<PAGE>
THE
OAKMARK
FUND
THE OAKMARK FAMILY of FUNDS
SEMI-ANNUAL THE
REPORT OAKMARK
-------------- SMALL CAP
April 30, 1996 FUND
--------------
THE
OAKMARK
BALANCED
FUND
THE
OAKMARK
INTERNATIONAL
FUND
[LOGO APPEARS HERE]
THE
MEMBER OF OAKMARK
==================== INT'L EMERGING
NO-LOAD VALUE FUND
100% MUTUAL FUND
COUNCIL (TM)
====================
No-Load Funds Managed by
HARRIS ASSOCIATES L.P.
<PAGE>
[LOGO APPEARS HERE]
THE OAKMARK FAMILY OF FUNDS
1996 SEMI-ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Letter from the President.................... 1
The Oakmark Funds Summary.................... 2
The Oakmark Fund
Performance Chart......................... 4
Letter from the Portfolio Manager......... 4
Schedule of Investments................... 8
The Oakmark Small Cap Fund
Performance Information................... 11
Letter from the Portfolio Manager......... 11
Schedule of Investments................... 14
The Oakmark Balanced Fund
Performance Information................... 16
Letter from the Portfolio Manager......... 16
Schedule of Investments................... 19
The Oakmark International Fund
Performance Chart......................... 21
Letter from the Portfolio Managers........ 21
Schedule of Investments................... 25
The Oakmark Int'l Emerging Value Fund
Performance Information................... 31
Letter from the Portfolio Managers........ 31
Schedule of Investments................... 34
Financial Statements......................... 40
Trustees and Officers........................ 61
Other Important Information.................. 61
</TABLE>
QUESTIONS ABOUT YOUR ACCOUNT:
If you have questions about your account, please call the Funds' transfer agent
at 1-800-626-9392.
24-HOUR NET ASSET VALUE HOTLINE:
To obtain the current net asset value per share of any Fund, please call
1-800-GROWOAK (1-800-476-9625).
<PAGE>
Letter From the President. . .
Fellow Shareholders:
I am pleased to report that each of The Oakmark Family of Funds had positive
returns during our second fiscal quarter ended April 30, 1996:
. THE OAKMARK SMALL CAP and THE OAKMARK INTERNATIONAL FUNDS led the way
with exceptionally robust returns of 19.65% and 11.78% respectively.
. THE OAKMARK INTERNATIONAL EMERGING VALUE FUND and THE OAKMARK BALANCED
FUND also significantly outperformed their peer groups during the
quarter by advancing 7.69% and 3.30%.
. THE OAKMARK FUND underperformed the S&P Index this quarter, but has
still generally kept pace with the unusually strong S&P for the past
year.
The results of this quarter strongly illustrate that there will be periods
when sectors of the investment spectrum--whether defined geographically or by
market capitalization--will have wide return variances. By investing in several
funds within The Oakmark Family, many of our investors have created a
diversified portfolio of global investments, all driven by the same value-
oriented investment philosophy. For those investors interested only in U.S.
stocks and bonds wherein the asset allocation is within predetermined ranges, we
offer The Oakmark Balanced Fund. This fund maintains a more conservative asset
allocation strategy and will be less volatile than an all-stock portfolio. To
make The Balanced Fund more accessible to shareholders, we have also reduced the
minimum initial investment to $1,000.
Thank you for your business and your confidence in us.
Sincerely,
/s/ VICTOR A. MORGENSTERN
VICTOR A. MORGENSTERN
President
<PAGE>
THE OAKMARK FUNDS FAMILY SUMMARY INFORMATION*
PERFORMANCE FOR PERIOD ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
OAKMARK SMALL CAP
------- ---------
<S> <C> <C>
3 Months 2.03% 19.65%
6 Months 13.66% 21.80%
Performance for:
1 Year 27.65% N/A
3 Years (Annualized) 22.26% N/A
Since Inception
(Annualized) 31.66% N/A
Value of $10,000 $36,823 $12,180
from inception date 8/05/91 11/01/95
</TABLE>
TOP FIVE HOLDINGS AS OF APRIL 30, 1996
<TABLE>
<S> <C> <C> <C> <C>
Company and Philip Morris Co. 6.51% SPX Corp. 5.66%
% of Total Net First USA Inc. 5.00% U.S. Industries Inc. 5.43%
Assets Mellon Bank Corp. 4.86% First Brands Corp. 4.08%
Lockheed Martin Corp. 4.55% Carbide/Graphite
U.S. West Media Group 4.46% Group Inc. 3.82%
Peoples Bank
of Bridgeport 3.53%
</TABLE>
TOP FIVE INDUSTRIES AS OF APRIL 30, 1996
<TABLE>
<S> <C> <C> <C> <C>
Industries and Broadcasting & Machinery &
% of Total Net Publishing 16.80% Metal Processing 15.50%
Assets Food & Beverage 16.70% Banks 12.90%
Other Consumer Goods Other Industrial Goods
and Services 10.30% and Services 12.80%
Other Financial 8.10% Other Financial 8.70%
Aerospace and Defense 6.60 Retail 8.50%
</TABLE>
*The Oakmark Fund's average annual total return for the twelve months ended
March 31, 1996 and the period August 5, 1991 (inception) through March 31, 1996
was 27.50% and 32.00%, respectively.
The Oakmark Small Cap Fund's total return for November 1, 1995 (inception)
through March 31, 1996 was 14.60%.
The Oakmark Balanced Fund's total return for November 1, 1995 (inception)
through March 31, 1996 was 5.00%.
2
<PAGE>
<TABLE>
<CAPTION>
BALANCED INTERNATIONAL INT'L EMERGING VALUE
-------- ------------- --------------------
<S> <C> <C>
3.30% 11.78% 7.69%
6.30% 23.90% 13.40%
N/A 26.14% N/A
N/A 14.47% N/A
N/A 18.12% N/A
$10,630 $18,162 $11,340
11/01/95 09/30/92 11/01/95
US Industries Inc. 3.98% Cordiant PLC 5.43% European Vinyls
US West Media Group 3.88% AB Volvo 4.30% Corp. Int. 3.74%
McDonnell Telefonos de Mexico, Polysindo Eka Perk 3.56%
Douglas Corp. 3.65% S.A. 3.38% Fyffes 3.34%
First USA 3.36% National Australia Fukuda Denshi Co. 3.05%
Philip Morris Co. 3.33% Bank 3.32% Asia Pulp & Paper Ltd. 3.01%
Usiminas 3.18%
Government & Banks 11.20% Other Industrial Goods
Agency Securities 28.10% Telecommunications 8.30% & Services 14.00%
Other Consumer Goods Steel 7.00% Mining & Building
& Services 13.50% Food 6.80% Materials 7.20%
Broadcasting Transportation 6.30% Computer Systems 7.00%
and Publishing 10.40% Components 6.60%
Corporate Bonds 7.90% Food 5.90%
Food and Beverage 6.60%
</TABLE>
The Oakmark International Fund's average annual total return for the twelve
months ended March 31, 1996 and the period September 30, 1992 (inception)
through March 31, 1996 was 25.50% and 16.40%, respectively.
The Oakmark International Emerging Value Fund's total return for November 1,
1995 (inception) through March 31, 1996 was 9.70%.
The Funds' past performances are no guarantee of future results. Share prices
and investment returns will vary, so you may have a gain or loss when you sell
shares.
3
<PAGE>
Oakmark Fund
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM ITS
INCEPTION (8/5/91) TO PRESENT (4/30/96) AS COMPARED TO THE
STANDARD & POOR'S 500 INDEX.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
OAKMARK FUND S&P 500
- - -------------------------------------------------------
<S> <C> <C>
8/91 $10,000 $10,000
10/91 12,100 10,201
10/92 17,110 11,216
10/93 24,504 12,892
10/94 26,653 13,401
10/95 32,397 16,931
4/96 36,823 19,239
</TABLE>
4/30/96 NAV $31.18
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
THROUGH 4/30/96
--------------------------------
TOTAL RETURN TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. LAST 6 MOS. FROM 4/30/95 8/5/91
------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C>
THE OAKMARK FUND 2.0% 13.7% 27.6% 31.7%
Standard & Poor's 500
Stock Index* 3.4% 13.7% 30.0% 14.8%
Dow-Jones Industrial
Average* 3.8% 18.4% 31.9% 17.0%
Value Line Composite
Index* 6.4% 12.1% 19.4% 8.5%
</TABLE>
*Total return includes change in share prices and in each case included
reinvestment of any dividends and capital gain distributions. Each of the three
indexes or averages is an unmanaged group of stocks whose composition is
different from the Fund. The S&P 500 is a broad market-weighted average
dominated by blue-chip stocks. The Dow-Jones Average includes only 30 big
companies. The Value Line index is an unweighted average of more than 1,000
stocks. Past performance is no guarantee of future performance.
THE OAKMARK FUND
REPORT FROM ROBERT J. SANBORN, PORTFOLIO MANAGER
MID-YEAR UPDATE
As we reach the mid-point of our fiscal year, it is my custom to review the
portfolio and assess how we're doing. Our results in the fiscal year to date are
satisfactory--your Fund is up 13.7 percent, in line with the Standard & Poor's
500, which is also up 13.7 percent.
We do not obsess on stock price changes in the short run. Rather, similar
to a venture capitalist, we concentrate on the BUSINESS results of the companies
which we own (and assume that stock prices will take care of themselves). In
general, I am pleased with the progress our holdings continue to make.
4
<PAGE>
Oakmark Fund
Most of our larger holdings are reporting strong earnings, and have generated
business results (and value growth) at least in line with our expectations.
Some are re-focusing their business operations (Anheuser-Busch has spun off its
bakery operations and sold Eagle Snacks and--to us Cub fans--the hated baseball
Cardinals, Knight-Ridder is selling its financial data division, and American
Home Products is selling its food operations). We applaud these moves, they
demonstrate a commitment to value maximization and will enhance each company's
competitiveness. I again note that over half of our twenty largest holdings are
in the midst of share repurchase programs. I reiterate that we believe this is
the best way to return excess capital to shareholders.
There is currently a strong bias towards quality in your Fund. A "quality"
business is one that generates higher-than-average returns on invested capital
over the long term. These returns are the result of a superior business
structure--a differentiated product, loyal (as opposed to merely price-
conscious) end-users, modest capital expenditure requirements, barriers to
entry, and foreign growth opportunities. Eight of our twenty largest holdings
are high-quality consumer brands with these characteristics, yet they sell at
unduly modest valuations. With market rotation recently favoring the stocks of
companies exposed to a stronger-than-expected economy, these consumer stocks
are extremely attractive. We continue to find more candidates for your Fund in
this sector.
While I believe we will own many of these companies in the long run, we are
not wed to this sector. When the market eventually revalues these stocks, we
will move on. After all, a great business, except for its market valuation, is
a lousy stock. There are times to own lesser-quality companies, such as
immediately after the Crash of 1987 and in the fourth quarter of 1990. Your
Fund's flexibility should prove beneficial to all of us in the long term.
We have added two holdings to our "top twenty" since the end of our fiscal
year. US WEST MEDIA GROUP is an attractive collection of cable and programming
assets, and a 1995 spin-out of the giant utility US West. DUN & BRADSTREET is a
collection of good businesses that has been under-managed for a long time.
During 1996, this company will split into three companies. We expect both of
these holdings to benefit from their liberation from a vast corporate overseer.
Thus, while we do invest for the long term and our portfolio turnover is far
less than average, we are also continually scouring the landscape to upgrade
your portfolio.
Your Fund continues to remain concentrated. Our twenty largest holdings
comprise over 72 percent of our equity holdings, versus 70 percent at the end
of the fiscal year. You may also notice that I have recently made an effort to
reduce our number of total holdings. Many of our smaller holdings cannot make a
significant impact on our performance, and, just as some of our companies are
shedding peripheral holdings, so am I. The resulting portfolio will allow us to
direct our efforts to the holdings that will butter our bread.
All of us at Harris Associates are honored to manage your hard-earned money.
Personally, I realize I have the greatest job in the world. Even during this
5
<PAGE>
Oakmark Fund
grim Chicago "spring," I know I'm walking down the sunny side of the street. I
am well aware that some of you do not always agree with me and some of you
wish we could outperform every quarter (you guys are not bashful), but please
know that we continue to always try to do the best for you.
THESE ARE THE GOOD OLD DAYS
We hear there is a lot of economic insecurity in the US. Critics say the
capitalist system is cruel and heartless, and that only a few lucky winners
are benefiting from our economy. They say living standards are falling and are
lower than 20 years ago, the US is falling behind other nations, the young
cannot afford to buy a house.
Is this all true? An insightful article by W. Michael Cox and Richard Alm in
the December Reason asked the same questions and concludes, "In fact,
Americans never had it so good."
Let's take homes first. The average first time home-buyer in 1993 was 31
years old, three years older than in 1970. During that same time-period, the
median age at which we first marry (an event which often precedes home-buying)
has risen the same three years. The average size of a new home is over 2,000
square feet, compared to 1,500 in 1970. Over 75 percent of new homes have air
conditioning (34 percent in 1970). Over 75 percent of all households have
clothes washers (65 percent in 1970), 96 percent have color TVs (34 percent in
1970), over 70 percent have VCRs (zero in 1970), almost half have dishwashers
(25 percent in 1970).
Reason has a list of the new and improved products since 1970. A partial
listing includes microwaves, cellular phones, answering machines, cable TV,
airbags, CDs, personal computers, camcorders, fax machines, aspartame, remote
controls (can you imagine a world without remote controls?? Homer Simpson and
I shudder!!), movie rentals, soft contact lenses. The list goes on and on
(and, somehow, fails to include The Oakmark Fund). Medical advances have been
huge: in-vitro fertilization, organ transplants, CAT-scan, biotechnology,
anti-depressants. Life expectancy at birth has increased from 70.8 years in
1970 to 75.4 in 1990.
The naysayers aver that all this has been purchased with borrowed money.
Wrong. The average American's net worth has increased by two percent per year
since 1970. They'll aver that the average American is working longer. Wrong.
The average work-week has declined from 37.1 hours to 34.5 hours, and
vacations and paid holidays have increased from 15.5 days to 22.5 days. With
longer life expectancy and earlier retirement, workers have added five extra
years of waking leisure to their lives in the past twenty years. Total
recreational spending has almost tripled in real terms since 1970.
OK, OK, the naysayers admit, we are better off and maybe we're worth more,
but still the average worker's real compensation has declined. Wrong. It is
true that average real wages have been flat since 1970, and that is an oft-
quoted
6
<PAGE>
Oakmark Fund
statistic. It is highly misleading, though. Fringe benefits as a percentage of
compensation have soared since 1970; as payroll taxes have soared, workers and
companies opt for more non-wage benefits in the form of health care and
retirement programs. With fringe benefits included, average real compensation
is up 15 percent.
OK, OK, the naysayers will say, we surrender, but still most of the gains are
going to those at the top. They have a point here. In 1972, those with advanced
degrees made 72 percent more than high school graduates; in 1992, they made 2.5
times more. What's going on here? I suggest that in an increasingly globalized
economy, those that can differentiate themselves in terms of human capital will
benefit. Also, there is tremendous mobility within income quintiles. A US
Treasury study of income tax returns filed from 1979 to 1988 indicated that 86
percent in the bottom quintile in 1979 managed to move to a higher quintile in
1988; almost 15 percent made it to the highest quintile. As the authors note,
"More moved from the bottom to the top than stayed in the bottom."
Are there unhappy people in the US? Sure. Do we have serious problems? You
bet. Let's focus on the real problems, though, and not the phony ones. In terms
of material well-being, the average American is better off than ever before.
ROBERT J. SANBORN
Portfolio Manager
[email protected]
May 16, 1996
7
<PAGE>
Oakmark Fund
THE OAKMARK FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Shares Held Common Stocks Market Value
- - ------------------------------------------------------------------
<S> <C>
COMMON STOCKS--93.5%
FOOD & BEVERAGE--16.7%
2,881,500 Philip Morris Companies Inc. $ 259,695,187
3,897,250 H.J. Heinz Company 132,019,344
1,769,100 Anheuser-Busch Companies Inc. 118,750,837
2,422,100 Nabisco Holdings Corp. 74,176,813
585,000 CPC International 40,438,125
1,571,900 Interstate Bakeries 37,332,625
200,000 International Dairy Queen, Inc. (a) 4,225,000
--------------
666,637,931
APPAREL--0.1%
388,500 K-Swiss Inc., Class A 3,593,625
RETAIL--5.7%
3,745,500 Federated Department Stores, Inc. (a) 125,006,063
954,600 The Kroger Company 39,257,925
1,600,000 Zale Corporation (a) 29,800,000
1,000,000 Carson Pirie Scott & Co. (a) 24,250,000
600,000 Cole National Corporation (a) 9,825,000
53,800 Rex Stores Corporation (a) 840,625
--------------
228,979,613
OTHER CONSUMER GOODS & SERVICES--10.3%
3,810,400 The Black & Decker Corporation 153,368,600
2,032,800 American Brands, Inc. 84,615,300
477,700 The Clorox Company 39,469,962
940,400 First Brands Corporation 24,920,600
957,500 Whitman Corporation 24,176,875
583,800 GC Companies, Inc. (a) 21,089,775
885,000 JUNO Lighting Inc. 13,109,062
400,000 Stanhome, Inc. 11,800,000
957,500 Arctco, Inc. 9,215,937
601,500 Justin Industries, Inc. 7,744,313
281,500 Rollins, Inc. 6,333,750
257,600 Paragon Trade Brands, Inc. (a) 6,021,400
395,000 Mikasa, Inc. (a) 4,690,625
100,000 Alberto-Culver Company 3,375,000
207,000 Armor All Products Corporation 3,221,438
--------------
413,152,637
BANKS--4.9%
3,606,550 Mellon Bank Corporation 193,852,063
340,000 River Bank America (a) 2,975,000
--------------
196,827,063
INSURANCE--6.0%
3,296,200 Torchmark Corporation 141,736,600
1,405,747 Old Republic International 46,389,651
984,700 AmericanFinancial Group, Inc. 30,156,438
501,300 Acordia, Inc. 15,916,275
95,000 MAIC Holdings, Inc. (a) 3,075,625
--------------
237,274,589
</TABLE>
8
<PAGE>
Oakmark Fund
THE OAKMARK FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Shares Held Common Stocks Market Value
- - -----------------------------------------------------------------------
<S> <C>
OTHER FINANCIAL--8.1%
3,548,000 First USA, Inc. $ 199,575,000
2,194,900 AMBAC Inc. 106,727,012
204,400 Fund American Enterprises Holdings, Inc. 15,636,600
--------------
321,938,612
BROADCASTING & PUBLISHING--16.8%
9,112,300 U.S. West Media Group 177,689,850
2,174,400 Knight-Ridder, Inc. 157,372,200
2,400,100 Dun + Bradstreet Corporation 146,106,088
6,829,179 Tele-Communications, Inc., Class A (a) 130,608,048
1,432,294 TCI Communications, Inc. (a) 39,209,048
300,000 Gannett 20,512,500
--------------
671,497,734
PHARMACEUTICAL--2.6%
975,000 American Home Products Corporation 102,862,500
MANAGED CARE SERVICES--2.5%
2,000,000 Foundation Health Corporation (a) 78,250,000
420,000 Physicians Health Services, Inc. (a) 13,755,000
270,000 Right CHOICE Managed Care, Inc. (a) 4,556,250
500,000 Laboratory Corporation of America Holdings 4,250,000
--------------
100,811,250
MEDICAL PRODUCTS--1.1%
1,297,800 Sybron Corporation (a) 32,769,450
550,000 Spacelabs Medical, Inc. (a) 12,237,500
--------------
45,006,950
AEROSPACE & DEFENSE--6.6%
2,251,750 Lockheed Martin Corporation 181,547,344
610,000 McDonnell Douglas Corporation 58,865,000
779,600 Logicon, Inc. 23,193,100
--------------
263,605,444
OTHER INDUSTRIAL GOODS & SERVICES--6.1%
2,839,100 James River Corporation 75,945,925
1,999,700 The Geon Company 52,992,050
935,200 Bandag Incorporated, Class A 45,240,300
880,400 SPX Corporation 20,249,200
246,400 Great Lakes Chemical Corporation 16,816,800
590,000 USG Corporation (a) 15,413,750
170,000 UCAR International Inc. (a) 6,970,000
182,600 Amtrol, Inc. 4,428,050
45,000 OM Group, Inc. 1,715,625
26,300 Bandag Incorporated 1,318,287
--------------
241,089,987
COMMERCIAL REAL ESTATE--0.9%
2,291,700 Host Marriott Corporation (a) 30,651,487
585,700 Catellus Development Corporation (a) 5,344,513
--------------
35,996,000
</TABLE>
9
<PAGE>
Oakmark Fund
THE OAKMARK FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Shares Held Market Value
- - --------------------------------------------------------------------------------
<S> <C>
FOREIGN SECURITIES--5.1%
3,035,000 DeBeers Consolidated Mines Limited ADR (b) $ 96,361,250
3,276,500 YPF Sociedad Anonima (b) 71,673,438
547,700 EVC International NV 19,657,747
413,200 Telefonos de Mexico, S.A. de C.V. (b) 14,048,800
--------------
201,741,235
TOTAL COMMON STOCKS (COST: $2,890,973,375) 3,731,015,170
SHORT TERM INVESTMENTS--6.2%
COMMERCIAL PAPER--6.2%
American Express Credit Corporation, 5.33% due 5/06/96-5/09/96 $ 40,000,000
Ford Motor Credit Corp., 5.33% due 5/10/96-5/14/96 36,500,000
Ford Motor Credit Corp., 5.31% due 5/15/96-5/16/96 18,000,000
Ford Motor Credit Corp., 5.29% due 5/20/96-5/24/96 47,000,000
Ford Motor Credit Corp., 5.30% due 5/28/96-5/29/96 37,000,000
General Electric Capital Corporation, 5.32% due 5/01/96 17,000,000
General Electric Capital Corporation, 5.36% due 5/02/96 11,000,000
General Electric Capital Corporation, 5.31% due 5/03/96 14,500,000
General Electric Capital Corporation, 5.33% due 5/08/96 3,500,000
General Electric Capital Corporation, 5.29% due 5/17/96 4,500,000
General Electric Capital Corporation, 5.25% due 5/20/96-5/21/96 18,000,000
--------------
TOTAL COMMERCIAL PAPER (COST: $247,000,000) 247,000,000
--------------
Total Investments (Cost $3,137,973,375)--99.7% $3,978,015,170
Other assets, less other liabilities--.3% 10,234,270
--------------
TOTAL NET ASSETS--100% $3,988,249,440
==============
</TABLE>
- - ----------
Notes:
(a) Non-income producing security.
(b) Represents an American Depositary Receipt.
(c) At April 30, 1996, net unrealized appreciation of $840,041,795 for federal
income tax purposes consisted of gross unrealized appreciation of
$857,356,493 and gross unrealized depreciation of $17,314,698.
AFFILIATED COMPANIES
The following companies are considered affiliated because the Fund owns
greater than 5% of the outstanding voting shares of the company
<TABLE>
<S> <C> <S> <C>
AMBAC, Inc. 6.25% Spacelabs Medical, Inc. 5.27%
Cole National Corporation 5.76% K-Swiss Inc., Class A 9.51%
Carson Pirie Scott & Co 6.11% Logicon, Inc. 5.61%
First USA, Inc. 6.00% Physicians Health Services, Inc. 7.74%
The Geon Company 8.03% Right CHOICE Managed Care, Inc. 7.26%
SPX Corporation 6.76%
</TABLE>
The aggregate cost and value of investments in these companies at April 30,
1996 was $329,534,565 and $470,953,738, respectively, which represents 11.8%
of the total net assets. During the six months ended April 30, 1996, dividends
received from these companies was $926,868.
See accompanying notes to financial statements.
10
<PAGE>
Small Cap
THE OAKMARK SMALL CAP FUND
RESULTS FROM NOVEMBER 1, 1995 (INCEPTION) THRU APRIL 30, 1996:
4/30/96 NAV $12.18
<TABLE>
<CAPTION>
3 MONTHS* 6 MONTHS*
--------- ---------
<S> <C> <C>
THE OAKMARK SMALL CAP FUND.................................. 19.7% 21.8%
Lipper Small Co. Growth..................................... 14.6% 19.3%
Russell 2000................................................ 10.4% 17.6%
S&P 600..................................................... 10.0% 17.5%
</TABLE>
*Total return includes change in share prices and in each case included
reinvestment of any dividends and capital gain distributions. Each of the three
indexes or averages is an unmanaged group of stocks whose composition is
different from the Fund. The Lipper Small Company Growth Fund Index is
comprised of 30 Small Cap Funds. The Russell 2000 Index measures the
performance of smaller companies, and represents approximately 10% of the total
value of publicly traded companies in the U.S. The S&P 600 Index measures the
performance of selected U.S. stocks with a small market capitalization. Past
performance is no guarantee of future results.
REPORT FROM STEVEN J. REID, PORTFOLIO MANAGER
Dear Fellow Shareholders:
I am pleased to report that your Fund appreciated 19.7% during its second
fiscal quarter ended April 30, 1996 and 21.8% since the Fund's inception on
November 1, 1995.
In the inaugural report to shareholders, I stated that we would compare the
investment results of the Fund to both the Russell 2000 and the S&P Small-Cap
600 indices. We were fortunate to have attained results that compared favorably
to either index, despite the fact your Fund did not have any exposure to energy
or technology, which were very strong sectors in the market.
INVESTMENT PHILOSOPHY--REVISITED
QUESTION: Does the Fund exclude sectors of the market, such as energy or
technology stocks?
ANSWER: No. In our ongoing search for companies in which to invest, we did
not find any companies in these sectors that met the criteria of our investment
philosophy. These are two areas in which we are less likely to have significant
investments for two reasons:
. First, we use a bottom-up approach to investing. As an example, we do
not make predictions of oil prices or factors which might affect them,
such as weather or political instability. If we can uncover an oil
producer that has oil reserves priced significantly below the cost of
finding those reserves, we will consider making an investment in that
company (someday we will find that company).
11
<PAGE>
Small Cap
. Second, we are long-term investors. Today's latest technology is
tomorrow's obsolescence. Our investment time horizon is often far longer
than the product life-cycle of goods produced by technology companies.
However, many of the companies in which your Fund invests are
significant users of the products created by technology companies. This
allows us to be the beneficiaries of technology without having to
determine which technology producer has created the better mouse trap.
The key to how your Fund invests lies in adhering to the basic tenet of your
Fund's investment philosophy: we invest in securities that are priced at a
significant discount to their underlying value.
QUESTION: Does the Fund actively trade stocks?
ANSWER: No. Our goal is to keep turnover at a minimum due to the costs
associated with trading. However, I intend to make sure that the portfolio
consists of the most attractive investment opportunities available.
QUESTION: Is the Fund still finding attractive investment opportunities?
ANSWER: Yes, but please don't call us asking what they are (feel free to
call with other questions, however).
INVESTMENT PORTFOLIO
Your Fund's two largest holdings are SPX Corp., a producer of automotive
equipment and tools, and U.S. Industries, Inc., a small conglomerate. These
two companies have several things in common. A year ago, both were under-
earning, under-managed, and swimming in a sea of debt. Fundamentally, however,
each company had sound businesses and tremendous potential. What each company
lacked was a capable and focused management which could realize the inherent
value of the businesses. Last year, both companies installed new managers who
have made significant changes for the benefit of shareholders.
John Blystone, the new CEO of SPX Corp. has taken steps to bring down costs
and improve profit margins. U.S. Industries is now managed by David Clarke,
CEO, and John Raos, President, who have acted quickly to divest uneconomic
assets and reduce debt. These managers are bringing about cultural changes
within their companies that emphasize operational excellence and high levels
of profitability. Most
12
<PAGE>
Small Cap
importantly, their compensation is tied closely to the returns received by
shareholders.
During the quarter, an offer was made to acquire Life Partners Group. The
stock has been sold, which results in turnover, but we were able to realize the
full value of this holding. Congratulations to Harris Associates analyst, Bill
Jacobs for sourcing this idea.
SUMMERTIME: I SCREAM, YOU SCREAM, WE ALL SCREAM FOR ICE CREAM!
Looking out my front window, I can see the glacial change in my lawn from
tundra to green grass. Eventually, the midwest will be void of freezing
temperatures and the precipitation du jour. This will evolve to the hot humid
weather I will be complaining about in the July quarterly report. In the
meantime, a dramatic surge in sales should occur for one of your Fund's
tastiest holdings, Eskimo Pie. One of our traders, J.P. Tansey, is a big fan of
not only the stock, but also the product. He has informed me that he is cutting
back on his favorite frozen delight to get back down to fighting weight before
the wedding bells ring. Fortunately, the company has introduced a new line of
low fat frozen treats under the "Snackwell" name. It appears the company and
J.P. Tansey are in great shape for the future.
Once again, I would like to thank everyone involved, especially our
shareholders, for your support of The Oakmark Small Cap Fund.
STEVEN J. REID
Portfolio Manager
[email protected]
May 16, 1996
13
<PAGE>
Small Cap
THE OAKMARK SMALL CAP FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Shares Market
Held Common Stocks Value
- - --------------------------------------------------------------------
<S> <C>
COMMON STOCKS--95.7%
FOOD & BEVERAGE--6.5%
120,000 Eskimo Pie Corporation $ 2,460,000
125,000 GoodMark Foods, Inc. 2,015,625
40,000 Smucker (JM) Class B 800,000
-----------
5,275,625
RETAIL--8.5%
145,000 Cole National Corporation (a) 2,374,375
150,000 Rex Stores Corporation (a) 2,343,750
90,000 Carson Pirie Scott & Co. (a) 2,182,500
-----------
6,900,625
OTHER CONSUMER GOODS & SERVICES--6.6%
125,000 First Brands Corporation 3,312,500
100,000 Justin Industries, Inc. 1,287,500
30,000 JUNO Lighting Inc. 444,375
30,000 Arctco, Inc. 288,750
-----------
5,333,125
BANKS--12.9%
135,000 Peoples Bank of Bridgeport Connecticut 2,868,750
85,000 Harbor Federal Savings Bank 2,443,750
140,000 Pocahontas Federal Savings & Loan Association 1,995,000
75,000 Northwest Savings Bank 1,818,750
78,500 Savings Bank of Finger Lakes 1,295,250
4,950 Riverview Savings Bank, FSB 76,725
-----------
10,498,225
INSURANCE--5.8%
100,000 Renaissancere Holdings, Ltd. 2,725,000
40,000 CapMAC Holdings, Inc. 1,165,000
35,000 Amerin Corporation 791,875
-----------
4,681,875
OTHER FINANCIAL--8.7%
75,000 ContiFinancial Corporation 2,390,625
54,100 First USA Paymentech Inc. 2,353,350
127,600 Duff & Phelps Credit Rating Company 2,296,800
-----------
7,040,775
BROADCASTING & PUBLISHING--8.3%
200,000 Granite Broadcasting Corporation 2,550,000
106,500 Lee Enterprises, Incorporated 2,343,000
34,800 Central Newspapers, Class A 1,265,850
40,000 Jones Intercable, Inc. (a) 577,500
-----------
6,736,350
MANAGED CARE SERVICES--3.3%
275,000 Healthcare Services Group, Inc. 2,715,625
</TABLE>
14
<PAGE>
Small Cap
THE OAKMARK SMALL CAP FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Shares
Held/
Principal Market
Value Value
- - -------------------------------------------------------------------
<S> <C>
DIVERSIFIED CONGLOMERATES--5.4%
210,000 U.S. Industries, Inc. $ 4,410,000
MACHINERY & METALS--15.5%
175,000 The Carbide/Graphite Group 3,106,250
110,000 Kysor Industrial Corporation 2,832,500
297,500 Sudbury, Inc. 2,714,687
75,500 Mathews International Corporation 2,114,000
38,000 Gardner Denver Machinery Incorporated 903,094
56,500 Northwest Pipe Company 889,875
-----------
12,560,406
OTHER INDUSTRIAL GOODS & SERVICES--12.8%
200,000 SPX Corporation 4,600,000
130,000 Barefoot Inc. 1,616,875
60,200 Amtrol, Inc. 1,459,850
74,300 Amsco International, Inc. 1,077,350
60,000 Rexene Corporation 772,500
50,000 Griffon Corporation (a) 450,000
100,000 Repap Enterprises Incorporated 425,000
-----------
10,401,575
COMMERCIAL REAL ESTATE--1.4%
128,000 Catellus Development Corporation (a) 1,168,000
-----------
TOTAL COMMON STOCKS (COST: $68,900,869) 77,722,206
FIXED INCOME--1.6%
CORPORATE BONDS--1.6%
RECREATION AND ENTERTAINMENT--1.6%
3,000,000 Harrah's Jazz Bonds, 14.25% due 11/15/2001 1,320,000
-----------
TOTAL FIXED INCOME (COST: $1,177,788) 1,320,000
SHORT TERM INVESTMENTS--12.4%
COMMERCIAL PAPER--12.4%
American Express Credit Corporation, 5.26% due
5/2/96-5/3/96 3,800,000
Ford Motor Credit Corp., 5.20% due 5/1/1996 2,200,000
Ford Motor Credit Corp., 5.26% due 5/6/1996 1,600,000
General Electric Capital Corporation, 5.05% due
5/2/1996 2,500,000
-----------
TOTAL COMMERCIAL PAPER (COST: $10,100,000) 10,100,000
Total Investments (Cost $80,178,657)--109.7% $89,142,206
Other liabilities, less other assets--(9.7%) (7,897,814)
-----------
TOTAL NET ASSETS--100% $81,244,392
===========
</TABLE>
- - ----------
Notes:
(a) Non-income producing security.
(b) At April 30, 1996, net unrealized appreciation of $8,963,549 for federal
income tax purposes consisted of gross unrealized appreciation of
$9,452,956 and gross unrealized depreciation of $489,407.
AFFILIATED COMPANIES
At April 30, 1996, the Fund owned 8.7% of Pocohontas Federal Savings & Loan
Association. Companies in which the Fund owns greater than 5% are considered
affiliated to the Fund. The purchase cost was $2,114,563, market value was
$1,995,000, and dividends earned during the six months ended April 30, 1996
were $8,930.
See accompanying notes to financial statements.
15
<PAGE>
Balanced
THE OAKMARK BALANCED FUND
RESULTS FROM NOVEMBER 1, 1995 (INCEPTION) THRU APRIL 30, 1996:
4/30/96 NAV $10.63
<TABLE>
<CAPTION>
3 MONTHS* 6 MONTHS*
--------- ---------
<S> <C> <C>
THE OAKMARK BALANCED FUND................................... 3.3% 6.3%
Lipper Balanced Fund Index.................................. 1.1% 7.8%
Lehman Govt/Corp Bond....................................... -3.6% 0.04%
S&P 500..................................................... 3.4% 13.7%
</TABLE>
*Total return includes change in share prices and in each case included
reinvestment of any dividends and capital gain distributions. Each of the three
indexes or averages is an unmanaged group of stocks whose composition is
different from the Fund. The Lipper Balanced Fund Index Composite is comprised
of 30 balanced funds. The Lehman Govt./Corp. Bond index includes the Lehman
Government and Lehman Corporate indices. The S&P 500 is a broad market-weighted
average dominated by blue-chip stocks. Past performance is no guarantee of
future results.
REPORT FROM CLYDE S. MCGREGOR, PORTFOLIO MANAGER
DEVELOPING INVESTMENT STRATEGIES FOR THE LONG TERM
Return, if you will, to October, 19, 1987--to the infamous stock market
meltdown. At that time, Harris Associates was managing two equity portfolios
for a specialized graduate school. One portfolio was part of the school's
endowment fund, the other part of the pension plan for the school's
professors. Although each fund had independent investment committees, they
shared a financial consultant who had advised both groups in the early 1980's
to keep at least 85% of their funds invested in stocks.
For several years, all went well--in fact, very well. Both portfolios
prospered and both committees enjoyed serene meetings. Then the unthinkable
happened: the market collapsed, uncertainty and illiquidity prevailed, and
"long term investing" no longer seemed like a relevant concept.
Bad Decisions Beget Bad Luck
The Sunday following the collapse, the investment committee for the school's
endowment fund met. A newer committee member argued with considerable
vehemence that the 85% equities policy was inappropriate and that the most
prudent course was to liquidate everything. After much discussion, the
committee passed his motion. We received notice early the next morning to sell
the stocks. In a remarkable demonstration of how bad decisions beget bad luck,
the stock market declined another 8% that day. We sold the endowment fund
equities for prices we knew were "wrong," but they were all we had to work
with at the moment. The endowment fund closed out the month of October down
30%.
Meanwhile, the pension committee stuck to its original strategy. The next
few months were often rocky, but the market recovered, and by
16
<PAGE>
Balanced
March 31, 1988, the pension fund portfolio had more than recovered all of its
October 1987 losses. The endowment fund was still sitting with 70% of its
October 1 value invested in Treasury notes.
Adopting Strategies That Withstand The Stress Test
Now, I do not recount this story to recommend that all investors should
always maintain a 100% stock commitment. After all, I do manage a balanced
fund. Nor am I advising that investors always "buy the dips."
Rather, I am suggesting that investors know themselves so they can adopt an
asset allocation strategy which will stand the tests that time will certainly
present. The graduate school's endowment committee had adopted a strategy to
which it could not adhere at the point of maximum stress. Precisely at the
moment when the strategy could provide utmost value, the committee abandoned
it.
My second point is that the needs and risk tolerance of investors evolve over
time, and this evolution carries implications for asset allocation and
investment strategies. In the case of the graduate school above, changes in the
endowment committee's membership made necessary a reconsideration of the 85%
stock policy long before October, 1987.
How Do Your Funds Fit?
Where does The Oakmark Balanced Fund fit into all of this? Your Fund
maintains a conservative asset allocation of 50-65% stocks, 25-30% Treasury
notes, and 10-25% corporate bonds.
History has shown that this sort of asset allocation can produce attractive
rates of return with considerably less volatility than an all-stock portfolio.
In addition, a greater portion of your return will derive from income (which is
more certain) and less from capital gain (less certain). These characteristics
may not be necessary for all investors, but they are desirable for most--which
is why I say, "Investor, know thyself."
CURRENT PORTFOLIO
Investors regularly say, "The stock market is high. How do you build downside
protection into your portfolios?" One way is to own stocks of companies in
great businesses at good prices, such as Heinz (branded, packaged foods), Lee
Enterprises (newspapers), and Promus Hotel (hotel franchising). These stocks
are not immune to market downturns,
17
<PAGE>
Balanced
but the combination of their valuations, financial characteristics, and
business franchises limit their fundamental riskiness.
Another option is to buy shares of companies that have wonderful balance
sheets, but whose stock prices have declined for transitory reasons. Fund
holdings Arctco (snowmobiles) and Juno Lighting suffered significant stock
price declines last year based on modest changes in their underlying
businesses. Both companies, however, have substantially more cash on the
balance sheet than debt, pay good dividends and have been buying back stock.
To avoid the possibility of loss completely, one should not own stocks. We
believe, however, that investors can reduce the risk of serious loss through
these kinds of purchases--and by developing investment strategies that will
stand the tests of time.
Please feel free to write or E-mail me with your questions and comments.
CLYDE S. MCGREGOR
Portfolio Manager
[email protected]
May 16, 1996
18
<PAGE>
Balanced
THE OAKMARK BALANCED FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Shares Held/Principal Value Description Market Value
- - -----------------------------------------------------------------------------
<S> <C>
EQUITY AND EQUIVALENTS--54.6%
RETAIL--6.1%
8,500 The Kroger Company $ 349,563
260,000 Federated Department Stores, Inc., 5%
Convertible Notes due 10/1/2003 290,550
----------
640,113
OTHER CONSUMER GOODS AND SERVICES--13.5%
11,800 Promus Hotel Corporation 334,825
7,900 The Black & Decker Corporation 317,975
33,000 Arctco, Inc. 317,625
20,800 JUNO Lighting Inc. 308,100
2,900 Goodyear Tire & Rubber Company 151,162
----------
1,429,687
FOOD & BEVERAGE--6.6%
3,900 Philip Morris Companies Inc. 351,488
10,150 H.J. Heinz Company 343,831
----------
695,319
BANKS AND OTHER FINANCIAL--5.8%
6,300 First USA, Inc. 354,375
4,800 Mellon Bank Corporation 258,000
----------
612,375
BROADCASTING AND PUBLISHING--10.4%
21,000 U.S. West Media Group 409,500
13,600 Lee Enterprises, Incorporated 299,200
3,700 Knight-Ridder, Inc. 267,787
4,600 Cablevision Systems Corporation 5% Redeemable
Exchangeable, Convertible Preferred Stock 119,025
----------
1,095,512
MEDICAL PRODUCTS--2.1%
15,600 Amsco International, Inc. 226,200
AEROSPACE & DEFENSE--3.7%
4,000 McDonnell Douglas Corporation 386,000
OTHER INDUSTRIAL GOODS & SERVICES--6.4%
9,800 The Geon Company 259,700
20,000 U.S. Industries, Inc. 420,000
----------
679,700
TOTAL EQUITY AND EQUIVALENTS (COST: $5,317,189) 5,764,906
FIXED INCOME--39.7%
PREFERRED STOCK--3.7%
FINANCIAL SERVICES--1.4%
5,645 Everen Capital Corp., Preferred, Series A 153,130
BROADCASTING & CABLE TV--2.3%
3,900 Tele-Communications, Inc., Preferred Junior Class B 6% 241,800
TOTAL PREFERRED STOCK (COST: $385,678) 394,930
</TABLE>
19
<PAGE>
Balanced
THE OAKMARK BALANCED FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Shares Held/Principal Value Description Market Value
- - -----------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS--7.9%
RETAIL--1.0%
100,000 The Vons Companies Inc., 9.625% due 4/01/2002 105,250
BUILDING MATERIALS & CONSTRUCTION--1.5%
150,000 USG Corporation, 9.25% due 9/15/2001, Senior Notes
Series B 159,937
UTILITIES--1.5%
150,000 Midland Funding Corporation, 11.75% due 7/23/2005 157,688
OTHER INDUSTRIAL GOODS & SERVICES--1.6%
150,000 UCAR Global Enterprises Inc., 12% due 1/15/2005,
Senior Subordinated Note 171,000
AEROSPACE AND AUTOMOTIVE--1.5%
150,000 Coltec Industries, Inc., 9.75% due 1/01/2000 153,938
RECREATION AND ENTERTAINMENT--0.8%
190,000 Harrah's Jazz Bonds, 14.25% due 11/15/2001 83,600
TOTAL CORPORATE BONDS (COST: $925,296) 831,413
GOVERNMENT AND AGENCY SECURITIES--28.1%
1,000,000 United States Treasury Notes, 6% due 10/15/99 991,990
600,000 United States Treasury Notes, 6.125% due 5/31/97 602,352
600,000 United States Treasury Notes, 5.25% due 7/31/98 589,242
500,000 United States Treasury Notes, 5.625% due 11/30/2000 484,475
300,000 Federal Home Loan Bank, 6.405% due 4/10/2001,
Consolidated Bond 295,197
TOTAL GOVERNMENT AND AGENCY SECURITIES
(COST: $3,014,616) 2,963,256
TOTAL FIXED INCOME (COST: $4,325,590) 4,189,599
COMMERCIAL PAPER--4.9%
519,000 American Express Credit Corporation, 5.3%, due
5/01/96 519,000
Total Investments (Cost $10,161,779)--99.2% $10,473,505
Other Assets, Less Other Liabilities--0.8% 88,491
-----------
TOTAL NET ASSETS--100% $10,561,996
===========
</TABLE>
- - ----------
Notes:
(a) Non-income producing security.
(b) At April 30, 1996, net unrealized appreciation of $311,726 for federal
income tax purposes consisted of gross unrealized appreciation of $557,800
and gross unrealized depreciation of $246,074.
20
<PAGE>
International
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL
FUND FROM ITS INCEPTION (9/30/92) TO PRESENT (4/30/96)
AS COMPARED TO THE MORGAN STANLEY WORLD EX U.S. INDEX.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Oakmark International M.S. World Ex U.S.
- - ---------------------------------------------------------------------
<S> <C> <C>
9/92 $10,000 $10,000
10/92 9,800 9,505
10/93 14,454 12,981
10/94 15,121 14,265
10/95 14,659 14,248
4/96 18,162 16,144
</TABLE>
4/30/96 NAV $14.80
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN* THROUGH 4/30/96
---------------------------
TOTAL RETURN TOTAL RETURN FROM FROM INCEPTION
LAST 3 MOS. LAST 6 MOS. 4/30/95 9/30/96
------------ ------------ ------- --------------
<S> <C> <C> <C> <C>
OAKMARK INTERNATIONAL 11.8% 23.9% 26.1% 18.1%
Morgan Stanley World ex U.S.* 5.4% 13.3% 11.8% 14.3%
Morgan Stanley EAFE* 5.4% 13.2% 11.4% 14.4%
Lipper Analytical International Fund
Average* 5.3% 12.1% 12.1% 14.4%
</TABLE>
*Total return includes change in share prices and in each case included
reinvestment of any dividends and capital gain distributions. Each of the three
indexes or averages is an unmanaged group of stocks whose composition is
different from the Fund. The Morgan Stanley World ex U.S. Index includes 19
country sub-indexes. The Morgan Stanley EAFE Free Index refers to Europe, Asia
and the Far East and includes 18 country sub-indexes. The Lipper International
Fund Average includes 106 mutual funds that invest in securities whose primary
markets are outside the United States. Past performance is no guarantee of
future performance.
THE OAKMARK INTERNATIONAL FUND
REPORT FROM DAVID G. HERRO AND MICHAEL J. WELSH,
PORTFOLIO MANAGERS
Dear Fellow Shareholders:
Your Fund produced a return of 11.8% for the last fiscal quarter--results
which are more than satisfactory on an absolute and relative basis.
Nevertheless, we urge you to focus on the most important measure: the Fund's
very acceptable since-inception performance of 81.6% or 18.1% annually. We will
continue working hard to produce solid LONG-TERM results.
21
<PAGE>
International
This just-concluded fiscal quarter saw strong performance from our European
cyclical investments such as Kvaerner +26%, Volvo +20%, and EVC +31%, and from
our largest position, Cordiant +26%. Such results reinforce our belief that
the investments in our portfolio represent excellent value.
GLOBAL ECONOMIC CHANGES FOR THE GOOD
Recently, concerns about the changing nature of the global economy have been
voiced here and abroad, reinforcing a prevailing feeling of economic
restlessness. From the media to politicians like Ted Kennedy and Pat Buchanan,
there have been cries that "something must be done." Proposed solutions
include limiting immigration and increasing trade protection on the theory
that our problems come from outside our borders.
Well, the pundits are dead wrong--again. The global economy is going through
a structural change driven by two major trends:
. technology, which is rapidly changing the way we live and work
. heightened economic growth in the underdeveloped countries of the world
The results of these trends are HIGHLY POSITIVE and will lead to higher
global living standards throughout the world.
The technological revolution has been blamed for a great deal of the
publicized job losses as machines have replaced people in certain businesses.
But technology has been the source of job creation as well. For example,
consider the computer hardware/software industry employment trends over the
last 10 years: Growth has been explosive--and these are high paying jobs. Is
anyone arguing that it is bad to trade low-paying, obsolete jobs for those
which are high pay? Although this is what's happening, the pundits are
focusing only on one side of the equation--on job losses.
The globalization of the economy is producing the same effect: job losses in
industries in which we no longer have a competitive advantage to job creation
in industries in which we do. Protectionists like Pat Buchanan are making the
absurd suggestion that we should sacrifice growth in high-paying jobs in the
aerospace, chemicals, software industries to save low skill, low-paying jobs
in industries like textiles. That way lies madness.
22
<PAGE>
International
Economist Joseph Schumpeter called this process CREATIVE DESTRUCTION: to
create something newer and better, something old must be displaced. This is
exactly what is happening today. Yes, we need to help address the temporary
social side-effects of unemployment in certain sectors, but nothing should be
done to impede the process.
LACK OF PROTECTION MEANS GROWTH
The United States compared to the rest of the Western economies has a
relatively free labor market. What has this lack of protection provided? It has
provided one of the lowest unemployment rates and one of the greatest job
creation records in the developed world. The call for additional government
intervention is misguided and would bring nothing but inefficiency--the same
inefficiency suffocating economic growth in Germany, Sweden, and Japan, among
others.
SHAREHOLDERS OF THE WORLD, UNITE!
As shareholders of The Oakmark International Fund, you already know that one
of our investment criteria is the quality of a company's management. More
specifically, we assess management's treatment of shareholders: are
shareholders viewed as just one of many constituents, such as employees,
bankers, suppliers, and politicians which management must satisfy, or are they
viewed properly as the owners of the business?
THE CONCEPT OF SHAREHOLDER VALUE
Until recently, the concept of shareholder value was well-understood only in
the United States and maybe in the United Kingdom. Now, however, as the market
for capital is no longer local, but global, companies worldwide are paying
close, active attention, rather than paying only lip service, to shareholder
value.
So far this year, in our Portfolio, we've seen positive proof of this trend.
CHARGEURS, for instance, the diversified conglomerate which represents 2% of
the Fund, has announced an unprecedented move for a French company: a split
into two separate entities, one media and one industrial, to help the market
more properly value its dispersed businesses. Management believes they have
created a good deal of value in the last five years, and a split-up is the best
way for shareholders to realize this value.
In another example of management working for the owners, EVC INTERNATIONAL
(2.5% of the Fund) has announced one of the first ever
23
<PAGE>
International
share buy-backs on the Amsterdam exchange. Management believes that the
highest return project for the Company's funds is to buy back very undervalued
stock. The shares now trade at a substantial discount to the Company's asset
value, and at around one-third of the replacement cost of its facilities.
Finally, TELEFONOS DE MEXICO (3.4% of the Fund) has spent substantial sums
buying stock since economic turmoil hit Mexico and the share price. The
Company has repurchased nearly 12% of its total outstanding shares since the
beginning of 1995, and has another 5% remaining on its current authorization.
That management can accomplish such a feat in the midst of an economic
depression is testament to the Company's cash-generating ability and
management's shareholder orientation.
In our investment process, we will continue to seek out companies and
managements which not only generate excess cash from their businesses, but
which also redeploy that cash intelligently and in the service of their
shareholders.
DAVID HERRO
MICHAEL WELSH
Portfolio Managers
[email protected]
[email protected]
May 16, 1996
24
<PAGE>
International
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS
COUNTRY DIVERSIFICATION--APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
% of Fund
Country Net Assets
- - ---------------------------------------------------------------
<S> <C>
ARGENTINA 6.1%
Alparagatas Sociedad Anonima Industrial Y Comercial
Banco de Galicia Y Buenos Aires
CIADEA S.A.
YPF Sociedad Anonima
AUSTRALIA 5.6%
National Australia Bank Limited
Pioneer International
BRAZIL 3.3%
Iochpe-Maxion SA
Usiminas
CANADA 1.4%
Call Net Enterprises Inc., Common
Call Net Enterprises Inc., Class B
CENTRAL EUROPE 0.5%
The Central European Growth Fund PLC
FINLAND 1.6%
Kone Corporation
FRANCE 5.0%
Chargeurs S.A.
Ecco S.A.
Groupe Legris Industries
Strafor Facom
HONG KONG 6.1%
Chen Hsong Holdings Limited
Giordano Holdings Limited
Hong Kong Aircraft Engineering Company Limited
Lame Holdings Limited
Varitronix International Holdings Limited
Yue Yuen Industrial (Holdings) Limited
INDONESIA 2.6%
Asia Pulp & Paper Company Ltd
ISRAEL 3.0%
Bezeq
Scitex Corporation Limited
JAPAN 2.0%
Kyocera Corporation
</TABLE>
<TABLE>
<CAPTION>
% of Fund
Country Net Assets
- - ---------------------------------------------------------------
<S> <C>
KOREA 2.2%
BYC Company
Daehan Flour Mills Co., Ltd.
Keumkang
Lotte Chilsung Beverage
Lotte Confectionery
Pacific Corporation
MALAYSIA 1.0%
Leong Hup Holdings Berhad
MEXICO 4.6%
Empaques Ponderosa, S.A.
Grupo Financiero Bancomer, S.A. De C.V. (GFB)-B
Grupo Financiero Bancomer, S.A. C.V.-L
Telefonos de Mexico, S.A. de C.V.
NETHERLANDS 6.3%
EVC International NV
Hollandsche Beton Groep nv
Macintosh
Royal Pakhoed N.V.
NEW ZEALAND 2.5%
Lion Nathan Limited
NORWAY 3.0%
Kvaerner
PORTUGAL 2.5%
Banco Espirito Santo E Comercial de Lisboa, S.A.
SPAIN 6.4%
Banco Popular Espanol
Telefonica
Union Electrica Fenosa S.A.
SWEDEN 11.4%
AB Volvo
Avesta Sheffield
Mo och Domsjo AB
Svenska Handelsbanken
SWITZERLAND 1.8%
Saurer Ltd.
TAIWAN 0.8%
Tung-Ho Steel Enterprise Corp.
UNITED KINGDOM 13.6%
British Aerospace Public Limited Company
Cordiant PLC
Guinness PLC
London International Group PLC
Reckitt & Colman PLC
Rolls-Royce Public Limited Company
</TABLE>
25
<PAGE>
International
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Shares Held Description Market Value
------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--93.3%
CONSUMER NON-DURABLES--4.3%
88,233 Chargeurs S.A. (France) Entertainment & Wool
Production Holding
Company $ 23,477,576
89,522,000 Yue Yuen Industrial
(Holdings) Limited (Hong Athletic Footwear
Kong) Manufacturing 21,757,011
24,000 BYC Company (Korea) Textile Manufacturer 2,935,818
35,820 Pacific Corporation Cosmetics and Household
(Korea) Goods Manufacturer 814,666
--------------
48,985,071
FOOD--6.8%
11,500,700 Lion Nathan Limited (New
Zealand) New Zealand Brewer 28,678,671
3,580,000 Guinness PLC (United
Kingdom) Distiller and Brewer 25,786,994
4,939,000 Leong Hup Holdings Berhad Major Poultry Operation
(Malaysia) in Malaysia and KFC
Operator 10,994,044
56,000 Lotte Confectionery Confectionary
(Korea) Manufacturer 6,476,068
36,970 Lotte Chilsung Beverage Manufacturer of Soft
(Korea) Drinks, Juices, & Sport
Drinks 4,417,874
29,190 Daehan Flour Mills Co.,
Ltd. (Korea) Food Processing 1,387,767
--------------
77,741,418
HOUSEHOLD PRODUCTS--1.7%
1,550,853 Reckitt & Colman PLC Household Cleaners and
(United Kingdom) Air Fresheners 16,995,649
1,155,600 London International
Group PLC (United
Kingdom) Latex Products 2,435,406
--------------
19,431,055
RETAIL--2.9%
13,403,000 Giordano Holdings Limited East Asian Clothing
(Hong Kong) Retailer & Manufacturer 12,388,527
17,430,294 Alparagatas Sociedad
Anonima Industrial Y
Comercial (Argentina) Textiles 10,337,198
462,900 Macintosh (Netherlands) Non-Food Specialty
Retailer 10,319,685
--------------
33,045,410
TELECOMMUNICATIONS--8.3%
1,130,100 Telefonos de Mexico, S.A. Telephone Company in
de C.V. (Mexico) (b) Mexico 38,423,400
1,950,500 Telefonica (Spain) Telephone 34,731,781
</TABLE>
26
<PAGE>
International
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Shares Held Description Market Value
------------------------------------------------------------------------------
<S> <C> <C>
908,500 Call Net Enterprises
Inc., Common (Canada) Telecommunications $ 10,242,729
522,500 Call Net Enterprises,
Inc., Class B (Canada)
(a) Telecommunications 5,756,518
1,863,000 Bezeq (Israel) Telephone Company 5,038,133
--------------
94,192,561
OIL & NATURAL GAS--2.7%
1,406,200 YPF Sociedad Anonima Exploration, Production
(Argentina) (b) and Marketing 30,760,625
TRANSPORTATION--6.3%
2,134,600 AB Volvo (Sweden) Automobiles and Trucks 48,945,721
3,969,637 CIADEA S.A. (Argentina) Assembler and
(a) Distributor of
Automobiles 23,026,199
--------------
71,971,920
ELECTRIC--1.8%
3,443,230 Union Electrica Fenosa
S.A. (Spain) Spanish Electric Utility 20,599,827
BANKS--11.2%
4,210,000 National Australia Bank
Limited (Australia) Largest Australian Bank 37,767,636
1,880,480 Banco Espirito Santo E
Comercial de Lisboa,
S.A. (Portugal) Portuguese Bank 28,879,742
1,218,850 Svenska Handelsbanken
(Sweden) Large Swedish Bank 24,982,327
108,093 Banco Popular Espanol
(Spain) Large Spanish Bank 17,913,525
26,635,000 Grupo Financiero
Bancomer, S.A. De C.V. Large Mexican Financial
(GFB)-B (Mexico) (a) Group 11,829,812
644,826 Banco de Galicia Y Buenos
Aires (Argentina) Argentinian Bank 3,856,445
6,129,630 Grupo Financiero
Bancomer, S.A. De C.V.- Large Mexican Financial
L (Mexico) (a)* Group 2,177,957
--------------
127,407,444
INVESTMENT COMPANIES--0.5%
6,000,000 The Central European Diversified, Closed-End
Growth Fund PLC (United Fund Investing in
Kingdom) Central Europe 5,961,162
COMPUTER SYSTEMS--2.6%
1,409,500 Scitex Corporation
Limited (Israel) (b)* Color Pre-Press Systems 29,599,500
</TABLE>
27
<PAGE>
International
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Shares Held Description Market Value
- - -------------------------------------------------------------------------------
<S> <C> <C>
CHEMICALS--3.8%
801,915 EVC International NV Western European PVC
(Netherlands) Manufacturer $ 28,781,892
566,500 Royal Pakhoed N.V. Petroleum Products,
(Netherlands) Chemical Handling 14,183,163
--------------
42,965,055
MARKETING SERVICES--5.4%
30,408,656 Cordiant PLC (United Global Advertising
Kingdom) (a) Agency 61,796,907
AEROSPACE--5.8%
7,848,737 Rolls-Royce Public
Limited Company (United
Kingdom) Jet Engines 28,001,666
1,449,666 British Aerospace Public
Limited Company (United
Kingdom) Defense Products 19,007,362
7,258,800 Hong Kong Aircraft Commercial Aircraft
Engineering Company Overhaul and
Limited (Hong Kong) Maintenance 18,392,151
--------------
65,401,179
COMPONENTS--3.2%
304,000 Kyocera Corporation
(Japan) Electric Components 22,900,626
6,685,000 Varitronix International
Holdings Limited (Hong
Kong) Liquid Crystal Displays 12,271,605
1,840,000 Chen Hsong Holdings Plastic Injection
Limited (Hong Kong) Moulding Machines 945,511
--------------
36,117,742
FORESTRY PRODUCTS--4.5%
2,473,600 Asia Pulp & Paper Company Paper & Packaging
Ltd (Indonesia) (a) Products in Asia 29,683,200
387,700 Mo och Domsjo AB (Sweden) Paper, Pulp & Timber 20,638,154
144,000 Empaques Ponderosa, S.A.
(Mexico) (a) Boxboard 288,775
--------------
50,610,129
MACHINERY & METALS--3.6%
49,400 Saurer Ltd. (Switzerland) Textile Machinery 20,291,559
141,898 Strafor Facom (France) Metal Processing, Office
Equipment, Mining Tools 10,297,388
195,097 Group Legris Industries Europe's Leading Crane
(France) Manufacturer 9,665,183
7,880,000 Iochpe-Maxion SA (Brazil) Agricultural Machinery &
Automotive Parts 873,702
--------------
41,127,832
</TABLE>
28
<PAGE>
International
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Shares Held/Principal Value Description Market Value
- - ------------------------------------------------------------------------------
<S> <C> <C>
MINING AND BUILDING MATERIALS--3.0%
8,180,923 Pioneer International Concrete Products,
(Australia) Aggregates $ 24,870,520
126,980 Keumkang (Korea) Building Materials 9,447,018
--------------
34,317,538
STEEL--7.0%
31,788,700 Usiminas (Brazil) Steel Production 36,207,268
3,405,000 Avesta Sheffield
(Sweden) Stainless Steel 35,146,573
700,966 Tung-Ho Steel Enterprise Taiwanese Manufacturer
Corp. (Taiwan) (a) of Steel Bars and H-
Beams 8,642,911
--------------
79,996,752
OTHER INDUSTRIAL GOODS & SERVICES--3.2%
167,000 Kone Corporation
(Finland) Elevators 18,633,771
62,337 Ecco S.A. (France) Temporary Services
Provider 14,005,468
14,040,000 Lamex Holdings Limited Hong Kong's Largest
(Hong Kong) Office Furniture
Supplier 4,083,770
--------------
36,723,009
SHIP BUILDING--3.1%
897,110 Kvaerner (Norway) Shipbuilding and
Engineering 34,616,626
COMMERCIAL REAL ESTATE--1.6%
108,732 Hollandsche Beton Groep
nv (Netherlands) Construction 18,656,089
TOTAL COMMON STOCKS (COST: $968,888,095) 1,062,024,851
COMMERCIAL PAPER--7.7%
7,000,000 American Express Credit Corporation,
5.25% due 5/3/1996 7,000,000
6,000,000 American Express Credit Corporation,
5.25% due 5/6/1996 6,000,000
6,000,000 American Express Credit Corporation,
5.25% due 5/7/1996 6,000,000
5,000,000 American Express Credit Corporation,
5.25% due 5/13/1996 5,000,000
9,000,000 Ford Motor Credit Corp., 5.29% due 5/3/1996 9,000,000
6,000,000 Ford Motor Credit Corp., 5.25% due 5/8/1996 6,000,000
11,000,000 Ford Motor Credit Corp., 5.24% due 5/9/1996 11,000,000
6,500,000 Ford Motor Credit Corp., 5.24% due 5/10/1996 6,500,000
7,000,000 General Electric Capital Corporation,
5.25% due 5/1/1996 7,000,000
7,000,000 General Electric Capital Corporation,
5.25% due 5/2/1996 7,000,000
10,000,000 General Electric Capital Corporation,
5.29% due 5/14/1996 10,000,000
7,000,000 General Electric Capital Corporation,
5.29% due 5/15/1996 7,000,000
TOTAL COMMERCIAL PAPER (COST: $87,500,000) 87,500,000
</TABLE>
29
<PAGE>
International
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Shares Held/
Principal Value Description Market Value
- - -------------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENTS--0.1%
748,000 State Street Repurchase Agreement, 4.75% due 5/1/96,
fully collaterized by US Treasury obligations $ 748,000
Total investments (cost $1,057,136,095)--101.1% $1,150,272,851
Foreign currencies (cost $6,397,183)--.6% $ 6,372,216
Other liabilities, less other assets--(1.7%)(c) (18,985,379)
--------------
TOTAL NET ASSETS--100% $1,137,659,688
==============
</TABLE>
- - ----------
Notes:
(a) Non-income producing security.
(b) Represents an American Depositary Receipt.
(c) Includes portfolio and transaction hedges.
(d) At April 30, 1996, net unrealized appreciation of $93,111,789 for federal
income tax purposes consisted of gross unrealized appreciation of
$151,031,121 and gross unrealized depreciation of $57,919,332.
AFFILIATED COMPANIES
The following companies are considered affiliated because the Fund owns
greater than 5% of the outstanding voting shares of the company.
<TABLE>
<CAPTION>
<S> <C>
Alparagatas Sociedad Anonima
Industrial 6.12%
Call Net Enterprises, Inc.
Common 9.65%
CIADEA, S.A. 5.29%
Cordiant PLC 6.82%
EVC International NV 5.48%
Lamex Holdings Limited 6.33%
Leong Hup Holdings Berhad 5.68%
Macintosh 6.44%
</TABLE>
The aggregate cost and value of investments in these companies at April 30, 1996
was $139,740,085 and $159,582,424, respectively, which represents 13.9% of the
total net assets. During the six months ended April 30, 1996, dividends received
from these companies was $1,404,267.
30
<PAGE>
int'l emerging value
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
RESULTS FROM NOVEMBER 1, 1995 (INCEPTION) THRU APRIL 30, 1996*
4/30/96 NAV $11.34
<TABLE>
<CAPTION>
3 MONTHS* 6 MONTHS*
--------- ---------
<S> <C> <C>
The Oakmark Int'l Emerging Value Fund....................... 7.7% 13.4%
Morgan Stanley World ex U.S................................. 5.4% 13.2%
Lipper Analytical International Fund Average................ 5.7% 12.1%
Lipper Emerging Market Fund Index........................... 3.1% 13.4%
</TABLE>
*Total return includes change in share prices and in each case included
reinvestment of any dividends and capital gain distributions. Each of the three
indexes or averages is an unmanaged group of stocks whose composition is
different from the Fund. The Morgan Stanley World ex U.S. Index includes 19
country sub-indexes. The Lipper International Fund Average includes 106 mutual
funds that invest in securities whose primary markets are outside the United
States. The Lipper Emerging Market Fund Index is comprised of 10 Emerging
Market Funds. Past performance is no guarantee of future results.
REPORT FROM DAVID G. HERRO AND ADAM D. SCHOR,
PORTFOLIO MANAGERS
Welcome to the second quarter report of The Oakmark International Emerging
Value Fund. We are pleased with our performance for the quarter and since
inception. We continue to stress a long-term outlook so we try not to get too
excited about any single quarter. We would like to mention, however, that
according to Lipper Analytical Services, your Fund was the best-performing
diversified international fund for the quarter ending March, 1996.
OPPORTUNITIES IN INTERNATIONAL INVESTING
When making presentations about international investing, the international
team at Harris Associates points to the tremendous investment opportunities
that result from developing international economies and companies. It is a
theme we have discussed often in the quarterly reports of Oakmark
International.
COMMON--AND MISGUIDED--CONCERNS ABOUT INTERNATIONAL INVESTING
First, international markets scare a lot of investors. When we talk about
changes in Argentina, Indonesia, or India, many investors become wary. Sending
their money to these countries is a difficult jump into the unknown for some
investors. Second, many investors who actually believe in the opportunities of
international investing still prefer to wait for some sign indicating the right
moment to leap.
To address the concerns of those fearful about entering foreign markets,
let's go to Malaysia nine months ago. One evening in Kuala Lumpur, Adam Schor
left his hotel to look for a restaurant. First, he came across a Hard Rock
Cafe, a chain with restaurants around the world,
31
<PAGE>
int'l emerging value
including one less than a mile from his Chicago home. Next, he saw TGI
Fridays, another U.S. chain. Farther down the road, he would have found
McDonalds and KFC outlets. The next day, in a small town in northwest
Malaysia, he met with the CEO of a real estate company who informed him, "I
don't believe O.J. is innocent." The CEO then discussed in detail the trial
and the verdict, which had been announced--on the other side of the world--
barely eight hours earlier. Listening to the CEO and recalling his hamburger
at the Hard Rock Cafe reminded Adam how small the world has become.
Sure it's a cliche. But to investors in an international equity fund, a
shrinking world means expanding opportunities. It means that the productivity
gap between nations is closing. It means smaller differences in how companies
are run. This narrowing creates tremendous opportunities for investors. We can
set the U.S. economy as our model of a mature economy and a U.S. corporation
as our model of a company operating in such an economy. As other countries
catch up to this model, we will see strong growth, tremendous efficiency
gains, and an overall improvement in the treatment of shareholders. The
driving need for new capital will fuel this change and will benefit
shareholders in these companies. If one is cautious about valuations, and
picks investments carefully, it is possible to achieve very good returns by
owning those companies that close the gaps most quickly.
EXPANSION IN EMERGING MARKETS
Fifty years ago, many now mature industries in the U.S. were coming of age.
Now, in emerging markets, the pattern is repeating. Industries considered
mature in the U.S., such as autos, building materials, paper, and retail, are
growing sharply. That's why we're excited about Ciadea, an Argentine auto
maker, and about PT Polysindo in Indonesia. Polysindo is a quickly expanding
integrated textile manufacturer. In these companies and others, we have a
chance to enter fast-growing industries early and at good prices.
EFFICIENCY GAINING GROUND IN EUROPE
Europe too will see the gap close. In a competitive global economy,
development causes ripples. So, as Asia and Latin America get more
competitive, Europe feels the pressure. Efficiency gains often require
capital, and so many European companies are facing the need to increase their
stock prices and lower their costs of capital. We're seeing a few companies
act to enhance shareholder value. So far, its a ripple, not a wave, but the
change is coming.
32
<PAGE>
INT'L EMERGING VALUE
Consider the share buyback authorized by EVC, your Fund's largest holding.
Although common in the U.S., a buyback was so rare in the Netherlands that local
Dutch analysts did not understand how it worked. As was detailed in the Oakmark
International letter this quarter, other companies outside the U.S. are treating
their shareholders better, too. It's a further sign that, even in developed
nations, the closing gap between U.S. companies and international companies can
help shareholders. We want to take advantage of historical U.S. dynamics now
showing up in the rest of the world.
By the way, some suggest buying U.S. companies which are expanding overseas as
a way to participate. It's true many U.S. companies are turning overseas to find
growth. It seems to us, however, a very diluted way to taste the opportunity.
THE HELP YOURSELF SIGN
Meanwhile, many believe in the attractiveness of international investing but
can't figure out the timing. If you're in a crowded room, and in the corner, you
see bushels of money and the sign Help Yourself, you don't wait for the crowd
before you make your move. You hit the corner on your own and start collecting
your bounty. If you waited for the crowd and tried to move with them, you'd be
left with little money and many bruises. Trying to guess when markets will
recognize the international values we've found is like trying to guess the
behavior of the crowd. Waiting for a signal means you're content to run with the
pack rather than ahead of it. It's a strategy destined to be no better than
average--and being average is far short of our goal for your Fund and your
investment returns.
David Herro
Adam Schor
[email protected]
[email protected]
Portfolio Managers
May 16, 1996
33
<PAGE>
INT'L EMERGING VALUE
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS
COUNTRY DIVERSIFICATION--APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
% of Fund
Country Net Assets
- - ------------------------------------------------
<S> <C>
ARGENTINA 8.8%
Alparagatas Sociedad
Anonima Industrial Y Comercial
CIADEA S.A.
Disco S.A.
YPF Sociedad Anonima
AUSTRALIA 9.7%
C.E. Heath International
Holdings Limited
Parbury Limited
Solution 6 Holdings Limited
Wattyl
AUSTRIA 0.7%
Bau Holdings
BRAZIL 1.6%
Banco Nacional S.A.
Cemig
Iochpe-Maxion SA
CANADA 2.4%
Moffat Communications
Limited
FRANCE 5.8%
Geophysique
Groupe Fives-Lille
The NSC Group
GERMANY 1.6%
WMF
HONG KONG 5.4%
Oriental Press Group Ltd.
Tech Tronic Industries
Company Limited
Yip's Hang Cheung
(Holdings) Limited
HUNGARY 2.3%
Egis Gyogyszergyar
Soproni Sorgyar AR RT
INDIA 0.2%
Zee Telefilms
INDONESIA 6.6%
Asia Pulp & Paper Company
Ltd
PT Polysindo Eka Perkasa
IRELAND 5.0%
Barlo Group plc
Fyffes
ISRAEL 5.1%
Nice Systems Ltd.
Tower Semiconductor Limited
ITALY 1.7%
Danieli
JAPAN 3.0%
Fukuda Denshi Co., Ltd.
KOREA 4.7%
Asia Cement Manufacturing Co.
Chosun Brewery
Daehan Flour Mills Co., Ltd.
MEXICO 4.9%
Grupo Herdez, SA de CV
Telefonos de Mexico, S.A. de C.V.
NETHERLANDS 5.5%
EVC International NV
N.V. Koninklijke Sphinx Gustavsberg
NEW ZEALAND 3.4%
Sanford Limited
Steel & Tube Holdings Ltd
SINGAPORE 4.4%
Aztech
Pentex-Schweizer Circuits Limited
SPAIN 2.3%
Grupo Uralita
SWITZERLAND 1.4%
Swisslog Holding AG
THAILAND 0.1%
Christiani & Nielsen
UNITED KINGDOM 5.0%
Cordiant PLC
Powerscreen International PLC
Vardon PLC
</TABLE>
34
<PAGE>
INT'L EMERGING VALUE
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Number of Market
Shares Description Value
- - --------------------------------------------------------------------------------
COMMON STOCKS--91.6%
CONSUMER NON-DURABLES--3.6%
<S> <C> <C>
1,326,000 PT Polysindo EKA Integrated Textile Manufacturer
Perkasa (Indonesia) $ 838,162
FOOD--5.9%
2,086,000 Grupo Herdez, SA de Manufacturer and Distributor
CV (Mexico) of Bottled and Canned Food 668,194
8,410 Chosun Brewery Korean Brewer 289,609
(Korea)
4,500 Daehan Flour Mills Food Processing
Co., Ltd. (Korea) 213,941
13,155 Soproni Sorgy AR RT Hungarian Brewer
(Hungary) 205,860
-----------
1,377,604
HOUSEHOLD PRODUCTS--3.3%
25,550 N. V. Koninklijke Bathroom Products
Sphinx Gustavsberg
(Netherlands) 418,999
2,000 WMF (Germany) Tableware and Kitchenware 365,798
-----------
784,797
RETAIL--4.8%
40,000 Disco S. A. Grocery Store Chain 635,000
(Argentina)
850,000 Alparagatas Sociedad Textiles
Anonima Industrial Y
Comercial (Argentina) 504,100
-----------
1,139,100
OTHER CONSUMER GOODS & SERVICES--4.6%
466,917 Fyffes (Ireland) Distributor of Fresh Fruit,
Flowers and Produce in Europe 785,101
155,000 Vardon PLC (United Bingo Clubs
Kingdom) 307,993
-----------
1,093,094
TELECOMMUNICATIONS--2.0%
13,950 Telefonos de Mexico, Telephone Company in Mexico
S.A. de C.V.
(Mexico) (b) 474,300
OIL & NATURAL GAS--3.6%
6,200 Geophysique (France) Oil Services Company 428,331
19,000 YPF Sociedad Anonima Exploration, Production and
(Argentina) (b) Marketing 415,625
-----------
843,956
TRANSPORTATION--2.3%
92,250 CIADEA S.A. Assembler and Distributor of
(Argentina) (a) Automobiles 535,103
ELECTRIC--1.3%
12,500,000 Cemig (Brazil) Electric Utility 314,988
</TABLE>
35
<PAGE>
INT'L EMERGING VALUE
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Number of Market
Shares Description Value
- - --------------------------------------------------------------------------------
BANKS--0.0%
<S> <C> <C>
8,800,000 Banco Nacional S.A. Brazilian Bank
(Brazil) (d) $ 0
OTHER FINANCIAL--2.2%
286,000 CE Heath Insurance and Reinsurance
International Broker
Holdings Limited
(Australia) 512,239
BROADCASTING & PUBLISHING--3.3%
46,200 Moffat Communications Owner and Operator of
Limited (Canada) Television Stations and
Cable Systems 559,897
374,000 Oriental Press Group Newspaper Publisher
Ltd. (Hong Kong) 174,055
10,900 Zee Telefilms, B Broadcasting and TV
Shares (India) 41,013
-----------
774,965
COMPUTER SYSTEMS--7.0%
730,000 Solution 6 Holdings Design Computer
Limited (Australia) Systems/Consultants 567,714
35,000 Nice Systems (Israel) Voice Logging Systems 535,938
855,000 Aztech (Singapore) Design and Produce Multimedia
Computing Products 535,211
-----------
1,638,863
PHARMACEUTICAL--1.4%
7,600 Egis Gygogyszergyar Hungarian Pharmaceutical
(Hungary) Company 329,506
CHEMICALS--3.7%
24,500 EVC International NV Western European PVC
(Netherlands) Manufacturer 879,341
MARKETING SERVICES--2.7%
310,000 Cordiant PLC (United Advertising Agency Holding
Kingdom) (a) Company 629,986
COMPONENTS--6.6%
41,900 Tower Semiconductor Semi Conductors
Limited (Israel) 670,400
312,000 Pentex Schweizer Manufacturer and Marketer of
Circuits Limited Printed Circuit Boards
(Singapore) 492,702
790,000 Barlo Group PLC Manufacturer of Radiators and
(Ireland) Industrial Plastics 381,286
-----------
1,544,388
FORESTRY PRODUCTS--3.0%
59,000 Asia Pulp & Paper Paper & Packaging Products in
Company Ltd Asia
(Indonesia) (a) 708,000
</TABLE>
36
<PAGE>
INT'L EMERGING VALUE
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Number of Market
Shares Description Value
- - -------------------------------------------------------------------------------
MACHINERY & METALS--3.1%
<S> <C> <C>
3,125 Groupe Fives-Lille Builder of Heavy Machinery
(France) $ 330,189
60,500 Steel & Tube Holdings Produces and Distributes Steel
Ltd. (New Zealand) 328,330
576,000 Iochpe-Maxion SA Agricultural Machinery &
(Brazil) Automotive Parts 63,864
-----------
722,383
MINING AND BUILDING MATERIALS--7.2%
14,050 Asia Cement Large Cement Manufacturer
Manufacturing Co.
(Korea) 595,760
1,398,959 Parbury Limited Manufactures Building Products
(Australia) 560,463
55,100 Grupo Uralita (Spain) Manufacturers of Building
Products and Chemicals 541,470
-----------
1,697,693
OTHER INDUSTRIAL GOODS & SERVICES--14.0%
25,000 Fukuda Denshi Co., Medical Products Manufacturer
Ltd. (Japan) and Distributor 716,983
161,067 Wattyl (Australia) Paint Company 676,912
4,870,000 Yip's Hang Cheung Hong Kong Paint Company
(Holdings) Limited 648,452
211,400 Sanford Limited (New Owns and Manages Fisheries
Zealand) 464,711
3,550,000 TechTronic Industries Manufactures Electric Hand
Company Limited Tools
(Hong Kong) 454,334
1,045 SwissLog Holding AG Logistics Services
(Switzerland) 334,979
-----------
3,296,371
PRODUCTION EQUIPMENT--5.3%
4,260 The NSC Group Manufacturer of Textile
(France) Equipment 602,624
114,300 Danieli (Italy) Steel Mini-Mills Equipment 411,246
34,500 Powerscreen Manufacturer of Industrial
International PLC Equipment
(United Kingdom) (a) 236,821
-----------
1,250,691
COMMERCIAL REAL ESTATE--0.7%
2,600 Bau Holdings Construction
(Austria) 154,575
22,179 Christiani & Nielsen Structural and Civil
(Thailand) Engineering Contractor 13,398
-----------
167,973
TOTAL COMMON STOCKS (COST: $19,897,872) $21,553,503
</TABLE>
37
<PAGE>
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS--APRIL 30, 1996 (UNAUDITED) (CONTINUED)
int'l emerging value
<TABLE>
<CAPTION>
Principal Market
Value Description Value
- - --------------------------------------------------------------------------------
<S> <C>
COMMERCIAL PAPER--9.0%
697,000 American Express Credit
Corporation, 5.05% due
5/2/1996 $ 697,000
710,000 Ford Motor Credit Corp.
5.29% due 5/31/1996 710,000
710,000 General Electric Capital
Corporation, 5.00% due
5/1/1996 710,000
-----------
TOTAL COMMERCIAL PAPER (COST: $2,117,000) 2,117,000
Total Investments (Cost $22,014,872)--100.6% 23,670,503
Foreign Currencies (Cost $172,677)--.7% 171,887
Other Liabilities, Less Other Assets--1.3%(c) (310,937)
-----------
TOTAL NET ASSETS--100% $23,531,453
===========
</TABLE>
- - ----------
Notes:
(a) Non-income producing security.
(b) Represents an American Depositary Receipt.
(c) Includes portfolio and transaction hedges.
(d) On November 10, 1995, the Commissao de Valores Mobilliarious suspended
trading in Banco Nacional. The Central Bank of Brazil is in the process of
appraising the assets and liabilities of Banco Nacional to determine the
value, if any, of its equity. The shares are valued at zero as determined
by the pricing committee of the Board of Directors.
(e) At April 30, 1996, net unrealized appreciation $1,654,841 for federal
income tax purposes consisted of gross unrealized appreciation of
$2,275,906 and gross unrealized depreciation of $621,065.
38
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
39
<PAGE>
THE OAKMARK SERIES OF FUNDS
STATEMENT OF ASSETS AND LIABILITIES--APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Oakmark
Fund
- - ------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value $3,978,015,170
Cash 494,842
Foreign currency, at value 0
Receivable for:
Forward foreign currency contracts 0
Securities sold 6,177,064
Fund shares sold 6,962,842
Dividends and interest 6,808,028
Expense reimbursement 0
--------------
Total receivables 19,947,934
Other assets 20,201
--------------
Total assets $3,998,478,147
==============
LIABILITIES AND NET ASSETS
Payable for:
Securities purchased $ 0
Fund shares redeemed 5,610,397
Forward foreign currency contracts 0
Due to Adviser 3,271,182
Other 1,347,129
--------------
Total liabilities 10,228,708
--------------
Net assets applicable to Fund shares outstanding $3,988,249,440
==============
Fund shares outstanding 127,913,063
==============
PRICING OF SHARES
Net asset value per share $ 31.18
==============
ANALYSIS OF NET ASSETS
Paid in capital $3,079,693,971
Accumulated undistributed net realized gain (loss) on sale of
investments, forward contracts and foreign currency transactions 53,922,423
Net unrealized appreciation (depreciation) of investments 840,041,795
Net unrealized appreciation (depreciation) of foreign currency portfolio
hedges 0
Net unrealized appreciation (depreciation)--other 0
Accumulated undisturbed net investment income (loss) 14,591,251
--------------
Net assets applicable to Fund shares outstanding $3,988,249,440
==============
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
<TABLE>
<CAPTION>
Small International
Cap Balanced International Emerging
Fund Fund Fund Fund
- - -------------------------------------------------------------------
<S> <C> <C> <C>
$89,142,206 $10,473,505 $1,150,272,851 $23,670,503
124,586 2,955 140 615,219
0 0 6,372,216 171,887
0 0 4,955,977 1,007
$ 238,140 $ 36,375 $ 4,758,702 $ 0
1,452,007 13,950 15,695,616 361,228
73,631 57,048 10,430,694 82,050
0 22,946 0 71,227
- - ----------- ----------- -------------- -----------
1,763,778 130,319 35,840,989 515,562
46,562 46,580 16,277 46,663
- - ----------- ----------- -------------- -----------
$91,077,132 $10,653,359 $1,192,502,473 $25,019,834
=========== =========== ============== ===========
$ 9,686,578 $ 20,000 $ 49,017,299 $ 1,343,665
2,436 11,602 2,368,463 2,268
0 0 142,794 386
45,834 24,407 799,313 53,995
97,891 35,354 2,514,916 88,067
- - ----------- ----------- -------------- -----------
9,832,739 91,363 54,842,785 1,488,381
- - ----------- ----------- -------------- -----------
$81,244,392 $10,561,996 $1,137,659,688 $23,531,453
=========== =========== ============== ===========
6,671,620 994,021 76,848,495 2,074,605
=========== =========== ============== ===========
$ 12.18 $ 10.63 $ 14.80 $ 11.34
=========== =========== ============== ===========
$72,737,034 $10,113,414 $1,053,052,858 $21,823,786
(373,364) 84,936 (52,363,884) 39,971
8,963,549 311,726 93,111,789 1,654,841
0 0 4,878,957 0
0 0 72,288 311
(82,827) 51,920 38,907,680 12,724
- - ----------- ----------- -------------- -----------
$81,244,392 $10,561,996 $1,137,659,688 $23,531,453
=========== =========== ============== ===========
</TABLE>
41
<PAGE>
THE OAKMARK SERIES OF FUNDS
STATEMENT OF OPERATIONS--FOR THE SIX MONTHS ENDED APRIL 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Oakmark
Fund
- - --------------------------------------------------------------------------
<S> <C>
Investment income:
Dividends $ 33,317,126
Interest 7,808,309
Foreign taxes withheld (342,961)
------------
Total investment income 40,782,474
------------
Expenses:
Investment advisory fee 17,007,458
Transfer and dividend disbursing fees 1,930,082
Custodian and accounting fees 215,152
Legal expenses 26,307
Audit expenses 7,749
Trustees fees 37,217
Registration and blue sky expenses 523,036
Reports to shareholders 111,899
Insurance expense 18,200
Organization expense 17,290
Other 371,321
------------
Total expenses 20,265,711
Less expense offset arrangements (11,931)
Less expense reimbursement 0
------------
Net Expenses 20,253,780
------------
Net investment income (loss) 20,528,694
Net realized and unrealized gain (loss) on investments and
foreign currency transactions:
Net realized gain (loss) on investments 53,847,985
Net realized gain (loss) on foreign currency transactions 0
Net change in appreciation (depreciation) of investments
and foreign currencies 341,925,887
Net change in appreciation (depreciation) of forward
currency exchange contracts 0
Net change in appreciation (depreciation)--other 0
------------
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 395,773,872
------------
Net increase (decrease) in net assets resulting from
operations $416,302,566
============
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
<TABLE>
<CAPTION>
Small International
Cap Balanced International Emerging
Fund Fund Fund Fund
- - -------------------------------------------------------------------
<S> <C> <C> <C>
$ 189,536 $ 48,665 $ 14,621,464 $ 136,895
75,764 97,656 816,807 24,057
0 0 (1,830,970) (14,708)
---------- -------- ------------ ----------
265,300 146,321 13,607,301 146,244
---------- -------- ------------ ----------
160,156 24,407 4,253,328 53,995
86,102 23,107 1,102,277 42,212
10,250 5,650 411,853 40,139
5,307 5,432 10,458 5,391
11,608 10,649 10,503 12,643
5,914 5,774 14,664 5,796
54,558 35,114 (15,060) 37,724
9,853 2,083 60,710 4,155
5,712 5,703 18,200 5,703
723 723 4,732 723
1,929 769 211,495 665
---------- -------- ------------ ----------
352,112 119,411 6,083,160 209,146
(3,985) (2,065) (5,093) (4,349)
0 (22,946) 0 (71,277)
---------- -------- ------------ ----------
348,127 94,000 6,078,067 133,520
---------- -------- ------------ ----------
(82,827) 51,920 7,529,234 12,724
(373,364) 84,936 (13,484,025) 49,562
0 0 (3,188,626) (9,771)
8,963,549 311,726 186,160,991 1,654,841
0 0 12,941,386 0
0 0 (97,006) 311
---------- -------- ------------ ----------
8,590,185 396,662 182,332,720 1,694,943
---------- -------- ------------ ----------
$8,507,358 $448,582 $189,861,954 $1,707,667
========== ======== ============ ==========
</TABLE>
43
<PAGE>
THE OAKMARK FUND
STATEMENT OF CHANGES IN NET ASSETS--APRIL 30, 1996
<TABLE>
<CAPTION>
Six Months Year Ended
Ended April 30, October 31,
1996 1995
- - ------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
From Operations:
Net investment income $ 20,528,694 $ 27,572,923
Net realized gain on sale of investments 53,847,985 87,157,237
Net realized gain (loss) on foreign currency
transactions 0 (37,102)
Net change in unrealized appreciation 341,925,887 320,305,458
-------------- --------------
Net increase in net assets from operations 416,302,566 434,998,516
Distribution to shareholders from:
Net investment income (per share $.2841 in
fiscal 1996 and $.231 in fiscal 1995) (29,455,258) (15,107,180)
Net realized short-term gain (per share $.042
in fiscal 1996 and $.7277 in fiscal 1995) (4,354,278) (47,575,398)
Net realized long-term gain (per share $.7987
in fiscal 1996 and $.7411 in fiscal 1995) (82,805,021) (48,452,482)
-------------- --------------
Total distributions to shareholders (116,614,557) (111,135,060)
From Fund share transactions:
Reinvestment of dividends and capital gain
distributions 110,930,311 106,504,973
Proceeds from shares sold 1,265,779,050 1,384,343,262
Payments for shares redeemed (515,216,950) (664,894,744)
-------------- --------------
Net increase in net assets from Fund share
transactions 861,492,411 825,953,491
-------------- --------------
Total increase in net assets 1,161,180,420 1,149,816,947
Net assets:
Beginning of period 2,827,069,020 1,677,252,073
-------------- --------------
End of period (including undistributed net
investment income of $14,591,251 and
$23,383,697, respectively) $3,988,249,440 $2,827,069,020
============== ==============
</TABLE>
See accompanying notes to the financial statements.
44
<PAGE>
THE OAKMARK SMALL CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1996
- - -----------------------------------------------------------------------------
(Unaudited)
<S> <C>
From Operations:
Net investment income (loss) $ (82,827)
Net realized gain (loss) on sale of investments (373,364)
Net realized gain (loss) on foreign currency transactions 0
Net change in unrealized appreciation 8,963,549
-----------
Net increase in net assets from operations 8,507,358
Distribution to shareholders from:
Net investment income 0
Net realized short-term gain 0
Net realized long-term gain 0
-----------
Total distributions to shareholders 0
From Fund share transactions:
Reinvestment of dividends and capital gain distributions 0
Proceeds from shares sold 74,359,471
Payments for shares redeemed, net of fees (1,622,437)
-----------
Net increase in net assets from Fund share transactions 72,737,034
-----------
Total increase in net assets 81,244,392
Net assets:
Beginning of period 0
-----------
End of period (including undistributed net investment loss
of $82,827) $81,244,392
===========
</TABLE>
See accompanying notes to the financial statements.
45
<PAGE>
THE OAKMARK BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS--APRIL 30, 1996
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1996
- - -------------------------------------------------------------------------------
(Unaudited)
<S> <C>
From Operations:
Net investment income $ 51,920
Net realized gain on sale of investments 84,936
Net realized gain (loss) on foreign currency transactions 0
Net change in unrealized appreciation 311,726
-----------
Net increase in net assets from operations 448,582
Distribution to shareholders from:
Net investment income 0
Net realized short-term gain 0
Net realized long-term gain 0
-----------
Total distributions to shareholders 0
From Fund share transactions:
Reinvestment of dividends and capital gain distributions 0
Proceeds from shares sold 11,165,384
Payments for shares redeemed (1,051,970)
-----------
Net increase in net assets from Fund share transactions 10,113,414
-----------
Total increase in net assets 10,561,996
Net assets:
Beginning of period 0
-----------
End of period (including undistributed net investment income
of $51,920) $10,561,996
===========
</TABLE>
See accompanying notes to the financial statements.
46
<PAGE>
THE OAKMARK INTERNATIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS--APRIL 30, 1996
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1996 October 31, 1995
- - -------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
From Operations:
Net investment income $ 7,529,234 $ 13,743,307
Net realized gain (loss) on investments (13,484,025) 62,822,164
Net realized gain (loss) on foreign
currency transactions (3,188,626) (26,735,730)
Net change in unrealized appreciation
(depreciation) of investments and foreign
currencies 186,160,991 (120,637,092)
Net change in unrealized appreciation
(depreciation) of forward currency
exchange contracts 12,941,386 17,767,564
Net change in unrealized appreciation
(depreciation)--other (97,006) (20,391)
-------------- -------------
Net increase (decrease) in net assets
resulting from operations 189,861,954 (53,060,178)
Distribution to shareholders from:
Net investment income (per share $.00 in
fiscal 1996 and $.00 in fiscal 1995) 0 0
Net realized short-term gain (per share
$.5020 in fiscal 1996 and $.6863 in fiscal
1995) (29,886,815) (56,722,392)
Net realized long-term gain (per share
$.5413 in fiscal 1996 and $.3725 in fiscal
1995) (32,229,557) (30,791,949)
-------------- -------------
Total distributions to shareholders (62,116,372) (87,514,341)
From Fund share transactions:
Proceeds from shares sold 312,448,484 81,810,540
Reinvestment of dividends 57,835,528 312,101,705
Payments for shares redeemed (180,101,448) (719,598,750)
-------------- -------------
Net increase in net assets from Fund share
transactions 190,182,564 (325,686,505)
-------------- -------------
Total increase (decrease) in net assets 317,928,146 (466,261,024)
Net assets:
Beginning of period 819,731,542 1,285,992,566
-------------- -------------
End of period (including undistributed net
investment income of $38,907,680 and
$31,378,447, respectively) $1,137,659,688 $ 819,731,542
============== =============
</TABLE>
See accompanying notes to the financial statements.
47
<PAGE>
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
STATEMENT OF CHANGE IN NET ASSETS--APRIL 30, 1996
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1996
- - ------------------------------------------------------------------------------
(unaudited)
<S> <C>
From Operations:
Net investment income $ 12,724
Net realized gain (loss) on investments 49,562
Net realized gain (loss) on foreign currency transactions (9,771)
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies 1,654,841
Net change in unrealized appreciation (depreciation) of
forward currency exchange contracts 0
Net change in unrealized appreciation (depreciation)--other 311
-----------
Net increase (decrease) in net assets resulting from
operations 1,707,667
Distribution to shareholders from:
Net investment income 0
Net realized short-term gain 0
Net realized long-term gain 0
-----------
Total distributions to shareholders 0
From Fund share transactions:
Proceeds from shares sold 22,756,557
Reinvestment of dividends 0
Payments for shares redeemed, net of fees (932,771)
-----------
Net increase in net assets from Fund share transactions 21,823,786
-----------
Total increase (decrease) in net assets 23,531,453
Net assets:
Beginning of period 0
-----------
End of period (including undistributed net investment
income of $12,724) respectively) $23,531,453
===========
</TABLE>
See accompanying notes to the financial statements.
48
<PAGE>
HARRIS ASSOCIATES INVESTMENT TRUST
1. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of The Oakmark Fund
("Oakmark"), The Oakmark Small Cap Fund ("Small Cap"), The Oakmark Balanced Fund
("Balanced"), The Oakmark International Fund ("International"), and The Oakmark
International Emerging Value Fund ("Int'l Emerging Value") collectively referred
to as "the Funds", each a series of the Harris Associates Investment Trust (a
Massachusetts business trust). These policies are in conformity with generally
accepted accounting principles ("GAAP"). The presentation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates and assumptions.
Security valuation--
Investments are stated at current value. Securities traded on securities
exchanges and securities traded on the NASDAQ National Market are valued at the
last sales price on the day of valuation, or if lacking any reported sales that
day, at the most recent bid quotation. Over-the-counter securities not so traded
are valued at the most recent bid quotation. Money market instruments having a
maturity of 60 days or less from the date of valuation are valued on an
amortized cost basis which approximates market value. Securities for which
quotations are not readily available are valued at a fair value as determined by
the pricing committee of the board of Trustees.
Foreign currency translations--
Values of investments and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollars using the mean of the bid
and offer prices of such currencies at the time of valuation. Purchases and
sales of investments and dividend and interest income are converted at the
prevailing rate of exchange on the respective dates of such transactions.
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized gain or loss from investments.
Net realized gains on foreign currency transactions arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference
49
<PAGE>
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Funds' books, and the U.S. dollar equivalent of the amounts
actually received or paid, and the realized gains or losses resulting from the
portfolio and transaction hedges.
As of April 30, 1996, only the International and Int'l Emerging Value funds
had foreign currency transactions. Net unrealized appreciation--other includes
the following components:
<TABLE>
<CAPTION>
Int'l Emerging
International Value
- - --------------------------------------------------------------------------------
<S> <C> <C>
Unrealized appreciation (depreciation) on open
securities purchases $ 89,891 $(73)
Unrealized appreciation (depreciation) on
transaction hedge purchases (65,773) 621
Unrealized appreciation (depreciation) on
dividends and dividend reclaim receivables 49,762 (289)
Unrealized appreciation (depreciation) on sales
receivables (9,305)
Other--net 7,713 52
-------- ----
Net unrealized appreciation (depreciation)--other $ 72,288 $311
======== ====
</TABLE>
Security transactions and investment income--
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed) and dividend income is recorded on the ex-dividend
date. Interest income and expenses are recorded on the accrual basis.
Fund shares are sold and redeemed on a continuing basis at net asset value.
Net asset value per share is determined daily as of the close of regular trading
on the New York Stock Exchange on each day the Exchange is open for trading by
dividing the total value of the Fund's investments and other assets, less
liabilities, by the number of Fund shares outstanding.
Forward foreign currency contracts--
At April 30, 1996, International and Int'l Emerging Value had each entered
into forward foreign currency contracts under which they are obligated to
exchange currencies at specified future dates. The Funds' currency transactions
are limited to transaction hedging and portfolio hedging involving either
specific transactions or portfolio positions.
The contractual amounts of forward foreign exchange contracts do not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. Risks arise from the possible inability
of counterparties to meet the terms of their contracts and from movements in
currency values. The International Fund had the following outstanding contracts
at April 30, 1996:
50
<PAGE>
Portfolio Hedges:
<TABLE>
<CAPTION>
Unrealized
Appreciation
US Dollar Settlement (Depreciation)
Proceeds Foreign Currency Date at April 30, 1996
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 8,107,013 1,000,000,000 Spanish Pesetas July 1996 $ 277,267
10,000,000 1,273,500,000 Spanish Pesetas August 1996 40,340
9,466,243 1,191,800,000 Spanish Pesetas August 1996 151,176
15,000,000 1,894,200,000 Spanish Pesetas September 1996 215,285
8,839,996 45,000,000 French Francs August 1996 92,858
8,040,067 40,534,000 French Francs August 1996 155,476
9,886,551 49,760,000 French Francs September 1996 190,001
14,126,320 9,400,000 Pounds Sterling July 1996 (5,916)
5,000,000 3,276,325 Pounds Sterling September 1996 77,340
19,331,211 12,738,854 Pounds Sterling September 1996 192,566
5,816,370 9,458,000 Netherlands Guilders August 1996 250,399
10,000,000 16,366,000 Netherlands Guilders September 1996 342,668
29,114,164 47,574,000 Netherlands Guilders September 1996 1,032,527
9,161,376 15,152,000 Netherlands Guilders October 1996 199,742
17,459,707 108,870,000 Norwegian Kroner May 1996 884,770
23,039,295 156,370,000 Swedish Krona May 1996 (11,448)
11,909,331 78,810,000 Swedish Krona June 1996 303,097
29,580,442 198,987,500 Swedish Krona June 1996 283,372
16,927,192 113,595,000 Swedish Krona July 1996 207,437
----------
$4,878,957
==========
</TABLE>
Transaction Hedges:
Foreign Currency Purchases
<TABLE>
<CAPTION>
Unrealized
Appreciation
Settlement (Depreciation)
US Dollar Foreign Currency Proceeds Date at April 30, 1996
- - -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$5,931,068 6,841,370 Australian Dollars May 1996 $(17,812)
5,531,068 6,835,294 Swiss Franc May 1996 (25,838)
5,563,903 704,796,732 Spanish Peseta May 1996 (23,127)
7,038,136 4,663,012 Pound Sterling May 1996 (18,699)
427,725 3,303,398 Hong Kong Dollar May 1996 (34)
3,521,006 373,818,600 Japanese Yen May 1996 52,615
1,807,808 3,085,457 Netherlands Guilder May 1996 (7,133)
3,067,722 480,126,250 Portuguese Escudo May 1996 (6,864)
6,266,331 42,336,437 Swedish Krona May 1996 (23,492)
--------
$(70,384)
========
</TABLE>
Foreign Currency Sales
<TABLE>
<CAPTION>
Unrealized
Appreciation
U.S. Dollar Settlement (Depreciation)
Foreign Currency Cost Date at April 30, 1996
- - -----------------------------------------------------------------------
<S> <C> <C> <C>
815,865 Pound Sterling $1,233,929 May 1996 $ 5,772
12,768,505 Norwegian Kroner 1,944,843 May 1996 1,269
10,762,200 Swedish Krona 1,584,541 May 1996 (2,430)
-------
$ 4,611
=======
</TABLE>
51
<PAGE>
The Int'l Emerging Value Fund had the following outstanding transaction
hedges on purchases of securities:
<TABLE>
<CAPTION>
Unrealized
Appreciation
Settlement (Depreciation)
US Dollar Foreign Currency Proceeds Date at April 30, 1996
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
$73,284 92,799 Australian Dollars May, 1996 $(386)
82,444 105,024 Australian Dollars May, 1996 58
125,322 170,626 Canadian Dollars May, 1996 (0)
52,402 5,580,810 Japanese Yen May, 1996 949
-----
$ 621
=====
</TABLE>
At April 30, 1996, International and Int'l Emerging Value funds each had
sufficient cash and/or securities to cover any commitments under these
contracts.
Federal income taxes, dividends and distributions to shareholders--
No provision is made for Federal income taxes since the Funds elect to be
taxed as "regulated investment companies" and make such distributions to their
shareholders as to be relieved of all Federal income taxes under provisions of
current Federal tax law.
2. TRANSACTIONS WITH AFFILIATES
Each fund has an investment advisory agreement with Harris Associates L.P.
(Adviser). For management services and facilities furnished, the Funds pay the
Adviser monthly fees at annual rates as follows. Oakmark pays 1% on the first
$2.5 billion of net assets, .95% on the next $1.25 billion of net assets, .90%
on the next $1.25 billion of net assets and .85% on the excess of $5 billion of
net assets as determined at the end of each calendar month. International pays
1% on the first $2.5 billion of net assets, .95% on the next $2.5 billion of net
assets and .90% on the excess of $5 billion of net assets as determined at the
end of each calendar month. Small Cap pays 1.25% of net assets, Balanced pays
.75% of net assets and Int'l Emerging Value pays 1.25% of net assets. Each fee
is calculated on the total net assets as determined at the end of each preceding
calendar month. The investment advisory agreement of each Fund provides that the
Adviser will reimburse the Funds to the extent that annual expenses, excluding
certain expenses, exceed the applicable limits prescribed by any state in which
the Fund's shares are offered for sale. For the six months ended April 30, 1996
the Adviser has voluntarily waived $22,946 of expenses for Balanced and $71,277
for Int'l Emerging Value.
In connection with the organization of the Funds, the Adviser advanced
expenses of approximately $146,500 and $47,000 to Oakmark and International and
approximately $7,283 each to Small Cap,
52
<PAGE>
Balanced and Int'l Emerging Value. These expenses are being amortized on a
straight line basis through July, 1996 for Oakmark, September, 1997 for
International and October, 2000 for Small Cap, Balanced and Int'l Emerging
Value. Registration expenses of approximately $56,751, $56,811 and $56,726 were
advanced by the Adviser to Small Cap, Balanced and Int'l Emerging Value,
respectively. Registration expenses are being amortized on a straight line basis
through October, 1996.
During the six months ended April 30, 1996, the Funds incurred brokerage
commissions of $1,624,431, $1,511,546, $115,621, $9,821 and $92,656 of which
$569,970, $40,514, $48,686, $8,732 and $1,471 were paid by Oakmark,
International, Small Cap, Balanced and Int'l Emerging Value, respectively, to an
affiliate of the Adviser.
3. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund shares as shown in the statement of changes in
net assets are in respect of the following number of shares (in thousands):
<TABLE>
<CAPTION>
Int'l
Six Months Ended Small Emerging
April 30, 1996 Oakmark Cap Balanced International Value
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares sold 41,796 6,828 1,095 22,610 2,162
Shares issued in reinvestment
of dividends 3,731 0 0 4,756 0
Less shares redeemed (16,898) (156) (101) (13,742) (87)
------- ----- ----- ------- -----
Net increase in shares
outstanding 28,629 6,672 994 13,624 2,075
======= ===== ===== ======= =====
<CAPTION>
Year Ended October 31, 1995 Oakmark International
- - ------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 54,044 24,062
Shares issued in reinvestment
of dividends 4,782 6,472
Less shares redeemed (26,065) (56,012)
------- -------
Net increase in shares
outstanding 32,761 (25,478)
======= =======
</TABLE>
53
<PAGE>
4. INVESTMENT TRANSACTIONS
Transactions in investment securities, excluding short term securities, were
as follows (in thousands):
<TABLE>
<CAPTION>
Int'l
Six Months Ended Small Emerging
April 30, 1996 Oakmark Cap Balanced International Value
- - -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases $ 939,978 $76,362 $10,156 $256,910 $20,491
Proceeds from sales 236,765 5,910 598 213,226 643
<CAPTION>
Year Ended
October 31, 1995 Oakmark International
- - -----------------------------------------------------------------------
<S> <C> <C>
Purchases $1,085,381 $251,353
Proceeds from sales 359,990 671,180
</TABLE>
The market values (in thousands) of securities on loan to broker-dealers at
April 30, 1996 are shown below. Security loans are required to be secured at all
times by collateral at least equal to the market value of securities loaned. The
Funds receive income from lending securities by investing the collateral and
continue to earn income on the loaned securities. Security loans are subject to
the risk of failure by the borrower to return the loaned securities in which
case the Funds could incur a loss.
<TABLE>
<CAPTION>
Int'l
Small Emerging
Oakmark Cap Balanced International Value
- - -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Market Value of Securities
Loaned n/a $5,102 $1,817 $73,920 $48
Collateral (Cash and U.S.
Treasuries) n/a 5,448 1,898 79,091 51
</TABLE>
5. SHAREHOLDER MEETING
On January 30, 1996 each Fund held a meeting of shareholders to vote on a
new investment advisory agreement for the Fund with the Adviser with the same
terms as its current advisory agreement. Shareholders of Oakmark also voted on a
proposed amendment to the Fund's investment policies that, if adopted, would
permit the Fund to invest in repurchase agreements and to lend portfolio
securities. A tabulation of results is shown below.
<TABLE>
<CAPTION>
Int'l
Small Emerging
(in thousands) Oakmark Cap Balanced International Value
- - --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisory Agreement
For 73,642 1,272 372 38,262 475
Against 1,441 11 1 573 6
Abstain 1,977 26 1 715 5
Repurchase Agreements
For 51,570
Against 4,304
Abstentions 2,240
Broker non-votes 18,946
Securities Lending
For 49,663
Against 5,985
Abstain 2,467
Broker non-votes 18,946
</TABLE>
54
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
55
<PAGE>
THE OAKMARK FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year Ended October 31, Period Ended
Six Months Ended ------------------------------------ October 31,
April 30, 1996 1995 1994 1993 1992 1991(a)
- - ----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 28.47 $ 25.21 $ 24.18 $ 17.11 $12.10 $10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.15 0.30 0.27 0.17 (0.03)(d) (0.01)
Net Gains or Losses on Securities
(both realized and unrealized) 3.68 4.66 1.76 7.15 5.04 2.11
-------- -------- -------- -------- ------ ------
Total From Investment Operations 3.83 4.96 2.03 7.32 5.01 2.10
Less Distributions:
Dividends (from net investment income) (0.28) (0.23) (0.23) (0.04) 0.00 0.00
Distributions (from capital gains) (0.84) (1.47) (0.77) (0.21) 0.00 0.00
-------- -------- -------- -------- ------ ------
Total Distributions (1.12) (1.70) (0.10) (0.25) 0.00 0.00
-------- -------- -------- -------- ------ ------
Net Asset Value, End of Period $ 31.18 $ 28.47 $ 25.21 $ 24.18 $17.11 $12.10
======== ======== ======== ======== ====== ======
Total Return 13.66% 21.55% 8.77% 43.21% 41.40% 87.10%*
Ratios/Supplemental Data:
Net Assets, End of Period ($ million) $3,988.2 $2,827.1 $1,677.3 $1,107.0 $114.7 $ 4.8
Ratio of Expenses to Average Net Assets 1.15%* 1.17% 1.22% 1.32% 1.70% 2.50%(b)*
Ratio of Net Income (Loss) to Average Net Assets 1.16%* 1.27% 1.19% 0.94% (0.24)% (0.66)%(c)*
Portfolio Turnover Rate 6.7% 18.0% 29.3% 18.0% 34.0% 0.0%
Average Commission Rate Paid $ 0.0534(e)
</TABLE>
- - ------------
*Ratios have been determined on an annualized basis.
(a) From August 5, 1991, the date on which the Fund Shares were first offered
for sale to the public.
(b) If the Fund had paid all of its expenses and there had been no reimbursement
by the Adviser, this annualized ratio would have been 4.92% for the period.
(c) Computed giving effect to the Adviser's expense limitation undertaking.
(d) Based on average month-end shares outstanding.
(e) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
56
<PAGE>
THE OAKMARK INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year Ended October 31, Period Ended
Six Months Ended ------------------------- October 31,
April 30, 1996 1995 1994 1993 1992(a)
- - -----------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.97 $14.50 $ 14.09 $ 9.80 $ 10.00
Income From Investment Operations:
Net Investment Income 0.01 0.30 0.21 0.06 0.26
Net Gains or Losses on Securities
(both realized and unrealized) 2.86 (0.77) 0.43 4.48 (0.46)
-------- ------ -------- ------ -------
Total From Investment Operations 2.87 (0.47) 0.64 4.54 (0.20)
Less Distributions:
Dividends (from net investment income) 0.00 0.00 (0.08) (0.25) 0.00
Distributions (from capital gains) (1.04) (1.06) (0.15) 0.00 0.00
-------- ------ -------- ------ -------
Total Distributions (1.04) (1.06) (0.23) (0.25) 0.00
-------- ------ -------- ------ -------
Net Asset Value, End of Period $ 14.80 $12.97 $ 14.50 $14.09 $ 9.80
======== ====== ======== ====== =======
Total Return 23.90% (3.06)% 4.62% 47.49% (22.81)%*
Ratios/Supplemental Data:
Net Assets, End of Period ($ million) $1,137.7 $819.7 $1,286.0 $815.4 $ 23.5
Ratio of Expenses to Average Net Assets 1.36%* 1.40% 1.37% 1.26% 2.04%*
Ratio of Net Income to Average Net Assets 1.68%* 1.40% 1.44% 1.55% 37.02%*
Portfolio Turnover Rate 25% 27% 55% 21% 0%
Average Commission Rate Paid $ 0.0160(b)
</TABLE>
- - ------------
*Ratios have been determined on an annualized basis.
(a) From September 30, 1992, the date on which the Fund Shares were first
offered for sale to the public.
(b) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
57
<PAGE>
THE OAKMARK SMALL CAP FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1996
- - -----------------------------------------------------------------------
(Unaudited)
<S> <C>
Net Asset Value, Beginning of Period $10.00
Income From Investment Operations:
Net Investment Income (Loss) (0.01)
Net Gains or Losses on Securities (both realized and
unrealized) 2.19
-------
Total From Investment Operations 2.18
Less Distributions:
Dividends (from net investment income) 0.00
Distributions (from capital gains) 0.00
-------
Total Distributions 0.00
-------
Net Asset Value, End of Period $ 12.18
=======
Total Return 21.80%
Ratios/Supplemental Data:
Net Assets, End of Period ($ million) $ 81.2
Ratio of Expenses to Average Net Assets* 2.12%*
Ratio of Net Income (Loss) to Average Net Assets* (0.50)%*
Portfolio Turnover Rate 17.8%
Average Commission Rate Paid $0.0544(a)
</TABLE>
- - ----------
*Ratios have been determined on an annualized basis using average daily net
assets.
(a) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission rate structures may
differ.
58
<PAGE>
THE OAKMARK BALANCED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1996
- - -----------------------------------------------------------------------
(Unaudited)
<S> <C>
Net Asset Value, Beginning of Period $ 10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.05
Net Gains or Losses on Securities (both realized and
unrealized) 0.58
-------
Total From Investment Operations 0.63
Less Distributions:
Dividends (from net investment income) 0.00
Distributions (from capital gains) 0.00
-------
Total Distributions 0.00
-------
Net Asset Value, End of Period $ 10.63
=======
Total Return 6.30%
Ratios/Supplemental Data:
Net Assets, End of Period ($ million) $ 10.6
Ratio of Expenses to Average Net Assets* 2.50%(a)*
Ratio of Net Income to Average Net Assets* 1.34%(a)*
Portfolio Turnover Rate 7.8%
Average Commission Rate Paid $0.0597(b)
</TABLE>
- - ----------
*Ratios have been determined on an annualized basis using average daily net
assets.
(a) If the fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, the ratio of expense to average net assets
would have been 3.09% and the ratio of net income (loss) to average net
assets would have been .75%.
(b) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
59
<PAGE>
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Six Months
Ended
April 30, 1996
- - ----------------------------------------------------------------------
(unaudited)
<S> <C>
Net Asset Value, Beginning of Period $10.00
Income From Investment Operations:
Net Investment Income 0.01
Net Gains or Losses on Securities (both realized and
unrealized) 1.33
-------
Total From Investment Operations 1.34
Less Distributions:
Dividends (from net investment income) 0.00
Distributions (from capital gains) 0.00
-------
Total Distributions 0.00
-------
Net Asset Value, End of Period $11.34
=======
Total Return 13.40%
Ratios/Supplemental Data:
Net Assets, End of Period ($ million) $ 23.5
Ratio of Expenses to Average Net Assets* 2.50%*(a)
Ratio of Net Income to Average Net Assets* 0.23%*(a)
Portfolio Turnover Rate 5.83%
Average Commission Rate Paid $0.0047(b)
</TABLE>
- - ----------
*Ratios have been determined on an annualized basis using average daily net
assets.
(a) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, the ratio of expenses to average net assets
would have been 4.72% and the ratio of net income (loss) to average net
assets would have been (2.77)%.
(b) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
60
<PAGE>
THE OAKMARK FUNDS'
SEMI-ANNUAL REPORT
APRIL 30, 1996
TRUSTEES AND OFFICERS
TRUSTEES
Michael J. Friduss Allan J. Reich
Thomas H. Hayden Marv Rotter
Christine M. Maki Burton W. Ruder
Victor A. Morgenstern Peter S. Voss
Gary Wilner, M.D.
OFFICERS
Victor A. Morgenstern--President
Robert J. Sanborn--Executive Vice President
David G. Herro--Vice President
Clyde S. McGregor--Vice President
Steven J. Reid--Vice President
Adam Schor--Assistant Vice President
Michael J. Welsh--Assistant Vice President
Donald Terao--Treasurer
Anita M. Nagler--Secretary
Ann W. Regan--Vice President--Shareholder Operations and Assistant Secretary
Kristi L. Rowsell--Assistant Treasurer
OTHER INFORMATION
TRANSFER AGENT
State Street Bank and Trust Company
Attention: The Oakmark Family of Funds
P.O. Box 8510
Boston, Massachusetts 02266-8510
1-800-626-9392
INVESTMENT ADVISER
Harris Associates L.P.
LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
ADDRESS OF FUND AND ADVISER
Two North LaSalle Street, Suite 500
Chicago, Illinois 60602
1-800-OAKMARK (1-800-625-6275)
24-HOUR NAV INFORMATION
1-800-GROWOAK (1-800-476-9625)
This report, including the unaudited financial statements contained herein, is
submitted for the general information of the shareholders of the Funds. The
report is not authorized for distribution to prospective investors in the Funds
unless it is accompanied or preceded by a currently effective prospectus of the
Funds. No sales charge to the shareholder or to the new investor is made in
offering the shares of the Funds.
<PAGE>
[LOGO APPEARS HERE]
Harris Associates L.P.
2 North LaSalle Street
Chicago, IL 60602
1-800-OAKMARK
