<Page>
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 811-7739
------------------------------------------
Harding, Loevner Funds, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
50 Division Street, Somerville, NJ 08876
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
David R. Loevner, President 50 Division Street, Somerville, NJ 08876
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (877) 435-8105
-----------------
Date of fiscal year end: 10/31/2003
---------------------------
Date of reporting period: 11/01/2002-10/31/2003
---------------------------
Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
<Page>
[HARDING, LOEVNER LOGO]
HARDING, LOEVNER FUNDS, INC.
ANNUAL REPORT
OCTOBER 31, 2003
Portfolios managed by
Harding, Loevner Management, L.P.
INTERNATIONAL EQUITY PORTFOLIO
EMERGING MARKETS PORTFOLIO
GLOBAL EQUITY PORTFOLIO
P.O. Box 9130
Boston, MA 02117-9130
Telephone: 877-435-8105
Fax: 617-927-8400
<Page>
HARDING, LOEVNER FUNDS, INC.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
December 12, 2003
Dear Shareholder:
Enclosed is the Annual Report to Shareholders for the year ended
October 31, 2003, as required by regulation.
Our regular quarterly narrative discussing developments in the calendar
quarter ended December 31, 2003 will be sent to you shortly.
Sincerely,
/s/ David R. Loevner
David R. Loevner
President
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<Table>
Performance Information and Statements of Net Assets
International Equity Portfolio.......................... 1
Emerging Markets Portfolio.............................. 7
Global Equity Portfolio................................. 13
Statements of Operations.................................... 20
Statements of Changes in Net Assets......................... 21
Financial Highlights........................................ 24
Notes to Financial Statements............................... 27
Report of Independent Auditors.............................. 32
Supplemental Tax Information................................ 33
Directors and Principal Officers............................ 35
</Table>
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HYPOTHETICAL COMPARISON OF CHANGES IN VALUE OF $10,000
INVESTMENT IN HARDING, LOEVNER FUNDS, INC. -
INTERNATIONAL EQUITY PORTFOLIO AND
THE MSCI ALL COUNTRY WORLD FREE EX-US INDEX
(NET DIVIDENDS REINVESTED) AND THE
LIPPER INTERNATIONAL EQUITY FUND INDEX
<Table>
<Caption>
INTERNATIONAL MSCI ALL COUNTRY LIPPER INTERNATIONAL
EQUITY PORTFOLIO WORLD FREE EX-US INDEX EQUITY FUND INDEX
5/11/94 $10,000 $10,000 $10,000
5/31/94 $9,920 $9,852 $9,985
6/30/94 $9,750 $9,921 $9,828
7/31/94 $10,040 $10,083 $10,130
8/31/94 $10,330 $10,422 $10,481
9/30/94 $10,100 $10,164 $10,210
10/31/94 $10,330 $10,437 $10,392
11/30/94 $9,700 $9,934 $9,907
12/31/94 $9,753 $9,911 $9,775
1/31/95 $9,120 $9,461 $9,290
2/28/95 $9,311 $9,409 $9,288
3/31/95 $9,532 $9,941 $9,532
4/30/95 $9,929 $10,329 $9,883
5/31/95 $10,402 $10,283 $9,980
6/30/95 $10,392 $10,141 $10,018
7/31/95 $10,659 $10,717 $10,569
8/31/95 $10,254 $10,345 $10,390
9/30/95 $10,477 $10,522 $10,564
10/31/95 $10,394 $10,240 $10,344
11/30/95 $10,455 $10,481 $10,452
12/31/95 $10,923 $10,895 $10,755
1/31/96 $11,278 $11,045 $11,009
2/29/96 $11,379 $11,045 $11,056
3/31/96 $11,592 $11,251 $11,229
4/30/96 $11,734 $11,592 $11,595
5/31/96 $11,907 $11,418 $11,583
6/30/96 $12,211 $11,476 $11,689
7/31/96 $11,815 $11,095 $11,295
8/31/96 $11,980 $11,160 $11,442
9/30/96 $12,132 $11,437 $11,699
10/31/96 $11,994 $11,322 $11,652
11/30/96 $12,500 $11,759 $12,198
12/31/96 $12,606 $11,623 $12,307
1/31/97 $12,441 $11,410 $12,327
2/28/97 $12,317 $11,619 $12,550
3/31/97 $12,244 $11,594 $12,616
4/30/97 $12,224 $11,692 $12,671
5/31/97 $12,864 $12,414 $13,385
6/30/97 $13,309 $13,099 $14,027
7/31/97 $13,650 $13,365 $14,473
8/31/97 $12,616 $12,313 $13,431
9/30/97 $13,319 $12,979 $14,293
10/31/97 $12,193 $11,874 $13,207
11/30/97 $12,151 $11,725 $13,097
12/31/97 $12,074 $11,860 $13,201
1/31/98 $12,168 $12,215 $13,520
2/28/98 $13,102 $13,030 $14,386
3/31/98 $13,564 $13,481 $15,167
4/30/98 $13,595 $13,577 $15,400
5/31/98 $13,763 $13,331 $15,420
6/30/98 $13,532 $13,281 $15,286
7/31/98 $13,448 $13,407 $15,520
8/31/98 $11,445 $11,516 $13,287
9/30/98 $11,298 $11,273 $12,874
10/31/98 $12,189 $12,454 $13,820
11/30/98 $12,945 $13,123 $14,513
12/31/98 $13,305 $13,575 $14,870
1/31/99 $13,007 $13,561 $14,960
2/28/99 $12,709 $13,257 $14,573
3/31/99 $13,359 $13,897 $15,060
4/30/99 $14,488 $14,592 $15,762
5/31/99 $13,742 $13,907 $15,176
6/30/99 $14,775 $14,546 $15,896
7/31/99 $15,425 $14,887 $16,251
8/31/99 $15,606 $14,939 $16,379
9/30/99 $15,905 $15,040 $16,432
10/31/99 $16,512 $15,600 $17,005
11/30/99 $17,588 $16,223 $18,252
12/31/99 $19,931 $17,771 $20,495
1/31/2000 $18,955 $16,806 $19,296
2/29/2000 $19,221 $17,260 $20,569
3/31/2000 $19,388 $17,910 $20,623
4/30/2000 $18,534 $16,910 $19,315
5/31/2000 $17,681 $16,478 $18,784
6/30/2000 $18,967 $17,179 $19,654
7/31/2000 $18,434 $16,501 $19,017
8/31/2000 $18,867 $16,705 $19,339
9/30/2000 $17,647 $15,779 $18,211
10/31/2000 $16,871 $15,277 $17,592
11/30/2000 $16,284 $14,592 $16,850
12/31/2000 $16,781 $15,090 $17,478
1/31/2001 $16,841 $15,315 $17,581
2/28/2001 $15,834 $14,102 $16,347
3/31/2001 $14,502 $13,099 $15,198
4/30/2001 $15,450 $13,982 $16,122
5/31/2001 $15,042 $13,585 $15,732
6/30/2001 $14,466 $13,059 $15,288
7/31/2001 $14,154 $12,767 $14,891
8/31/2001 $13,663 $12,447 $14,591
9/30/2001 $12,187 $11,123 $13,001
10/31/2001 $12,655 $11,435 $13,353
11/30/2001 $13,279 $11,958 $13,851
12/31/2001 $13,728 $12,111 $14,098
1/31/2002 $13,175 $11,591 $13,528
2/28/2002 $13,247 $11,673 $13,718
3/31/2002 $13,897 $12,301 $14,443
4/30/2002 $13,957 $12,374 $14,544
5/31/2002 $14,174 $12,499 $14,752
6/30/2002 $13,548 $11,954 $14,170
7/31/2002 $12,248 $10,787 $12,755
8/31/2002 $12,224 $10,785 $12,766
9/30/2002 $10,913 $9,640 $11,391
10/31/2002 $11,527 $10,156 $11,982
11/30/2002 $11,948 $10,644 $12,549
12/31/2002 $11,663 $10,299 $12,147
1/31/2003 $11,059 $9,937 $11,703
2/28/2003 $10,709 $9,733 $11,356
3/31/2003 $10,588 $9,537 $11,078
4/30/2003 $11,422 $10,447 $12,175
5/31/2003 $11,893 $11,103 $12,956
6/30/2003 $12,014 $11,404 $13,262
7/31/2003 $12,497 $11,706 $13,633
8/31/2003 $12,872 $12,053 $14,027
9/30/2003 $13,029 $12,388 $14,309
10/31/2003 $13,658 $13,189 $15,162
</Table>
<Table>
<Caption>
RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2003
--------------------------------------------------------
AVERAGE ANNUAL
CUMULATIVE TOTAL RETURN TOTAL RETURN
------------------------------------- -----------------
FUND NAME LAST 12 MONTHS 5 YR INCEPTION 5 YR INCEPTION
- -----------------------------------------------------------------------------------
INTERNATIONAL EQUITY
PORTFOLIO (5/11/94) 18.49% 12.05% 36.58% 2.30% 3.34%
MSCI All Country World ex
USA Free
(Net dividend) 29.87% 5.91% 31.89% 1.15% 2.96%
Lipper International Fund
Index 26.54% 9.71% 51.62% 1.87% 4.49%
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF 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. Investment
return reflects voluntary fee waivers in effect. Absence such waivers, total
return would be reduced. The performance provided does not reflect the deduction
of taxes that a shareholder would pay on Portfolio distributions.
1
<Page>
HARDING, LOEVNER FUNDS, INC.
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INTERNATIONAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
The Portfolio rose in value by 18.49% net of fees in the financial year through
October 31, 2003. In comparison, the benchmark MSCI All Country World Free ex-US
Index rose 29.87%, its growth component by 35.44% and its value component by
24.39%. Please refer to the preceding page of the report for complete
performance information.
Adherence to our investment discipline, which emphasizes stocks of companies
featuring financial strength, proven management and the ability to grow earnings
even in difficult economic times has hampered our relative performance this
year. A year ago, there was great doubt about both the quantity and the quality
of corporate profits. In an environment of shrinking demand, earnings growth was
being squeezed between a lack of pricing power and a rise in wage costs, while
revelations of accounting fraud were leading to distrust of the reported
earnings of even the world's most admired companies. Financial scandals still
abound, but, the massive fiscal and monetary stimuli thrown at the world economy
by authorities in the US, Europe and Japan have worked their magic, and it now
appears that the world may be embarked on a rare period of synchronized growth.
As a result, risky assets have been re-priced upwards. We see this phenomenon
all over financial markets in the narrowed spread between low and high-grade
corporate bonds; in the outperformance of emerging markets and stocks of small
companies, and in the outperformance of very cyclical sectors, such as
technology and heavy industrials. We see it even within sectors in the
outperformance of high-quality companies relative to low-quality ones, when
defined, for example, by such criteria as financial leverage or return on
equity. In this environment, our emphasis on financial strength and the
durability of earnings growth has been a recipe for strongly positive absolute
returns but for poor returns relative to our benchmark.
This is not to say we have been averse to taking on risk within the concept of
our discipline. During the year we increased the Portfolio's exposure in several
sectors usually considered to offer high returns at the expense of greater risk.
In geographical terms, this is exemplified by the Portfolio's exposure to
Emerging Markets. Overall allocation to stocks in emerging countries is now very
close to our 20% self imposed limit. But this increased level of risk has,
crucially, not been achieved at the expense of the standards we demand in
individual companies. In the Financials sector, for example, we added three new
holdings; in BBVA Bancomer in Mexico, Bangkok Bank in Thailand and HDFC Bank of
India, which represent the companies with the strongest balance sheets and the
best market positions in those countries' fast-growing financials sectors.
Similarly, we raised our exposure to the Information Technology sector, through
buying new holdings in Japan in Keyence and Rohm, and in France, through buying
back a former holding, Dassault Systemes. These three IT companies have shown
that they can survive the deep downturns that characterize their sector, thanks
to their excellent management, financial strength and strongly competitive
products, in our opinion.
At the same time, we have reduced exposure to the slower growth, but less
volatile, energy sector, through partial sales of global giant BP, Imperial Oil
of Canada, and Sasol, the South African coal-to-liquids company. We made
mistakes during the year. We had reduced our exposure to German financial
institutions late last year, but had retained holdings in Deutsche Bank and
Munich Re, the reinsurance company. We were wrong to hold them in the first
quarter, and wrong to sell them when we did. We made a similar error with
Embraer, the Brazilian manufacturer of regional jet aircraft. Despite a period
of severe underperformance, we sold, out of concerns about the financial health
of the company's customer base, the airline industry. Those concerns were
justified, but as bond markets reopened to risky credits including the airlines,
a potential crisis for Embraer was averted.
As we enter the new financial year, we believe that a rosy outlook about the
strength and duration of economic growth, and about the operating environment
for non-US companies, is priced into stocks, and may well be too optimistic. We
think that the recent underperformance and consequent under valuation of
high-quality growth stocks now provides a historic opportunity for high
prospective returns, as was presented by the markets as a whole a year ago. As
ever, we rely on the companies in which we are invested to deliver the earnings
growth that we believe should generate positive long-term returns for fund
holders.
PAST PERFORMANCE IS NOT INDICATIVE OF 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. Investment
return reflects voluntary fee waivers in effect. Absence such waivers, total
return would be reduced.
Please refer to the Statement of Net Assets on the following pages for fund
holdings, and important disclosures on page 19 of this report.
2
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 97.5%
- ---------------------------
COMMON STOCKS - 95.7%
- ---------------------
AUSTRALIA - 0.9%
- --------------
Rio Tinto Ltd. (Diversified Metal Producers) 135,083 $ 3,416,986
-------------
BRAZIL - 1.4%
- -----------
Companhia Vale do Rio Doce - ADR (Metals & Mining) 122,749 4,959,060
-------------
CANADA - 4.9%
- ------------
EnCana Corp. (Oil & Gas) 244,000 8,386,280
Imperial Oil Ltd. (Integrated International Oil Producers) 217,000 8,630,090
-------------
17,016,370
-------------
CHINA - 1.2%
- -----------
Aluminum Corp. of China Ltd. (Metals & Mining) 8,108,000 4,176,314
-------------
DENMARK - 1.4%
- --------------
ISS A/S (Service Organizations) 102,513 4,889,549
-------------
FRANCE - 7.4%
- ------------
Air Liquide (Industrial Chemicals & Gases Manufacturers) 65,454 9,701,510
Carrefour SA (Miscellaneous Retailers) 103,000 5,407,345
Dassault Systemes SA (Software) 93,900 3,984,294
Schneider Electric SA (Electrical Equipment) 117,800 6,895,055
-------------
25,988,204
-------------
GERMANY - 2.7%
- --------------
Metro AG (Food & Drug Retailing) 235,000 9,610,736
-------------
HONG KONG - 1.9%
- ---------------
China Mobile HK Ltd. - ADR (Telephone Systems) 262,700 3,722,459
Yue Yuen Industrial Holdings Ltd. (Textiles & Apparel) 1,083,000 3,068,107
-------------
6,790,566
-------------
HUNGARY - 1.3%
- -------------
Gedeon Richter Rt. (Pharmaceuticals) 43,000 4,421,970
-------------
INDIA - 1.1%
- ----------
HDFC Bank Ltd. (Banks) 530,000 3,699,592
-------------
IRELAND - 1.5%
- ------------
CRH plc (Construction Materials) 289,252 5,201,872
-------------
</Table>
See Notes to Financial Statements
3
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 (CONTINUED) SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------
ISRAEL - 1.3%
- -----------
Teva Pharmaceutical Industries Ltd. - ADR (Ethical Drug
Manufacturers) 83,668 $ 4,759,873
-------------
JAPAN - 17.1%
- ------------
Asatsu-DK Inc. (Advertising Agencies) 289,500 6,912,607
Canon Inc. (Business Machines & Office Equipment) 186,000 9,000,955
Kao Corp. (Cosmetics & Personal Care) 301,000 6,187,838
Keyence Corp. (Electronic Equipment & Instruments) 17,500 3,849,093
Mitsubishi Corp. (General Diversified) 922,000 9,569,309
Nissan Motor Co., Ltd. (Automobiles) 634,000 7,104,998
Nomura Holdings Inc. (Financial Services) 341,000 5,856,261
Rohm Co., Ltd. (Electronics) 57,700 7,778,360
Yamato Transport Co., Ltd. (Transportation) 282,000 3,747,687
-------------
60,007,108
-------------
MEXICO - 3.9%
- ------------
Coca-Cola Femsa SA de CV - ADR (Beverages, Food & Tobacco)* 142,000 2,868,400
Grupo Financiero BBVA Banc (Banks)* 7,132,700 6,054,059
Wal-Mart de Mexico SA de CV - ADR (Discount Stores) 165,000 4,601,140
-------------
13,523,599
-------------
NETHERLANDS - 5.0%
- ----------------
Heineken NV (Beverages, Food & Tobacco) 261,000 9,314,764
IHC Caland NV (Shipbuilding) 194,000 8,276,768
-------------
17,591,532
-------------
RUSSIA - 0.9%
- -----------
Yukos - ADR (Oil & Gas) 67,000 3,095,400
-------------
SINGAPORE - 1.3%
- --------------
DBS Group Holdings Ltd. (Commercial Banks) 541,200 4,445,366
-------------
SOUTH AFRICA - 1.3%
- -----------------
Sasol Ltd. (Oil & Gas) 359,200 4,699,034
-------------
SOUTH KOREA - 2.1%
- ----------------
Samsung Electronics Co., Ltd. - GDR (Diversified
Electronics) 36,300 7,260,000
-------------
SPAIN - 3.2%
- -----------
Bankinter SA (Commercial Banks) 107,000 3,992,839
Santander Central Hispano SA (Banks) 753,000 7,221,741
-------------
11,214,580
-------------
SWEDEN - 3.5%
- ------------
Securitas AB, Class B (Service Organizations) 577,700 7,109,379
Skandinaviska Enskilda Banken AB, Class A (Banks) 426,000 5,133,287
-------------
12,242,666
-------------
</Table>
See Notes to Financial Statements
4
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 (CONTINUED) SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------
SWITZERLAND - 10.2%
- -----------------
Nestle SA - ADR (Diversified Food) 153,000 $ 8,421,258
Novartis AG - Registered (Pharmaceuticals) 183,800 7,005,968
Roche Holding AG - Genusschein (Pharmaceuticals) 61,100 5,056,015
Swiss Re - Registered (Insurance) 119,500 7,521,605
UBS AG - Registered (Banks) 123,166 7,563,270
-------------
35,568,116
-------------
TAIWAN - 1.5%
- ------------
Taiwan Semiconductor (Parts & Components)* 2,639,989 5,206,159
-------------
THAILAND - 1.3%
- -------------
Bangkok Bank Co., Ltd. (Banks)* 1,895,000 4,441,221
-------------
UNITED KINGDOM - 17.4%
- ---------------------
BP plc - ADR (Oil & Gas) 183,000 7,755,540
Carnival plc (Transportation) 101,000 3,487,792
Close Brothers Group plc (Diversified Financials) 420,723 5,158,260
Premier Farnell plc (Electronics) 1,375,000 5,974,431
Rio Tinto plc (Diversified Metal Producers) 205,000 4,983,492
Standard Chartered plc (Other Financial Services) 387,000 6,208,126
Unilever plc (Diversified Food) 689,000 5,840,624
Vodafone Group plc - Sponsored ADR (Telephone Systems) 452,671 9,573,992
WPP Group plc (Advertising Agencies) 1,234,000 11,783,142
-------------
60,765,399
-------------
Total Common Stocks (Cost $278,972,160) 334,991,272
-------------
PREFERRED STOCK - 1.8%
- -------------------
BERMUDA - 1.8%
- --------------
Taiwan Semi Flemings - 144A (Cost $3,905,373)* 619,931 6,112,638
-------------
TOTAL LONG TERM INVESTMENTS (COST $282,877,533) 341,103,910
-------------
<Caption>
FACE
REPURCHASE AGREEMENT - 2.4% AMOUNT
- --------------------------- --------------
Investors Bank & Trust Company Repurchase Agreement, 0.72%
due 11/03/03 in the amount of $8,413,320; issued 10/31/03
(collateralized by $8,505,688 par of FNMA #555106, 3.379%
due 06/01/26 with a market value of $8,833,533)
(Cost $8,412,815) $ 8,412,815 8,412,815
-------------
TOTAL INVESTMENTS - 99.9% (COST $291,290,348) $ 349,516,725
-------------
</Table>
See Notes to Financial Statements
5
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 (CONTINUED) VALUE (1)
- ----------------------------------------------------------------------------------------------------
OTHER ASSETS, NET OF LIABILITIES - 0.1%
- ------------------------------------------------------------
Receivable for securities sold $ 288,569
Receivable for Fund shares sold 18,583
Dividends receivable 769,528
Tax reclaim receivable 175,788
Other assets 21,979
Prepaid expenses 1,442
Payable for Fund shares redeemed (3,700)
Due to Foreign Custodian (Cost $289,562) (288,569)
Payable to Investment Advisor (175,194)
Other liabilities (305,200)
-------------
503,226
-------------
NET ASSETS - 100%
- ------------------------------------------------------------
Applicable to 30,983,098 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 350,019,951
=============
Net Asset Value, Offering and Redemption Price Per Share $ 11.30
=============
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 2003 WERE AS
FOLLOWS:
- ------------------------------------------------------------
Paid-in capital $ 360,204,760
Accumulated undistributed net investment income 2,174,828
Accumulated distributions in excess of net realized gain on
investments and foreign currency-related transactions (70,612,605)
Net unrealized appreciation on investments and on assets and
liabilities denominated in foreign currencies (Note 4) 58,252,968
-------------
$ 350,019,951
=============
</Table>
Summary of Abbreviations
144A Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified buyers.
ADR American Depository Receipt
FNMA Federal National Mortgage Association
GDR Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
6
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO -- OVERVIEW
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HYPOTHETICAL COMPARISON OF CHANGES IN VALUE OF $10,000
INVESTMENT IN HARDING, LOEVNER FUNDS, INC. -
EMERGING MARKETS PORTFOLIO AND THE MSCI
EMERGING MARKETS FREE INDEX (NET DIVIDENDS REINVESTED)
AND THE LIPPER EMERGING MARKETS FUNDS INDEX
<Table>
<Caption>
EMERGING MARKETS LIPPER EMERGING MSCI EMERGING
PORTFOLIO MARKETS FUNDS INDEX MARKETS FREE INDEX
11/9/98 $10,000 $10,000 $10,000
11/30/98 $10,280 $10,127 $10,202
12/31/98 $10,160 $10,000 $10,054
1/31/99 $9,740 $9,797 $9,892
2/28/99 $9,500 $9,713 $9,988
3/31/99 $10,490 $10,794 $11,305
4/30/99 $11,870 $12,293 $12,703
5/31/99 $11,780 $12,146 $12,629
6/30/99 $13,350 $13,510 $14,063
7/31/99 $13,180 $13,172 $13,681
8/31/99 $13,400 $13,027 $13,805
9/30/99 $13,310 $12,564 $13,339
10/31/99 $13,680 $12,943 $13,623
11/30/99 $15,090 $14,370 $14,845
12/31/99 $17,954 $16,895 $16,733
1/31/2000 $17,634 $16,699 $16,833
2/29/2000 $18,644 $17,197 $17,055
3/31/2000 $19,098 $17,248 $17,139
4/30/2000 $17,439 $15,372 $15,514
5/31/2000 $16,923 $14,554 $14,873
6/30/2000 $18,541 $15,276 $15,397
7/31/2000 $17,552 $14,653 $14,606
8/31/2000 $17,789 $14,803 $14,677
9/30/2000 $16,532 $13,388 $13,396
10/31/2000 $15,346 $12,388 $12,425
11/30/2000 $14,553 $11,268 $11,339
12/31/2000 $14,966 $11,675 $11,612
1/31/2001 $16,530 $13,028 $13,210
2/28/2001 $15,826 $12,018 $12,174
3/31/2001 $14,932 $10,872 $10,973
4/30/2001 $15,636 $11,427 $11,514
5/31/2001 $15,748 $11,742 $11,647
6/30/2001 $15,469 $11,536 $11,404
7/31/2001 $14,731 $10,821 $10,678
8/31/2001 $14,306 $10,680 $10,572
9/30/2001 $12,440 $9,156 $8,934
10/31/2001 $13,278 $9,637 $9,488
11/30/2001 $14,161 $10,592 $10,478
12/31/2001 $15,268 $11,268 $11,308
1/31/2002 $15,962 $11,712 $11,690
2/28/2002 $16,376 $11,974 $11,879
3/31/2002 $17,427 $12,630 $12,589
4/30/2002 $17,461 $12,784 $12,670
5/31/2002 $17,349 $12,667 $12,465
6/30/2002 $16,208 $11,741 $11,526
7/31/2002 $14,843 $10,864 $10,645
8/31/2002 $14,798 $10,953 $10,808
9/30/2002 $13,523 $9,854 $9,642
10/31/2002 $13,971 $10,324 $10,268
11/30/2002 $14,642 $11,019 $10,974
12/31/2002 $14,273 $10,747 $10,609
1/31/2003 $14,161 $10,685 $10,562
2/28/2003 $13,881 $10,432 $10,265
3/31/2003 $13,825 $10,097 $9,972
4/30/2003 $14,675 $11,070 $10,858
5/31/2003 $15,626 $11,865 $11,635
6/30/2003 $16,342 $12,463 $12,294
7/31/2003 $17,584 $13,033 $13,059
8/31/2003 $18,590 $13,905 $13,933
9/30/2003 $18,870 $14,214 $14,034
10/31/2003 $20,313 $15,321 $15,229
</Table>
<Table>
<Caption>
RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2003
-----------------------------------------------------
AVERAGE ANNUAL
CUMULATIVE TOTAL RETURN TOTAL RETURN
----------------------------------- ----------------
FUND NAME LAST 12 MONTHS 5 YR INCEPTION 5 YR INCEPTION
- --------------------------------------------------------------------------------
EMERGING MARKETS
PORTFOLIO (11/9/98) 45.40% N/A 103.13% N/A 15.30%
MSCI Emerging Markets
Free (Net dividend) 48.31% N/A 52.29% N/A 8.82%
Lipper Emerging Markets
Funds Index 48.40% N/A 53.21% N/A 8.95%
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF 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. Investment
return reflects voluntary fee waivers in effect. Absence such waivers, total
return would be reduced. The performance provided does not reflect the deduction
of taxes that a shareholder would pay on Portfolio distributions.
7
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO -- OVERVIEW
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
This year ended October 31, 2003 was particularly eventful for the Portfolio,
with returns of 45.40%, just 3% behind MSCI Emerging Markets Free Index.
Relative performance was affected by a rally of lower quality stocks,
particularly in the second quarter of 2003. The earnings of these companies had
been considered to be most at risk, and their stock prices recovered
disproportionately when these risks were perceived to be reducing by investors.
This type of rally does not favor our style with its criteria of high quality
growth. Please refer to the preceding page of the report for complete
performance information.
Favorable developments during the year reversed the negative climate that had
plagued global equity markets for nearly three years, and had a significant
positive impact on the emerging markets in particular. These developments
included an end to the recessions in both the US and Japan, strong rises in
major commodity prices, sustained higher oil prices, near record-low interest
rates, the passing of the SARS virus, the end of major combat in Iraq, and a
recovery in demand for IT hardware such as PCs, flat-panel displays and
color-screen cell phones, the bulk of which now are produced in Asia. The
improvement in the investment outlook has helped rebuild equity investors'
appetite for both growth and risk, lifting the value of emerging market stocks
in particular. The solid pickup in earnings of emerging market based companies
has reinforced share gains. We believe that the long-term secular arguments for
the emerging markets include the trends towards improved fiscal discipline and
inflation management. The corporate sector in many instances has de-leveraged,
cut costs and has increased its export competitiveness. After almost a
half-decade of this 'good behavior,' notably in Asia, solid export growth has
helped reduce debt and build up major foreign exchange reserves, notably in
India, China, Korea and Taiwan, and improved the reserve position in Russia.
This in turn has allowed central banks to cut interest rates without risking a
free-fall in their currencies, a dynamic that has not existed in the emerging
markets for many years. Low interest rates and renewed bank lending have fueled
strong consumer spending, a key factor driving the returns of non-export (i.e.
domestically) oriented companies in the emerging markets.
One of the most notable changes in the Portfolio over the years has been the
increase in holdings in Telecom Service stocks whose weight has been built back
from 2% up to 10%. The major change in our investment view was centered on
cellular companies in particular, where insights have come from meeting with
many operators throughout the emerging markets. We saw that the pendulum had
swung back in favor of the leading operators. Intense competition has moderated,
competitors have merged and cellular company financials have improved as
remaining players have focused more on profitability than market share growth.
Steep falls in network equipment and handset prices have enabled greater market
penetration without sacrificing profitability. We now own leading cellular
companies in some of the most highly populated, youngest and fastest-growing
countries in the world: Russia (145m), China (1bn), Indonesia (225m), India
(1bn), Thailand (60m), Mexico (100m), Brazil (80m), South Africa (45m) and
Nigeria (>100m). Penetration in these markets is still low.
Consistent with our investment discipline, our companies tend to be globally
competitive and leaders in their own home markets. As macro factors have turned
more favorable globally, we are especially excited about the prospects. As the
effects of lower domestic interest rates and renewed bank lending feed through,
corporate earnings growth can be driven by a more balanced mix of export and
domestic sales. The stage is set for renewed capital investment in housing,
autos, and infrastructure that has long been defined by a price of money that
had been prohibitively high. This is already starting to stimulate a virtuous
circle of investment and growth that may be sustained for many years.
PAST PERFORMANCE IS NOT INDICATIVE OF 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. Investment
return reflects voluntary fee waivers in effect. Absence such waivers, total
return would be reduced.
Please refer to the Statement of Net Assets on the following pages for fund
holdings, and important disclosures on page 19 of this report.
8
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 97.0%
- ---------------------------
COMMON STOCKS - 92.8%
- ---------------------
BRAZIL - 6.1%
- -----------
Aracruz Celulose SA (Forest Products & Paper) 18,833 $ 529,207
Companhia de Bebidas das Americas - ADR (Beverages, Food &
Tobacco) 17,000 360,400
Companhia Vale do Rio Doce - ADR (Metals & Mining) 16,000 646,400
Compania Brasileira de Distribuicao Grupo Pao de Acurcar
(National & Regional Food Chains) 13,900 279,807
-------------
1,815,814
-------------
CHILE - 2.6%
- ----------
Banco Santander - ADR (Banks) 18,500 439,560
Sociedad Quimica y Minera de Chile SA - ADR (Chemicals) 7,800 325,650
-------------
765,210
-------------
CHINA - 2.3%
- -----------
Aluminum Corp. of China Ltd. (Metals & Mining) 1,300,000 669,611
-------------
ESTONIA - 1.1%
- ------------
Hansabank Ltd. (Banks) 15,000 341,601
-------------
HONG KONG - 5.9%
- ---------------
China Mobile HK Ltd. - ADR (Telephone Systems) 21,000 297,570
CNOOC Ltd. (Oil & Gas) 283,000 533,880
Denway Motors Ltd. (Automobiles) 840,000 692,275
Yue Yuen Industrial Holdings Ltd. (Textiles & Apparel) 75,000 212,473
-------------
1,736,198
-------------
HUNGARY - 2.5%
- -------------
Gedeon Richter Rt. (Pharmaceuticals) 7,100 730,139
-------------
INDIA - 8.4%
- ----------
Bajaj Auto Ltd. (Automobiles) 28,000 565,468
Bharti Tele-Ventures Ltd. (Telephone Systems)* 262,000 522,323
Housing Development Finance Corp., Ltd. (Other Financial
Services) 48,000 550,644
Reliance Industries - 144A (Chemicals) 35,500 848,450
-------------
2,486,885
-------------
INDONESIA - 2.6%
- --------------
PT Telekomunikasi Indonesia - ADR (Telecommunications) 27,000 383,400
PT Unilever Indonesia Tbk (Cosmetics & Personal Care) 1,050,000 398,546
-------------
781,946
-------------
ISRAEL - 3.3%
- -----------
Taro Pharmaceutical Industries Ltd. (Pharmaceuticals)* 8,500 546,125
</Table>
See Notes to Financial Statements
9
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
ISRAEL (CONTINUED)
Teva Pharmaceutical Industries Ltd. - ADR (Ethical Drug
Manufacturers) 7,600 $ 432,364
-------------
978,489
-------------
MALAYSIA - 1.2%
- -------------
Resorts World Berhad (Entertainment & Leisure) 125,000 361,842
-------------
MEXICO - 7.0%
- ------------
America Movil SA de CV Series L - ADR (Telephone Systems) 25,200 599,760
Consorcio ARA SA de CV Series * (Real Estate)* 173,000 471,321
Grupo Financiero BBVA Banc (Banks)* 546,600 463,941
Wal-Mart de Mexico SA de CV - ADR (Discount Stores) 19,400 540,983
-------------
2,076,005
-------------
POLAND - 1.4%
- ------------
Grupa Kety SA (Metals & Mining) 13,800 407,894
-------------
RUSSIA - 5.5%
- -----------
Sberbank of Russia (Banks) 1,525 383,537
VimpelCom - Sponsored ADR (Telephone Systems)* 10,800 703,080
Yukos - ADR (Oil & Gas) 11,653 538,369
-------------
1,624,986
-------------
SOUTH AFRICA - 10.0%
- ------------------
Bidvest Group Ltd. (Industrial Conglomerates) 56,000 344,772
Impala Platinum Holdings Ltd. (Metals & Mining) 9,300 854,467
MTN Group Ltd. (Telephone Systems)* 125,000 447,788
Sasol Ltd. (Oil & Gas) 37,400 489,265
Standard Bank Investment Corp., Ltd. (Banks) 78,500 380,375
Steinhoff International Holdings Ltd. (Home Construction,
Furnishings & Appliances) 435,000 440,993
-------------
2,957,660
-------------
SOUTH KOREA - 14.9%
- -----------------
Hite Brewery Co., Ltd. (Brewers) 7,600 577,947
Hyundai Mobis (Automobiles) 13,000 501,986
Hyundai Motor Co., Ltd. (Automobiles) 13,500 450,000
LG Electronics Inc. (Electronics) 6,000 310,773
Pohang Iron and Steel Co., Ltd. (Steel Producers -
Integrated) 2,960 345,146
S1 Corp. (Securities Brokerage) 16,600 347,850
Samsung Electronics Co., Ltd. - GDR (Diversified
Electronics) 4,350 870,000
Samsung SDI Co., Ltd. (Diversified Electronics) 7,100 731,897
Shinsegae Co., Ltd. (Retailers) 1,450 290,980
-------------
4,426,579
-------------
TAIWAN - 10.9%
- -------------
Advantech Co., Ltd. (Computers & Information) 191,508 287,473
Compal Electronics Inc. (Computers & Peripherals) 264,500 400,935
Delta Electronics (Electrical Equipment) 302,500 386,416
Premier Image Technology (Electronic Equipment &
Instruments) 236,500 389,816
</Table>
See Notes to Financial Statements
10
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
TAIWAN (CONTINUED)
Quanta Computer Inc. (Computers & Peripherals) 185,655 $ 505,462
Synnex Technology International Corp. - GDR (Systems &
Subsystems) 68,387 408,270
Taiwan Semiconductor (Parts & Components)* 207,374 408,949
Tong Yang Industry Co., Ltd. (Automobiles) 300,000 454,746
-------------
3,242,067
-------------
THAILAND - 2.8%
- -------------
Advanced Information Service plc (Telecommunications) 275,000 427,372
Siam Cement Public Co., Ltd. (Cement Producers) 72,000 407,871
-------------
835,243
-------------
TURKEY - 1.1%
- ------------
Anadolu Efes Biracilik ve Malt Sanayii AS (Beverages, Food &
Tobacco) 27,000,000 331,355
-------------
UNITED KINGDOM - 3.2%
- --------------------
Anglo American plc - ADR (Metals & Mining) 46,927 959,188
-------------
Total Common Stocks (Cost $21,495,502) 27,528,712
-------------
PREFERRED STOCK - 4.2%
- -------------------
BERMUDA - 0.9%
- --------------
Taiwan Semi Flemings - 144A (Financial Services)* 24,818 244,710
-------------
BRAZIL - 1.3%
- -----------
Banco Itau SA - ADR (Commercial Banks) 9,596 391,997
-------------
SOUTH KOREA - 2.0%
- ----------------
Samsung Electronics Co., Ltd. - GDR (Diversified
Electronics)* 6,000 594,000
-------------
Total Preferred Stock (Cost $864,066) 1,230,707
-------------
TOTAL LONG TERM INVESTMENTS (COST $22,359,568) 28,759,419
-------------
<Caption>
FACE
REPURCHASE AGREEMENT - 2.0% AMOUNT
- --------------------------- -------------
Investors Bank & Trust Company Repurchase Agreement, 0.72%
due 11/03/03 in the amount of $589,732; issued 10/31/03
(collateralized by $598,759 par of FNMA #580300, 5.865% due
06/01/31 with a market value of $619,182) (Cost $589,697) $ 589,697 589,697
-------------
TOTAL INVESTMENTS - 99.0% (COST $22,949,265) $ 29,349,116
-------------
</Table>
See Notes to Financial Statements
11
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 (CONTINUED) VALUE (1)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS, NET OF LIABILITIES - 1.0%
- ------------------------------------------------------------
Receivable for Fund shares sold $ 1,314
Dividends receivable 54,717
Tax reclaim receivable 2,092
Domestic Cash 253,007
Foreign Currency (Cost $45,128) 45,136
Other assets 13
Prepaid expenses 68
Payable to Investment Advisor (22,731)
Other liabilities (25,932)
-------------
307,684
-------------
NET ASSETS - 100%
- ------------------------------------------------------------
Applicable to 1,632,803 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 29,656,800
=============
Net Asset Value, Offering and Redemption Price Per Share $ 18.16
=============
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 2003 WERE AS
FOLLOWS:
- ------------------------------------------------------------
Paid-in capital $ 24,228,573
Accumulated undistributed net investment income 64,484
Accumulated distributions in excess of net realized gain on
investments and foreign currency-related transactions (1,036,116)
Net unrealized appreciation on investments and on assets and
liabilities denominated in foreign currencies (Note 4) 6,399,859
-------------
$ 29,656,800
=============
</Table>
Summary of Abbreviations
144A Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified buyers.
ADR American Depository Receipt
FNMA Federal National Mortgage Association
GDR Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
12
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HYPOTHETICAL COMPARISON OF CHANGES IN VALUE OF $10,000
INVESTMENT IN HARDING, LOEVNER FUNDS, INC. -
GLOBAL EQUITY PORTFOLIO AND THE MSCI
ALL COUNTRY WORLD FREE INDEX (NET DIVIDENDS
REINVESTED) AND THE LIPPER GLOBAL EQUITY FUND INDEX
<Table>
<Caption>
GLOBAL MSCI ALL COUNTRY WORLD LIPPER GLOBAL
EQUITY PORTFOLIO FREE INDEX EQUITY FUND INDEX
12/1/96 $10,000 $10,000 $10,000
12/31/96 $9,990 $9,855 $10,016
1/31/97 $10,144 $10,021 $10,240
2/28/97 $10,058 $10,157 $10,302
3/31/97 $10,030 $9,954 $10,178
4/30/97 $10,161 $10,274 $10,311
5/31/97 $10,685 $10,887 $10,938
6/30/97 $11,134 $11,444 $11,407
7/31/97 $11,641 $11,961 $11,977
8/31/97 $10,918 $11,122 $11,313
9/30/97 $11,385 $11,715 $12,018
10/31/97 $10,645 $11,018 $11,262
11/30/97 $10,793 $11,186 $11,285
12/31/97 $10,923 $11,333 $11,419
1/31/98 $10,891 $11,582 $11,547
2/28/98 $11,617 $12,375 $12,326
3/31/98 $12,106 $12,903 $12,946
4/30/98 $12,054 $13,024 $13,135
5/31/98 $11,958 $12,777 $13,013
6/30/98 $11,726 $13,007 $13,058
7/31/98 $11,289 $13,011 $13,064
8/31/98 $9,542 $11,188 $11,161
9/30/98 $9,651 $11,411 $11,167
10/31/98 $10,383 $12,453 $11,907
11/30/98 $10,846 $13,209 $12,562
12/31/98 $11,142 $13,822 $13,084
1/31/99 $11,045 $14,105 $13,358
2/28/99 $10,756 $13,750 $12,972
3/31/99 $11,251 $14,369 $13,418
4/30/99 $12,138 $14,990 $14,027
5/31/99 $11,688 $14,460 $13,614
6/30/99 $12,388 $15,180 $14,300
7/31/99 $12,504 $15,118 $14,339
8/31/99 $12,575 $15,100 $14,324
9/30/99 $12,240 $14,937 $14,199
10/31/99 $12,857 $15,693 $14,752
11/30/99 $13,705 $16,181 $15,743
12/31/99 $15,279 $17,529 $17,492
1/31/2000 $15,195 $16,583 $16,808
2/29/2000 $15,540 $16,640 $17,847
3/31/2000 $16,125 $17,734 $18,291
4/30/2000 $15,766 $16,938 $17,379
5/31/2000 $15,371 $16,499 $16,862
6/30/2000 $16,175 $17,058 $17,530
7/31/2000 $15,836 $16,557 $17,174
8/31/2000 $16,576 $17,072 $17,872
9/30/2000 $15,448 $16,134 $16,921
10/31/2000 $15,378 $15,818 $16,508
11/30/2000 $14,588 $14,838 $15,546
12/31/2000 $15,365 $15,086 $16,001
1/31/2001 $15,397 $15,465 $16,267
2/28/2001 $14,326 $14,161 $15,074
3/31/2001 $13,200 $13,202 $14,027
4/30/2001 $14,287 $14,158 $14,987
5/31/2001 $14,105 $13,991 $14,896
6/30/2001 $13,712 $13,559 $14,477
7/31/2001 $13,491 $13,342 $14,118
8/31/2001 $12,822 $12,724 $13,558
9/30/2001 $11,577 $11,559 $12,292
10/31/2001 $11,877 $11,803 $12,598
11/30/2001 $12,609 $12,525 $13,284
12/31/2001 $12,990 $12,640 $13,477
1/31/2002 $12,658 $12,291 $13,069
2/28/2002 $12,484 $12,198 $12,991
3/31/2002 $12,880 $12,744 $13,607
4/30/2002 $12,508 $12,337 $13,277
5/31/2002 $12,500 $12,347 $13,307
6/30/2002 $11,765 $11,588 $12,534
7/31/2002 $10,824 $10,614 $11,426
8/31/2002 $10,832 $10,637 $11,479
9/30/2002 $9,741 $9,467 $10,338
10/31/2002 $10,500 $10,162 $10,928
11/30/2002 $11,045 $10,714 $11,462
12/31/2002 $10,527 $10,200 $10,962
1/31/2003 $10,258 $9,900 $10,611
2/28/2003 $10,028 $9,722 $10,350
3/31/2003 $9,932 $9,681 $10,235
4/30/2003 $10,765 $10,538 $11,113
5/31/2003 $11,431 $11,144 $11,797
6/30/2003 $11,637 $11,353 $12,024
7/31/2003 $12,057 $11,601 $12,278
8/31/2003 $12,501 $11,873 $12,603
9/30/2003 $12,382 $11,945 $12,672
10/31/2003 $13,040 $12,667 $13,401
</Table>
<Table>
<Caption>
RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2003
--------------------------------------------------------
AVERAGE ANNUAL
CUMULATIVE TOTAL RETURN TOTAL RETURN
------------------------------------- -----------------
FUND NAME LAST 12 MONTHS 5 YR INCEPTION 5 YR INCEPTION
- -----------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
(12/1/96) 24.19% 25.58% 30.40% 4.66% 3.91%
MSCI All Country World
Free (Net dividend) 24.65% 1.72% 26.67% 0.34% 3.48%
Lipper Global Fund Index 22.63% 12.55% 34.01% 2.39% 4.32%
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF 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. Investment
return reflects voluntary fee waivers in effect. Absence such waivers, total
return would be reduced. The performance provided does not reflect the deduction
of taxes that a shareholder would pay on Portfolio distributions.
13
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
The Portfolio returned 24.19% net of fees in the financial year through
October 31, 2003. In comparison, the benchmark MSCI All Country World Free Index
rose 24.65%. Please refer to the preceding page for complete performance
information.
We began the fiscal year cautiously hopeful that, in spite of the uncertain
outlook, the stocks of strong companies were set to perform well from deeply
depressed prices, given the large amounts of fiscal and monetary stimulus being
applied by government authorities around the world. The winter months and the
lead-up to the Iraqi war neither rewarded nor dashed our optimism, but the
global stock market rally that ensued as the war was set to begin has been as
strong as we could have hoped for. Recent weeks and months have offered the kind
of evidence of economic and corporate profit revival globally that higher stock
prices have begun to discount--in contrast to the weak and fluctuating data that
characterized the fall and winter.
One dominant aspect of this market rally has been that investors have embraced
risk with a vengeance, as they were--for the time being--untroubled by fears of
recession and financial failure on the one hand, or higher interest rates on the
other. We thus faced a market where stocks of lower-quality companies, whose
prospects are much improved by an end to the harsh economic environment, have
outperformed those of companies able to survive the worst of conditions. The
smallest companies by market capitalization outperformed the largest, the least
profitable companies outperformed the most profitable and, within the US by way
of example, stocks priced below $5 per share (deemed too speculative by the Fed
to allow use as margin collateral) returned more than twice what the S&P 500
returned.
In our view, managers have had to take on large risks to match or beat the
market indices in this rally, given the embrace of risk that has characterized
the market rise. Given our longstanding preference for companies with high
financial quality, growing profits, and managements who are working primarily
for shareholders, we are pleased that the Portfolio has done as well as it has
in such an adverse environment for our style. The fact is, however, that we have
embraced a number of vectors of risk in the portfolio, without sacrificing the
core principles of our investment philosophy. We have taken risks with our
geographic exposure, where we have been underweight the US market, overweight in
emerging markets, and more recently have built holdings to become overweight the
Japanese market. We also have taken risks with sector weightings, overweighting
technology holdings and basic materials, while underweighting health care and
financials. Within sectors, we have preferred more cyclical companies, such as
semiconductor companies (we've owned six) over software companies, biotechnology
(e.g., Genentech) over traditional pharmaceuticals, or wholesale banks such as
JPMorgan and Deutsche over retail banks.
We believe that the policy stimulus engineered by the authorities, along with
the rapid growth from Asia and particularly China, will continue to foster
economic growth. The Portfolio has been, and remains, appropriately positioned
to benefit from the improving environment, but the sharp rise in prices of the
most cyclical and the most speculative shares leads us to be increasingly wary
of just how much of the anticipated recovery has been already discounted. We are
unlikely to add further to the cyclical risk in the portfolio. On the contrary,
we are more likely to be reducing some of our geographic and cyclical risks if
current risk-seeking investor behavior continues apace.
PAST PERFORMANCE IS NOT INDICATIVE OF 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. Investment
return reflects voluntary fee waivers in effect. Absence such waivers, total
return would be reduced.
Please refer to the Statement of Net Assets on the following pages for fund
holdings, and important disclosures on page 19 of this report.
14
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 97.9%
- ---------------------------
COMMON STOCKS - 95.6%
- ---------------------
AUSTRALIA - 2.4%
- --------------
Rio Tinto Ltd. (Diversified Metal Producers) 25,300 $ 639,975
-------------
BRAZIL - 1.2%
- -----------
Companhia Vale do Rio Doce - ADR (Metals & Mining) 8,100 327,240
-------------
CANADA - 2.2%
- ------------
EnCana Corp. (Oil & Gas) 16,700 573,979
-------------
FRANCE - 8.6%
- ------------
Air Liquide (Industrial Chemicals & Gases Manufacturers) 3,566 528,548
Dassault Systemes SA (Software) 16,700 708,602
L'Oreal SA (Cosmetics & Personal Care) 7,020 519,024
Schlumberger Ltd. (Exploration, Drilling Service &
Equipment) 5,600 263,032
Television Francaise (Media) 8,900 266,933
-------------
2,286,139
-------------
GERMANY - 5.8%
- --------------
Bayerische Motoren Werke AG (Automobiles) 6,500 260,313
Deutsche Bank AG (Commercial Banks) 9,490 625,963
Muenchener Rueckversicherungs AG - Registered (Insurance) 5,400 644,009
-------------
1,530,285
-------------
HONG KONG - 1.5%
- ---------------
Denway Motors Ltd. (Automobiles) 470,000 387,344
-------------
JAPAN - 15.1%
- ------------
Canon Inc. (Business Machines & Office Equipment) 12,000 580,707
Fanuc Ltd. (Machinery) 4,450 267,563
Hirose Electronics Co., Ltd. (Electrical Equipment) 3,200 393,251
Keyence Corp. (Electronic Equipment & Instruments) 2,700 593,860
Mitsubishi Corp. (General Diversified) 88,600 919,567
Nomura Holdings Inc. (Financial Services) 22,000 377,823
Rohm Co., Ltd. (Electronics) 4,500 606,631
Sharp Corp. (Electronics) 17,000 267,676
-------------
4,007,078
-------------
MEXICO - 2.3%
- ------------
Grupo Financiero BBVA Banc (Banks)* 285,100 241,986
Wal-Mart de Mexico SA de CV - ADR (Discount Stores) 13,600 379,245
-------------
621,231
-------------
</Table>
See Notes to Financial Statements
15
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 (CONTINUED) SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------
NETHERLANDS - 2.2%
- ----------------
Heineken NV (Beverages, Food & Tobacco) 11,600 $ 413,989
Qiagen NV (Health Care Equipment & Supplies)* 15,610 182,918
-------------
596,907
-------------
RUSSIA - 1.0%
- -----------
Yukos - ADR (Oil & Gas) 5,500 254,100
-------------
SOUTH AFRICA - 1.4%
- -----------------
Sasol Ltd. (Oil & Gas) 28,040 366,818
-------------
SOUTH KOREA - 2.7%
- ----------------
Samsung Electronics Co., Ltd. - GDR (Diversified
Electronics) 3,600 720,000
-------------
SWITZERLAND - 2.5%
- ----------------
Nestle SA - ADR (Diversified Food) 5,040 277,406
Novartis AG - Registered (Pharmaceuticals) 9,958 379,573
-------------
656,979
-------------
TAIWAN - 0.8%
- ------------
Taiwan Semiconductor (Parts & Components)* 114,345 225,493
-------------
THAILAND - 1.3%
- -------------
Bangkok Bank Co., Ltd. (Banks)* 152,800 358,110
-------------
UNITED KINGDOM - 7.4%
- --------------------
Pearson plc (Miscellaneous Printing & Publishing) 47,600 490,384
Standard Chartered plc (Other Financial Services) 18,300 293,563
Vodafone Group plc - Sponsored ADR (Telephone Systems) 37,600 795,240
WPP Group plc (Advertising Agencies) 41,500 396,273
-------------
1,975,460
-------------
UNITED STATES - 37.2%
- ------------------
Abbott Laboratories (Pharmaceuticals) 8,200 349,484
Air Products & Chemicals Inc. (Industrial Chemicals & Gases
Manufacturers) 5,900 267,919
Allied Capital Corp. (Commercial Finance Companies) 10,371 257,719
American International Group (Insurance Companies) 9,700 590,051
Analog Devices (Semiconductor Equipment & Products)* 13,840 613,527
BEA Systems Inc. (Computer Software & Processing)* 19,100 265,490
Berkshire Hathaway Inc., Class A (Insurance Companies)* 7 544,670
Caterpillar Inc. (Heavy Machinery) 9,450 692,496
Colgate-Palmolive Co. (Cosmetics & Toiletries) 11,150 593,068
Comcast Corp., Class A (Media)* 11,300 383,296
Emerson Electric Co. (Electrical Equipment) 7,400 419,950
Estee Lauder Companies Inc., Class A (Cosmetics & Personal
Care) 7,600 284,164
Exxon Mobil Corp. (Integrated International Oil Producers) 7,000 256,060
J.P. Morgan Chase & Co. (Banks) 13,760 493,984
</Table>
See Notes to Financial Statements
16
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 (CONTINUED) SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------
UNITED STATES (CONTINUED)
Johnson & Johnson Inc. (Health Care Providers & Services) 4,100 $ 206,353
Kinder Morgan Inc. (Oil & Gas) 10,670 571,378
Medco Health Solutions, Inc. (Insurance)* 1,189 39,475
Merck & Co., Inc. (Pharmaceuticals) 9,860 436,305
Praxair Inc. (Chemicals) 3,900 271,362
Qualcomm Inc. (Communications) 9,300 441,750
The Coca-Cola Company (Beverages, Food & Tobacco) 7,880 365,632
TJX Companies Inc. (Retailers) 34,700 728,353
Viacom Inc., Class B (Media) 14,050 560,173
Wrigley (WM.) Jr. Co. (Confectionary Goods) 4,270 240,828
-------------
9,873,487
-------------
Total Common Stocks (Cost $20,508,226) 25,400,625
-------------
PREFERRED STOCK - 2.1%
- -------------------
BERMUDA - 2.1%
- --------------
Taiwan Semi Flemings - 144A (Cost $458,008)* 55,239 544,667
-------------
RIGHTS - 0.2%
- -----------
GERMANY - 0.2%
- --------------
Muenchener Rueckversicherungs AG (Cost $0)* 5,400 44,633
-------------
TOTAL LONG TERM INVESTMENTS (COST $20,966,234) 25,989,925
-------------
<Caption>
FACE
REPURCHASE AGREEMENT - 2.2% AMOUNT
- --------------------------- --------------
Investors Bank & Trust Company Repurchase Agreement, 0.72%
due 11/03/03 in the amount of $594,382; issued 10/31/03
(collateralized by $615,529 par of FNMA CMT FLTR FNR G92-5
FA , 4.045% due 01/25/22 with a market value of $624,064)
(Cost $594,347) $ 594,347 594,347
-------------
TOTAL INVESTMENTS - 100.1% (COST $21,560,581) $ 26,584,272
-------------
</Table>
See Notes to Financial Statements
17
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2003 (CONTINUED) VALUE (1)
- ----------------------------------------------------------------------------------------------------
LIABILITIES, NET OF OTHER ASSETS - (0.1)%
- ------------------------------------------------------------
Receivable for securities sold $ 165,852
Receivable for Fund shares sold 1,260
Dividends receivable 52,613
Tax reclaim receivable 8,713
Foreign Currency (Cost $20,938) 19,724
Other assets 13
Prepaid expenses 153
Payable for securities purchased (185,577)
Due to Custodian (20,938)
Payable to Investment Advisor (21,520)
Other liabilities (37,013)
-------------
(16,720)
-------------
NET ASSETS - 100%
- ------------------------------------------------------------
Applicable to 1,615,184 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 26,567,552
=============
Net Asset Value, Offering and Redemption Price Per Share $ 16.45
=============
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 2003 WERE AS
FOLLOWS:
- ------------------------------------------------------------
Paid-in capital $ 24,949,772
Accumulated undistributed net investment income 104,983
Accumulated distributions in excess of net realized gain on
investments and foreign currency-related transactions (3,510,742)
Net unrealized appreciation on investments and on assets and
liabilities denominated in foreign currencies (Note 4) 5,023,539
-------------
$ 26,567,552
=============
</Table>
Summary of Abbreviations
144A Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified buyers.
ADR American Depository Receipt
FNMA Federal National Mortgage Association
FNR Federal National Mortgage Association
GDR Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
18
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT INDICATIVE OF 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. Investment
return reflects voluntary fee waivers in effect. Absence such waivers, total
return would be reduced.
THE FUNDS INVEST IN FOREIGN SECURITIES, WHICH MAY 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 THAT OF THE U.S. OR OTHER
MORE ESTABLISHED FOREIGN MARKETS. ECONOMIC OR POLITICAL INSTABILITY MAY CAUSE
LARGER PRICE CHANGES IN EMERGING MARKET SECURITIES THAN OTHER FOREIGN
SECURITIES. INVESTMENTS BY THE EMERGING MARKETS PORTFOLIO IN LOWER-RATED AND
NON-RATED SECURITIES PRESENTS A GREATER RISK OF LOSS TO PRINCIPAL AND INTEREST
THAN HIGHER-RATED SECURITIES.
MSCI All Country World Free ex-US Index includes all developed and emerging
markets in the MSCI universe of 48 countries, excluding the US, with Free
versions of countries where they exist. Net dividends reinvested.
Lipper International Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.
MSCI All Country World Free ex-US Index includes all developed and emerging
markets in the MSCI universe of 48 countries, excluding the US, with Free
versions of countries where they exist. Net dividends reinvested. You cannot
invest directly in this Index.
Lipper Global Fund Index, an unmanaged index published by Lipper Analytical
Services Inc., includes 30 funds that are generally similar to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives. This fund invests at least 25% of its total assets in securities
traded outside the US and may own US securities.
The S&P 500 Index is an unmanaged index commonly used to measure performance of
U.S. stocks.
MSCI Emerging Markets Free Index includes all emerging markets in the MSCI
universe of 26 countries, with Free versions of countries where they exist. Net
dividends reinvested.
Lipper Emerging Market Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives. You cannot invest directly in this Index.
You cannot invest directly in an Index.
Small capitalization companies tend to have limited liquidity and greater price
volatility than large capitalization companies.
References to specific securities, portfolio holdings and sector weightings are
subject to change at any time and are not recommendations to buy or sell any
security.
For use only when preceded or accompanied by a prospectus. Read the prospectus
carefully before you invest or send money.
The Portfolios are distributed by Quasar Distributors, LLC. (Date of first use:
12/03)
19
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 2003
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERNATIONAL EMERGING GLOBAL
EQUITY MARKETS EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------- -----------
INVESTMENT INCOME
Interest $ 15,433 $ 1,157 $ 3,263
Dividends (Net of foreign withholding
taxes of $890,424, $41,012 and
$30,703, respectively) 6,651,088 382,865 428,503
------------ ---------- -----------
Total investment income 6,666,521 384,022 431,766
------------ ---------- -----------
EXPENSES
Investment advisory fees (Note 3) 2,380,668 191,415 221,606
Administration fees (Note 3) 337,971 18,751 28,879
Custodian fees 267,090 45,072 27,249
Directors' fees and expenses (Note 3) 59,446 2,131 4,156
Shareholder record keeping fees 90,372 11,664 6,055
Printing and postage fees 1,433 203 499
State registration filing fees 18,536 5,607 5,501
Professional fees 141,393 3,947 7,982
Other fees and expenses 54,345 1,382 1,551
------------ ---------- -----------
Total Expenses 3,351,254 280,172 303,478
Waiver of investment advisory fee (Note
3) (176,908) (12,201) (26,488)
------------ ---------- -----------
Net expenses 3,174,346 267,971 276,990
------------ ---------- -----------
Net investment income 3,492,175 116,051 154,776
------------ ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
(NOTE 4)
Net realized gain (loss) --
Investment transactions (net of
foreign tax expense $145,179,
$23,221 and $10,218, respectively) (34,349,991) (260,677) (1,416,212)
Foreign currency transactions (958,713) (28,426) (34,866)
------------ ---------- -----------
Net realized loss (35,308,704) (289,103) (1,451,078)
------------ ---------- -----------
Change in unrealized appreciation
(depreciation) --
Investments 87,917,853 6,913,422 6,526,293
Translation of assets and liabilities
denominated in foreign currency 27,848 2,687 (1,375)
------------ ---------- -----------
Net change in unrealized appreciation 87,945,701 6,916,109 6,524,918
------------ ---------- -----------
Net realized and unrealized gain 52,636,997 6,627,006 5,073,840
------------ ---------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 56,129,172 $6,743,057 $ 5,228,616
============ ========== ===========
</Table>
See Notes to Financial Statements
20
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERNATIONAL EQUITY PORTFOLIO
------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
2003 2002
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 3,492,175 $ 2,099,876
Net realized loss on investments and
foreign currency transactions (35,308,704) (16,143,044)
Net change in unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities denominated in foreign
currency 87,945,701 (10,865,564)
------------ ------------
Net increase (decrease) in net
assets resulting from operations 56,129,172 (24,908,732)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,406,053) (936,591)
------------ ------------
Total distributions to shareholders (1,406,053) (936,591)
------------ ------------
TRANSACTIONS IN SHARES OF COMMON STOCK
Proceeds from sale of shares 46,271,780 106,248,969
Net Asset Value of shares issued to
shareholders in payment of
distributions declared 1,167,410 766,666
Cost of shares redeemed (41,142,391) (75,890,936)
------------ ------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 6,296,799 31,124,699
------------ ------------
NET INCREASE IN NET ASSETS 61,019,918 5,279,376
NET ASSETS
At beginning of year 289,000,033 283,720,657
------------ ------------
At end of year $350,019,951 $289,000,033
============ ============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME INCLUDED IN NET ASSETS $ 2,174,828 $ 1,157,682
============ ============
</Table>
See Notes to Financial Statements
21
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
EMERGING MARKETS PORTFOLIO
--------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 116,051 $ 13,598
Net realized loss on investments and
foreign currency transactions (289,103) (645,506)
Net change in unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities denominated in foreign
currency 6,916,109 (447,669)
----------- -----------
Net increase (decrease) in net
assets resulting from operations 6,743,057 (1,079,577)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (2,415)
----------- -----------
Total distributions to shareholders - (2,415)
----------- -----------
TRANSACTIONS IN SHARES OF COMMON STOCK
Proceeds from sale of shares 14,391,098 8,950,366
Net Asset Value of shares issued to
shareholders in payment of
distributions declared - 1,910
Cost of shares redeemed (1,593,501) (485,560)
----------- -----------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 12,797,597 8,466,716
----------- -----------
NET INCREASE IN NET ASSETS 19,540,654 7,384,724
NET ASSETS
At beginning of year 10,116,146 2,731,422
----------- -----------
At end of year $29,656,800 $10,116,146
=========== ===========
ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME INCLUDED IN NET ASSETS $ 64,484 $ -
=========== ===========
</Table>
See Notes to Financial Statements
22
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
GLOBAL EQUITY PORTFOLIO
-------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
2003 2002
------------ -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 154,776 $ 75,886
Net realized loss on investments and foreign
currency transactions (1,451,078) (2,041,717)
Net change in unrealized appreciation
(depreciation) on investments and translation
of assets and liabilities denominated in
foreign currency 6,524,918 (671,898)
----------- -----------
Net increase (decrease) in net assets
resulting from operations 5,228,616 (2,637,729)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (50,332) (5,298)
Net realized gain from investments and foreign
currency-related transactions - (72,575)
----------- -----------
Total distributions to shareholders (50,332) (77,873)
----------- -----------
TRANSACTIONS IN SHARES OF COMMON STOCK
Proceeds from sale of shares 3,911,357 7,912,380
Net Asset Value of shares issued to shareholders
in payment of distributions declared 30,865 74,154
Cost of shares redeemed (2,284,852) (4,063,131)
----------- -----------
NET INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS 1,657,370 3,923,403
----------- -----------
NET INCREASE IN NET ASSETS 6,835,654 1,207,801
NET ASSETS
At beginning of year 19,731,898 18,524,097
----------- -----------
At end of year $26,567,552 $19,731,898
=========== ===========
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
INCLUDED IN NET ASSETS $ 104,983 $ 45,623
=========== ===========
</Table>
See Notes to Financial Statements
23
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERNATIONAL EQUITY PORTFOLIO
-------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
OCT. 31, 2003 OCT. 31, 2002 OCT. 31, 2001 OCT. 31, 2000 OCT. 31, 1999
------------- ------------- ------------- ------------- -------------
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF YEAR $9.58 $10.55 $15.22 $15.50 $11.62
---------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income 0.11 0.07 0.09 0.09 0.10
Net realized and unrealized gain
(loss) on investments and foreign
currency-related transactions 1.65 (1.01) (3.61) 0.36 3.97
---------- ----------- ----------- ----------- -----------
Net increase (decrease) from investment
operations 1.76 (0.94) (3.52) 0.45 4.07
---------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:+
Net investment income (0.04) (0.03) - (0.23) (0.18)
Net realized gain from investments
and foreign currency-related
transactions - - (1.15) (0.50) (0.01)
---------- ----------- ----------- ----------- -----------
Total distributions (0.04) (0.03) (1.15) (0.73) (0.19)
---------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR $11.30 $9.58 $10.55 $15.22 $15.50
========== =========== =========== =========== ===========
TOTAL RETURN 18.49% (8.92)% (24.99)% 2.18% 35.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $350,020 $289,000 $283,721 $349,046 $328,473
Ratio of net operating expenses to
average net assets 1.00% 1.00% 1.00% 0.99% 1.00%
Ratio of net investment income, to
average net assets 1.10% 0.70% 0.63% 0.45% 0.75%
Decrease reflected in above expense
ratios due to waiver of investment
advisory and administration fees,
and reimbursement of other
expenses 0.06% 0.06% 0.05% - * 0.04%
Portfolio turnover rate 58% 45% 46% 49% 35%
</Table>
* Rounds to less than 0.01%.
+ Certain prior year amounts have been reclassified to conform to the current
year presentation.
See Notes to Financial Statements
24
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
EMERGING MARKETS PORTFOLIO
--------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED ENDED
OCT. 31, 2003 OCT. 31, 2002 OCT. 31, 2001 OCT. 31, 2000 OCT. 31, 1999*
------------- ------------- ------------- ------------- --------------
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF YEAR $12.49 $11.88 $14.89 $13.68 $10.00
---------- ---------- --------- --------- ----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (loss) 0.07 0.04 0.01 (0.05) 0.03
Net realized and unrealized gain
(loss) on investments and foreign
currency-related transactions 5.60 0.58 (1.89) 1.79 3.65
---------- ---------- --------- --------- ----------
Net increase (decrease) from investment
operations 5.67 0.62 (1.88) 1.74 3.68
---------- ---------- --------- --------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:+
Net investment income - (0.01) - (0.02) -
Net realized gain from investments
and foreign currency-related
transactions - - (1.13) (0.51) -
---------- ---------- --------- --------- ----------
Total distributions - (0.01) (1.13) (0.53) -
---------- ---------- --------- --------- ----------
NET ASSET VALUE, END OF YEAR $18.16 $12.49 $11.88 $14.89 $13.68
========== ========== ========= ========= ==========
TOTAL RETURN 45.40% 5.22% (13.48)% 12.18% 36.80%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $29,657 $10,116 $2,731 $2,575 $1,534
Ratio of net operating expenses to
average net assets 1.75% 1.75% 1.75% 1.75% 1.75%(b)
Ratio of net investment income
(loss), to average net assets 0.76% 0.19% 0.08% (0.39)% 0.24%(b)
Decrease reflected in above expense
ratios due to waiver of investment
advisory and administration fees,
and reimbursement of other
expenses 0.08% 0.39% 1.15% 1.08% 4.14%(b)
Portfolio turnover rate 58% 43% 38% 28% 53%(a)
</Table>
* Commencement of Operations was November 9, 1998.
+ Certain prior year amounts have been reclassified to conform to the current
year presentation.
(a) Not annualized.
(b) Annualized.
See Notes to Financial Statements
25
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
GLOBAL EQUITY PORTFOLIO
-------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
OCT. 31, 2003 OCT. 31, 2002 OCT. 31, 2001 OCT. 31, 2000 OCT. 31, 1999
------------- ------------- ------------- ------------- -------------
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF YEAR $13.28 $15.08 $21.81 $20.00 $16.16
---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income 0.09 0.05 0.04 0.03 0.05
Net realized and unrealized gain
(loss) on investments and foreign
currency-related transactions 3.11 (1.79) (4.49) 3.89 3.79
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from investment
operations 3.20 (1.74) (4.45) 3.92 3.84
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:+
Net investment income (0.03) (0.00)* - (0.16) -
Net realized gain from investments
and foreign currency-related
transactions - (0.06) (2.28) (1.95) -
---------- ---------- ---------- ---------- ----------
Total distributions (0.03) (0.06) (2.28) (2.11) -
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR $16.45 $13.28 $15.08 $21.81 $20.00
========== ========== ========== ========== ==========
TOTAL RETURN 24.19% (11.59)% (22.77)% 19.66% 23.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $26,568 $19,732 $18,524 $25,089 $21,087
Ratio of net operating expenses to
average net assets 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment income, to
average net assets 0.70% 0.38% 0.24% 0.10% 0.65%
Decrease reflected in above expense
ratios due to waiver of investment
advisory and administration fees,
and reimbursement of other
expenses 0.12% 0.19% 0.22% 0.23% 0.32%
Portfolio turnover rate 68% 55% 50% 57% 44%
</Table>
* Rounds to less than $0.01.
+ Certain prior year amounts have been reclassified to conform to the current
year presentation.
See Notes to Financial Statements
26
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
1. ORGANIZATION
Harding, Loevner Funds, Inc. (the "Fund") was organized as a Maryland
corporation on July 31, 1996 and is registered under the Investment Company Act
of 1940, as amended, as an open-end diversified management investment company.
The Fund currently has three Portfolios (individually, "Portfolio"), all of
which were active as of October 31, 2003: International Equity Portfolio
("International Equity"); Global Equity Portfolio ("Global Equity")
(collectively, the "Initial Portfolios"); and Emerging Markets Portfolio
("Emerging Markets"). The investment objective of each portfolio is as follows:
International Equity--to seek long-term capital appreciation through investments
in equity securities of companies based outside the United States; Global
Equity--to seek long-term capital appreciation through investments in equity
securities of companies based both in and outside the United States; Emerging
Markets Portfolio--to seek long-term capital appreciation through investments in
equity securities of companies based in developing markets outside the United
States.
Global Equity commenced operations on December 1, 1996 following the acquisition
of net assets of Harding, Loevner Management, L.P.'s--Global Equity L. P.
("GELP"), a limited partnership, in a tax-free reorganization. Emerging Markets
commenced operations on November 9, 1998. The Fund is managed by Harding,
Loevner Management, L.P. (the "Investment Adviser").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Fund are in conformity with accounting principles
generally accepted in the United States ("GAAP") for investment companies. The
following is a summary of the Fund's significant accounting policies:
ESTIMATES
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
VALUATION
All investments in the Fund are valued daily at their market price, which
results in unrealized gains or losses. Securities traded on an exchange are
valued at their last sales price on that exchange. Securities for which no sales
are reported are valued at the latest bid price obtained from a quotation
reporting system or from established market makers. Repurchase agreements are
valued at their amortized cost plus accrued interest. Securities for which
market quotations are not readily available are valued by the Board of
Directors. As of October 31, 2003, there were no securities in the Fund which
required valuation by the Board of Directors.
SECURITIES
All securities transactions are recorded on a trade date basis. Interest income
and expenses are recorded on an accrual basis. Dividend income is recorded on
the ex-dividend date (except for certain foreign dividends that may be recorded
as soon as the fund is informed of such dividends). The Fund accretes discount
or amortizes premium on a daily basis to interest income. The Fund uses the
specific identification method for determining gain or loss on sales of
securities.
INCOME TAX
It is the policy of each Portfolio of the Fund to qualify as a regulated
investment company, if such qualification is in the best interest of its
shareholders, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of taxable income sufficient to relieve
it from substantially all Federal income and excise taxes.
EXPENSES
Expenses directly attributed to a specific Portfolio of the Fund are charged to
that Portfolio's operations; expenses not directly attributable to a specific
Portfolio are allocated among the Portfolios either equitably or based on their
average daily net assets.
27
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DIVIDENDS TO SHAREHOLDERS
It is the policy of the Fund to declare dividends from net investment income
annually. Net short-term and long-term capital gains distributions for the
Portfolios, if any, normally are distributed on an annual basis.
Dividends from net investment income and distributions from net realized gains
from investment transactions have been determined in accordance with income tax
regulations and may differ from net investment income and realized gains
recorded by the Portfolios for financial reporting purposes. Differences result
primarily from foreign currency transactions and timing differences related to
recognition of income, and gains and losses from investment transactions. To the
extent that any differences which are permanent in nature result in
overdistributions to shareholders, the amount of the overdistribution is
reclassified within the capital accounts based on its federal tax basis
treatment. To the extent that they exceed net investment income and net realized
gains for tax purposes, they are reported as returns of capital. Temporary
differences do not require reclassification.
CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked prices of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated at the rates of
exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at exchange rates prevailing when accrued. The Fund does
not isolate that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising from changes
in market prices of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments.
Net realized gains and losses from foreign currency-related transactions arise
from sales of foreign currency, currency gains or losses realized between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Portfolio's books, and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation or depreciation on
translation of assets and liabilities denominated in foreign currencies arise
from changes in the value of assets and liabilities other than investments in
securities at the period end, resulting from changes in the exchange rate.
3. SIGNIFICANT AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Fund's Board of Directors has approved investment advisory agreements (the
"Agreements") with the Investment Adviser. The advisory fees are computed daily
at an annual rate of 0.75%, 1.25% and 1.00% of the average daily net assets of
International Equity, Emerging Markets and Global Equity, respectively.
In addition, the Fund has an administration agreement with Investors Bank &
Trust Company, which provides certain accounting, clerical and bookkeeping
services, corporate secretarial services and assistance in the preparation and
filing of tax returns and reports to shareholders and the Securities and
Exchange Commission. Under this agreement, International Equity, Emerging
Markets and Global Equity incurred $337,971, $18,751 and $28,879, respectively,
in administration fees for the year ended October 31, 2003.
The Investment Adviser has voluntarily agreed to reduce its fee to the extent
that aggregate expenses (exclusive of brokerage commissions, other investment
expenses, interest on borrowings, taxes and extraordinary expenses) exceed an
annual rate of 1.00%, 1.75% and 1.25%, respectively, of the average daily net
assets of International Equity, Emerging Markets and Global Equity. For the year
ended October 31, 2003, the Investment Advisor voluntarily waived $176,908,
$12,201 and $26,488, respectively, in investment advisory fees from
International Equity, Emerging Markets and Global Equity.
Directors' fees and related expenses for International Equity, Emerging Markets
and Global Equity amounted to $59,446, $2,131 and $4,156, respectively, for the
year ended October 31, 2003.
28
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
3. SIGNIFICANT AGREEMENTS AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Fund's Board of Directors has approved a Portfolio Advisory Service Services
Agreement (the "Agreement") between the Fund, on behalf of the International
Equity Portfolio and Oppenheimer Asset Management ("Oppenheimer") (formerly CIBC
World Markets Corp.). Under the Agreement, the Fund pays Oppenheimer 0.25% of
the average daily net assets of the International Equity Portfolio held by
Oppenheimer in consideration for certain record keeping and transactional
services. Because of the Investment Adviser's voluntary cap on the Fund's fees
and expenses, the Investment Adviser paid the 0.25% fee during the year ended
October 31, 2003.
On January 1, 2003, the Fund's Operating Agreement with Charles Schwab & Co.
("Schwab") was amended to implement an account establishment and maintenance fee
to be paid by the Fund to reimburse Schwab for its costs in establishing certain
trading symbols and maintaining accounts for the International Equity Portfolio.
4. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities, other than
short-term investments, for the year ended October 31, 2003, were as follows for
each Portfolio:
<Table>
<Caption>
PURCHASE COST OF PROCEEDS FROM SALES OF
PORTFOLIO INVESTMENT SECURITIES INVESTMENT SECURITIES
- ---------------------------------------------------------------------------------------
International Equity $188,048,696 $176,781,810
Emerging Markets 21,106,440 8,678,793
Global Equity 16,783,727 14,688,860
</Table>
The cost of investments for Federal income tax purposes and the components of
net unrealized appreciation on investments at October 31, 2003, for each of the
Portfolios were as follows:
<Table>
<Caption>
UNREALIZED UNREALIZED
PORTFOLIO APPRECIATION DEPRECIATION NET COST
- -------------------------------------------------------------------------------------
International Equity $62,514,514 $4,907,531 $57,606,983 $291,909,742
Emerging Markets 6,420,418 96,618 6,323,800 23,025,316
Global Equity 4,994,294 88,197 4,906,097 21,678,175
</Table>
The unrealized appreciation/deprecation on foreign currency for International
Equity, Emerging Markets and Global Equity was $26,591, $8 and $(152),
respectively, for the year ended October 31, 2003.
During the year ended October 31, 2002 the tax character of distributions paid
from ordinary income was $936,591, $2,415 and $5,406 for International Equity,
Emerging Markets and Global Equity, respectively. The tax character of
distributions paid from long term capital gains was $72,467 for Global Equity.
During the year ended October 31, 2003, the tax character of distributions paid
from ordinary income was $1,406,053 and $50,332 for International Equity and
Global Equity, respectively.
As of October 31, 2003, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
<Table>
<Caption>
UNDISTRIBUTED ACCUMULATED UNREALIZED TOTAL
ORDINARY CAPITAL AND APPRECIATION/ ACCUMULATED
PORTFOLIO INCOME OTHER LOSSES (DEPRECIATION)* EARNINGS/(DEFICIT)
- -------------------------------------------------------------------------------------------------
International Equity $2,174,828 $(69,993,211) $57,633,574 $(10,184,809)
Emerging Markets 64,484 (960,065) 6,323,808 5,428,227
Global Equity 104,983 (3,393,148) 4,905,945 1,617,780
</Table>
* The difference between book-basis and tax-basis unrealized
appreciation/depreciation is attributable primarily to the tax deferral of
losses on wash sales.
29
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS (CONTINUED)
At October 31, 2003, International Equity and Emerging Markets, for federal
income purposes, had capital loss carryovers of $19,383,557 and $169,228,
respectively, which will reduce the taxable income arising from future net
realized gain on investments, if any, to the extent permitted by the Internal
Revenue code and thus will reduce the amount of distributions to shareholders
which would otherwise be necessary to relieve the Portfolios of any liability
for federal income or excise tax. Such capital loss carryovers will expire on
October 31, 2009. International Equity, Emerging Markets and Global Equity had
capital loss carryovers of $15,105,753, $615,951 and $1,565,511, respectively,
which will expire on October 31, 2010. International Equity, Emerging Markets
and Global Equity had capital loss carryovers of $35,503,901, $174,886 and
$1,827,637, respectively, which will expire on October 31, 2011.
5. FOREIGN EXCHANGE CONTRACTS
The Portfolios, on occasion, enter into forward foreign exchange contracts in
order to hedge their exposure to changes in foreign currency exchange rates on
their foreign portfolio holdings. A forward foreign exchange contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference between
the cost of the original contracts and the closing of such contracts is included
in net realized gains or losses on foreign currency-related transactions.
Fluctuations in the value of forward foreign exchange contracts are recorded for
book purposes as unrealized appreciation or depreciation on assets and
liabilities denominated in foreign currencies by the Portfolio. The Portfolios
are also exposed to credit risk associated with counter party nonperformance on
these forward foreign exchange contracts which is typically limited to the
unrealized gain on each open contract.
The Portfolios enter into foreign currency transactions on the spot markets in
order to pay for foreign investment purchases or to convert to dollars the
proceeds from foreign investment sales or coupon interest receipts. The
Portfolios did not have open foreign currency transactions to buy or sell
currency on the spot markets as of October 31, 2003.
6. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock for International Equity were as follows for the
periods indicated:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------
Shares sold 4,743,141 $ 46,271,780 10,279,456 $106,248,969
Shares issued upon
reinvestment of dividends 121,352 1,167,410 69,194 766,666
---------- ------------ ---------- ------------
4,864,493 47,439,190 10,348,650 107,015,635
Shares redeemed (4,039,579) (41,142,391) (7,074,051) (75,890,936)
---------- ------------ ---------- ------------
Net increase 824,914 $ 6,296,799 3,274,599 $ 31,124,699
========== ============ ========== ============
</Table>
Transactions in capital stock for Emerging Markets were as follows for the
periods indicated:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
----------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
Shares sold 936,359 $14,391,098 610,917 $8,950,366
Shares issued upon
reinvestment of dividends -- -- 143 1,910
-------- ----------- ------- ----------
936,359 14,391,098 611,060 8,952,276
Shares redeemed (113,515) (1,593,501) (31,034) (485,560)
-------- ----------- ------- ----------
Net increase 822,844 $12,797,597 580,026 $8,466,716
======== =========== ======= ==========
</Table>
30
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2003
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in capital stock for Global Equity were as follows for the periods
indicated:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 294,445 $ 3,911,357 538,844 $ 7,912,380
Shares issued upon
reinvestment of dividends 2,312 30,865 4,589 74,154
-------- ----------- -------- -----------
296,757 3,942,222 543,433 7,986,534
Shares redeemed (167,676) (2,284,852) (286,046) (4,063,131)
-------- ----------- -------- -----------
Net increase 129,081 $ 1,657,370 257,387 $ 3,923,403
======== =========== ======== ===========
</Table>
Redemptions made within three months of purchase are subject to a redemption fee
equal to 2% of the amount redeemed. For the year ended October 31, 2003, the
International Equity Portfolio received $3,986 in redemption fees related to
transactions in shares of common stock on the Statement of Changes in Net
Assets.
7. REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements under which a bank or
securities firm that is a primary or reporting dealer in U.S. Government
securities agrees, upon entering into a contract, to sell such securities to a
Portfolio and repurchase such securities from such Portfolio at a mutually
agreed upon price and date.
Each Portfolio also is permitted to enter into reverse repurchase agreements
under which a primary or reporting dealer in U.S. Government securities
purchases securities from a Portfolio and such Portfolio agrees to repurchase
the securities at an agreed upon price and date.
Each Portfolio may engage in repurchase and reverse repurchase transactions with
parties selected on the basis of such party's creditworthiness. Securities
purchased subject to repurchase agreements must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. If the value of the underlying securities falls below the value of the
repurchase price plus accrued interest, the Portfolio will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Portfolio maintains the right to sell the underlying securities
at market value and may claim any resulting loss against the seller. When a
Portfolio engages in reverse repurchase agreement transactions, such Portfolio
will maintain, in a segregated account with its custodian, liquid securities
equal in value to those subject to the agreement.
8. CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions may involve
certain considerations and risks not typically associated with investments in
the United States. 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 International Equity,
Emerging Markets and Global Equity are authorized to invest.
31
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Shareholders and Board of Directors
Harding, Loevner Funds, Inc.
We have audited the accompanying statements of net assets of Harding, Loevner
Funds, Inc. (comprising, the International Equity Portfolio, the Emerging
Markets Portfolio, and the Global Equity Portfolio), (collectively the "Funds")
as of October 31, 2003, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of October 31, 2003 by
correspondence with the custodian and others. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios comprising Harding, Loevner Funds, Inc. at
October 31, 2003, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for each of the indicated periods, in conformity
with accounting principles generally accepted in the United States of America.
/s/ Ernst & Young LLP
New York, New York
December 8, 2003
32
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
SUPPLEMENTAL TAX INFORMATION
(UNAUDITED)
- --------------------------------------------------------------------------------
The Global Equity Portfolio has designated 100% of distributions from net
investment income as qualifying for the dividend received deduction for
corporations.
International Equity, Emerging Markets and Global Equity paid qualifying foreign
taxes of $1,009,185, $63,278 and $32,387 and earned $7,541,512, $423,877 and
$293,242 foreign source income during the year ended October 31, 2003,
respectively. Pursuant to Section 853 of the Internal revenue Code,
International Equity, Emerging Markets and Global Equity designated $0.0326,
$0.0388 and $0.0201 per share as foreign taxes paid and $0.2434, $0.2596 and
$0.1816 per share as income earned from foreign sources for the year ended
October 31, 2003, respectively.
33
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
SUPPLEMENTAL TAX INFORMATION (CONTINUED)
(UNAUDITED)
- --------------------------------------------------------------------------------
The International Equity and Global Equity Portfolios have elected to pass
through the credit for taxes paid in foreign countries during its fiscal year
ended October 31, 2003. In accordance with current tax laws, the Foreign Income
and Foreign Tax per share (for a share outstanding on October 31, 2003) is as
follows:
<Table>
<Caption>
INTERNATIONAL EQUITY
--------------------------
GROSS FOREIGN
COUNTRY FOREIGN TAX DIVIDENDS
- ----------------------------------------------------------------
Australia 0.0000 0.0067
Austria 0.0003 0.0021
Brazil 0.0016 0.0184
Canada 0.0013 0.0074
Denmark 0.0009 0.0058
France 0.0025 0.0165
Germany 0.0014 0.0096
Hong Kong 0.0000 0.0009
Ireland 0.0005 0.0037
Israel 0.0003 0.0017
Italy 0.0004 0.0023
Japan 0.0015 0.0137
Mexico 0.0000 0.0024
Netherlands 0.0055 0.0366
Russia 0.0000 0.0078
Singapore 0.0007 0.0031
South Africa 0.0000 0.0106
Spain 0.0012 0.0077
Sweden 0.0005 0.0034
Switzerland 0.0041 0.0193
Taiwan 0.0004 0.0000
Thailand 0.0043 0.0000
United Kingdom 0.0053 0.0638
</Table>
<Table>
<Caption>
GLOBAL EQUITY
--------------------------
COUNTRY GROSS FOREIGN
FOREIGN TAX DIVIDENDS
- ----------------------------------------------------------------
Australia 0.0000 0.0108
Brazil 0.0009 0.0277
Canada 0.0008 0.0032
Denmark 0.0000 0.0029
France 0.0031 0.0231
Germany 0.0034 0.0173
Hong Kong 0.0000 0.0128
Israel 0.0000 0.0002
Italy 0.0000 0.0000
Japan 0.0009 0.0126
Mexico 0.0000 0.0029
Netherlands 0.0005 0.0032
Russia 0.0012 0.0122
South Africa 0.0000 0.0135
South Korea 0.0001 0.0017
Sweden 0.0000 0.0035
Switzerland 0.0010 0.0103
Taiwan 0.0003 0.0000
Thailand 0.0060 0.0000
United Kingdom 0.0018 0.0236
</Table>
<Table>
<Caption>
EMERGING MARKETS
--------------------------
GROSS FOREIGN
COUNTRY FOREIGN TAX DIVIDENDS
- ----------------------------------------------------------------
Austria 0.0009 0.0062
Brazil 0.0027 0.0417
Chile 0.0017 0.0071
China 0.0014 0.0000
Croatia 0.0001 0.0034
Hong Kong 0.0000 0.0199
Hungary 0.0000 0.0000
India 0.0001 0.0094
Indonesia 0.0005 0.0070
Israel 0.0003 0.0014
Luxembourg 0.0000 0.0000
Malaysia 0.0023 0.0126
Mexico 0.0000 0.0099
Poland 0.0004 0.0028
Russia 0.0026 0.0324
South Africa 0.0000 0.0313
South Korea 0.0035 0.0205
Taiwan 0.0106 0.0360
Thailand 0.0096 0.0075
United Kingdom 0.0022 0.0105
</Table>
Shareholders will receive more detailed information along with their Form
1099-DIV in January, 2004.
34
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
DIRECTORS AND PRINCIPAL OFFICERS OF THE FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
DISINTERESTED DIRECTORS:
<Table>
<Caption>
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, POSITION TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS AND WITH THE AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AGE FUND TIME SERVED* FIVE YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
Jane A. Freeman Director Indefinite; Director Scientific Learning 3 None
c/o Scientific Learning since 1996 Corporation
300 Frank Ogawa Plaza (Education
Oakland, CA 94612 Software), Chief
Age, 50 Financial Officer,
1/00-present;
Treasurer and Vice
President, Finance &
Business
Development,
9/99-1/00;
Rockefeller & Co.,
Investment Manager,
1988-8/99.
Samuel R. Karetsky Director Indefinite; Director The Karetsky Group, 3 None
900 Third Avenue, 26th Fl. since 1998 LLC (Consulting),
New York, NY 10022 1/03 to present;
Age, 58 European Investors
Inc., Managing
Director,
11/98-12/02; Samuel
R. Karetsky L.L.C.
(Consulting),
3/97-10/98.
Carl W. Schafer Director Indefinite; Director The Atlantic 3 Roadway
66 Witherspoon Street since 1996 Foundation Corporation;
Princeton, NJ 08542 (Charitable Frontier Oil
Age, 67 Foundation), Corp.; Labor
President, Ready, Inc.;
1990-present. UBS Mutual
Funds; Guardian
Life Mutual
Funds; European
Investors REIT
Mutual Fund.
</Table>
INTERESTED DIRECTOR:
<Table>
<Caption>
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, POSITION TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS AND WITH THE AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AGE FUND TIME SERVED* FIVE YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
David R. Loevner** Director, Indefinite; Harding, Loevner 3 None
Harding, Loevner President and Director, President Management, L.P.,
Management, L.P. Chairman of the and Chairman of the President and CEO,
50 Division Street, Board Board since 1996 7/89-present.
Suite 401
Somerville, NJ 08876
Age, 49
</Table>
* Each director is elected to serve in accordance with the Articles of
Incorporation and By-Laws of the Fund until his or her successor is duly
elected and qualified.
** David R. Loevner is considered an "interested person" of the Fund as
defined in the Investment Company Act of 1940, as amended, because he
serves as President and CEO of Harding, Loevner Management, L.P., the
Fund's investment adviser.
35
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
DIRECTORS AND PRINCIPAL OFFICERS OF THE FUND (CONTINUED)
(UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS OF THE FUND
<Table>
<Caption>
PRINCIPAL
NAME, TERM OF OFFICE OCCUPATION(S)
ADDRESS AND POSITION AND LENGTH OF DURING PAST
AGE WITH THE FUND TIME SERVED@ FIVE YEARS
- ----------------------------------------------------------------------------------------
Richard Reiter Treasurer and 1 year; Treasurer Harding, Loevner
Harding, Loevner Chief Financial and Chief Financial Management, L.P.,
Management, L.P. Officer Officer since Portfolio Manager
50 Division Street, September 2002 1/01-present;
Suite 401 Product Information
Somerville, NJ 08876 Manager, 4/96-12/00.
Age, 37
Patrice Singleton Vice President 1 year; Vice Harding Loevner
Harding, Loevner President since 2002 Management, L.P.,
Management, L.P. General Manager
50 Division Street, 7/94-present.
Suite 401
Somerville, NJ 08876
Age, 50
Susan C. Mosher Secretary 1 year; Secretary Investors Bank &
Investors Bank & Trust since 1999 Trust Company,
Company Director and Senior
200 Clarendon Street Counsel,
Boston, MA 02116 1995-present.
Age, 48
Annellen M. McNamara Assistant 1 year; Assistant Investors Bank &
Investors Bank & Trust Treasurer Treasurer since 2002 Trust Company,
Company Director,
200 Clarendon Street 6/02-present; Senior
Boston, MA 02116 Manager 1/00-6/02;
Age, 36 Manager 1998-1999.
John M. DelPrete Assistant 1 year; Assistant Investors Bank &
Investors Bank & Trust Secretary Secretary since 2000 Trust Company,
Company Senior Associate
200 Clarendon Street Counsel,
Boston, MA 02116 1997-present.
Age, 35
</Table>
@ 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.
The Fund's Statement of Additional Information contains additional information
about the Directors and Officers and is available, without charge, upon request,
by calling 1-877-435-8105.
36
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS AND OTHER PERTINENT INFORMATION
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Jane A. Freeman
DIRECTOR OF THE FUND
Samuel R. Karetsky
DIRECTOR OF THE FUND
Carl W. Schafer
DIRECTOR OF THE FUND
David R. Loevner
DIRECTOR, PRESIDENT AND CHAIRMAN
OF THE BOARD OF THE FUND
Patrice Singleton
VICE PRESIDENT OF THE FUND
Susan C. Mosher
SECRETARY OF THE FUND
Richard Reiter
CHIEF FINANCIAL OFFICER AND
TREASURER OF THE FUND
Annellen McNamara
ASSISTANT TREASURER
OF THE FUND
John M. DelPrete
ASSISTANT SECRETARY
OF THE FUND
INVESTMENT ADVISER
Harding, Loevner Management, L.P.
50 Division Street, Suite 401
Somerville, NJ 08876
DISTRIBUTOR
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, WI 53202
ADMINISTRATOR, CUSTODIAN AND
FUND ACCOUNTING AGENT
Investors Bank & Trust Company
P.O. Box 9130
Boston, MA 02117
TRANSFER AND DIVIDEND
DISBURSING AGENT
Investors Bank & Trust Company
P.O. Box 9130
Boston, MA 02117
LEGAL COUNSEL
Dechert
1775 Eye Street, N.W
Washington, D.C. 20006-2401
INDEPENDENT AUDITORS
Ernst & Young LLP
5 Times Square
New York, NY 10036
<Page>
ITEM 2. CODE OF ETHICS.
As of October 31, 2003, the Registrant has adopted a code of ethics that
applies to the Registrant's President/Chief Executive Officer and
Treasurer/Chief Financial Officer. For the year ended October 31, 2003,
there were no amendments to a provision of its code of ethics, nor were
there any waivers granted from a provision of the code of ethics. A copy of
its code of ethics is filed with this Form N-CSR under Item 10(a).
<Page>
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board of Directors has determined that the Registrant has
more than one audit committee financial expert serving on its audit
committee. The audit committee financial experts serving on the Registrant's
audit committee are Carl Schafer and Jane Freeman, both of whom are
independent.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. LISTED COMPANY AUDIT COMMITTEES.
Not applicable to this filing.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this registrant.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Within the 90-day period immediately preceding the filing of this
Report, the Registrant's Chief Executive Officer and Principal Financial Officer
have each evaluated the effectiveness of the Registrant's "Disclosure Controls
and Procedures" and have concluded that they were effective. As such term is
used above, the Registrant's Controls and Procedures are controls and other
procedures of the Registrant that are designed to ensure that information
required to be disclosed by the Registrant in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure Controls and Procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Registrant in such reports is
accumulated and communicated to the Registrant's management, including its
principal executive officer or officers and principal financial officer or
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
(a) Code of Ethics is attached.
(b) Certification letters are attached.
(c) Section 906 Certifications are attached.
2
<Page>
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/ David R Loevner
-------------------------------
David R. Loevner, President
Date: December 19, 2003
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/ David R Loevner
------------------------------------------------------
David R. Loevner, President
Date: December 19, 2003
By: /s/ Richard Reiter
------------------------------------------------------
Richard Reiter, Treasurer and Chief Financial Officer
Date: December 19, 2003
3