International Small Companies Equity

2014 Second Quarter Report

Composite Performance (%) For Periods Ending June 30, 20141 3 Months YTD 1 Year 3 Years2 5 Years2 Since Inception2,3 HL International Small Companies (gross of fees) 3.13 7.63 28.11 11.96 20.32 10.51 HL International Small Companies (net of fees) 2.86 7.08 26.81 10.74 18.97 9.27 MSCI All Country World ex-US Small Cap Index4 3.79 7.48 26.52 7.28 14.87 4.91 1The Composite performance returns shown are preliminary; 2Annualized returns; 3Inception Date: December 31, 2006; 4The Benchmark Index. Please read the above performance in conjunction with the footnotes on the back page of this report. Past performance does not guarantee future results. All performance and data shown are in US dollar terms, unless otherwise noted. Sector Exposure (%) Sector HL ISC ACWIxUS SC (Under) / Over The Benchmark Market Review • International Small Companies Industrials 28.4 20.1 posted solid returns, but nevertheless lagged larger-cap Health Care 11.9 5.9 companies in the quarter. Cons Staples 10.7 5.9 • Energy stocks outperformed on Cash 2.7 – fears of rising energy prices amidst Info Technology 12.4 10.4 the turmoil in the Middle East. Telecom Services 3.0 1.2 Portfolio Highlights Utilities 1.0 2.4 • The arrival of an awaited spike in Energy 1.5 6.0 M&A activity has directly affected the portfolio, with three companies Cons Discretionary 11.9 16.9 receiving acquisition offers. Materials 4.9 11.0 • We sold two Industrials holdings Financials 11.6 20.2 during the quarter but maintain our sizable overweight to the sector. (10.0)-10.0 (5.0)-5.0 0.00.0 5.05.0 10.010.0 • We increased our exposure to frontier markets, where we have been seeking relatively Geographical Exposure (%) undiscovered high-quality, Region HL ISC ACWIxUS SC (Under) / Over The Benchmark growing companies at attractive valuations.

Europe EMU 23.7 16.5 Cash 2.7 – Table of Contents

Frontier Markets5 1.8 – Market Review page 2 Other6 1.4 – Pacific ex-Japan 10.2 9.1 Performance and Attribution page 2 Emerging Markets 21.8 21.2 Portfolio Highlights Middle East 0.0 0.7 page 3

Europe ex-EMU 22.9 24.2 Purchases and Sales page 5 Japan 14.6 19.0 Canada 0.9 9.3 Portfolio Facts & Holdings pages 5 - 7 (10.0)-10.0 (5.0)-5.0 0.00.0 5.05.0 10.010.0 5Includes countries with less-developed markets outside the Index; 6Includes companies classified in countries outside the Index.

Sector and region allocations are supplemental information only and complement the fully compliant International Small Companies Composite GIPS Presentation. Source: Harding Loevner International Small Companies Model; MSCI and S&P. MSCI Barra and S&P do not make any express or implied warranties or representations and shall have no liability whatsoever with respect to any GICS data contained herein.

© 2014 Harding Loevner Market Review Regionally, returns showed significant dispersion for the quarter. The European Monetary Union (EMU) countries were down 1% International small companies—represented by the MSCI All in the quarter, with the worst performance occurring in four out Country World ex-US Small Cap Index—gained 3.8% in the quar- of the five “PIIGS” countries, whose debt burdens and struggling ter. This solid return nevertheless lagged the larger-cap MSCI All economies caused such concern in 2010–2011. Portugal, Ireland, Country World ex-US Index, which rose 5.3%. Year-to-date, how- Italy, and Greece—now relegated to the Emerging Markets (EM) ever, international small cap companies have continued to outpace division—were each down between 8–11%. Yet , the fifth large caps, with the small-cap Index gaining 7.5% and the large- member of this cohort, delivered a positive return of nearly 2%. cap Index rising 5.9%. At the other extreme were Japan (up 8%), energy-rich Canada (up 13%), and EMs (up 6%). Within EMs, India performed exception- All sectors in the Index were positive, with Energy at the top by ally well, surging 33% amidst investor enthusiasm for the resound- gaining 11% on fears of rising energy prices amidst the turmoil in ing electoral victory of Narendra Modi to the position of Prime the Middle East. There was no clear trend in sector performance, Minister. Many other EMs—including Thailand, , Russia, however, with Health Care, Materials, Utilities, and Consumer Philippines, and Hungary—were also up double digits despite Staples—a mix of more and less cyclical sectors—all also post- signs of rising political risk in these countries. ing returns above the overall Index. Meanwhile, the Information Technology, Telecom Services, and Consumer Discretionary sec- Performance and Attribution tors underperformed the Index.

The International Small Companies Composite rose 3.1% in the second quarter, underperforming the Index, which returned 3.8%. Market Performance (%) The charts to the right illustrate performance attribution for the Market 2Q 2014 Trailing 12 months quarter by sector and region respectively. Year-to-date, the Com- USD USD posite has gained 7.6%, in-line with the 7.5% return of the Index. Canada 12.9 34.0 Our relative performance for the second quarter was hurt by our Emerging Markets 5.7 15.1 underweight in the surging Energy sector. The sector represents Europe EMU -0.9 42.1 nearly 6% of the Index while our single Energy holding, Ezion, gives us a weight of less than 2% in the sector. Europe ex-EMU 0.0 36.6 Japan 8.5 18.6 Poor stock selection in Consumer Staples was also a large detrac- Middle East -1.8 21.5 tor. Singapore-based packaged food maker Super Group reported Pacific ex-Japan 2.2 17.0 disappointing earnings growth due to higher costs associated with its expansion in China, as well as increased labor costs. Shares MSCI ACWxUS Small Cap Index 3.8 26.5 of another packaged food maker, Vitasoy Intl Holdings of Hong Kong, fell after posting good returns early in the quarter despite strong revenue and profit growth. Our holdings in Financials ben- Sector Performance (%) of the MSCI ACW ex-US Small Cap Index efited the portfolio most, especially ’s Equity Bank. The Sector 2Q 2014 Trailing 12 months company’s profits rose because of strong increases in fee income USD USD along with a healthy decline in non-performing loans. Brazilian central securities depository CETIP also performed well as cash Consumer Discretionary 1.4 25.3 generation remained strong, allowing management to raise the Consumer Staples 4.7 16.5 dividend payout ratio to 75%. Energy 11.3 25.8 Financials 4.0 24.3 Viewed geographically, our large underweight to the strong-return- ing Canadian market hurt relative returns in the second quarter. Health Care 5.5 27.9 Industrials 3.6 31.4 Information Technology 1.6 30.5 Bold font indicates companies held in the portfolio during the quarter. Only the Materials 5.4 26.4 first reference to a particular holding appears in bold. The portfolio is actively Telecom Services 1.7 47.4 managed therefore holdings shown may not be current. Portfolio holdings should not be considered recommendations to buy or sell any security. It should Utilities 5.2 28.4 not be assumed that investment in the security identified has been or will be profitable. To request a complete list of holdings for the past year, please contact Harding Loevner. A complete list of holdings at June 30, 2014 is available on Source: Wilshire Atlas (as of June 30, 2014); MSCI Barra and S&P pages six and seven of this report.

2 Harding Loevner International Small Companies Equity The Canadian market is dominated by Energy companies, so this is Portfolio Highlights a direct corollary of our underweight in Energy. We had poor stock M&A Activity selection in the euro zone, mainly in . Media company and petroleum storage facility operator RUBIS were both hurt by We wrote in the third quarter 2013 about our expectations for a the strengthened euro. RUBIS’s growth was also adversely affect- surge in M&A activity due to companies’ limited organic growth ed by lower propane prices and extremely warm weather condi- opportunities alongside the easy-money policies across the world. tions across Europe. Europe ex-EMU was the strongest contributor This year, the surge has finally arrived, with M&A activity hitting a to returns by region, particularly our holdings in the UK market. seven-year quarterly high in June 2014.1 The arrival of this awaited spike in buyout offers has directly affected the portfolio, with three companies receiving acquisition offers. Intl Small Cos Composite 2Q14 Performance Attribution Singapore’s Goodpack controls the world’s largest fleet of Interna- by Sector vs. MSCI ACW ex-US Small Cap Index tional Bulk Containers (IBCs), which are returnable metal shipping crates that provide a substitute for traditional wooden crates and 2.02.0 Total Variance: -0.7 barrels. The company provides delivery, collection, and techni- Total Stock Selection: -0.3 cal support for its IBCs across 60 countries, eliminating the need Total Group Weight: -0.4 1.01.0 for customers to store or dispose of their own shipping crates and containers. On May 27, the well-known private equity firm KKR announced a proposal to buy Goodpack for US$1.1 billion, rep- 0.00.0 resenting a roughly 23% premium to the prevailing share price in March when Goodpack first announced it had been approached by

-1.0-1.0 prospective buyers. Neither side has disclosed further information about the potential transaction. Percent Return Value Added Percent Return Value

-2.0-2.0 Despite the jump in Goodpack’s shares, we continue to hold the

Cash stock because we think the company is worth even more and expect Energy Utilities Teleom Teleom Staples

Services to gain value as the courtship between the two entities continues. Materials Financials Industrials Consumer Consumer Information Technology Health Care It is likely KKR sees what we see: while Goodpack’s end-market Discretionary remains rather small—its customers are predominately in rubber Stock Selection Group Weight Overall Contribution manufacturing—over the years the company has established an unrivaled IBC network that should allow it to operate successfully Intl Small Cos Composite 2Q14 Performance Attribution on a global scale across many more industries, such as food and auto components. KKR may plan to leverage its own portfolio of by Region vs. MSCI ACW ex-US Small Cap Index companies to help develop new end markets for Goodpack.

2.02.0 Total Variance: -0.7 Further south, Pacific Equity Partners (PEP) confirmed its bid for Total Stock Selection: 0.8 SAI Global, an Australia-based company that provides business Total Group Weight: -1.5 information services. The company helps clients comply with lo- 1.01.0 cal and international business standards; provides governance, risk and compliance solutions; and offers other specialized services, 0.00.0 such as property information brokerage and outsourced mortgage settlements. PEP’s US$1 billion offer represents a roughly 20% -1.0-1.0 premium to the closing share price before the bid. Percent Return Value Added Percent Return Value Our investment thesis for SAI has been that it will be able to build -2.0-2.0 1 2 upon its technology infrastructure and strong market position in

Cash Australia to grow internationally without requiring significant new Japan Other Pacific Europe Frontier Canada Markets ex-EMU Markets

ex-Japan investments. PEP, which is also based in Australia and already Emerging Middle East

Europe EMU owns two other businesses in this space (PEXA and Veda Group), may share our view. The start-up costs for entering into the business Stock Selection Group Weight Overall Contribution information services industry are substantial, but SAI has already 1Includes countries with less-developed markets outside the Index; 2Includes companies classified in countries outside the Index. Source: Wilshire Atlas; Harding Loevner International Small Companies 1Michael J. De La Merced, “Mergers Hit a 7-Year High, Propelled by a Series Composite; MSCI Barra and S&P. of Blockbuster Deals,” New York Times (June 30, 2014).

2014 Second Quarter Report 3 invested in the necessary IT infrastructure, application software This quarter we highlight two portfolio companies operating in the and systems, and workforce. The board of SAI has opened a formal trading and distribution industry that generate attractive returns by bidding process and, similar to Goodpack, we believe the potential focusing on valuable business niches. risk/reward from holding the stock through the process is favor- able. The extent of SAI’s existing infrastructure and its scalability In Poland, food distributor Eurocash has taken advantage of the may well attract other suitors, including financial buyers (similar to cultural and geographic dynamics of the country’s food industry to PEP), but also strategic buyers such as current competitors Bureau become quite successful serving the specific needs of urban shop- Veritas, SGS, Intertek, and Thomson Reuters. While we have been pers. Sixty percent of Poland’s population lives in urban areas and primarily interested in the potential for SAI to expand internation- consumers have been slow to adopt the suburban-sprawl habit of ally, perhaps one of these firms will pay for a different growth op- stockpiling numerous bags of groceries purchased at large hyper- portunity: the chance to enter the Australian market. markets on the outskirts of town. On the contrary, most grocery shoppers in Poland still prefer to shop at smaller-format stores lo- cated within walking distance of their homes. Hypermarkets do India performed exceptionally well amidst investor have a presence in the country, but much of Poland’s population enthusiasm for the resounding electoral victory of lacks the transportation, the time, and the storage space necessary Narendra Modi to the position of Prime Minister. to make hypermarket shopping cost effective and habit forming. The small-store format thus continues to grow rapidly in the coun- try. To address this demand, Eurocash is opening about 250 small Most recently, Canadian engineering and construction company supermarkets per year. SNC-Lavalin (SNC) acquired UK-based portfolio holding Kentz. We have long valued the large and growing market that Kentz Eurocash is Poland’s top grocery wholesaler, with an extensive serves globally across the oil and gas, petrochemical, mining, and distribution network serving independent mom-and-pop stores power industries. Specifically, Kentz’s ability to coordinate engi- throughout the country. But the company also has three grocery- neering, construction, project management and technical services store franchises (ABC, Delikatesy Centrum, and Tradis Active) in some of the world’s most remote locations is a capability few that are captive customers of its distribution business. Eurocash competitors can match. The growth in the company’s order book of also uses the stores operated by its franchisees for very short-term over 20% annually over the last five years is evidence of its strong storage to support its distribution network. In exchange, Eurocash competitive position. By purchasing Kentz, SNC improves its up- passes some of the cost savings from its economies of scale to stream oil and gas and liquefied natural gas businesses and gains franchisees, allowing them to offer their customers grocery-store access to the US, Middle East, and Asia-Pacific markets. prices in a convenience-store format. This successful model has al- lowed the company to generate returns on equity in excess of 20% In the third quarter of last year, a Kentz competitor, AMEC, made every year since 2006. a £680 million bid for the company that the board unanimously rejected. We agreed with this decision, believing the offer did not reflect Kentz’s extensive growth prospects. The SNC-Lavalin offer Our mission is to identify companies that have sustain- of £1.15 billion represented a 33% premium to the closing share able competitive advantages that allow them to effective- price and a nearly 70% premium to AMEC’s offer made less than a ly execute one of these three classic business strategies. year ago—a true win for shareholders. The board has unanimously accepted the offer. Japan’s Misumi operates in a niche defined not by a single geo- Competitive Strategy: Niche Markets graphic market but rather by an industry segment. Misumi sells factory automation and die components—specialized tools used to Companies must typically pursue one of three strategies to be cut or shape materials—to the manufacturing industry. The com- successful: industry leadership in controlling costs; differentiated pany divides its own manufacturing process into two stages. In the products that set them apart from competitors; or a focus on valu- first stage, it uses a standardized process to produce half-finished able niches. In the language of Michael Porter, companies that are goods; in the second stage, Misumi utilizes a “finishing process” unable to follow one of these clearly identifiable strategies run the to add value by making each product unique for the end customer. risk of becoming “stuck in the middle,” which leads to reduced The standardization of the initial manufacturing phase creates cost returns on capital, falling revenue and earnings growth, or, worse savings that Misumi passes on to its customers. The challenge is still, a combination of the two. Our mission is to identify compa- identifying the optimal breakpoint between the two manufacturing nies that have sustainable competitive advantages that allow them stages to maximize efficiency and cost savings. Misumi, however, to effectively execute one of these three classic business strategies. has demonstrated that it can successfully make this determination Small companies are often adept at occupying market niches, and by tapping into its extensive operating experience. can be the dominant cost leader within their segment. They gen- erally lack the size associated with powerful economies of scale Founded in 1963, Misumi’s long-term focus on offering only die common amongst broader focused cost-leaders, but their seg- and factory automation components means it has developed a lev- mented approach, if executed properly, can protect their returns. el of expertise and economies of scale that few competitors can

4 Harding Loevner International Small Companies Equity Supplemental Information as of June 30, 2014

capital discipline. Given this anticipated slowdown in demand match. The company sells more than one million different types of for Rotork’s products, we felt the stock was well priced and components and is supplied by a network of about one-thousand sold our position. separate subcontractors. Misumi has thus effectively positioned itself as a broker between a vast group of suppliers and an even- PKC Group, in contrast, has continued to meet all our growth larger collection of buyers, giving it favorable bargaining power. and profitability targets. Its revenues are derived from produc- Domestic and international clients alike value Misumi because of ing wiring systems and electronics used in commercial vehi- its large product lineup available online and via catalogues; abil- cles, which is a very similar business to another portfolio hold- ity to respond to small-lot orders; fast delivery; consistently high- ing, Leoni, which focuses on non-commercial vehicles. Based quality offerings; and low prices. As a result, Misumi has been able on our estimates of future growth and profitability, PKC was to grow revenues and earnings at about 9% per year for the past trading at a premium to Leoni, so we sold the former and used ten years. the proceeds to increase our position in the latter.

We sold two Industrials holdings during the quarter We increased our exposure to the frontier markets region, where but maintain our sizable overweight to the sector. we have been seeking relatively undiscovered high-quality, grow- ing companies at attractive valuations. Unlike our recent invest- ments in Equity Bank and Bank of Georgia, our newest frontier Purchases and Sales market holding is outside of the Financials sector. Pricesmart is a retailer operating the largest network of membership warehouse We removed two positions from the portfolio this quarter: elec- clubs in Central America, South America, and the Caribbean. The tric valve actuator manufacturer Rotork and wiring system and company is well positioned to benefit from the rapid growth in electronics manufacturer PKC Group. Rotork’s electric valve these niche markets by leveraging its network of club stores to cre- actuators sit on top of valves in fluid control systems and facil- ate scale, enabling it to offer customers high-quality merchandise itate automatic valve opening and closing. We were attracted to at competitive prices. Its membership-based model has helped to Rotork because of its strong reputation for producing reliable further strengthen its competitive position. Competition is dif- and high-quality products in an industry where these factors ficult in this industry, as Pricesmart must compete against local are critical. Rotork’s reputation also serves as a considerable mom & pop stores and modern international competitors such as barrier to entry to competitors. However, we began to question supermarkets and (potentially) Wal-Mart. However, Wal-Mart has the ongoing strength of customer demand. Oil and gas compa- elected not to operate its membership-based Sam’s Club stores in nies account for more than half of Rotork’s revenue, yet capital Pricemart’s region as the markets are seemingly too small for this expenditures by oil and gas companies are expected to decline global operator. We took advantage of a recent price correction to 5–6% over the next three years as they increasingly focus on establish our stake at what we believe to be an attractive price.

Portfolio Characteristics HL ISC ACWI ex-US SC HL ISC ACWI ex-US SC Market Cap1 ($M) $1,614 $1,666 Wtd Avg Mkt Cap ($M) $1,951 $2,029 Profit Margin1 (%) 6.7 6.3 Price/Earnings3 21.8 20.9 Return on Assets1 (%) 6.6 4.1 Price/Cash Flow3 13.8 10.6 Debt/Equity1 (%) 12.5 30.4 Price/Book3 2.7 1.5 Return on Equity1 (%) 14.3 9.7 Dividend Yield4 (%) 1.9 2.3 Std Dev of 5 Year ROE1 (%) 2.2 4.6 Alpha2 (%) 5.73 – Sales Growth1,2 (%) 11.2 5.8 Beta2 0.94 1.00 Earnings Growth1,2 (%) 6.1 5.1 R-Squared2 0.94 1.00 Cash Flow Growth1,2 (%) 5.6 2.8 Sharpe Ratio2 1.20 0.85 Dividend Growth1,2 (%) 5.3 1.4 Standard Deviation2 (%) 16.67 17.24

1Weighted median; 2Trailing five years, annualized; 3Weighted harmonic mean; 4Weighted mean. Source (Alpha, Beta, R-Squared, Sharpe Ratio, Standard Deviation): eVestment Alliance (eA); Harding Loevner International Small Companies Composite, based on the Composite returns; MSCI Barra. Source (other characteristics): Wilshire Atlas (Run Date: July 8, 2014); Harding Loevner International Small Companies Model, based on the underlying holdings; MSCI Barra.

Portfolio characteristics are supplemental information only and complement the fully compliant International Small Companies Composite GIPS Presentation. The portfolio is actively managed therefore holdings shown may not be current. Portfolio holdings should not be considered recommendations to buy or sell any security. The complete list of holdings at June 30, 2014 is available on the following page.

2014 Second Quarter Report 5 Supplemental Information as of June 30, 2014

International Small Cos Holdings (as of June 30, 2014) International Small Cos Holdings (as of June 30, 2014) End End Sector/Company/Description Country Sector/Company/Description Country Wt.% Wt.% Consumer Discretionary Carl Zeiss Meditec - Ophthalmology systems Germany 1.1 ABC-Mart - Footwear retailer Japan 0.4 Diasorin - Producer of reagents for diagnostics Italy 0.7 Asics - Sporting goods Japan 0.7 Draegerwerk - Medical, safety, and aerospace Germany 0.4 Cheil Worldwide - Marketing services South Korea 1.4 Gerresheimer - Specialty packaging manufacturer Germany 1.3 Gerry Weber - Women’s fashion Germany 1.3 KPJ Healthcare - Healthcare provider Malaysia 0.6 Halla Visteon Climate Control - Automobile A/C South Korea 1.2 M3 - Medical information services Japan 0.8 Hiday Hidaka - Restaurants Japan 1.6 Message - Senior care facilities Japan 1.3 Ipsos - Market research France 1.0 Nakanishi - Dental tool manufacturer Japan 1.3 Leoni - Automobile parts Germany 1.3 Rohto Pharmaceutical - Pharma/cosmetics mfg. Japan 0.4 Pico Far East Holdings - Events services Hong Kong 0.6 Synergy Healthcare - Sterilization services UK 1.5 Stanley Electric - Auto lighting and LED packaging Japan 1.1 - Veterinary pharmaceuticals France 0.5 YOOX - Online luxury goods retailer Italy 1.3 Industrials Consumer Staples AKR Corporindo - Petroleum distribution Indonesia 0.9 Arcs - Retail supermarket business Japan 0.3 Arcadis - Engineering consulting services Netherlands 0.7 Binggrae - Specialty dairy products South Korea 0.6 Asahi Diamond - Mfg. cutting & polishing tools Japan 0.4 Britvic - Soft drink supplier UK 0.7 Bertrandt - Engineering services Germany 0.7 Clicks Group - Retail pharmacy chain South Africa 0.8 Brunel International - Employment services Netherlands 1.1 Cosmos Pharmaceutical - Drug store operator Japan 0.7 CAF - Railroad cars and components manufacturer Spain 1.2 Eurocash - Food wholesaler Poland 0.9 Cardno - Environmental consultant Australia 0.6 Grupo Herdez - Processed foods Mexico 0.5 Coastal Contracts - Marine transportation services Malaysia 2.1 KWS Saat - Agricultural products Germany 1.1 Danieli - Builds iron and steel facilities Italy 0.6 Pigeon - Baby care goods Japan 1.0 Dialog Group Berhad- Petrochemical tech. svcs. Malaysia 0.8 Pricesmart - Membership club warehouse retailer US 0.9 Grafton Group - Building supplies retailer UK 1.8 SLC Agricola - Agriculture products Brazil 0.8 Haitian - Plastic injection mold machine maker China 0.4 Super Group - Packaged beverages Singapore 1.3 Kentz - Engineering & construction services UK 2.7 Vitasoy Intl Holdings - Soy-based foods & bev mfg Hong Kong 1.0 Mills - Specialty engineering services Brazil 1.0 Energy Misumi Group - Machinery parts distributor Japan 1.5 Ezion - Offshore energy services Singapore 1.5 MonotaRO - Online distributor of maintenance supplies Japan 1.3 Financials Morgan Advanced Materials - Tech materials UK 1.0 Anadolu Hayat Emeklilik - Life insurance/pension Turkey 1.2 PayPoint - Bill-paying network UK 1.3 Avanza Bank - Financial services Sweden 0.9 Pfeiffer Vacuum Technology - Vacuum pump mfg. Germany 0.8 Bank of Georgia - Commercial bank UK 1.6 RPS Group - Environmental health, safety and risk UK 1.9 CETIP - Securities registry and depository Brazil 1.5 SAI Global - Business information services Australia 1.2 Discovery - Health and life insurance South Africa 0.9 Semperit - Rubber product manufacturer Austria 1.7 Equity Bank - Commercial bank Kenya 1.8 Tat Hong Holdings - Heavy machinery & equipment Singapore 0.3 First Cash Financial - Retail pawn shops US 0.5 Vacon - Software-based frequency convertors Finland 0.6 Jardine Lloyd Thompson - Insurance brokerage UK 0.7 Valid Solucoes - Security printing services Brazil 1.2 Laurentian Bank - Commercial bank Canada 0.9 Wijaya Karya - Engineering & construction Indonesia 0.6 Rathbone Bros - Wealth management UK 1.7 Information Technology Health Care Advantech - Manufacturer & marketer of industrial PCs Taiwan 1.7 Abcam - Production of antibodies UK 0.6 Alten - Technology consulting France 0.9 BML - Medical laboratory operator Japan 1.5 ASM International - Semiconductor equipment Netherlands 0.5

Model portfolio holdings are supplemental information only and complement the fully compliant International Small Companies Composite GIPS Presentation. The portfolio is actively managed therefore holdings shown may not be current. Portfolio holdings should not be considered recommendations to buy or sell any security. It should not be assumed that investment in the security identified has been or will be profitable. To request a complete list of portfolio holdings for the past year contact Harding Loevner.

6 Harding Loevner International Small Companies Equity Supplemental Information as of June 30, 2014

International Small Cos Holdings (as of June 30, 2014) International Small Cos Holdings (as of June 30, 2014) End End Sector/Company/Description Country Sector/Company/Description Country Wt.% Wt.% Bechtle - IT servicing and IT product reseller Germany 1.5 Imdex Limited - Drilling components Australia 0.6 Chipbond Technology - Chip packaging service Taiwan 0.6 Lintec - Adhesive products and paper Japan 0.5 Domino Printing Sciences - Printing equipment UK 0.9 RPC - Plastic packaging manufacturer UK 1.8 Industrial & Financial Systems - Software devel. Sweden 1.9 Yip’s Chemical - Chemical products and solvents China 0.6 Ingenico - Electronic payment equipment mfg. France 0.7 Telecom Services LEM Holdings - Electrical components manufacturing 0.7 iinet - Internet service provider Australia 1.2 Temenos Group - Banking software Switzerland 0.8 Tower Bersama - Wireless telecom towers Indonesia 0.9 Vaisala - Atmospheric measuring devices Finland 0.6 TPG Telecom - Telecom services Australia 0.9 Wirecard - Online payment services Germany 0.9 Utilities Youngtek Electronics - Semiconductor equipment Taiwan 0.6 RUBIS - Liquid chemical storage and distribution France 1.0 Materials Cash 2.7 Chr. Hansen - Produces natural food ingredients Denmark 0.5 Goodpack - Intermediate bulk container fleet Singapore 0.9

Last Quarter Last 12 Months Largest Contributors (%) Largest Contributors (%) Sector Weight Contribution Sector Weight Contribution Kentz INDU 2.3 0.62 Kentz INDU 1.7 1.94 Equity Bank FINA 1.5 0.54 Industrial & Financial Sys. INFT 1.6 1.37 Industrial & Financial Sys. INFT 1.8 0.31 RPC MATS 1.6 1.02 Nakanishi HLTH 1.2 0.31 Bechtle INFT 1.4 0.96 CETIP FINA 1.4 0.29 Britvic STPL 1.3 0.85 Largest Detractors (%) Largest Detractors (%) Sector Weight Contribution Sector Weight Contribution YOOX DSCR 1.6 -0.37 Super Group STPL 1.6 -0.71 Domino Printing Sciences INFT 1.2 -0.27 Eurocash STPL 1.2 -0.43 Super Group STPL 1.3 -0.22 Pico Far East Holdings DSCR 1.0 -0.33 TPG Telecom TCOM 1.3 -0.21 Yip's Chemical MATS 0.9 -0.29 Brunel International INDU 1.3 -0.20 AKR Corporindo INDU 1.0 -0.24

The portfolio holdings identified above do not represent all of the securities held in the portfolio. It should not be assumed that investment in the securities identified has been or will be profitable. The following information is available upon request: (1) information describing the methodology of the contribution data in the charts above; and (2) a list showing the weight and contribution of all holdings during the quarter and the last 12 months. Past performance does not guarantee future results. In the charts above, “weight” is the average percentage weight of the holding during the period, and “contribution” is the contribution to overall performance over the period. Quarterly data is not annualized.

Completed Portfolio Transactions Positions Initiated Positions Sold Company Country Sector Company Country Sector Pricesmart US STPL PKC Group Finland INDU Rotork UK INDU

Portfolio holdings and attribution are supplemental information only and complement the fully compliant International Small Companies Composite GIPS Presentation. The portfolio is actively managed therefore holdings shown may not be current. Portfolio holdings should not be considered recommendations to buy or sell any security. It should not be assumed that investment in the security identified has been or will be profitable. To request a complete list of portfolio holdings for the past year contact Harding Loevner.

2014 Second Quarter Report 7 Fundamental. Thinking. Worldwide.SM

International Small Companies Composite Performance (as of June 30, 2014) HL ISC HL ISC ACWI ex-US HL ISC 3-Yr ACWI ex-US Internal No. of Composite Percent Firm Gross Net Small Cap1 Std Deviation2 Small Cap 3-Yr Dispersion3 Accounts Assets Assets Std Deviation2 (%) (%) (%) (%) (%) (%) ($M) (%) 2014 YTD4 7.63 7.08 7.48 16.20 16.60 N.A.5 3 183 0.50 2013 28.37 26.92 20.13 16.41 16.65 N.M.6 3 166 0.50 2012 25.73 24.31 18.96 19.24 19.96 N.M. 2 119 0.53 2011 -11.90 -12.80 -18.21 23.37 23.89 N.M. 2 84 0.62 2010 25.94 24.40 25.58 28.53 30.38 N.M. 1 18 0.16 2009 75.88 73.80 63.50 26.81 28.45 N.M. 1 8 0.13 2008 -47.01 -47.67 -50.01 + + N.M. 1 3 0.09 2007 17.80 16.73 11.11 + + N.M. 1 6 0.09 1Benchmark Index; 2Variability of the composite and the Index returns over the preceding 36-month period, annualized; 3Asset-weighted standard deviation (gross of fees); 4The 2014 YTD performance returns and assets shown are preliminary; 5N.A.–Internal dispersion less than a 12-month period; 6N.M.–Information is not statistically significant due to an insufficient number of portfolios in the Composite for the entire year; +Less than 36 months of return data.

The International Small Companies Composite contains fully discretionary, fee paying international equity accounts investing primarily in non-US equity and equity- equivalent securities of companies with a market capitalization of below $3 billion. The investment objective of the Composite is long-term capital appreciation. For comparison purposes, the Composite is measured against the MSCI All Country World ex-US Small Cap Index (gross of withholdings taxes). Returns include the effect of foreign currency exchange rates. The exchange rate source of the benchmark is Reuters. The exchange rate source of the Composite is Bloomberg. Additional information about the benchmark, including the percentage of composite assets invested in countries or regions not included in the benchmark, is available upon request.

The MSCI All Country World ex-US Small Cap Index is a free-float market capitalization index that is designed to measure small cap developed and emerging market equity performance. The Index consists of 45 developed and emerging market countries, targeting companies market capitalization range of USD 170–4,200 million in terms of the company’s full market capitalization. You cannot invest directly in this Index.

Harding Loevner LP claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Harding Loevner has been independently verified by Ashland Partners & Company, LLP for the period November 1, 1989 through March 31, 2014.

Verification assesses whether (1) the firm has complied with all composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policy and procedures are designed to calculate and present performance in compliance with GIPS standards. The International Small Companies Composite has been examined for the periods January 1, 2007 through March 31, 2014. The verification and performance exam reports are available upon request.

Harding Loevner LP is an investment adviser registered with the Securities and Exchange Commission. Harding Loevner is an affiliate of Affiliated Managers Group, Inc. (NYSE: AMG), an investment holding company with stakes in a diverse group of boutique firms. The firm maintains a complete list and description of composites, which is available upon request.

Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Composite performance is presented gross of foreign withholding taxes on dividends, interest income and capital gains. Past performance is not indicative of future results. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.

The US dollar is the currency used to express performance. Returns are presented both gross and net of management fees and include the reinvestment of all income. Net returns are calculated using actual fees. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. The standard fee schedule generally applied to separate International Small Companies accounts is 1.15% annually of the market value up to $15 million; 0.80% of amounts above $15 million. Actual investment advisory fees incurred by clients may vary. The annual composite dispersion presented is an asset-weighted standard deviation calculated for the accounts in the composite the entire year.

The International Small Companies Composite was created on December 31, 2006.

HARDING LOEVNER LP 400 Crossing Blvd, Fourth Floor • Bridgewater, NJ 08807 • Tel (908) 218-7900 • Fax (908) 218-1915 • www.hardingloevner.com

2014 Second Quarter Report