International Equity Research Review | Second Quarter 2019 - Fundamental. Thinking. Worldwide - Harding Loevner
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Fundamental. Thinking. Worldwide. International Equity Research Review | Second Quarter 2019
Composite Performance
As of June 30, 2019
Performance (% Total Return)
3 Months YTD 1 Year 3 Years Since Inception
HL International Equity Research (gross of fees) 3.94 15.61 1.82 11.18 11.16
HL International Equity Research (net of fees) 3.76 15.20 1.08 10.37 10.34
MSCI All Country World ex-US Index3,4 3.22 14.00 1.80 9.91 8.23
HL Intl Equity HL Intl Equity
MSCI ACWI ex-US MSCI ACWI ex-US
Research Reearch
Alpha (%) 1.41 — Information Ratio 0.53 —
Beta 0.98 — Sharpe Ratio 0.87 0.76
R-Squared 0.95 — Up/Down Capture (%) 101/93 —
Standard Deviation (%) 11.22 11.24
1Annualized Returns; 2Inception date: December 31, 2015; 3The Benchmark Index; 4Gross of withholding taxes. The International Equity Research Composite contains fully discretionary, fee-paying accounts
investing in non-US equity and equity-equivalent securities, and cash reserves and is measured against the MSCI All Country World ex-US Total Return Index (Gross) for comparison purposes. 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. Harding Loevner claims compliance with the Global Investment Performance Standards (GIPS®). Harding Loevner has been independently verified for the period November
1, 1989 through March 31, 2019. 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. Verification does not ensure the accuracy of any composite presentation. The International Equity Research
Composite has not received a performance examination. Performance data quoted represents past performance; past performance does not guarantee future results. Returns are presented both gross and net
of management fees and include the reinvestment of all income. Net returns are calculated using actual fees. The US dollar is the currency used to express performance. For complete information on the
construction and historical record of the International Equity Research Composite, please contact Harding Loevner at 908-218-7900 or visit www.hardingloevner.com. The firm maintains a complete list and
description of composites, which is available upon request. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 2MSCI ACW ex-US Index Total Returns by Quality, Growth, and Value Rank
Quality Rank Quintiles Growth Rank Quintiles Value Rank Quintiles
20 20 20
2Q19 Return (%)
15 15 15
Quality had the
10 10 10
biggest impact.
High quality
outperformed. 5 5 5
0 0 0
Highest Lowest Fastest Slowest Least Most
Exp. Exp.
Quality Rank Quintiles Growth Rank Quintiles Value Rank Quintiles
20 20 20
2019 YTD
High quality and 15 15 15
fast growing
Return (%)
companies 10 10 10
outperformed
while the least
5 5 5
expensive
stocks lagged.
0 0 0
Highest Lowest Fastest Slowest Least Most
Exp. Exp.
Source: FactSet; Data as of June 30, 2019. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 3Total Returns for Select Indexes
7
6
2Q19 5
Growth
2Q19 Return (%)
4
outperformed
in each region 3 4.9
except EM 2 4.2 4.3
3.8
3.2 4.1
1
0.7
1.4
0
MSCI ACW MSCI ACW xUS MSCI WRLD MSCI WRLD MSCI US MSCI EM MSCI FEM MSCI ACW xUS
xUS Small Cap
Standard Growth Value
25
20
2019 YTD Return (%)
2019 YTD 15
Growth 18.8
outperformed in 10 17.4
16.6 15.1
each region 14.0 14.9
5 10.8 11.9
0
MSCI ACW MSCI ACW xUS MSCI WRLD MSCI WRLD MSCI US MSCI EM MSCI FEM MSCI ACW xUS
xUS Small Cap
Source: MSCI, Inc. Data as of June 30, 2019. HARDING LOEVNER 4Quality & Growth Investment Philosophy
As of June 30, 2019
More Profitable Lower Risk Faster Growth
Profit Margin Return on Assets Return on Equity Std Dev of ROE Debt/Equity Sales Growth Earnings Growth Cash Flow Growth
64.8
15.8
12.9 13.2
11.1 42.7
8.4 9.0
7.7 8.0
6.0
5.2 4.9
3.4
2.7
1.7
Harding Loevner International Equity Research Model MSCI All Country World ex-US Index
Source: FactSet. Growth and volatility metrics are based on five-year historical data; the other ratios are based on the most recent annual data. All metrics and ratios are presented as
weighted medians. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 5Risk Statistics
Trailing 20-Day Standard Deviation of Daily Returns, annualized
40
35
30
25
20
15
10.7
10 9.9
5
0
Model International Equity Research Portfolio MSCI All Country World Ex-United States
Source: FactSet; MSCI Inc. Data as of June 30, 2019. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 6Benchmark Sector/Region Returns
Second Quarter
Sector Total Return (%) Region Total Return (%)
Industrials 5.4
Europe EMU 6.1
Financials 4.7
Pacific ex-Japan 5.2
Info Technology 4.2
Cons Discretionary 4.1 Canada 5.1
HL IER Composite 4.0
HL IER Composite 4.0
MSCI ACWxUS Index 3.2
Materials 3.1 Europe ex-EMU 3.7
Cons Staples 2.5
MSCI ACWxUS Index 3.2
Utilities 2.3
Health Care 1.3 Japan 1.0
Comm Services 1.2
Emerging Markets 0.8
Energy 0.8
Middle East -3.5
Real Estate -1.5
-2.0 0.0 2.0 4.0 6.0 -5.0 0.0 5.0 10.0
Source: FactSet; Data as of June 30, 2019. Past performance does not guarantee future results. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 7Performance Attribution: Composite vs Benchmark
Second Quarter
Sector
1.0 Top Five Contributors to
Absolute Returns
Total Effect: 0.7 0.5
Effect (%) Adidas
Selection Effect: 0.5 0.0 SAP
Allocation Effect: 0.2 EssilorLuxottica
-0.5
Spirax-Sarco
-1.0
HLTH INDU INFT FINA UTIL MATS RLST DSCR CASH ENER STPL COMM ICTSI
Region
1.0 Top Five Detractors from
Absolute Returns
Total Effect: 0.7
0.5 Encana
Effect (%)
Selection Effect: 1.2
Unicharm
Allocation Effect: -0.5 0.0
Dentsu
-0.5
Check Point
-1.0 Coway
XEMU PACXJ EMU FRONTIER¹ JAPAN EMERGE CASH MIDEAST CANADA
Selection Effect Allocation Effect Total Effect
1Includes countries with less-developed markets outside the Index. “Composite”: International Equity Research Composite. “Benchmark”: MSCI All Country World ex-US Index. Past performance
does not guarantee future results. Sector and Region Attribution and Contributors and Detractors are shown as supplemental information only and complement the fully compliant
International Equity Research Composite GIPS Presentation. 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
and (2) a list showing the weight and contribution of all holdings during the quarter. Contribution is the contribution to overall performance over the period. Contributors and detractors
exclude cash and securities in the Composite not held in the Model Portfolio. Quarterly data is not annualized. Please read the disclosures on the last page, which are an integral part of this
presentation. HARDING LOEVNER 8Benchmark Sector/Region Returns
Year to Date
Sector Total Return (%) Region Total Return (%)
Info Technology 19.5
Canada 21.5
Industrials 16.3
Pacific ex-Japan 18.1
Cons Discretionary 15.8
HL IER Composite 15.6 Europe EMU 16.8
Materials 14.9
Europe ex-EMU 16.1
MSCI ACWxUS Index 14.0
Cons Staples 14.0 HL IER Composite 15.6
Energy 13.4
MSCI ACWxUS Index 14.0
Financials 12.9
Real Estate 12.9 Emerging Markets 10.8
Health Care 12.8
Japan 8.0
Utilities 11.1
Middle East 6.3
Comm Services 7.8
0.0 10.0 20.0 30.0 0.0 10.0 20.0 30.0
Source: FactSet; Data as of June 30, 2019. Past performance does not guarantee future results. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 9Performance Attribution: Composite vs Benchmark
Year to Date
Sector
1.5 Top Five Contributors to
Total Effect: 1.7 Absolute Returns
1.0
Selection Effect: 1.5
Effect (%) ICTSI
Allocation Effect: 0.2 0.5 SAP
Anheuser-Busch InBev
0.0
Adidas
-0.5
INDU HLTH INFT FINA UTIL COMM MATS ENER RLST DSCR STPL CASH Sonova Holding
Region
1.5 Top Five Detractors from
Total Effect: 1.7
Absolute Returns
1.0
Selection Effect: 2.4 Dentsu
0.5
Effect (%)
Allocation Effect: -0.7
0.0 Stanley Electric
-0.5 Bankinter
-1.0 Fuchs Petrolub
-1.5
XEMU EMERGE JAPAN PACXJ FRONTIER¹ MIDEAST EMU CANADA CASH
Hankook Tire
Selection Effect Allocation Effect Total Effect
1Includes countries with less-developed markets outside the Index. “Composite”: International Equity Research Composite. “Benchmark”: MSCI All Country World ex-US Index. Past performance
does not guarantee future results. Sector and Region Attribution and Contributors and Detractors are shown as supplemental information only and complement the fully compliant
International Equity Research Composite GIPS Presentation. 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
and (2) a list showing the weight and contribution of all holdings during the period. Contribution is the contribution to overall performance over the period. Contributors and detractors exclude
cash and securities in the Composite not held in the Model Portfolio. Data is not annualized. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 10Completed Portfolio Transactions
Trailing 12 Months
3Q18 4Q18 1Q19 2Q19
30
20
20
Positions 10 16 16
Established 12
0
Positions
Sold 10 13
17
20
20
27
30
Portfolio Turnover (3-yr avg annual): 43.5%
The portfolio is actively managed therefore holdings shown may not be current. 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. To request a complete list of portfolio holdings for the past year, contact Harding Loevner. Holdings are
shown as supplemental information only and complement the fully compliant International Equity Research Composite GIPS Presentation. Please read the disclosures on the last page, which
are an integral part of this presentation. HARDING LOEVNER 11Portfolio Allocation Comparison
June 30, 2019 vs December 31, 2018 vs June 30, 2018
Sector (%) Region (%)
Consumer
Staples
Emerging
Markets
Industrials
Cons
Europe
Discretionary
ex-EMU
Info
Technology
Europe
EMU
Health Care
0.0 5.0 10.0 15.0 20.0
0.0 10.0 20.0 30.0 40.0
6/30/2019 3/31/2019 6/30/2018 6/30/2019 3/31/2019 6/30/2018
1Includes countries with less-developed markets outside the Index. Source: Harding Loevner International Equity Research Model; MSCI Inc. and S&P. Sector and region end weights, holdings,
and active share are shown as supplemental information only and complement the fully compliant International Equity Research Composite GIPS Presentation. Please read the disclosures on
the last page, which are an integral part of this presentation. HARDING LOEVNER 12Portfolio Exposures
As of June 30, 2019
Sector HL% ACWIxUS% (Under) / Over Geography HL% ACWIxUS% (Under) / Over
Cons Staples 13.8 9.8 Europe ex-EMU 24.6 20.7
Info Technology 11.9 8.5
Emerging Markets 29.9 26.4
Cash 2.2 —
Industrials 13.4 11.9 Cash 2.2 —
Health Care 9.1 8.3 Middle East 1.0 0.4
Cons Discretionary 11.9 11.3
Japan 16.2 15.8
Materials 7.2 7.6
Comm Services 6.3 6.9 Frontier Markets¹ 0.3 —
Real Estate 1.8 3.3 Pacific ex-Japan 7.4 8.5
Energy 4.1 7.1
Canada 2.7 6.8
Utilities 0.4 3.4
Financials 17.9 21.9 Europe EMU 15.7 21.4
(5.0) 0.0 5.0 (10.0) (5.0) 0.0 5.0 10.0
80% Active Share
1Includes countries with less-developed markets outside the Index. Source: Harding Loevner International Equity Research Model; MSCI Inc. and S&P. Sector and region end weights are shown
as supplemental information only and complement the fully compliant International Equity Research Composite GIPS Presentation. Please read the disclosures on the last page, which are an
integral part of this presentation. HARDING LOEVNER 1325 Largest Holdings
As of June 30, 2019
Company Country Sector Wt (%)
SAP Germany Info Technology 1.2
Alimentation Couche-Tard Canada Cons Staples 1.2
Anheuser-Busch InBev Belgium Cons Staples 1.2
Allianz Germany Financials 1.1
Nestlé Switzerland Cons Staples 1.1
Roche Switzerland Health Care 1.1
BHP Australia Materials 1.1
AIA Group Hong Kong Financials 1.1
Tata Consultancy Services India Info Technology 1.1
Canadian National Railway Canada Industrials 1.0
Alcon, Inc. Switzerland Health Care 1.0
Unilever UK Cons Staples 1.0
ASSA ABLOY Sweden Industrials 1.0
Amadeus Spain Info Technology 1.0
Oversea-Chinese Banking Corp Singapore Financials 1.0
Sonova Holding Switzerland Health Care 1.0
ABC-Mart Japan Cons Discretionary 1.0
Dentsu Japan Comm Services 1.0
Kuehne + Nagel Switzerland Industrials 1.0
Shimano Japan Cons Discretionary 1.0
Royal Dutch Shell UK Energy 1.0
China Mobile China Comm Services 1.0
Unicharm Japan Cons Staples 1.0
DBS Group Singapore Financials 1.0
Banco Santander Spain Financials 0.9
Source: Harding Loevner International Equity Research Model; MSCI Inc. and S&P. Holdings are shown as supplemental information only and complement the fully compliant International
Equity Research Composite GIPS Presentation. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 14Harding Loevner Profile
As of June 30, 2019
43 investment professionals
Global Equity portfolio management team averages 14 years at Harding Loevner
Strategy Assets Firm Assets
Global $16.2B 24%
International (Non-US) $33.8B 49%
Emerging Markets $18.0B 26%
Total Assets Frontier Emerging Markets $0.4B 1%
$69B Global Small CompaniesAppendix
HARDING LOEVNER 16Composite Performance
As of June 30, 2019
Annualized Returns for Trailing Periods (%)
15.0
11.18 11.16
10.37 10.34
9.91
10.0
8.23
Percent
5.0
1.82 1.80
1.08
0.0
1 Year 3 Years Since Inception
HL International Equity Reearch (gross) HL International Equity Research (net) MSCI ACW ex-US Index (gross)¹
HL Intl Equity HL Intl Equity
MSCI ACWI ex-US MSCI ACWI ex-US
Research Reearch
Alpha (%) 1.41 — Information Ratio 0.53 —
Beta 0.98 — Sharpe Ratio 0.87 0.76
R-Squared 0.95 — Up/Down Capture (%) 101/93 —
Standard Deviation (%) 11.22 11.24
1The Benchmark Index, gross of withholding taxes. The 3-year and since inception returns are annualized. Inception date of the International Equity Research Composite: December 31, 2015. Investment
Statistics shown are derived from trailing five years’ monthly returns. Performance returns shown are preliminary. The International Equity Research Composite contains fully discretionary, fee-paying
accounts investing in non-US equity and equity-equivalent securities and cash reserves, and is measured against the MSCI All Country World ex-US Total Return Index (Gross) for comparison purposes. 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. Harding Loevner claims compliance with the Global Investment Performance Standards (GIPS®). Harding Loevner has been independently verified for the period
November 1, 1989 through March 31, 2019. 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. Verification does not ensure the accuracy of any composite presentation. The International Equity
Research Composite has not received a performance examination. Performance data quoted represents past performance; past performance does not guarantee future results. Returns are presented both
gross and net of management fees and include the reinvestment of all income. Net returns are calculated using actual fees. The US dollar is the currency used to express performance. For complete
information on the construction and historical record of the International Equity Research Composite, please contact Harding Loevner at (908) 218-7900 or visit www.hardingloevner.com. The firm maintains a
complete list and description of composites, which is available upon request. Statistics are supplemental information only and complement the fully compliant International Equity Research Composite GIPS
Presentation. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 17Disclosures
The information provided in this Presentation should not be considered a recommendation to purchase or sell a particular security. Unless otherwise stated, non-performance based criteria have been used to select the securities
listed. The portfolio is actively managed therefore securities shown may not be current. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of portfolio
holdings for the past year contact Harding Loevner. A complete list of holdings for the International Equity Research Model at June 30, 2019 is available on request.
Investing in stocks entails the risks of market volatility. The value of all types of stocks may increase or decrease over varying time periods. To the extent the investments depicted herein represent international securities, you
should be aware that there may be additional risks associated with international investing, including foreign economic, political, monetary and/or legal factors, changing currency exchange rates, foreign taxes, and differences in
financial and accounting standards.
Quality-Growth Characteristics, Investment Statistics, Benchmark Returns, Performance Attribution, Portfolio Exposures and Portfolio Transactions are shown as supplemental information only and complement the fully compliant
International Equity Research Composite GIPS Presentation, which is available on request.
Alpha: a measure of risk-adjusted return. Beta: a measure of the portfolio’s sensitivity to the market. R-Squared: a measure of how well a portfolio tracks the market. Standard Deviation: the statistical measure of the degree to
which an individual value in a probability distribution tends to vary from the mean of the distribution. Information Ratio: a measure of risk-adjusted return calculated by dividing the portfolio active return (i.e., portfolio returns
minus benchmark return) by the standard deviation of the active return. Sharpe Ratio: the return over the risk free rate per unit of risk. Up/Down Capture: a measure of the manager’s performance in up/down markets relative to
the market itself. Profit Margin: relationship of gross profits to net sales. Return on Assets: net income for past 12 months divided by total assets. Return on Equity: the net income divided by total common equity outstanding,
expressed as a percent. Debt/Equity Ratio: total long-term debt divided by total shareholder’s equity. Sales Per Share: the total revenue earned per share over a 12-month period, net of returns, allowances, and discounts. Earnings
Per Share: portion of a company’s profit allocated to each outstanding share of common stock. Cash Flow: a measure of the cash generating capability of a company calculated by adding non-cash charges (e.g. depreciation) and
interest expense to pretax income. Turnover: calculated by dividing the lesser of Purchases or Sales by Average Capital.
The MSCI All Country World ex-US Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets, excluding the US. The Index
consists of 46 developed and emerging market countries. You cannot invest directly in this Index.
Harding Loevner’s Quality, Growth, and Value rankings are proprietary measures determined using objective data. Quality rankings are based on the stability, trend, and level of profitability, as well as balance sheet strength.
Growth rankings are based on historical growth of earnings, sales, and assets, as well as expected changes in earnings and profitability. Value rankings are based on several valuation measures, including price ratios.
The Composite and Attribution returns may show discrepancies due to the different data sources for these returns. Composite performance is preliminary and obtained from Harding Loevner’s accounting system and Attribution
returns are obtained from the FactSet portfolio analysis system. Please note returns from FactSet are not audited for GIPS compliance and are for reference only.
Source (Benchmark Performance, Performance Attribution, Contributors and Detractors): FactSet, Harding Loevner International Equity Research Composite; MSCI Inc.
Source (Portfolio Exposures, Portfolio Transactions, Portfolio Allocation Comparison, Quality-Growth Characteristics [Run date: July 4, 2019]): FactSet; Harding Loevner International Equity Research Model; MSCI Inc.
Source (Investment Statistics): eVestment Alliance; Harding Loevner International Equity Research Composite, based on composite returns.
MSCI Inc. 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.
FactSet Fundamentals, Copyright 2019 FactSet Research Systems, Inc. All rights reserved.
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