apparel)†

       1,180          80,387  

LG Household & Health Care Ltd. (Household & Personal Products)†

       116          116,443  

NAVER Corp. (Media & Entertainment)†

       181          63,355  

NCSoft Corp. (Media & Entertainment)†

       370          198,881  
              538,218  

Taiwan - 11.2%

           

Advantech Co., Ltd. (Technology Hardware & Equipment)†

       6,499          85,071  

Airtac International Group (Capital Goods)†

       6,069          182,260  

Chipbond Technology Corp. (Semiconductors & Semiconductor Equipment)†

       72,000          167,394  
 

 

See Notes to Financial Statements

 

40


Table of Contents

Harding, Loevner Funds, Inc.

 

Emerging Markets Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 95.8% (continued)          

Taiwan - 11.2% (continued)

         

Eclat Textile Co., Ltd. (Consumer Durables & Apparel)†

       4,000        $87,568  

Hon Hai Precision Industry Co., Ltd. (Technology Hardware & Equipment)†

       45,000        174,130  

Largan Precision Co., Ltd. (Technology Hardware & Equipment)†

       700        52,328  

Silergy Corp. (Semiconductors & Semiconductor Equipment)†

       600        99,074  

Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & Semiconductor Equipment)†

       8,000        169,301  
            1,017,126  

Thailand - 1.3%

         

Siam Commercial Bank pcl, Reg S (Banks)†

       32,000        121,510  

Turkey - 0.8%

         

BIM Birlesik Magazalar AS (Food & Staples Retailing)†

       11,148        72,069  

United Arab Emirates - 0.9%

         

Agthia Group PJSC (Food Beverage & Tobacco)†

       13,882        22,471  

Emaar Properties PJSC (Real Estate)†

       53,031        57,999  
            80,470  

Vietnam - 3.3%

         

Bank for Foreign Trade of Vietnam JSC (Banks)†

       15,240        65,630  

Hoa Phat Group JSC (Materials)†

       67,966        170,638  

Saigon Beer Alcohol Beverage Corp. (Food Beverage & Tobacco)†

       2,320        16,357  

Vietnam Dairy Products JSC (Food Beverage & Tobacco)†

       11,810        47,085  
                    299,710  

Total Common Stocks (Cost $7,634,691)

                  $8,682,169

    

         
PREFERRED STOCKS - 2.6%          

Brazil - 0.4%

         

Itau Unibanco Holding SA - Sponsored ADR, 0.78% (Banks)+

       8,370        34,066  

Colombia - 0.5%

         

Bancolombia SA - Sponsored ADR, 0.68% (Banks)+

       1,139        40,924  
     Shares    Value  
PREFERRED STOCKS - 2.6% (continued)     

South Korea - 1.7%

         

Samsung Electronics Co., Ltd. - GDR, Reg S, 2.18% (Technology Hardware & Equipment)+†

 

      

 

115

 

 

      

 

$158,395

 

 

 

Total Preferred Stocks (Cost $182,169)

                  $233,385

    

         
SHORT TERM INVESTMENTS - 1.0%          

Northern Institutional Funds - Treasury Portfolio (Premier Shares), 0.01% (Money Market Funds)

 

      

 

91,914

 

 

      

 

91,914

 

 

 

Total Short Term Investments (Cost $91,914)

 

       $91,914

    

                     

Total Investments — 99.4%

                     

(Cost $7,908,774)

                  $9,007,468

Other Assets Less Liabilities - 0.6%

                  57,099  

Net Assets — 100.0%

                  $9,064,567

 

Summary of Abbreviations
ADR    American Depositary Receipt
GDR    Global Depositary Receipt
Reg S    Security sold outside United States without registration under the Securities Act of 1933.
*    Non-income producing security.
   Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.
^    Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 2.6% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.
+    Current yield is disclosed. Dividends are calculated based on a percentage of the issuer’s net income.
 

 

See Notes to Financial Statements

 

41


Table of Contents

Harding, Loevner Funds, Inc.

 

Emerging Markets Research Portfolio

Portfolio of Investments (continued)

October 31, 2021

 

 

Industry       
Percentage of
Net Assets
 
 

Automobiles & Components

       2.9 %

Banks

       17.6

Capital Goods

       4.9

Commercial & Professional Services

       0.5

Consumer Durables & Apparel

       7.4

Consumer Services

       1.5

Diversified Financials

       2.1

Energy

       6.7

Food & Staples Retailing

       2.4

Food Beverage & Tobacco

       6.4

Health Care Equipment & Services

       0.7

Household & Personal Products

       2.3

Insurance

       2.6

Materials

       3.9

Media & Entertainment

       6.4

Pharmaceuticals, Biotechnology & Life Sciences

       4.9

Real Estate

       1.7

Retailing

       4.4

Semiconductors & Semiconductor Equipment

       4.8

Software & Services

       3.4

Technology Hardware & Equipment

       6.7

Telecommunication Services

       0.8

Transportation

       3.4

Money Market Fund

       1.0

Total Investments

       99.4

Other Assets Less Liabilities

       0.6

Net Assets

       100.0 %
 

 

See Notes to Financial Statements

 

42


Table of Contents

Harding, Loevner Funds, Inc.

 

Chinese Equity Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares    Value  
COMMON STOCKS - 95.7%          

China - 80.3%

         

Alibaba Group Holding Ltd. (Retailing)*†

       9,000        $186,204  

ANTA Sports Products Ltd. (Consumer Durables & Apparel)†

       5,000        77,979  

Baidu Inc., Class A (Media & Entertainment)*†

       4,008        81,982  

China Tourism Group Duty Free Corp., Ltd., Class A (Retailing)†

       4,300        179,469  

Country Garden Services Holdings Co., Ltd. (Real Estate)†

       9,000        69,683  

CSPC Pharmaceutical Group Ltd. (Pharmaceuticals, Biotechnology & Life Sciences)†

       60,000        62,871  

ENN Energy Holdings Ltd. (Utilities)†

       4,000        69,320  

Foshan Haitian Flavouring & Food Co., Ltd., Class A (Food Beverage & Tobacco)†

       3,190        58,380  

Fuyao Glass Industry Group Co., Ltd., Class H (Automobiles & Components)^†

       10,000        57,957  

Gree Electric Appliances Inc. of Zhuhai, Class A (Consumer Durables & Apparel)†

       9,800        55,909  

Haitian International Holdings Ltd. (Capital Goods)†

       28,020        82,032  

Hangzhou Tigermed Consulting Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       4,500        120,034  

Hefei Meiya Optoelectronic Technology Inc., Class A (Capital Goods)†

       8,000        50,300  

Inner Mongolia Yili Industrial Group Co., Ltd., Class A (Food Beverage & Tobacco)†

       9,400        63,329  

JD.com Inc., Class A (Retailing)*†

       2,750        108,009  

Jiangsu Hengrui Medicine Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       7,440        57,139  

Midea Group Co., Ltd., Class A (Consumer Durables & Apparel)†

       8,800        94,095  

NetEase Inc. (Media & Entertainment)†

       5,700        111,479  

Ping An Insurance Group Co. of China Ltd., Class H (Insurance)†

       3,500        25,204  

Sangfor Technologies Inc., Class A (Software & Services)†

       2,329        73,796  
     Shares    Value  
COMMON STOCKS - 95.7% (continued)          

China - 80.3% (continued)

         

SF Holding Co., Ltd., Class A (Transportation)†

       10,300        $103,716  

Shanghai International Airport Co., Ltd., Class A (Transportation)*†

       7,000        57,693  

Shenzhen Inovance Technology Co., Ltd., Class A (Capital Goods)†

       7,400        75,051  

Shenzhou International Group Holdings Ltd. (Consumer Durables & Apparel)†

       5,000        108,413  

Sunny Optical Technology Group Co., Ltd. (Technology Hardware & Equipment)†

       5,100        137,532  

Tencent Holdings Ltd. (Media & Entertainment)†

       3,600        223,510  

TravelSky Technology Ltd., Class H (Software & Services)†

       50,000        93,637  

Trip.com Group Ltd. (Consumer Services)*†

       1,646        47,478  

Wuliangye Yibin Co., Ltd., Class A (Food Beverage & Tobacco)†

       2,900        98,388  

WuXi AppTec Co., Ltd., Class A (Pharmaceuticals, Biotechnology & Life Sciences)†

       7,360        158,590  

Wuxi Biologics Cayman Inc. (Pharmaceuticals, Biotechnology & Life Sciences)*^†

       13,500        206,187  

Yonyou Network Technology Co., Ltd., Class A (Software & Services)†

       14,000        69,314  

Zhejiang Sanhua Intelligent Controls Co., Ltd., Class A (Capital Goods)†

       27,300        100,935  
            3,165,615  

Hong Kong - 8.6%

         

AIA Group Ltd. (Insurance)†

       11,200        126,569  

Hong Kong Exchanges & Clearing Ltd. (Diversified Financials)†

       800        48,552  

Techtronic Industries Co., Ltd. (Capital Goods)†

       8,000        164,381  
            339,502  

Taiwan - 6.8%

         

Airtac International Group (Capital Goods)†

       4,185        125,682  

Silergy Corp. (Semiconductors & Semiconductor Equipment)†

       850        140,354  
                    266,036  

Total Common Stocks (Cost $3,930,272)

                  $3,771,153
 

 

See Notes to Financial Statements

 

43


Table of Contents

Harding, Loevner Funds, Inc.

 

Chinese Equity Portfolio

Portfolio of Investments

October 31, 2021

 

 

     Shares    Value  
SHORT TERM INVESTMENTS - 2.9%     

Northern Institutional Funds - Treasury Portfolio (Premier Shares), 0.01% (Money Market Funds)

       115,797        $115,797  

    

                     

Total Short Term Investments (Cost $115,797)

 

       $115,797

    

                     

Total Investments — 98.6%

                     
     

(Cost $4,046,069)

                  $3,886,950

Other Assets Less Liabilities - 1.4%

                  55,355  

Net Assets — 100.0%

                  $3,942,305

 

*

Non-income producing security.

 

Investment categorized as level 2 security as disclosed in Note 2 of the Notes to Financial Statements.

 

^

Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities, which represent 6.7% of net assets as of October 31, 2021, are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers.

Industry       
Percentage of
Net Assets
 
 

Automobiles & Components

       1.5 %

Capital Goods

       15.2

Consumer Durables & Apparel

       8.5

Consumer Services

       1.2

Diversified Financials

       1.2

Food Beverage & Tobacco

       5.6

Insurance

       3.8

Media & Entertainment

       10.6

Pharmaceuticals, Biotechnology & Life Sciences

       15.3

Real Estate

       1.8

Retailing

       12.0

Semiconductors & Semiconductor Equipment

       3.6

Software & Services

       6.0

Technology Hardware & Equipment

       3.5

Transportation

       4.1

Utilities

       1.8

Money Market Fund

       2.9

Total Investments

       98.6

Other Assets Less Liabilities

       1.4

Net Assets

       100.0 %
 

 

See Notes to Financial Statements

 

44


Table of Contents

Harding, Loevner Funds, Inc.

 

Statements of Assets and Liabilities

October 31, 2021

 

 

    

Global

Equity

Portfolio

   

International

Equity

Portfolio

   

International

Small

Companies

Portfolio

 

ASSETS:

     

Investments (cost $1,184,684,075, $13,933,485,200 and $413,637,180, respectively)

    $1,809,770,181       $21,870,513,062       $599,950,717  

Dividends and interest receivable

    571,591       13,293,705       732,572  

Foreign currency (cost $—, $539,254 and $7, respectively)

          534,955       7  

Receivable for investments sold

          13,277,638        

Receivable for Fund shares sold

    252,670       31,107,257       164,195  

Tax reclaims receivable

    473,105       23,448,557       320,439  

Prepaid expenses

    38,584       103,604       47,198  

Total Assets:

    1,811,106,131       21,952,278,778       601,215,128  

LIABILITIES:

     

Payable to Investment Adviser

    (1,111,974     (12,092,774     (474,175

Payable for investments purchased

    (1,738,968     (12,876,411      

Payable for Fund shares redeemed

    (19,426,561     (7,891,932     (320,535

Payable for directors’ fees and expenses

    (13,053     (157,471     (4,421

Payable for distribution fees

          (236,911     (32,793

Deferred capital gains tax

                (454,451

Other liabilities

    (633,323     (6,233,590     (276,541

Total Liabilities

    (22,923,879     (39,489,089     (1,562,916

Net Assets

    $1,788,182,252       $21,912,789,689       $599,652,212  

ANALYSIS OF NET ASSETS:

     

Paid in capital

    $924,051,547       $13,583,358,724       $402,282,148  

Distributable earnings

    864,130,705       8,329,430,965       197,370,064  

Net Assets

    $1,788,182,252       $21,912,789,689       $599,652,212  

Net Assets:

     

Institutional Class

    $1,354,918,024       $18,268,497,458       $549,894,685  

Institutional Class Z

    379,780,950       3,235,427,855        

Investor Class

          408,864,376       49,757,527  

Advisor Class

    53,483,278              

Total Shares Outstanding:

     

Institutional Class (500,000,000, 700,000,000 and 500,000,000, respectively, $.001 par value shares authorized)

    25,121,394       595,345,577       24,120,943  

Institutional Class Z (200,000,000, 300,000,000 and —, respectively, $.001 par value shares authorized)

    7,038,982       105,421,552        

Investor Class (—, 100,000,000 and 400,000,000, respectively, $.001 par value shares authorized)

          13,356,507       2,210,954  

Advisor Class (400,000,000, — and —, respectively, $.001 par value shares authorized)

    993,822              

Net Asset Value, Offering Price and Redemption Price Per Share:

     

Institutional Class

    $53.93       $30.69       $22.80  

Institutional Class Z

    53.95       30.69        

Investor Class

          30.61       22.51  

Advisor Class

    53.82              

See Notes to Financial Statements

 

45


Table of Contents

Harding, Loevner Funds, Inc.

 

Statements of Assets and Liabilities (continued)

October 31, 2021

 

 

     

Institutional

Emerging

Markets

Portfolio

    

Emerging

Markets

Portfolio

    

Frontier

Emerging

Markets

Portfolio

 

ASSETS:

            

Investments (cost $4,308,538,841, $2,266,693,132 and $162,484,624, respectively)

     $6,511,476,413        $3,823,508,533        $224,121,024  

Dividends and interest receivable

     4,615,867        2,727,807        36,898  

Foreign currency (cost $220,220, $121,547 and $2,781,160, respectively)

     220,220        121,547        2,738,235  

Receivable for investments sold

     491,011        301,032        135,387  

Receivable for Fund shares sold

     3,411,635        3,346,640        29,710  

Tax reclaims receivable

     29,357        17,823        1,437  

Capital gain tax refund receivable

     1,034                

Prepaid expenses

     41,488        36,155        56,387  

Total Assets:

     6,520,287,025        3,830,059,537        227,119,078  

LIABILITIES:

            

Payable to Investment Adviser

     (5,418,332      (3,151,275      (253,151

Payable for investments purchased

                   (1,953,312

Payable for Fund shares redeemed

     (3,115,655      (1,728,328      (38,547

Payable for directors’ fees and expenses

     (46,939      (27,587      (1,584

Payable for distribution fees

                   (15,213

Deferred capital gains tax

     (15,291,995      (9,493,942      (519,683

Other liabilities

     (2,528,063      (2,327,558      (201,787

Total Liabilities

     (26,400,984      (16,728,690      (2,983,277

Net Assets

     $6,493,886,041        $3,813,330,847        $224,135,801  

ANALYSIS OF NET ASSETS:

            

Paid in capital

     $4,444,632,905        $2,031,431,562        $271,723,080  

Distributable earnings

     2,049,253,136        1,781,899,285        (47,587,279

Net Assets

     $6,493,886,041        $3,813,330,847        $224,135,801  

Net Assets:

            

Institutional Class

     $5,774,485,913        $—        $—  

Institutional Class I

                   96,905,519  

Institutional Class II

                   117,688,685  

Institutional Class Z

     719,400,128                

Investor Class

                   9,541,597  

Advisor Class

            3,813,330,847         

Total Shares Outstanding:

            

Institutional Class (500,000,000, — and —, respectively, $.001 par value shares authorized)

     225,632,756                

Institutional Class I (—, — and 400,000,000, respectively, $.001 par value shares authorized)

                   10,807,522  

Institutional Class II (—, — and 200,000,000, respectively, $.001 par value shares authorized)

                   13,039,458  

Institutional Class Z (500,000,000, — and —, respectively, $.001 par value shares authorized)

     28,043,117                

Investor Class (—, — and 400,000,000, respectively, $.001 par value shares authorized)

                   1,070,165  

Advisor Class (—, 500,000,000 and —, respectively, $.001 par value shares authorized)

            56,977,702         

Net Asset Value, Offering Price and Redemption Price Per Share:

            

Institutional Class

     $25.59        $—        $—  

Institutional Class I

                   8.97  

Institutional Class II

                   9.03  

Institutional Class Z

     25.65                

Investor Class

                   8.92  

Advisor Class

            66.93         

See Notes to Financial Statements

 

46


Table of Contents

Harding, Loevner Funds, Inc.

 

Statements of Assets and Liabilities (continued)

October 31, 2021

 

 

      Global
Equity
Research
Portfolio
    International
Equity
Research
Portfolio
    Emerging
Markets
Research
Portfolio
    Chinese
Equity
Portfolio
 

ASSETS:

              

Investments (cost $7,142,361, $11,885,132, $7,908,774 and $4,046,069, respectively)

     $9,845,038       $15,266,656       $9,007,468       $3,886,950  

Dividends and interest receivable

     8,894       14,798       3,307       1  

Foreign currency (cost $90, $40,278, $89,634 and $—, respectively)

     90       40,280       88,791        

Receivable for investments sold

     27,075                    

Receivable for Fund shares sold

           1,485       1,973        

Tax reclaims receivable

     3,030       13,189              

Capital gain tax refund receivable

                 1,681        

Prepaid offering fees

                       31,929  

Prepaid expenses

     26,300       34,402       31,074       49,331  

Total Assets:

     9,910,427       15,370,810       9,134,294       3,968,211  

LIABILITIES:

              

Payable to Investment Adviser

     (5,735     (8,991     (7,747     (3,174

Payable for investments purchased

           (5     (9      

Payable for directors’ fees and expenses

     (71     (112     (66     (28

Deferred capital gains tax

     (5,022     (11,542     (15,315      

Other liabilities

     (43,210     (55,389     (46,590     (22,704

Total Liabilities

     (54,038     (76,039     (69,727     (25,906

Net Assets

     $9,856,389       $15,294,771       $9,064,567       $3,942,305  

ANALYSIS OF NET ASSETS:

              

Paid in capital

     $6,115,186       $10,361,598       $7,189,265       $4,279,226  

Distributable earnings

     3,741,203       4,933,173       1,875,302       (336,921

Net Assets

     $9,856,389       $15,294,771       $9,064,567       $3,942,305  

Net Assets:

              

Institutional Class

     $9,856,389       $15,294,771       $9,064,567       $3,942,305  

Total Shares Outstanding:

              

Institutional Class (400,000,000, 400,000,000, 400,000,000 and 500,000,000, respectively, $.001 par value shares authorized)

     594,183       1,039,750       689,539       421,003  

Net Asset Value, Offering Price and Redemption Price Per Share:

              

Institutional Class

     $16.59       $14.71       $13.15       $9.36  

See Notes to Financial Statements

 

47


Table of Contents

Harding, Loevner Funds, Inc.

 

Statements of Operations

For the Fiscal Year Ended October 31, 2021

 

 

      Global
Equity
Portfolio
    International
Equity
Portfolio
    International
Small
Companies
Portfolio
    Institutional
Emerging
Markets
Portfolio
    Emerging
Markets
Portfolio
 

INVESTMENT INCOME

                  

Dividends (net of foreign withholding taxes of $633,813, $40,962,304, $762,333, $13,566,625 and $9,094,071, respectively)

     $10,160,582       $405,614,126       $6,709,512       $99,362,438       $62,277,083  

Non-cash dividends

                 634,945              

Total investment income

     10,160,582       405,614,126       7,344,457       99,362,438       62,277,083  

EXPENSES

                  

Investment advisory fees (Note 3)

     12,574,579       136,790,622       5,049,738       70,803,476       45,506,566  

Administration fees (Note 3)

     508,585       6,062,974       160,635       1,985,877       1,267,623  

Distribution fees, Investor Class

           961,029       117,246              

Custody and accounting fees (Note 3)

     232,160       2,227,218       216,914       1,872,354       1,244,503  

Directors’ fees and expenses

     50,501       595,893       15,028       193,348       123,390  

Transfer agent fees and expenses (Note 3)

     10,580       432,836       10,821       47,333       436,767  

Printing and postage fees

     26,389       728,222       20,722       271,342       357,882  

State registration filing fees

     74,787       152,236       44,527       72,610       58,066  

Professional fees

     163,672       517,864       80,415       211,690       158,709  

Shareholder servicing fees (Note 3)

     1,035,509       14,723,814       368,923       5,294,632       5,990,614  

Compliance officers’ fees and expenses (Note 3)

     4,162       48,971       1,255       15,766       9,931  

Other fees and expenses

     54,507       792,864       25,263       266,352       283,024  

Total Expenses

     14,735,431       164,034,543       6,111,487       81,034,780       55,437,075  

Less Waiver of investment advisory fee and/or reimbursement of other operating expenses (Note 3)

     (29,813           (105,484     (4,871,288     (886,208

Net expenses

     14,705,618       164,034,543       6,006,003       76,163,492       54,550,867  

Net investment income (loss)

     (4,545,036     241,579,583       1,338,454       23,198,946       7,726,216  

REALIZED AND UNREALIZED GAIN (LOSS)

                  

Net realized gain (loss)

                  

Investment transactions

     250,744,051       792,034,475       20,592,020       131,078,180       321,310,657  

Foreign currency transactions

     (317,496     124,819       (73,250     (79,598     (326,732

Net realized gain

     250,426,555       792,159,294       20,518,770       130,998,582       320,983,925  

Change in unrealized appreciation (depreciation)

                  

Investments (net of increase (decrease) in deferred foreign taxes of $—, $—, $(466,922), $(12,352,780) and $(7,933,193), respectively)

     230,191,908       3,880,313,763       111,528,178       1,002,780,187       482,789,858  

Translation of assets and liabilities denominated in foreign currencies

     (3,851     (781,400     3,777       236,655       149,107  

Net change in unrealized appreciation

     230,188,057       3,879,532,363       111,531,955       1,003,016,842       482,938,965  

Net realized and unrealized gain

     480,614,612       4,671,691,657       132,050,725       1,134,015,424       803,922,890  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

     $476,069,576       $4,913,271,240       $133,389,179       $1,157,214,370       $811,649,106  

See Notes to Financial Statements

 

48


Table of Contents

Harding, Loevner Funds, Inc.

 

Statements of Operations (continued)

For the Fiscal Year Ended October 31, 2021

 

 

      Frontier
Emerging
Markets
Portfolio
    Global
Equity
Research
Portfolio
    International
Equity
Research
Portfolio
    Emerging
Markets
Research
Portfolio
    Chinese
Equity
Portfolio(1)
 

INVESTMENT INCOME

                  

Dividends (net of foreign withholding taxes of $550,233, $11,074, $31,689, $23,783 and $1,517, respectively)

     $5,407,538       $134,980       $263,100       $171,198       $32,328  

Total investment income

     5,407,538       134,980       263,100       171,198       32,328  

EXPENSES

                  

Investment advisory fees (Note 3)

     3,049,582       64,247       105,581       89,567       33,260  

Administration fees (Note 3)

     76,652       12,698       14,445       12,637       10,225  

Distribution fees, Investor Class

     25,199                          

Custody and accounting fees (Note 3)

     253,292       14,534       20,989       18,561       7,501  

Directors’ fees and expenses

     6,542       298       439       294       101  

Transfer agent fees and expenses (Note 3)

     3,234       482       577       502       746  

Printing and postage fees

     6,532       126       182       104       2,201  

State registration filing fees

     57,780       23,192       19,915       22,944       2,041  

Professional fees

     58,848       40,551       42,086       57,359       36,860  

Shareholder servicing fees (Note 3)

     76,735             7,361       1       58  

Compliance officers’ fees and expenses (Note 3)

     533       24       34       24       8  

Offering fees

                             148,851  

Other fees and expenses

     20,351       4,342       7,366       4,062       3,776  

Total Expenses

     3,635,280       160,494       218,975       206,055       245,628  

Less Waiver of investment advisory fee and/or reimbursement of other operating expenses (Note 3)

     (263,700     (87,073     (105,857     (103,057     (205,365

Net expenses

     3,371,580       73,421       113,118       102,998       40,263  

Net investment income (loss)

     2,035,958       61,559       149,982       68,200       (7,935

REALIZED AND UNREALIZED GAIN (LOSS)

                  

Net realized gain (loss)

          

Investment transactions

     19,098,669       992,924       1,550,320       772,614       (169,681

Foreign currency transactions

     (115,819     397       (720     (1,298     (1,460

Net realized gain (loss)

     18,982,850       993,321       1,549,600       771,316       (171,141

Change in unrealized appreciation (depreciation)

          

Investments (net of increase (decrease) in deferred foreign taxes of $(17,950), $(2,016), $(2,086), $(4,798) and $—, respectively)

     40,028,435       1,413,992       1,625,804       564,659       (159,119

Translation of assets and liabilities denominated in foreign currencies

     (37,934           (201     (541      

Net change in unrealized appreciation (depreciation)

     39,990,501       1,413,992       1,625,603       564,118       (159,119

Net realized and unrealized gain (loss)

     58,973,351       2,407,313       3,175,203       1,335,434       (330,260

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

     $61,009,309       $2,468,872       $3,325,185       $1,403,634       $(338,195

 

(1) 

For the period from December 16, 2020 (commencement of operations) through October 31, 2021.

See Notes to Financial Statements

 

49


Table of Contents

Harding, Loevner Funds, Inc.

 

Statements of Changes in Net Assets

For the Fiscal Years Ended October 31

 

 

    

Global Equity

Portfolio

   

International Equity

Portfolio

   

International Small Companies

Portfolio

 
     2021     2020     2021     2020     2021     2020  
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS               

Net investment income (loss)

     $(4,545,036     $(1,352,788     $241,579,583       $159,954,853       $1,338,454       $1,559,394  

Net realized gain (loss) on investments and foreign currency transactions

     250,426,555       110,956,573       792,159,294       (443,646,886     20,518,770       (4,067,129

Net change in unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies

     230,188,057       72,903,102       3,879,532,363       1,117,466,328       111,531,955       35,452,939  

Net increase in net assets resulting from operations

     476,069,576       182,506,887       4,913,271,240       833,774,295       133,389,179       32,945,204  
DISTRIBUTIONS TO SHAREHOLDERS:               

Institutional Class

     (65,209,713     (4,316,797     (123,781,067     (230,105,321     (609,752     (1,807,612

Institutional Class Z

     (17,916,242     (1,747,501     (21,728,233     (34,291,239            

Investor Class

                 (1,685,707     (5,139,836     (12,869     (315,070

Advisor Class

     (3,368,857     (135,973                        

Total distributions to shareholders

     (86,494,812     (6,200,271     (147,195,007     (269,536,396     (622,621     (2,122,682
TRANSACTIONS IN SHARES OF COMMON STOCK               

Institutional Class

     18,309,218       243,439,192       646,601,165       (630,807,060     92,733,830       36,814,201  

Institutional Class Z

     7,371,412       7,571,877       422,221,016       135,625,446              

Investor Class

                 (21,699,734     (70,443,766     (2,710,589     (20,120,767

Advisor Class

     (13,246,523     (3,444,298                        

Net Increase (Decrease) in net assets from portfolio share transactions

     12,434,107       247,566,771       1,047,122,447       (565,625,380     90,023,241       16,693,434  

NET INCREASE (DECREASE) IN NET ASSETS

     402,008,871       423,873,387       5,813,198,680       (1,387,481     222,789,799       47,515,956  

NET ASSETS

              

At beginning of year

     1,386,173,381       962,299,994       16,099,591,009       16,100,978,490       376,862,413       329,346,457  

At end of year

     $1,788,182,252       $1,386,173,381       $21,912,789,689       $16,099,591,009       $599,652,212       $376,862,413  
                                                  

See Notes to Financial Statements

 

50


Table of Contents

Harding, Loevner Funds, Inc.

 

Statements of Changes in Net Assets (continued)

For the Fiscal Years Ended October 31

 

 

    

Institutional Emerging Markets

Portfolio

   

Emerging Markets

Portfolio

   

Frontier Emerging Markets

Portfolio

 
     2021     2020     2021     2020     2021     2020  
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS               

Net investment income

     $23,198,946       $32,486,504       $7,726,216       $19,174,342       $2,035,958       $3,878,583  

Net realized gain (loss) on investments and foreign currency transactions

     130,998,582       (73,626,689     320,983,925       (40,331,776     18,982,850       (831,046

Net change in unrealized appreciation

              

(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies

     1,003,016,842       110,468,671       482,938,965       21,905,626       39,990,501       (33,493,549

Net increase (decrease) in net assets resulting from operations

     1,157,214,370       69,328,486       811,649,106       748,192       61,009,309       (30,446,012

DISTRIBUTIONS TO SHAREHOLDERS:

              

Institutional Class

     (23,061,824     (76,149,087                        

Institutional Class I

                             (1,305,371     (2,815,425

Institutional Class II

                             (2,278,483     (2,717,575

Institutional Class Z

     (3,583,856     (9,138,400                        

Investor Class

                             (146,250     (292,150

Advisor Class

                 (14,604,731     (63,406,861            

Total distributions to shareholders

     (26,645,680     (85,287,487     (14,604,731     (63,406,861     (3,730,104     (5,825,150

TRANSACTIONS IN SHARES OF COMMON STOCK

              

Institutional Class

     (72,145,922     (12,857,492                        

Institutional Class I

                             1,089,776       (51,623,798

Institutional Class II

                             (31,446,987     2,717,575  

Institutional Class Z

     (38,875,745     80,529,077                          

Investor Class

                             (3,400,547     (8,252,656

Advisor Class

                 (722,922,763     (472,445,897            

Net Increase (Decrease) in net assets from portfolio share transactions

     (111,021,667     67,671,585       (722,922,763     (472,445,897     (33,757,758     (57,158,879

NET INCREASE (DECREASE) IN NET ASSETS

     1,019,547,023       51,712,584       74,121,612       (535,104,566     23,521,447       (93,430,041

NET ASSETS

              

At beginning of year

     5,474,339,018       5,422,626,434       3,739,209,235       4,274,313,801       200,614,354       294,044,395  

At end of year

     $6,493,886,041       $5,474,339,018       $3,813,330,847       $3,739,209,235       $224,135,801       $200,614,354  
                                                  

See Notes to Financial Statements

 

51


Table of Contents

Harding, Loevner Funds, Inc.

 

Statements of Changes in Net Assets (continued)

For the Fiscal Years Ended October 31

 

 

     Global Equity Research
Portfolio
    International Equity
Research Portfolio
    Emerging Markets
Research Portfolio
 
     2021     2020     2021     2020     2021     2020  

INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS

              

Net investment income

     $61,559       $55,729       $149,982       $214,094       $68,200       $58,056  

Net realized gain on investments and foreign currency transactions

     993,321       162,841       1,549,600       198,640       771,316       46,259  

Net change in unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies

     1,413,992       273,547       1,625,603       163,973       564,118       58,967  

Net increase in net assets resulting from operations

     2,468,872       492,117       3,325,185       576,707       1,403,634       163,282  

DISTRIBUTIONS TO SHAREHOLDERS:

              

Institutional Class

     (217,846     (379,881     (489,632     (374,600     (134,267     (299,717

Total distributions to shareholders

     (217,846     (379,881     (489,632     (374,600     (134,267     (299,717

TRANSACTIONS IN SHARES OF COMMON STOCK

              

Institutional Class

     218,347       379,881       (34,784     (7,165,689     428,228       305,718  

Net Increase (Decrease) in net assets from portfolio share transactions

     218,347       379,881       (34,784     (7,165,689     428,228       305,718  

NET INCREASE (DECREASE) IN NET ASSETS

     2,469,373       492,117       2,800,769       (6,963,582     1,697,595       169,283  

NET ASSETS

              

At beginning of year

     7,387,016       6,894,899       12,494,002       19,457,584       7,366,972       7,197,689  

At end of year

     $9,856,389       $7,387,016       $15,294,771       $12,494,002       $9,064,567       $7,366,972  
                                                  

See Notes to Financial Statements

 

52


Table of Contents

Harding, Loevner Funds, Inc.

 

Statements of Changes in Net Assets (continued)

For the Fiscal Years Ended October 31

 

 

     Chinese Equity
Portfolio(1)
 
     2021  

INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS

  

Net investment loss

     $(7,935

Net realized loss on investments and foreign currency transactions

     (171,141

Net change in unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies

     (159,119

Net decrease in net assets resulting from operations

     (338,195

DISTRIBUTIONS TO SHAREHOLDERS:

  

Institutional Class

      

Total distributions to shareholders

      

TRANSACTIONS IN SHARES OF COMMON STOCK

  

Institutional Class

     4,280,500  

Net Increase in net assets from portfolio share transactions

     4,280,500  

NET INCREASE IN NET ASSETS

     3,942,305  

NET ASSETS

  

Beginning of year

      

End of year

     $3,942,305  
          

 

(1)

For the period from December 16, 2020 (commencement of operations) through October 31, 2021.

See Notes to Financial Statements

 

53


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights

For the Fiscal Years Ended October 31

 

 

     Global Equity Portfolio
Institutional Class
 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 42.41      $ 35.38      $ 35.68      $ 40.84      $ 32.53  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income (loss)(1)

     (0.14      (0.06      0.09        0.13        0.09  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     14.30        7.33        3.45        (0.13      8.74  

Net increase (decrease) from investment operations

     14.16        7.27        3.54               8.83  

Distributions to Shareholders from:

                    

Net investment income

            (0.24      (0.12      (0.14      (0.13

Net realized gain from investments

     (2.64             (3.72      (5.02      (0.39

Total distributions

     (2.64      (0.24      (3.84      (5.16      (0.52

Net asset value, end of year

   $ 53.93      $ 42.41      $ 35.38      $ 35.68      $ 40.84  

Total Return

     34.57      20.63      11.86      (0.35 )%       27.58

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 1,354,918      $ 1,043,741      $ 684,764      $ 619,347      $ 790,097  

Expenses to average net assets

     0.88      0.92      0.93      0.94      0.93

Expenses to average net assets (net of fees waived/reimbursed)

     0.88      0.92      0.93      0.94      0.93

Net investment income (loss) to average net assets

     (0.28 )%       (0.15 )%       0.28      0.34      0.25

Portfolio turnover rate

     59      63      39      42      33

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

54


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     Global Equity Portfolio
Institutional Class Z
 
     2021      2020      2019      2018      2017(1)(2)  

Net asset value, beginning of year

   $ 42.39      $ 35.36      $ 35.67      $ 40.84      $ 39.33  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income (loss)(3)

     (0.10      (0.02      0.11        0.17        (0.01

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     14.30        7.31        3.44        (0.15      1.52  

Net increase (decrease) from investment operations

     14.20        7.29        3.55        0.02        1.51  

Distributions to Shareholders from:

                    

Net investment income

            (0.26      (0.14      (0.17       

Net realized gain from investments

     (2.64             (3.72      (5.02       

Total distributions

     (2.64      (0.26      (3.86      (5.19       

Net asset value, end of year

   $ 53.95      $ 42.39      $ 35.36      $ 35.67      $ 40.84  

Total Return

     34.66      20.76      11.89      (0.26 )%       3.80 %(A) 

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 379,781      $ 289,320      $ 229,355      $ 140,359      $ 46,493  

Expenses to average net assets

     0.81      0.85      0.88      0.91      1.21 %(B) 

Expenses to average net assets (net of fees waived/reimbursed)

     0.80      0.84      0.88      0.90      0.90 %(B) 

Net investment income (loss) to average net assets

     (0.20 )%       (0.05 )%       0.32      0.43      (0.05 )%(B) 

Portfolio turnover rate

     59      63      39      42      33 %(A)  

 

(A)

Not Annualized.

 

(B)

Annualized.

 

(1)

For the period from August 1, 2017 (commencement of class operations) through October 31, 2017.

 

(2)

All per share amounts and net asset values have been adjusted as a result of the reverse share split effected after the close of business on December 1, 2017.

 

(3)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

55


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     Global Equity Portfolio
Advisor Class
 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 42.41      $ 35.30      $ 35.60      $ 40.78      $ 32.47  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income (loss)(1)

     (0.24      (0.12      0.03        0.07        0.01  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     14.29        7.33        3.43        (0.15      8.73  

Net increase (decrease) from investment operations

     14.05        7.21        3.46        (0.08      8.74  

Distributions to Shareholders from:

                    

Net investment income

            (0.10      (0.04      (0.08      (0.04

Net realized gain from investments

     (2.64             (3.72      (5.02      (0.39

Total distributions

     (2.64      (0.10      (3.76      (5.10      (0.43

Net asset value, end of year

   $ 53.82      $ 42.41      $ 35.30      $ 35.60      $ 40.78  

Total Return

     34.28      20.47      11.60      (0.57 )%       27.28

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 53,483      $ 53,112      $ 48,181      $ 90,567      $ 75,244  

Expenses to average net assets

     1.09      1.11      1.12      1.14      1.14

Expenses to average net assets (net of fees waived/reimbursed)

     1.09      1.11      1.12      1.14      1.14

Net investment income (loss) to average net assets

     (0.48 )%       (0.32 )%       0.09      0.18      0.02

Portfolio turnover rate

     59      63      39      42      33

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

56


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

    

International Equity Portfolio

Institutional Class

 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 23.76      $ 22.72      $ 20.74      $ 22.64      $ 18.37  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(1)

     0.34        0.23        0.29        0.31        0.23  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     6.80        1.19        1.98        (1.83      4.22  

Net increase (decrease) from investment operations

     7.14        1.42        2.27        (1.52      4.45  

Distributions to Shareholders from:

                    

Net investment income

     (0.21      (0.38      (0.29      (0.20      (0.18

Net realized gain from investments

                          (0.18       

Total distributions

     (0.21      (0.38      (0.29      (0.38      (0.18

Net asset value, end of year

   $ 30.69      $ 23.76      $ 22.72      $ 20.74      $ 22.64  

Total Return

     30.16      6.25      11.19      (6.86 )%       24.47

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 18,268,498      $ 13,596,900      $ 13,766,876      $ 11,995,592      $ 11,107,736  

Expenses to average net assets

     0.80      0.81      0.81      0.81      0.82

Expenses to average net assets (net of fees waived/reimbursed)

     0.80      0.81      0.81      0.81      0.82

Net investment income to average net assets

     1.17      1.01      1.35      1.34      1.22

Portfolio turnover rate

     14      17      30      10      12

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

57


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     International Equity Portfolio
Institutional Class Z
 
     2021      2020      2019      2018      2017(1)(2)  

Net asset value, beginning of year

   $ 23.76      $ 22.72      $ 20.75      $ 22.64      $ 21.35  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(3)

     0.37        0.25        0.30        0.40        0.02  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     6.79        1.18        1.98        (1.90      1.27  

Net increase (decrease) from investment operations

     7.16        1.43        2.28        (1.50      1.29  

Distributions to Shareholders from:

                    

Net investment income

     (0.23      (0.39      (0.31      (0.21       

Net realized gain from investments

                          (0.18       

Total distributions

     (0.23      (0.39      (0.31      (0.39       

Net asset value, end of year

   $ 30.69      $ 23.76      $ 22.72      $ 20.75      $ 22.64  

Total Return

     30.25      6.32      11.29      (6.79 )%       6.00 %(A)  

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 3,235,428      $ 2,165,343      $ 1,938,763      $ 1,342,804      $ 166,923  

Expenses to average net assets

     0.72      0.73      0.75      0.74      0.99 %(B)  

Expenses to average net assets (net of fees waived/reimbursed)

     0.72      0.73      0.75      0.74      0.80 %(B)  

Net investment income to average net assets

     1.25      1.08      1.42      1.77      0.33 %(B)  

Portfolio turnover rate

     14      17      30      10      12 %(A)  

 

(A)

Not Annualized.

 

(B)

Annualized.

 

(1)

All per share amounts and net asset values have been adjusted as a result of the reverse share split effected after the close of business on December 1, 2017.

 

(2)

For the period from July 17, 2017 (commencement of operations) through October 31, 2017.

 

(3)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

58


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     International Equity Portfolio
Investor Class
 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 23.70      $ 22.66      $ 20.65      $ 22.55      $ 18.30  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income (loss)(1)

     0.24        0.16        0.22        0.21        0.19  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     6.80        1.18        1.98        (1.80      4.18  

Net increase (decrease) from investment operations

     7.04        1.34        2.20        (1.59      4.37  

Distributions to Shareholders from:

                    

Net investment income

     (0.13      (0.30      (0.19      (0.13      (0.12

Net realized gain from investments

                          (0.18       

Total distributions

     (0.13      (0.30      (0.19      (0.31      (0.12

Net asset value, end of year

   $ 30.61      $ 23.70      $ 22.66      $ 20.65      $ 22.55  

Total Return

     29.74      5.91      10.79      (7.16 )%       24.04

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 408,864      $ 337,348      $ 395,339      $ 411,712      $ 644,243  

Expenses to average net assets

     1.12      1.13      1.13      1.14      1.14

Expenses to average net assets (net of fees waived/reimbursed)

     1.12      1.13      1.13      1.14      1.14

Net investment income to average net assets

     0.83      0.69      1.03      0.92      0.95

Portfolio turnover rate

     14      17      30      10      12

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

59


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     International Small Companies Portfolio
Institutional Class
 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 17.14      $ 15.64      $ 15.29      $ 16.67      $ 13.72  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(1)

     0.06        0.08        0.12        0.13        0.11  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     5.63        1.53        1.24        (1.30      3.41  

Net increase (decrease) from investment operations

     5.69        1.61        1.36        (1.17      3.52  

Distributions to Shareholders from:

                    

Net investment income

     (0.03      (0.11      (0.13      (0.06      (0.16

Net realized gain from investments

                   (0.88      (0.15      (0.41

Total distributions

     (0.03      (0.11      (1.01      (0.21      (0.57

Net asset value, end of year

   $ 22.80      $ 17.14      $ 15.64      $ 15.29      $ 16.67  

Total Return

     33.16      10.34      10.14      (7.15 )%       26.98

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 549,895      $ 337,166      $ 272,252      $ 151,283      $ 144,170  

Expenses to average net assets

     1.16      1.34      1.38      1.39      1.41

Expenses to average net assets (net of fees waived/reimbursed)

     1.14      1.15      1.15      1.15      1.15

Net investment income to average net assets

     0.29      0.50      0.78      0.75      0.72

Portfolio turnover rate

     13      30      37      52      19

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

60


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

    

International Small Companies Portfolio
Investor Class

 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 16.94      $ 15.48      $ 15.16      $ 16.55      $ 13.64  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income (loss)(1)

     (2)        0.04        0.09        0.10        0.05  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     5.58        1.51        1.21        (1.29      3.42  

Net increase (decrease) from investment operations

     5.58        1.55        1.30        (1.19      3.47  

Distributions to Shareholders from:

                    

Net investment income

     (0.01      (0.09      (0.10      (0.05      (0.15

Net realized gain from investments

                   (0.88      (0.15      (0.41

Total distributions

     (0.01      (0.09      (0.98      (0.20      (0.56

Net asset value, end of year

   $ 22.51      $ 16.94      $ 15.48      $ 15.16      $ 16.55  

Total Return

     32.84      10.07      9.82      (7.35 )%       26.71

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 49,757      $ 39,696      $ 57,095      $ 57,912      $ 50,292  

Expenses to average net assets

     1.50      1.67      1.70      1.75      1.80

Expenses to average net assets (net of fees waived/reimbursed)

     1.40      1.40      1.40      1.40      1.40

Net investment income to average net assets

     0.01      0.28      0.63      0.58      0.37

Portfolio turnover rate

     13      30      37      52      19

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

 

(2)

Amount was less than $0.005 per share.

See Notes to Financial Statements

 

61


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     Institutional Emerging Markets Portfolio
Institutional Class
 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 21.23      $ 21.25      $ 18.43      $ 21.94      $ 17.65  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(1)

     0.09        0.12        0.24        0.19        0.19  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     4.37        0.19        2.76        (3.53      4.20  

Net increase (decrease) from investment operations

     4.46        0.31        3.00        (3.34      4.39  

Distributions to Shareholders from:

                    

Net investment income

     (0.10      (0.33      (0.18      (0.17      (0.10

Net realized gain from investments

                                  

Total distributions

     (0.10      (0.33      (0.18      (0.17      (0.10

Net asset value, end of year

   $ 25.59      $ 21.23      $ 21.25      $ 18.43      $ 21.94  

Total Return

     21.03      1.38      16.43      (15.33 )%       25.08

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 5,774,486      $ 4,847,707      $ 4,864,702      $ 3,978,321      $ 4,386,511  

Expenses to average net assets

     1.22      1.28      1.27      1.27      1.28

Expenses to average net assets (net of fees waived/reimbursed)

     1.15      1.28      1.27      1.27      1.28

Net investment income to average net assets

     0.33      0.59      1.18      0.84      0.97

Portfolio turnover rate

     13      23      17      24      17

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

62


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     Institutional Emerging Markets Portfolio
Institutional Class Z
 
     2021      2020      2019      2018      2017(1)  

Net asset value, beginning of year

   $ 21.28      $ 21.28      $ 18.45      $ 21.94      $ 17.71  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(2)

     0.11        0.15        0.27        0.22        0.22  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     4.38        0.20        2.76        (3.52      4.21  

Net increase (decrease) from investment operations

     4.49        0.35        3.03        (3.30      4.43  

Distributions to Shareholders from:

                    

Net investment income

     (0.12      (0.35      (0.20      (0.19      (0.20

Net realized gain from investments

                                  

Total distributions

     (0.12      (0.35      (0.20      (0.19      (0.20

Net asset value, end of year

   $ 25.65      $ 21.28      $ 21.28      $ 18.45      $ 21.94  

Total Return

     21.11      1.55      16.61      (15.21 )%       25.43

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 719,400      $ 626,632      $ 557,924      $ 391,583      $ 458,288  

Expenses to average net assets

     1.13      1.19      1.19      1.20      1.23

Expenses to average net assets (net of fees waived/reimbursed)

     1.07      1.11      1.11      1.11      1.12

Net investment income to average net assets

     0.41      0.76      1.34      1.00      1.12

Portfolio turnover rate

     13      23      17      24      17

 

(1)

All per share amounts and net asset values have been adjusted as a result of the reverse share split effected after the close of business on December 1, 2017.

 

(2)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

63


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     Emerging Markets Portfolio
Advisor Class
 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 55.48      $ 55.65      $ 48.21      $ 57.46      $ 46.27  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(1)

     0.12        0.26        0.58        0.42        0.43  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     11.55        0.40        7.28        (9.24      11.02  

Net increase (decrease) from investment operations

     11.67        0.66        7.86        (8.82      11.45  

Distributions to Shareholders from:

                    

Net investment income

     (0.22      (0.83      (0.42      (0.40      (0.26

Net realized gain from investments

                          (0.03       

Total distributions

     (0.22      (0.83      (0.42      (0.43      (0.26

Net asset value, end of year

   $ 66.93      $ 55.48      $ 55.65      $ 48.21      $ 57.46  

Total Return

     21.04      1.11      16.46      (15.47 )%       24.93

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 3,813,331      $ 3,739,209      $ 4,274,314      $ 3,459,157      $ 4,014,977  

Expenses to average net assets

     1.31      1.36      1.37      1.40      1.42

Expenses to average net assets (net of fees waived/reimbursed)

     1.28      1.36      1.37      1.40      1.42

Net investment income to average net assets

     0.18      0.49      1.10      0.73      0.84

Portfolio turnover rate

     15      18      19      24      17

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

64


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     Frontier Emerging Markets Portfolio
Institutional Class I
 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 6.92      $ 7.80      $ 7.62      $ 8.50      $ 7.35  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(1)

     0.06        0.10        0.14        0.11        0.05  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     2.12        (0.82      0.14        (0.82      1.17  

Net increase (decrease) from investment operations

     2.18        (0.72      0.28        (0.71      1.22  

Distributions to Shareholders from:

                    

Net investment income

     (0.13      (0.16      (0.10      (0.17      (0.07

Net asset value, end of year

   $ 8.97      $ 6.92      $ 7.80      $ 7.62      $ 8.50  

Total Return

     31.74      (9.50 )%       3.59      (8.47 )%       16.82

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 96,905      $ 73,376      $ 144,742      $ 220,367      $ 266,844  

Expenses to average net assets

     1.64      1.68      1.63      1.62      1.71

Expenses to average net assets (net of fees waived/reimbursed)

     1.64      1.68      1.63      1.62      1.71

Net investment income to average net assets

     0.75      1.44      1.72      1.24      0.69

Portfolio turnover rate

     30      21      31      20      28

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

65


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

    

Frontier Emerging Markets Portfolio

Institutional Class II

 
     2021      2020      2019      2018      2017(1)(2)  

Net asset value, beginning of year

   $ 6.95      $ 7.82      $ 7.63      $ 8.50      $ 7.43  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(3)

     0.09        0.14        0.17        0.14        0.08  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     2.13        (0.84      0.13        (0.83      0.99  

Net increase (decrease) from investment operations

     2.22        (0.70      0.30        (0.69      1.07  

Distributions to Shareholders from:

                    

Net investment income

     (0.14      (0.17      (0.11      (0.18       

Net asset value, end of year

   $ 9.03      $ 6.95      $ 7.82      $ 7.63      $ 8.50  

Total Return

     32.18      (9.26 )%       4.01      (8.31 )%       14.40 %(A) 

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 117,689      $ 116,911      $ 128,742      $ 163,794      $ 166,698  

Expenses to average net assets

     1.55      1.60      1.55      1.56      1.58 %(B)  

Expenses to average net assets (net of fees waived/reimbursed)

     1.35      1.35      1.35      1.35      1.35 %(B)  

Net investment income to average net assets

     1.05      1.95      2.19      1.51      1.47 %(B)  

Portfolio turnover rate

     30      21      31      20      28 %(A)  

 

(A)

Not Annualized.

 

(B)

Annualized.

 

(1)

For the period from March 1, 2017 (commencement of class operations) through October 31, 2017.

 

(2)

All per share amounts and net asset values have been adjusted as a result of the share dividend effected after the close of business on December 1, 2017.

 

(3)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

66


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     Frontier Emerging Markets Portfolio
Investor Class
 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 6.88      $ 7.75      $ 7.57      $ 8.43      $ 7.28  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income (loss)(1)

     0.03        0.08        0.11        0.07        0.04  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     2.11        (0.83      0.13        (0.79      1.15  

Net increase (decrease) from investment operations

     2.14        (0.75      0.24        (0.72      1.19  

Distributions to Shareholders from:

                    

Net investment income

     (0.10      (0.12      (0.06      (0.14      (0.04

Net asset value, end of year

   $ 8.92      $ 6.88      $ 7.75      $ 7.57      $ 8.43  

Total Return

     31.14      (9.70 )%       3.24      (8.75 )%       16.40

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 9,542      $ 10,327      $ 20,560      $ 25,388      $ 30,981  

Expenses to average net assets

     2.14      2.12      2.00      2.06      2.13

Expenses to average net assets (net of fees waived/reimbursed)

     2.00      2.00      2.00      2.00      2.00

Net investment income to average net assets

     0.35      1.17      1.38      0.87      0.48

Portfolio turnover rate

     30      21      31      20      28

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

67


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

    

Global Equity Research Portfolio

Institutional Class

 
     2021      2020      2019      2018      2017(1)  

Net asset value, beginning of year

   $ 12.76      $ 12.57      $ 12.06      $ 12.23      $ 10.00  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(2)

     0.10        0.10        0.14        0.10        0.08  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     4.11        0.78        1.40        0.23        2.15  

Net increase (decrease) from investment operations

     4.21        0.88        1.54        0.33        2.23  

Distributions to Shareholders from:

                    

Net investment income

     (0.09      (0.15      (0.09      (0.18       

Net realized gain from investments

     (0.29      (0.54      (0.94      (0.32       

Total distributions

     (0.38      (0.69      (1.03      (0.50       

Net asset value, end of year

   $ 16.59      $ 12.76      $ 12.57      $ 12.06      $ 12.23  

Total Return

     33.45      7.15      14.36      2.74      22.30 %(A) 

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 9,856      $ 7,387      $ 6,895      $ 5,452      $ 5,308  

Expenses to average net assets

     1.75      2.04      1.96      2.64      3.49 %(B) 

Expenses to average net assets (net of fees waived/reimbursed)

     0.80      0.80      0.83      0.90      0.90 %(B) 

Net investment income to average net assets

     0.67      0.80      1.18      0.76      0.80 %(B) 

Portfolio turnover rate

     39      44      44      45      36 %(A) 

 

(A)

Not Annualized.

 

(B)

Annualized.

 

(1)

For the period from December 19, 2016 (commencement of class operations) through October 31, 2017.

 

(2)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

68


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     International Equity Research Portfolio
Institutional Class
 
     2021      2020      2019      2018      2017  

Net asset value, beginning of year

   $ 12.01      $ 12.03      $ 11.59      $ 13.11      $ 11.10  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(1)

     0.14        0.14        0.18        0.14        0.12  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     3.03        0.07        1.17        (0.93      2.26  

Net increase (decrease) from investment operations

     3.17        0.21        1.35        (0.79      2.38  

Distributions to Shareholders from:

                    

Net investment income

     (0.15      (0.14      (0.13      (0.14      (0.17

Net realized gain from investments

     (0.32      (0.09      (0.78      (0.59      (0.20

Total distributions

     (0.47      (0.23      (0.91      (0.73      (0.37

Net asset value, end of year

   $ 14.71      $ 12.01      $ 12.03      $ 11.59      $ 13.11  

Total Return

     26.76      1.73      12.93      (6.43 )%       22.26

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 15,295      $ 12,494      $ 19,458      $ 9,305      $ 9,479  

Expenses to average net assets

     1.45      1.40      1.42      1.78      2.26

Expenses to average net assets (net of fees waived/reimbursed)

     0.75      0.75      0.79      0.90      0.90

Net investment income to average net assets

     0.99      1.20      1.62      1.07      0.99

Portfolio turnover rate

     38      51      44      43      55

 

(1)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

69


Table of Contents

Harding, Loevner Funds, Inc.

 

Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     Emerging Markets Research Portfolio
Institutional Class
 
     2021      2020      2019      2018      2017(1)  

Net asset value, beginning of year

   $ 11.21      $ 11.42      $ 10.82      $ 13.01      $ 10.00  

Increase (Decrease) in Net Assets from Operations

                    

Net investment income(2)

     0.10        0.09        0.15        0.12        0.10  

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     2.04        0.17        1.35        (1.34      2.91  

Net increase (decrease) from investment operations

     2.14        0.26        1.50        (1.22      3.01  

Distributions to Shareholders from:

                    

Net investment income

     (0.07      (0.14      (0.09      (0.23       

Net realized gain from investments

     (0.13      (0.33      (0.81      (0.74       

Total distributions

     (0.20      (0.47      (0.90      (0.97       

Net asset value, end of year

   $ 13.15      $ 11.21      $ 11.42      $ 10.82      $ 13.01  

Total Return

     19.18      2.19      15.05      (10.24 )%       30.10 %(A) 

Ratios/Supplemental Data:

                    

Net assets, end of year (000’s)

   $ 9,065      $ 7,367      $ 7,198      $ 5,702      $ 5,880  

Expenses to average net assets

     2.30      2.40      2.29      2.90      3.72 %(B) 

Expenses to average net assets (net of fees waived/reimbursed)

     1.15      1.15      1.19      1.30      1.30 %(B) 

Net investment income to average net assets

     0.76      0.83      1.35      0.93      1.04 %(B) 

Portfolio turnover rate

     45      67      58      55      46 %(A) 

 

(A)

Not Annualized.

 

(B)

Annualized.

 

(1)

For the period from December 19, 2016 (commencement of class operations) through October 31, 2017.

 

(2)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

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Financial Highlights (continued)

For the Fiscal Years Ended October 31

 

 

     Chinese Equity
Portfolio
Institutional
Class
 
     2021(1)  

Net asset value, beginning of year

   $ 10.00  

Increase (Decrease) in Net Assets from Operations

  

Net investment income (loss)(2)

     (0.02

Net realized and unrealized gain (loss) on investments and foreign currency-related transactions

     (0.62

Net increase (decrease) from investment operations

     (0.64

Distributions to Shareholders from:

  

Net investment income

      

Net realized gain from investments

      

Net asset value, end of year

   $ 9.36  

Total Return

     (6.40 )%(A) 

Ratios/Supplemental Data:

  

Net assets, end of year (000’s)

   $ 3,942  

Expenses to average net assets

     7.00 %(B) 

Expenses to average net assets (net of fees waived/reimbursed)

     1.15 %(B) 

Net investment income (loss) to average net assets

     (0.23 )%(B) 

Portfolio turnover rate

     17 %(A) 

 

(A)

Not Annualized.

 

(B)

Annualized.

 

(1)

For the period from December 16, 2020 (commencement of operations) through October 31, 2021.

 

(2)

Net investment income per share was calculated using the average shares outstanding method.

See Notes to Financial Statements

 

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Notes to Financial Statements

October 31, 2021

 

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 (the “1940 Act”), as an open-end management investment company. The Fund currently has nine separate diversified Portfolios and one non-diversified Portfolio, all of which were active as of October 31, 2021 (individually, a “Portfolio”, collectively, the “Portfolios”). The Fund is managed by Harding Loevner LP (the “Investment Adviser”).

 

Portfolio    Inception Date    Investment Objective

Global Equity Portfolio

(“Global Equity”)

  

Institutional Class: November 3, 2009

Institutional Class Z: August 1, 2017

Advisor Class: December 1, 1996

  

to seek long-term capital appreciation through investments in equity securities of companies based both inside and outside the United States

International Equity Portfolio

(“International Equity”)

  

Institutional Class: May 11, 1994*

Institutional Class Z: July 17, 2017

Investor Class: September 30, 2005

  

to seek long-term capital appreciation through investments in equity securities of companies based outside the United States

International Small Companies Portfolio

(“International Small Companies”)

  

Institutional Class: June 30, 2011

Investor Class: March 26, 2007

  

to seek long-term capital appreciation through investments in equity securities of small companies based outside the United States

Institutional Emerging Markets Portfolio**

(“Institutional Emerging Markets”)

  

Institutional Class (Formerly Class I):

October 17, 2005

Institutional Class Z (Formerly

Class II): March 5, 2014

  

to seek long-term capital appreciation through investments in equity securities of companies based in emerging markets

Emerging Markets Portfolio**

(“Emerging Markets”)

   Advisor Class: November 9, 1998   

to seek long-term capital appreciation through investments in equity securities of companies based in emerging markets

Frontier Emerging Markets Portfolio

(“Frontier Emerging Markets”)

  

Institutional Class I: May 27, 2008

Institutional Class II: March 1, 2017

Investor Class: December 31, 2010

  

to seek long-term capital appreciation through investments in equity securities of companies based in frontier and smaller emerging markets

Global Equity Research Portfolio

(“Global Equity Research”)

   Institutional Class: December 19, 2016   

to seek long-term capital appreciation through investments in equity securities of companies based both inside and outside the United States

International Equity Research Portfolio

(“International Equity Research”)

   Institutional Class: December 17, 2015   

to seek long-term capital appreciation through investments in equity securities of companies based outside the United States

Emerging Markets Research Portfolio

(“Emerging Markets Research”)

   Institutional Class: December 19, 2016   

to seek long-term capital appreciation through investments in equity securities of companies based in emerging markets

Chinese Equity Portfolio

(“Chinese Equity”)

   Institutional Class: December 16, 2020   

to seek long-term capital appreciation through investments in equity securities of Chinese companies

* The International Equity Portfolio is the successor to the HLM International Equity Portfolio of AMT Capital Fund, Inc., pursuant to a reorganization that took place on October 31, 1996. Information for periods prior to October 31, 1996, is historical information for the predecessor portfolio.

** Effective March 1, 2019, the Institutional Emerging Markets and Emerging Markets Portfolios’ shares are generally available for purchase by new and existing shareholders, subject to certain limitations that may apply at the Fund’s discretion.

2.   Summary of Significant Accounting Policies

The accounting policies of the Fund are in conformity with accounting principles generally accepted in the United States (“GAAP”) for investment companies. Accordingly, the Fund follows accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, “Financial Services - Investment Companies”. The following is a summary of the Fund’s significant accounting policies:

 

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Notes to Financial Statements (continued)

October 31, 2021

 

2.   Summary of Significant Accounting Policies (continued)

 

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

The Board of Directors of the Fund (the “Board” or the “Directors”) has adopted procedures (“Procedures”) to govern the valuation of the securities held by each Portfolio of the Fund in accordance with the 1940 Act. The Procedures incorporate principles set forth in relevant pronouncements of the Securities and Exchange Commission (“SEC”) and its staff, including guidance on the obligations of the Portfolios and their Directors to determine, in good faith, the fair value of the Portfolios’ securities when market quotations are not readily available.

In determining a Portfolio’s net asset value per share (“NAV”), each equity security traded on a securities exchange, including the NASDAQ Stock Market, and over-the-counter securities, are first valued at the closing price on the exchange or market designated by the Fund’s accounting agent as the principal exchange (each, a “principal exchange”). The closing price provided by the Fund’s accounting agent for a principal exchange may differ from the price quoted elsewhere and may represent information such as last sales price, an official closing price, a closing auction price or other information, depending on exchange or market convention. Shares of open-end mutual funds including money market funds are valued at NAV. Such securities are typically categorized as “Level 1” pursuant to the hierarchy described below.

Since trading in many foreign securities is normally completed before the time at which a Portfolio calculates its NAV, the effect on the value of such securities held by a Portfolio of events that occur between the close of trading in the security and the time at which the Portfolio prices its securities would not be reflected in the Portfolio’s calculation of its NAV if foreign securities were generally valued at their closing prices. To address this issue, the Board has approved the daily use of independently provided quantitative models that may adjust the closing prices of certain foreign equity securities based on information that becomes available after the foreign market closes, through the application of an adjustment factor to such securities’ closing price. Adjustment factors may be greater than, less than, or equal to 1. Thus, use of these quantitative models could cause a Portfolio to value a security higher, lower or equal to its closing market price, which in turn could cause the Portfolio’s NAV per share to differ significantly from that which would have been calculated using closing market prices. The use of these quantitative models is also intended to decrease the opportunities for persons to engage in ‘‘time zone arbitrage,’’ i.e., trading intended to take advantage of stale closing prices in foreign markets that could affect the NAV of the Portfolios. Securities subjected to an adjustment factor due to the use of these quantitative models are not specifically designated on the Portfolios’ Portfolio of Investments as being “fair valued”. Securities with an adjustment factor greater than or less than 1, which are absent the use of significant unobservable inputs into their valuation, are categorized as “Level 2” and securities with an adjustment factor equal to 1, which are absent the use of significant unobservable inputs into their valuation, are categorized as “Level 1” pursuant to the hierarchy described below.

Any securities for which market quotations are not readily available or for which available prices are deemed unreliable are priced by the Investment Adviser at “fair value as determined in good faith”, in accordance with the Procedures. Such securities are identified on the Portfolios’ Portfolio of Investments as securities valued at “fair value as determined in good faith” and absent the use of significant unobservable inputs into their valuation, such securities would be categorized as “Level 2” pursuant to the hierarchy described below.

GAAP has established a hierarchy for NAV determination purposes in which various inputs are used in determining the value of each Portfolio’s assets or liabilities. GAAP defines fair value as the price that the Portfolio would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. GAAP establishes a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability including assumptions about risk. Such risks include the inherent risk in a particular valuation technique which is used to measure fair value. This may include the quantitative models and/or the inputs to the quantitative models used in the valuation technique described above. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

 

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Notes to Financial Statements (continued)

October 31, 2021

 

2.   Summary of Significant Accounting Policies (continued)

 

Level 1   

unadjusted quoted prices in active markets for identical assets

Level 2   

other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

Level 3   

significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments)

GAAP provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate when a transaction is not orderly.

The following is a summary of the Portfolios’ investments classified by Level 1, Level 2 and Level 3 and security type as of October 31, 2021. Please refer to each Portfolio’s Portfolio of Investments to view individual securities classified by industry type and country.

 

     Unadjusted Quoted Prices      Other Significant      Significant         
     in Active Markets for      Observable Inputs      Unobservable Inputs         
Portfolio    Identical Assets (Level 1)      (Level 2)      (Level 3)      Total  

 

 

Global Equity

           

Common Stocks

       $ 1,290,519,764      $ 464,465,277      $      $ 1,754,985,041  

Short Term Investments

     54,785,140                      54,785,140  

 

 

Total Investments

       $ 1,345,304,904      $ 464,465,277      $      $ 1,809,770,181  

 

 

International Equity

           

Common Stocks

       $ 5,075,565,480      $ 15,842,097,923      $      $ 20,917,663,403  

Preferred Stocks

     217,409,738        108,850,534               326,260,272  

Short Term Investments

     626,589,387                      626,589,387  

 

 

Total Investments

       $ 5,919,564,605      $ 15,950,948,457      $      $ 21,870,513,062  

 

 

International Small Companies

           

Common Stocks

       $ 52,328,094      $ 531,255,096      $      $ 583,583,190  

Short Term Investments

     16,367,527                      16,367,527  

 

 

Total Investments

       $ 68,695,621      $ 531,255,096      $      $ 599,950,717  

 

 

Institutional Emerging Markets

           

Common Stocks

       $ 1,558,654,668      $ 4,648,698,676      $      $ 6,207,353,344  

Preferred Stocks

     119,219,669        20,416,416               139,636,085  

Rights

     844                      844  

Short Term Investments

     164,486,140                      164,486,140  

 

 

Total Investments

       $ 1,842,361,321      $ 4,669,115,092      $      $ 6,511,476,413  

 

 

Emerging Markets

           

Common Stocks

       $ 920,231,859      $ 2,748,882,261      $      $ 3,669,114,120  

Preferred Stocks

     70,417,463        11,971,900               82,389,363  

Rights

     496                      496  

Short Term Investments

     72,004,554                      72,004,554  

 

 

Total Investments

       $ 1,062,654,372      $ 2,760,854,161      $      $ 3,823,508,533  

 

 

Frontier Emerging Markets

           

Common Stocks

       $ 42,718,114      $ 172,260,173      $      $ 214,978,287  

Preferred Stocks

     6,585,250                      6,585,250  

Short Term Investments

     2,557,487                      2,557,487  

 

 

Total Investments

       $ 51,860,851      $ 172,260,173      $      $ 224,121,024  

 

 

 

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Notes to Financial Statements (continued)

October 31, 2021

 

2.   Summary of Significant Accounting Policies (continued)

 

     Unadjusted Quoted Prices      Other Significant      Significant         
     in Active Markets for      Observable Inputs      Unobservable Inputs         
Portfolio    Identical Assets (Level 1)      (Level 2)      (Level 3)      Total  

 

 

Global Equity Research

           

Common Stocks

       $ 4,677,051      $ 4,986,630      $      $ 9,663,681  

Preferred Stocks

     26,667        61,558               88,225  

Short Term Investments

     93,132                      93,132  

 

 

Total Investments

       $ 4,796,850      $ 5,048,188      $      $ 9,845,038  

 

 

International Equity Research

           

Common Stocks

       $ 1,964,368      $ 12,769,146      $      $ 14,733,514  

Preferred Stocks

     83,894        217,243               301,137  

Short Term Investments

     232,005                      232,005  

 

 

Total Investments

       $ 2,280,267      $ 12,986,389      $      $         15,266,656  

 

 

Emerging Markets Research

           

Common Stocks

       $ 1,876,342      $ 6,805,827      $      $ 8,682,169  

Preferred Stocks

     74,990        158,395               233,385  

Short Term Investments

     91,914                      91,914  

 

 

Total Investments

       $ 2,043,246      $ 6,964,222      $      $ 9,007,468  

 

 

Chinese Equity

           

Common Stocks

       $      $ 3,771,153      $      $ 3,771,153  

Short Term Investments

     115,797                      115,797  

 

 

Total Investments

       $ 115,797      $ 3,771,153      $      $ 3,886,950  

 

 

As of October 31, 2021, there were no Level 3 investments held within the Portfolios.

Securities

For financial reporting purposes, all securities transactions are recorded on a trade date basis, as of the last business day in the reporting period. Throughout the reporting period, securities transactions are typically accounted for on a trade date – plus one business day basis. Interest income and expenses are recorded on an accrual basis. Dividend income is recorded on the ex-dividend date (except for certain foreign dividends that may be recorded as soon as the Portfolio is informed of such dividends). The Portfolios use the specific identification method for determining realized gains or losses from sales of securities.

Dividends to Shareholders

It is the policy of the Portfolios to declare dividends from net investment income annually. Net short-term and long-term capital gains distributions for the Portfolios, if any, are also normally 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. In general, to the extent that any differences, which are permanent in nature, result in over distributions to shareholders, the amount of the over distribution is reclassified within the capital accounts based on its federal tax basis treatment and may be reported as return of capital. Temporary differences do not require reclassification.

 

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Notes to Financial Statements (continued)

October 31, 2021

 

2.   Summary of Significant Accounting Policies (continued)

 

Currency Translation

Assets and liabilities denominated in foreign currencies and commitments under forward foreign currency exchange 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 the Portfolios’ 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 Portfolios do 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 gain (loss) on investment transactions” and “Change in unrealized appreciation (depreciation) on investments” on the Statements of Operations.

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 Portfolios’ 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 rates.

Expenses

Most expenses of the Fund can be directly attributed to a particular Portfolio. Expenses which cannot be directly attributed are apportioned among the Portfolios based upon relative net assets or other appropriate measures. If an expense is incurred at the Portfolio level, it is generally apportioned among the classes of that Portfolio based upon relative net assets of each respective class. Certain expenses are incurred at the class level and charged only to that particular class. These expenses may be class specific (i.e., distribution fees charged only to a particular class) or they may be identifiable to a particular class (i.e., the costs related to mailing shareholder reports to shareholders of a particular class).

Organization and Offering Fees

Costs incurred by the Chinese Equity Portfolio in connection with its organization were expensed as they were incurred. Costs related to the offering of shares were deferred and amortized on a straight line basis over the twelve-month period from the date of commencement of operations of the Portfolios.

Redemption Fees

Prior to February 28, 2020, the Fund had established fees on short-term redemptions to discourage frequent trading in Portfolio shares. Redemptions of Portfolio shares made within 90 days of purchase may have been subject to a redemption fee equal to 2% of the amount redeemed. For the year ended October 31, 2020 the Portfolios received the following redemption fees. These amounts are netted against “Payments for Shares Redeemed” in Note 7 - Capital Share Transactions.

 

     Institutional     Institutional      Institutional  
     Class     Class I      Class II  
    

 

 
     Year Ended     Year Ended      Year Ended  
     October 31,     October 31,      October 31,  
Portfolio    2020     2020      2020  

Global Equity

   $ 18,908     $      $  

International Equity

     132,379               

International Small Companies

     974               

Institutional Emerging Markets

     27,951             

Frontier Emerging Markets

           1,471         

*  Formerly Class I

       
     Investor     Advisor      Institutional  
     Class     Class      Class Z  
    

 

 
     Year Ended     Year Ended      Year Ended  
     October 31,     October 31,      October 31,  
Portfolio    2020     2020      2020  

 

 

Global Equity

   $     $ 1,561      $  

 

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Notes to Financial Statements (continued)

October 31, 2021

 

2.   Summary of Significant Accounting Policies (continued)

 

     Investor      Advisor      Institutional  
     Class      Class      Class Z  
    

 

 
     Year Ended      Year Ended      Year Ended  
     October 31,      October 31,      October 31,  
Portfolio    2020      2020      2020  

 

 

International Equity

   $ 4,924      $      $ 26  

International Small Companies

     1,582                

Emerging Markets

            36,279         

Frontier Emerging Markets

     1,292                

Indemnifications

Under the Fund’s organizational document, its officers and Board are indemnified against certain liability arising out of the performance of their duties to the Portfolios. In the normal course of business, the Fund may enter into contracts that contain a variety of representations or that provide indemnification for certain liabilities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

3.   Transactions with Affiliates and Significant Agreements

The Board has approved investment advisory agreements with the Investment Adviser. Advisory fees are computed daily and paid monthly based on the average daily net assets of each Portfolio. The Investment Adviser has contractually agreed to reduce its fee and/or reimburse the Portfolios for other operating expenses to the extent that aggregate expenses, excluding certain non-operating expenses, exceed certain annual rates of the average daily net assets of each class.

The following annualized advisory fees and contractual expense limits were in effect for the year ended October 31, 2021. The advisory fees are charged at the Portfolio level as a whole and expense limitations are at the class specific level.

 

Portfolio   First $1 billion of
assets
  Next $1 billion of
assets
  Next $1 billion of
assets
  Over $3 billion of
assets
  Over $4 billion of
assets
  Over $5 billion of
assets
  Contractual
Expense  Limit(a)

Global Equity–Institutional Class

      0.75%       0.73%       0.71%       0.69%       0.69%       0.69%       0.90%

Global Equity–Institutional Class Z

      0.75%       0.73%       0.71%       0.69%       0.69%       0.69%       0.80%

Global Equity–Advisor Class

      0.75%       0.73%       0.71%       0.69%       0.69%       0.69%       1.20%

International Equity–Institutional Class

      0.75%       0.73%       0.71%       0.69%       0.67%       0.65%       1.00%

International Equity–Institutional Class Z

      0.75%       0.73%       0.71%       0.69%       0.67%       0.65%       0.80%

International Equity–Investor Class

      0.75%       0.73%       0.71%       0.69%       0.67%       0.65%       1.25%

International Small Companies–Institutional Class(b)

      0.95%       0.95%       0.95%       0.95%       0.95%       0.95%       1.15%

International Small Companies–Investor Class(b)

      0.95%       0.95%       0.95%       0.95%       0.95%       0.95%       1.40%

Institutional Emerging Markets–Institutional Class(c)

      1.00%       0.98%       0.96%       0.94%       0.94%       0.94%       1.10% (d),(e) 

Institutional Emerging Markets–Institutional Class Z(c)

      1.00%       0.98%       0.96%       0.94%       0.94%       0.94%       1.00% (d),(f) 

Emerging Markets–Advisor Class(c)

      1.00%       0.98%       0.96%       0.94%       0.94%       0.94%       1.30% (d),(g) 

Frontier Emerging Markets–Institutional Class I

      1.35%       1.35%       1.35%       1.35%       1.35%       1.35%       1.75%

Frontier Emerging Markets–Institutional Class II

      1.35%       1.35%       1.35%       1.35%       1.35%       1.35%       1.35%

Frontier Emerging Markets–Investor Class

      1.35%       1.35%       1.35%       1.35%       1.35%       1.35%       2.00%

Global Equity Research–Institutional Class

      0.70%       0.70%       0.70%       0.70%       0.70%       0.70%       0.80%

International Equity Research–Institutional Class

      0.70%       0.70%       0.70%       0.70%       0.70%       0.70%       0.75%

Emerging Markets Research–Institutional Class

      1.00%       1.00%       1.00%       1.00%       1.00%       1.00%       1.15%

Chinese Equity–Institutional Class

      0.95%       0.95%       0.95%       0.95%       0.95%       0.95%       1.15%

 

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Notes to Financial Statements (continued)

October 31, 2021

 

3.   Transactions with Affiliates and Significant Agreements (continued)

 

 

(a)

Effective through February 28, 2022 for each Portfolio except Institutional Emerging Markets and Emerging Markets.

 

(b)

Prior to July 1, 2021, International Small Companies Contractual management fee was 1.00% of all assets.

 

(c)

Prior to July 1, 2021, Institutional Emerging Markets and Emerging Markets contractual management fees were 1.15% on the first $1 billion of assets, 1.13% on the next $1 billion of assets, 1.11% on the next $1 billion of assets, and 1.09% for assets over $3 billion.

 

(d)

Effective through February 28, 2023.

 

(e)

Prior to July 1, 2021, the Investment Adviser had contractually agreed to cap the expenses for the Institutional Emerging Markets Portfolio’s Institutional Class at 1.17%.

 

(f)

Prior to July 1, 2021, the Investment Adviser had contractually agreed to cap the expenses for the Institutional Emerging Markets Portfolio’s Institutional Class Z at 1.15% on the first $1 Billion of assets.

 

(g)

Prior to July 1, 2021 the Investment Adviser had contractually agreed to cap expenses for the Emerging Markets Portfolio’s Advisor Class at 1.32%.

For the year ended October 31, 2021, the Investment Adviser waived and/or reimbursed the following amounts pursuant to the contractual expense limits described above:

 

Portfolio   Fees waived and/or reimbursed by the Investment  Adviser  

Global Equity-Institutional Class Z

  $     29,813

International Small Companies-Institutional Class

         59,818

International Small Companies-Investor Class

         45,666

Institutional Emerging Markets-Institutional Class

    4,398,629

Institutional Emerging Markets-Institutional Class Z

       472,659

Emerging Markets-Advisor Class

       886,208

Frontier Emerging Markets-Institutional Class II

       249,317

Frontier Emerging Markets-Investor Class

         14,383

Global Equity Research-Institutional Class

         87,073

International Equity Research-Institutional Class

       105,857

Emerging Markets Research-Institutional Class

       103,057

Chinese Equity-Institutional Class

       205,365

The Fund has an administration agreement with The Northern Trust Company (“Northern Trust”), 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 SEC.

Northern Trust also serves as custodian of each Portfolio’s securities and cash, transfer agent, dividend disbursing agent and agent in connection with any accumulation, open-account or similar plans provided to the shareholders of the Portfolios.

Foreside Management Services, LLC provides compliance support to the Fund’s Chief Compliance Officer. Fees paid pursuant to these services are shown as “Compliance officers’ fees and expenses” on the Statements of Operations.

The Fund has adopted an Amended Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act (“Distribution Plan”). Under the Distribution Plan, the Investor Class of each of the International Equity, International Small Companies and Frontier Emerging Markets Portfolios may pay underwriters, distributors, dealers or brokers a fee at an annual rate of up to 0.25% of the average daily net assets of the Portfolio’s Investor Class shares for services or expenses arising in connection with activities primarily intended to result in the sale of Investor Class shares of the Portfolios or for Shareholder Services (defined below) consistent with those described under the Shareholder Servicing Plan.

The Fund, on behalf of the Portfolios, has agreements with various financial intermediaries and “mutual fund supermarkets”, under which customers of these intermediaries may purchase and hold Portfolio shares. These intermediaries assess fees in consideration for providing certain account maintenance, recordkeeping and transactional and other shareholder services (collectively, “Shareholder Services”). With the exception of Institutional Class Z, each Portfolio or class is authorized, pursuant to a Shareholder Servicing Plan, to pay to each intermediary an annual rate of up to 0.25% of its average daily net assets attributable to that intermediary (subject to the contractual expense limits described above) for such Shareholder Services. Because of the contractual expense limits on certain Portfolios’ fees and expenses, the Investment Adviser paid a portion of the Portfolios’ share of these fees during the year ended October 31, 2021. Such payments, if any, are included in the table above under the caption “Fees waived and/or reimbursed by the Investment Adviser”.

 

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Notes to Financial Statements (continued)

October 31, 2021

 

3.   Transactions with Affiliates and Significant Agreements (continued)

 

A Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common Directors. For the year ended October 31, 2021, no Portfolios engaged in purchases and/or sales of securities from an affiliated portfolio in compliance with Rule 17a-7 of the 1940 Act.

4.   Class Specific Expenses

The class level expenses for the year ended October 31, 2021, were as follows for each Portfolio:

 

     Distribution      State Registration      Printing and      Transfer Agent      Shareholder  
Portfolio    Fees      Filing Fees      Postage Fees      Fees and Expenses      Servicing Fees  

 

 

Global Equity–Institutional Class

       $      $ 35,918      $ 16,104      $ 5,925      $ 901,239  

 

 

Global Equity–Institutional Class Z

            19,938        1,585        1,602         

 

 

Global Equity–Advisor Class

            18,931        8,700        3,053        134,270  

 

 

International Equity–Institutional Class

            100,229        617,953        393,920        14,197,154  

 

 

International Equity–Institutional Class Z

            26,929        72,069        17,936         

 

 

International Equity–Investor Class

     961,029        25,078        38,200        20,980        526,660  

 

 

International Small Companies–Institutional Class

            24,817        17,715        7,870        315,214  

 

 

International Small Companies–Investor Class

     117,246        19,710        3,007        2,951        53,709  

 

 

Institutional Emerging Markets–Institutional Class

            49,487        259,906        38,682        5,294,632  

 

 

Institutional Emerging Markets–Institutional Class Z

            23,123        11,436        8,651         

 

 

Emerging Markets–Advisor Class

            58,066        357,882        436,767        5,990,614  

 

 

Frontier Emerging Markets–Institutional Class I

            20,065        4,978        1,925        61,744  

 

 

Frontier Emerging Markets–Institutional Class II

            18,775        104        307         

 

 

Frontier Emerging Markets–Investor Class

     25,199        18,940        1,450        1,002        14,991  

 

 

Global Equity Research–Institutional Class

            23,192        126        482         

 

 

International Equity Research–Institutional Class

            19,915        182        577        7,361  

 

 

Emerging Markets Research–Institutional Class

            22,944        104        502        1  

 

 

Chinese Equity–Institutional Class*

            2,041        2,201        746        58  

 

 

*  For the period from December 16, 2020 (commencement of operations) through October 31, 2021.

5.   Investment Transactions

Cost of purchases and proceeds from sales of investment securities, other than short-term investments, for the year ended October 31, 2021, were as follows for each Portfolio:

 

      Purchase Cost of              Proceeds from Sales of          
Portfolio    Investment Securities                            Investment Securities                        

Global Equity

    $ 960,866,670         $ 1,022,572,110     

International Equity

     3,789,621,160           2,663,580,322     

International Small Companies

     154,095,356           63,782,442     

Institutional Emerging Markets

     864,780,262           1,025,655,849     

Emerging Markets

     612,976,182           1,341,715,211     

Frontier Emerging Markets

     65,039,839           101,308,024     

Global Equity Research

     3,572,342           3,506,986     

International Equity Research

     5,511,787           5,900,604     

Emerging Markets Research

     4,163,969           3,874,355     

Chinese Equity*

     4,765,392           665,457     

*  For the period from December 16, 2020 (commencement of operations) through October 31, 2021.

6.   In-Kind Redemptions

During the year ended October 31, 2020, the Global Equity Portfolio delivered portfolio securities rather than cash in exchange for the redemption of shares for certain investors (in-kind redemptions). These investors received readily marketable securities that were valued on the redemption date using the same method employed in calculating the Portfolio’s NAV per share. The Global Equity Portfolio had in-kind

 

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Notes to Financial Statements (continued)

October 31, 2021

 

6.   In-Kind Redemptions (continued)

 

redemptions of approximately $38,788,196. The redemption amounts are included in “Net increase (decrease) in net assets from portfolio share transactions” on the Statements of Changes in Net Assets. Net gain of approximately $17,420,766 on the securities resulting from such in-kind redemptions are included in “Net realized gain (loss) on investments and foreign currency transactions” in the Statements of Changes in Net Assets. For financial reporting purposes, these transactions are treated as sales of securities and the resulting gains and losses are recognized based on the market value of the securities on the date of the redemption. For tax purposes, no gains or losses are recognized.

7.   Capital Share Transactions

Transactions in capital shares for the year ended October 31, 2021, were as follows for each Portfolio:

 

                                               Net     Net  
          Proceeds     Shares From     Reinvestment           Payments     Increase     Increase  
    Shares     From     Reinvested     of     Shares     for Shares     (Decrease)     (Decrease)  
     Sold     Shares Sold     Dividends     Dividends     Redeemed     Redeemed     in Shares     in Net Assets  

Global Equity

               

Institutional Class

    2,755,173     $ 134,959,470       1,350,884       $61,262,574       (3,594,707   $ (177,912,826     511,350     $ 18,309,218  

Institutional Class Z

    1,253,152       60,994,104       296,046       13,419,766       (1,334,691     (67,042,458     214,507       7,371,412  

Advisor Class

    260,555       12,723,575       72,150       3,270,573       (591,279     (29,240,671     (258,574     (13,246,523

International Equity

               

Institutional Class

    135,837,628       3,960,640,326       3,415,990       94,725,399       (116,226,503     (3,408,764,560     23,027,115       646,601,165  

Institutional Class Z

    40,762,511       1,210,064,860       756,652       20,966,814       (27,234,972     (808,810,658     14,284,191       422,221,016  

Investor Class

    3,429,544       101,106,880       59,184       1,641,770       (4,364,393     (124,448,384     (875,665     (21,699,734

International Small Companies

 

             

Institutional Class

    7,747,074       162,134,735       29,893       569,448       (3,321,648     (69,970,353     4,455,319       92,733,830  

Investor Class

    178,402       3,648,929       661       12,455       (310,774     (6,371,973     (131,711     (2,710,589

Institutional Emerging Markets

 

             

Institutional Class

    39,751,528       1,033,720,059       773,359       19,248,905       (43,255,578     (1,125,114,886     (2,730,691     (72,145,922

Institutional Class Z

    6,828,128       178,141,359       126,142       3,145,987       (8,363,042     (220,163,091     (1,408,772     (38,875,745

Emerging Markets

               

Advisor Class

    11,237,277       764,954,443       203,160       13,223,728       (21,865,322     (1,501,100,934     (10,424,885     (722,922,763

Frontier Emerging Markets

 

             

Institutional Class I

    3,693,948       29,496,185       132,190       1,028,440       (3,620,253     (29,434,849     205,885       1,089,776  

Institutional Class II

                291,739       2,278,483       (4,064,425     (33,725,470     (3,772,686     (31,446,987

Investor Class

    152,653       1,225,142       17,809       138,196       (600,304     (4,763,885     (429,842     (3,400,547

Global Equity Research

 

             

Institutional Class

    34       501       15,309       217,846                   15,343       218,347  

International Equity Research

 

             

Institutional Class

    14,627       208,669       36,323       489,632       (51,422     (733,085     (472     (34,784

Emerging Markets Research

 

             

Institutional Class

    22,627       302,608       10,514       134,267       (653     (8,647     32,488       428,228  

Chinese Equity

               

Institutional Class*

    421,003       4,280,500                               421,003       4,280,500  

*  For the period from December 16, 2020 (commencement of operations) through October 31, 2021.

Transactions in capital shares for the year ended October 31, 2020, were as follows for each Portfolio:

 

                                               Net     Net  
          Proceeds     Shares From     Reinvestment           Payments     Increase     Increase  
    Shares     From     Reinvested     of     Shares     for Shares     (Decrease)     (Decrease)  
     Sold     Shares Sold     Dividends     Dividends     Redeemed     Redeemed     in Shares     in Net Assets  
Global Equity                                                

Institutional Class

    12,675,160     $ 516,679,441       99,937     $ 3,750,633       (7,521,201   $ (276,990,882     5,253,896     $ 243,439,192  

Institutional Class Z

    1,214,016       46,104,062       34,033       1,275,910       (909,670     (39,808,095     338,379       7,571,877  

Advisor Class

    324,320       12,635,875       3,494       131,272       (440,185     (16,211,445     (112,371     (3,444,298

International Equity

               

Institutional Class

    186,458,188       4,129,832,968       7,739,005       182,950,087       (227,702,716     (4,943,590,115     (33,505,523     (630,807,060

 

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Notes to Financial Statements (continued)

October 31, 2021

 

7.   Capital Share Transactions (continued)

 

 

                                                    Net     Net  
            Proceeds      Shares From      Reinvestment            Payments     Increase     Increase  
     Shares      From      Reinvested      of      Shares     for Shares     (Decrease)     (Decrease)  
      Sold      Shares Sold      Dividends      Dividends      Redeemed     Redeemed     in Shares     in Net Assets  

Institutional Class Z

     27,006,575      $ 623,067,400        1,367,636      $ 32,317,240        (22,561,293   $ (519,759,194     5,812,918     $ 135,625,446  

Investor Class

     4,328,969        95,529,374        213,471        5,048,578        (7,754,318     (171,021,718     (3,211,878     (70,443,766

International Small Companies

 

                 

Institutional Class

     7,221,258        109,689,074        98,894        1,656,470        (5,059,225     (74,531,343     2,260,927       36,814,201  

Investor Class

     609,402        9,503,676        18,570        308,083        (1,972,802     (29,932,526     (1,344,830     (20,120,767

Institutional Emerging Markets

 

                 

Institutional Class

     80,055,144        1,550,781,076        2,860,129        63,923,895        (83,498,478     (1,627,562,463     (583,205     (12,857,492

Institutional Class Z

     7,951,385        170,473,905        364,763        8,156,096        (5,085,941     (98,100,924     3,230,207       80,529,077  

Emerging Markets

                    

Advisor Class

     16,535,208        833,799,789        963,746        56,465,950        (26,896,624     (1,362,711,636     (9,397,670     (472,445,897

Frontier Emerging Markets

 

                 

Institutional Class I

     4,237,438        28,199,937        272,401        2,132,906        (12,462,963     (81,956,641     (7,953,124     (51,623,798

Institutional Class II

                   346,188        2,717,575                    346,188       2,717,575  

Investor Class

     573,612        3,560,115        35,821        279,761        (1,762,337     (12,092,532     (1,152,904     (8,252,656

Global Equity Research

                    

Institutional Class

                   30,488        379,881                    30,488       379,881  

International Equity Research

 

                 

Institutional Class

     152,365        1,688,521        30,406        374,600        (760,187     (9,228,810     (577,416     (7,165,689

Emerging Markets Research

 

                 

Institutional Class

     660        6,001        25,882        299,717                    26,542       305,718  

8.   Income Tax

The cost of investments for federal income tax purposes and the components of net unrealized appreciation (depreciation) on investments at October 31, 2021, for each of the Portfolios were as follows:

 

      Gross      Gross      Net Unrealized          
Portfolio    Unrealized      Unrealized      Appreciation /         
   Appreciation      Depreciation      (Depreciation)      Cost  

Global Equity

   $ 642,824,112      $ (21,970,152    $ 620,853,960      $ 1,188,916,221  

International Equity

     8,286,074,902        (467,085,189      7,818,989,713        14,051,523,349  

International Small Companies

     202,304,549        (21,992,167      180,312,382        419,638,335  

Institutional Emerging Markets

     2,415,018,178        (292,930,826      2,122,087,352        4,389,389,061  

Emerging Markets

     1,622,389,733        (114,677,044      1,507,712,689        2,315,795,844  

Frontier Emerging Markets

     66,180,966        (11,210,934      54,970,032        169,150,992  

Global Equity Research

     3,045,880        (347,194      2,698,686        7,146,352  

International Equity Research

     3,852,915        (585,366      3,267,549        11,999,107  

Emerging Markets Research

     1,891,882        (805,527      1,086,355        7,921,113  

Chinese Equity

     342,144        (501,432      (159,288      4,046,238  

It is the policy of each Portfolio of the Fund to qualify as a regulated investment company 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; therefore, no federal income tax provision is required.

The Portfolios may be subject to taxes imposed by countries in which they invest. Such taxes are generally based on income and/or capital gains earned. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are recorded. Taxes accrued on unrealized gains are reflected as a liability on the Statements of Assets and Liabilities under the caption “Deferred capital gains tax” and as a reduction in “Distributable earnings”. When assets subject to capital gains tax are sold, accrued taxes are relieved, and the actual amount of the taxes paid is reflected on the Statements of Operations as a reduction in “Net realized gain (loss) on Investment

 

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Notes to Financial Statements (continued)

October 31, 2021

 

8.   Income Tax (continued)

 

Transactions”. The Portfolios seek to recover a portion of foreign withholding taxes applied to income earned in jurisdictions where favorable treaty rates for US investors are available. The portion of such taxes believed to be recoverable is reflected as an asset on the Statements of Assets and Liabilities under the caption “Tax reclaims receivable”.

Management has performed an analysis of each Portfolio’s tax positions for the open tax years as of October 31, 2021, and has concluded that no provisions for income tax are required. The Portfolios’ federal tax returns for the prior three fiscal years (open tax years: October 31, 2019; October 31, 2020; October 31, 2021) remain subject to examination by the Portfolios’ major tax jurisdictions, which include the United States, the State of New Jersey and the State of Maryland. Management is not aware of any events that are reasonably possible to occur in the next twelve months that would result in the amounts of any unrecognized tax benefits significantly increasing or decreasing for the Portfolios. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, new tax laws and accounting regulations and interpretations thereof.

The tax character of distributions paid during the fiscal years ended October 31, 2021 and 2020 were as follows:

 

              Distributions From          
     Ordinary      Long-Term      Ordinary      Long-Term  
     Income      Capital Gains      Income      Capital Gains  
Portfolio    2021      2021      2020      2020  

Global Equity

     10,667,822      $ 75,826,990      $ 6,200,271      $  

International Equity

     147,195,007               269,536,396         

International Small Companies

     622,621               2,122,682         

Institutional Emerging Markets

     26,645,680               85,287,487         

Emerging Markets

     14,604,731               63,406,861         

Frontier Emerging Markets

     3,730,104               5,825,150         

Global Equity Research

     190,800        27,046        83,862        296,019  

International Equity Research

     489,632               232,264        142,336  

Emerging Markets Research

     66,856        67,411        145,125        154,592  

As of October 31, 2021, the components of distributable earnings/(deficit) on a tax basis were as follows:

 

      Undistributed      Undistributed      Accumulated     Unrealized     Total  
     Ordinary      Long-Term      Capital and     Appreciation     Accumulated  
Portfolio    Income      Capital Gains      Other Losses     (Depreciation)(1)     Earnings/(Deficit)  

Global Equity

     $  25,226,683      $ 218,044,847      $     $ 620,859,175     $ 864,130,705  

International Equity

     280,427,730        229,955,619              7,819,047,616       8,329,430,965  

International Small Companies

     1,591,567        15,922,140              179,856,357       197,370,064  

Institutional Emerging Markets

     34,566,494               (92,085,458     2,106,772,100       2,049,253,136  

Emerging Markets

     14,625,660        269,068,722              1,498,204,903       1,781,899,285  

Frontier Emerging Markets

     1,827,703               (103,813,638     54,398,656       (47,587,279

Global Equity Research

     266,842        780,662              2,693,699       3,741,203  

International Equity Research

     622,513        1,059,361        (4,934     3,256,233       4,933,173  

Emerging Markets Research

     264,618        540,505              1,070,179       1,875,302  

Chinese Equity*

     11,045               (188,678     (159,288     (336,921

*  For the period from December 16, 2020 (commencement of operations) through October 31, 2021.

(1) The difference between book basis and tax basis net unrealized appreciation is attributable primarily to the tax deferral of losses on certain sale of securities. Unrealized Appreciation (Depreciation) includes amounts related to foreign currency and currency translations.

 

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Notes to Financial Statements (continued)

October 31, 2021

 

8.   Income Tax (continued)

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), each Portfolio is permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses.

At October 31, 2021, capital losses incurred that will be carried forward indefinitely under provisions of the Act were as follows:

 

Portfolio

  

Short-Term

Capital Loss

Carryforward

    

Long-Term

Capital Loss

Carryforward

 

Institutional Emerging Markets

   $ (82,711,940    $ (9,373,518

Frontier Emerging Markets

     (19,505,546      (84,308,092

Chinese Equity*

     (169,512       

*  For the period from December 16, 2020 (commencement of operations) through October 31, 2021.

Primarily as a result of differing book/tax treatment of foreign currency transactions and foreign capital gain tax expenses, the Portfolios made reclassifications among certain capital accounts. The reclassifications have no impact on the net assets of the Portfolios. As of October 31, 2021, the following reclassifications were made to the Statements of Assets and Liabilities:

 

     
Portfolio    Paid-in Capital             Distributable earnings  

Chinese Equity*

   $ (1,274   $ 1,274  

*  For the period from December 16, 2020 (commencement of operations) through October 31, 2021.

During the fiscal year ended October 31, 2021, the International Equity, International Small Companies, Institutional Emerging Markets, Emerging Markets and Frontier Emerging Markets Portfolios utilized $556,130,928, $4,712,316, $113,764,086, $36,752,112 and $19,167,471, respectively, in capital loss carryforwards.

9.   Foreign Exchange Contracts

The Portfolios do not generally hedge foreign currency exposure, however, the Portfolios may enter into forward foreign exchange contracts in order to hedge their exposure to changes in foreign currency exchange rates on their foreign portfolio holdings. Each Portfolio will conduct its currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market, or by entering into forward contracts to purchase or sell currency. Foreign currency transactions entered into on the spot markets serve to pay for foreign investment purchases or to convert to dollars, the proceeds from foreign investment sales or dividend and interest receipts. The Portfolios will disclose open forward currency contracts, if any, on the Portfolios of Investments. The Portfolios do not separately disclose open spot market transactions on the Portfolios of Investments. Such realized gain (loss) and unrealized appreciation (depreciation) on spot market transactions is included in “Net realized gain (loss) on foreign currency transactions” and “Change in unrealized appreciation (depreciation) on translation of assets and liabilities denominated in foreign currencies”, respectively, on the Portfolios’ Statements of Operations. The Portfolios held no open forward currency contracts as of or during the fiscal year ended October 31, 2021.

The Central Bank of Nigeria has implemented currency controls that significantly limit the ability to convert Nigerian Naira (NGN) to U.S. dollars. As of October 31, 2021, the Frontier Emerging Markets Portfolio had 6.4% of Nigeria exposure (comprised of 0.8% NGN and 5.6% Nigerian equities) and the Emerging Markets Research Portfolio had 0.7% of Nigeria exposure (comprised of 0.2% NGN and 0.5% Nigerian equities). The NGN has been valued based on an established foreign currency benchmark rate and the Nigerian equity securities have been valued at their closing price on the Nigerian Stock Exchange. These valuation methodologies are in accordance with the Procedures and GAAP. However, the conversion rate from NGN to U.S. dollars does not reflect the impact of the aforementioned currency controls. As a result, the value of NGN currently held, any proceeds from the sale of Nigerian equities received by the Frontier Emerging Markets and Emerging Markets Research Portfolios, or dividends received by the Portfolios in connection with their investment in such Nigerian equities, may differ materially once converted from NGN to U.S. dollars.

10.   Participation Notes

Each Portfolio may invest in participation notes. Participation notes are promissory notes that are designed to replicate the return of a particular underlying equity or debt security, currency or market. Participation notes are issued by banks or broker-dealers or their affiliates and allow a Portfolio to gain exposure to common stocks in markets where direct investment may not be allowed. Participation notes are generally traded over-the-counter. In addition to carrying the same risks associated with a direct investment in the underlying security, participation notes are

 

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Notes to Financial Statements (continued)

October 31, 2021

 

10.   Participation Notes (continued)

 

subject to the risk that the broker-dealer or bank that issues them will not fulfill its contractual obligation to complete the transaction with a Portfolio. Participation notes constitute general unsecured contractual obligations of the banks or broker-dealers that issue them, and a Portfolio would be relying on the creditworthiness of such banks or broker-dealers and would have no rights under a participation note against the issuer(s) of the underlying security(ies). Participation notes may be more volatile and less liquid than other investments held by the Portfolios.

11.   Concentration of Ownership

At October 31, 2021, the percentage of total shares outstanding held by record shareholders each owning 10% or greater of the aggregate shares outstanding of each Portfolio were as follows:

 

      No. of              %         
      Shareholders                                Ownership                   

Global Equity

     2           32.78 %*   

International Equity

     2           25.56 %*   

International Small Companies

     4           58.76 %*   

Institutional Emerging Markets

     2           57.13 %*   

Emerging Markets

     4           77.06 %*   

Frontier Emerging Markets

     3           45.39 %*   

Global Equity Research

     2           83.34  

International Equity Research

     3           71.82 %*   

Emerging Markets Research

     2           72.15  

Chinese Equity

     2           47.51  

*  Includes omnibus positions of broker-dealers representing numerous shareholder accounts.

Investment activities of these shareholders may have a material effect on the Portfolios.

12.   Concentration of Risk

Investing in securities of foreign issuers and currency transactions may involve certain considerations and risks not typically associated with investments in U.S. issuers. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and U.S. government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which the Portfolios are authorized to invest.

The Frontier Emerging Markets Portfolio is permitted to invest up to 35% of its total assets in companies in the same industry, if, at the time of investment, that industry represents 20% or more of the Frontier Emerging Markets Portfolio’s benchmark index. During periods when the Frontier Emerging Markets Portfolio has invested more than 25% of its total assets in companies in the same industry, it will operate as a concentrated portfolio and be subject to additional risks and greater volatility. Such additional risks include increased competition within the industry, or changes in legislation, or government regulations affecting the industry. The value of the Frontier Emerging Markets Portfolio’s shares may be particularly vulnerable to factors affecting the banking industry, such as the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, extensive government regulation, and price competition. Such risks may be magnified with respect to securities of issuers in Frontier Emerging Markets. At October 31, 2021, the Frontier Emerging Markets Portfolio’s investment in the Banking industry amounted to 32.17% of its total assets.

As a non-diversified fund, the Chinese Equity Portfolio has the ability to invest a larger percentage of its assets in the securities of a smaller number of issuers than a diversified fund. As a result, poor performance by a single issuer could adversely affect the Chinese Equity Portfolio’s performance more than if the Chinese Equity Portfolio were invested in a larger number of issuers.

 

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Notes to Financial Statements (continued)

October 31, 2021

 

 

13.   Pandemic Risk

The outbreak of the novel coronavirus (“COVID-19”) and subsequent global pandemic has significantly impacted the global economy, individual companies, and financial markets in general and throughout the world has created significant uncertainty. The duration and extent of COVID-19 over the long-term cannot be reasonably estimated at this time. The ultimate impact of COVID-19 and the extent to which COVID-19 impacts the Fund’s normal course of business, results of operations, investments, and cash flows will depend on future developments, which are highly uncertain and difficult to predict.

14.   Line of Credit

The Fund has a $150 million line of credit agreement with Northern Trust. Borrowings are made solely to facilitate the handling of redemptions or unusual or unanticipated short-term cash requirements. Because several Portfolios participate and collateral requirements apply, there is no assurance that an individual Portfolio will have access to the entire $150 million at any particular time. Interest is charged to each Portfolio based on its borrowings at an amount above the Federal Funds rate, subject to a minimum rate. In addition, a facility fee is computed at an annual rate of 0.15% on the line of credit and is allocated among the Portfolios.

For the year ended October 31, 2021, Emerging Markets had an outstanding balance for two days with a maximum balance of $81,000,000 at an average weighted interest rate of 1.75%. International Equity Research had an outstanding balance for one day with a maximum balance of $200,000 at an average weighted interest rate of 1.75%.

15.   Subsequent Events

Subsequent events occurring after the date of this report have been evaluated for potential impact, for purposes of recognition or disclosure in the financial statements, through the date the report was issued.

 

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LOGO   
  

KPMG LLP

345 Park Avenue

   New York, NY 10154-0102

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Harding, Loevner Funds, Inc.:

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities of Global Equity Portfolio, International Equity Portfolio, International Small Companies Portfolio, Institutional Emerging Markets Portfolio, Emerging Markets Portfolio, Frontier Emerging Markets Portfolio, Global Equity Research Portfolio, International Equity Research Portfolio, Emerging Markets Research Portfolio, and Chinese Equity Portfolio (each a portfolio of the Harding, Loevner Funds, Inc.) (the Portfolios), including the portfolios of investments, as of October 31, 2021, the related statements of operations for the year then ended (the period from December 16, 2020 (commencement of operations) to October 31, 2021 for Chinese Equity Portfolio), the statements of changes in net assets for each of the years in the two-year period then ended (the period from December 16, 2020 (commencement of operations) to October 31, 2021 for Chinese Equity Portfolio), and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended (the period from December 16, 2020 (commencement of operations) to October 31, 2021 for Chinese Equity Portfolio). In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Portfolios as of October 31, 2021, the results of their operations for the year then ended (the period from December 16, 2020 (commencement of operations) to October 31, 2021 for Chinese Equity Portfolio), the changes in their net assets for each of the years in the two-year period then ended (the period from December 16, 2020 (commencement of operations) to October 31, 2021 for Chinese Equity Portfolio), and the financial highlights for each of the years in the five-year period then ended (the period from December 16, 2020 (commencement of operations) to October 31, 2021 for Chinese Equity Portfolio), in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Portfolios’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Portfolios in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2021, by correspondence with custodians and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.

 

LOGO

We have served as the auditor of Harding, Loevner Funds, Inc. Portfolios since 2006.

New York, New York

December 17, 2021

 

  

KPMG LLP, a Delaware limited liability partnership and a member firm of

the KPMG global organization of independent member firms affiliated with

KPMG International Limited, a private English company limited by guarantee.

  

 

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Supplemental Tax Information

(unaudited)

 

 

International Equity, International Small Companies, Institutional Emerging Markets, Emerging Markets, Frontier Emerging Markets, Global Equity Research, International Equity Research, and Emerging Markets Research paid qualifying foreign taxes of $40,962,304, $805,743, $13,569,569, $9,094,071, $518,012, $12,315, $37,976, and $28,727 and earned $496,883,528, $2,100,581, $48,856,165, $24,044,001, $2,586,125, $75,811, $188,599, and $99,955 from foreign source income during the fiscal year ended October 31, 2021, respectively. Pursuant to Section 853 of the Internal Revenue Code, International Equity, International Small Companies, Institutional Emerging Markets, Emerging Markets, Frontier Emerging Markets, Global Equity Research, International Equity Research, and Emerging Markets Research designated $0.0574, $0.0306, $0.0535, $0.1596, $0.0208, $0.0207, $0.0365, and $0.0417 per share as foreign taxes paid and $0.6958, $0.0798, $0.1926, $0.4220, $0.1038, $0.1276, $0.1814, and $0.1450 per share as income earned from foreign sources for the fiscal year ended October 31, 2021, respectively.

Global Equity, International Equity, International Small Companies, Institutional Emerging Markets, Emerging Markets, Frontier Emerging Markets, Global Equity Research, International Equity Research, Emerging Markets Research, and Chinese Equity had qualifying dividend income of $8,609,966, $462,399,169, $5,807,715, $90,980,200, $57,948,430, $2,979,929, $127,421, $251,398, $143,393, and $14,933, respectively, during the fiscal year ended October 31, 2021.

For the fiscal year ended October 31, 2021, Global Equity designated 16.57% of the distributions from net investment income as qualifying for the 100% corporate dividend received deduction.

For the fiscal year ended October 31, 2021, Global Equity Research designated 16.06% of the distributions from net investment income as qualifying for the 100% corporate dividend received deduction.

Pursuant to Section 852 of the Internal Revenue Code, Global Equity designated $218,044,847 as a long term capital gain dividend for the fiscal year ended October 31, 2021.

Pursuant to Section 852 of the Internal Revenue Code, International Equity designated $229,955,619 as a long term capital gain dividend for the fiscal year ended October 31, 2021.

Pursuant to Section 852 of the Internal Revenue Code, International Small Companies designated $15,922,140 as a long term capital gain dividend for the fiscal year ended October 31, 2021.

Pursuant to Section 852 of the Internal Revenue Code, Emerging Markets designated $269,068,722 as a long term capital gain dividend for the fiscal year ended October 31, 2021.

Pursuant to Section 852 of the Internal Revenue Code, Global Equity Research designated $780,662 as a long term capital gain dividend for the fiscal year ended October 31, 2021.

Pursuant to Section 852 of the Internal Revenue Code, International Equity Research designated $1,059,361 as a long term capital gain dividend for the fiscal year ended October 31, 2021.

Pursuant to Section 852 of the Internal Revenue Code, Emerging Markets Research designated $540,505 as a long term capital gain dividend for the fiscal year ended October 31, 2021.

 

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Approval of Investment Advisory Agreement

(unaudited)

 

 

Approval of Investment Advisory Agreement

At a meeting of the board of directors (collectively, the “Board” or “Directors” and, each, a “Director”) of Harding, Loevner Funds, Inc. (the “Fund”) held on June 11, 2021 (the “Meeting”), the Board, including a majority of those Directors who are not “interested persons” of the Fund (the “Independent Directors”), as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) considered and approved the continuation of three investment advisory agreements (the “Advisory Agreements”): the first, between Harding Loevner LP (“Harding Loevner” or the “Adviser”) and the Fund, on behalf of the Global Equity Portfolio, the International Equity Portfolio, the International Small Companies Portfolio, the Institutional Emerging Markets Portfolio, the Emerging Markets Portfolio, and the Frontier Emerging Markets Portfolio (collectively, the “Traditional Portfolios”); the second, between the Adviser and the Fund, on behalf of the International Equity Research Portfolio (the “IER Portfolio”); and the third, between the Adviser and the Fund on behalf of the Global Equity Research Portfolio (the “GER Portfolio”) and Emerging Markets Research Portfolio (the “EMR Portfolio” and together with the IER Portfolio and GER Portfolio, the “Research Portfolios,” and together with the Traditional Portfolios, each a “Portfolio” and collectively, the “Portfolios”). The Meeting was held via videoconference, with telephonic participation optional, in accordance with exemptive relief from certain in-person meeting requirements issued by the SEC in an exemptive order under Section 6(c) and Section 38(a) of the 1940 Act.

Overview of the Review Process

Prior to the Meeting, the Board established a subcommittee of the Governance Committee of the Board comprised of three Independent Directors (the “Subcommittee”) to conduct a preliminary review of the materials provided to the Board by the Adviser in connection with consideration of the Advisory Agreements, to assist the Board in its deliberations, and to liaise with the Adviser. In addition, legal counsel to the Independent Directors (“Independent Counsel”), on behalf of the Independent Directors, delivered to the Adviser a written request for information that the Board believed necessary to evaluate the terms of the Advisory Agreements. In response, the Adviser furnished materials to facilitate the Board’s evaluation of the terms of the Advisory Agreements (the “Renewal Materials”), including information on, among other things: (i) the investment performance, expenses and advisory fees of each Portfolio relative to other mutual funds and benchmark indices, as set forth in reports prepared by Institutional Shareholder Services (the “ISS Reports”), a third-party fund analytics provider engaged as part of the Advisory Agreement review process; (ii) the Adviser’s profitability and costs arising from services provided to the Fund; (iii) the qualifications of the Adviser and portfolio management personnel with respect to services provided to the Portfolios; and (iv) the Adviser’s investment research capabilities and resources. The Adviser also sought to provide the foregoing information in the context of the unprecedented circumstances faced by the industry as a whole, given the reality of the continuing COVID-19 pandemic.

In preparation for the Meeting, the Adviser provided the Subcommittee with a preliminary version of the Renewal Materials for review and comment. The Subcommittee and representatives of the Adviser discussed the preliminary Renewal Materials during a telephonic meeting on May 20, 2021. Following this meeting, the Adviser revised the Renewal Materials in response to the Subcommittee’s comments and distributed the Renewal Materials in final form to the full Board. The Board also received and considered a memorandum regarding the Board’s responsibilities in connection with renewal of the Advisory Agreements prepared by Independent Counsel and Independent Counsel assisted the Independent Directors throughout the process.

At the Meeting, both in general and executive sessions, the Board considered and discussed the materials presented by the Adviser. During the presentations, the Adviser expanded on those materials and responded to specific questions from the Board. Among other things, the Adviser focused on the long-term performance records of the Portfolios and the competitiveness of the Portfolios’ advisory fees and total expense ratios. The Adviser also focused on the quality of the services provided to the Portfolios and its continued investment in personnel, technology and other resources that service the Fund. The Independent Directors met in executive session with Independent Counsel prior to the commencement of the Meeting and during the course of the Meeting to discuss the materials provided and information presented by the Adviser.

In evaluating continuance of the Advisory Agreements with respect to each Portfolio, among other things, the Board considered the various factors and information discussed below. The following discussion is not intended to be all-inclusive, as the Board reviewed a variety of factors and considered a significant amount of information.

Nature, Extent and Quality of Services

The Board evaluated the information it deemed necessary to assess the nature, extent and quality of investment advisory services provided to the Portfolios by the Adviser. The Board also considered the nature, extent and quality of the extensive non-advisory services provided to the Portfolios by the Adviser, including portfolio trading; the resources devoted to, and the record of compliance with, each Portfolio’s compliance policies and procedures; the resources devoted to the supervision of third-party service providers; and the quality and quantity of administrative and shareholder servicing. The Board noted that it received information in connection with quarterly Board and committee meetings throughout the year regarding the services rendered by the Adviser concerning the management of each Portfolio’s affairs and the Adviser’s role in coordinating providers of other services to the Portfolios.

 

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Approval of Investment Advisory Agreement (continued)

(unaudited)

 

 

The Adviser presented and discussed with the Board the qualifications, backgrounds and responsibilities of the Adviser’s management team and information regarding the members of each Portfolio’s portfolio management team. The Board evaluated the Adviser’s ability to attract and retain qualified investment advisory and non-advisory personnel and engaged in a discussion with the Adviser regarding its recruitment, retention and professional development programs and strategies.

The Board also considered the adequacy of the Adviser’s financial and operational resources committed to each Portfolio, and how well the Adviser utilized those resources to meet the Portfolio’s investment needs, to oversee non-investment services and to satisfy compliance requirements. The Board also considered the nature and extent of the steps taken by the Adviser to deliver the same quality of service to its clients, including the Fund, under the remote work conditions brought about by the COVID-19 pandemic and the Adviser’s operation of its business continuity plan and cybersecurity policies during this remote work environment.

The Board further noted that, as of March 31, 2021, the Adviser had approximately $84.0 billion in assets under management and that the Fund was the Adviser’s largest client, with assets of approximately $33.5 billion. The Board took into account the benefits realized by the Portfolios from the Adviser’s affiliation with Affiliated Managers Group, Inc., an established global asset management company.

The Board considered annual and periodic reports of the Fund’s Chief Compliance Officer (the “CCO”) with respect to the effectiveness and adequacy of the Fund’s and the Adviser’s compliance programs, including program enhancements related to information security and financial intermediary oversight and noted the additional compliance services that are provided, including liquidity risk management. The Board noted the CCO’s determination that the Adviser’s compliance program is reasonably designed to prevent violations of the federal securities laws. Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of services historically provided and to be provided to each Portfolio under its Advisory Agreements.

Performance of the Adviser

For each Portfolio, the Board considered, among other things, the historical performance for multiple time periods ended as of March 31, 2021, including the one-year, three-year, five-year and ten-year periods (or shorter for newer Portfolios) included in the ISS Reports, compared against each Portfolio’s Morningstar Category and benchmark index. The Board considered the Portfolios’ risk-adjusted performance and the high active share (i.e., low overlap with benchmark indices) inherent in the Adviser’s investment process.

With respect to the recent performance of the Portfolios, the Board noted that for the one-year period ended March 31, 2021: each class of the Global Equity Portfolio, International Equity Portfolio, Institutional Emerging Markets Portfolio, Emerging Markets Portfolio, Frontier Emerging Markets Portfolio, Global Equity Research Portfolio and International Equity Research Portfolio outperformed its respective benchmark index; each class of the International Small Companies Portfolio, and Emerging Markets Research Portfolio underperformed its respective benchmark index; and all Portfolios, except the Global Equity Portfolio, performed below the median of their respective Morningstar Category.

In assessing longer term performance by the Portfolios, for the five-year period ended March 31, 2021, the Board noted that each class of the Global Equity Portfolio, International Equity Portfolio, International Small Companies Portfolio, Frontier Emerging Markets Portfolio and International Equity Research Portfolio, with at least five years of operations, outperformed its respective benchmark index; and each class of the Global Equity Portfolio with at least five years of operations was above the median of its Morningstar Category. Each class of the Emerging Markets Portfolio and Institutional Emerging Markets Portfolio with at least five years of operations underperformed its respective benchmark index; and each class of the International Equity Portfolio, Institutional Emerging Markets Portfolio, Emerging Markets Portfolio, Frontier Emerging Markets Portfolio, International Small Companies Portfolio and International Equity Research Portfolio with at least five years of operations was below the median of its respective Morningstar Category. The Board noted in their review that the Global Equity Research Portfolio and Emerging Markets Research Portfolios had not yet completed five years of operations.

For the ten-year period ended March 31, 2021, the Board noted that each class of all Portfolios with at least ten years of operations had performance above the median of its respective Morningstar Category and outperformed its benchmark index, except each class of the International Equity Portfolio and the International Small Companies Portfolio, and the Institutional Class of the Frontier Emerging Markets Portfolio, outperformed their respective benchmark indices but performed below the median of their respective Morningstar Categories; and the Investor Class of the Frontier Emerging Markets Portfolio, which underperformed the Portfolio’s benchmark index and was below the median of its Morningstar Category.

In addition, the Board reviewed the Adviser’s investment philosophy used to manage the Portfolios, as well as the effectiveness of the Adviser’s use of portfolio management teams for the day-to-day management of Portfolios. The Board noted the Adviser’s bottom-up, business-focused approach based on the study of individual companies and the competitive dynamics of the global industries in which those companies

 

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Approval of Investment Advisory Agreement (continued)

(unaudited)

 

 

participate. The Board considered the Adviser’s disciplined adherence to its investment philosophy and process as well as the evolutionary enhancements to the methodology used in its implementation. The Board also took note of the Adviser’s integration of environmental, social and governance (“ESG”) factors in its investment process.

In evaluating the investment performance of the Portfolios, the Board acknowledged that the Adviser’s investment style may result in periods of underperformance, but has generally produced outperformance over longer time periods and that the Portfolios generally performed well relative to their respective benchmark indices. The Board also considered the Adviser’s ongoing efforts to identify the causes of any underperformance and the effectiveness of these efforts. Finally, the Board considered that the Morningstar Category performance data provided within the ISS Reports was less useful with respect to the Frontier Emerging Markets Portfolio, as Morningstar did not have a Frontier Markets category at March 31, 2021 and instead compared the Portfolio to the Diversified Emerging Markets category.

Based on these considerations, the Board concluded that each Portfolio’s performance was consistent with the Adviser’s investment discipline.

Costs of the Services and Profitability of the Adviser

The Board considered information regarding the Adviser’s costs to provide investment management services to the Portfolios and the profitability to the Adviser from managing the Portfolios. In evaluating the Adviser’s profitability, the Board considered the Adviser’s profitability analyses for calendar years 2019 and 2020, noting that the Adviser’s profit margin after assumed tax, in relation to its management of the Portfolios, was approximately equal in 2019 and 2020. The Board also considered profitability adjusted, on a pro forma basis, for estimated provisions for federal and state corporate income taxes; each Portfolio’s expense ratio; the allocation methodology used by the Adviser to compute such profitability; and the Adviser’s contractual fee waivers and expense reimbursements with respect to the applicable Portfolios. The Board further considered profitability on a Portfolio-by-Portfolio basis, focusing on the Adviser’s profit both with and without taking into account those costs borne by the Adviser with respect to its efforts to expand the Portfolios’ shareholder base.

The Adviser also presented its profitability analyses for calendar years 2019 and 2020 on an adjusted basis to reflect the equity-related compensation received by certain senior personnel of the Adviser who are limited partners of the Adviser. In the adjusted profitability analyses, the Adviser stated that it had adjusted the Adviser’s personnel expenses to an amount that more closely resembled the compensation paid to similarly situated personnel at peer firms, noting that the salaries and bonuses paid to the Adviser’s limited partners are lower than the compensation paid at peer firms because the limited partners also receive equity related compensation. The Board noted that this adjusted profitability information was useful in its consideration and assessment of the Adviser’s profitability.

The Board took note of the costs the Adviser has incurred that are intended to assure the continued delivery of high-quality services to its clients, including the Portfolios, and the future costs the Adviser plans to incur, including hiring additional qualified personnel and further investing in technology, including with respect to cybersecurity as well as enhancing its operational infrastructure. The Board considered the Adviser’s need to accommodate changing regulatory requirements and to adapt to structural changes in the mutual fund marketplace. The Board also noted that future profitability to the Adviser from managing the Portfolios would depend on the level of assets in the Portfolios and investment returns, as well as the Adviser’s total assets under management, and may be limited as certain Portfolios’ investment strategies encounter their capacity limitations. In assessing profitability, the Board considered each Portfolio’s profitability in the context of the services provided, the reasonableness of the fees charged for those services and the continued growth of assets through new investments.

Based upon these considerations, the Board concluded that the profits historically realized by the Adviser, and the profits the Adviser anticipates will be realized from its continued relationship with the Portfolios, are not excessive in light of the nature, extent and quality of the services provided to the Portfolios.

Comparison of Fees and Services Provided by the Adviser

The Board reviewed the contractual advisory fees that are payable by the Portfolios to the Adviser and the actual investment advisory fees realized by the Adviser taking into account the fee waiver and/or expense reimbursement arrangements for certain of the Portfolios. The Board considered the fact that the Adviser’s waiver/expense reimbursement arrangements are not subject to recapture and that the proposed fee reductions and breakpoints were contractual in nature, noting that in fiscal year 2020, the Adviser waived a portion of its advisory fees for the following Portfolios: the Institutional Class Z of the Global Equity Portfolio and the Institutional Class Z of the Institutional Emerging Markets Portfolio; the Investor Class and Institutional Class II of the Frontier Emerging Markets Portfolio; the Investor Class and Institutional Class of the International Small Companies Portfolio; and the Institutional Class of the International Equity Research Portfolio, the Global Equity Research Portfolio and the Emerging Markets Research Portfolio. In addition, the Board compared the Adviser’s separate account fee schedule with the advisory fees payable by the Portfolios to the Adviser. Further, the Board took note that the fee waivers in place for the Global Equity

 

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(unaudited)

 

 

Research Portfolio and Emerging Markets Research Portfolio exceeded the Adviser’s advisory fee. Finally, the Board considered the ISS Reports, which included information comparing each Portfolio’s management fee and overall expenses with those of funds in a group of peer funds selected by Institutional Shareholder Services (the “Expense Group”).

The Board noted that the net operating expenses of each Portfolio (expenses other than the fees pursuant to the Advisory Agreements and distribution and service fees) (the “Net Operating Expenses”) were below the median of their respective Expense Groups with the exception of the Research Portfolios, and were above the median of their respective Morningstar Category-derived universe (the “Expense Universe”), with the exception of the Emerging Markets Research Portfolio. With respect to the Research Portfolios, the Board took note that Net Operating Expenses exceed the median of their respective Expense Universe median due to the small asset size of these Portfolios, although this was partially offset by the voluntary subsidy of those Portfolios by the Adviser. The Board also observed that, except as noted below, the total expense ratio of each class of each Portfolio, after any applicable waiver of advisory fees and reimbursement of expenses, was at or below its respective Expense Group and Expense Universe medians. Exceptions included: the Institutional Class of the Institutional Emerging Markets Portfolio and the Institutional Class of the International Small Companies Portfolio, each of which had a total expense ratio above the median for its Expense Group and Expense Universe; and the Institutional Class of the Emerging Markets Research Portfolio, which had a total expense ratio above the median for its Expense Universe. The Board did not consider any of these differences to be material.

The Board noted that the net management fee for each class of each Portfolio was at or below the median of its Expense Group, except the Advisor Class of the Emerging Markets Portfolio; both classes of the Institutional Emerging Markets Portfolio and International Small Companies Portfolio; the Emerging Markets Research Portfolio; and all classes of the Frontier Emerging Markets Portfolio, each of which were above the median for their respective Expense Groups. The Board also noted that, for each Portfolio with an Expense Universe, the net management fee was at or below the median of its Expense Universe, except all classes of the Global Equity Portfolio, International Equity Portfolio and International Small Companies Portfolio; the Advisor Class of the Emerging Markets Portfolio; and both classes of the Institutional Emerging Markets Portfolio, each of which were above the median for their respective Expense Universes.

The Board noted that it did not consider the Expense Universe to be an appropriate comparator for the Frontier Emerging Markets Portfolio, as it was comprised of the Diversified Emerging Markets Morningstar Category, which is not limited exclusively to funds primarily investing in equity securities of companies based in the frontier emerging markets.. In its consideration of each Portfolio’s net management fee, the Board considered each Portfolio’s performance record and the extensive scope of non-advisory services provided by the Adviser, which it performs without additional compensation.

The Board recognized that the Adviser’s separate account and collective trust clients require fewer services from the Adviser than the Fund. The Board additionally recognized the Adviser’s efforts to direct more institutional investors into pooled vehicles, including the Portfolios, to the extent possible. Further, the Board took note that many sophisticated institutional investors, after reviewing similar investment vehicles with the assistance of their consultants, had determined and continue to, invest in the Portfolios, which further supported the reasonableness of the advisory fees charged by the Adviser.

The Board also noted the Adviser’s commitment to review periodically the fees charged to the Portfolios and the proposed management fee reductions for the Institutional Emerging Markets Portfolio, Emerging Markets Portfolio and International Small Companies Portfolio as part of the 2021 Advisory Agreements renewal process, to ensure that the fees remain competitive.

Based on these considerations, the Board concluded that each Portfolio’s fee, in light of the services provided by the Adviser, was reasonable.

Economies of Scale

The Board considered the extent to which economies of scale have been realized as the Portfolios’ assets grew, whether there is potential for realization of further economies of scale for the Portfolios, and whether material economies of scale are being shared with shareholders. The Board also considered that the Portfolios have benefitted both from asset growth in the Portfolios and even more from asset growth in the Adviser’s other accounts, each of which have resulted in certain expenses becoming a smaller percentage of overall assets.

The Board acknowledged that other aspects of the Portfolios’ investment strategies may limit the realization of economies of scale, including a particular strategy’s capacity limitations. The Board noted the strategies utilized by the Adviser to manage the high level of capacity utilization in the International Equity Portfolio, Emerging Markets Portfolio and Institutional Emerging Markets Portfolio. The Board also acknowledged the Adviser’s considerable and continued reinvestment in its business; its business plans for the Research Portfolios and payment of the associated expenses out of its own profits, including through revenue sharing payments.

 

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Harding, Loevner Funds, Inc.

 

Approval of Investment Advisory Agreement (continued)

(unaudited)

 

 

The Board considered that the Adviser assumes substantial business risk each time it sponsors a new Portfolio. The Board also noted that the Adviser provides the same high-quality services to the International Small Companies Portfolio and Research Portfolios, which have not yet achieved profitability due to their smaller level of assets.

Based on these considerations, the Board concluded that it was satisfied with the extent to which any economies of scale currently are and will be realized for the benefit of the Portfolios’ shareholders, and recognized its obligation to consider the same annually based on changing circumstances.

Other Benefits

The Board considered other benefits derived or to be derived by the Adviser from the relationship with the Portfolios as part of its consideration of continuance of the Advisory Agreements. In this regard, the Board noted that the only tangible material indirect benefit from the Adviser’s relationship with the Portfolios is from the receipt of research products and services obtained through soft dollars in connection with Portfolio brokerage transactions. The Board also considered the extent to which the Adviser and its clients, including the Portfolios, benefitted from receipt of these research products and services.

The Board also considered the benefits that the Portfolios derived from their association with the Adviser. In this regard, the Board considered the competitive nature of the mutual fund marketplace and that the Portfolios’ shareholders invested in the Portfolios because of the Fund’s relationship with the Investment Adviser.

Conclusion

Following extensive discussion, both in general session and in an executive session of the Independent Directors meeting alone with Independent Counsel, the Board determined that it had received sufficient information to take action on the proposed resolutions regarding continuance of the Advisory Agreements and that all of its questions had been addressed to its satisfaction. The Board, including a majority of the Independent Directors, concluded with respect to each Portfolio that its investment advisory fees were sufficiently supported by their review of the factors described above.

In light of all the foregoing, the Board, and separately, a majority of the Independent Directors, approved the continuance of each Advisory Agreement on behalf of the respective Portfolio(s). The Board’s approval determinations were made on the basis of each Director’s business judgment after consideration of all the information presented. The Board’s decision was based on all of the above-mentioned factors and their related conclusions, with no single factor or conclusion being determinative and with each Director not necessarily attributing the same weight to each factor.

 

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Harding, Loevner Funds, Inc.

 

Privacy Notice

(unaudited)

 

 

HARDING, LOEVNER FUNDS, INC.

PRIVACY NOTICE

The Fund collects nonpublic personal information about you from the following sources:

 

   

Information, such as your name, address, social security number, assets and income, submitted by you on applications, forms, or in other written or verbal customer communications. This information may also be provided by a consultant or intermediary acting on your behalf.

 

   

Information that results from any transaction performed by us for you.

The Fund will not disclose any nonpublic personal information about you or its former customers to anyone except as permitted or required by law.

If you decide to close your account(s) or become an inactive customer, the Fund will adhere to the privacy policies and practices as described in this notice.

The Fund restricts access to your personal and account information to only those employees who need to know that information to provide products or services to you. The Fund maintains physical, administrative and technical safeguards to protect your nonpublic personal information.

 

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Harding, Loevner Funds, Inc.

 

Directors and Principal Officers

(unaudited)

 

 

Independent Directors:

 

Name, Address and

Year of Birth                            

 

Position
with the Fund

 

Term of Office
and Length of
Time Served

 

Principal Occupation
During Past Five Years

  Number of
Portfolios in
Fund
Complex
Overseen By
Director
 

Other Directorships

Carolyn N. Ainslie

c/o Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1958

  Director   Indefinite; Director since 2014; Member of the Audit Committee since 2015 - Present and Co - Chairperson June - December, 2017 and Chairperson since 2018; Member of the Governance Committee since March 2018   Bill & Melinda Gates Foundation, Chief Financial Officer, 2018-present; Princeton University, Vice President for Finance and Treasurer, 2008 – 2018.   10   None.

Jill R. Cuniff

c/o Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1964

  Director   Indefinite; Director since 2018; Member of the Audit Committee since 2018; Member of the Governance Committee since March 2018   Edge Asset Management, President and Director, 2009 - 2016.   10   None.

R. Kelly Doherty

c/o Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1958

  Director   Indefinite; Director since 2004; Lead Independent Director since 2014; Member of the Governance Committee since March 2018   Caymen Partners (private investment vehicles), Managing Partner, 1999 – present.   10   Selective Insurance Group, Inc. (SIGI).

Charles W. Freeman, III

c/o Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1964

  Director   Indefinite; Director since 2008; Member of the Governance Committee since March 2018   U.S. Chamber of Commerce, Senior Vice President for Asia, 2018 - present; Bower Group Asia, Managing Director, China, December 2016 – 2017; Forbes-Tate, LLC, International Principal, 2014 – 2016.   10   None.

 

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Harding, Loevner Funds, Inc.

 

Directors and Principal Officers

(unaudited)

 

Independent Directors (continued):

 

Name, Address and

Year of Birth                            

 

Position

with the

Fund

 

Term of Office
and Length of
Time Served

 

Principal Occupation
During Past Five Years

  Number of
Portfolios in
Fund
Complex
Overseen By
Director
 

Other Directorships

Jason Lamin

c/o Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1974

  Director   Indefinite; Director since 2021; Member of the Audit Committee since 2021; Member of the Governance Committee beginning March 2021.   Lenox Park Solutions, Inc. (FinTech Company), Founder and Chief Executive Officer, 2009 – present.   10   None.

Eric Rakowski

c/o Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1958

  Director   Indefinite; Director since 2008; Chairman of the Governance Committee since March 2018   University of California at Berkeley School of Law, Professor, 1990 – present.   10   AMG Funds (46 portfolios); AMG Pantheon Private Equity Fund (1 portfolio); AMG Pantheon Private Equity Master Fund (1 portfolio); AMG Pantheon Subsidiary Fund, LLC (1 portfolio).

Samuel R. Karetsky*

c/o Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1945

  Director Emeritus   One year; Director Emeritus since 2021; Director 1998-2020   The Karetsky Group LLC (advisory firm), Managing Member, 2003 – present; Wetherby Asset Management, Wealth Manager, 2004 – present   None.   None.

*Mr. Karetsky retired as a voting member of the Board and was elected to the position of “Director Emeritus” with a one-year term, effective January 1, 2021. His term as Director Emeritus concludes on December 31, 2021. Directors Emeritus do not vote with the Board and do not serve on any of the committees.

 

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Harding, Loevner Funds, Inc.

 

Directors and Principal Officers

(unaudited)

 

 

Interested Directors:

 

Name, Address and

Year of Birth

 

Position

with the

Fund

 

Term of

Office and

Length of

Time Served*

 

Principal Occupation

During Past Five Years

  Number of
Portfolios
in Fund
Complex
Overseen
By Director
 

Other

Directorships

David R. Loevner**

Harding Loevner LP

Fish Creek Center

1230 Ida Dr. Ste. 312

PO Box 383

Wilson, WY 83014

1954

  Director and Chairman of the Board of Directors   Indefinite; Director and Chairman of the Board since 1996   Harding Loevner LP, Chairman and Chief Executive Officer, 1989 – present; Harding Loevner Funds, plc, Director, 2007 - present.   10   None.

Alexandra K. Lynn***

Affiliated Managers Group, Inc.

777 South Flagler Drive West Palm Beach, FL 33401

1979

  Director   Indefinite; Director since 2021.   Affiliated Managers Group, Inc., 2009– present (Chief Administrative Officer, 2018 – present)   10   None.

Christine C. Carsman****

Affiliated Managers Group, Inc.

777 South Flagler Drive

West Palm Beach, FL 33477

1952

  Director Emeritus   One year; Director Emeritus since 2021; Director 2017-2020   Affiliated Managers Group, Inc., Senior Policy Advisor, 2019 – present; Executive Vice President, Deputy General Counsel and Chief Regulatory Counsel 2017 – 2018; Senior Vice President and Deputy General Counsel 2011-2016; AMG Funds plc. Chair of the Board of Directors, 2015 – 2018; Director, 2010-2018.   None.   AMG Funds (46 portfolios); AMG Pantheon Fund (1 portfolio); AMG Pantheon Master Fund (1 portfolio); AMG Pantheon Subsidiary Fund, LLC (1 portfolio).

* Each of Mr. Loevner and Ms. Lynn is elected to serve in accordance with the Articles of Incorporation and By-Laws of the Fund until their respective successor is duly elected and qualified.

** Mr. Loevner is considered an “interested person” of the Fund as defined in 1940 Act, because he serves as Chairman of Harding Loevner LP, the Fund’s investment advisor.

*** Ms. Lynn is considered an “interested person” of the Fund as defined in the 1940 Act, as a result of her position with, and interest in securities of, AMG, a control person of Harding Loevner.

****Ms. Carsman is considered an “interested person” of the Fund as defined in the 1940 Act, as a result of her position with, and interest in securities of, AMG, a control person of Harding Loevner. Ms. Carsman retired as a voting member of the Board and was elected to the position of “Director Emeritus” with a one-year term, effective January 1, 2021. Her term as Director Emeritus concludes on December 31, 2021. Directors Emeritus do not vote with the Board and do not serve on any committees.

The Funds’ Statement of Additional Information contains additional information about the Directors and is available upon request and without charge by calling (877) 435-8105.

 

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Table of Contents

Harding, Loevner Funds, Inc.

 

Directors and Principal Officers

(unaudited)

 

 

Principal Officers of the Fund:

 

Name, Address and

Year of Birth

  

Position(s)

with

the Fund

  

Term of Office

and Length of

Time Served*        

  

Principal Occupation

During Past Five Years

Richard T. Reiter

Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1966

   President    1 year; since 2011   

Harding Loevner LP, President and Chief Operating

Officer, 1996 - present.

Tracy L. Dotolo

Foreside Management Services, LLC

10 High Street, Suite 302

Boston, MA 02110

1976

  

Chief Financial Officer and Treasurer

  

1 year; since 2019

  

Director at Foreside, Inc. 2016 – present; Vice

President – Global Fund Services at JPMorgan Chase

2009 – 2016.

Aaron J. Bellish

Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1979

  

Assistant Treasurer

  

1 year; since 2012

  

Harding Loevner LP, Chief Operating Officer, 2021 –

present; Chief Financial Officer, 2012 – 2021.

Derek A. Jewusiak

The Northern Trust Company

333 South Wabash

Chicago, IL 60604

1971

  

Assistant Treasurer

  

1 year; since 2013

  

The Northern Trust Company, Vice President, 2012 –

present.

Lisa Togneri

Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1976

  

Assistant Treasurer

  

1 year; since 2021

  

Harding Loevner LP, Chief Financial Officer, 2021 –

present; Deputy Chief Financial Officer, 2019 – 2021;

Soundlink Partners, Chief Financial Officer and Chief

Operating Officer, 2015-2019.

Ryan Bowles

Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1988

  

Assistant Treasurer

  

1 year; since 2019

  

Harding Loevner LP, Product Manager, 2010 –

present.

Lisa R. Price

Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1979

  

Assistant Secretary

  

1 year; since 2019

  

Harding Loevner LP, Counsel, 2019 – present; Oak

Hill Advisors, LP, Principal, Associate General

Counsel and Chief Compliance Officer (OHAI),

January 2019 – August 2019, Vice President,

Associate General Counsel and Chief Compliance

Officer (OHAI), 2015 – 2018.

Brian D. Simon

Harding Loevner LP

400 Crossing Boulevard

Fourth Floor

Bridgewater, NJ 08807

1962

   Chief Compliance Officer, Anti-Money Laundering Compliance Officer and Assistant Secretary   

1 year, since 2016, 2016 and 2015 respectively

  

Harding Loevner LP, General Counsel, 2014 –

present.

 

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Table of Contents

Harding, Loevner Funds, Inc.

 

Directors and Principal Officers

(unaudited)

 

Principal Officers of the Fund (continued):

 

Name, Address and

Year of Birth

  

Position(s)

with

the Fund

  

Term of Office

and Length of

Time Served*        

  

Principal Occupation

During Past Five Years

Marcia Y. Lucas

The Northern Trust Company

333 South Wabash Avenue

Chicago, IL 60604

1967

   Secretary, December 2018 - Present; Assistant Secretary, 2011-November 2018    1 year; since 2011    The Northern Trust Company, Senior Vice President, 2015 – present.

* Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

There is no family relationship among any of the Directors or officers listed above.

 

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Harding, Loevner Funds, Inc.

 

Supplemental Information

(unaudited)

 

 

Quarterly Portfolio Schedules of Investments

Each Portfolio files its complete portfolio of investments with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Portfolios’ Forms N-PORT are available on the SEC’s website at www.sec.gov. Additionally, they are available upon request by calling (877) 435-8105.

Proxy Voting Record

The Fund’s proxy voting record relating to the Portfolios’ securities during the most recent 12-month period ended June 30 is available on the Fund’s website at www.hardingloevnerfunds.com and on the SEC’s website at www.sec.gov, on Form N-PX.

Proxy Voting Policies and Procedures

The Fund’s proxy voting policies and procedures are included in Appendix B to the Fund’s Statement of Additional Information and is available without charge, upon request, by calling (877) 435-8105 or on the SEC’s website at www.sec.gov.

Additional Information

The Adviser updates Fact Sheets for the Portfolios each calendar quarter that are posted to the Fund’s website at www.hardingloevnerfunds.com. This information, along with the Adviser’s commentaries on its various strategies, is available without charge, upon request, by calling (877) 435-8105.

 

 

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Table of Contents

 

 

Client Name

Address Line 1

Address Line 2

City, State Zip

 

(877) 435-8105

www.hardingloevnerfunds.com


Table of Contents

Item 1. Reports to Stockholders (cont.).

 

(b)

Not applicable.

Item 2. Code of Ethics.

 

(a)

As of October 31, 2021, the Registrant has adopted a code of ethics that applies to the Registrant’s President/Chief Executive Officer and Treasurer/Chief Financial Officer (the “Code of Ethics”).

 

(c)

For the fiscal year ended October 31, 2021, there were no amendments to a provision of the Registrant’s Code of Ethics.

 

(d)

For the fiscal year ended October 31, 2021, there were no waivers granted from a provision of the Registrant’s Code of Ethics.

Item 3. Audit Committee Financial Expert.

As of October 31, 2021, the Registrant’s Board of Directors has determined that the following members of the Audit Committee are audit committee financial experts and independent: Carolyn N. Ainslie and Jill R. Cuniff.

Item 4. Principal Accountant Fees and Services.

(a) Audit Fees: The aggregate fees billed for each of the last two fiscal years for professional services rendered by KPMG LLP, the Registrant’s principal accountant, for the audit of the Registrant’s annual financial statements in connection with statutory and regulatory filings or engagements for those fiscal years are $249,570 in 2021 and $226,280 in 2020.

(b) Audit-Related Fees: The aggregate fees billed in each of the last two fiscal years for assurance and related services by KPMG LLP that are reasonably related to the performance of the audit of the Registrant financial statements and are not reported under paragraph (a) of this Item are None.

(c) Tax Fees: The aggregate fees billed in each of the last two fiscal years for professional services rendered by KPMG LLP for the review of domestic tax returns were $86,630 in 2021 and $76,590 in 2020.

(d) All Other Fees: The aggregate fees billed in each of the last two fiscal years for products and services provided by KPMG LLP, other than the services reported in paragraphs (a) through (c) of this Item are $0 in 2021 and $15,000 in 2020, related to research, preparation and filing of tax returns in certain foreign jurisdictions.

(e)(1) Disclose the audit committee pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.

A copy of the Audit Committee’s Pre-Approval Policies and Procedures is filed with this Form N-CSR under Item 13(c).

(e)(2) There were no amounts that were pre-approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

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Table of Contents

(f) Not applicable.

(g) Not applicable.    

(h) Not applicable.

(i) Not applicable.

(j) Not applicable.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Investments.

 

(a)

Schedule I is included as part of the report to shareholders filed under Item 1 of this report on Form N-CSR.

 

(b)

Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. Controls and Procedures.

 

(a)

The Registrant’s Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) were effective as of a date within 90 days prior to the filing date of this report, based on their evaluation of the effectiveness of the Registrant’s disclosure controls and procedures as of the evaluation date.

 

(b)

There were no significant changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

Not applicable.

 

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Table of Contents

Item 13. Exhibits.

 

(a)(1)

Exhibit 99.12.A: Incorporated by reference to Exhibit 12(a)(1) to the report filed on Form N-CSR on January 7, 2013 (Accession No. 0001193125-13-005151).

(a)(2)    Exhibit 99.CERT: Certifications pursuant to Rule 30a-2(a) of the Investment Company Act of 1940, as amended, are attached.

(a)(3)    Not applicable.

(a)(4)    Not applicable.

(b)         Exhibit 99.906: Certifications pursuant to Rule 30a-2(b) of the Investment Company Act of 1940, as amended, are attached hereto.

 

4


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Harding, Loevner Funds, Inc.

 

By   /s/ Richard T. Reiter                
  Richard T. Reiter
  President
  (Principal Executive Officer)

Date: January 5, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

By   /s/ Richard T. Reiter                
  Richard T. Reiter
  President
  (Principal Executive Officer)

Date: January 5, 2022

 

By   /s/ Tracy L. Dotolo                
  Tracy L. Dotolo
  Chief Financial Officer and Treasurer
  (Principal Financial Officer)

Date: January 5, 2022

 

5