<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
---------------------------
Date of reporting period: 10/31/2004
---------------------------
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
<Page>
[HARDING, LOEVNER LOGO]
HARDING, LOEVNER FUNDS, INC.
ANNUAL REPORT
OCTOBER 31, 2004
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.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<Table>
Performance Information and Statements of Net Assets
International Equity Portfolio........................ 1
Emerging Markets Portfolio............................ 9
Global Equity Portfolio............................... 17
Statements of Operations.................................. 24
Statements of Changes in Net Assets....................... 25
Financial Highlights...................................... 28
Notes to Financial Statements............................. 31
Report of Independent Auditors............................ 37
Supplemental Tax Information.............................. 38
Directors and Principal Officers.......................... 40
Supplemental Information.................................. 42
</Table>
For use only when preceded or accompanied by a prospectus. Read the prospectus
carefully before you invest or send money.
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
HYPOTHETICAL EXPENSE EXAMPLE
(UNAUDITED)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including brokerage commissions on purchases and sales of fund shares;
and (2) ongoing costs, including management fees and other fund expenses. The
following example is intended to help you understand your ongoing costs (in
dollars and cents) of investing in a Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from May 1, 2004 to October 31, 2004.
ACTUAL EXPENSES
The first line under each Fund in the table below provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line for your Fund under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line under each Fund in the table below provides information about
hypothetical account values and hypothetical expenses based on each Fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as brokerage
commissions paid on purchases and sales of fund shares. Therefore, the second
line under each Fund in the table is useful in comparing ongoing costs only, and
will not help you determine the relative total costs of owning different funds.
In addition, if these transactional costs were included, your costs would have
been higher.
<Table>
-------------------------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING ACCOUNT DURING PERIOD*
ACCOUNT VALUE VALUE ANNUALIZED (MAY 1 TO
MAY 1, 2004 OCTOBER 31, 2004 EXPENSE RATIO OCTOBER 31, 2004)
-------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Actual $ 1,000.00 $ 1,018.90 1.00% $5.07
Hypothetical (5% return
before expenses) 1,000.00 1,020.11 1.00% 5.08
EMERGING MARKETS PORTFOLIO
Actual 1,000.00 1,119.40 1.78% 9.47
Hypothetical (5% return
before expenses) 1,000.00 1,016.20 1.78% 9.01
GLOBAL EQUITY PORTFOLIO
Actual 1,000.00 993.60 1.25% 6.26
Hypothetical (5% return
before expenses) 1,000.00 1,018.85 1.25% 6.34
</Table>
* Expenses are calculated using each Portfolio's annualized expense ratio (as
disclosed in the table), multipled by the average account value for the
period, multiplied by number of days in the period (184 days), and divided
by the number of days in the year (366 days).
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO -- OVERVIEW
(UNAUDITED)
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<Table>
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>
<Table>
<Caption>
INTERNATIONAL MSCI ALL COUNTRY LIPPER INTERNATIONAL
EQUITY PORTFOLIO WORLD FREE EX-US INDEX EQUITY FUND INDEX
11/1/94 $10,000 $10,000 $10,000
10/31/95 $10,062 $9,812 $9,953
10/31/96 $11,611 $10,848 $11,212
10/31/97 $11,803 $11,377 $12,709
10/31/98 $11,800 $11,932 $13,298
10/31/99 $15,984 $14,946 $16,363
10/31/2000 $16,332 $14,637 $16,928
10/31/2001 $12,251 $10,956 $12,849
10/31/2002 $11,158 $9,731 $11,530
10/31/2003 $13,221 $12,637 $14,590
10/31/2004 $14,605 $15,071 $17,004
</Table>
<Table>
<Caption>
RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2004
-------------------------------------------------------------
AVERAGE ANNUAL
CUMULATIVE TOTAL RETURN TOTAL RETURN
-------------------------------------- ---------------------
FUND NAME LAST 12 MONTHS 5 YR 10 YR 5 YR 10 YR
- --------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
(11/1/94) 10.46% (8.63)% 46.05% (1.79)% 3.86%
MSCI All Country World ex USA Free
(Net dividend) 19.26% 0.83% 50.71% 0.17% 4.19%
Lipper International Fund Index 16.55% 3.92% 70.04% 0.77% 5.45%
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. PERFORMANCE CURRENT TO THE MOST RECENT MONTH END MAY
BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED AND MAY BE OBTAINED BY VISITING
THE WEBSITE AT www.hardingloevner.com.
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.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
The Portfolio rose in value by 10.46% net of fees in the financial year ending
October 31, 2004. In comparison, the benchmark MSCI All Country World ex-US
Index rose by 19.26%--its value component by 24.00% and its growth component by
14.00%. Please refer to the preceding page of the report for complete
performance information.
As was the case in the prior year, our quality-and-growth-oriented investment
style hampered our results, though its effect was more pronounced in the first
half of the year than in the second. The traditional virtues of business quality
were particularly out of favor this year, as investors embraced the stocks of
lower margin, lower return, more highly leveraged, and more volatile companies
at the expense of those of companies with more profitable and robust businesses.
We believe the headwinds that our quality-growth style has fought over the past
two years have now abated, and possibly turned in our favor. With a reversal of
the long-term declining trend in US interest rates and a slowing in the pace of
the global cyclical recovery, companies in the mature economies are finding it
harder to sustain their recent "recovery" rates of growth in revenues, cash flow
and earnings. In developed markets, corporate earnings growth has already
slowed, having peaked in the second calendar quarter. In this context, it seems
natural to us that developed stock markets should again begin to discriminate in
favor of companies that are capable of delivering LONG-TERM earnings growth and
against those that are not.
In the developing economies, growth is continuing and is so far largely
unaffected by the prospect of rising US interest rates. Balance sheets in
developing economies at all levels--sovereign, corporate and consumer--are
generally strong, a legacy of the debt crises and currency devaluations in Latin
America, Russia and Asia in the 1990s that had a lasting effect on their
appetite for, and access to, foreign credit. The most pronounced example of this
is the $1.5+ trillion of US Treasury bonds held by central banks in Asia
ex-Japan and Latin America. Unfettered by debt and more competitive globally
than ever, developing economies are growing strongly--as are the disposable
income and spending of their citizens, who themselves constitute the most
important new market for local companies.
The Portfolio reflects our conviction that what is rare is inherently valuable.
In developed markets, it is sustainable corporate earnings growth that is
increasingly rare. In emerging markets, where underlying economic trends are
generally supportive of growth, it is good managements and durable business
models that are rare (though, perhaps, decreasingly so as they mature.)
Importantly, our developed market companies, in their quest for long-term
growth, have themselves made significant business investments in, or oriented
toward, the developing economies.
In developed markets, our new investments in the year include ABB, the world's
premier power transmission and distribution company; Atlas Copco, the global
leader in compressed air technologies; VNU, the Dutch owner of Nielsen Media
Research; Qiagen, a small German company that dominates the global market for
purified RNA & DNA, which are critical to research in pharmaceuticals and
diagnostics; and Smith & Nephew, a UK health care company focused on
orthopedics, endoscopy and wound management.
In emerging markets we purchased Reliance Industries, India's largest integrated
petrochemical company and owner of the nation's number two wireless company.
Consumption of petrochemicals in India is less than two kilos per capita
annually, less than 5% of the US level. As Indians' incomes rise, so will their
consumption; in the meantime, Reliance is taking advantage of the refinery
shortage in this country by exporting gasoline. We also invested in Advanced
Info Services, Thailand's largest wireless company; Denway Motors, Chinese
manufacturer of Honda motorcars; and Yanzhou Coal, China's largest producer.
We responded to rising commodity and share prices over the course of the year by
reducing progressively our exposure to the Materials and Energy sectors, where
at the beginning of the year we had been significantly overweight. We sold CVRD
and Rio Tinto in the spring--profitably, but, in hindsight, too soon. Our later
sales of our two Chinese resource companies, Aluminum Corp of China and Yanzhou
Coal, were better timed. Similarly, we reduced energy stocks that our model
suggested had reached or outrun their intrinsic value based upon estimated
long-term, as opposed to near-term, energy prices. We sold British Petroleum
entirely, and reduced holdings of Dutch oilfield service company IHC Caland and
Canada's Imperial Oil.
2
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO -- OVERVIEW (CONTINUED)
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
As quality growth-oriented investors, we feel as though we have wandered in the
wilderness for well over a year, a period in which stocks of companies with
historically high profit margins and returns to capital, low financial risk, and
relatively reliable growth have been devalued on a relative basis. We are
encouraged to think that these virtues in the Portfolio may soon be recognized
again, as its companies demonstrate their ability to grow their earnings amidst
a more challenging economic environment.
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.
You cannot invest directly in an Index.
For discussion of risks of investing in these funds, see Note 8 of the Notes to
Financial Statements.
3
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -----------------------------------------------------------------------------
Advertising Agencies 3.2%
Automobiles 2.5
Banks 10.9
Beverages, Food & Tobacco 1.3
Business Machines & Office Equipment 2.4
Commercial Banks 2.6
Construction Materials 1.8
Cosmetics & Personal Care 1.8
Discount Stores 1.4
Diversified Electronics 1.9
Diversified Financials 1.3
Diversified Food 3.9
Electronic Equipment & Instruments 2.1
Electronics 2.3
Financial Services 3.6
Food & Drug Retailing 2.9
General Diversified 4.5
Health Care Equipment & Supplies 1.3
Heavy Machinery 3.8
Home Construction, Furnishings & Appliances 1.6
Industrial Chemicals & Gases Manufacturers 3.1
Insurance 1.9
Integrated International Oil Producers 2.3
Media 1.9
Medical Supplies 0.9
Miscellaneous Retailers 1.2
Oil & Gas 7.7
Other Financial Services 1.8
Parts & Components 1.1
Pharmaceuticals 6.1
Power Transmission Equipment 2.3
Retailers 0.9
Service Organizations 1.4
Shipbuilding 2.2
Software 1.2
Telecommunications 1.4
Telephone Systems 3.0
Textiles & Apparel 1.2
-------------
Total 98.7%
=============
</Table>
See Notes to Financial Statements
4
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 97.7%
- ---------------------------
COMMON STOCKS - 97.0%
- ---------------------
CANADA - 5.5%
- ------------
EnCana Corp. (Oil & Gas) 200,266 $ 9,893,140
Imperial Oil Ltd. (Integrated International Oil Producers) 126,780 7,363,382
-------------
17,256,522
-------------
DENMARK - 1.4%
- --------------
ISS A/S (Service Organizations) 84,393 4,506,452
-------------
FRANCE - 7.5%
- ------------
Air Liquide (Industrial Chemicals & Gases Manufacturers) 59,275 9,623,070
Carrefour SA (Miscellaneous Retailers) 85,060 3,743,666
Dassault Systemes SA (Software) 76,900 3,903,629
Schneider Electric SA (Heavy Machinery) 96,810 6,443,875
-------------
23,714,240
-------------
GERMANY - 2.9%
- --------------
Metro AG (Food & Drug Retailing) 190,670 9,151,393
-------------
HONG KONG - 3.8%
- ---------------
Denway Motors Ltd. (Automobiles) 6,360,000 2,150,878
Hutchison Whampoa Ltd. (General Diversified) 766,000 5,888,110
Yue Yuen Industrial Holdings Ltd. (Textiles & Apparel) 1,516,500 3,808,815
-------------
11,847,803
-------------
INDIA - 4.6%
- ----------
HDFC Bank Ltd. (Banks) 684,800 6,259,293
Reliance Industries Ltd. (Oil & Gas) 716,200 8,359,710
-------------
14,619,003
-------------
IRELAND - 1.8%
- ------------
CRH plc (Construction Materials) 237,252 5,695,053
-------------
JAPAN - 17.4%
- ------------
Canon Inc. (Business Machines & Office Equipment) 152,600 7,556,979
Kao Corp. (Cosmetics & Personal Care) 246,600 5,702,881
Keyence Corp. (Electronic Equipment & Instruments) 28,550 6,439,013
Matsushita Electric Industrial Co., Ltd. (Home Construction,
Furnishings & Appliances) 348,000 5,051,858
Mitsubishi Corp. (General Diversified) 755,900 8,360,927
Nissan Motor Co., Ltd. (Automobiles) 519,700 5,820,296
Nomura Holdings Inc. (Financial Services) 473,100 5,808,202
Rohm Co., Ltd. (Electronics) 70,100 7,203,450
Sumitomo Mitsui Financial Group Inc. (Banks) 430 2,797,822
-------------
54,741,428
-------------
</Table>
See Notes to Financial Statements
5
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
MEXICO - 1.4%
- ------------
Wal-Mart de Mexico SA de CV - ADR (Discount Stores) 135,290 $ 4,427,257
-------------
NETHERLANDS - 6.7%
- ----------------
Heineken NV (Beverages, Food & Tobacco) 132,637 4,186,534
IHC Caland NV (Shipbuilding) 119,317 6,860,367
Qiagen NV (Health Care Equipment & Supplies)* 395,700 4,198,638
VNU NV (Media) 215,500 5,915,586
-------------
21,161,125
-------------
SINGAPORE - 1.3%
- --------------
DBS Group Holdings Ltd. (Commercial Banks) 444,083 4,170,452
-------------
SOUTH AFRICA - 1.9%
- -----------------
Sasol Ltd. (Oil & Gas) 300,400 6,005,288
-------------
SOUTH KOREA - 1.9%
- ----------------
Samsung Electronics Co., Ltd. - GDR (Diversified
Electronics) 29,900 5,860,400
-------------
SPAIN - 4.0%
- -----------
Banco Santander Central Hispano SA (Banks) 765,700 8,562,213
Bankinter SA (Commercial Banks) 88,100 3,946,686
-------------
12,508,899
-------------
SWEDEN - 3.5%
- ------------
Atlas Copco AB, Class A (Heavy Machinery) 129,200 5,371,820
Skandinaviska Enskilda Banken AB, Class A (Banks) 349,200 5,836,936
-------------
11,208,756
-------------
SWITZERLAND - 15.0%
- -----------------
ABB Ltd. (Power Transmission Equipment)* 1,260,300 7,320,839
Actelion Ltd. (Pharmaceuticals)* 30,100 3,464,329
Nestle SA - ADR (Diversified Food) 125,220 7,380,367
Novartis AG - Registered (Pharmaceuticals) 151,000 7,234,273
Roche Holding AG - Genusschein (Pharmaceuticals) 83,630 8,591,326
Swiss Re - Registered (Insurance) 97,900 6,045,009
UBS AG - Registered (Banks) 100,910 7,309,661
-------------
47,345,804
-------------
TAIWAN - 1.1%
- ------------
Taiwan Semiconductor Manufacturing Co. (Parts & Components) 2,706,576 3,546,023
-------------
THAILAND - 2.5%
- -------------
Advanced Information Service plc (Telecommunications) 1,858,500 4,232,093
Bangkok Bank Pub Co., Ltd. (Banks) 1,554,400 3,628,608
-------------
7,860,701
-------------
</Table>
See Notes to Financial Statements
6
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
UNITED KINGDOM - 12.8%
- ---------------------
Close Brothers Group plc (Diversified Financials) 344,713 $ 4,215,224
Signet Group plc (Retailers) 1,513,200 2,961,635
Smith & Nephew plc (Medical Supplies) 334,300 2,847,614
Standard Chartered plc (Other Financial Services) 317,840 5,694,333
Unilever plc (Diversified Food) 565,600 4,778,686
Vodafone Group plc - Sponsored ADR (Telephone Systems) 371,641 9,584,621
WPP Group plc (Advertising Agencies) 1,012,930 10,192,910
-------------
40,275,023
-------------
Total Common Stocks (Cost $243,352,109) 305,901,622
-------------
PREFERRED STOCK - 0.7%
- -------------------
BERMUDA - 0.7%
- --------------
Taiwan Semi Flemings - 144A (Parts & Components) (Cost
$1,795,286)* 352,916 2,310,916
-------------
TOTAL LONG TERM INVESTMENTS (COST $245,147,395) 308,212,538
-------------
</Table>
<Table>
<Caption>
FACE
REPURCHASE AGREEMENT - 1.0% AMOUNT
- --------------------------- ------------
Investors Bank & Trust Repurchase Agreement, 1.27% due
11/01/04 in the amount of $3,181,673; issued 10/29/04
(collateralized by $3,259,028 par of FNMA #636041, 5.185%,
due 04/01/32 with a market value of $3,340,404) (Cost
$3,181,337) $ 3,181,337 3,181,337
------------
TOTAL INVESTMENTS - 98.7% (COST $248,328,732) $311,393,875
------------
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.
</Table>
See Notes to Financial Statements
7
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) VALUE (1)
--
- -------------------------------------------------------------------------------------------------
OTHER ASSETS, NET OF LIABILITIES - 1.3%
- ------------------------------------------------------------
Receivable for securities sold $ 4,101,304
Receivable for Fund shares sold 7,374
Dividends receivable 449,762
Tax reclaim receivable 261,641
Other assets 112
Prepaid expenses 3,758
Payable for Fund shares redeemed (120,553)
Payable for open forward currency exchange contracts (3,607)
Payable to Investment Advisor (166,878)
Other liabilities (506,453)
------------
4,026,460
------------
NET ASSETS - 100%
- ------------------------------------------------------------
Applicable to 25,417,858 outstanding $.001 par value shares
(authorized 500,000,000 shares) $315,420,335
============
Net Asset Value, Offering and Redemption Price Per Share $ 12.41
============
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 2004 WERE AS
FOLLOWS:
- ------------------------------------------------------------
Paid-in capital $292,503,602
Accumulated undistributed net investment income 1,431,240
Accumulated distributions in excess of net realized gain on
investments and foreign currency-related transactions (41,614,853)
Net unrealized appreciation on investments and on assets and
liabilities denominated in foreign currencies (Note 4) 63,100,346
------------
$315,420,335
============
</Table>
Summary of Abbreviations
144A Security exempt from registration under Rule 144A of the Securities Act of
1933. This security, which represents 0.73% of net assets as of October 31,
2004, is considered liquid and may be resold in transactions exempt from
registration, normally to qualified institutional 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
8
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO -- OVERVIEW
(UNAUDITED)
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<Table>
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>
<Table>
<Caption>
EMERGING MARKETS LIPPER EMERGING MSCI EMERGING
PORTFOLIO MARKETS FUNDS INDEX MARKETS FREE INDEX
11/9/98 $10,000 $10,000 $10,000
10/31/99 $13,680 $12,943 $13,623
10/31/2000 $15,346 $12,388 $12,425
10/31/2001 $13,278 $9,637 $9,488
10/31/2002 $13,971 $10,324 $10,268
10/31/2003 $20,313 $15,321 $15,229
10/31/2004 $25,003 $18,625 $18,126
</Table>
<Table>
<Caption>
RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2004
---------------------------------------------------------
AVERAGE ANNUAL
CUMULATIVE TOTAL RETURN TOTAL RETURN
------------------------------------- ------------------
FUND NAME LAST 12 MONTHS 5 YR INCEPTION 5 YR INCEPTION
- ------------------------------------------------------------------------------------
EMERGING MARKETS
PORTFOLIO (11/9/98) 23.09% 82.77% 150.03% 12.82% 16.57%
MSCI Emerging Markets
Free (Net dividend) 19.03% 33.06% 81.26% 5.88% 10.46%
Lipper Emerging Markets
Funds Index 21.56% 43.91% 86.25% 7.55% 10.96%
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. PERFORMANCE CURRENT TO THE MOST RECENT MONTH END MAY
BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED AND MAY BE OBTAINED BY VISITING
THE WEBSITE AT www.hardingloevner.com.
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.
9
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO -- OVERVIEW
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
The Portfolio returned 23.09% for year ended October 31, 2004, 4.06% ahead of
the benchmark MSCI Emerging Markets Index. Relative outperformance was achieved
primarily through stock selection, and achieved in a period when value
outperformed growth by over 10%. Please refer to the preceding page of the
report for complete performance information.
The rally that commenced in March 2003 drove the Emerging Markets ("EM") up 85%,
followed by a 20% correction in April/May 2004. The correction was precipitated
by rising short-term interest rates in the US, concern over global economic
growth, particularly in China, oil prices and the situation in Iraq. The
relative outperformance of the Portfolio was achieved as these fears dissipated
and EM economies demonstrated their resilience. During the period since the
April/May correction, stocks have been driven more by fundamentals than by
momentum, consistent with our investment style.
Since the Asian and Russian crises of 1997/98, the major developing markets
economies have built foreign exchange reserves, exerted fiscal discipline and
reduced both inflation and interest rates. The latter have set the stage for
growth in domestic consumption, and it is around the theme of the EM consumer
that the most significant changes in the Portfolio have occurred. The two
sectors most affected are Telecom Services and Financials. In Telecom Services,
we continued to build our holdings to 16% of portfolio, up from 10% in October
2003 and from 2% in 2002. Reduced network and handset costs have increased
affordability and potential market size, as cellular telephony has emerged as a
high priority in the EM consumer wallet. Improved regulatory environments and
moderating competition have allowed leading cellular companies to grow in their
individual country markets and simultaneously focus on profitability.
In Financial Services, we have built a geographically diverse portfolio of
thirteen EM banks. Affordable consumer credit is newly available in many
markets, and is helping propel domestic consumption. We look for banks that
focus on retail products, notably mortgages and consumer lending, with efficient
retail delivery platforms and proven risk management.
As our holdings around the theme of the EM consumer have increased, we have
reduced our holdings of export-oriented companies, though we continue to hold
positions in selected globally-competitive exporters. These are global leaders
in industries ranging from traditional resource-based businesses, such as mining
and pulp, to high-tech businesses such as semiconductors and display panels. As
a consequence, we are now underweight relative to the benchmark in Materials,
Industrials, and Information Technology.
Over the year we have increased our holdings in the Energy sector. Russia is
emerging as a strategic supplier to the global energy markets; the Portfolio
includes companies positioned to participate in its development. We hold
investments in leading oil producers in several other countries, such as India,
China and Brazil, as well as in selected service providers to the oil industry.
Western pharmaceutical companies are increasingly authorizing the manufacture of
the generic version of their soon-to-be-off-patent drugs to subsidiaries or
allied manufacturers, in an effort to retain some of the income from their
compounds that would otherwise be lost to competing, generic drug manufacturers.
Recognition of this shift in the competitive structure of the pharmaceutical
industry has caused us to sell our holdings in EM generic drug makers. We now
have no holdings in the Health Care sector, compared to 6% last year and to the
current benchmark level of 3%.
Our investment approach relies upon fundamental analysis to identify companies
that are growing, have good financial and management strength, and possess
sustainable competitive advantages. The high average quality of the companies in
the Portfolio is the primary risk control measure, complemented by prudent
portfolio diversification. We believe that the Portfolio is appropriately
constructed to take advantage of the continued growth and development of the
Emerging Markets.
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.
For discussion of risks of investing in these funds, see Note 8 of the Notes to
Financial Statements.
10
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -----------------------------------------------------------------------------
Automotive 3.7%
Banks 10.8
Beverages, Food & Tobacco 1.2
Brewers 2.4
Building Materials 0.7
Cement Producers 1.2
Commercial Banks 1.4
Commercial Services & Supplies 1.0
Communications 0.9
Computer Software & Processing 1.3
Computers & Information 1.0
Computers & Peripherals 0.8
Discount Stores 1.3
Diversified Electronics 4.7
Diversified Paper 1.1
Electrical Equipment 2.4
Electronic Equipment & Instruments 1.5
Electronics 1.4
Entertainment & Leisure 0.8
Financial Services 6.6
Home Construction, Furnishings & Appliances 2.8
Industrial - Diversified 1.3
Industrial Conglomerates 1.7
Metals & Mining 7.0
National & Regional Food Chains 1.1
Oil & Gas 12.2
Other Financial Services 1.0
Parts & Components 0.9
Radio & TV Broadcasters 1.5
Real Estate 0.7
Retailers 1.3
Securities Brokerage 1.0
Systems & Subsystems 1.1
Telecommunications 3.3
Telephone Systems 11.6
Textiles & Apparel 2.7
Transportation 2.5
-------------
Total 99.9%
=============
</Table>
See Notes to Financial Statements
11
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 96.2%
- ---------------------------
COMMON STOCKS - 90.9%
- ---------------------
AUSTRIA - 1.1%
- ------------
Erste Bank der Oesterreichischen Sparkassen AG (Banks) 16,000 $ 715,504
-------------
BRAZIL - 5.3%
- -----------
Companhia Brasileira de Distribuicao Grupo Pao de Acucar
(National & Regional Food Chains) 29,800 709,240
Companhia Vale Do Rio Doce - ADR (Metals & Mining) 58,000 1,227,280
Petroleo Brasileiro SA - ADR (Oil & Gas) 25,000 887,000
Votorantim Celulose - Sponsored ADR (Diversified Paper) 20,300 701,365
-------------
3,524,885
-------------
CHILE - 1.2%
- ----------
Banco Santander - ADR (Banks) 29,600 827,616
-------------
CHINA - 0.7%
- -----------
Anhui Conch Cement Co., Ltd., Class H (Building Materials) 448,000 500,090
-------------
EGYPT - 2.0%
- -----------
MobiNil - Egyptian Co. for Mobile Services (Telephone
Systems) 32,000 594,154
Orascom Telecom Holding SAE (Telephone Systems)* 45,000 769,378
-------------
1,363,532
-------------
ESTONIA - 1.2%
- ------------
Hansabank Ltd. (Banks) 77,000 778,441
-------------
HONG KONG - 5.4%
- ---------------
China Mobile HK Ltd. - ADR (Telephone Systems) 60,700 883,185
CNOOC Ltd. (Oil & Gas) 1,780,000 919,460
Techtronic Industries Co. (Electrical Equipment) 440,000 877,214
Yue Yuen Industrial Holdings Ltd. (Textiles & Apparel) 370,000 929,286
-------------
3,609,145
-------------
HUNGARY - 1.6%
- -------------
MOL Magyar Olaj-es Gazipari Rt. (Oil & Gas) 19,000 1,066,858
-------------
INDIA - 7.8%
- ----------
Bajaj Auto Ltd. (Automotive) 28,000 595,017
Bharti Tele-Ventures Ltd. (Telephone Systems)* 262,000 908,859
Housing Development Finance Corp., Ltd. (Other Financial
Services) 48,000 676,854
ICICI Bank Ltd. (Banks) 151,000 996,494
Reliance Industries Ltd. - Sponsored GDR 144A (Oil & Gas) 46,500 1,143,900
</Table>
See Notes to Financial Statements
12
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
INDIA (CONTINUED)
Satyam Computer Services Ltd. (Computer Software &
Processing) 108,000 $ 891,263
-------------
5,212,387
-------------
INDONESIA - 2.4%
- --------------
PT Bank Danamon Indonesia Tbk (Banks) 1,600,000 629,713
PT Telekomunikasi Indonesia - ADR (Telecommunications) 49,900 951,593
-------------
1,581,306
-------------
ISRAEL - 0.9%
- -----------
Orbotech Ltd. (Electronic Equipment & Instruments)* 34,400 581,704
-------------
LUXEMBOURG - 1.8%
- -----------------
Tenaris SA - ADR (Metals & Mining) 27,300 1,222,221
-------------
MALAYSIA - 3.1%
- -------------
Malaysia International Shipping Corp. Berhad
(Transportation) 258,000 902,821
Maxis Communications Berhad (Telephone Systems) 270,000 611,317
Resorts World Berhad (Entertainment & Leisure) 225,000 565,802
-------------
2,079,940
-------------
MEXICO - 8.4%
- ------------
America Movil SA de CV Series L - ADR (Telephone Systems) 35,700 1,570,800
Consorcio ARA SA de CV Series (Real Estate)* 173,000 461,773
Grupo Aeroportuario del Sureste SA de CV - ADR (Commercial
Services & Supplies) 28,400 650,644
Grupo Financiero Banorte SA de CV (Financial Services) 225,000 1,056,851
Grupo Televisa SA (Radio & TV Broadcasters) 18,300 1,006,500
Wal-Mart de Mexico SA de CV - ADR (Discount Stores) 25,900 847,557
-------------
5,594,125
-------------
PHILIPPINES - 1.9%
- ---------------
Globe Telecom Inc. (Communications) 32,000 582,989
Philippine Long Distance Telephone Co. - Sponsored ADR
(Telephone Systems)* 26,400 662,640
-------------
1,245,629
-------------
POLAND - 2.5%
- ------------
Bank Pekao SA (Banks) 23,000 876,377
Polski Koncern Naftowy Orlen SA (Oil & Gas) 75,000 809,884
-------------
1,686,261
-------------
RUSSIA - 4.8%
- -----------
Oao Gazprom - Sponsored ADR Reg S (Oil & Gas) 36,000 1,344,960
Sberbank of Russia (Banks) 1,700 788,800
VimpelCommunications - Sponsored ADR (Telephone Systems)* 9,500 1,083,000
-------------
3,216,760
-------------
SOUTH AFRICA - 10.0%
- ------------------
Bidvest Group Ltd. (Industrial Conglomerates) 105,589 1,163,425
Impala Platinum Holdings Ltd. (Metals & Mining) 11,500 930,541
</Table>
See Notes to Financial Statements
13
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
SOUTH AFRICA (CONTINUED)
JD Group Ltd. (Home Construction, Furnishings & Appliances) 90,000 $ 842,090
MTN Group Ltd. (Telephone Systems) 125,000 683,512
Sasol Ltd. (Oil & Gas) 57,400 1,147,482
Standard Bank Group Ltd. (Financial Services) 100,269 885,681
Steinhoff International Holdings Ltd. (Home Construction,
Furnishings & Appliances) 585,000 1,025,251
-------------
6,677,982
-------------
SOUTH KOREA - 12.4%
- -----------------
Hankook Tire Co., Ltd. (Automotive) 60,000 554,865
Hite Brewery Co., Ltd. (Brewers) 7,600 552,963
Hyundai Mobis (Automotive) 18,000 924,867
Kookmin Bank - ADR (Banks)* 30,700 1,032,441
LG Electronics Inc. (Electronics) 16,400 925,266
S1 Corp. (Securities Brokerage) 23,600 666,944
Samsung Electronics Co., Ltd. - GDR (Diversified
Electronics) 7,650 1,499,400
Samsung SDI Co., Ltd. (Diversified Electronics) 7,100 642,316
Shinsegae Co., Ltd. (Retailers) 3,000 843,921
SK Telecom Co. (Telecommunications) 4,090 641,014
-------------
8,283,997
-------------
TAIWAN - 7.5%
- ------------
Advantech Co., Ltd. (Computers & Information) 303,866 650,218
Delta Electronics (Electrical Equipment) 492,625 744,587
Formosa Chemicals & Fibre Corp. (Textiles & Apparel) 531,000 896,990
Premier Image Technology (Electronic Equipment &
Instruments) 547,575 400,198
Quanta Computer Inc. (Computers & Peripherals) 323,146 522,572
Synnex Technology International Corp. (Systems & Subsystems) 231,000 331,454
Synnex Technology International Corp. - GDR (Systems &
Subsystems) 75,225 428,752
Taiwan Semiconductor Manufacturing Co. (Parts & Components) 480,672 629,753
Tong Yang Industry Co., Ltd. (Automotive) 308,943 385,473
-------------
4,989,997
-------------
THAILAND - 2.1%
- -------------
Advanced Information Service plc (Telecommunications) 275,000 626,218
Siam Cement Public Co., Ltd. (Cement Producers) 124,000 771,623
-------------
1,397,841
-------------
TURKEY - 3.4%
- ------------
Akbank TAS (Banks) 125,000,000 565,392
Anadolu Efes Biracilik ve Malt Sanayii AS (Beverages, Food &
Tobacco) 48,722,000 772,734
Arcelik AS (Industrial - Diversified)* 148,000,000 900,925
-------------
2,239,051
-------------
UNITED KINGDOM - 3.4%
- --------------------
Anglo American plc - ADR (Metals & Mining) 57,727 1,283,848
</Table>
See Notes to Financial Statements
14
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
SABMiller plc (Brewers) 70,350 $ 1,019,305
-------------
2,303,153
-------------
Total Common Stocks (Cost $49,623,904) 60,698,425
-------------
PREFERRED STOCK - 5.3%
- -------------------
BRAZIL - 2.5%
- -----------
All America Latina Logistica (Transportation)* 35,000 753,412
Banco Itau Holding Financeria SA - ADR (Commercial Banks) 15,796 955,658
-------------
1,709,070
-------------
RUSSIA - 1.3%
- -----------
Transneft (Oil & Gas) 900 854,550
-------------
SOUTH KOREA - 1.5%
- ----------------
Samsung Electronics Co., Ltd. - GDR 144A (Diversified
Electronics) 7,500 991,875
-------------
Total Preferred Stock (Cost $2,690,920) 3,555,495
-------------
TOTAL LONG TERM INVESTMENTS (COST $52,314,824) 64,253,920
-------------
</Table>
<Table>
<Caption>
FACE
REPURCHASE AGREEMENT - 3.7% AMOUNT
- --------------------------- ------------
Investors Bank & Trust Repurchase Agreement, 1.27% due
11/01/04 in the amount of $2,499,610; issued 10/29/04
(collateralized by $2,608,953 par of FHLMC #2334 FA, 2.37%,
due 07/15/31 with a market value of $2,625,196) (Cost
$2,499,346) $ 2,499,346 2,499,346
------------
TOTAL INVESTMENTS - 99.9% (COST $54,814,170) $ 66,753,266
------------
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.
</Table>
See Notes to Financial Statements
15
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) VALUE (1)
--
- -------------------------------------------------------------------------------------------------
OTHER ASSETS, NET OF LIABILITIES - 0.1%
- ------------------------------------------------------------
Receivable for Fund shares sold $ 538,422
Dividends receivable 60,630
Tax reclaim receivable 1,074
Receivable for open forward foreign currency contracts 439
Other assets 88
Prepaid expenses 215
Payable for securities purchased (389,830)
Payable to Investment Advisor (54,382)
Other liabilities (105,103)
------------
51,553
------------
NET ASSETS - 100%
- ------------------------------------------------------------
Applicable to 2,994,943 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 66,804,819
============
Net Asset Value, Offering and Redemption Price Per Share $ 22.31
============
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 2004 WERE AS
FOLLOWS:
- ------------------------------------------------------------
Paid-in capital $ 52,645,935
Accumulated undistributed net investment income 119,482
Accumulated undistributed net realized gain on investments
and foreign currency-related transactions 2,098,450
Net unrealized appreciation on investments and on assets and
liabilities denominated in foreign currencies (Note 4) 11,940,952
------------
$ 66,804,819
============
</Table>
Summary of Abbreviations
144A Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities, which represent 3.20% of net assets as of October
31, 2004, are considered liquid and may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
ADR American Depository Receipt
FHLMC Federal Home Loan Mortgage Association
GDR Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
16
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO -- OVERVIEW
(UNAUDITED)
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<Table>
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>
<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
10/31/97 $10,645 $11,018 $11,262
10/31/98 $10,383 $12,453 $11,907
10/31/99 $12,857 $15,693 $14,752
10/31/2000 $15,378 $15,818 $16,508
10/31/2001 $11,877 $11,803 $12,598
10/31/2002 $10,500 $10,162 $10,928
10/31/2003 $13,040 $12,667 $13,401
10/31/2004 $13,663 $14,381 $15,114
</Table>
<Table>
<Caption>
RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2004
---------------------------------------------------------
AVERAGE ANNUAL
CUMULATIVE TOTAL RETURN TOTAL RETURN
------------------------------------- ------------------
FUND NAME LAST 12 MONTHS 5 YR INCEPTION 5 YR INCEPTION
- ------------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
(12/1/96) 4.78% 6.27% 36.63% 1.22% 4.02%
MSCI All Country World
Free (Net dividend) 13.53% (8.37)% 43.81% (1.73)% 4.70%
Lipper Global Fund Index 12.78% 2.46% 51.14% 0.49% 5.36%
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. PERFORMANCE CURRENT TO THE MOST RECENT MONTH END MAY
BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED AND MAY BE OBTAINED BY VISITING
THE WEBSITE AT www.hardingloevner.com.
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.
17
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
The Portfolio returned 4.78% net of fees in the financial year through October
31, 2004. In comparison, the benchmark MSCI All Country World Free Index rose
13.53%. Please refer to the preceding page for complete performance information.
One of the key features of the fiscal year has been the continuation of the
flight from quality by investors that began with the rally from the bear market
lows eighteen months ago. We are keenly aware of this, given our investment
philosophy that explicitly favors highly profitable and financially strong
companies, a philosophy that has been out of step with the market. Objective
measures of our more qualitative preferences, such as return on assets, profit
margins, or the indebtedness of companies have been highly explanatory of
performance this year--in an inverse way. Companies whose operating performance
put them in the top echelons on those measures turned out to be in the bottom
tiers of stock price performance, by a substantial margin. We had been able to
sidestep that headwind for our investment style last year by embracing the
highest quality companies within more cyclical industries, but the more muted
tone of growth in developed economies, combined with the degree to which
cyclical recovery had been already discounted last year, meant that a cyclical
bias within the Portfolio hurt, rather than helped, this year, leaving us to
bear the full brunt of the quality headwinds. Our stock selection has detracted
from relative performance across nearly every industrial sector--evidence, we
believe, that we have been consistent in our unwillingness to diverge from
owning high-quality companies.
The other important aspect of the market environment this year has been the
underwhelming performance of the US stock market relative to non-US markets,
combined with the resumed decline of the US Dollar. The S&P500 Index returned
just over 9% in the twelve months ending October 31st, while the non-US markets,
as measured in dollars by the MSCI All-Country World ex-US Index, rose by nearly
20%. The Euro rose 10% against the Dollar, while the Japanese Yen rose 4%. We
have been underweight the US market since late in 2001, and have consistently
remained so through this year. We arrived at our allocation stance through
comparison valuations of US versus international companies, and through an
appreciation of the corporate governance and financial transparency issues
facing US companies. We also recognized that the large budget and current
account deficits were evidence that the US has been consuming more than it has
been producing. Correcting that would require either lower consumption by
Americans, more production exported, or a significant movement in the dollar
exchange rates. Those views increasingly are being shared by other investors
(and featured in the media); thus we are growing skeptical that they hold the
key to significant outperformance in the near future.
The final facet of the investment year that has affected the Portfolio has been
the severity and variety of pressures on companies in the non-cyclical sectors
of Health Care and Consumer Staples, where numerous companies have had to post
profit warnings, negating the traditional view of these industries as
'defensive.' The Portfolio has suffered from the withdrawal of Vioxx by Merck,
along with disappointing growth and the cost pressures of rising commodity and
packaging prices at Coca-Cola and Nestle. We have been hurt by the fact that our
more non-cyclical holdings have not performed as strongly as we would have
expected, had we been able to predict the slowing growth and lower bond yields
that have actually transpired.
Over the last three months, the quality headwinds show signs of abating, and we
are hopeful that the competitive advantages that characterize our companies will
once more be in the forefront of qualities prized by investors as the global
environment remains a challenging one. We also sense that optimism about both
the economy and the equity market is lower than it was a year ago, which
conversely gives us confidence that our companies will find opportunities they
can exploit.
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.
You cannot invest directly in an Index.
For discussion of risks of investing in these funds, see Note 8 of the Notes to
Financial Statements.
18
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -----------------------------------------------------------------------------
Advertising Agencies 1.5%
Automobiles 2.1
Automotive 1.9
Banks 5.2
Beverages, Food & Tobacco 3.4
Business Machines & Office Equipment 1.1
Chemicals 1.2
Commercial Banks 4.2
Communications 2.8
Computer Software & Processing 3.4
Cosmetics & Personal Care 2.9
Cosmetics & Toiletries 0.9
Discount Stores 1.6
Diversified Electronics 2.5
Diversified Food 1.9
Diversified Metal Producers 2.4
Electrical Equipment 2.8
Electronic Equipment & Instruments 2.2
Electronics 1.7
Exploration, Drilling Service & Equipment 1.3
Financial Services 5.4
General Diversified 2.1
Health Care Equipment & Supplies 1.2
Heavy Machinery 2.8
Industrial Chemicals & Gases Manufacturers 2.3
Insurance 2.8
Insurance Companies 3.1
Integrated International Oil Producers 1.2
Media 5.0
Miscellaneous Printing & Publishing 1.5
Oil & Gas 7.6
Other Financial Services 1.2
Pharmaceuticals 3.9
Power Transmission Equipment 1.4
Radio, TV, & Phonograph Manufacturers 1.0
Retailers 3.0
Semiconductor Equipment & Products 2.4
Software 1.8
Telephone Systems 3.5
-------------
Total 100.2%
=============
</Table>
See Notes to Financial Statements
19
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 97.0%
- ---------------------------
COMMON STOCKS - 95.7%
- ---------------------
AUSTRALIA - 2.4%
- --------------
Rio Tinto Ltd. (Diversified Metal Producers) 22,100 $ 609,866
-------------
AUSTRIA - 1.5%
- ------------
Erste Bank der Oesterreichischen Sparkassen AG (Banks) 8,500 380,112
-------------
CANADA - 3.0%
- ------------
EnCana Corp. (Oil & Gas) 15,800 780,520
-------------
FRANCE - 6.0%
- ------------
Air Liquide (Industrial Chemicals & Gases Manufacturers) 1,832 297,418
Dassault Systemes SA (Software) 9,100 461,938
L'Oreal SA (Cosmetics & Personal Care) 6,420 440,314
Schlumberger Ltd. (Exploration, Drilling Service &
Equipment) 5,300 333,582
-------------
1,533,252
-------------
GERMANY - 2.1%
- --------------
Deutsche Bank AG (Commercial Banks) 7,200 550,329
-------------
HONG KONG - 2.1%
- ---------------
Denway Motors Ltd. (Automobiles) 1,628,000 550,571
-------------
JAPAN - 13.1%
- ------------
Canon Inc. (Business Machines & Office Equipment) 5,800 287,225
Hirose Electronics Co., Ltd. (Electrical Equipment) 2,900 289,386
JSR Corp. (Automotive) 27,300 498,834
Keyence Corp. (Electronic Equipment & Instruments) 2,500 563,837
Mitsubishi Corp. (General Diversified) 49,600 548,620
Nomura Holdings Inc. (Financial Services) 19,700 241,855
Rohm Co., Ltd. (Electronics) 4,300 441,866
Sony Corp. - ADR (Radio, TV, & Phonograph Manufacturers) 7,100 247,435
Sumitomo Mitsui Financial Group Inc. (Banks) 40 260,262
-------------
3,379,320
-------------
MEXICO - 2.6%
- ------------
Coca-Cola Femsa SA de CV - ADR (Beverages, Food & Tobacco) 12,800 257,536
Wal-Mart de Mexico SA de CV - ADR (Discount Stores) 12,900 422,142
-------------
679,678
-------------
NETHERLANDS - 4.3%
- ----------------
Heineken NV (Beverages, Food & Tobacco) 10,050 317,217
Qiagen NV (Health Care Equipment & Supplies)* 28,200 299,221
</Table>
See Notes to Financial Statements
20
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
NETHERLANDS (CONTINUED)
VNU NV (Media) 17,600 $ 483,129
-------------
1,099,567
-------------
SOUTH AFRICA - 2.1%
- -----------------
Sasol Ltd. (Oil & Gas) 26,540 530,560
-------------
SOUTH KOREA - 3.9%
- ----------------
Kookmin Bank - ADR (Banks)* 11,000 369,930
Samsung Electronics Co., Ltd. - GDR (Diversified
Electronics) 3,270 640,920
-------------
1,010,850
-------------
SPAIN - 1.1%
- -----------
Bankinter SA (Commercial Banks) 6,500 291,186
-------------
SWITZERLAND - 6.6%
- ----------------
ABB Ltd. (Power Transmission Equipment)* 63,100 366,536
Nestle SA - ADR (Diversified Food) 8,120 478,586
Novartis AG - Registered (Pharmaceuticals) 8,020 384,231
Swiss Re - Registered (Insurance) 7,600 469,275
-------------
1,698,628
-------------
TAIWAN - 0.0%
- ------------
Taiwan Semiconductor Manufacturing Co. (Parts & Components) 393 515
-------------
THAILAND - 1.3%
- -------------
Bangkok Bank Pub Co., Ltd. (Banks) 142,200 331,953
-------------
UNITED KINGDOM - 7.7%
- --------------------
Pearson plc (Miscellaneous Printing & Publishing) 34,400 378,217
Standard Chartered plc (Other Financial Services) 17,100 306,359
Vodafone Group plc - Sponsored ADR (Telephone Systems) 34,900 900,071
WPP Group plc (Advertising Agencies) 39,300 395,468
-------------
1,980,115
-------------
UNITED STATES - 35.9%
- ------------------
Abbott Laboratories (Pharmaceuticals) 7,600 323,988
Air Products & Chemicals Inc. (Industrial Chemicals & Gases
Manufacturers) 5,500 292,490
American International Group (Insurance Companies) 9,100 552,461
Analog Devices (Semiconductor Equipment & Products) 15,400 620,004
BEA Systems Inc. (Computer Software & Processing)* 17,900 145,348
Berkshire Hathaway Inc., Class A (Insurance Companies)* 3 252,750
Caterpillar Inc. (Heavy Machinery) 8,850 712,779
Colgate-Palmolive Co. (Cosmetics & Toiletries) 5,300 236,486
Comcast Corp., Class A (Media)* 11,000 324,500
Emerson Electric Co. (Electrical Equipment) 6,650 425,932
Estee Lauder Companies Inc., Class A (Cosmetics & Personal
Care) 7,100 304,945
Exxon Mobil Corp. (Integrated International Oil Producers) 6,500 319,930
</Table>
See Notes to Financial Statements
21
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) SHARES VALUE (1)
- ---------------------------------------------------------------------------------------------------
UNITED STATES (CONTINUED)
Kinder Morgan Inc. (Oil & Gas) 9,870 $ 635,332
Medco Health Solutions Inc. (Insurance)* 7,089 240,388
Merck & Co., Inc. (Pharmaceuticals) 9,360 293,062
Oracle Corp. (Computer Software & Processing)* 57,600 729,216
Praxair Inc. (Chemicals) 7,600 320,720
Qualcomm Inc. (Communications) 17,300 723,313
The Coca-Cola Company (Beverages, Food & Tobacco) 7,380 300,071
TJX Companies Inc. (Retailers) 32,700 784,146
Viacom Inc., Class B (Media) 12,850 468,897
Wells Fargo & Co. (Commercial Banks) 4,200 250,824
-------------
9,257,582
-------------
Total Common Stocks (Cost $20,161,544) 24,664,604
-------------
PREFERRED STOCK - 1.3%
- -------------------
BERMUDA - 1.3%
- --------------
Taiwan Semi Flemings - 144A (Parts & Components) (Cost
$374,264)* 51,865 339,615
-------------
TOTAL LONG TERM INVESTMENTS (COST $20,535,808) 25,004,219
-------------
</Table>
<Table>
<Caption>
FACE
REPURCHASE AGREEMENT - 3.2% AMOUNT
- --------------------------- ------------
Investors Bank & Trust Repurchase Agreement, 1.27% due
11/01/04 in the amount of $806,594; issued 10/29/04
(collateralized by $797,809 par of FNMA #303705, 6.50%, due
07/01/14 with a market value of $846,840) (Cost $806,509) $ 806,509 806,509
------------
TOTAL INVESTMENTS - 100.2% (COST $21,342,317) $ 25,810,728
------------
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.
</Table>
See Notes to Financial Statements
22
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<Table>
<Caption>
OCTOBER 31, 2004 (CONTINUED) VALUE (1)
--
- -------------------------------------------------------------------------------------------------
LIABILITIES, NET OF OTHER ASSETS - (0.2)%
- ------------------------------------------------------------
Dividends receivable $ 27,610
Tax reclaim receivable 5,491
Other assets 27
Prepaid expenses 268
Payable to Investment Advisor (16,378)
Other liabilities (57,990)
------------
(40,972)
------------
NET ASSETS - 100%
- ------------------------------------------------------------
Applicable to 1,501,233 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 25,769,756
============
Net Asset Value, Offering and Redemption Price Per Share $ 17.17
============
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 2004 WERE AS
FOLLOWS:
- ------------------------------------------------------------
Paid-in capital $ 22,996,328
Accumulated undistributed net investment income 33,867
Accumulated distributions in excess of net realized gain on
investments and foreign currency-related transactions (1,729,568)
Net unrealized appreciation on investments and on assets and
liabilities denominated in foreign currencies (Note 4) 4,469,129
------------
$ 25,769,756
============
</Table>
Summary of Abbreviations
144A Security exempt from registration under Rule 144A of the Securities Act of
1933. This security, which represents 1.32% of net assets as of October 31,
2004, is considered liquid and may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
ADR American Depository Receipt
FHLMC Federal Home Loan Mortgage Association
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
23
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERNATIONAL EMERGING GLOBAL
EQUITY MARKETS EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------- ----------
INVESTMENT INCOME
Interest $ 24,708 $ 6,017 $ 1,527
Dividends (Net of foreign withholding
taxes of $541,547, $110,095, and
$11,326, respectively) 6,489,333 972,268 408,433
----------- ---------- ----------
Total investment income 6,514,041 978,285 409,960
----------- ---------- ----------
EXPENSES
Investment advisory fees (Note 3) 2,705,280 542,255 269,187
Administration fees (Note 3) 358,797 48,344 32,664
Custodian and fund accounting fees (Note
3) 443,199 90,698 35,865
Directors' fees and expenses (Note 3) 73,812 9,722 5,706
Shareholder record keeping fees 105,564 14,890 4,638
Printing and postage fees 14,201 552 614
State registration filing fees 29,965 14,198 2,792
Professional fees 118,949 43,456 31,481
Other fees and expenses 76,914 5,321 2,585
----------- ---------- ----------
Total Expenses 3,926,681 769,436 385,532
Waiver of investment advisory fee (Note
3) (319,649) (10,279) (49,048)
----------- ---------- ----------
Net expenses 3,607,032 759,157 336,484
----------- ---------- ----------
Net investment income 2,907,009 219,128 73,476
----------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
(NOTE 4)
Net realized gain (loss) --
Investment transactions (net of
foreign tax expense $298,646,
$34,686, and $1,935, respectively) 28,699,106 3,099,880 1,781,174
Foreign currency transactions (1,177,123) (64,960) (39,512)
----------- ---------- ----------
Net realized gain 27,521,983 3,034,920 1,741,662
----------- ---------- ----------
Change in unrealized appreciation
(depreciation) --
Investments 4,838,766 5,539,245 (555,280)
Translation of assets and liabilities
denominated in foreign currency 8,612 1,848 870
----------- ---------- ----------
Net change in unrealized appreciation
(depreciation) 4,847,378 5,541,093 (554,410)
----------- ---------- ----------
Net realized and unrealized gain 32,369,361 8,576,013 1,187,252
----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $35,276,370 $8,795,141 $1,260,728
=========== ========== ==========
</Table>
See Notes to Financial Statements
24
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERNATIONAL EQUITY PORTFOLIO
-------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
2004 2003
--------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 2,907,009 $ 3,492,175
Net realized gain (loss) on
investments and foreign currency
transactions 27,521,983 (35,308,704)
Net change in unrealized appreciation
on investments and translation of
assets and liabilities denominated
in foreign currency 4,847,378 87,945,701
------------- ------------
Net increase in net assets resulting
from operations 35,276,370 56,129,172
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,167,605) (1,406,053)
------------- ------------
Total distributions to shareholders (2,167,605) (1,406,053)
------------- ------------
TRANSACTIONS IN SHARES OF COMMON STOCK
Proceeds from sale of shares 49,810,442 46,271,780
Net Asset Value of shares issued to
shareholders upon reinvestment of
dividends 1,833,540 1,167,410
Cost of shares redeemed (119,352,363) (41,142,391)
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (67,708,381) 6,296,799
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS (34,599,616) 61,019,918
NET ASSETS
At beginning of year 350,019,951 289,000,033
------------- ------------
At end of year $ 315,420,335 $350,019,951
============= ============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME INCLUDED IN NET ASSETS $ 1,431,240 $ 2,174,828
============= ============
</Table>
See Notes to Financial Statements
25
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
EMERGING MARKETS PORTFOLIO
--------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
2004 2003
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 219,128 $ 116,051
Net realized gain (loss) on
investments and foreign currency
transactions 3,034,920 (289,103)
Net change in unrealized appreciation
on investments and translation of
assets and liabilities denominated
in foreign currency 5,541,093 6,916,109
----------- -----------
Net increase in net assets resulting
from operations 8,795,141 6,743,057
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (62,351) -
----------- -----------
Total distributions to shareholders (62,351) -
----------- -----------
TRANSACTIONS IN SHARES OF COMMON STOCK
Proceeds from sale of shares 30,147,050 14,391,098
Net Asset Value of shares issued to
shareholders upon reinvestment of
dividends 58,908 -
Cost of shares redeemed (1,798,399) (1,593,501)
Redemption fees 7,670 -
----------- -----------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 28,415,229 12,797,597
----------- -----------
NET INCREASE IN NET ASSETS 37,148,019 19,540,654
NET ASSETS
At beginning of year 29,656,800 10,116,146
----------- -----------
At end of year $66,804,819 $29,656,800
=========== ===========
ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME INCLUDED IN NET ASSETS $ 119,482 $ 64,484
=========== ===========
</Table>
See Notes to Financial Statements
26
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
GLOBAL EQUITY PORTFOLIO
-------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
2004 2003
------------ -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 73,476 $ 154,776
Net realized gain (loss) on investments and
foreign currency transactions 1,741,662 (1,451,078)
Net change in unrealized appreciation
(depreciation) on investments and translation
of assets and liabilities denominated in
foreign currency (554,410) 6,524,918
----------- -----------
Net increase in net assets resulting from
operations 1,260,728 5,228,616
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (105,080) (50,332)
----------- -----------
Total distributions to shareholders (105,080) (50,332)
----------- -----------
TRANSACTIONS IN SHARES OF COMMON STOCK
Proceeds from sale of shares 1,297,150 3,911,357
Net Asset Value of shares issued to shareholders
upon reinvestment of dividends 66,670 30,865
Cost of shares redeemed (3,317,264) (2,284,852)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (1,953,444) 1,657,370
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (797,796) 6,835,654
NET ASSETS
At beginning of year 26,567,552 19,731,898
----------- -----------
At end of year $25,769,756 $26,567,552
=========== ===========
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
INCLUDED IN NET ASSETS $ 33,867 $ 104,983
=========== ===========
</Table>
See Notes to Financial Statements
27
<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, 2004 OCT. 31, 2003 OCT. 31, 2002 OCT. 31, 2001 OCT. 31, 2000
------------- ------------- ------------- ------------- -------------
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF YEAR $11.30 $9.58 $10.55 $15.22 $15.50
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income 0.11 0.11 0.07 0.09 0.09
Net realized and unrealized gain
(loss) on investments and foreign
currency-related transactions 1.07 1.65 (1.01) (3.61) 0.36
------------ ------------ ------------ ------------ ------------
Net increase (decrease) from investment
operations 1.18 1.76 (0.94) (3.52) 0.45
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:+
Net investment income (0.07) (0.04) (0.03) - (0.23)
Net realized gain from investments
and foreign currency-related
transactions - - - (1.15) (0.50)
------------ ------------ ------------ ------------ ------------
Total distributions (0.07) (0.04) (0.03) (1.15) (0.73)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $12.41 $11.30 $9.58 $10.55 $15.22
============ ============ ============ ============ ============
TOTAL RETURN 10.46% 18.49% (8.92)% (24.99)% 2.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $315,420 $350,020 $289,000 $283,721 $349,046
Ratio of net operating expenses to
average net assets 1.00% 1.00% 1.00% 1.00% 0.99%
Ratio of net investment income, to
average net assets 0.81% 1.10% 0.70% 0.63% 0.45%
Decrease reflected in above expense
ratios due to waiver of investment
advisory and administration fees,
and reimbursement of other
expenses 0.09% 0.06% 0.06% 0.05% - *
Portfolio turnover rate 37% 58% 45% 46% 49%
</Table>
+ Certain prior year amounts have been reclassified to conform to the current
year presentation.
* Rounds to less than 0.01%.
See Notes to Financial Statements
28
<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 YEAR
ENDED ENDED ENDED ENDED ENDED
OCT. 31, 2004 OCT. 31, 2003 OCT. 31, 2002 OCT. 31, 2001 OCT. 31, 2000
------------- ------------- ------------- ------------- -------------
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF YEAR $18.16 $12.49 $11.88 $14.89 $13.68
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (loss) 0.07 0.07 0.04 0.01 (0.05)
Net realized and unrealized gain
(loss) on investments and foreign
currency-related transactions 4.12 5.60 0.58 (1.89) 1.79
----------- ----------- ----------- ----------- -----------
Net increase (decrease) from investment
operations 4.19 5.67 0.62 (1.88) 1.74
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:+
Net investment income (0.04) - (0.01) - (0.02)
Net realized gain from investments
and foreign currency-related
transactions - - - (1.13) (0.51)
----------- ----------- ----------- ----------- -----------
Total distributions (0.04) - (0.01) (1.13) (0.53)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR $22.31 $18.16 $12.49 $11.88 $14.89
=========== =========== =========== =========== ===========
TOTAL RETURN 23.09% 45.40% 5.22% (13.48)% 12.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $66,805 $29,657 $10,116 $2,731 $2,575
Ratio of net operating expenses to
average net assets 1.75% 1.75% 1.75% 1.75% 1.75%
Ratio of net investment income
(loss), to average net assets 0.51% 0.76% 0.19% 0.08% (0.39)%
Decrease reflected in above expense
ratios due to waiver of investment
advisory and administration fees,
and reimbursement of other
expenses 0.02% 0.08% 0.39% 1.15% 1.08%
Portfolio turnover rate 40% 58% 43% 38% 28%
</Table>
+ Certain prior year amounts have been reclassified to conform to the current
year presentation.
See Notes to Financial Statements
29
<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, 2004 OCT. 31, 2003 OCT. 31, 2002 OCT. 31, 2001 OCT. 31, 2000
------------- ------------- ------------- ------------- -------------
PER SHARE DATA
NET ASSET VALUE,
BEGINNING OF YEAR $16.45 $13.28 $15.08 $21.81 $20.00
---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS
Net investment income 0.05 0.09 0.05 0.04 0.03
Net realized and
unrealized gain
(loss) on
investments and
foreign
currency-related
transactions 0.74 3.11 (1.79) (4.49) 3.89
---------- ---------- ---------- ---------- ----------
Net increase (decrease)
from investment
operations 0.79 3.20 (1.74) (4.45) 3.92
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:+
Net investment income (0.07) (0.03) (0.00)* - (0.16)
Net realized gain
from investments
and foreign
currency-related
transactions - - (0.06) (2.28) (1.95)
---------- ---------- ---------- ---------- ----------
Total distributions (0.07) (0.03) (0.06) (2.28) (2.11)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
YEAR $17.17 $16.45 $13.28 $15.08 $21.81
========== ========== ========== ========== ==========
TOTAL RETURN 4.78% 24.19% (11.59)% (22.77)% 19.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's) $25,770 $26,568 $19,732 $18,524 $25,089
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 0.27% 0.70% 0.38% 0.24% 0.10%
Decrease reflected in
above expense
ratios due to
waiver of
investment advisory
and administration
fees, and
reimbursement of
other expenses 0.18% 0.12% 0.19% 0.22% 0.23%
Portfolio turnover
rate 29% 68% 55% 50% 57%
</Table>
+ Certain prior year amounts have been reclassified to conform to the current
year presentation.
* Rounds to less than $0.01.
See Notes to Financial Statements
30
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
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, 2004: 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.
International Equity commenced operations on October 31, 1996 after acquiring
the net assets of Harding, Loevner Management, L.P.'s AMT Capital Fund, Inc.
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:
INDEMNIFICATIONS
In the normal course of business, the Fund may enter into contracts that contain
a variety of representations or that provide indemnification for certain
liabilities. The Fund's maximum exposure under these arrangements is unknown, as
this would involve future claims that may be made against the Fund that have not
yet occurred. However, the Fund has not had prior claims or losses pursuant to
these contracts and expects the risk of loss to be remote.
ESTIMATES
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
VALUATION
The Board of Directors (the "Board") of the Fund has adopted procedures
("Procedures") to govern the valuation of the portfolio securities held by each
series of the Fund in accordance with the Investment Company Act of 1940, as
amended ("1940 Act"). The Procedures incorporate principles set forth in
relevant pronouncements of the Securities and Exchange Commission ("SEC") and
its staff, including guidance on the obligations of funds and their Directors to
determine, in good faith, the fair value of the fund's portfolio securities when
market quotations are not readily available.
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 fair valued by the Board or its
delegate in accordance with the Procedures, although the actual calculations may
be done by others. Factors considered in making this determination may include,
but are not limited to, information obtained by contacting the issuer, analysts,
or the appropriate stock exchange (for exchange-traded securities), analysis of
the issuer's financial statements or other available documents and, if
necessary, available information concerning other securities in similar
circumstances. The Fund has implemented fair value pricing on a daily basis for
all foreign equity securities held by the Portfolios. The fair value pricing
utilizes quantitative models developed by an independent pricing service unless
the Fund determines that use of another fair valuation methodology is
appropriate. As of October 31, 2004, there were no securities in the Fund which
required valuation by the Board.
31
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 as adjustments to interest income and the
cost of investments. The Fund uses the specific identification method for
determining realized gains or losses from 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.
DIVIDENDS TO SHAREHOLDERS
It is the policy of the Fund to declare dividends from net investment income
annually. Net short-term and long-term capital gains distributions for the
Portfolios, if any, normally are distributed on an annual basis.
Dividends from net investment income and distributions from net realized gains
from investment transactions have been determined in accordance with income tax
regulations and may differ from net investment income and realized gains
recorded by the Portfolios for financial reporting purposes. Differences result
primarily from foreign currency transactions and timing differences related to
recognition of income, and gains and losses from investment transactions. To the
extent that any differences which are permanent in nature result in
overdistributions to shareholders, the amount of the overdistribution is
reclassified within the capital accounts based on its federal tax basis
treatment. Temporary differences do not require reclassification. To the extent
that they exceed net investment income and net realized gains for tax purposes,
they are reported as returns of capital.
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 in the Statements of
Operations.
Net realized gains and losses from foreign currency-related transactions arise
from sales of foreign currency, currency gains or losses realized between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the 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.
32
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITY LENDING
Each portfolio is authorized to lend securities from its investment portfolios
to banks, brokers and other financial institutions if it receives collateral in
cash, U.S. Government Securities or other liquid investments which will be
maintained at all times in an amount equal to at least 102% of the current
market value of the loaned securities. The loans will be terminable at any time
by the Fund and the relevant Portfolio will then receive the loaned securities
within five days. During the period of such a loan, the Portfolio receives the
income on the loaned securities and a loan fee and may thereby increase its
total return. A Portfolio continues to receive interest or dividends on the
securities loaned and simultaneously earns either interest on the investment of
the cash collateral or fee income if the loan is otherwise collateralized.
However, a Portfolio normally pays lending fees and related expenses from the
interest or dividends earned on invested collateral. Should the borrower of the
securities fail financially, there is a risk of delay in recovery of the
securities or loss of rights in the collateral. However, loans are made only to
borrowers which are approved by the Board of Directors and are deemed by Harding
Loevner to be of good financial standing. A Portfolio may invest cash collateral
it receives in connection with a loan of securities in securities of the U.S.
Government and its agencies and other high quality short-term debt instruments.
For purposes of complying with each Portfolio's investment policies and
restrictions, collateral received in connection with securities loans will not
be deemed an asset of a Portfolio unless otherwise required by law.
For the year ended October 31, 2004, the portfolios did not engage in security
lending.
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 $358,797, $48,344 and $32,664, respectively,
in administration fees and $443,199, $90,698 and $35,865, respectively, in
custodian and fund accounting fees for the year ended October 31, 2004.
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, 2004, the Investment Advisor voluntarily waived $319,649,
$10,279 and $49,048, 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 $73,812, $9,722 and $5,706, respectively, for the
year ended October 31, 2004.
The Fund has agreements with various financial intermediaries and "mutual fund
supermarkets," including Oppenheimer Asset Management, Charles Schwab & Co. and
Fidelity Brokerage Services LLC, under which customers of these intermediaries
may purchase and hold Fund shares. These intermediaries assess fees in
consideration for providing certain distribution, account maintenance, record
keeping and transactional services. In recognition of the savings of expenses to
the Fund arising from the economies of scale associated with these
intermediaries' holding their customers' shares in a single account with the
Fund's transfer agent, each Portfolio is authorized to pay to each intermediary
up to 0.15% of its average daily net assets attributable to that intermediary
for providing sub-accounting and related shareholder services (subject to the
voluntary expense cap); the balance of the intermediaries' fees are paid by
Harding Loevner. Because of Harding Loevner's voluntary cap on the Fund's fees
and expenses, Harding Loevner paid a portion or all of the Portfolios' share of
these fees during the year ended October 31, 2004. The Fund may enter into
similar arrangements with other intermediaries in the future.
33
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities, other than
short-term investments, for the year ended October 31, 2004, were as follows for
each Portfolio:
<Table>
<Caption>
PURCHASE COST OF PROCEEDS FROM SALES OF
PORTFOLIO INVESTMENT SECURITIES INVESTMENT SECURITIES
- ---------------------------------------------------------------------------------------
International Equity $129,052,454 $195,780,343
Emerging Markets 44,057,257 17,213,002
Global Equity 7,751,166 9,964,700
</Table>
The cost of investments for Federal income tax purposes and the components of
net unrealized appreciation on investments at October 31, 2004, for each of the
Portfolios were as follows:
<Table>
<Caption>
UNREALIZED UNREALIZED
PORTFOLIO APPRECIATION DEPRECIATION NET COST
- -------------------------------------------------------------------------------------
International Equity $67,482,950 $5,282,353 $62,200,597 $249,193,278
Emerging Markets 13,021,600 1,127,550 11,894,050 54,859,216
Global Equity 5,007,355 645,110 4,362,245 21,448,483
</Table>
The unrealized appreciation (depreciation) on foreign currency for International
Equity, Emerging Markets and Global Equity was $35,203, $1,856 and $718,
respectively, for the year ended October 31, 2004.
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.
During the year ended October 31, 2004, the tax character of distributions paid
from ordinary income was $2,167,605, $62,351 and $105,080 for International
Equity, Emerging Markets and Global Equity, respectively.
As of October 31, 2004, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED TOTAL
ORDINARY LONG-TERM CAPITAL AND APPRECIATION/ ACCUMULATED
PORTFOLIO INCOME CAPITAL GAINS OTHER LOSSES (DEPRECIATION)* EARNINGS/(DEFICIT)
- ------------------------------------------------------------------------------------------------------------
International Equity
Portfolio $1,431,240 $ -- $ (40,750,307) $62,235,800 $22,916,733
Emerging Markets
Portfolio 119,482 2,143,497 -- 11,895,905 14,158,884
Global Equity Portfolio 33,867 -- (1,623,402) 4,362,963 2,773,428
</Table>
* The difference between book basis and tax basis unrealized
appreciation/depreciation is attributable to the deferral of losses on wash
sales.
At October 31, 2004, International Equity, for federal income purposes, had a
capital loss carryover of $5,246,406, 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, 2010. International Equity and Global
Equity had capital loss carryovers of $35,503,901 and $1,623,402, respectively,
which will expire on October 31, 2011.
International Equity, Emerging Markets, and Global Equity utilized $29,242,904,
$960,065 and $1,769,746, respectively, of capital loss carryforwards in the
current period to offset net realized capital gain for federal tax purposes.
34
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS (CONTINUED)
Primarily as a result of differing book/tax treatment of foreign currency
transactions and foreign capital gain tax expenses, the Funds made
reclassifications among certain capital accounts. The reclassifications have no
impact on the net assets of the Funds. As of October 31, 2004, the following
reclassifications were made to the Statement of Net Assets.
<Table>
<Caption>
ACCUMULATED UNDISTRIBUTED
NET REALIZED GAIN/LOSS ON ACCUMULATED
INVESTMENTS & FOREIGN UNDISTRIBUTED
CURRENCY RELATED NET INVESTMENT
PAID-IN CAPITAL TRANSACTIONS INCOME
- -----------------------------------------------------------------------------------------------
International Equity $7,223 $1,475,769 $(1,482,992)
Emerging Markets 2,133 99,646 (101,779)
Global Equity -- 39,512 (39,512)
</Table>
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 counterparty 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, 2004.
6. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock for International Equity were as follows for the
years indicated:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------
Shares sold 4,113,187 $ 49,810,442 4,743,141 $ 46,271,780
Shares issued upon
reinvestment of dividends 153,692 1,833,540 121,352 1,167,410
---------- ------------ ---------- ------------
4,266,879 51,643,982 4,864,493 47,439,190
Shares redeemed (9,832,119) (119,352,363) (4,039,579) (41,142,391)
---------- ------------ ---------- ------------
Net increase (decrease) (5,565,240) $(67,708,381) 824,914 $ 6,296,799
========== ============ ========== ============
</Table>
Transactions in capital stock for Emerging Markets were as follows for the years
indicated:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
----------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
Shares sold 1,446,775 $30,147,050 936,359 $14,391,098
Shares issued upon
reinvestment of dividends 3,013 58,908 -- --
--------- ----------- -------- -----------
1,449,788 30,205,958 936,359 14,391,098
Shares redeemed (87,648) (1,798,399) (113,515) (1,593,501)
--------- ----------- -------- -----------
Net increase 1,362,140 $28,407,559 822,844 $12,797,597
========= =========== ======== ===========
</Table>
35
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2004
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in capital stock for Global Equity were as follows for the years
indicated:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 76,175 $ 1,297,150 294,445 $ 3,911,357
Shares issued upon
reinvestment of dividends 3,913 66,670 2,312 30,865
-------- ----------- -------- -----------
80,088 1,363,820 296,757 3,942,222
Shares redeemed (194,039) (3,317,264) (167,676) (2,284,852)
-------- ----------- -------- -----------
Net increase (decrease) (113,951) $(1,953,444) 129,081 $ 1,657,370
======== =========== ======== ===========
</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, 2004, the
Emerging Markets Portfolio received $7,670 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. 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.
36
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
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, 2004, 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of October 31, 2004 by
correspondence with the custodian. 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, 2004, 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 U.S.
generally accepted accounting principles.
[ERNST & YOUNG SIGNATURE]
New York, New York
December 7, 2004
37
<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 $812,355, $144,781, and $10,685 and earned $6,886,367, $1,091,626, and
$251,904 foreign source income during the year ended October 31, 2004,
respectively. Pursuant to Section 853 of the Internal Revenue Code,
International Equity, Emerging Markets and Global Equity designated $0.0320,
$0.0483 and $0.0071 per share as foreign taxes paid and $0.2708, $0.3645 and
$0.1678 per share as income earned from foreign sources for the year ended
October 31, 2004, respectively.
International Equity, Emerging Markets and Global Equity had qualifying dividend
income of $6,346,866, $853,364 and $395,204 during the year ended October 31,
2004, respectively.
38
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
SUPPLEMENTAL TAX INFORMATION (CONTINUED)
(UNAUDITED)
- --------------------------------------------------------------------------------
The International Equity, Emerging Markets, and Global Equity Portfolios have
elected to pass through the credit for taxes paid in foreign countries during
its fiscal year ended October 31, 2004. In accordance with current tax laws, the
Foreign Income and Foreign Tax per share (for a share outstanding on October 31,
2004 is as follows:
<Table>
<Caption>
INTERNATIONAL EQUITY
--------------------------
GROSS FOREIGN
COUNTRY FOREIGN TAX DIVIDENDS
- ----------------------------------------------------------------
Australia 0.0000 0.0018
Bermuda 0.0000 0.0022
Brazil 0.0018 0.0038
Canada 0.0014 0.0091
China 0.0000 0.0030
Denmark 0.0004 0.0027
France 0.0000 0.0213
Germany 0.0019 0.0128
Hong Kong 0.0000 0.0091
India 0.0000 0.0051
Ireland 0.0047 0.0000
Israel 0.0000 0.0002
Japan 0.0016 0.0280
Mexico 0.0000 0.0026
Netherlands 0.0014 0.0149
Russia 0.0004 0.0004
Singapore 0.0008 0.0040
South Africa 0.0000 0.0095
South Korea 0.0006 0.0060
Spain 0.0017 0.0165
Sweden 0.0147 0.0147
Switzerland 0.0025 0.0316
Thailand 0.0112 0.0090
Taiwan 0.0013 0.0019
United Kingdom 0.0039 0.0562
</Table>
<Table>
<Caption>
EMERGING MARKETS
--------------------------
COUNTRY GROSS FOREIGN
FOREIGN TAX DIVIDENDS
- ----------------------------------------------------------------
Austria 0.0004 0.0024
Bermuda 0.0000 0.0008
Brazil 0.0025 0.0428
Chile 0.0024 0.0110
China 0.0000 0.0052
Egypt 0.0000 0.0006
Estonia 0.0004 0.0023
Hong Kong 0.0000 0.0135
Hungary 0.0006 0.0042
Indonesia 0.0032 0.0208
India 0.0002 0.0178
Israel 0.0002 0.0010
Luxemborg 0.0000 0.0069
Malaysia 0.0013 0.0045
Mexico 0.0000 0.0281
Philippines 0.0017 0.0069
Poland 0.0004 0.0023
Russia 0.0000 0.0030
South Africa 0.0000 0.0537
South Korea 0.0068 0.0459
Taiwan 0.0146 0.0535
Thailand 0.0134 0.0174
Turkey 0.0000 0.0057
United Kingdom 0.0008 0.0170
</Table>
<Table>
<Caption>
GLOBAL EQUITY
--------------------------
GROSS FOREIGN
COUNTRY FOREIGN TAX DIVIDENDS
- ----------------------------------------------------------------
Australia 0.0004 0.0027
Bermuda 0.0000 0.0098
Brazil 0.0010 0.0001
Canada 0.0006 0.0042
France 0.0000 0.0170
Germany 0.0006 0.0139
Hong Kong 0.0000 0.0117
Japan 0.0006 0.0184
Mexico 0.0000 0.0058
Netherlands Antilles 0.0000 0.0007
Netherlands 0.0002 0.0053
Russia 0.0000 0.0006
South Africa 0.0000 0.0125
South Korea 0.0010 0.0113
Spain 0.0006 0.0042
Switzerland 0.0011 0.0148
Taiwan 0.0000 0.0000
United Kingdom 0.0030 0.0349
United States 0.0000 0.1076
</Table>
Shareholders will receive more detailed information along with their Form
1099-DIV in January, 2005.
39
<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
- ----------------------------------------------------------------------------------------------------------------------------
R. Kelly Doherty Director Indefinite; Director Cayman Partners 3 None
41 Post Road since 2004 (private investment
Bernardsville, NJ 07924 vehicle), Managing
Age, 46 Partner,
2/99-present;
Bankers Trust
Company, 1982-1/99,
Vice Chairman,
1997-1/99.
Jane A. Freeman Director Indefinite; Director Scientific Learning 3 None
c/o Scientific Learning since 1996 Corporation
300 Frank Ogawa Plaza (Education
Oakland, CA Software), Chief
Age, 51 Financial Officer,
1/00-present;
Treasurer and Vice
President,
Finance & Business
Development,
9/99-1/00;
Rockfeller & 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 (Advisory Firm),
New York, NY 10022 1/03-present;
Age, 59 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 Frontier Oil
66 Witherspoon Street since 1996 Foundation Corp.; Labor
Princeton, NJ 08542 (Charitable Ready, Inc.;
Age, 69 Foundation), UBS Mutual
President, Funds; Guardian
1990-present. Life Mutual
Funds; European
Investors REIT
Mutual Funds.
Raymond J. Clark Director Indefinite; Director Woodrow Wilson 3 Princeton
66 Greenway Terrace since 2004 National Fellowship Healthcare
Princeton, NJ 08540 Foundation, System; American
Age, 70 Treasurer, Red Cross-Mercer
08/04-present; County Chapter
Wellesley College,
Interim Vice
President of Finance
and Treasurer,
10/03-6/04;
Princeton
University,
Treasurer, Emeritus,
02/01-present;
Princeton
University,
Treasurer,
1987-2001.
</Table>
40
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
DIRECTORS AND PRINCIPAL OFFICERS OF THE FUND (CONTINUED)
(UNAUDITED)
- --------------------------------------------------------------------------------
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, 50
</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.
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, 38
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, 51
Susan C. Mosher Secretary and 1 year; Secretary Investors Bank &
Investors Bank & Trust Chief Compliance since 1999; Chief Trust Company,
Company Officer Compliance Officer Director and Senior
200 Clarendon Street since 2004 Counsel,
Boston, MA 02116 1995-present.
Age, 49
Brenda J. O'Neill Assistant 1 year; Assistant Investors Bank &
Investors Bank & Trust Treasurer Treasurer since 2004 Trust Company,
Company Senior Manager
200 Clarendon Street 11/02-present;
Boston, MA 02116 Manager 7/00-10/02;
Age, 36 Supervisor
10/97-6/00.
</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 of the Fund and is available, without charge, upon request,
by calling 1-877-435-8105.
41
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION
(UNAUDITED)
- --------------------------------------------------------------------------------
QUARTERLY FORM N-Q PORTFOLIO SCHEDULE
Each portfolio will file its complete schedule with the Security and Exchange
Commission ("SEC") on Form N-Q at the end of the first and third fiscal quarters
within 60 days of the end of the quarter to which it relates. The Portfolio's
Form N-Q will be available on the SEC's website at www.sec.gov and may also be
reviewed and copied at the SEC's Public Reference Room. Additionally, they are
available upon request by calling 1-877-435-8105.
PROXY VOTING RECORD
The Fund's proxy voting record relating to the portfolio securities during the
most recent 12-month period ended June 30 is available on the Fund's website at
www.hardingloevner.com and on the Commission's website at www.sec.gov.
PROXY VOTING POLICIES AND PROCEDURES
A description of the Fund's proxy voting policies and procedures are located in
the Statement of Additional Information and is available without charge, upon
request, by calling 1-877-435-8105 or on the Commission's website at
www.sec.gov.
42
<Page>
HARDING, LOEVNER FUNDS, INC.
- --------------------------------------------------------------------------------
OFFICERS & 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
R. Kelly Doherty
DIRECTOR OF THE FUND
Raymond J. Clark
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 AND CHIEF COMPLIANCE
OFFICER OF THE FUND
Richard Reiter
CHIEF FINANCIAL OFFICER AND
TREASURER OF THE FUND
Brendan J. O'Neill
ASSISTANT TREASURER
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
<Page>
ITEM 2. CODE OF ETHICS.
As of October 31, 2004, 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, 2004,
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 11(a)(1).
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.
(a) AUDIT FEES: The aggregate fees billed for each of the last two fiscal
years for professional services rendered by Ernst Young LLP for the audit of
the registrant annual financial statements or services that are normally
provided by the accountant in connection with statutory and regulatory
filings or engagements for those fiscal years are $65,600 in 2004 and $59,600
in 2003.
(b) AUDIT-RELATED FEES: The aggregate fees billed in each of the last two
fiscal years for assurance and related services by Ernst Young LLP that are
reasonably related to the performance of the audit of the registrant
financial statements and are not reported under paragraph (a) of this Item
are NONE.
(c) TAX FEES: The aggregate fees billed in each of the last two fiscal years
for professional services rendered by Ernst Young LLP for the review of
domestic tax returns and the preparation of Indian income-tax returns are
$12,050 in 2004 and $6,000 in 2003.
(d) ALL OTHER FEES: The aggregate fees billed in each of the last two fiscal
years for products and services provided by Ernst Young LLP, other than the
services reported in paragraphs (a) through (c) of this Item are NONE.
(e)(1) Disclose the audit committee pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Registrant's audit committee pre-approves all audit and non-audit
services to be performed by Ernst & Young LLP, the Registrant's independent
accountant, before Ernst & Young LLP is engaged by the Registrant to
perform such services.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) Not applicable
(c) 100%
(d) Not applicable
<Page>
(f) Not applicable.
(g) Not applicable.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable to this filing.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this registrant.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to this registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable to this filing.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The Registrant's Principal Executive Officer and Principal
Financial Officer concluded that the Registrant's disclosure controls
and procedures (as defined in Rule 30a-3(c) under the Investment
Company Act of 1940) were effective as of a date within 90 days prior
to the filing date of this report, based on their evaluation of the
effectiveness of the Registrant's disclosure controls and procedures
as of the Evaluation Date.
(b) There were no significant changes in the Registrant's internal
control over financial reporting (as defined in Rule 30a-3(d) under
the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Sox Code of Ethics is attached.
(a)(2) Section 302 Certification letters are attached.
(b) Section 906 Certifications are attached.
<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 21, 2004
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 21, 2004
By: /S/ Richard Reiter
-------------------------------------------------------
Richard Reiter, Treasurer and Chief Financial Officer
Date: December 21, 2004