Harding Loevner Funds N-CSRSCertified semi-annual shareholder report (management investment company)

Harding Loevner Funds

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

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Since we last wrote to you in October, global stock markets have taken a decidedly healthier turn. Non-US markets have rallied by 20%, with developed markets outpacing emerging markets (EMs), which have risen 16%. But even that more moderate result for EM is still twice the return of the US market, which has risen just shy of 8% over the same period. Countries in the eurozone, Germany and France in particular, have stood out as their markets surged on the realization that Europe would weather the energy crisis provoked by Russia’s invasion of Ukraine better than initially feared. Additionally, China’s stock market rebounded as its economy emerged from its lengthy COVID-19 lockdown, rising a remarkable 35%, the biggest jump among major EM markets. The rest of EM rose less than 5%, although several Eastern European markets enjoyed similar eye-popping rebounds from their Ukraine-inspired declines from earlier last year.

Although inflation pressures have moderated, core inflation has remained stubbornly high, frustrating central banks. In contrast, bond markets rallied to offer lower long-term yields as investors fear the monetary tightening already baked into borrowers’ costs will lead to a severe recession. Those fears are perhaps not entirely misplaced given the ruckus in the US regional banking sector. The depositor runs on US regional banks, which began in March as asset/liability mismatches led to banks holding underwater securities or lending portfolios, forced the hand of regulators to intervene. Silicon Valley Bank failed on March 10 and was taken over by the Federal Deposit Insurance Corporation (FDIC). Nine days later and halfway around the world, Credit Suisse, the storied Swiss bank, faced a similar fate as regulators pushed it into the arms of its oldest rival UBS after it, too, hemorrhaged deposits.

more bluntly, through unemployment and bankruptcies. Inverted yield curves, clearly visible in North American and European bond markets, are warning of precisely the latter. Individually, these are, by nature, low-probability scenarios, but ones that would be calamitous for stock markets from current levels.

Every bear market reveals mistakes that investors made; we received no exemption from that truism. A touchstone at Harding Loevner is to examine our mistakes, not to assign blame (individual accountability already being clear-cut in our process), but rather to understand whether and how we can avoid repeating them in the future. While our process has functioned as designed and has led to good long-term performance, we’ve experienced a small number of notably negative outcomes from decisions taken over the last two years that prompt us to investigate how we might prevent similar instances in the future.

Portfolio Management Team
		Peter Baughan, CFA Co-Lead Portfolio Manager   Jingyi Li Co-Lead Portfolio Manager   Scott Crawshaw Portfolio Manager   Christopher Mack, CFA Portfolio Manager   Richard Schmidt, CFA Portfolio Manager   Moon Surana, CFA Portfolio Manager

Performance Summary

For the Global Equity Portfolio, the Advisor Class rose 11.14%, the Institutional Class rose 11.25%, and the Institutional Class Z rose 11.30% (net of fees and expenses) in the six-month period ended April 30, 2023. The Portfolio’s benchmark, the MSCI All Country World Index, rose 12.68% (net of source taxes) in the same period.

Market Review

Global markets rose in the six-month period ended April 30, 2023. Buoyed by slowing inflation and falling US bond yields, most regions finished in positive territory amid continued interest rate hikes by central banks and mounting signs of stress in the banking industry, both in the US and abroad.

In the fall and winter of 2022, long-term bond yields fell on mounting fears that elevated short-term borrowing costs might have been strangling the more productive areas of the economy, tipping it into outright recession. As yield differentials declined, the US dollar reversed course and fell against most other major currencies for the six-month period ended April 30, 2023.

However, investor sentiment was placated by US inflation continuing to decrease from its June 2022 highs, while Europe’s inflation also appeared to peak, with the energy supply crisis there easing. Labor markets remained tight, with job openings plentiful, wage gains widespread, and jobless claims stable. The Federal Reserve increased its borrowing rate four times since October, albeit in smaller

the index return, helped by the mild winter that averted the energy crisis threatened by a cutting off of Russian oil and gas supplies. Emerging Markets outperformed as China’s blistering relief rally late in 2022 was enough to offset the doldrums its market has seen in 2023 so far; the government has effectively rolled back its zero-COVID policy following widespread protests that challenged President Xi Jinping’s absolute control.

Performance Attribution

The largest detractor of absolute and relative performance was our exposure to SVB Financial, the parent of Silicon Valley Bank (SVB), and First Republic Bank (First Republic). The placement of SVB into receivership in mid-March, following accelerated deposit withdrawals and a failed effort to raise capital, caused a total loss in our SVB position. As customer panic spread to other regional banks, First Republic experienced a precipitous drop in the price of its stock, which we later sold. Together, these holdings detracted 430 bps from our returns. The Portfolio’s overweight in Health Care also detracted from returns.

The losses from SVB and First Republic were significantly mitigated, though not fully offset, by an outperformance by our Information Technology and Communication Services holdings. Our biggest relative contributor was Meta Platforms, the parent of Facebook, which pledged to boost efficiency through layoffs and a hiring freeze. It also signaled lower capital expenditures and increased share repurchases. Other tech companies, including Salesforce, similarly benefited from plans to lower costs and increase profitability. Shares of enterprise software provider SAP gained after the company showed progress on its strategic initiative to shift customers to its new cloud-based solution and took action to boost profitability by selling non-core asset, Qualtrics.

By region, weak stocks in the US detracted. Aside from First Republic and SVB, shares of agricultural equipment

visible in retrospect, meant that its balance sheet wasn’t positioned for this interest rate cycle. One of those missteps was to invest largely in mortgage-backed securities with long maturities. Another came when management decided to take off some of SVB’s interest rate hedges in 2022 because of concern at the time that a potential recession might lead to lower, not higher, rates.

These moves left SVB with large unrealized losses in its bond portfolio, which was the topic of ongoing debate inside our research group. Although there were dissenting opinions among our analysts, we concluded that the various challenges weighing on deposit growth and net interest margins would have a transitory impact on profitability and value but judged that they did not present a threat to solvency absent any other development. In hindsight, we missed the importance of the unrealized losses; the magnitude of these losses relative to the bank’s equity—and relative to other banks—is what limited the company’s financial flexibility.

The abrupt speed of the deposit withdrawals in early March was partly a consequence of the distinctive makeup of SVB’s and First Republic’s depositors, a feature that we had long found an appealing source of differentiation and growth. SVB uniquely catered to the specialized needs of venture capitalists and their portfolio companies, making itself a fixture of the innovation economy, while First Republic tailored its services to the financial elite. Both carved out what appeared to be loyal constituencies in markets that were growing faster than the overall economy.

What we failed to foresee was that this advantage could quite suddenly reverse, and, in SVB’s case especially, customers could all at once lose confidence in the bank despite its importance to their industry. The homogeneity and interconnectedness of SVB’s customers created a propensity to act in unison. With large account balances that exceeded US deposit insurance limits representing the great majority of SVB’s and First Republic’s deposits, these proved to be, in the face of stress, less “sticky” than history had led us to believe.

This rush to withdraw might not have happened if the timing of certain events was different. On March 8, within an hour of SVB announcing what we saw as a rational capital-restructuring plan, another California bank, Silvergate, announced its involuntary liquidation. This news ignited fear in the close-knit venture capital community, and SVB was immediately overtaken by a viral social media storm that spiraled into one of the largest and fastest bank runs in US history.

In general, we harbor a healthy suspicion of financial businesses due to their weakness in recessions and susceptibility to crises, and we look to measures of financial strength to assess a bank’s ability to survive periods of

Portfolio Highlights

We exited some of our more expensive and higher-volatility holdings. We sold Align Technology, the maker of Invisalign clear aligners; online marketplace Etsy; athletic apparel retailer Lululemon; and Verisk, a data provider to the insurance market. We redeployed this capital to more reasonably priced and less volatile stocks.

One of our two new additions to the Portfolio is AbbVie, a US drugmaker best known for Humira, a medicine used to treat a variety of autoimmune diseases. AbbVie is building upon its maturing blockbuster Humira business by expanding its stable of autoimmune-disorder treatments with launches such as Skyrizi and Rinvoq, which have been well received and should support continued growth. Separately, we believe the slowdown in venture capital funding may foster more collaboration between biotechnology companies with promising, early-stage pipelines and large pharmaceutical companies. This may allow AbbVie to supplement its own pipeline at cheaper valuations than biotechs had commanded in recent years.

One other purchase is Northrop Grumman, a US defense contractor whose stock price experienced a pullback. We like that Northrop has a larger presence than its rivals in the most favorable subcategories of the defense industry—

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

Portfolio Management Team

Edmund Bellord

Portfolio Manager

Moon Surana, CFA

Portfolio Manager

Performance Summary

For the Global Equity Research Portfolio, the Institutional Class rose 14.62% (net of fees and expenses) in the six-month period ended April 30, 2023. The Portfolio’s benchmark, the MSCI All Country World Index, rose 12.68% (net of source taxes) in the same period.

Market Review

Global markets rose in the fiscal year to date. Buoyed by slowing inflation and falling US bond yields, most regions finished in positive territory amid continued interest rate hikes by central banks and mounting signs of stress in the banking industry, both in the US and abroad.

During the autumn and winter of 2022, there was a significant decline in long-term bond yields due to growing concerns that high short-term borrowing costs could potentially stifle the more productive sectors of the economy, pushing it into a full-fledged recession. As the yield differentials decreased, the direction of the US dollar changed, leading to its decline. Currently, it has experienced a negative performance against most major currencies for the fiscal year so far.

Nevertheless, investor confidence was reassured as inflation in the US continued to decline from its peak in June 2022, and there were indications that Europe’s inflation had also reached its highest point, with the energy supply crisis in the region showing signs of improvement. Labor markets remained tight, with abundant job openings,

Most non-US regions outperformed the US market. Among them, the eurozone stood out by delivering a return that was more than double the index performance. This success was partly attributed to the mild winter, which prevented an energy crisis brought on by disruptions in Russian oil and gas supplies. Emerging Markets outperformed as China’s blistering relief rally late in 2022 was enough to offset the sluggishness in its market seen in 2023 so far; the government has effectively rolled back its zero-COVID policy following widespread protests that challenged President Xi Jinping’s absolute control.

Performance Attribution

Strong stocks in Consumer Discretionary, Industrials, and Consumer Staples contributed to relative performance. US automotive supplier BorgWarner and Japanese electric light manufacturer Stanley Electric were key outperformers in Consumer Discretionary; the companies reported strong quarterly results during the period. In Industrials, Alfa Laval, a Swedish industrial equipment manufacturer, posted favorable results for 2022 and indicated that marine orders, which were expected to be under pressure, remained strong. The Portfolio’s underweight in Energy also contributed.

The largest detractor from absolute and relative performance was our exposure to regional and mid-sized US banks, including SVB Financial (the parent of Silicon Valley Bank), Signature Bank, and First Republic Bank (First Republic). In March, SVB was placed into receivership following accelerated deposit withdrawals and a failed effort to raise capital, caused a total loss in our position. On the same day, Signature Bank was closed by the FDIC after a similar wave of customer withdrawals. As panic spread to other regional banks, First Republic also experienced a precipitous drop in the price of its stock, which we later sold. Together, these holdings detracted more than 300 basis points (bps) from our returns. The Portfolio’s overweight in Health Care also detracted from returns.

By region, our overweight in the eurozone and underweight in the US were the largest contributors, more than making

in venture capital activity coinciding with a torrent of large interest rate hikes. Not only that, but management missteps, visible in retrospect, meant that its balance sheet wasn’t positioned for this interest rate cycle. One of those missteps was to invest largely in mortgage-backed securities with long maturities. Another came when management decided to take off some of SVB’s interest rate hedges in 2022 because of concern at the time that a potential recession might lead to lower, not higher, rates.

These moves left SVB with large unrealized losses in its bond portfolio, which was the topic of ongoing debate inside our research group. Although there were dissenting opinions among our analysts, we concluded that the various challenges weighing on deposit growth and net interest margins would have a transitory impact on profitability and value but judged that they did not present a threat to solvency absent any other development. In hindsight, we missed the importance of the unrealized losses; the magnitude of these losses relative to the bank’s equity—and relative to other banks—is what limited the company’s financial flexibility.

The abrupt speed of the deposit withdrawals in early March was partly a consequence of the distinctive makeup of SVB’s and First Republic’s depositors, a feature that we had long found an appealing source of differentiation and growth. SVB uniquely catered to the specialized needs of venture capitalists and their portfolio companies, making itself a fixture of the innovation economy, while First Republic tailored its services to the financial elite. Both carved out what appeared to be loyal constituencies in markets that were growing faster than the overall economy.

What we failed to foresee was that this advantage could quite suddenly reverse, and, in SVB’s case especially, customers could all at once lose confidence in the bank despite its importance to their industry. The homogeneity and interconnectedness of SVB’s customers created a propensity to act in unison. With large account balances that exceeded US deposit insurance limits representing the great majority of SVB’s and First Republic’s deposits, these proved to be, in the face of stress, less “sticky” than history had led us to believe.

This rush to withdraw might not have happened if the timing of certain events was different. On March 8, within an hour of SVB announcing what we saw as a rational capital-restructuring plan, another California bank, Silvergate, announced its involuntary liquidation. This news ignited fear in the close-knit venture capital community, and SVB was immediately overtaken by a viral social media storm that spiraled into one of the largest and fastest bank runs in US history.

In general, we harbor a healthy suspicion of financial businesses due to their weakness in recessions and

Portfolio Highlights

The Global Equity Research Portfolio’s holdings flow directly from our analysts’ “buy” recommendations among Harding Loevner’s universe of researched companies. We ended the period with 302 holdings in the Portfolio, a small decrease as downgrades outpaced upgrades. By sector, our exposure to Financials decreased the most, driven both by transactions and the weak performance of our holdings. By region, our exposure to the US declined by 400 bps, which was matched by corresponding increases in Europe ex EMU and Japan.

The Portfolio experienced the effects of the turbulence in the US regional banking sector, resulting in the failure of both Silicon Valley Bank (SVB) and Signature Bank, which were both held in the Portfolio. Like SVB, First Republic suffered a bank run which jeopardized its profitability and led to a sharp decline in its stock price. With doubts about First Republic’s sustainability, our analyst downgraded the stock and we were able to sell our position.

Our exposure to Consumer Staples increased as we acquired shares of McCormick & Co, a storied manufacturer of condiments and spices, as well as Haleon, a prominent global consumer health company headquartered in the United Kingdom. Haleon enjoys notable competitive advantages stemming from its product differentiation and robust brands such as Advil and Theraflu. It benefits from significant barriers to entry for competitors due to the intricate regulations in consumer health markets. We anticipate that growing sales and profits will be supported

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

Portfolio Management Team

		Ferrill Roll, CFA Co-Lead Portfolio Manager   Andrew West, CFA Co-Lead Portfolio Manager   Maria Lernerman, CFA Portfolio Manager   Bryan Lloyd, CFA Portfolio Manager   Babatunde Ojo, CFA Portfolio Manager   Patrick Todd, CFA Portfolio Manager

Performance Summary

For the International Equity Portfolio, the Investor Class increased 22.73%, the Institutional Class increased 22.93%, and the Institutional Class Z increased 23.00% (net of fees and expenses) in the six-month period ended April 30, 2023. The Portfolio’s benchmark, the MSCI All Country World ex US Index, increased 20.65% (net of source taxes).

Market Review

International stock markets rose sharply in the six-month period ending April 30, 2023, shaking off the effects of rate increases by central banks around the world as well as the high-profile bank failures in the US and Switzerland.

The period began with US inflation subsiding modestly, giving the US Federal Reserve (the Fed) some much needed breathing room to slow the pace of its rate increases. Labor markets, however, remained tight, with job openings plentiful, wage gains widespread, and jobless claims stable. In December, the Fed boosted its short-term borrowing rate by 50 basis points—a slower pace than the four prior jumbo 75 basis point increases. The Bank of England, Swiss National Bank, and European Central Bank all followed suit with similarly attenuated rate hikes. The messaging on monetary policy, however, remained resolutely hawkish as central bankers signaled that the fight against inflation was far from over by raising their estimates for terminal rates. Though continuing to moderate the pace of increases, the Fed raised rates two more times during the period, with 25bps hikes in February and March.

Switzerland took coordinated action to improve US dollar liquidity and ease global funding markets. The run spooked depositors beyond US shores, with Swiss banking regulators forced to intervene by ramming through an 11th-hour merger between UBS and its troubled rival, Credit Suisse—a controversial maneuver favoring equity holders over contingent capital bond holders, who had thought they were more senior. In April, First Republic Bank—another US-based regional bank that catered to the ultra-wealthy—became the third bank to fail, with JPMorgan Chase assuming all of its assets.

Every sector recorded a double digit increase save for Energy; though the sector still returned over 8%, the decline in oil prices throughout most of the period weighed on returns. Information Technology and tech-like sectors including Communication Services (social media and search engines) and Consumer Discretionary (e-commerce) outperformed.

All regions were positive for the period. Europe both inside and outside the eurozone performed the strongest, while Canada and Emerging Markets lagged.

By style, the most-expensive stocks underperformed, while the highest-quality stocks performed in-line with the benchmark. There was no clear effect by growth as both the fastest- and slowest-growing stocks outperformed.

Performance Attribution

The Portfolio outperformed during the period, bolstered by strong stock selection across regions and sectors.

By sector, strong stocks in Financials and Consumer Staples contributed the most to relative performance. In the former, our insurance holdings AIA Group and Ping An Insurance rebounded, with investors anticipating a resumption of life policy sales growth as mobility restrictions are relaxed in China. Multiline insurer Allianz benefited from optimism that it can increase policy rates in its property and casualty

in crises and their inherent vulnerabilities in recessions. Banks, in particular, might seem unappealing at first glance, being low return-on-asset businesses that rely on financial leverage to boost their returns on equity to a level that is comparable with other businesses. So how do banks even get a look-in for consideration at Harding Loevner?

While our investment process values growing, high-quality businesses, their biggest earnings lie far in the future—thus the share prices of these businesses tend to be exposed to rising interest rates. In contrast, the underlying business of many banks (and thus their share prices) can benefit immediately from these rising rates. That was the case last year, when we added to our Financials holdings as interest rates were increasing. Those Financials offset a portion of the poor relative performance of the priciest, faster-growing stocks we held, and meant we owned less of the latter.

In a market where our investment style might face fierce headwinds, a meaningful allocation to banks and other financials can add value when it is most needed. The problem is that we have little confidence in our ability to forecast precisely when those periods may be. As a result, we tend to hold some proportion of Banks and other Financials nearly all the time, in case such an environment arises without warning.

Our holding in HDFC Bank illustrates our approach to investing in banks. Started in 1994 as a subsidiary of the oldest mortgage finance company in India, HDFC has become the country’s leading private-sector bank by building a strong retail and corporate banking franchise based on technology and service in a market still dominated by state-run banks that sorely lack such services. The bank has an impeccable track record of risk management that has served it well over the cycles. The bank enjoys one of the best non-performing loan ratios in the industry of just 1.3%, much lower than peers. This consistent approach has allowed it to invest in both branch expansion and digital initiatives over the years without getting distracted by asset quality issues. The combination of operating efficiency, growing scale, a broadening product set, and a healthy nominal interest rate structure in India has afforded it strong profitability that can generate the capital needed to underpin its growth. That growth has itself been a feature of rising financial services intensity in a rapidly growing economy.

Although we have relied on our allocation to Financials to help weather the headwinds faced by growth stocks over the past year, we are now noticing a decrease in those headwinds as valuations for the fastest-growing companies have improved. However, while better value is re-kindling our interest in more growth companies that previously fetched unpalatable prices, we harbor few illusions that we’ll see a sustained return to an environment where valuations are disregarded entirely. For one, higher interest rates have pulverized growth investors who ignored valuations.

banks aimed policies toward generating positive real interest rates in order to contain those pressures, valuation abruptly returned to the fore.

Today’s investment climate appears more balanced. The deepest of deep-value stocks, which had fallen out of favor have had a nice rebound over the past two years, but their weaker business quality and lower growth make them more vulnerable to a downturn in the economic cycle caused by higher interest rates. With the cost of debt starting to pinch, the ability of high-quality companies to self-finance via profit reinvestment seems to offer an edge over both lower-quality asset-intensive firms that are well represented in value indexes and over the cash-burning immature businesses that are common among speculative growth stocks. Of note, we are beginning to see more companies with bright prospects trading at less demanding valuations.

We bought a new holding in LONGi, a Chinese company that has a dominant position in the solar energy value chain. It has become a global leader in manufacturing solar wafers and modules (aka solar panels) by focusing on high energy-conversion efficiency at low manufacturing cost. LONGi’s investment in research and development, improvements in manufacturing processes, and rising scale efficiencies have helped reduce the cost per kWh of solar power by over 90% since 2007. We expect the combination of solar energy cost competitiveness and its low carbon emissions to drive significant growth of solar energy capacity investment in this and future decades. LONGi’s leading position in the market, combined with the company’s ongoing R&D that should help cement its technological lead, will support strong profit growth for the company as that investment in solar grows overall. We purchased the stock after it had fallen due to concerns about geopolitical risks, trade frictions, and industry rivalry. While we recognize the risks, our discussions with the company indicate that it is well positioned to benefit from industry consolidation and that its cost leadership will support its ability to expand and globalize its production base.

We acquired shares of Haleon, a British company that ranks among the world’s largest consumer health companies in terms of revenue. Its product portfolio includes oral, respiratory and digestive health, pain relief, and vitamins and minerals, including top brands such as Sensodyne toothpaste, Centrum vitamins, Advil and Panadol painkillers,

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

Portfolio Management Team

Performance Summary

For the International Developed Markets Equity Portfolio, the Institutional Class increased 22.35% (net of fees and expenses) in the six-month period ended April 30, 2023. The Portfolio’s benchmark, the MSCI World ex US Index, increased 22.32% (net of source taxes).

Market Review

International stock markets rose sharply in the six-month period ending April 30, 2023, shaking off the effects of rate increases by central banks around the world as well as the high-profile bank failures in the US and Switzerland.

The period began with US inflation subsiding modestly, giving the US Federal Reserve some much needed breathing room to slow the pace of its rate increases. Labor markets, however, remained tight, with job openings plentiful, wage gains widespread, and jobless claims stable. In December, the Fed boosted its short-term borrowing rate by 50 basis points (bps)—a slower pace than the four prior jumbo 75 bps increases. The Bank of England, Swiss National Bank, and European Central Bank all followed suit with similarly attenuated rate hikes. The messaging on monetary policy, however, remained resolutely hawkish as central bankers signaled that the fight against inflation was far from over by raising their estimates for terminal rates. Though continuing to moderate the pace of increases, the Fed raised rates two more times during the period, with 25 bps hikes in February and March.

liquidity and ease global funding markets. The run spooked depositors beyond US shores, with Swiss banking regulators forced to intervene by ramming through an 11th-hour merger between UBS and its troubled rival, Credit Suisse—a controversial maneuver favoring equity holders over contingent capital bond holders, who had thought they were more senior. In April, First Republic Bank—another US-based regional bank that catered to the ultra-wealthy—became the third bank to fail, with JPMorgan Chase assuming all of its assets.

Every sector recorded double digit increases except Energy, which returned just over 8%. The decline in oil prices throughout most of the period weighed on Energy returns. Information Technology and tech-like sectors including Communication Services (social media and search engines) and Consumer Discretionary (e-commerce) outperformed.

All regions were positive for the period, with the exception of Middle East. Europe, both inside and outside the eurozone, performed the strongest, while Canada and Emerging Markets lagged. By style, the most-expensive stocks underperformed, while the highest-quality stocks performed in-line with the benchmark. There was no clear effect by growth as both the fastest- and slowest- growing stocks outperformed.

Performance Attribution

The Portfolio mirrored the Index during the period, both bolstered by strong stock selection across regions and sectors.

By sector, strong stocks in Financials and Consumer Staples contributed the most to relative performance. In the former, our insurance holdings AIA Group and Ping An Insurance rebounded, with investors anticipating a resumption of life policy sales growth as mobility restrictions are relaxed in China. Multiline insurer Allianz benefited from optimism that it can increase policy rates in its property and casualty business to offset inflationary pressures. In Consumer Staples, French cosmetics producer L’Oréal and

While our investment process values growing, high-quality businesses, their biggest earnings lie far in the future—thus the share prices of these businesses tend to be exposed to rising interest rates. In contrast, the underlying business of many banks (and thus their share prices) can benefit immediately from these rising rates. That was the case last year, when we added to our Financials holdings as interest rates were increasing. Those Financials offset a portion of the poor relative performance of the priciest, faster-growing stocks we held, and meant we owned less of the latter. In a market where our investment style might face fierce headwinds, a meaningful allocation to banks and other financials can add value when it is most needed. The problem is that we have little confidence in our ability to forecast precisely when those periods may be. As a result, we tend to hold some proportion of Banks and other Financials nearly all the time, in case such an environment arises without warning.

Our holding in HDFC Bank illustrates our approach to investing in banks. Started in 1994 as a subsidiary of the oldest mortgage finance company in India, HDFC has become the country’s leading private-sector bank by building a

Portfolio Positioning (% Weight) at April 30, 2023

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

higher interest rates. With the cost of debt starting to pinch, the ability of high-quality companies to self-finance via profit reinvestment seems to offer an edge over both lower-quality asset-intensive firms that are well represented in value indexes and over the cash-burning immature businesses that are common among speculative growth stocks. Of note, we are beginning to see more companies with bright prospects trading at less demanding valuations.

We bought a new holding in LONGi, a Chinese company that has a dominant position in the solar energy value chain. It has become a global leader in manufacturing solar wafers and modules (aka solar panels) by focusing on high energy-conversion efficiency at low manufacturing cost. LONGi’s investment in R&D, improvements in manufacturing processes, and rising scale efficiencies have helped reduce the cost per kWh of solar power by over 90% since 2007. We expect the combination of solar energy cost competitiveness and its low carbon emissions to drive significant growth of solar energy capacity investment in this and future decades. LONGi’s leading position in the market, combined with the company’s ongoing R&D that should help cement its technological lead, will support strong profit growth for the company as that investment in solar grows overall. We purchased the stock after it had fallen due to concerns about geopolitical risks, trade frictions, and industry rivalry. While we recognize the risks, our discussions with the company indicate that it is well positioned to benefit from industry consolidation and that its cost leadership will support its ability to expand and globalize its production base.

We acquired shares of Haleon, a British company that ranks among the world’s largest consumer health companies in terms of revenue. Its product portfolio includes oral, respiratory, and digestive health, pain relief, and vitamins and minerals, including top brands such as Sensodyne toothpaste, Centrum vitamins, Advil and Panadol painkillers, Theraflu, and Flonase. Haleon sells these products globally, with about 38% of sales in North America, 23% in Asia Pacific, and the rest in Europe, the Middle East, and Latin America. This has resulted in about a 6% market share in global consumer health. Though most of its brands are long-established, Haleon went public only in 2022, the result of Pfizer and GSK merging their over-the-counter health care products into a single firm. Now that Haleon has been unleashed by its former parent companies to stand on its own as a leader in the consumer health industry with market

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

Portfolio Management Team

		Ferrill Roll, CFA Intl. Co-Lead Portfolio Manager   Andrew West, CFA Intl. Co-Lead Portfolio Manager   Maria Lernerman, CFA Intl. Carbon Transition Portfolio Manager   Bryan Lloyd, CFA Portfolio Manager   Babatunde Ojo, CFA Portfolio Manager   Patrick Todd, CFA Portfolio Manager

Performance Summary

The International Carbon Transition Equity Portfolio was incepted on December 21, 2022. Since inception, the Institutional Class increased 9.60% (net of fees and expenses) through April 30, 2023. The Portfolio’s benchmark, the MSCI All Country World ex US Index, increased 8.39% (net of source taxes).

Market Review

International stock markets rose sharply in the six-month period ending April 30, 2023, shaking off the effects of rate increases by central banks around the world as well as the high-profile bank failures in the US and Switzerland.

The period began with US inflation subsiding modestly, giving the US Federal Reserve (the Fed) some much needed breathing room to slow the pace of its rate increases. Labor markets, however, remained tight, with job openings plentiful, wage gains widespread, and jobless claims stable. In December, the Fed boosted its short-term borrowing rate by 50 basis points (bps)—a slower pace than the four prior jumbo 75 basis point increases. The Bank of England, Swiss National Bank, and European Central Bank all followed suit with similarly attenuated rate hikes. The messaging on monetary policy, however, remained resolutely hawkish as central bankers signaled that the fight against inflation was far from over by raising their estimates for terminal rates. Though continuing to moderate the pace of increases, the Fed

the holes in their balance sheets. As the crisis escalated, the central banks of the US, Canada, UK, Japan, Europe, and Switzerland took coordinated action to improve US dollar liquidity and ease global funding markets. The run spooked depositors beyond US shores, with Swiss banking regulators forced to intervene by ramming through an 11^th-hour merger between UBS and its troubled rival, Credit Suisse—a controversial maneuver favoring equity holders over contingent capital bond holders, who had thought they were more senior. In April, First Republic Bank—another US-based regional bank that catered to the ultra-wealthy—became the third bank to fail, with JPMorgan Chase assuming all of its assets.

Every sector recorded a double digit increase except for Energy; though the sector still returned over 8%, the decline in oil prices throughout most of the period weighed on returns. Information Technology and tech-like sectors including Communication Services (social media and search engines) and Consumer Discretionary (e-commerce) outperformed.

All regions were positive for the period. Europe, both inside and outside the eurozone, performed the strongest, while Canada and Emerging Markets lagged.

By style, the most-expensive stocks underperformed, while the highest-quality stocks performed in-line with the benchmark. There was no clear effect by growth as both the fastest- and slowest-growing stocks outperformed.

Performance and Attribution

The Portfolio outperformed during the period, bolstered by strong stock selection across regions and sectors.

By sector, strong stocks in Consumer Staples and Industrials contributed the most to relative performance. In the former, French cosmetics producer L’Oréal and Mexico-based Coke bottler and convenience store operator FEMSA outperformed. Despite slowing global growth and extended lockdowns throughout 2022, L’Oréal continued

Banks, in particular, might seem unappealing at first glance, being low return-on-asset businesses that rely on financial leverage to boost their returns on equity to a level that is comparable with other businesses. So how do banks even get a look-in for consideration at Harding Loevner?

While our investment process values growing, high-quality businesses, their biggest earnings lie far in the future—thus the share prices of these businesses tend to be exposed to rising interest rates. In contrast, the underlying business of many banks (and thus their share prices) can benefit immediately from these rising rates. In a market where our investment style might face fierce headwinds, a meaningful allocation to banks and other financials can add value when it is most needed. The problem is that we have little confidence in our ability to forecast precisely when those periods may be. As a result, we tend to hold some proportion of Banks and other Financials nearly all the time, in case such an environment arises without warning.

Our holding in HDFC Bank illustrates our approach to investing in banks. Started in 1994 as a subsidiary of the

Portfolio Positioning (% Weight) at April 30, 2023

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

weaker business quality and lower growth make them more vulnerable to a downturn in the economic cycle caused by higher interest rates. With the cost of debt starting to pinch, the ability of high-quality companies to self-finance via profit reinvestment seems to offer an edge over both lower-quality asset-intensive firms that are well represented in value indexes and over the cash-burning immature businesses that are common among speculative growth stocks. Of note, we are beginning to see more companies with bright prospects trading at less demanding valuations.

We bought a new holding in LONGi, a Chinese company that has a dominant position in the solar energy value chain. It has become a global leader in manufacturing solar wafers and modules (aka solar panels) by focusing on high energy-conversion efficiency at low manufacturing cost. LONGi’s investment in R&D, improvements in manufacturing processes, and rising scale efficiencies have helped reduce the cost per kWh of solar power by over 90% since 2007. We expect the combination of solar energy cost competitiveness and its low carbon emissions to drive significant growth of solar energy capacity investment in this and future decades. LONGi’s leading position in the market, combined with the company’s ongoing R&D that should help cement its technological lead, will support strong profit growth for the company as that investment in solar grows overall. We purchased the stock after it had fallen due to concerns about geopolitical risks, trade frictions, and industry rivalry. While we recognize the risks, our discussions with the company indicate that it is well positioned to benefit from industry consolidation and that its cost leadership will support its ability to expand and globalize its production base.

We acquired shares of Haleon, a British company that ranks among the world’s largest consumer health companies

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

Portfolio Management Team

Edmund Bellord

Portfolio Manager

Moon Surana, CFA

Portfolio Manager

Performance Summary

For the International Equity Research Portfolio, the Institutional Class increased 21.17% (net of fees and expenses) in the six-month period ended April 30, 2023. The Portfolio’s benchmark, the MSCI All Country World ex US Index, increased 20.65% (net of source taxes).

Market Review

International stock markets rose sharply in the six-month period ending April 30, 2023, shaking off the effects of rate increases by central banks around the world as well as the high-profile bank failures in the US and Switzerland.

The period began with US inflation subsiding modestly, giving the US Federal Reserve (the Fed) some much needed breathing room to slow the pace of its rate increases. Labor markets, however, remained tight, with job openings plentiful, wage gains widespread, and jobless claims stable. In December, the Fed boosted its short-term borrowing rate by 50 basis points—a slower pace than the four prior jumbo 75 basis point increases. The Bank of England, Swiss National Bank, and European Central Bank all followed suit with similarly attenuated rate hikes. The messaging on monetary policy, however, remained resolutely hawkish as central bankers signaled that the fight against inflation was far from over by raising their estimates for terminal rates. Though continuing to moderate the pace of increases, the Fed raised rates two more times during the period, with 25bps hikes in February and March.

liquidity and ease global funding markets. The run spooked depositors beyond US shores, with Swiss banking regulators forced to intervene by ramming through an 11^th-hour merger between UBS and its troubled rival, Credit Suisse—a controversial maneuver favoring equity holders over contingent capital bond holders, who had thought they were more senior. In April, First Republic Bank—another US-based regional bank that catered to the ultra-wealthy—became the third bank to fail, with JPMorgan Chase assuming all of its assets.

Every sector recorded a double-digit increase except for Energy; though the sector still returned over 8%, the decline in oil prices throughout most of the period weighed on returns. Information Technology and tech-like sectors including Communication Services (social media and search engines) and Consumer Discretionary (e-commerce) outperformed.

All regions were positive for the period. Europe, both inside and outside the eurozone, performed the strongest, while Canada and Emerging Markets lagged.

By style, the most-expensive stocks underperformed, while the highest-quality stocks performed in-line with the benchmark. There was no clear effect by growth as both the fastest- and slowest-growing stocks outperformed.

Performance Attribution

The Portfolio outperformed during the period, bolstered by favorable allocations across regions and sectors.

By sector, strong stocks in Financials and Information Technology (IT) contributed to relative performance. In the former, Spanish bank BBVA posted its best year-over-year earnings growth in its history for 2022, driven by increases in revenue and lending growth. The bank also issued positive future revenue guidance and an increase in its cash dividend for 2023. Our insurance holdings AIA Group and Ping An Insurance also rebounded, with investors anticipating a resumption of life policy sales growth as mobility restrictions are relaxed in China.

being low return-on-asset businesses that rely on financial leverage to boost their returns on equity to a level that is comparable with other businesses. So how do banks even get a look-in for consideration at Harding Loevner?

While our investment process values growing, high-quality businesses, their biggest earnings lie far in the future—thus the share prices of these businesses tend to be exposed to rising interest rates. In contrast, the underlying business of many banks (and thus their share prices) can benefit immediately from these rising rates. In a market where our investment style might face fierce headwinds, a meaningful allocation to banks and other financials can add value when it is most needed. The problem is that we have little confidence in our ability to forecast precisely when those periods may be. As a result, we tend to hold some proportion of Banks and other Financials nearly all the time, in case such an environment arises without warning.

Our holding in HDFC Bank illustrates our approach to investing in banks. Started in 1994 as a subsidiary of the oldest mortgage finance company in India, HDFC has become the country’s leading private-sector bank by building a strong retail and corporate banking franchise based on technology and service in a market still dominated by state-run banks that sorely lack such services. The bank has an impeccable track record of risk management that has served it well over the cycles. The bank enjoys one of the best non-performing loan ratios in the industry of just 1.3%, much lower than peers. This consistent approach has allowed it to invest in both branch expansion and digital initiatives over the years without getting distracted by asset quality issues. The combination of operating efficiency, growing scale, a broadening product set, and a healthy nominal interest rate structure in India has afforded it strong profitability that can generate the capital needed to underpin its growth. That growth has itself been a feature of rising financial services intensity in a rapidly growing economy.

Although we have relied on our allocation to Financials to help weather the headwinds faced by growth stocks over the past year, we are now noticing a decrease in those headwinds as valuations for the fastest-growing companies have improved. However, while better value is re-kindling our interest in more growth companies that previously fetched unpalatable prices, we harbor few illusions that we’ll see a sustained return to an environment where valuations are disregarded entirely. For one, higher interest rates have pulverized growth investors who ignored valuations. Additionally, the recent instability in the banking sector has led the market to dramatically reprice the prospect for additional rate increases. Policy rates remain below inflation rates, a combination unlikely to contain inflation, as price pressures have shifted from energy and manufactured goods to services and wages, which have historically been more difficult to adjust. This supports the view that interest rates will stay high for a long time, barring a recession. The upshot

Additionally, we sold Moneta Money Bank and National Commercial Bank as they no longer meet our investment criteria. In the case of National Commercial Bank, our analyst downgraded it due to concerns regarding capital allocation following their investment in Credit Suisse, which was out-of-step with its strategic objectives and resulted in significant loss of shareholder value. Another bank we sold was Bankinter, as we had concerns about increasing funding costs. In a higher-interest rate environment, deposit competition has been heating up, and Bankinter—catering to the high- and mid-income segment with larger average deposit sizes than its peers—is more vulnerable to funding cost increases.

Within the Industrials sector, we made several purchases based on attractive valuations following stock price corrections. These purchases included Techtronic, Tomra, and Country Garden Services. Additionally, we acquired Hengli Hydraulic, a leading Chinese manufacturer of hydraulic components used in excavators. Hengli’s competitive advantages in cost and process technology position it well to gain global market share in hydraulic components. Its applications extend beyond excavators, including uses such as tractors, marine engineering, and wind turbines. Furthermore, Hengli’s development of linear

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

Portfolio Management Team

Jafar Rizvi, CFA

Co-Lead Portfolio Manager

Anix Vyas, CFA

Co-Lead Portfolio Manager

Performance Summary

For the International Small Companies Portfolio, the Investor Class rose 17.52% and the Institutional Class rose 17.60% (net of fees and expenses) in the six-month period ended April 30, 2023. The Portfolio’s benchmark, the MSCI All Country World ex US Small Cap Index, rose 16.59% (net of source taxes) in the same period. In addition, a new Institutional Class Z was launched on April 4, 2023. The share class rose 2.88% since inception to April 30, 2023, while the benchmark rose 0.42% in this period.

Market Review

Market optimism at the beginning of the fiscal year turned to caution after the collapse of three US specialty banks. As the crisis escalated, the central banks of the US, Canada, England, Europe, Japan, and Switzerland took coordinated action to improve US dollar liquidity and ease global funding markets. Swiss banking regulators were also forced to ram through a controversial merger between UBS and its troubled rival Credit Suisse. Despite the bedlam, fueled in no small part by sharp increases in interest rates and the consequent drop in bond values, central bankers continued to hike rates to combat inflation, albeit accompanied by a new, more cautious tone.

As the economic outlook grew increasingly uncertain, the Bloomberg Commodity Total Return Index tumbled 6% during the fiscal year to date. Europe’s natural-gas shortage was less severe than initially feared and the Energy sector posted the biggest decline, a contrast to its strong performance last year.