<PAGE>
(Logo of Company) The
Oakmark
Fund
The Oakmark Family of Funds
The
FIRST Oakmark
QUARTER Small Cap
REPORT Fund
--------------------
January 31, 1996 The
-------------------- Oakmark
Balanced
Fund
MEMBER OF
---------------- The
100% NO-LOAD Oakmark
MUTUAL FUND International
COUNCIL Fund
----------------
No-Load Funds Managed by The
Harris Associates L.P. Oakmark
Int'l Emerging
Value Fund
<PAGE>
[LOGO]
The Oakmark Family of Funds
1996 FIRST QUARTER 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.............. 18
The Oakmark International Fund
Performance Chart.................... 20
Letter from the Portfolio Managers... 20
Schedule of Investments.............. 23
The Oakmark Int'l Emerging Value Fund
Performance Information.............. 29
Letter from the Portfolio Managers... 29
Schedule of Investments.............. 31
Trustees and Officers................... 37
Other Important Information............. 37
</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>
HARRIS ASSOCIATES INVESTMENT TRUST
THE OAKMARK FUNDS FIRST QUARTER REPORT 1996
LETTER FROM THE PRESIDENT
Fellow shareholders:
I am pleased to report that overall The Oakmark Fund Family had a good first
fiscal quarter ending January 31, 1996. Our flagship funds, The Oakmark Fund
and The Oakmark International Fund, both achieved double digit returns, and
our three new funds are off to a good start, as each had positive returns
through the initial start-up period. We have continually received positive
comments from you about Robert Sanborn's and David Herro's shareholder
letters. Thus, I am pleased to highlight the addition of Steven Reid's, Clyde
McGregor's, and Adam Schor's shareholder letters. Each one can be found in
their respective fund sections.
We now have over 1000 shareholders in each of The Oakmark Small Cap and The
Oakmark International Emerging Value Funds, and therefore, they are included
in the newspaper listing under the OAKMARK heading. The Oakmark Balanced Fund
should be included shortly.
After the large gains in 1995, the U.S. market is starting to experience
increased volatility. As long-term investors, we have learned that such
periods usually create buying opportunities for us to purchase securities at
attractive valuations, as prices are driven by short-term emotional sentiment.
We urge you to continue to focus on long-term performance and use periods of
weakness to add to investment positions in The Oakmark Funds.
We also would like to remind you that April 15, 1996 is the deadline for IRA
contributions for 1995.
Sincerely,
/s/ Victor Morgenstern
VICTOR A. MORGENSTERN
President
<PAGE>
THE OAKMARK FUNDS FAMILY SUMMARY INFORMATION*
PERFORMANCE FOR PERIOD ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
OAKMARK SMALL CAP
<S> <C> <C>
3 Months 11.40% 1.80%
6 Months 16.90% N/A
Annualized
Performance for:
1 Year 36.30% N/A
3 Years 21.90% N/A
Since Inception 33.10% 1.80%
Value of $10,000 $ 36,091 $ 10,180
from inception
date 08/05/91 11/01/95
</TABLE>
TOP FIVE HOLDINGS AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Company and Philip Morris Amerin Corporation 4.88%
% of Total Net Companies 6.09% SPX Corporation 3.63%
Assets Mellon Bank Harbor Fed Svgs Bk Fl 3.45%
Corporation 5.11% Northwest Savings
Lockheed Martin Bank 3.25%
Corporation 4.87% Cap Mac Holdings Inc. 3.17%
First USA, Inc. 4.81%
USWest Media Group 4.00%
</TABLE>
TOP FIVE INDUSTRIES AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Industries and Food & Beverage 14.80% Other Industrial Goods
% of Total Net Broadcasting & & Services 19.20%
Assets Publishing 14.00% Machinery & Metal
Other Consumer Goods Processing 14.80%
and Services 10.40% Banks 12.80%
Other Financial 8.80% Insurance 9.90%
Aerospace & Defense 7.00% Broadcasting &
Publishing 8.70%
</TABLE>
*The Oakmark Fund's average annual total return for the twelve months ended
December 31, 1995 and the period August 5, 1991 (inception) through December 31,
1995 was 33.4% and 33.0%, respectively.
The Oakmark Small Cap Fund's total return for November 1, 1995 (inception)
through December 31, 1995 was 3.30%.
The Oakmark Balanced Fund's total return for November 1, 1995 (inception)
through December 31, 1995 was 2.40%.
2
<PAGE>
<TABLE>
<CAPTION>
BALANCED INTERNATIONAL INT'L EMERGING VALUE
-------- ------------- --------------------
<S> <C> <C>
2.90% 10.80% 5.30%
N/A 4.80% N/A
N/A 18.60% N/A
N/A 14.50% N/A
2.90% 15.70% 5.30%
$10,290 $16,248 $10,530
11/01/95 09/30/92 11/01/95
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Juno Lighting 3.55% Cordiant PLC 6.70% Grupo Herdez 4.37%
Promus Hotel Corp 3.51% AB Volvo 3.97% Codiant PLC 3.72%
US West Media Group 3.46% Kvaerner 3.72% Danieli & Company 3.63%
H J Heinz Co 3.42% Telefonos de Mexico, Sanford 3.55%
Mellon Bank Corp 3.31% S.A. de C.V. 3.70% Uralita 3.54%
Usiminas 3.55%
U.S. Treasuries 23.80% Other Industrial Goods Other Industrial Goods
Other Consumer Goods & Services 12.90% & Services 13.50%
& Services 16.10% Banks 11.20% Industrial
Broadcasting & Aerospace 7.60% Components 6.70%
Publishing 11.00% Telecommunications 6.80% Mining & Building
Other Industrial Goods Marketing Services 6.70% Materials 6.50%
& Services 6.90% Machinery & Metal
Corporate Bonds 5.40% Processing 6.40%
Food & Beverage 6.40%
</TABLE>
The Oakmark International Fund's average annual total return for the twelve
months ended December 31, 1995 and the period September 30, 1992 (inception)
through December 31, 1995 was 8.3% and 13.7%, respectively.
The Oakmark International Emerging Value Fund's total return for November 1,
1995 (inception) through December 31, 1995 was (3.70)%.
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 (1/31/96) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX.
[GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
1/31/96 NAV $30.56
<TABLE>
<CAPTION>
Average Annual Total Return*
Through 1/31/96
--------------------------------
Total Return Total Return From Fund Inception
Last 3 mos. Last 6 mos. From 1/31/95 8/5/91
------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C>
THE OAKMARK FUND 11.4% 16.9% 36.3% 33.1%
Standard & Poor's 500
Stock Index* 10.0% 14.5% 38.7% 14.9%
Dow-Jones Industrial
Average* 14.1% 15.9% 43.8% 17.0%
Value Line Composite
Index* 5.4% 3.5% 20.4% 7.5%
</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
Dear Fellow Shareholders:
SMOKIN' . . .
Company A is a very large public company. Over the past ten years, its
operating profit per share has grown at 17.2 percent per year; the Value Line
Industrial Composite has grown at 6.1 percent. Over the last ten years, A's
Return on Assets (ROA) has averaged 16.5 percent, compared to the Composite of
9.2 percent. In my estimation, long-term ROA is the single best indicator of
the quality of a business.
4
<PAGE>
Oakmark Fund
Company A dominates its business. Its market share in its primary business
inside the US (47%) and outside the US (14%) are at all-time highs. Its
customers are extremely loyal, perhaps as loyal as customers are to any other
mass consumer product in the world. Its growth outside of the US is tremendous,
with double-digit volume growth and over 16 percent operating profit growth in
1995. A makes more profits than all of its competitors combined.
Take a guess at A's identity. Microsoft? No. Coca-Cola? No. Good guesses,
though.
Here's a hint. A was the last entrant in its category (in 1917!!), is the
top-performing stock from the original Fortune 500 of 40 years ago, and sells
at only 70 percent of the valuation of the Value Line Industrial Composite.
OK, I'll tell you. Company A is Philip Morris, your Fund's largest holding,
and the best business I have ever encountered. It is controversial for sure,
and I have heard from many of you. My personal view on smoking--that it is
probably risky, as is driving, eating a lot of Ding-Dongs, and many other
activities, but that the consumer has concluded that the benefits outweigh the
risks--is irrelevant, because we have a legal obligation to invest in those
securities that best meet our investment criteria.
Philip Morris generates almost two-thirds of its profits from its tobacco
business, which is (in terms of profits) half domestic, half international. The
Marlboro brand represents more than half of the Company's worldwide units, and
a far higher percentage of its profits. Marlboro is undoubtedly the most
valuable brand on the planet. Its billboards are instantly recognizable even
without the product's name highlighted, and the brand epitomizes the outdoors,
individualism, and freedom.
Marlboro was actually a brand targeted to females that was transformed into
the juggernaut it is by the most famous advertising campaign in history. More
important, Philip Morris has marketed the product consistently for decades. Its
recent efforts with its "Marlboro Country Store" and "Marlboro Action Team"
promotions have been spectacularly successful in reinforcing the Marlboro brand
imagery. No other product has ever--ever--been as well-marketed as Marlboro.
Philip Morris is a cash-generating monster. It pays a hefty dividend that
rises with earnings, makes complementary acquisitions, and has had to make
significant investments in strengthening an already-powerful global
distribution system. Nevertheless, Philip Morris has been repurchasing its
shares (and retiring its debt) in the marketplace, having retired 12 percent in
the last five years. In previous letters, I have stated that we believe this is
a particularly efficient way to return cash to shareholders.
One of your Fund's investment guidelines is to invest with owner-oriented
management. I have a very high degree of confidence in this management team. MO
has not gotten complacent despite its success. As CEO Geoffrey Bible stated in
last year's annual report, "Our all-consuming ambition is to create wealth for
owners of Philip Morris. And the best way to do that over the long term is to
continue growing profitably and delivering strong cash flows in each of our
5
<PAGE>
Oakmark Fund
core businesses . . . I'm confident we can do it, and at rates that compare
quite favorably with our global competitors and the rest of corporate
America."
I have had the pleasure of visiting Mr. Bible and company officers Murray
Bring and Herbert Millington at MO's headquarters in New York, and I can only
relate my positive impression of MO's leadership. They are informal,
approachable people, yet with a deep understanding of what will add value to
the company they steward.
So, we have a great, great business--high returns, extremely high barriers
to entry, excellent growth opportunities--with strong management and yet MO
trades at only seven times this year's expected operating earnings plus
amortization. That is a bargain, and the litigation that has hung over the
industry for decades is the leading culprit. While we are confident that the
litigation issue will eventually go away without material impact on Philip
Morris, I must admit that there is more than average event risk in this
holding. However, we believe that we are more than getting paid for our risk.
PULL THOSE STAKES!! . . .
Shareholders of public companies elect directors, who appoint and oversee
management. In our view, management has one mission: to maximize the long-term
value per share of the company. Period.
Now, politicians of both major parties are arguing that corporations have
broader responsibilities. The current Secretary of Labor, Robert Reich (who
appeared earlier in these pages advocating that pension funds earmark a
portion of their assets to "raise incomes and spark new jobs") and Senator Ted
Kennedy say that the federal government should provide incentives for "good"
corporate citizenship. Senator Bob Dole recently criticized "corporate greed"
and noted that "corporate profits are setting records and so are corporate
layoffs." The core of Pat Buchanan's Presidential campaign is an appeal to
American workers who fear economic insecurity.
Reich suggests that corporate taxes might be adjusted to encourage companies
to resist layoffs. Senator Kennedy wants to reward certain "responsible"
companies with "most favored company" status. They would earn this prize, and
some goodies, for their record in "creating jobs, avoiding layoffs simply to
maximize profits, paying adequate wages" and so forth.
[Folks, this is all nonsense. Maximizing profits is, after all, the basis of
the capitalistic system. Profits allow companies to hire and pay workers. Does
Senator Kennedy really believe that companies lay off workers simply to
benefit short-term profits? Can you imagine establishing laws and the
inevitable bureaucracies to determine which companies are "responsible" and
which are not?]
Tony Blair, the Labour MP and possible next Prime Minister of Britain, has
coined the term "stakeholder capitalism" to describe corporate behavior that
goes beyond mere profit maximization. This is the German and Japanese form of
capitalism, which includes lifetime employment for many in the corporate
sector. The irony of the current infatuation with stakeholder capitalism in
the
6
<PAGE>
Oakmark Fund
US and Britain is that the commitment to stakeholder capitalism in Germany
and Japan is waning. Both countries are experiencing a decline in their
competitiveness, especially relative to the US. Germany's high cost of
production is causing severe problems. In Japan, huge numbers of employed but
essentially non-contributing workers (in Japan, they are called "the tribe that
sits by the windows") are rendering companies uncompetitive, causing strains
within companies, and retarding returns to shareholders. Despite the headlines,
the US is producing record industrial production and exports, and American
industry is as competitive as it has been in decades.
There has always been job insecurity. Government will never be able to
eliminate it (although the USSR sure made a decent attempt). The current
wailing by politicians of various stripes has exacerbated the perception of
insecurity far more than the reality. As Robert Samuelson writes in Newsweek,
layoffs account for only a trivially larger share of unemployment compared to
the 1970s. Second, a University of Maryland study concludes that trade costs
11.4 million jobs and creates 10.0 million jobs. Since the US is a high value-
added economy, the jobs created are better than the jobs lost.
What does this have to do with The Oakmark Fund? Well, if any of these
proposals were to ever become law, some of our companies might be run
differently. They would not be able to initiate the kinds of down-sizing that
makes them more competitive and more profitable. They would be forced to be
inefficient. Wages would really stagnate. Companies would have to establish
departments that would have to interface with the new bureaucrats. Returns to
you, the shareholder, would decline. The only winners would be the Washington
bureaucrats.
Most of the advocates of these proposals forget that the vast majority of
investors are also employees. As an employee, we want wages, benefits, and the
opportunity to grow. As an investor, via a profit-sharing plan, an IRA or
whatever, we want companies to be run for the benefit of their owners--us!
Blurring these relationships will only send more power to Washington and
subsidize people in jobs that should not exist.
At the turn of this century, more than 40 percent of the US work force was in
agriculture. Today, less than 5 percent of our labor force is in farming,
output has soared, and we are the envy of the world. We should not lament the
fact that 35 percent of the work force "lost" jobs. These people devoted their
energies and talents to other areas, and we are all better for it. It is high
time that we recognize these simple truths.
We cannot eliminate economic insecurity, but we can extract more from our
economy. Do not discourage capital formation as we do in the US. Make it easy
for new companies to start up. Reduce the crippling over-regulation of
business. And develop the best-educated work force in the world.
ROBERT J. SANBORN
Portfolio Manager
[email protected]
February 24, 1996
7
<PAGE>
THE OAKMARK FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996
Oakmark Fund
<TABLE>
<CAPTION>
Shares Held Common Stocks Market Value
- -------------------------------------------------------------------------
COMMON STOCKS--90.8%
FOOD & BEVERAGE--14.8%
<C> <S> <C>
2,381,500 Philip Morris Companies Inc. $ 221,479,500
1,669,100 Anheuser-Busch Companies, Inc. 116,002,450
2,597,250 H.J. Heinz Company 89,280,468
2,122,100 Nabisco Holdings Corp. 73,742,974
1,571,900 Interstate Bakeries 33,206,388
200,000 International Dairy Queen, Inc. Class A (a) 4,350,000
--------------
538,061,780
APPAREL--.2%
388,500 K-Swiss Inc. Class A 3,982,124
620,600 J. Baker Inc. 2,831,488
--------------
6,813,612
RETAIL--4.1%
3,705,500 Federated Department Stores, Inc. (a) 100,048,500
1,600,000 Zale Corporation (a) 22,100,000
1,000,000 Carson Pirie Scott & Co. (a) 17,875,000
600,000 Cole National Corporation Class A (a) 6,450,000
445,000 Best Products Co., Inc. (a) 1,807,812
53,800 Rex Stores Corporation (a) 699,400
--------------
148,980,712
OTHER CONSUMER GOODS & SERVICES--10.4%
3,340,200 The Black & Decker Corporation 113,149,274
2,032,800 American Brands, Inc. 92,746,500
477,700 The Clorox Company 39,469,962
470,200 First Brands Corporation 23,216,125
957,500 Whitman Corporation 21,783,125
583,800 GC Companies, Inc. (a) 20,068,125
885,000 JUNO Lighting Inc. 14,381,250
400,000 Stanhome Inc. 10,700,000
757,500 Arctco Inc. 8,427,188
601,500 Justin Industries, Inc. 6,541,313
281,500 Rollins, Inc. 6,122,625
257,600 Paragon Trade Brands, Inc. (a) 5,570,600
395,000 Mikasa, Inc. (a) 4,986,875
100,000 Alberto-Culver Company 3,350,000
225,525 Rauch Industries, Inc. 2,875,444
51,500 Polaroid Corporation 2,311,063
107,000 Armor All Products Corp. 1,631,750
304,000 Drypers Corporation (a) 988,000
--------------
378,319,219
OIL--.3%
270,000 Murphy Oil Corporation 11,373,750
BANKS--5.2%
3,506,550 Mellon Bank Corporation 185,847,150
340,000 River Bank America (a) 2,975,000
--------------
188,822,150
</TABLE>
8
<PAGE>
THE OAKMARK FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
Oakmark Fund
<TABLE>
<CAPTION>
Shares Held Common Stocks Market Value
- -------------------------------------------------------------------------------
INSURANCE--6.2%
<C> <S> <C>
2,947,000 Torchmark Corporation $ 139,614,125
953,200 Old Republic International 33,481,150
984,700 American Financial Group, Inc. 32,002,750
501,300 Acordia, Inc. 14,851,013
221,200 MAIC Holdings, Inc. (a) 7,023,100
85,000 Meridian Insurance Group 1,211,250
--------------
228,183,388
OTHER FINANCIAL--8.8%
3,358,000 First USA, Inc. 175,035,750
2,194,900 AMBAC Inc. 105,080,838
620,000 Capital One Financial Corporation 16,662,500
204,400 Fund American Enterprises Holdings, Inc. (a) 15,738,800
102,200 White River Corporation (a) 3,730,300
330,000 Duff & Phelps Corporation 2,268,750
33,000 Duff & Phelps Corporation Preferred Con. Series A
Exchangable 845,625
--------------
319,362,563
BROADCASTING & PUBLISHING--14%
6,894,600 US West Media Group 145,648,424
2,149,400 Knight-Ridder, Inc. 142,666,426
6,729,179 Tele-Communications, Inc. Class A (a) 142,153,906
1,432,294 TCI Communications, Inc. (a) 39,209,048
500,000 Gannett 31,750,000
500,000 Adelphia Communications Corp. (a) 3,750,000
200,000 Jones Intercable, Inc. Class A (a) 2,475,000
--------------
507,652,804
COMPUTER SYSTEMS--.6%
999,000 Control Data Systems, Inc. (a) 17,357,625
210,000 InaCom Corporation (a) 3,255,000
--------------
20,612,625
PHARMACEUTICAL--2.7%
975,000 American Home Products Corporation 99,450,000
MANAGED CARE SERVICES--2.7%
1,740,000 Foundation Health Corporation (a) 75,255,000
420,000 Physicians Health Services, Inc. (a) 15,120,000
500,000 Laboratory Corporation of America Holdings 4,187,500
270,000 Right CHOICE Managed Care, Inc. (a) 3,948,750
--------------
98,511,250
MEDICAL PRODUCTS--1.6%
1,297,800 Sybron Corporation (a) 31,471,650
550,000 Spacelabs Medical, Inc. (a) 14,850,000
303,000 St. Jude Medical, Inc. (a) 13,369,875
--------------
59,691,525
AEROSPACE & DEFENSE--7.0%
2,351,750 Lockheed Martin Corporation 177,263,156
610,000 McDonnell Douglas Corporation 54,290,000
779,600 Logicon, Inc. 21,341,550
--------------
252,894,706
</TABLE>
9
<PAGE>
THE OAKMARK FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
Oakmark Fund
<TABLE>
<CAPTION>
Shares Held Common Stocks Market Value
- ------------------------------------------------------------------------
FURNITURE & TEXTILES--0%
<C> <S> <C>
363,000 Forstmann & Company, Inc. (a) $ 113,438
MACHINERY AND METAL PROCESSING--.1%
237,500 Encore Wire Corporation (a) 2,404,688
OTHER INDUSTRIAL GOODS & SERVICES--5.2%
1,999,700 The Geon Company 55,991,600
508,000 Great Lakes Chemical Corporation 37,909,500
1,054,100 James River Corporation 27,670,125
426,000 Bandag, Incorporated Class A 21,619,500
550,000 OM Group, Inc. 18,150,000
880,400 SPX Corporation 12,985,900
190,000 USG Corp. (a) 5,652,500
170,000 UCAR International Inc. (a) 5,291,250
182,600 Amtrol Inc. 3,012,900
60,200 Exide Corporation 1,715,700
50,000 Griffon Corporation (a) 462,500
--------------
190,461,475
COMMERCIAL REAL ESTATE--.9%
2,190,800 Host Marriott Corporation (a) 25,194,200
585,700 Catellus Development Corporation (a) 4,246,325
333,080 Host Marriott Services Corporation (a) 2,123,385
--------------
31,563,910
FOREIGN SECURITIES--6.0%
2,650,000 DeBeers Consolidated Mines Limited ADR (b) 90,431,250
3,276,500 YPF Sociedad Anonima (b) 74,130,813
888,200 Telefonos de Mexico, S.A. de C.V. (b) 30,087,775
547,700 EVC International NV 15,428,169
697,500 Scitex Corporation Limited 9,765,000
--------------
219,843,007
TOTAL COMMON STOCKS 3,303,116,602
</TABLE>
COMMERCIAL PAPER--9.2%
<TABLE>
<S> <C>
American Express Credit Corp., 5.45% - 5.70% due 02/01/96 -
02/13/96 $ 45,000,000
Ford Motor Credit Corp., 5.36% - 5.58% due 02/01/96 - 03/08/96 171,000,000
General Electric Capital Corp., 5.38% - 5.70% due 02/02/96 -
03/07/96 120,000,000
--------------
TOTAL COMMERCIAL PAPER 336,000,000
--------------
Total Investments--100% 3,639,116,602
Other liabilities, less other assets--0% (1,781,080)
--------------
TOTAL NET ASSETS--100% $3,637,335,522
==============
</TABLE>
- ----------
Notes:
(a) Non-income producing security.
(b) Represents an American Depositary Receipt.
For the fund's fiscal year ended October 31, 1995, the portfolio turnover was
18% and the fund's expense ratio was 1.17%.
10
<PAGE>
Small Cap
THE OAKMARK SMALL CAP FUND
RESULTS FROM NOVEMBER 1, 1995 (INCEPTION) THRU JANUARY 31, 1996*
<TABLE>
<S> <C>
The Oakmark Small Cap Fund................................................. 1.8%
Lipper Small Co. Growth.................................................... 4.0%
Russell 2000............................................................... 6.5%
S&P 600.................................................................... 5.2%
</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
I am pleased to have the opportunity to address you, the Fund's owners. In
this report, I will explain our investment philosophy, the universe of
securities in which we invest, and describe some of the holdings of the Fund.
INVESTMENT PHILOSOPHY
For those of you that are familiar with The Oakmark Family of Funds, what I
have to say about our investment philosophy will be extremely familiar; for
those of you who are not familiar with The Oakmark Funds, I hope to enlighten
you. The Oakmark Small Cap Fund uses the same value-oriented investment
philosophy that Harris Associates has employed for over twenty years. The
philosophy is intellectually coherent and has served our clients well.
The primary tenet of our investment philosophy is to invest in securities
that are selling at a significant discount to their underlying value. We define
underlying value, or business value, as what a rational business person would
pay to own the entire business. In our effort to find securities that meet this
criterion, there are four important factors that shape our investment
perspective:
. We are long-term investors. We view investing not as a sprint but as a
marathon. Our investment horizon is long because the businesses in which
we invest do not produce faddish results: they build value through the
goods or services they produce over the long term.
. We are bottom-up, not top-down investors. We do not make forecasts of
the stock market, the economy, or interest rates. We research and
evaluate every security in which we invest on its own merit.
. We invest with owner-oriented managers. We look for management that has
a direct stake in the business and whose incentives are tied to growing
the value of the business.
11
<PAGE>
Small Cap
. We are conscious of the costs of investing. Trading has its costs in the
form of commissions, capital gains taxes and price impacts. The
portfolio will be adequately diversified, but not over-diversified.
In summary, we seek to invest in undervalued securities of companies that
have excellent long-term prospects with owner-oriented managers. In future
quarterlies, I will refer to these basic tenets when discussing the
portfolio's investments.
THE SMALL CAP INVESTMENT UNIVERSE
What is the Small Cap Investment universe? This is a question that is open
to interpretation and for which there is no exact definition. Your fund does
not hold household names; they are orphans on Wall Street. They may be
unknown, unloved, and underfollowed. Most important, they are undervalued and
present excellent investment opportunities.
I am often asked to quantify the Small Cap universe in terms of market
capitalization. Market capitalization is defined as the number of shares
outstanding of a company's stock multiplied by the market price. As a
reference point, it is worth looking at the market indices that most closely
measure the investment universe from which your fund invests. These indices
are the Russell 2000 and the S&P Small Cap 600. Within these indices there are
companies whose market capitalization range from less than $50 million to
greater than $1 billion.
The companies in our portfolio have an average market capitalization of
about $300 million. Since market capitalization is a function of share price,
it is in our best interest to see the indices' market capitalization grow, and
your Fund with it, hopefully at a faster rate than the indices.
THE HOLDINGS
The holdings of your Fund are an eclectic collection of niche producers of
goods and services.
Our largest holding is Amerin Corporation, a provider of private mortgage
insurance. The company was formed by experienced industry executives who, with
their own capital and help from others, were able to break through what was
once thought to be oligolpolistic barriers of entry into the industry. Today,
through their entrepreneurial leadership, they have garnered a 6% market share
and are reshaping the distribution system of the industry.
12
<PAGE>
Small Cap
Another significant holding is Goodmark Foods. Goodmark products are almost
unavoidable to anyone who ventures to the checkout line of a convenience store.
They are the producer of "Slim Jims" and beef jerky. You may be surprised to
know that meat snacks are one of the fastest-growing items among snack foods.
Management purchased the company almost fifteen years ago from General Mills in
an LBO, and owns 35% of the company.
Another unique holding in your Fund is Matthews International, which is the
largest manufacturer of a product none of us want to use for a long, long time:
cast bronze memorials. The company, which is almost entirely employee-owned,
also provides printing and graphics products and services. We were able to
purchase the shares of Matthews International because several retirees made
their stock available to us.
Again, welcome to The Oakmark Small Cap Fund. I am very excited about our
investments and look forward to our next quarterly report. As shareholders, you
should know that the vast majority of my investable assets are in the Fund. In
closing, I would like to thank everyone involved, including our shareholders,
for helping to launch the Fund.
STEVEN J. REID
Portfolio Manager
[email protected]
February 24, 1996
13
<PAGE>
THE OAKMARK SMALL CAP FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996
Small Cap
<TABLE>
<CAPTION>
Shares Market
Held Common Stocks Value
- ----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--93.4%
FOOD & BEVERAGE--7.1%
50,000 GoodMark Foods, Inc. $ 818,750
40,000 J.M. Smucker Company 750,000
25,000 Eskimo Pie Corporation 456,250
-----------
2,025,000
RETAIL--5.0%
44,000 Carson Pirie Scott & Co. (a) 786,500
60,000 Cole National Corporation (a) 645,000
-----------
1,431,500
OTHER CONSUMER GOODS & SERVICES--7.4%
15,000 First Brands Corporation 740,625
50,000 Justin Industries, Inc. 543,750
30,000 JUNO Lighting Inc. 487,500
30,000 Arctco Inc. 333,750
-----------
2,105,625
BANKS--12.8%
40,000 Harbor Federal Savings Bank 990,000
40,000 Northwest Savings Bank 935,000
45,000 Peoples Bank of Bridgeport Conn 894,375
35,500 Pocahontas Federal Savings & Loan Association 568,000
18,000 Savings Bank of Finger Lakes 297,000
-----------
3,684,375
INSURANCE--9.9%
54,200 Amerin Guaranty Corporation 1,402,425
40,000 CapMAC Holdings Inc. 910,000
40,000 Life Partners Group, Inc. 525,000
-----------
2,837,425
OTHER FINANCIAL--1.8%
34,000 Duff & Phelps Credit Rating Co. 522,750
BROADCASTING & PUBLISHING--8.7%
40,000 Big Flower Press Holdings, Inc. 600,000
24,000 Lee Enterprises, Incorporated 501,000
40,000 Jones Intercable, Inc. (a) 495,000
105,000 Graff Pay-Per-View Inc. 472,500
45,000 Granite Broadcasting Corporation 430,313
-----------
2,498,813
MANAGED CARE SERVICES--1.6%
50,000 Healthcare Services Group, Inc. 468,750
</TABLE>
14
<PAGE>
THE OAKMARK SMALL CAP FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
Small Cap
<TABLE>
<CAPTION>
Shares Market
Held Common Stocks Value
- ---------------------------------------------------------------------------
<C> <S> <C>
MACHINERY AND METAL PROCESSING--14.8%
36,000 Kysor Industrial Corporation $ 873,000
50,000 The Carbide/Graphite Group, Inc. 800,000
40,000 Matthews International Corporation 860,000
100,000 Sudbury, Inc. 812,500
50,000 Northwest Pipe Company 575,000
35,000 Stimsonite Corporation 319,375
-----------
4,239,875
OTHER INDUSTRIAL GOODS & SERVICES--19.2%
70,700 SPX Corporation 1,042,825
50,000 Amtrol Inc. 825,000
20,000 Fisher Scientific International Inc. 705,000
60,000 Rexene Corporation 637,500
100,000 Dorsey Trailers, Inc. 525,000
50,000 Griffon Corporation (a) 462,500
40,000 Barefoot Inc. 450,000
100,000 Repap Enterprises Incorporated 443,750
35,000 Offshore Logistics, Inc. 437,500
-----------
5,529,075
COMMERCIAL REAL ESTATE--2.0%
80,000 Catellus Development Corporation (a) 580,000
DIVERSIFIED CONGLOMERATES--3.1%
50,000 U.S. Industries, Inc. 900,000
FIXED INCOME--2.9%
CORPORATE BONDS
3,000,000 Harrah's Jazz Bonds 14.25% 11/15/2001 832,500
TOTAL CORPORATE BONDS 832,500
===========
SHORT TERM INVESTMENTS
Principal
Value Repurchase Agreement
- ---------------------------------------------------------------------------
1,533,000 State Street Bank Repurchase Agreement, 5.50% Due
02/01/1996 (Collateralized by US Treasury
Obligations) 1,533,000
TOTAL SHORT TERM--5.3% 1,533,000
Total Investments--101.6% 29,188,688
Other liabilities, less other assets--(1.6%) (463,438)
TOTAL NET ASSETS--100% $28,725,250
===========
</TABLE>
- ----------
Notes:
(a)Non-income producing security.
15
<PAGE>
Balanced
THE OAKMARK BALANCED FUND
RESULTS FROM NOVEMBER 1, 1995 (INCEPTION) THRU JANUARY 31, 1996*
<TABLE>
<S> <C>
The Oakmark Balanced Fund................................................. 2.9%
Lipper Balanced Fund Comp................................................. 6.4%
Value Line................................................................ 5.4%
S&P 500................................................................... 10.0%
</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 Value Line index is an unweighted average of more
than 1,000 stocks. 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
Greetings from The Oakmark Balanced Fund! The goal for The Balanced Fund is
to produce attractive rates of return with attention to preservation of
capital and current income.
Our investment philosophy is based on the simple observation that purchasing
something for less than it is worth is usually a good thing to do. It is even
better when that something is actually a business where people are working
hard to make the enterprise value grow. We do not put much faith in
prognostications about the future, so we will only pay for what we can measure
right now. And, we place great importance in the attitude of corporate
managers toward their responsibilities. We invest only where we are
comfortable that management acts as if their shareholders are their partners.
My colleague Robert Sanborn of The Oakmark Fund has discussed our corporate
investment philosophy in detail in previous shareholder letters. The Balanced
Fund adheres to the same philosophy. (In fact, 90% of the equities in The
Balanced Fund are also held in The Oakmark Fund or The Oakmark Small Cap
Fund.) Rather than elaborate on philosophy, it is important that this
inaugural report describe our concept of a balanced fund.
1) A balanced fund is an integrated unit. In The Oakmark Balanced Fund we
blend together different types of assets to achieve your investment goals.
Often investors understand balanced portfolios to be an aggregation of
independent segments. We disagree. The component parts of The Oakmark Balanced
Fund should work together like the sections of a finely tuned orchestra.
2) The stocks we buy affect our choices of fixed income holdings. Nothing is
done in a vacuum. If the Fund's allocation to equities is high, we will orient
the fixed income allocation to Treasury notes. Each security in the Fund
competes with all other holdings.
3) Our ability to find attractive investment opportunities drives the Fund's
asset allocation. Our investing process moves from the bottom up. If we find
good stock ideas to be plentiful, the Fund's allocation to
16
<PAGE>
Balanced
equities will approach the fully invested position of 65%. Or, if we determine
that corporate bonds offer compelling rates of return, we will emphasize that
sector. We do, however, intend to keep at least 25% of the portfolio invested
in US Treasury issues.
4) We do not equate volatility with risk. The academic community describes
risk by measuring how much the price of a security fluctuates--both down and
up. I think of risk as the probability of losing money in an investment. My
focus is to minimize the Fund's downside risk while positioning the portfolio
to capture upside volatility.
CURRENT PORTFOLIO
Clients often ask us our opinions concerning politics, the economy, and other
"big picture" items. Harris Associates investment personnel are knowledgeable
in these areas, but we prefer to talk about securities. I expect to review
interesting issues in the portfolio as a regular feature of these reports.
Your portfolio betrays some of the biases of the portfolio manager. Of the
twenty companies which have stocks represented in the Fund, three are
headquartered in Pittsburgh, my birthplace. Amsco International, which makes
sterilizing equipment for hospitals, announced an agreement to merge with
Steris Corp. soon after we purchased our holding. Heinz is an above average
company with strong growth prospects but only an average stock market
valuation. Mellon Bank is attractive because the market prices the stock like
other regional banks even though a large portion of the company's earnings
derive from investment management activities.
The equity portfolio has a large commitment to the media industry. This does
not merely reflect the fact that I analyzed media stocks for many years. We
believe that issues in the newspaper and cable TV industries are significantly
undervalued. Many newspaper company stocks have only recently exceeded their
1987 highs even though their earnings have shown solid growth. As well, cable
TV companies have suffered the impact of unfavorable regulation for the last
two years; recent events in Washington suggest a trend improvement.
We are pleased that the market, despite its elevated level, continues to
offer the opportunity to buy shares of good businesses at good prices. This is
particularly important to me because my wife and I are the Fund's largest
shareholders. (At Harris Associates we believe in eating our own cooking.)
Feel free to write or E-mail me with your questions or comments. Welcome to
the Fund.
CLYDE S. MCGREGOR
Portfolio Manager
[email protected]
March 11, 1996
17
<PAGE>
THE OAKMARK BALANCED FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996
Balanced
<TABLE>
<CAPTION>
Number of Shares or Principal
Amount Market Value
- ------------------------------------------------
EQUITY & EQUIVALENTS--52.2%
FOOD & BEVERAGE--3.4%
<C> <S> <C>
7,650 H.J. Heinz Company $ 262,968
RETAIL--2.7%
Federated Department
Stores, Inc. Convertible
210,000 5% 10/1/03 208,950
OTHER CONSUMER GOODS AND SERVICES--16.1%
16,800 JUNO Lighting Inc. 273,000
10,800 Promus Hotel Corporation 270,000
6,900 The Black & Decker
Corporation 233,737
19,000 Arctco Inc. 211,375
2,900 The Goodyear Tire &
Rubber Company 138,838
2,500 Polaroid 112,188
----------
1,239,138
BANKS--3.3%
4,800 Mellon Bank Corporation 254,400
OTHER FINANCIAL--2.7%
4,000 First USA, Inc. 208,500
BROADCASTING AND PUBLISHING--11.0%
12,600 US West Media Group 266,175
3,700 Knight-Ridder, Inc. 245,588
9,600 Lee Enterprises,
Incorporated 200,400
4,600 Cablevision Systems
Corporation Convertible
Preferred 130,525
----------
842,688
MEDICAL PRODUCTS--2.9%
15,600 Amsco International,
Inc. 222,300
AEROSPACE & DEFENSE--3.2%
2,800 McDonnell Douglas
Corporation 249,200
OTHER INDUSTRIAL GOODS AND SERVICES-- 6.9%
13,300 US Industries, Inc. 239,400
7,800 The Geon Company 218,400
2,500 Exide Corporation 71,250
----------
529,050
TOTAL EQUITY &
EQUIVALENTS 4,017,193
FIXED INCOME--33.2%
PREFERRED STOCKS--4.0%
2,900 Tele-Communications,
Inc. Preferred Jr. Cl B
6% 204,450
4,010 Everen Capital
Corporation Preferred
Series A 99,749
----------
304,199
</TABLE>
18
<PAGE>
THE OAKMARK BALANCED FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
Balanced
<TABLE>
<CAPTION>
Number of Shares or Principal Amount Market Value
- --------------------------------------------------------
CORPORATE BONDS--5.4%
<C> <S> <C>
150,000 Midland Funding Corp. 11, 11.75%
due 7/23/05 $ 156,375
100,000 The Vons Companies, Inc. 9.625%
4/1/02 106,250
100,000 Coltec Industries, Inc. 9.75%
due 4/1/00 103,500
190,000 Harrah's Jazz 14.25%
11/15/01 52,725
----------
418,851
U.S. TREASURIES--23.8%
600,000 US Treasury Note, 6.0%
due 10/15/99 617,358
600,000 US Treasury Note, 6.125%
due 5/31/97 609,012
600,000 US Treasury Note, 5.25%
due 7/31/98 603,342
----------
1,829,712
TOTAL FIXED INCOME $2,552,762
REPURCHASE AGREEMENTS--13.5%
State Street Bank Repurchase Agreement,
5.5% due 2/1/96 1,035,000
(Collateralized by US Treasury Obliga-
tions)
TOTAL REPURCHASE AGREEMENTS 1,035,000
TOTAL INVESTMENTS--98.9% 7,604,955
ASSETS, LESS OTHER LIABILITIES--1.1% 80,985
----------
TOTAL NET ASSETS--100% $7,685,940
==========
</TABLE>
19
<PAGE>
International
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL FUND FROM ITS
INCEPTION (9/30/92) TO PRESENT (1/31/96)
AS COMPARED TO THE MORGAN STANLEY WORLD EX U.S. INDEX.
[GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
1/31/96 NAV $13.24
<TABLE>
<CAPTION>
Average Annual Total Return*
Through 1/31/96
----------------------------------
Total Return Total Return From Inception
Last 3 mos. Last 6 mos. From 1/31/95 9/30/92
------------ ------------ -------------- ---------------
<S> <C> <C> <C> <C>
OAKMARK INTERNATIONAL 10.8% 4.8% 18.6% 15.7%
Morgan Stanley World ex
U.S.* 7.5% 2.7% 16.7% 13.6%
Morgan Stanley EAFE* 7.4% 2.5% 16.1% 13.7%
Lipper Analytical
International
Fund Average* 5.7% 3.5% 17.7% 13.5%
</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 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:
We are pleased to report that the Fund has started 1996 with a strong first
fiscal quarter return of +10.8%:
. This return compares favorably to its peer group and the respective
country indices.
. More importantly, your Fund's performance since inception (9/30/92) rates
well against all benchmarks, RETURNING OVER 62% VERSUS THE LIPPER AVERAGE
OF 52% AND AN EAFE RETURN OF 53%.
20
<PAGE>
International
As always, we encourage shareholder inquiries and we would like to share our
responses to some of the most frequently asked questions.
ANSWERS TO YOUR MOST FREQUENTLY ASKED QUESTIONS
1. WHY DID THE FUND RETURN 8.5% LAST YEAR WHEN MOST DOMESTIC FUNDS RETURNED
BETWEEN 25-40%?
Consider the most important performance period--our "since inception" return;
looking over the longer term, you can see that our Fund is doing very well.
Last year was a banner year for the US market, while most foreign markets
significantly underperformed the US market. Remember, our mandate is to invest
outside the US. More importantly, we are confident of the future--and your
future returns--given the attractiveness of our current portfolio in terms of
value.
2. WHAT WILL HAPPEN IN 1997 WHEN HONG KONG'S SOVEREIGNTY REVERTS TO CHINA?
Although theories abound, here's ours:
THERE WILL BE GREATER INTERACTION BETWEEN HONG KONG AND CHINA ON EVERY
CONCEIVABLE FRONT. From a positive perspective, this will mean:
. Hong Kong will be the center of economic attention for China's most
vibrant area: the South.
. Hong Kong will benefit from more opportunities for business, trade, and
economic activity.
From a negative perspective, this will mean:
. Hong Kong's society, one of the world's freest from an economic
perspective, will find freedoms muted--AT LEAST TEMPORARILY WHILE CHINA
ASSESSES ITS BEHAVIOR TOWARDS AND RELATIONSHIP TO THIS AREA.
From a long-term perspective, we believe China's sovereignty in Hong Kong
will mean that expected short-term anxieties will translate into long-term
gains if private property rights are respected.
3. WITH ALL OF THE NEW COMPETITION IN THE MEXICAN TELECOMMUNICATIONS MARKET
ON ITS WAY, IS TELMEX STILL AN ATTRACTIVE STOCK?
Despite regional volatility and new competition, Telmex remains an excellent
investment. The company has prepared itself to meet future challenges by
spending billions of dollars on new equipment over the last five years as well
as creating alliances with other telecom companies. Given the growth potential
of the market, there is room for other players.
Most importantly, the stock is cheap and the company is well-managed.
Management has used the massive free cash flow it is generating to benefit
shareholders.
21
<PAGE>
International
4. WHY SO LITTLE IN THE JAPANESE MARKET?
We continue to spend a good deal of time searching for Japanese companies
which meet our criteria, but it remains difficult. The majority of Japanese
companies appear either systematically overvalued or not managed for the
benefit of shareholders. Most have a miserable record of allocating resources
properly to build value for shareholders.
One company which does meet both our quantitative and qualitative criteria
is Kyocera, a manufacturer of ceramic components and electronic parts.
5. WHAT IS THE FUND'S LARGEST HOLDING AND WHY?
Just over 6% of the Fund's assets are invested in Cordiant Plc. Cordiant is
the parent company of two of the world's largest global advertising networks:
Saatchi and Saatchi Advertising Worldwide and Bates Advertising Worldwide.
Though the company has gone through some turmoil since the board and its
shareholders dismissed its founders, we're confident the stock will begin to
move up strongly; this growth will reflect management's well-focused efforts
to fortify the corporation by:
. hiring new and talented personnel.
. refinancing so that the corporation is now debt free on a net basis.
. reinforcing a new spirit of cooperation that has resulted in new
business.
Next quarter, we'll return to the "Traveler's Log."
DAVID HERRO
MICHAEL WELSH
Portfolio Managers
[email protected]
February 26, 1996
22
<PAGE>
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996
International
<TABLE>
<CAPTION>
Number of Shares
or Principal Amount Description Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--94.8%
CONSUMER NON-DURABLES--5.6%
85,828,000 Yue Yuen Industrial
(Holdings) Limited (Hong Athletic Footwear
Kong) Manufacturing $ 21,756,148
83,733 Chargeurs S.A. (France) Entertainment & Wool
Production Holding
Company 19,231,845
120,825 Adidas AG (Germany) Athletic Footwear &
Sportswear
Manufacturing 6,899,647
------------
47,887,640
FOOD--4.8%
11,750,700 Lion Nathan Limited (New
Zealand) New Zealand Brewer 27,601,254
4,939,000 Leong Hup Holdings Berhad
(Malaysia) Major Poultry Operation
in Malaysia and KFC
Operator 9,219,518
36,970 Lotte Chilsong Beverage
(Korea) Manufacturer of Soft
Drinks, Juices, & Sport
Drinks 4,312,578
------------
41,133,350
HOUSEHOLD PRODUCTS--2.3%
1,715,853 Reckitt & Colman PLC (Great Household Cleaners and
Britain) Air Fresheners 17,953,890
1,155,600 London International Group
PLC (Great Britain) Latex Products 2,163,587
------------
20,117,477
RETAIL--4.6%
19,821,000 Giordano Holdings Limited
(Hong Kong) East Asian Clothing
Retailer & Manufacturer 19,097,598
462,900 Macintosh (Netherlands) Non-Food Specialty
Retailer 11,374,828
16,702,189 Alparagatas Sociedad
Anonima Industrial Y
Comercial (Argentina) Textiles and Footwear 9,353,226
------------
39,825,652
TELECOMMUNICATIONS--6.8%
940,100 Telefonos de Mexico, S.A.
de C.V.
(Mexico) (b) Telephone 31,845,888
835,000 Telefonica (Spain) Telephone 12,243,207
908,500 Call Net Enterprises, Inc.
Common (Canada)(a) Telecommunications 8,098,032
722,500 Call Net Enterprises, Inc.
Class B (Canada)(a) Telecommunications 6,505,811
------------
58,692,938
</TABLE>
23
<PAGE>
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
International
<TABLE>
<CAPTION>
Number of Shares
or Principal Amount Description Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C>
TRANSPORTATION--6.2%
1,829,000 AB Volvo (Sweden) Automobiles and Trucks $ 34,221,359
3,634,637 CIADEA S.A. (Argentina)(a)
Assembler and
Distributor of
Automobiles 19,081,846
------------
53,303,205
OIL AND NATURAL GAS--3.4%
1,281,200 YPF Sociedad Anonima
(Argentina) (b) Exploration, Production
and Marketing 28,987,150
ELECTRIC--2.2%
3,443,230 Union Electrica Fenosa S.A.
(Spain) Spanish Electric Utility 18,850,100
BANKS--11.2%
1,680,480 Banco Espirito Santo E
Comercial de Lisboa, S.A.
(Portugal) Portuguese Bank 25,442,872
1,216,850 Svenska Handelsbanken
(Sweden) Largest Swedish Bank 22,942,911
113,793 Banco Popular Espanol Fourth-Largest Spanish
(Spain) Bank 20,357,422
1,984,826 Banco de Galicia Y Buenos
Aires (Argentina) Argentinian Bank 12,802,128
30,685,000 Grupo Financiero Bancomer,
S.A. De C.V. (GFB)(a)-- Large Mexican Financial
Series B (Mexico) Group 12,728,593
6,129,630 Grupo Financiero Bancomer,
S.A. De C.V. (GFB)(a)-- Large Mexican Financial
Series L (Mexico) Group 2,295,000
------------
96,568,926
INVESTMENT COMPANIES--.6%
6,000,000 The Central European Growth
Fund PLC (Great Britain)
Diversified, Closed-End
Fund Investing in
Central Europe 5,027,933
COMPUTER SYSTEMS--2.2%
1,334,500 Scitex Corporation Limited
(Israel) (b) Color Pre-Press Systems 18,683,000
MARKETING SERVICES--6.7%
35,708,656 Cordiant PLC (Great Global Advertising
Britain)(a) Agency 57,690,264
</TABLE>
24
<PAGE>
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
International
<TABLE>
<CAPTION>
Number of Shares
or Principal Amount Description Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C>
AEROSPACE--7.6%
7,848,737 Rolls-Royce Public Limited
Company (Great Britain) Jet Engines $ 24,175,485
6,748,000 Hong Kong Aircraft
Engineering Company
Limited (Hong Kong) Commercial Aircraft
Overhaul and
Maintenance 21,032,410
1,529,666 British Aerospace Public
Limited Company (Great
Britain) Defense Products 20,601,873
------------
65,809,768
COMPONENTS--2.0%
6,685,000 Varitronix International
Holdings Limited (Hong
Kong) Liquid Crystal Displays 13,573,692
35,000 Kyocera Corporation (Japan) Electronic Components 2,485,730
1,840,000 Chen Hsong Holdings Limited
(Hong Kong) Plastic Injection
Mouldings Machines 1,070,847
------------
17,130,269
FORESTRY PRODUCTS--5.1%
2,473,600 Asia Pulp & Paper Company
Ltd (Indonesia)(a)
Paper & Packaging
Products in Asia 24,117,600
440,700 Mo och Domsjo AB (Sweden) Paper, Pulp, Timber 19,028,497
144,000 Empaques Ponderosa, S.A.
(Mexico)(a) Boxboard 362,667
------------
43,508,764
MACHINERY AND METAL PROCESSING--1.7%
223,298 Strafor Facom (France) Metal Processing, Office
Equipment, Mining Tools 13,308,487
7,880,000 Iochpe-Maxion (Brazil) Agricultural Machinery
and Automotive Parts 1,329,312
------------
14,637,799
MINING AND BUILDING MATERIALS--3.2%
9,780,923 Pioneer International Concrete Products,
(Australia) Aggregates 27,462,635
</TABLE>
25
<PAGE>
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
International
<TABLE>
<CAPTION>
Number of Shares
or Principal Amount Description Market Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
OTHER INDUSTRIAL GOODS AND SERVICES--12.9%
26,663,700 Usiminas (Brazil) Steel Production $ 30,531,994
2,520,000 Avesta Sheffield (Sweden) Stainless Steel 20,673,575
698,200 EVC International NV
(Netherlands) Western European PVC
manufacturer 19,667,606
90,699 ECCO S.A. (France) Temporary Services
Provider 15,761,252
109,000 Kone Corporation (Finland) Elevators 8,415,696
700,966 Tung-Ho Steel Enterprise
Corp. (Taiwan)(a) Major Taiwanese
Manufacturer of Steel
Bars and H-Beams 6,769,229
146,597 Groupe Legris Industries
(France) Europe's Leading Crane
Manufacturer 5,458,917
14,040,000 Lamex Holdings Limited
(Hong Kong) Hong Kong's Largest
Office Furniture
Supplier 4,312,485
------------
111,590,754
SHIPBUILDING--3.7%
1,040,110 Kvaerner (Norway) Shipbuilding and
Engineering 32,061,790
REAL ESTATE AND CONTRUCTION--2.0%
108,732 Hollandsche Beton Groep nv
(Netherlands) Construction 16,813,219
------------
TOTAL COMMON STOCKS $815,782,633
</TABLE>
<TABLE>
<S> <C>
SHORT TERM INVESTMENTS
State Street Bank Repurchase Agreement, 5.5% due 02/01/96
(Collateralized by U.S. Treasury Obligations) 20,771,000
Ford Motor Credit Corp., 5.41% - 5.42% due 02/01/96-02/05/96 14,000,000
TOTAL SHORT TERM--4.0% 34,771,000
TOTAL INVESTMENTS--98.8% $850,553,633
OTHER ASSETS--1.2%
OTHER ASSETS LESS OTHER LIABILITIES (c) 10,634,071
TOTAL NET ASSETS--100% $861,187,704
============
</TABLE>
- ----------
Notes:
(a) Non-income producing security.
(b) Represents an American Depositary Receipt.
(c) Includes portfolio and transaction hedges.
For the Fund's fiscal year ending October 31, 1995 the portfolio turnover was
27% and the Fund's expense ratio was 1.40%.
26
<PAGE>
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
COUNTRY DIVERSIFICATION--JANUARY 31, 1996
International
<TABLE>
<CAPTION>
% of Fund
Net
Country Assets
- ---------------------------------------------------------------
<S> <C>
ARGENTINA 8.2%
Alparagatas Sociedad Anonima Industrial Y Comercial
Banco de Galicia Y Buenos Aires
CIADEA S.A.
YPF Sociedad Anonima
AUSTRALIA 3.2%
Pioneer International
BRAZIL 3.7%
Iochpe-Maxion
Usiminas
CANADA 1.7%
Call Net Enterprises Inc. Class B
Call Net Enterprises Inc. Common
CENTRAL EUROPE 0.6%
The Central European Growth Fund PLC
FINLAND 1.0%
Kone Corporation
FRANCE 6.2%
Chargeurs S.A.
Ecco S.A.
Groupe Legris Industries
Strafor Facom
GERMANY 0.8%
Adidas AG
GREAT BRITAIN 14.2%
British Aerospace Public Limited Company
Cordiant PLC
London International Group PLC
Reckitt & Colman PLC
Rolls Royce Public Limited Company
HONG KONG 9.4%
Chen Hsong Holdings Limited
Giordano Holdings Limited
Hong Kong Aircraft Engineering Company Limited
Lamex Holdings Limited
Varitronix International Holdings Limited
Yue Yuen Industrial (Holdings) Limited
INDONESIA
Asia Pulp & Paper Company Ltd 2.8%
ISRAEL 2.2%
Scitex Corporation Limited
JAPAN 0.3%
Kyocera Corporation
</TABLE>
27
<PAGE>
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
COUNTRY DIVERSIFICATION--JANUARY 31, 1996
International
<TABLE>
<CAPTION>
% of Fund
Net
Country Assets
- -------------------------------------------------------------------
<S> <C>
KOREA
Lotte Chilsung Beverage 0.5%
MALAYSIA
Leong Hup Holdings Berhad 1.1%
MEXICO 5.5%
Empaques Ponderosa, S.A.
Grupo Financiero Bancomer, S.A. De C.V. (GFB)--Series B
Grupo Financiero Bancomer, S.A. De C.V. (GFB)--Series L
Telefonos de Mexico, S.A. de C.V.
NETHERLANDS 5.6%
EVC International NV
Hollandsche Beton Groep nv
Macintosh
NEW ZEALAND 3.2%
Lion Nathan Limited
NORWAY 3.7%
Kvaerner
PORTUGAL 3.0%
Banco Espirito Santo E Comercial de Lisboa, S.A.
SPAIN 6.0%
Banco Popular Espanol
Telefonica
Union Electrica Fenosa S.A.
SWEDEN 11.2%
Avesta Sheffield
Mo och Domsjo AB
Svenska Handelsbanken
AB Volvo
TAIWAN
Tung-Ho Steel Enterprise Corp. 0.8%
</TABLE>
28
<PAGE>
int'l emerging value
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
RESULTS FROM NOVEMBER 1, 1995 (INCEPTION) THRU JANUARY 31, 1996*
<TABLE>
<S> <C>
The Oakmark Int'l Emerging Value Fund...................................... 5.3%
Morgan Stanley World ex U.S................................................ 7.5%
Lipper Analytical International Fund Average............................... 5.7%
Lipper Emerging Market Fund Index.......................................... 8.2%
</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 Oakmark International Emerging Value Fund's inaugural report.
We are gratified by our appreciation of 5.35 percent and are even more enthused
about our Fund's long-term potential.
WHAT IS EMERGING VALUE?
And where is it? We buy emerging companies, not countries. The fund is not
an emerging markets fund; at quarter end roughly half of our positions were in
developed markets. The companies we buy are either small capitalization stocks
in developed markets or companies of any size in emerging markets.
Some companies we like are small but have strong competitive advantages.
Others are larger and well-established, but are emerging as their home
countries develop. Examples of both are:
. Asia Pulp and Paper of Indonesia supplies the fastest growing paper
market in the world.
. Cemig, a Brazilian utility, is exploiting the strong electricity demand
in its economically revitalized country.
. Israel-based Nice Systems produces leading-edge telephone recording
technology.
. The management of France's Fives-Lille is creating value by
restructuring and selling peripheral businesses.
The Emerging Value Fund offers us the opportunity to buy these companies--and
others offering similar values--and put them in a focused fund.
29
<PAGE>
int'l emerging value
We believe that these stocks are more inefficiently priced than larger or
more well-followed international stocks. We can buy our type of company at an
excessive discount to its true net worth. There is little or no brokerage firm
coverage of these companies because they do not trade in big volumes.
Brokerage firms can't make enough money trading the stocks to justify
analyzing them. They are off the beaten path or run by low-key managements
focused on making money and not courting international markets.
We are confident that the market will eventually recognize the economic
value of these companies, and the prices will rise.
BOTTOM LINE
We believe that the best way to profit from these opportunities is through
the disciplined, bottom-up value philosophy we use in the other Oakmark funds.
We look at a company's value as it evolves and compare it to the market price,
which we know will bounce and dance before finally reconciling with business
value.
So, with this new fund and our old philosophy, we head out to search for
emerging value. Our search will take us around the world to motorcycle plants
in India or chemical works in the desert of Israel. And, less exotically, our
search will take us to the crowded office buildings of Frankfort and Paris and
Tokyo. Wherever we go, we will search for companies not properly priced by the
market, buy them and watch as the value emerges.
DAVID HERRO
ADAM SCHOR
[email protected]
[email protected]
Portfolio Managers
February, 1996
30
<PAGE>
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
int'l emerging value
<TABLE>
<CAPTION>
Number of Market
Shares Description Value
- -------------------------------------------------------------------------------
COMMON STOCKS--93.4%
CONSUMER NON-DURABLES--3.0%
<C> <C> <S> <C>
550,000 PT Polysindo Eka Integrated Textile Manufacturer
Perkasa (Indonesia) $ 299,956
FOOD--6.4%
1,459,000 Grupo Herdez, SA de Manufacturer and Distributor of
CV (Mexico) Bottled and Canned Food 436,226
10,943 Soproni Sorgy AR RT Hungarian Brewer
(Hungary) 197,772
---------
633,998
HOUSEHOLD PRODUCTS--4.3%
1,000 WMF (Germany) Tableware and Kitchenware 214,981
11,250 N.V. Koninklijke Bathroom Products
Sphinx Gustavsberg
(Netherlands) 213,066
---------
428,047
OTHER CONSUMER GOODS & SERVICES--4.3%
155,000 Vardon PLC (Great Bingo Clubs
Britain) 273,819
92,417 Fyffes (Ireland) Distributor of Fresh Fruit,
Flowers and Produce in Europe 160,486
---------
434,305
PHARMACEUTICAL--2.2%
7,000 Egis Gygogyszergyar Hungarian Pharmaceutical Company
(Hungary) 217,016
TELECOMMUNICATIONS--2.7%
7,850 Telefonos de Mexico, Telephone
S.A. de C.V.
(Mexico) (b) 265,919
TRANSPORTATION--3.3%
62,750 CIADEA S.A. Assembler and Distributor of
(Argentina) Automobiles 329,438
OIL AND NATURAL GAS--4.9%
6,200 Geophysique (France) Oil Services Company 283,592
9,000 YPF Sociedad Anonima Exploration, Production and
(Argentina) (b) Marketing 203,625
---------
487,217
ELECTRIC--3.1%
12,500,000 Cemig (Brazil) Electric Utility 311,829
</TABLE>
31
<PAGE>
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
int'l emerging value
<TABLE>
<CAPTION>
Number of Market
Shares Description Value
- ------------------------------------------------------------------------------
OTHER FINANCIAL--2.8%
<C> <C> <S> <C>
171,000 C.E. Heath Insurance and Reinsurance
International Broker
Holdings Limited
(Australia) $ 282,729
BANKS--0.0%
8,800,000 Banco Nacional S.A. Brazilian Bank
(Brazil)* 0
COMPUTER SYSTEMS--5.7%
30,000 Nice Systems Ltd. Voice Logging Systems
(Israel) 311,250
410,000 Aztech (Singapore) Design and Produce Multimedia
Computing Products 255,618
----------
566,868
MARKETING SERVICES--3.7%
230,000 Cordiant PLC (Great Global Advertising Agency
Britain) 371,584
BROADCASTING & PUBLISHING--3.5%
16,200 Moffat Communications Owner and Operator of
Limited (Canada) Television Stations and Cable
Systems 185,658
374,000 Oriental Press Group Newspaper Publisher
Ltd. (Hong Kong) 163,246
----------
348,904
COMPONENTS--6.7%
11,800 Tower Semiconductor Semiconductors
Ltd. (Israel) 241,901
440,000 Barlo Group plc Manufacturer of Radiators and
(Ireland) Industrial Plastics 220,275
125,000 Pentex Schweizer Manufacturer and Marketer of
Circuits Limited Printed Circuit Boards
(Singapore) 210,461
----------
672,637
FORESTRY PRODUCTS--3.3%
34,000 Asia Pulp & Paper Paper & Packaging Products in
Company Ltd Asia 331,500
(Indonesia)
MACHINERY AND(METAL PROCESSING--6.4%
3,125 Groupe Fives-Lille Builder of Heavy Machinery
(France) 280,992
51,000 Steel & Tube Holdings Produces and Distributes Steel
Limited (New
Zealand) 257,437
576,000 Iochpe-Maxion Manufacturer of Auto Parts and
(Brazil) Farm Machinery 97,168
----------
635,597
MINING AND BUILDING MATERIALS--6.5%
39,100 Grupo Uralita (Spain) Manufacturers of Building
Products and Chemicals 353,642
7,050 Asia Cement Large Cement Manufacturer in
Manufacturing Co. Japan
(Korea) 292,684
----------
646,326
</TABLE>
- ----------
*On November 10, 1995, the Comissao de Valores Mobiliarios 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. To date, this matter has not been resolved. The shares held by
the Fund are valued at zero as determined by the pricing committee of the
Board of Trustees.
32
<PAGE>
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
int'l emerging value
<TABLE>
<CAPTION>
Number of Market
Shares Description Value
- ------------------------------------------------------------------------------
OTHER INDUSTRIAL GOODS AND SERVICES--13.5%
<C> <C> <S> <C>
157,400 Sanford Limited (New Owns and Manages Fisheries
Zealand) $ 354,886
11,500 EVC International NV Western European PVC
(Netherlands) manufacturer 323,944
71,000 Wattyl (Australia) Paint Company 293,476
745 SwissLog Holding AG Logistics Services
(Switzerland) 200,953
7,000 Fukuda Denshi Co., Medical Products Manufacturer
Ltd. (Japan) and Distributor 179,470
----------
1,352,729
PRODUCTION EQUIPMENT--5.6%
114,300 Danieli (Italy) Steel Mini-Mills Equipment 362,137
34,500 Powerscreen Manufacturer of Industrial
International PLC Equipment
(Great Britain) 198,988
----------
561,125
REAL ESTATE AND CONSTRUCTION--1.5%
2,200 Bau Holdings Construction
(Austria) 134,524
12,500 Christiani & Nielsen Structural and Civil
(Thailand) Engineering Contractor 12,949
9,679 Christiani & Nielsen Structural and Civil
Rights (Thailand) Engineering Contractor 6,207
----------
153,680
TOTAL COMMON STOCKS $9,331,404
SHORT TERM INVESTMENTS--8.2%
821,000 State Street
Repurchase
Agreement, 5.5% due
2/1/96
(Collateralized by
U.S. Treasury
Obligations) 821,000
TOTAL SHORT TERM INVESTMENTS 821,000
TOTAL INVESTMENTS--101.6% 10,152,404
OTHER LIABILITIES, LESS OTHER ASSETS--(1.6%) (c) (164,358)
TOTAL NET ASSETS--100% $9,988,046
==========
</TABLE>
- ----------
Notes:
(a) Non-income producing security.
(b) Represents an American Depositary Receipt.
(c) Includes portfolio and transaction hedges.
33
<PAGE>
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
int'l emerging value
<TABLE>
<CAPTION>
% of Fund
Net
Country Assets
- -----------------------------------------------------
<S> <C>
ARGENTINA 5.3%
CIADEA S.A.
YPF Sociedad Anonima
AUSTRALIA 5.8%
C.E. Heath International Holdings Limited
Wattyl
AUSTRIA 1.3%
Bau Holdings
BRAZIL 4.1%
Banco Nacional S.A.
Cemig
Iochpe-Maxion
CANADA 1.9%
Moffat Communications Limited
FRANCE 5.7%
Geophysique
Groupe Fives-Lille
GERMANY 2.2%
WMF
GREAT BRITAIN 8.5%
Cordiant PLC
Powerscreen International PLC
Vardon PLC
HONG KONG 1.6%
Oriental Press Group Ltd.
HUNGARY 4.2%
Egis Gyogyszergyar
Soproni Sorgyar AR RT
INDONESIA
Asia Pulp & Paper Company Ltd 6.3%
PT Polysindo Eka Perkasa
IRELAND 3.8%
Barlo Group plc
Fyffes
ISRAEL 5.5%
Nice Systems Ltd.
Tower Semiconductor Ltd.
ITALY 3.6%
Danieli
JAPAN 1.8%
Fukuda Denshi Co., Ltd.
</TABLE>
34
<PAGE>
THE OAKMARK INTERNATIONAL EMERGING VALUE FUND
SCHEDULE OF INVESTMENTS--JANUARY 31, 1996 (CONTINUED)
int'l emerging value
<TABLE>
<CAPTION>
% of Fund
Net
Country Assets
- -----------------------------------------------
<S> <C>
KOREA
Asia Cement Manufacturing Co. 2.9%
MEXICO 7.0%
Grupo Herdez, SA de CV
Telefonos de Mexico, S.A. de C.V.
NETHERLANDS 5.4%
EVC International NV
N.V. Koninklijke Sphinx Gustavsberg
NEW ZEALAND 6.1%
Sanford Limited
Steel & Tube Holdings Limited
SINGAPORE 4.7%
Aztech
Pentex-Schweizer
SPAIN 3.5%
Grupo Uralita
SWITZERLAND 2.0%
Swisslog Holding AG
THAILAND 0.2%
Christiani & Nielsen
Christiani & Nielsen Rights
</TABLE>
35
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
36
<PAGE>
THE OAKMARK FUNDS'
FIRST QUARTER REPORT
JANUARY 31, 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
Lauren B. Pitalis--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 & Co.
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 OF COMPANY)
Harris Associates L.P.
2 North LaSalle Street
Chicago, IL 60602
1-800-OAKMARK
