HARRIS ASSOCIATES INVESTMENT TRUST, 497, 1996-03-05

HARRIS ASSOCIATES INVESTMENT TRUST
497, 1996-03-05

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<PAGE>

[LOGO OF OAKMARK]

The Oakmark Fund

The Oakmark Small Cap Fund

The Oakmark Balanced Fund

The Oakmark International Fund

The Oakmark Int'l Emerging Value Fund

THE OAKMARK
FAMILY OF FUNDS

[LOGO OF The Oakmark Family of Funds]

--------
Prospectus
--------

March 1, 1996

MEMBER OF
================================
100% NO-LOAD MUTUAL FUND COUNCIL
================================

No-Load Funds Managed by

Harris Associates L.P.
<PAGE>

[OAKMARK FAMILY OF FUNDS LOGO]

CONTENTS

<TABLE>
<S> <C>
Highlights............................................................. 2
Shareholder Transaction Expenses....................................... 4
Annual Fund Operating Expenses......................................... 4
Financial Highlights................................................... 6
The Funds.............................................................. 7
How the Funds Invest................................................... 7
Investment Techniques.................................................. 11
Risk Factors........................................................... 14
Restrictions on the Funds' Investments................................. 17
How to Purchase Shares................................................. 18
How to Redeem Shares................................................... 20
Shareholder Services................................................... 24
Net Asset Value........................................................ 25
Distributions.......................................................... 26
Taxes.................................................................. 26
Management of the Funds................................................ 27
Trustees and Officers.................................................. 31
Performance Information................................................ 32
Other Information...................................................... 33
</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
either Fund, please call 1-800-GROWOAK (1-800-476-
9625).
<PAGE>

PROSPECTUS

MARCH 1, 1996

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INVESTMENT OBJECTIVE:

LONG-TERM CAPITAL APPRECIATION
THE OAKMARK FUND The Oakmark Fund invests

primarily in equity securities.
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE:

THE OAKMARK LONG-TERM CAPITAL APPRECIATION
SMALL CAP FUND The Oakmark Small Cap Fund invests primarily in
equity securities of companies with small market
capitalizations.

- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE:

THE OAKMARK HIGH CURRENT INCOME AND PRESERVATION AND GROWTH OF
BALANCED FUND CAPITAL
The Oakmark Balanced Fund invests in a diversified
portfolio of equity and fixed-income securities.

- -------------------------------------------------------------------------------

INVESTMENT OBJECTIVE:
THE OAKMARK LONG-TERM CAPITAL APPRECIATION
INTERNATIONAL FUND The Oakmark International Fund invests primarily
in equity securities of non-U.S. issuers.

- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE:

LONG-TERM CAPITAL APPRECIATION
THE OAKMARK The Oakmark International Emerging Value Fund
INTERNATIONAL EMERGING invests primarily in equity securities of non-U.S.
VALUE FUND issuers that have small market capitalizations or
that are located in emerging markets.

- -------------------------------------------------------------------------------
NO LOAD--NO SALES CHARGE
NO 12B-1 FEES
MINIMUM INVESTMENT TICKER SYMBOLS
Initial purchase--$1,000 Oakmark Fund--OAKMX
or $2,500 Small Cap Fund--OAKSX
(see "How to Purchase Balanced Fund--(not yet assigned)
Shares") International Fund--OAKIX
Subsequent investments--$100 International Emerging Value Fund--OAKEX
- -------------------------------------------------------------------------------
Each "Fund" is a series of Harris Associates Investment Trust. The Funds may
invest to a limited extent in high-yield, high-risk bonds and in other securi-
ties that entail certain risks. See "Risk Factors."
This prospectus contains information you should know before investing. Please
retain it for future reference. A Statement of Additional Information regard-
ing the Funds dated the date of this prospectus has been filed with the Secu-
rities and Exchange Commission and (together with any supplement to it) is in-
corporated by reference. The Statement of Additional Information may be ob-
tained at no charge by writing or telephoning the Trust at its address or tel-
ephone number shown inside the back cover.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>

HIGHLIGHTS

HARRIS ASSOCIATES INVESTMENT TRUST (the "Trust") provides investors an
opportunity to pool their money to achieve economies of scale and
diversification, and to take advantage of the professional investment
expertise of Harris Associates L.P. (the "Adviser").

The Trust currently issues shares in five series (collectively, the "Funds"
and generally, a "Fund"). Each series has distinct investment objectives and
policies, and a shareholder's interest is limited to the series in which he or
she owns shares. The five series are: The Oakmark Fund ("Oakmark Fund"), The
Oakmark Small Cap Fund ("Small Cap Fund"), The Oakmark Balanced Fund
("Balanced Fund"), The Oakmark International Fund ("International Fund") and
The Oakmark International Emerging Value Fund ("International Emerging Fund").
Each is a "no-load" fund, and there are no sales or 12b-1 charges. There are
no redemption fees except in the case of shares of Small Cap Fund or
International Emerging Fund held less than six months, for which there is a 2%
redemption fee payable to the Fund.

The Trust is designed for long-term investors, including those who wish to
use shares of one or more series as a funding vehicle for tax-deferred
retirement plans (including tax-qualified retirement plans and Individual
Retirement Account (IRA) plans), and not for investors who intend to liquidate
their investments after a short period of time. Only Balanced Fund is intended
to present a balanced investment program between growth and income.

The chief consideration in selecting equity securities for each Fund's
portfolio is the size of the discount of market price relative to the economic
value of the security as determined by the Adviser. The Trust's investment
philosophy is predicated on the belief that over time market price and value
converge and that investment in securities priced significantly below long-
term value presents the best opportunity to achieve each Fund's objective of
long-term capital appreciation.

OAKMARK FUND seeks long-term capital appreciation by investing primarily in
equity securities.

SMALL CAP FUND seeks long-term capital appreciation by investing primarily
in equity securities of companies with small market capitalizations.

BALANCED FUND seeks high current income and preservation and growth of
capital by investing in a diversified portfolio of equity and fixed-income
securities.

2
<PAGE>

INTERNATIONAL FUND seeks long-term capital appreciation by investing
primarily in equity securities of non-U.S. issuers.

INTERNATIONAL EMERGING FUND seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers that have small
market capitalizations or that are located in emerging markets.

RISKS

The Funds are intended for long-term investors who can accept fluctuations
in value and other risks associated with seeking the investment objectives of
the respective Funds through investments in the types of securities in which
the Funds may invest. You should understand and consider carefully the risks
involved in a Fund before investing in that Fund. See "Risk Factors" for a
more detailed discussion.

PURCHASES

The minimum initial investment for Small Cap Fund and International Emerging
Fund is $1,000 and for each other Fund is $2,500 ($1,000 for an IRA, UGMA or
UTMA); additional investments must be at least $100. Shares may be purchased
by check, by bank wire, by electronic transfer or by exchange. See "How to
Purchase Shares."

REDEMPTIONS

For information on redeeming Fund shares, including the special redemption
privileges, see "How to Redeem Shares."

NET ASSET VALUE

The purchase and redemption price of a Fund's shares is the net asset value
per share. The net asset value is determined as of the close of regular
session trading on the New York Stock Exchange. See "Net Asset Value."

ADVISER

Harris Associates L.P. (the "Adviser") provides management and investment
advisory services to the Funds. See "Management of the Funds."

3
<PAGE>

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
OAKMARK,
BALANCED AND SMALL CAP AND
INTERNATIONAL INT'L EMERGING
FUNDS FUNDS
------------- --------------
<S> <C> <C>
Commission to purchase shares (sales load)......... None None
Commission to reinvest dividends................... None None
Deferred sales load................................ None None
Redemption fees(a)................................. None 2%(b)
Fees to exchange shares(c)......................... None None
</TABLE>
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(a) If you request payment of redemption proceeds by wire, you must pay the
cost of the wire (currently $5).
(b) This fee, payable to the Fund, is imposed only if you redeem shares of the
Fund within six months after purchase (other than by reinvestment of
dividends or distributions), determined on a first-in, first-out basis.
(c) There is no fee for an exchange between the Funds. There is a charge of $5
for an exchange from any Fund into Oakmark Units as described under "How
to Purchase Shares--By Exchange."

ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)

The following table is intended to help you understand the costs and
expenses that an investor in the Funds may bear directly or indirectly. For a
more complete explanation of the fees and expenses borne by the Funds, see the
discussions under the prospectus headings "How to Purchase Shares" and
"Management of the Funds", as well as the Statement of Additional Information
incorporated by reference into this prospectus.

<TABLE>
<CAPTION>
SMALL INT'L
OAKMARK CAP BALANCED INT'L EMERGING
FUND FUND FUND FUND FUND
------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C>
Investment management fees (a)........... 1.00% 1.25% .75% 1.00% 1.25%
12b-1 fees............................... None None None None None
Other expenses (after reimbursements of
certain expenses)(b).................... .17 1.05 1.75 .40 1.25
---- ---- ---- ---- ----
Total Fund operating expenses (after
reimbursement of certain expenses)...... 1.17% 2.30% 2.50% 1.40% 2.50%
==== ==== ==== ==== ====
</TABLE>
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(a) See "Management of the Funds" for rates of fees at various asset levels.

(b) Because Small Cap, Balanced and International Emerging Funds are newly
organized, their percentages shown for "Other Expenses" are estimates and,
in the case of

4
<PAGE>

International Emerging Fund, have been computed giving effect to the
Adviser's agreement to limit the Fund's ordinary operating expenses. See
"Management of the Funds." Absent that limitation, the "Other Expenses" and
"Total Fund Operating Expenses" of International Emerging Fund would be
estimated to be 2.55% and 3.80%, respectively.

The following example illustrates the expenses that you would pay on a
$1,000 investment in each Fund over various time periods assuming (1) a 5%
annual rate of return, (2) the operating expense percentages listed in the
table above remain the same through each of the periods, (3) reinvestment of
all dividends and capital gain distributions, and (4) redemption at the end of
each time period.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Oakmark Fund.................................... $12 $37 $64 $142
Small Cap Fund.................................. 23 72 N/A N/A
Balanced Fund................................... 25 78 N/A N/A
International Fund.............................. 14 44 77 168
International Emerging Fund..................... 25 78 N/A N/A
</TABLE>

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.

5
<PAGE>

FINANCIAL HIGHLIGHTS

The tables below reflect the results of the operations of Oakmark Fund and
International Fund for a share outstanding throughout the periods shown and
have been audited by Arthur Andersen LLP, independent public accountants.
These tables should be read in conjunction with the Funds' financial
statements and notes thereto, which may be obtained from the Trust upon
request without charge. Small Cap Fund, Balanced Fund and International
Emerging Fund did not commence operations until November 1, 1995.

OAKMARK FUND

<TABLE>
<CAPTION>
PERIOD
YEAR ENDED OCTOBER 31, ENDED
------------------------------------ OCT. 31,
1995 1994 1993 1992 1991(A)
-------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 25.21 $ 24.18 $ 17.11 $12.10 $10.00
Income from investment
operations:
Net investment income
(loss)................ .30 .27 .17 (.03)(d) (.01)
Net gains or losses on
securities (both
realized and
unrealized)........... 4.66 1.76 7.15 5.04 2.11
-------- -------- -------- ------ ------
Total from investment
operations............ 4.96 2.03 7.32 5.01 2.10
Less distributions:
Dividends (from net
investment income)..... (.23) (.23) (.04) -- --
Distributions (from
capital gains)........ (1.47) (.77) (.21) -- --
-------- -------- -------- ------ ------
Total distributions.... (1.70) (1.00) (.25) -- --
-------- -------- -------- ------ ------
Net asset value, end of
period................. $ 28.47 $ 25.21 $ 24.18 $17.11 $12.10
======== ======== ======== ====== ======
Total return............ 21.55% 8.77% 43.21% 41.40% 87.10%*
Ratios/supplemental
data:
Net assets, end of
period
($ million)......... $2.827.1 $1,677.3 $1,107.0 $114.7 $ 4.8
Ratio of expenses to
average net assets.... 1.17% 1.22% 1.32% 1.70% 2.50%(b)*
Ratio of net income
(loss) to average net
assets................ 1.27% 1.19% .94% (.24)% (.66)%(c)*
Portfolio turnover rate. 18% 29% 18% 34% 0%
</TABLE>
- -----------
*Ratios for the period have been determined on an annualized basis.
(a) From August 5, 1991, the date on which 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.

6
<PAGE>

INTERNATIONAL FUND

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------- PERIOD ENDED
1995 1994 1993 OCT. 31, 1992(A)
------ -------- ------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $14.50 $ 14.09 $ 9.80 $10.00
Income from investment operations:
Net investment income............. .30 .21 .06 .26
Net gains or losses on securities
(both realized and unrealized)... (.77) .43 4.48 (.46)
------ -------- ------ ------
Total from investment operations.. (.47) .64 4.54 (.20)
Less distributions:
Dividends (from net investment
income).......................... -- (.08) (.25) --
Distributions (from capital
gains)........................... (1.06) (.15) -- --
------ -------- ------ ------
Total distributions............... (1.06) (.23) (.25) --
------ -------- ------ ------
Net asset value, end of period..... $12.97 $ 14.50 $14.09 $ 9.80
====== ======== ====== ======
Total return....................... (3.06)% 4.62% 47.49% (22.81)%*
Ratios/supplemental data:
Net assets, end of period ($
million)......................... $819.7 $1,286.0 $815.4 $ 23.5
Ratio of expenses to average net
assets........................... 1.40% 1.37% 1.26% 2.04%*
Ratio of net income (loss) to
Average net assets............... 1.40% 1.44% 1.55% 37.02%*
Portfolio turnover rate............ 27% 55% 21% 0%
</TABLE>
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*Ratios for the period have been determined on an annualized basis.
(a) From September 30, 1992, the date on which Fund shares were first offered
for sale to the public.

THE FUNDS

The mutual funds offered by this prospectus are OAKMARK FUND, SMALL CAP
FUND, BALANCED FUND, INTERNATIONAL FUND AND INTERNATIONAL EMERGING FUND. Each
of the Funds is a no-load, diversified "mutual fund." No Fund imposes any
commission or charge when shares are purchased, nor bears any 12b-1 charges.

The Funds are series of Harris Associates Investment Trust (the "Trust"),
which is authorized to issue shares in separate series. Each series is a
separate portfolio of securities and other assets, with its own investment
objective and policies.

Harris Associates L.P. (the "Adviser") provides investment advisory and
administrative services to the Funds.

HOW THE FUNDS INVEST

The chief consideration in the selection of equity securities for each Fund
is the size of the discount of market price relative to the economic value, or
underlying value, of the security as determined by the Adviser. The economic
or underlying value of a security generally represents the

7
<PAGE>

per share net present value of the issuer's estimated long-term cash flows.
The Funds may also employ the techniques described below under "Investment
Techniques."

OAKMARK FUND seeks long-term capital appreciation by investing primarily in
equity securities. Although income is considered in the selection of
securities, the Fund is not designed for investors whose primary investment
objective is income.

The Fund invests principally in securities of U.S. issuers. However, it may
invest up to 25% of its total assets (valued at the time of investment) in
securities of non-U.S. issuers, including foreign government obligations and
foreign equity and debt securities that are traded over-the-counter or on
foreign exchanges. There are no geographic limits on the Fund's foreign
investments, but the Fund does not expect to invest more than 5% of its assets
in securities in emerging markets. See "Risk Factors--International Investing"
below.

SMALL CAP FUND seeks long-term capital appreciation by investing primarily
in equity securities. Under normal market conditions, the Fund invests at
least 65% of its total assets, taken at market value, in companies whose
market capitalization is less than $1 billion ("small cap companies") at the
time of purchase. A company's market capitalization is the total market value
of its outstanding common stock. Although income is considered in the
selection of securities, the Fund is not designed for investors whose primary
investment objective is income.

BALANCED FUND seeks high current income and preservation and growth of
capital by investing in a diversified portfolio of equity and fixed-income
securities. The Fund is intended to present a balanced investment program
between growth and income. It generally invests approximately 50-65% of its
total assets in equity securities, including securities convertible into
equity securities, 25-50% of its assets in U.S. Government securities and debt
securities rated at time of purchase within the two highest grades assigned by
Moody's Investors Service, Inc. ("Moody's") (Aaa or Aa) or by Standard &
Poor's Corporation ("S&P") (AAA or AA), and up to 20% in unrated or lower
rated debt securities (measured at market value at the time of investment).

8
<PAGE>

The Fund invests principally in securities of U.S. issuers. However, it may
invest up to 10% of its total assets (valued at the time of investment) in
foreign securities, including foreign government obligations and foreign
equity and debt securities that are traded over-the-counter or on foreign
exchanges. The Fund has no geographic limits on its foreign investments, but
the Fund does not expect to invest more than 5% of its assets in securities in
emerging markets. See "Risk Factors--International Investing" below.

INTERNATIONAL FUND seeks long-term capital appreciation by investing
primarily in equity securities of non-U.S. issuers.

The Adviser considers the relative political and economic stability of the
issuer's home country, the ownership status of the company, and the company's
accounting practices in evaluating the potential rewards and risks of an
investment opportunity. The Fund may invest in securities traded in mature
markets (for example, Japan, Canada and the United Kingdom), in less developed
markets (for example, Mexico and Thailand), and in selected emerging markets
(such as Peru and India). Investments in securities of non-U.S. issuers,
especially those traded in less developed or emerging markets, present
additional risk. There are no limits on the Fund's geographic asset
distribution, but, to provide adequate diversification, the Fund ordinarily
invests in the securities markets of at least five countries outside the
United States. See "Risk Factors--International Investing" below.

Some foreign governments have been engaged in programs of selling part or
all of their stakes in government owned or controlled enterprises
("privatizations"). The Adviser believes that privatizations may offer
opportunities for significant capital appreciation, and intends to invest
assets of the Fund in privatizations in appropriate circumstances. In certain
of those markets, the ability of foreign entities such as the Fund to
participate in privatizations may be limited by local law and/or the terms on
which the Fund may be permitted to participate may be less advantageous than
those afforded local investors. There can be no assurance that governments
will continue to sell companies currently owned or controlled by them or that
privatization programs will be successful.

The equity securities in which the Fund may invest include common and
preferred stocks and warrants or other similar rights and convertible
securities. The Fund may purchase securities of non-U.S. issuers directly or
in the form of American Depositary Receipts (ADRs), European Depositary
Receipts (EDRs), Global Depositary Receipts (GDRs), or other securities
representing underlying shares of non-U.S. issuers.

9
<PAGE>

Under normal market conditions, the Fund invests at least 65% of its total
assets, taken at market value, in securities of non-U.S. issuers.

The Adviser considers the relative political and economic stability of the
issuer's home country, the ownership structure of the company, and the
company's accounting practices in evaluating the potential rewards and risks
of an investment opportunity. The Fund invests in securities traded in both
developed and emerging markets. In those markets considered developed (for
example, Germany, France and Japan), the Fund invests in small cap companies,
generally expected to have market capitalizations under $1 billion. In
emerging markets (such as Brazil, Indonesia, Korea and Argentina), the Fund
considers companies of any capitalization. Investments in securities of non-
U.S. issuers, especially those traded in less developed or emerging markets,
present additional risks. There are no limits on the Fund's geographic asset
distribution, but, to provide adequate diversification, the Fund ordinarily
invests in the securities markets of at least five countries outside the
United States. See "Risk Factors--International Investing" below.

The equity securities in which the Fund may invest include common and
preferred stocks and warrants or other similar rights and convertible
securities. The Fund may purchase securities of non-U.S. issuers directly or
in the form of ADRs, EDRs, GDRs, or other securities representing underlying
shares of non-U.S. issuers. Under normal market conditions, the Fund invests
at least 65% of its total assets, taken at market value, in securities of non-
U.S. issuers.

- -----------
Under normal market conditions, each Fund expects to be substantially fully
invested in the types of securities described in the

10
<PAGE>

preceding paragraphs. Within the limitations described in this prospectus, the
percentages of Fund assets invested in various types of securities will vary
in accordance with the judgment of the Adviser. To the extent that investments
meeting a Fund's criteria for investment are not available, or when the
Adviser considers a temporary defensive posture advisable, the Fund may invest
without limitation in high-quality corporate debt obligations of U.S.
companies or U.S. government obligations, or may hold cash in domestic or
foreign currencies or invest in domestic or foreign money market securities.

In seeking to achieve its investment objective, each Fund ordinarily invests
on a long-term basis, but on occasion may also invest on a short-term basis
(for example, where short-term perceptions have created a significant gap
between price and value). Occasionally, securities purchased on a long-term
basis may be sold within 12 months after purchase in light of a change in the
circumstances of a particular company or industry or in general market or
economic conditions.

INVESTMENT TECHNIQUES

EQUITY SECURITIES. The equity securities in which each Fund may invest
include common and preferred stocks and warrants or other similar rights and
convertible securities. The chief consideration in the selection of equity
securities for each Fund is the size of the discount of market price relative
to the economic value of the security as determined by the Adviser. The
Adviser's investment philosophy for those investments is predicated on the
belief that over time market price and value converge and that investment in
securities priced significantly below long-term value presents the best
opportunity to achieve long-term capital appreciation.

The Adviser uses several qualitative and quantitative methods in analyzing
economic value, but considers the primary determinant of value to be the
enterprise's long-run ability to generate cash for its owners. Once the
Adviser has determined that a security is undervalued, the Adviser will
consider it for purchase by a Fund, taking into account the quality and
motivation of the management, the firm's market position within its industry
and its degree of pricing power. The Adviser believes that the risks of equity
investing are often reduced if management's interests are strongly aligned
with the interests of its stockholders.

DEBT SECURITIES. Each Fund may invest in debt securities of both
governmental and corporate issuers. Each of Oakmark Fund and Small Cap Fund
may invest up to 25% of its assets, Balanced Fund may invest up to 20% of its
assets, and International Fund and International Emerging Fund may invest up
to 10% of its assets (valued at the time of

11
<PAGE>

investment), in debt securities that are rated below investment grade, without
a minimum rating requirement. Lower-grade debt securities (commonly called
"junk bonds") are obligations of issuers rated BB or lower by S&P or Ba or
lower by Moody's. Lower-grade debt securities are considered speculative and
may be in poor standing or actually in default. Medium-grade debt securities
are those rated BBB by S&P or Baa by Moody's. Securities so rated are
considered to have speculative characteristics. See "Risk Factors." A
description of the ratings used by S&P and Moody's is included as an appendix
to the Statement of Additional Information.

SHORT SALES AGAINST THE BOX. Each Fund may sell short securities the Fund
owns or has the right to acquire without further consideration, a technique
called selling short "against the box." Short sales against the box may
protect the Fund against the risk of losses in the value of its portfolio
securities because any unrealized losses with respect to such securities
should be wholly or partially offset by a corresponding gain in the short
position. However, any potential gains in such securities should be wholly or
partially offset by a corresponding loss in the short position. Short sales
against the box may be used to lock in a profit on a security when, for tax
reasons or otherwise, the Adviser does not want to sell the security. The
Trust does not currently expect that more than 20% of any Fund's total assets
would be involved in short sales against the box. For a more complete
explanation, please refer to the Statement of Additional Information.

CURRENCY EXCHANGE TRANSACTIONS. Each Fund may engage in currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate for
purchasing or selling currency prevailing in the foreign exchange market or
through a forward currency exchange contract ("forward contract"). A forward
contract is an agreement to purchase or sell a specified currency at a
specified future date (or within a specified time period) and price set at the
time of the contract. Forward contracts are usually entered into with banks
and broker-dealers, are not exchange-traded and are usually for less than one
year, but may be renewed.

12
<PAGE>

forward contract with respect to an actual or anticipated portfolio security
position denominated or quoted in a particular currency. Each Fund may engage
in portfolio hedging with respect to the currency of a particular country in
amounts approximating actual or anticipated positions in securities
denominated in such currency. When a Fund owns or anticipates owning
securities in countries whose currencies are linked, the Adviser may aggregate
such positions as to the currency hedged. Although forward contracts may be
used to protect a Fund from adverse currency movements, the use of such hedges
may reduce or eliminate the potentially positive effect of currency
revaluations on the Fund's total return.

OTHER INVESTMENT COMPANIES. Certain markets are closed in whole or in part
to equity investments by foreigners. A Fund may be able to invest in such
markets solely or primarily through governmentally authorized investment
vehicles or companies. Each Fund generally may invest up to 10% of its assets
in the aggregate in shares of other investment companies and up to 5% of its
assets in any one investment company, as long as no investment represents more
than 3% of the outstanding voting stock of the acquired investment company at
the time of investment.

Investment in another investment company may involve the payment of a
premium above the value of such issuers' portfolio securities, and is subject
to market availability. The Trust does not intend to invest in such vehicles
or funds unless, in the judgment of the Adviser, the potential benefits of the
investment justify the payment of any applicable premium or sales charge. As a
shareholder in an investment company, a Fund would bear its ratable share of
that investment company's expenses, including its advisory and administration
fees. At the same time the Fund would continue to pay its own management fees
and other expenses.

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. Each Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. There is a risk that the securities may not be
delivered or that they may decline in value before the settlement date.

PRIVATE PLACEMENTS. Each Fund may acquire securities in private placements.
Because an active trading market may not exist for such securities, the sale
of such securities may be subject to delay and additional costs. No Fund will
purchase such a security if more than 15% of the value of such Fund's net
assets would be invested in illiquid securities.

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<PAGE>

LENDING OF PORTFOLIO SECURITIES. Each Fund except Oakmark Fund may lend its
portfolio securities to broker-dealers and banks to the extent indicated in
restriction 5 under "Restrictions on the Funds' Investment." Any such loan
must be continuously secured by collateral in cash or cash equivalents
maintained on a current basis in an amount at least equal to the market value
of the securities loaned by a Fund. The Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned, and would also receive an additional return that may be in the form of
a fixed fee or a percentage of the collateral. The Fund would have the right
to call the loan and obtain the securities loaned at any time on notice of not
more than five business days. In the event of bankruptcy or other default of
the borrower, the Fund could experience both delays in liquidating the loan
collateral or recovering the loaned securities and losses including (a)
possible decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights.

CASH RESERVES. To meet liquidity needs or for temporary defensive purposes,
each Fund may hold cash in domestic and foreign currencies and may invest in
domestic and foreign money market securities.

RISK FACTORS

GENERAL. All investments, including those in mutual funds, have risks, and
no investment is suitable for all investors. Each Fund is intended for long-
term investors. Only Balanced Fund is intended to present a balanced
investment program between growth and income.

SMALL CAP COMPANIES. During some periods, the securities of small cap
companies, as a class, have performed better than the securities of large
companies, and in some periods they have performed worse. Stocks of small cap
companies tend to be more volatile and less liquid than stocks of large
companies. Small cap companies, as compared to larger companies, may have a
shorter history of operations, may not have as great an ability to raise
additional capital, may have a less diversified product line making them
susceptible to market pressure, and may have a smaller public market for their
shares.

INTERNATIONAL INVESTING. International Fund and International Emerging Fund
provide long-term investors with an opportunity to invest a portion of their
assets in a diversified portfolio of securities of non-U.S. issuers. Each of
the other Funds may invest up to 25% (or 10% in the

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<PAGE>

case of Balanced Fund) of its assets in securities of non-U.S. issuers.
International investing allows you to achieve greater diversification and to
take advantage of changes in foreign economies and market conditions. Many
foreign economies have, from time to time, grown faster than the U.S. economy,
and the returns on investments in these countries have exceeded those of
similar U.S. investments, although there can be no assurance that these
conditions will continue.

You should understand and consider carefully the greater risks involved in
investing internationally. Investing in securities of non-U.S. issuers,
positions in which are generally denominated in foreign currencies, and
utilization of forward foreign currency exchange contracts involve both
opportunities and risks not typically associated with investing in U.S.
securities. These include: fluctuations in exchange rates of foreign
currencies; possible imposition of exchange control regulation or currency
restrictions that would prevent cash from being brought back to the United
States; less public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers and issuers of
securities; different accounting, auditing and financial reporting standards;
different settlement periods and trading practices; less liquidity and
frequently greater price volatility in foreign markets than in the United
States; imposition of foreign taxes; and sometimes less advantageous legal,
operational and financial protections applicable to foreign subcustodial
arrangements.

Although the Funds try to invest in companies and governments of countries
having stable political environments, there is the possibility of restriction
of foreign investment, expropriation of assets, or confiscatory taxation,
seizure or nationalization of foreign bank deposits or other assets,
establishment of exchange controls, the adoption of foreign government
restrictions, or other adverse political, social or diplomatic developments
that could affect investment in these nations. Economies in individual
emerging markets may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross domestic product, rates of inflation,
currency depreciation, capital reinvestment, resource self-sufficiency and
balance of payments positions. Many emerging market countries have experienced
high rates of inflation for many years, which has had and may continue to have
very negative effects on the economies and securities markets of those
countries.

The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent

15
<PAGE>

than in the U.S. and other major markets. There also may be a lower level of
monitoring and regulation of emerging markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.

Any Fund may invest in ADRs, EDRs or GDRs that are not sponsored by the
issuer of the underlying security. To the extent it does so, the Fund would
probably bear its proportionate share of the expenses of the depository and
might have greater difficulty in receiving copies of the issuer's shareholder
communications than would be the case with a sponsored ADR, EDR or GDR.

The cost of investing in securities of non-U.S. issuers is higher than the
cost of investing in U.S. securities. International Fund and International
Emerging Fund provide an efficient way for an individual to participate in
foreign markets, but their expenses, including advisory and custody fees, are
higher than for a typical domestic equity fund.

DEBT SECURITIES. As noted above, each Fund may invest to a limited extent in
debt securities that are rated below investment grade or, if unrated, are
considered by the Fund's investment adviser to be of comparable quality. A
decline in prevailing levels of interest rates generally increases the value
of debt securities in a Fund's portfolio, while an increase in rates usually
reduces the value of those securities. As a result, to the extent that a Fund
invests in debt securities, interest rate fluctuations will affect its net
asset value, but not the income it receives from its debt securities. In
addition, if the debt securities contain call, prepayment or redemption
provisions, during a period of declining interest rates, those securities are
likely to be redeemed, and the Fund would probably be unable to replace them
with securities having as great a yield.

Investment in medium- or lower-grade debt securities involves greater
investment risk, including the possibility of issuer default or bankruptcy. An
economic downturn could severely disrupt this market and adversely affect the
value of outstanding bonds and the ability of the issuers to repay principal
and interest. In addition, lower-quality bonds are less sensitive to interest
rate changes than higher-quality instruments and generally are more sensitive
to adverse economic changes or individual corporate developments. During a
period of adverse economic changes, including a period of rising interest
rates, issuers of such bonds may experience difficulty in servicing their
principal and interest payment obligations.

Furthermore, medium- and lower-grade debt securities tend to be less
marketable than higher-quality debt securities because the market for them is
less broad. The market for unrated debt securities is even narrower. During
periods of thin trading in these markets, the spread

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<PAGE>

between bid and asked prices is likely to increase significantly, and the Fund
may have greater difficulty selling its portfolio securities. The market value
of these securities and their liquidity may be affected by adverse publicity
and investor perceptions.

CHANGE IN OBJECTIVE. Each Fund's investment objective may be changed by the
board of trustees without shareholder approval. Shareholders would receive at
least 30 days' written notice of any change in a Fund's objective. If there is
a change in investment objective, you should consider whether the Fund remains
an appropriate investment in light of your then current financial position and
needs. There can be no assurance that any Fund will achieve its investment
objective.

RESTRICTIONS ON THE FUNDS' INVESTMENTS

No Fund will:

1. In regard to 75% of its assets, invest more than 5% of its assets (valued
at the time of investment) in securities of any one issuer, except in U.S.
government obligations;

2. Acquire securities of any one issuer which at the time of investment (a)
represent more than 10% of the voting securities of the issuer, or (b) have a
value greater than 10% of the value of the outstanding securities of the
issuer;

3. Borrow money except from banks for temporary or emergency purposes in
amounts not exceeding 10% of the value of the Fund's assets at the time of
borrowing [the Fund will not purchase additional securities when its
borrowings, less receivables from portfolio securities sold, exceed 5% of
total assets];

4. Issue any senior security except in connection with permitted borrowings;
or

5. Make loans, except that each Fund may invest in debt obligations, and
each Fund other than Oakmark Fund may invest in repurchase agreements* and
lend its portfolio securities [a Fund will not lend
- -----------
* A repurchase agreement involves a sale of securities to a Fund with the
concurrent agreement of the seller (bank or securities dealer) to
repurchase the securities at the same price plus an amount equal to an
agreed-upon interest rate within a specified time. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses. No Fund may invest more than 15% of its net assets in repurchase
agreements maturing in more than seven days and other illiquid securities.

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<PAGE>

securities having a value in excess of 33% of its assets (valued at the time
of any loan)].

These restrictions, except the bracketed portions and the footnote, are
"fundamental" and cannot be changed as to a Fund without the approval of a
"majority of the outstanding voting securities" of that Fund as defined in the
Investment Company Act of 1940. All of the Funds' investment restrictions,
including additional fundamental restrictions, are set forth in the Statement
of Additional Information.

HOW TO PURCHASE SHARES

You may purchase shares of any of the Funds by check, by wire, by electronic
transfer or by exchange. There are no sales commissions or underwriting
discounts. The minimum initial investment is $1,000 for Small Cap and
International Emerging Fund and $2,500 for the other Funds, except that the
minimum is $1,000 for (a) an investment in an Oakmark IRA account, (b) a gift
or transfer to a minor under a Uniform Gifts to Minors Act ("UGMA") or a
Uniform Transfers to Minors Act ("UTMA"), or (c) an investment through the
Automatic Investment Plan (see "Shareholder Services" below). Minimum
subsequent investments are $100, except for reinvestments of dividends and
capital gain distributions.

BY CHECK. To make an initial purchase of shares, complete and sign the Share
Purchase Application and mail it to the Trust's transfer agent, State Street
Bank and Trust Company, Attention: Oakmark Funds, P.O. Box 8510, Boston,
Massachusetts 02266-8510, together with a check for the total purchase amount
payable to State Street Bank and Trust Company.

You may make subsequent investments by submitting a check along with either
the stub from your Fund account confirmation statement or a note indicating
the amount of the purchase, your account number, and the name in which your
account is registered. Each individual check submitted for purchase must be at
least $100, and the Trust will not accept cash, drafts, third party checks, or
checks drawn on banks outside of the United States. If your order to purchase
shares of a Fund is canceled because your check does not clear, you will be
responsible for any resulting loss incurred by the Fund.

BY WIRE. You may also pay for shares by instructing your bank to wire money
to the Trust's custodian bank. Your bank may charge you a fee for sending the
wire. IF YOU ARE OPENING A NEW ACCOUNT BY WIRE

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<PAGE>

TRANSFER, YOU MUST FIRST TELEPHONE THE TRANSFER AGENT AT 1-800-626-9392 TO
REQUEST AN ACCOUNT NUMBER AND FURNISH YOUR SOCIAL SECURITY OR OTHER TAX
IDENTIFICATION NUMBER. Neither the Funds nor the Trust will be responsible for
the consequences of delays, including delays in the banking or Federal Reserve
wire systems.

BY ELECTRONIC TRANSFER. If you have an established Fund account with an
established electronic transfer privilege you may make subsequent investments
by an electronic transfer of funds from your bank account. Electronic transfer
allows you to make purchases at your request by calling 1-800-626-9392 or at
pre-scheduled intervals. See "Shareholder Services." Electronic transfer
purchases are subject to a $100 minimum and a $50,000 maximum. You may not
open a new account through electronic transfer. If your order to purchase
shares of a Fund is canceled because your electronic transfer does not clear,
you will be responsible for any resulting loss incurred by the Fund.

BY EXCHANGE. You may purchase shares of a Fund by exchange of shares from
another Fund or by exchange of Service Units of GS Short Duration Tax-Free
Fund, a portfolio of Goldman Sachs Trust, or of ILA Service Units of
Government Portfolio or Tax-Exempt Portfolio, each a portfolio of Goldman
Sachs-Institutional Liquid Assets (such Service Units and ILA Service Units
are referred to as "Oakmark Units"), either by phone (if the Telephone
Exchange Privilege has been established on the account from which the exchange
is being made) or by mail. AN EXCHANGE TRANSACTION IS A SALE AND PURCHASE OF
SHARES FOR FEDERAL INCOME TAX PURPOSES AND MAY RESULT IN CAPITAL GAIN OR LOSS.
IF YOU EXCHANGE SHARES OF SMALL CAP FUND OR INTERNATIONAL EMERGING FUND WITHIN
SIX MONTHS AFTER PURCHASE, YOU WILL BE SUBJECT TO A 2% REDEMPTION FEE PAYABLE
TO THE FUND. GENERALLY YOU MAY NOT MAKE MORE THAN SIX EXCHANGES FROM ANY FUND
IN ANY CALENDAR YEAR, AND THE TRUST MAY REFUSE REQUESTS FOR MORE FREQUENT
EXCHANGES. Restrictions apply and there is a charge (currently $5) for each
exchange into Oakmark Units; please review the information under "How to
Redeem Shares--By Exchange."

PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of a Fund's shares is made
at that Fund's net asset value (see "Net Asset Value") next determined as
follows:

A purchase by check or wire transfer is made at the net asset value next
determined after receipt by the Fund of the check or wire transfer of funds in
payment of the purchase.

A purchase by electronic transfer is made at the net asset value determined
after receipt of your electronic transfer investment instruction.

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<PAGE>

PURCHASES THROUGH DEALERS. You may purchase or redeem shares of the Funds
through certain investment dealers, banks or other institutions. Any such
purchase or redemption generally will not be effective until the order or
request is received by the Trust's transfer agent; it is the responsibility of
the dealer to transmit your order or request promptly. These institutions may
impose charges for their services. Any such charges could constitute a
substantial portion of a smaller account, and may not be in your best
interest. You may purchase or redeem shares of the Funds directly from or with
the Trust without imposition of any charges other than those described in this
prospectus.

GENERAL. The Trust cannot accept a purchase order specifying a particular
purchase date or price per share. Each purchase order for a Fund must be
accepted by an authorized officer of the Trust or its transfer agent and is
not binding until accepted and entered on the books of that Fund. Once your
purchase order has been accepted, you may not cancel or revoke it; however,
you may redeem the shares. The Trust reserves the right not to accept any
purchase order that it determines not to be in the best interest of the Trust
or of a Fund's shareholders. The Trust will not be responsible for any losses
resulting from unauthorized transactions initiated by telephone if it or its
transfer agent follows reasonable procedures designed to verify the identity
of the caller. Those procedures may include recording the call, requesting
additional information and sending written confirmation of telephone
transactions. You should verify the accuracy of telephone transactions
immediately upon receipt of your confirmation statement.

HOW TO REDEEM SHARES

BY MAIL. You may redeem all or any part of your shares of a Fund upon your
written request delivered to the Trust's transfer agent, State Street Bank and
Trust Company, Attention: Oakmark Funds, P.O. Box 8510, Boston, Massachusetts
02266-8510. Your redemption request must:

(1) identify the Fund and give your account number;

(2) specify the number of shares or dollar amount to be redeemed; and

(3) be signed in ink by all owners exactly as their names appear on the
account.

Your request must also INCLUDE A SIGNATURE GUARANTEE if any of the following
situations applies:

. you wish to redeem more than $50,000 worth of shares;

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<PAGE>

. your account registration has been changed within the last 30 days;

. the redemption check is to be mailed to an address different from the
one on your account (record address);

. the redemption check is to be made payable to someone other than the
registered account owner; or

. you are instructing us to wire the proceeds to a bank account and have
not signed up for the telephone redemption privilege.

You should be able to obtain a signature guarantee from a bank, securities
broker-dealer, credit union (if authorized under state law), securities
exchange or association, clearing agency or savings association, but not a
notary public. The signature guarantee must include an ink-stamped guarantee
for each signature on the redemption request and must include the name of the
guarantor bank or firm and an authorized signature.

Special rules apply to redemptions by corporations, trusts and partnerships.
In the case of a corporation, the request must be signed in the name of the
corporation by an officer whose title must be stated, and must be accompanied
by a bylaw provision or resolution of the board of directors, certified within
60 days, authorizing the officer to so act. A redemption request from a
partnership or a trust must be signed in the name of the partnership or trust
by a general partner or a trustee and include a signature guarantee. If the
trustee is not named in the account registration, a redemption request by a
trust must also include evidence of the trustee's appointment as such (e.g., a
certified copy of the relevant portions of the trust instrument). Under
certain circumstances, before the shares can be redeemed, additional documents
may be required in order to verify the authority of the person seeking to
redeem.

BY EXCHANGE. You may redeem all or any portion of your shares of a Fund or
of Oakmark Units and use the proceeds to purchase shares of any of the other
Funds or Oakmark Units if your signed, properly completed Application is on
file. AN EXCHANGE TRANSACTION IS A SALE AND PURCHASE OF SHARES FOR FEDERAL
INCOME TAX PURPOSES AND MAY RESULT IN CAPITAL GAIN OR LOSS. IF YOU EXCHANGE
SHARES OF SMALL CAP FUND OR INTERNATIONAL EMERGING FUND WITHIN SIX MONTHS
AFTER PURCHASE, YOU WILL BE SUBJECT TO A 2% REDEMPTION FEE PAYABLE TO THE
FUND. GENERALLY YOU MAY NOT MAKE MORE THAN SIX EXCHANGES FROM ANY FUND IN ANY
CALENDAR YEAR, AND THE TRUST MAY REFUSE REQUESTS FOR MORE FREQUENT EXCHANGES.
Before exchanging into Oakmark Units, you should obtain the prospectus
relating to the Oakmark Units from the

21
<PAGE>

Adviser and read it carefully. The exchange privilege is not an offering or
recommendation of Oakmark Units. The registration of the account to which you
are making an exchange must be exactly the same as that of the account from
which the exchange is made and the amount you exchange must meet any
applicable minimum investment of the fund being purchased. An exchange may be
made by following the redemption procedure described above under "By Mail" and
indicating the fund to be purchased, except that a signature guarantee
normally is not required. See also the discussion below of the Telephone
Exchange Privilege. The Trust charges a fee (currently $5) for each exchange
into Oakmark Units.

SPECIAL REDEMPTION PRIVILEGES. The Telephone Exchange and Telephone
Redemption Privileges will be established automatically when you open your
account unless you elect on your Application to decline these Privileges.
Other Privileges must be specifically elected. A signature guarantee may be
required to establish a Privilege after you have opened your account. Shares
held in an IRA account may not be redeemed by telephone. YOU MAY NOT EXCHANGE
OR REDEEM SHARES BY CALLING THE TRUST. CALL THE TRANSFER AGENT AT 1-800-626-
9392. YOUR CALL WILL BE RECORDED.

TELEPHONE EXCHANGE PRIVILEGE--You may use the Telephone Exchange Privilege
to exchange among shares of the Funds and Oakmark Units by calling 1-800-626-
9392. An exchange request received by telephone after 4 p.m. eastern time (or
after the close of regular session trading on the New York Stock Exchange if
the Exchange closes before 4 p.m.) is deemed received on the next business
day. The Trust's general redemption policies apply to redemptions by Telephone
Exchange. See "General Redemption Policies."

The Trust reserves the right at any time without prior notice to suspend or
terminate the use of the Telephone Exchange Privilege by any person or class
of persons. The Trust believes that use of the Telephone Exchange Privilege by
investors utilizing market-timing strategies adversely affects the Funds.
THEREFORE, THE TRUST GENERALLY WILL NOT HONOR REQUESTS FOR TELEPHONE EXCHANGES
BY SHAREHOLDERS IDENTIFIED BY THE TRUST AS "MARKET-TIMERS." Moreover, you may
not make more than six exchanges from any Fund in any calendar year. Although
the Trust will attempt to give prior notice of a suspension or termination of
an exchange privilege when it is reasonably able to do so, the suspension or
termination may be effective immediately, thereby preventing any uncompleted
exchange. See "How to Redeem Shares--By Exchange."

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<PAGE>

During periods of volatile economic and market conditions, you may have
difficulty placing your exchange by telephone; you may wish to consider
placing your exchange by mail during such periods.

TELEPHONE REDEMPTION PRIVILEGE--You may use the Telephone Redemption
Privilege to redeem shares having a value of up to $50,000 per day from your
account by calling 1-800-626-9392. The proceeds may be sent by check to your
registered address or you may request payment by electronic transfer to a
checking account previously designated by you at a bank that is a member of
the Automated Clearing House. REDEMPTIONS BY TELEPHONE ARE SUBJECT TO A
$50,000 MAXIMUM. A redemption request received by telephone after 4 p.m.
eastern time (or after the close of regular session trading on the New York
Stock Exchange if the Exchange closes before 4 p.m.) is deemed received on the
next business day. The Telephone Redemption Privilege is not available to
redeem shares held in an IRA account, and is not available for 60 days after
the Trust receives notice from you of a change of address.

GENERAL REDEMPTION POLICIES. You may not cancel or revoke your redemption
order once your instructions have been received and accepted. The Trust cannot
accept a redemption request that specifies a particular date or price for
redemption or any special conditions. PLEASE TELEPHONE THE TRANSFER AGENT IF
YOU HAVE ANY QUESTIONS ABOUT REQUIREMENTS FOR A REDEMPTION BEFORE SUBMITTING
YOUR REQUEST. The Trust reserves the right to require a properly completed
Application before making payment for shares redeemed.

The price at which your redemption order will be executed is the net asset
value next determined after proper redemption instructions are received. See
"Net Asset Value." Because the redemption price you receive depends upon that
Fund's net asset value per share at the time of redemption, it may be more or
less than the price you originally paid for the shares and may result in a
realized capital gain or loss. In the case of Small Cap Fund or International
Emerging Fund, the Fund charges a 2% redemption fee on shares redeemed
(including by exchange) within six months after purchase (other than by
reinvestment of dividends or distributions), determined on a first-in, first-
out basis.

The Trust will generally mail payment for shares redeemed within seven days
after proper instructions are received. If you attempt to redeem shares within
15 days after they have been purchased by check or electronic transfer, the
Trust may delay payment of the redemption proceeds to you until it can verify
that payment for the purchase of those

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<PAGE>

shares has been (or will be) collected. To reduce such delays, the Trust
recommends that your purchase be made by Federal funds wired through your
bank. If you so request, the proceeds of your redemption may be paid by wire,
but the cost of the wire (currently $5) will be deducted from the redemption
proceeds.

Neither the Trust, its transfer agent, nor their respective officers,
trustees, directors, employees, or agents will be responsible for the
authenticity of instructions provided under the Special Redemption Privileges,
nor for any loss, liability, cost or expense for acting upon instructions
furnished thereunder if they reasonably believe that such instructions are
genuine. The Funds employ procedures reasonably designed to confirm that
instructions communicated by telephone under any Special Redemption Privilege
are genuine. Use of any Special Redemption Privilege authorizes the Funds and
their transfer agent to tape-record all instructions to redeem. In addition,
callers are asked to identify the account number and registration, and may be
required to provide other forms of identification. Written confirmations of
transactions are mailed promptly to the registered address; a legend on the
confirmation requests the shareholder to review the transactions and inform
the Fund immediately if there is a problem. If a Fund does not follow
reasonable procedures for protecting shareholders against loss on telephone
transactions, it may be liable for any losses due to unauthorized or
fraudulent instructions.

The Trust reserves the right at any time without prior notice to suspend,
limit, modify or terminate any privilege or its use in any manner by any
person or class. The Trust also reserves the right to redeem shares in any
account and send the proceeds to the owner if the shares in the account do not
have a value of at least $1,000. A shareholder would be notified that the
account is below the minimum and allowed 30 days to bring the account value up
to the minimum.

Shares in any account you maintain with a Fund may be redeemed to the extent
necessary to reimburse a Fund for any loss it sustains that is caused by you
(such as losses from uncollected checks and electronic transfers or any Fund
liability under the Internal Revenue Code provisions on backup withholding
relating to your account).

SHAREHOLDER SERVICES

REPORTING TO SHAREHOLDERS. You will receive a confirmation statement
reflecting each of your purchases and redemptions of shares of a Fund, as well
as periodic statements detailing distributions made by that Fund. In addition,
the Trust will send you quarterly and annual reports showing Fund portfolio
holdings and will provide you annually with tax information.

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<PAGE>

IRA PLAN. The Trust has a master individual retirement account (IRA) plan
that allows you to invest on a tax-sheltered basis in the Funds or Oakmark
Units of the Government Portfolio of Goldman, Sachs Money Market Trust. The
plan also permits you to "roll over" or transfer to your Oakmark IRA a lump
sum distribution from a qualified pension or profit-sharing plan, thereby
postponing federal income tax on the distribution. If your employer has a
Simplified Employee Pension Plan (SEP), you may establish an IRA with the Fund
to which your employer may contribute, subject to special rules designed to
avoid discrimination.

SPECIAL WAYS TO INVEST OR REDEEM. In addition to the ways to purchase or
redeem shares described above, the New Account Purchase Application offers you
the following additional investment and redemption options:

AUTOMATIC INVESTMENTS--purchase Fund shares each month with payment by
electronic transfer from your bank account ($1,000 minimum initial investment;
$100-50,000 per monthly transaction).

TELEPHONE INVESTMENTS--purchase shares in an established Fund account with
an established electronic transfer privilege by placing a telephone order and
paying for them by electronic transfer from your bank account ($100-50,000 per
transaction).

AUTOMATIC EXCHANGE--automatically exchange (monthly, quarterly or annually)
a fixed dollar amount among any of the Funds of the Trust and Oakmark Units
($100-50,000 per transaction), subject to the applicable minimum investment
requirements.

SYSTEMATIC WITHDRAWALS--redeem a fixed dollar amount each month or quarter
and have the proceeds sent by check to you or deposited by electronic transfer
into your bank account (up to $50,000 per transaction).

You may establish any of these privileges by completing the Share Purchase
Application. If you have an established Fund account and want to add one of
these privileges, please call the Trust at 1-800-OAKMARK to obtain the
necessary form.

NET ASSET VALUE

The price per share for a purchase order or redemption request is the net
asset value next determined after receipt of the order.

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<PAGE>

The net asset value of a share of each Fund is determined by the Fund's
custodian, State Street Bank and Trust Company, as of the close of regular
session trading on the New York Stock Exchange (currently 4:00 p.m., Eastern
time) on any day on which that exchange is open for trading by dividing the
market value of that Fund's assets, less its liabilities, by the number of
shares outstanding. Trading in the portfolio securities of International Fund
or International Emerging Fund (and in any securities of non-U.S. issuers held
by any other Fund) takes place in various markets on days and at times other
than when the New York Stock Exchange is open for trading. Therefore, the
calculation of net asset value does not take place at the same time as the
prices of many of those portfolio securities are determined and the value of
the Funds' portfolios may change on days when the Funds are not open for
business and their shares may not be purchased or redeemed.

Price information can be obtained by calling the 24-Hour Net Asset Value
Hotline, 1-800-GROWOAK (1-800-476-9625).

DISTRIBUTIONS

Each Fund distributes to shareholders at least annually substantially all
net investment income and any net capital gains realized from sales of the
Fund's portfolio securities. All of your income dividends and capital gain
distributions will be reinvested in additional shares unless you elect to have
distributions paid by check. If any check from a Fund mailed to you is
returned as undeliverable or is not presented for payment within six months,
the Trust reserves the right to reinvest the check proceeds and future
distributions in additional Fund shares.

TAXES

Dividends from investment income and net short-term capital gains are
taxable as ordinary income. Distributions of long-term capital gains are
taxable as long-term capital gains regardless of the length of time you have
held your Fund shares. Distributions will be taxable to you whether received
in cash or reinvested in Fund shares.

You will be advised annually as to the source of your distributions for tax
purposes. If you are not subject to income taxation, you will not be required
to pay tax on amounts distributed to you.

If you purchase shares shortly before a record date for a distribution you
will, in effect, receive a return of a portion of your investment, but the
distribution will be taxable to you even if the net asset value of your shares
is reduced below your cost. However, for federal income tax purposes your
original cost would continue as your tax basis. If you redeem shares within
six months, any loss on the sale of those shares would be long-term capital
loss to the extent of any distributions of long-term capital gain that you
have received on those shares.

26
<PAGE>

Investment income received by a Fund from sources within foreign countries
may be subject to foreign income taxes withheld at the source. If a Fund pays
nonrefundable taxes to foreign governments during the year, the taxes will
reduce that Fund's dividends but will still be included in your taxable
income. However, you may be able to claim an offsetting credit or deduction on
your tax return for your share of foreign taxes paid by the Fund.

If (a) you fail to (i) furnish your properly certified social security or
other tax identification number or (ii) certify that your tax identification
number is correct or that you are not subject to backup withholding due to the
underreporting of certain income, or (b) the Internal Revenue Service informs
the Trust that your tax identification number is incorrect, the Trust may be
required to withhold Federal income tax at a rate of 31% ("backup
withholding") from certain payments (including redemption proceeds) to you.
These certifications are contained in the New Account Purchase Application
that you should complete and return when you open an account. The Fund must
promptly pay to the IRS all amounts withheld. Therefore, it is usually not
possible for the Fund to reimburse you for amounts withheld. You may claim the
amount withheld as a credit on your Federal income tax return.

This discussion of U.S. and foreign taxation applies only to U.S.
shareholders and is not intended to be a full discussion of income tax laws
and their effect. You may wish to consult your own tax adviser.

MANAGEMENT OF THE FUNDS

The board of trustees of the Trust has overall responsibility for the
conduct of the affairs of the Funds and the Trust. The trustees serve
indefinite terms of unlimited duration. The trustees appoint their own
successors, provided that at least two-thirds of the trustees, after such
appointment, have been elected by shareholders. Shareholders may remove a
trustee, with or without cause, upon the declaration in writing or vote of
two-thirds of the Trust's outstanding shares. A trustee may be removed with or
without cause upon the written declaration of a majority of the trustees.

The Funds' investments and business affairs are managed by the Adviser,
Harris Associates L.P. The Adviser also serves as investment adviser to
individuals, trusts, retirement plans, endowments and foundations, and manages
numerous private partnerships.

27
<PAGE>

The Adviser was organized in 1995 to succeed to the business of a previous
limited partnership, also named Harris Associates L.P. (the "Former Adviser"),
that, together with its predecessor, had advised and managed mutual funds
since 1970. The Adviser, a limited partnership, is managed by its general
partner, Harris Associates, Inc. ("HAI"), a wholly-owned subsidiary of New
England Investment Companies, L.P. ("NEIC"). NEIC owns all of the limited
partnership interests in the Adviser. NEIC is a publicly traded limited
partnership that owns investment management firms and that is a subsidiary of
New England Mutual Life Insurance Company ("NEML"). NEML has agreed to merge
into Metropolitan Life Insurance Company ("MLI") in a transaction that is
expected to be completed in the spring of 1996 but that is subject to various
regulatory approvals and approval by policyholders of the respective
companies. Upon completion of the merger NEIC will become a subsidiary of MLI.

Subject to the overall authority of the board of trustees, the Adviser
furnishes continuous investment supervision and management to the Funds and
also furnishes office space, equipment and management personnel.

For its services as investment adviser the Adviser receives from each Fund a
monthly fee based on that Fund's net assets at the end of the preceding month.
The annual rates of fees as a percentage of each Fund's net assets are as
follows:

<TABLE>
<CAPTION>
FUND FEE
------------------------------------- ---------------------------------------
<C> <S>
Balanced............................. .75%
Oakmark.............................. 1% up to $2.5 billion; .95% on the next
$1.25 billion; .90% on the next $1.25
billion; and .85% on net assets in
excess of $5 billion
International........................ 1% up to $2.5 billion; .95% on the next
$2.5 billion; and .90% on net assets in
excess of $5 billion
Small Cap and International Emerging. 1.25%
</TABLE>

These rates of fees are higher than those paid by most mutual funds. The
advisory agreement for each Fund provides that the total annual expenses of
the Fund, exclusive of taxes, interest, extraordinary litigation expenses and
brokers' commissions and other charges relating to the purchase or sale of
securities but including fees paid to the Adviser, shall not exceed the
limits, if any, prescribed by any state in which shares of that Fund are
qualified for sale. The Adviser has agreed to reimburse each Fund for any such
expenses in excess of such limits by an offset to the monthly advisory fee.
The Trust believes that the most restrictive expense limitation of any state
is 2.5% of the first $30 million

28
<PAGE>

of a Fund's average net assets, 2% of the next $70 million and 1.5%
thereafter. In addition, the Adviser has voluntarily agreed to reimburse each
of Small Cap Fund, Balanced Fund and International Emerging Fund to the extent
that the Fund's annual ordinary operating expenses exceed 2.5% of its average
net assets through October 31, 1996, subject to earlier termination by the
Adviser on 30 days' notice to the Fund.

The Trust uses "Harris Associates" in its name and "Oakmark" in the names of
the Funds by license from the Adviser and would be required to stop using
those names if Harris Associates ceased to be the Adviser. The Adviser has the
right to use the names for another enterprise, including another investment
company.

The investment objective and policies of Oakmark Fund were developed by the
Adviser and by Robert J. Sanborn, C.F.A., the Fund's portfolio manager. Mr.
Sanborn joined the Adviser as a portfolio manager and analyst in 1988. Prior
thereto, he had been a portfolio manager/analyst with The State Teachers
Retirement System of Ohio. Mr. Sanborn holds an M.B.A. in Finance from the
University of Chicago (1983) and a B.A. in Economics from Dartmouth College
(1980).

The investment objective and policies of Small Cap Fund were developed by
the Adviser and by Steven J. Reid, C.F.A., the Fund's portfolio manager. Mr.
Reid joined the Adviser as an accountant in 1980 and has been an investment
analyst since 1985. He holds a B.A. in Business from Roosevelt University
(1979).

The investment objective and policies of Balanced Fund were developed by the
Adviser and by Clyde S. McGregor, C.F.A, the Fund's portfolio manager. Mr.
McGregor joined the Adviser as an analyst in 1981 and began managing
portfolios in 1986. He holds an M.B.A. in Finance from the University of
Wisconsin--Madison (1977) and a B.A. in Economics and Religion from Oberlin
College (1974).

The investment objective and policies of International Fund were developed
by the Adviser and by David G. Herro, C.F.A., the Fund's portfolio manager.
The Fund is co-managed by Michael J. Welsh, C.P.A. Mr. Herro joined the
Adviser in 1992 as a portfolio manager and analyst. Previously, he had been an
international portfolio manager for the State of Wisconsin Investment Board
and The Principal Financial Group. Mr. Herro holds an M.A. in Economics from
the University of Wisconsin--Milwaukee (1986) and a B.S. in Business and
Economics from the University of Wisconsin--Platteville (1985). Mr. Welsh
joined the adviser as an international analyst in 1992. Previously he had been
a senior associate, valuation services, with Coopers & Lybrand. Mr. Welsh
holds an M.M. in Finance from Northwestern University (1993) and a B.S. in
Business and Accounting from the University of Kansas (1985).

29
<PAGE>

The investment objective and policies of International Emerging Fund were
developed by the Adviser and by David G. Herro, the Fund's portfolio manager.
The Fund is co-managed by Adam Schor, C.F.A. Mr. Schor joined the Adviser as
an international analyst in 1993. Previously he had been an analyst with
American Family Insurance Group and the State of Wisconsin Investment Board.
Mr. Schor holds an M.S. in Finance from the University of Wisconsin--Madison
(1993) and a B.S. in Journalism and Economics from Northwestern University
(1986).

Brokerage transactions for the Funds may be executed through Harris
Associates Securities L.P., a registered broker-dealer and an affiliate of the
Adviser.

30
<PAGE>

TRUSTEES AND OFFICERS

The trustees and officers of the Trust and their principal business
activities during the past five years are:

<TABLE>
<CAPTION>
NAME, POSITION(S)
WITH TRUST PRINCIPAL OCCUPATION(S) DURING PAST
AND AGE AT DECEMBER 31, 1995 FIVE YEARS#
- -------------------------------------- --------------------------------------
<S> <C>
VICTOR A. MORGENSTERN* President, HAI, since 1992 and Vice
Trustee and President, 53 President prior thereto
MICHAEL J. FRIDUSS Principal, MJ Friduss & Associates
Trustee, 53 (telecommunications consultants),
since 1993; Vice President--Customer
Service and Information Technology,
Ameritech Corporation (telecommunica-
tions), 1992-1993; Vice President--
Customer Sales and Service, Michigan
Bell Telephone Company, prior thereto
THOMAS H. HAYDEN Executive Vice President and director,
Trustee, 44 Bozell Worldwide, Inc. (advertising
and public relations), since 1992, and
Senior Vice President, prior thereto
CHRISTINE M. MAKI Vice President--Tax, Hyatt Corporation
Trustee, 35 (hotel management) since 1995; Tax
Manager, Coopers & Lybrand (indepen-
dent accountants), prior thereto
ALLAN J. REICH Senior Partner and Chair of
Trustee, 47 Corporate/Securities Practice Group,
D'Ancona & Pflaum (attorneys), since
1993; Senior Partner, McDermott, Will
& Emery (attorneys), prior thereto
MARV R. ROTTER General Manager, Rotter & Associates
Trustee, 49 (financial services)
BURTON W. RUDER President, The Academy Group (invest-
Trustee, 52 ments and consulting)
PETER S. VOSS* Chairman and Chief Executive Officer,
Trustee, 49 New England Investment Companies, Inc.
and New England Investment Companies,
L.P., since 1992; Group Executive Vice
President, Bank of America, N.A.,
1992; Executive Vice President, Secu-
rity Pacific Bank, prior thereto
GARY N. WILNER, M.D. Senior Attending Physician, Evanston
Trustee, 55 Hospital, and Medical Director--
Cardiopulmonary Wellness Program, Ev-
anston Hospital Corporation
ROBERT J. SANBORN Portfolio Manager and Analyst, HALP
Executive Vice President and
Portfolio Manager (Oakmark Fund), 37
DAVID G. HERRO Portfolio Manager and Analyst, HALP,
Vice President and Portfolio Manager since 1992; Portfolio Manager--Inter-
(International Fund and national Equities, State of Wisconsin
International Emerging Fund), 35 Investment Board, prior thereto
CLYDE S. MCGREGOR Portfolio Manager and Analyst, HALP
Vice President and Portfolio Manager
(Balanced Fund), 43
</TABLE>

31
<PAGE>

<TABLE>
<CAPTION>
NAME, POSITION(S)
WITH TRUST PRINCIPAL OCCUPATION(S) DURING PAST
AND AGE AT DECEMBER 31, 1995 FIVE YEARS#
- --------------------------------------- --------------------------------------
<S> <C>
STEVEN J. REID Portfolio Manager and Analyst, HALP
Vice President and Portfolio Manager
(Small Cap Fund), 39
ADAM SCHOR Portfolio Manager and Analyst, HALP,
Assistant Vice President and Co- since 1993; Analyst, American Family
portfolio Manager (International Insurance Group, 1992-1993; Analyst,
Emerging Fund), 31 State of Wisconsin Investment Board,
prior thereto
MICHAEL J. WELSH Portfolio Manager and Analyst, HALP,
Assistant Vice President and Co- since 1992; Senior Associate, Valua-
portfolio Manager (International tion Services, Coopers & Lybrand,
Fund), 32 prior thereto
LAUREN B. PITALIS Director of Mutual Fund Operations,
Vice President-Shareholder Operations HALP, since 1992; Manager of Distribu-
and Assistant Secretary, 35 tion Services, Mesirow Financial,
Inc., prior thereto
ANITA M. NAGLER Vice President, HAI, since 1994; Gen-
Secretary, 39 eral Counsel, HALP, since 1993; Asso-
ciate Regional Administrator--Enforce-
ment, Securities and Exchange Commis-
sion, prior thereto
DONALD TERAO Secretary and Treasurer, HAI, since
Treasurer, 46 1995; Controller, HALP, prior thereto
KRISTI L. ROWSELL Tax and Accounting Manager, HALP,
Assistant Treasurer, 29 since 1995; Vice President and Trea-
surer, Calamos Asset Management, Inc.,
1992-1995; Senior Tax Specialist, KPMG
Peat Marwick, prior thereto
</TABLE>
- ----------------
#As used in this table, from and after September 29, 1995 "HALP" and "HAI"
refer to the Adviser and the general partner of the Adviser, respectively,
and prior to that date those terms refer to the Former Adviser and the
general partner of the Former Adviser, respectively.

*Messrs. Morgenstern and Voss are trustees who are "interested persons" (as
defined in the Investment Company Act) of the Trust by virtue of their
relationships with HALP.

PERFORMANCE INFORMATION

From time to time the Funds may quote total return figures in sales
material. "Total Return" for a period is the percentage change in value during
the period of an investment in Fund shares, including the value of shares
acquired through reinvestment of all dividends and capital gains
distributions. "Average Annual Total Return" is the average annual compound
rate of change in value represented by the Total Return for the period. All of
these calculations assume the reinvestment of dividends and distributions in
additional shares of the Fund. Income taxes are not taken into account.

32
<PAGE>

In advertising and sales literature, a Fund's performance may be compared to
market indexes and to the performance of other mutual funds. A Fund may also
publicize its comparative performance as computed in rankings or ratings
determined by independent services or publications including Lipper Analytical
Services, Inc., Morningstar, Inc. and others.

The performance of a Fund is a function of conditions in the securities
markets, portfolio management and operating expenses, and past results are not
necessarily indicative of future results. See "Investment Objectives" and
"Investment Restrictions." Performance information supplied by a Fund may not
provide a basis for comparison with other investments using different
reinvestment assumptions or time periods.

OTHER INFORMATION

The Funds are series of Harris Associates Investment Trust (the "Trust"), an
open-end, diversified management investment company. The Trust is a
Massachusetts business trust organized under an Agreement and Declaration of
Trust ("Declaration of Trust") dated February 1, 1991, which provides that
each shareholder shall be deemed to have agreed to be bound by the terms
thereof. The Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an unlimited number
of shares, in one or more series, each with its own investment objective,
policies and restrictions, as the board of trustees may authorize. Any such
series of shares may be further divided, without shareholder approval, into
two or more classes of shares having such preferences or special or relative
rights or privileges as the trustees may determine. The Funds' shares are not
currently divided into classes. The Funds are the only series of the Trust
currently being offered. All shares issued will be fully paid and non-
assessable and will have no preemptive or conversion rights.

Each share of a series is entitled to participate pro rata in any dividends
and other distributions declared by the board of trustees with respect to that
series, and all shares of a series have equal rights in the event of
liquidation of that series.

Each share is entitled to one vote on each matter presented to shareholders.
As a business trust, the Trust is not required to hold annual shareholder
meetings. However, special meetings may be called for purposes such as
electing or removing trustees, changing fundamental policies, or approving an
investment advisory contract. On

33
<PAGE>

any matter submitted to a vote of shareholders, shares are voted in the
aggregate and not by individual series except when required by the Investment
Company Act of 1940 or other applicable law, or when the board of trustees
determines that the matter affects only the interests of one or more series,
in which case shareholders of the unaffected series are not entitled to vote
on such matters. All shares of the Trust are voted together in the election of
trustees.

Inquiries regarding the Funds should be directed to the Trust at its address
or telephone number shown on the inside back cover.

34
<PAGE>

INVESTMENT ADVISER
Harris Associates L.P.

ADDRESS OF TRUST AND ADVISER
Two North LaSalle Street
Chicago, Illinois 60602-3790
1-800-OAKMARK
(1-800-625-6275)

24-HOUR NAV HOTLINE
1-800-GROWOAK
(1-800-476-9625)

TRANSFER AGENT, DIVIDEND
DISBURSING AGENT & CUSTODIAN
State Street Bank and Trust Company
Attention: Oakmark Funds
P.O. Box 8510
Boston, Massachusetts 02266-8510
1-800-626-9392

AUDITORS
Arthur Andersen LLP
Chicago, Illinois

LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois

35
<PAGE>

[LOGO OF THE OAKMARK FAMILY OF FUNDS]

Harris Associates L.P.
2 North LaSalle Street
Chicago, IL 60602
1-800-OAKMARK

<PAGE>

Draft 12/20/95
STATEMENT OF
ADDITIONAL INFORMATION
----------------------

MARCH 1, 1996

THE OAKMARK FAMILY OF FUNDS

No-Load Funds

Two North La Salle Street
Chicago, Illinois 60602-3790
Telephone 1-800-OAKMARK
(1-800-625-6275)

This Statement of Additional Information relates to The Oakmark Fund
("Oakmark Fund"), The Oakmark Small Cap Fund ("Small Cap Fund"), The
Oakmark Balanced Fund ("Balanced Fund"), The Oakmark International Fund
("International Fund") and The Oakmark International Emerging Value Fund
("International Emerging Fund"), each a series of Harris Associates
Investment Trust (the "Trust"). It is not a prospectus but provides
information that should be read in conjunction with the Funds' prospectus
dated the same date as this Statement of Additional Information and any
supplement thereto. The prospectus may be obtained from the Funds at no
charge by writing or telephoning the Funds at their address or telephone
number shown above.

---------------------------------------------------------------------
| |
| Table of Contents |
| <TABLE> |
| <CAPTION> |
| |
| <S> <C> |
| The Funds.............................................. 1 |
| Investment Restrictions................................ 1 |
| How the Funds Invest................................... 4 |
| Performance Information................................ 9 |
| Investment Adviser..................................... 12 |
| Trustees and Officers.................................. 13 |
| Principal Shareholders................................. 15 |
| Purchasing and Redeeming Shares........................ 15 |
| Additional Tax Information............................. 16 |
| Taxation of Foreign Shareholders....................... 17 |
| Portfolio Transactions................................. 17 |
| Declaration of Trust................................... 20 |
| Custodian.............................................. 20 |
| Independent Public Accountants......................... 20 |
| Financial Statements................................... 20 |
| Appendix -- Bond Ratings............................... 21 |
| |
| </TABLE> |
| |
----------------------------------------------------------------------

<PAGE>

THE FUNDS

OAKMARK FUND seeks long-term capital appreciation by investing
primarily in equity securities.

SMALL CAP FUND seeks long-term capital appreciation by investing
primarily in equity securities of companies with small market
capitalizations.

BALANCED FUND seeks high current income with regard for both
preservation and growth of capital by investing in a diversified portfolio
of equity and fixed-income securities.

INTERNATIONAL FUND seeks long-term capital appreciation by investing
primarily in equity securities of non-U.S. issuers.

INTERNATIONAL EMERGING FUND seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers that have
small market capitalizations or that are located in emerging markets.

INVESTMENT RESTRICTIONS

In pursuing their respective investment objectives no Fund will:

1. In regard to 75% of its assets, invest more than 5% of its assets
(valued at the time of investment) in securities of any one issuer, except
in U.S. government obligations;

2. Acquire securities of any one issuer which at the time of
investment (a) represent more than 10% of the voting securities of the
issuer or (b) have a value greater than 10% of the value of the outstanding
securities of the issuer;

3. Invest more than 25% of its assets (valued at the time of
investment) in securities of companies in any one industry, except that
this restriction does not apply to investments in U.S. government
obligations;

4. Borrow money except from banks for temporary or emergency purposes
in amounts not exceeding 10% of the value of the Fund's assets at the time
of borrowing [the Fund will not purchase additional securities when its
borrowings, less receivables from portfolio securities sold, exceed 5% of
the value of the Fund's total assets];

5. Issue any senior security except in connection with permitted
borrowings;

6. Underwrite the distribution of securities of other issuers;
however the Fund may acquire "restricted" securities which, in the event of
a resale, might be required to be registered under the Securities Act of
1933 on the ground that the Fund could be regarded as an underwriter as
defined by that act with respect to such resale;/1/

/1/ In addition, each Fund must comply with certain state regulations that may
impose additional restrictions. Arkansas and Ohio regulations currently
prohibit investment of more than 10% of the Fund's assets in restricted
securities. See restriction 11.

1
<PAGE>

7. Make loans, but this restriction shall not prevent the Fund from
[Oakmark Fund only] investing in debt obligations, [other Funds] (a)
investing in debt obligations, (b) investing in repurchase agreements/2/,
or (c) lending its portfolio securities [the Fund will not lend securities
having a value in excess of 33-1/3% of its assets (valued at the time of
any loan)];

8. Purchase and sell real estate or interests in real estate,
although it may invest in marketable securities of enterprises which invest
in real estate or interests in real estate;/3/

9. Purchase and sell commodities or commodity contracts, except that
it may enter into forward foreign currency contracts;

10. Acquire securities of other investment companies except (a) by
purchase in the open market, where no commission or profit to a sponsor or
dealer results from such purchase other than the customary broker's
commission or (b) where the acquisition results from a dividend or a
merger, consolidation or other reorganization;/4/

11. Invest more than (a) 5% of its total assets (valued at the time
of investment) in securities of issuers (other than issuers of federal
agency obligations or securities issued or guaranteed by any foreign
country or asset-backed securities) that, together with any predecessors or
unconditional guarantors, have been in continuous operation for less than
three years ("unseasoned issuers") or (b) more than 15% of its total assets
(valued at time of investment) in restricted securities and securities of
unseasoned issuers;/5/

12. Pledge, mortgage or hypothecate its assets, except for temporary
or emergency purposes and then to an extent not greater than 15% of its
assets at cost;

- ----------
/2/ A repurchase agreement involves a sale of securities to a Fund with the
concurrent agreement of the seller (bank or securities dealer) to
repurchase the securities at the same price plus an amount equal to an
agreed-upon interest rate within a specified time. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses. No Fund may invest more than 15% of its net assets in repurchase
agreements maturing in more than seven days and other illiquid securities.

/3/ As long as shares of the Fund are qualified for sale in Texas, the Trust
will interpret "real estate" as including limited partnership interests,
but excluding readily marketable securities, including publicly traded
partnerships, of companies that invest in real estate.

/4/ In addition to this investment restriction, the Investment Company Act of
1940 provides that a Fund may neither purchase more than 3% of the voting
securities of any one investment company nor invest more than 10% of the
Fund's assets (valued at the time of investment) in all investment company
securities purchased by the Fund. In order to comply with California law,
each Fund has undertaken that it will not acquire or retain securities of
any open-end investment company. Investment in the shares of another
investment company would require the Fund to bear a portion of the
management and advisory fees paid by that investment company, which might
duplicate the fees paid by the Fund.

/5/ As long as it is required to do so by the Ohio Division of Securities,
the Trust will consider a security eligible for resale pursuant to Rule
144A under the Securities Act of 1933 to be a restricted security.

2
<PAGE>

13. Make margin purchases or participate in a joint or on a joint or
several basis in any trading account in securities;

14. Invest in companies for the purpose of management or the exercise
of control;

15. Purchase or retain securities of a company if all of the
directors and officers of the Fund and of its investment adviser who
individually own beneficially more than 1/2% of the securities of the
company collectively own beneficially more than 5% of such securities;

16. Invest more than 15% of its net assets (valued at the time of
investment) in illiquid securities, including repurchase agreements
maturing in more than seven days;

17. Invest in oil, gas or other mineral leases or exploration or
development programs, although it may invest in marketable securities of
enterprises engaged in oil, gas or mineral exploration;

18. [Oakmark Fund, Small Cap Fund and Balanced Fund only] Invest
more than 2% of its net assets (valued at the time of investment) in
warrants not listed on the New York or American stock exchanges, valued at
cost, nor more than 5% of its net assets in all warrants, provided that
warrants acquired in units or attached to other securities shall be deemed
to be without value for purposes of this restriction; [International Fund
and International Emerging Fund only] Invest more than 10% of its net
assets (valued at the time of investment) in warrants valued at the lower
of cost or market, provided that warrants acquired in units or attached to
securities shall be deemed to be without value for purposes of this
restriction;

19. [Oakmark Fund and Small Cap only] Invest more than 25% of its
total assets (valued at the time of investment) in securities of non-U.S.
issuers (other than securities represented by American Depositary Receipts)
[Balanced Fund only] Invest more than 10% of its total assets (valued at
the time of investment) in securities of non-U.S. issuers (other than
securities represented by American Depositary Receipts);/6/

20. Make short sales of securities unless the Fund owns at least an
equal amount of such securities, or owns securities that are convertible or
exchangeable, without payment of further consideration, into at least an
equal amount of such securities;

21. Invest in options, futures or options on futures, except that it
may invest in forward foreign currency contracts.

The first 10 restrictions listed above, except the bracketed portions,
are fundamental policies and may be changed only with the approval of the
holders of a "majority of the outstanding voting securities" of the
respective Fund, which is defined in the Investment Company Act of 1940
(the "1940 Act") as the lesser of (i) 67% of the shares of the Fund present
at a meeting if more than 50% of the outstanding shares of the Fund are
present in person or represented by proxy or (ii) more than 50% of the
outstanding shares of the Fund. Those restrictions not designated as
"fundamental," and a Fund's investment objective, may be changed by the
board of trustees without shareholder approval. A Fund's investment
objective will not be changed without at least 30 days' notice to
shareholders.

- ----------
/6/ Although securities represented by American Depositary Receipts
("ADRs") are not subject to restriction 19, none of these Funds has any
present intention to invest more than the indicated percentage of its total
assets in ADRs and securities of foreign issuers.

3
<PAGE>

Notwithstanding the foregoing investment restrictions, a Fund may
purchase securities pursuant to the exercise of subscription rights,
provided that such purchase will not result in the Fund's ceasing to be a
diversified investment company. Japanese and European corporations
frequently issue additional capital stock by means of subscription rights
offerings to existing shareholders at a price substantially below the
market price of the shares. The failure to exercise such rights would
result in a Fund's interest in the issuing company being diluted. The
market for such rights is not well developed in all cases and, accordingly,
a Fund may not always realize full value on the sale of rights. The
exception applies in cases where the limits set forth in the investment
restrictions would otherwise be exceeded by exercising rights or would have
already been exceeded as a result of fluctuations in the market value of a
Fund's portfolio securities with the result that the Fund would be forced
either to sell securities at a time when it might not otherwise have done
so, or to forego exercising the rights.

HOW THE FUNDS INVEST

SECURITIES OF NON-U.S. ISSUERS

International Fund and International Emerging Fund invest primarily in
securities of non-U.S. issuers, and the other Funds each may invest a minor
portion of their assets (up to 25% for Oakmark Fund and Small Cap Fund and
up to 10% for Balanced Fund) in securities of non-U.S. issuers.
International investing permits an investor to take advantage of the growth
in markets outside the United States. Investing in securities of non-U.S.
issuers may entail a greater degree of risk (including risks relating to
exchange rate fluctuations, tax provisions, or expropriation of assets)
than does investment in securities of domestic issuers. The Funds may
invest in securities of non-U.S. issuers directly or in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs),
Global Depositary Receipts (GDRs), or other securities representing
underlying shares of foreign issuers. Positions in these securities are not
necessarily denominated in the same currency as the common stocks into
which they may be converted. ADRs are receipts typically issued by an
American bank or trust company and trading in U.S. markets evidencing
ownership of the underlying securities. EDRs are European receipts
evidencing a similar arrangement. Generally ADRs, in registered form, are
designed for use in the U.S. securities markets and EDRs, in bearer form,
are designed for use in European securities markets. GDRs are receipts that
may trade in U.S. or non-U.S. markets. The Funds may invest in both
"sponsored" and "unsponsored" ADRs, EDRs or GDRs. In a sponsored depositary
receipt, the issuer typically pays some or all of the expenses of the
depository and agrees to provide its regular shareholder communications to
depositary receipt holders. An unsponsored depositary receipt is created
independently of the issuer of the underlying security. The depositary
receipt holders generally pay the expenses of the depository and do not
have an undertaking from the issuer of the underlying security to furnish
shareholder communications.

With respect to portfolio securities of non-U.S. issuers or
denominated in foreign currencies, a Fund's investment performance is
affected by the strength or weakness of the U.S. dollar against these
currencies. For example, if the dollar falls in value relative to the
Japanese yen, the dollar value of a yen-denominated stock held in the
portfolio will rise even though the price of the stock remains unchanged.
Conversely, if the dollar rises in value relative to the yen, the dollar
value of the yen-denominated stock will fall. See discussion of
transaction hedging and portfolio hedging under "Currency Exchange
Transactions."

You should understand and consider carefully the risks involved in
international investing. Investing in securities of non-U.S. issuers,
positions in which are generally denominated in foreign currencies, and
utilization of forward foreign currency exchange contracts involve certain
considerations comprising both risks and opportunities not typically
associated with investing in U.S. securities. These considerations
include: fluctuations in exchange rates of foreign currencies; possible
imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back to the United States; less
public information with respect to

4
<PAGE>

issuers of securities; less governmental supervision of stock exchanges,
securities brokers, and issuers of securities; different accounting,
auditing and financial reporting standards; different settlement periods
and trading practices; less liquidity and frequently greater price
volatility in foreign markets than in the United States; imposition of
foreign taxes; and sometimes less advantageous legal, operational and
financial protections applicable to foreign subcustodial arrangements.

Although the Funds try to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation of assets, confiscatory taxation, seizure or nationalization
of foreign bank deposits or other assets, establishment of exchange
controls, the adoption of foreign government restrictions, or other
adverse, political, social or diplomatic developments that could affect
investment in these nations.

PRIVATIZATIONS. Some governments have been engaged in programs of
selling part or all of their stakes in government owned or controlled
enterprises ("privatizations"). The adviser believes that privatizations
may offer opportunities for significant capital appreciation, and intends
to invest assets of International Fund and International Emerging Fund in
privatizations in appropriate circumstances. In certain of those markets,
the ability of foreign entities such as International Fund and
International Emerging Fund to participate in privatizations may be limited
by local law, and/or the terms on which such Funds may be permitted to
participate may be less advantageous than those afforded local investors.
There can be no assurance that governments will continue to sell companies
currently owned or controlled by them or that privatization programs will
be successful.

CURRENCY EXCHANGE TRANSACTIONS. Each Fund may enter into currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
for purchasing or selling currency prevailing in the foreign exchange
market or through a forward currency exchange contract ("forward
contract"). A forward contract is an agreement to purchase or sell a
specified currency at a specified future date (or within a specified time
period) and price set at the time of the contract. Forward contracts are
usually entered into with banks and broker-dealers, are not exchange-traded
and are usually for less than one year, but may be renewed.

Forward currency transactions may involve currencies of the different
countries in which a Fund may invest, and serve as hedges against possible
variations in the exchange rate between these currencies. A Fund's
currency transactions are limited to transaction hedging and portfolio
hedging involving either specific transactions or actual or anticipated
portfolio positions. Transaction hedging is the purchase or sale of a
forward contract with respect to specific receivables or payables of a Fund
accruing in connection with the purchase or sale of portfolio securities.
Portfolio hedging is the use of a forward contract with respect to an
actual or anticipated portfolio security position denominated or quoted in
a particular currency. When the Fund owns or anticipates owning securities
in countries whose currencies are linked, the Adviser may aggregate such
positions as to the currency hedged.

If a Fund enters into a forward contract hedging an anticipated
purchase of portfolio securities, liquid assets of the Fund, such as cash,
U.S. government securities or other liquid high grade debt obligations,
having a value at least as great as the commitment under the forward
contract will be segregated on the books of the Fund and held by the Fund's
custodian while the contract is outstanding.

At the maturity of a forward contract to deliver a particular
currency, a Fund may either sell the portfolio security related to such
contract and make delivery of the currency, or it may retain the security
and either acquire the currency on the spot market or terminate its
contractual obligation to deliver the currency by purchasing an offsetting
contract with the same currency trader obligating it to purchase on the
same maturity date the same amount of the currency.

5
<PAGE>

It is impossible to forecast with absolute precision the market value
of portfolio securities at the expiration of a forward contract.
Accordingly, it may be necessary for a Fund to purchase additional currency
on the spot market (and bear the expense of such purchase) if the market
value of the security is less than the amount of currency the Fund is
obligated to deliver and if a decision is made to sell the security and
make delivery of the currency. Conversely, it may be necessary to sell on
the spot market some of the currency received upon the sale of the
portfolio security if its market value exceeds the amount of currency the
Fund is obligated to deliver.

If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss to the extent
that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for
the sale of a currency and the date it enters into an offsetting contract
for the purchase of the currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase,
the Fund will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
A default on the contract would deprive the Fund of unrealized profits or
force the Fund to cover its commitments for purchase or sale of currency,
if any, at the current market price.

Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline. Such transactions also
preclude the opportunity for gain if the value of the hedged currency
should rise. Moreover, it may not be possible for the Fund to hedge
against a devaluation that is so generally anticipated that the Fund is not
able to contract to sell the currency at a price above the devaluation
level it anticipates. The cost to the Fund of engaging in currency
exchange transactions varies with such factors as the currency involved,
the length of the contract period, and prevailing market conditions. Since
currency exchange transactions are usually conducted on a principal basis,
no fees or commissions are involved.

DEBT SECURITIES

Each Fund may invest in debt securities, including lower-rated
securities (i.e., securities rated BB or lower by Standard & Poor's
Corporation ("S&P") or Ba or lower by Moody's Investor Services, Inc.
("Moody's"), commonly called "junk bonds") and securities that are not
rated. There are no restrictions as to the ratings of debt securities
acquired by a Fund or the portion of a Fund's assets that may be invested
in debt securities in a particular ratings category, except that
International Fund and International Emerging Fund will not invest more
than 10% of their respective total assets in securities rated below
investment grade, Balanced Fund will not invest more than 20% of its total
assets in such securities, and each of the other Funds will not invest more
than 25% of its total assets in such securities.

Securities rated BBB or Baa are considered to be medium grade and to
have speculative characteristics. Lower-rated debt securities are
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal. Investment in medium- or lower-quality debt
securities involves greater investment risk, including the possibility of
issuer default or bankruptcy. An economic downturn could severely disrupt
the market for such securities and adversely affect the value of such
securities. In addition, lower-quality bonds are less sensitive to
interest rate changes than higher-quality instruments and generally are
more sensitive to adverse economic changes or individual corporate
developments. During a period of adverse economic changes, including a
period of rising interest rates, issuers of such bonds may experience
difficulty in servicing their principal and interest payment obligations.

6
<PAGE>

Medium- and lower-quality debt securities may be less marketable than
higher-quality debt securities because the market for them is less broad.
The market for unrated debt securities is even narrower. During periods of
thin trading in these markets, the spread between bid and asked prices is
likely to increase significantly, and a Fund may have greater difficulty
selling its portfolio securities. See "Net Asset Value." The market value
of these securities and their liquidity may be affected by adverse
publicity and investor perceptions.

A description of the characteristics of bonds in each ratings category
is included in the appendix to this statement of additional information.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES

Each Fund may purchase securities on a when-issued or delayed-delivery
basis. Although the payment and interest terms of these securities are
established at the time a Fund enters into the commitment, the securities
may be delivered and paid for a month or more after the date of purchase,
when their value may have changed. A Fund makes such commitments only with
the intention of actually acquiring the securities, but may sell the
securities before settlement date if the adviser deems it advisable for
investment reasons. A Fund may utilize spot and forward foreign currency
exchange transactions to reduce the risk inherent in fluctuations in the
exchange rate between one currency and another when securities are
purchased or sold on a when-issued or delayed-delivered basis.

At the time a Fund enters into a binding obligation to purchase
securities on a when-issued basis, liquid assets of the Fund having a value
at least as great as the purchase price of the securities to be purchased
will be segregated on the books of the Fund and held by the custodian
throughout the period of the obligation. The use of these investment
strategies, as well as any borrowing by a Fund, may increase net asset
value fluctuation.

ILLIQUID SECURITIES

No Fund may invest in illiquid securities, if as a result such
securities would comprise more than 15% of the value of the Fund's assets.
In addition the Funds must comply with certain state regulations that may
impose more restrictive limitations.

If through the appreciation of illiquid securities or the depreciation
of liquid securities, the Fund should be in a position where more than 15%
of the value of its net assets are invested in illiquid assets, including
restricted securities, the Fund will take appropriate steps to protect
liquidity.

Illiquid securities may include restricted securities, which may be
sold only in privately negotiated transactions or in a public offering with
respect to which a registration statement is in effect under the Securities
Act of 1933 (the "1933 Act"). Where a Fund holds restricted securities and
registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Fund may be permitted to sell
a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Fund might obtain a
less favorable price than prevailed when it decided to sell. Restricted
securities will be priced at fair value as determined in good faith by the
board of trustees.

Notwithstanding the above, each Fund may purchase securities that,
although privately placed, are eligible for purchase and sale under Rule
144A under the 1933 Act. This rule permits certain qualified institutional
buyers, such as the Funds, to trade in privately placed securities even
though such securities are not registered under the 1933 Act. The adviser,
under the supervision of the board of trustees, may consider whether
securities purchased under Rule 144A

7
<PAGE>

are liquid and thus not subject to the Fund's restriction of investing no
more than 15% of its assets in illiquid securities, although the Ohio
Division of Securities currently requires each Fund to limit its investment
in Rule 144A securities and securities of "unseasoned issuers" to 15% of
total assets. (See restriction 11 under "Investment Restrictions.") A
determination of whether a Rule 144A security is liquid or not is a
question of fact. In making this determination the adviser will consider
the trading markets for the specific security taking into account the
unregistered nature of a Rule 144A security. In addition, the adviser could
consider the (1) frequency of trades and quotes, (2) number of dealers and
potential purchasers, (3) dealer undertakings to make a market, (4) and the
nature of the security and of market place trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics
of transfer). The liquidity of Rule 144A securities would be monitored and,
if as a result of changed conditions, it is determined that a Rule 144A
security is no longer liquid, the Fund's holdings of illiquid securities
would be reviewed to determine what, if any, steps are required to assure
that the Fund does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the effect of
increasing the amount of a Fund's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase such
securities.

SHORT SALES

Each Fund may sell securities short against the box, that is: (1)
enter into short sales of securities that it currently owns or has the
right to acquire through the conversion or exchange of other securities
that it owns without additional consideration; and (2) enter into
arrangements with the broker-dealers through which such securities are sold
short to receive income with respect to the proceeds of short sales during
the period the Fund's short positions remain open. A Fund may make short
sales of securities only if at all times when a short position is open the
Fund owns at least an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short.

In a short sale against the box, a Fund does not deliver from its
portfolio the securities sold and does not receive immediately the proceeds
from the short sale. Instead, the Fund borrows the securities sold short
from a broker-dealer through which the short sale is executed, and the
broker-dealer delivers such securities, on behalf of the Fund, to the
purchaser of such securities. Such broker-dealer is entitled to retain the
proceeds from the short sale until the Fund delivers to such broker-dealer
the securities sold short. In addition, the Fund is required to pay to the
broker-dealer the amount of any dividends paid on shares sold short.
Finally, to secure its obligation to deliver to such broker-dealer the
securities sold short, the Fund must deposit and continuously maintain in a
separate account with the Fund's custodian an equivalent amount of the
securities sold short or securities convertible into or exchangeable for
such securities without the payment of additional consideration. A Fund is
said to have a short position in the securities sold until it delivers to
the broker-dealer the securities sold, at which time the Fund receives the
proceeds of the sale. A Fund may close out a short position by purchasing
on the open market and delivering to the broker-dealer an equal amount of
the securities sold short, rather than by delivering portfolio securities.

Short sales may protect a Fund against the risk of losses in the value
of its portfolio securities because any unrealized losses with respect to
such portfolio securities should be wholly or partially offset by a
corresponding gain in the short position. However, any potential gains in
such portfolio securities should be wholly or partially offset by a
corresponding loss in the short position. The extent to which such gains
or losses are offset will depend upon the amount of securities sold short
relative to the amount the Fund owns, either directly or indirectly, and,
in the case where the Fund owns convertible securities, changes in the
conversion premium.

8
<PAGE>

Short sale transactions involve certain risks. If the price of the
security sold short increases between the time of the short sale and the
time a Fund replaces the borrowed security, the Fund will incur a loss and
if the price declines during this period, the Fund will realize a short-
term capital gain. Any realized short-term capital gain will be decreased,
and any incurred loss increased, by the amount of transaction costs and any
premium, dividend or interest which the Fund may have to pay in connection
with such short sale. Certain provisions of the Internal Revenue Code may
limit the degree to which a Fund is able to enter into short sales. There
is no limitation on the amount of each Fund's assets that, in the
aggregate, may be deposited as collateral for the obligation to replace
securities borrowed to effect short sales and allocated to segregated
accounts in connection with short sales. No Fund currently expects that
more than 20% of its total assets would be involved in short sales against
the box.

TEMPORARY STRATEGIES

Each Fund has the flexibility to respond promptly to changes in market
and economic conditions. In the interest of preserving shareholders'
capital, the adviser may employ a temporary defensive investment strategy
if it determines such a strategy to be warranted. Pursuant to such a
defensive strategy, a Fund temporarily may hold cash (U.S. dollars, foreign
currencies, or multinational currency units) and/or invest up to 100% of
its assets in high quality debt securities or money market instruments of
U.S. or foreign issuers, and most or all of International Fund's
investments and International Emerging Fund's investments may be made in
the United States and denominated in U.S. dollars. It is impossible to
predict whether, when or for how long a Fund will employ defensive
strategies.

In addition, pending investment of proceeds from new sales of Fund
shares or to meet ordinary daily cash needs, each Fund temporarily may hold
cash (U.S. dollars, foreign currencies or multinational currency units) and
may invest any portion of its assets in money market instruments.

PERFORMANCE INFORMATION

From time to time the Funds may quote total return figures in sales
material. "Total Return" for a period is the percentage change in value
during the period of an investment in Fund shares, including the value of
shares acquired through reinvestment of all dividends and capital gains
distributions. "Average Annual Total Return" is the average annual
compounded rate of change in value represented by the Total Return for the
period.

Average Annual Total Return will be computed as follows:

ERV = P(1+T)n

Where: P = the amount of an assumed initial investment in Fund
shares

T = average annual total return

n = number of years from initial investment to the end
of the period

ERV = ending redeemable value of shares held at the end
of the period

9
<PAGE>

For example, Total Return and Average Annual Total Return on a $1,000
investment in each of Oakmark Fund and International Fund for the following
periods ended October 31, 1995 were:

<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------- ---------------
<S> <C> <C>
Oakmark Fund
One year............................... 21.55% 21.55%
Life of Fund (from August 5, 1991)..... 223.97 32.00

International Fund
One year............................... (3.06) (3.06)
Life of Fund (from September 30, 1992). 46.59 13.20
</TABLE>

Because they are newly organized, similar information does not exist for
Small Cap Fund, Balanced Fund or International Emerging Fund.

Performance figures quoted by the Funds will assume reinvestment of
all dividends and distributions, but will not take into account income
taxes payable by shareholders. The Funds impose no sales charge and pay no
distribution ("12b-1") expenses. Each Fund's performance is a function of
conditions in the securities markets, portfolio management, and operating
expenses. Although information such as yield and total return is useful in
reviewing a Fund's performance and in providing some basis for comparison
with other investment alternatives, it should not be used for comparison
with other investments using different reinvestment assumptions or time
periods.

In advertising and sales literature, the performance of a Fund may be
compared with that of other mutual funds, indexes or averages of other
mutual funds, indexes of related financial assets or data, and other
competing investment and deposit products available from or through other
financial institutions. The composition of these indexes or averages
differs from that of the Funds. Comparison of a Fund to an alternative
investment should consider differences in features and expected
performance.

All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Funds generally believe
to be accurate. The Funds may also refer to publicity (including
performance rankings) in newspapers, magazines, or other media from time to
time. However, the Funds assume no responsibility for the accuracy of such
data. Newspapers and magazines that might mention the Funds include, but
are not limited to, the following:

Barron's Global Finance Pensions and Investments
Business Week Investor's Daily Personal Investor
Changing Times Kiplinger's Personal Finance Smart Money
Chicago Tribune Los Angeles Times Stanger Reports
Chicago Sun-Times Money Time
Crain's Chicago Business Mutual Fund Letter USA Today
Consumer Reports Mutual Funds Magazine U.S. News and World
Consumer Digest Morningstar Report
Financial World Newsweek The Wall Street Journal
Forbes The New York Times Worth
Fortune

10
<PAGE>

A Fund may compare its performance to the Consumer Price Index (All Urban),
a widely recognized measure of inflation. The performance of a Fund may also be
compared to the Morgan Stanley EAFE (Europe, Australia and Far East) Index, a
generally accepted benchmark for performance of major overseas markets, and to
the following indexes or averages:

<TABLE>
<S> <C>
Dow-Jones Industrial Average Wilshire 5000

Standard & Poor's 500 Stock Index New York Stock Exchange Composite Index

Standard & Poor's 400 Industrials American Stock Exchange Composite Index

Standard & Poor's Small Cap 600 NASDAQ Composite

Standard & Poor's Mid Cap 400 NASDAQ Industrials
</TABLE>

In addition, each of Oakmark Fund, Small Cap Fund and Balanced Fund may
compare its performance to the following indexes and averages: Value Line Index;
Lipper Capital Appreciation Fund Average; Lipper Growth Funds Average; Lipper
Small Company Growth Funds Average; Lipper General Equity Funds Average; Lipper
Equity Funds Average; and Lipper Small Company Growth Fund Index. Each of
International Fund and International Emerging Fund may compare its performance
to the following indexes and averages: Lipper International & Global Funds
Average; Lipper International Fund Index; Lipper International Equity Funds
Average; Morgan Stanley Capital International World ex the U.S. Index;
Morningstar International Stock Average.

Lipper Indexes and Averages are calculated and published by Lipper
Analytical Services, Inc. ("Lipper"), an independent service that monitors the
performance of more than 1,000 funds. The Funds may also use comparative
performance as computed in a ranking by Lipper or category averages and rankings
provided by another independent service. Should Lipper or another service
reclassify a Fund to a different category or develop (and place a Fund into) a
new category, that Fund may compare its performance or ranking against other
funds in the newly assigned category, as published by the service. Each Fund may
also compare its performance or ranking against all funds tracked by Lipper or
another independent service, including Morningstar, Inc.

The Funds may cite their ratings, recognition, or other mention by
Morningstar or any other entity. Morningstar's rating system is based on risk-
adjusted total return performance and is expressed in a star-rating format. The
risk-adjusted number is computed by subtracting a fund's risk score (which is a
function of the fund's monthly returns less the 3-month T-bill return) from the
fund's load-adjusted total return score. This numerical score is then translated
into rating categories, with the top 10% labeled five star, the next 22.5%
labeled four star, the next 35% labeled three star, the next 22.5% labeled two
star, and the bottom 10% one star. A high rating reflects either above-average
returns or below-average risk or both.

To illustrate the historical returns on various types of financial assets,
the Funds may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains)
very long-term (since 1926) total return data (including, for example, total
return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks; small company stocks; long-term corporate bonds; long-term government
bonds; intermediate-term government bonds; U.S. Treasury bills; and Consumer
Price Index.

11
<PAGE>

INVESTMENT ADVISER

The Funds' investment adviser, Harris Associates L.P. (the "Adviser"),
furnishes continuing investment supervision to the Funds and is responsible for
overall management of the Funds' business affairs pursuant to investment
advisory agreements relating to the respective Funds dated September 30, 1995
(the "Agreements"). The Adviser furnishes office space, equipment and personnel
to the Funds, and assumes the expenses of printing and distributing the Funds'
prospectus and reports to prospective investors.

Each Fund pays the cost of its custodial, stock transfer, dividend
disbursing, bookkeeping, audit and legal services. Each Fund also pays other
expenses such as the cost of proxy solicitations, printing and distributing
notices and copies of the prospectus and shareholder reports furnished to
existing shareholders, taxes, insurance premiums, the expenses of maintaining
the registration of that Fund's shares under federal and state securities laws
and the fees of trustees not affiliated with the Adviser.

The Agreements provide that the total annual expenses of each Fund,
exclusive of taxes, interest and extraordinary litigation expenses, but
including fees paid to the Adviser, shall not exceed the limits imposed by the
securities regulations of any state in which the Fund's shares are qualified for
sale, and the Adviser has agreed to reimburse each Fund for any such expenses in
excess of such limits. The Advisor believes that currently the most restrictive
limits are 2.5% of the first $30 million of a Fund's average net assets, 2% of
the next $70 million, and 1.5% thereafter. Brokers' commissions and other
charges relating to the purchase or sale of securities are not regarded as
expenses for this purpose. Moreover, for purposes of calculating the expenses
subject to this limitation, the excess custodian costs attributable to
investments in foreign securities compared to the custodian costs which would
have been incurred had the investments been in domestic securities are excluded.
In addition, the Adviser has voluntarily agreed to reimburse each of Small Cap
Fund, Balanced Fund and International Emerging Fund to the extent that the
Fund's annual ordinary operating expenses exceed 2.5% of its average net assets
through October 31, 1996, subject to earlier termination by the Adviser on 30
days' notice to the Fund. For the purpose of determining whether a Fund is
entitled to any reduction in advisory fee or expense reimbursement, that Fund's
expenses are calculated daily and any reduction in fee or reimbursement is made
monthly.

For its services as investment adviser, the Adviser receives from each Fund
a monthly fee based on that Fund's net assets at the end of the preceding month.
The annual rates of fees as a percentage of each Fund's net assets are as
follows:

FUND FEE
---------------------- ----------------------------------------------
<S> <C>

Balanced .75%

Oakmark 1% up to $2.5 billion; .95% on the next $1.25
billion; .90% on the next $1.25 billion; and
.85% on net assets in excess of $5 billion

International 1% up to $2.5 billion; .95% on the next $2.5
billion; and .90% on net assets in excess of
$5 billion

Small Cap and 1.25%
International Emerging

</TABLE>

Oakmark Fund paid advisory fees of $21,215,738, $13,431,816 and $6,164,542
for the fiscal years ended October 31, 1995, 1994 and 1993, respectively.
International Fund paid advisory fees of $9,916,904, $13,080,028 and $2,151,162
for the fiscal years ended October 31,

12
<PAGE>

1995, 1994 and 1993, respectively. The other Funds did not commence operations
until November 1, 1995.

The Agreement for each Fund is for an initial term expiring September 30,
1996. Each Agreement will continue from year to year thereafter so long as such
continuation is approved at least annually by (1) the board of trustees or the
vote of a majority of the outstanding voting securities of the Fund, and (2) a
majority of the trustees who are not interested persons of any party to the
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. Each Agreement may be terminated at any time, without penalty, by
either the Trust or the Adviser upon sixty days' written notice, and is
automatically terminated in the event of its assignment as defined in the 1940
Act.

The Agreement for each Fund will terminate automatically upon the
consummation of the anticipated merger of New England Mutual Life Insurance
Company (which controls the Adviser) into Metropolitan Life Insurance Company.
However, it is expected that concurrent with that merger the Trust will enter a
new investment advisory agreement for each Fund with the Adviser on terms
identical to the terms of the Fund's present Agreement except for a change in
the effective date of the new agreement and an initial term expiring September
30, 1997.

The Adviser is a limited partnership managed by its general partner, Harris
Associates, Inc., whose directors are David G. Herro, Robert M. Levy, Roxanne M.
Martino, Victor A. Morgenstern, William C. Nygren, John Raitt, Neal Ryland,
Robert J. Sanborn and Peter S. Voss. Mr. Morgenstern is the president and chief
executive officer of Harris Associates, Inc.

TRUSTEES AND OFFICERS

Information on the trustees and officers of the Trust is included in the
Funds' prospectus under "Trustees and Officers." All of that information is
incorporated herein by reference.

The addresses of the trustees are as follows:

Michael J. Friduss c/o MJ Friduss & Associates
1555 Museum Drive
Highland Park, Illinois 60035

Thomas H. Hayden c/o Bozell Worldwide, Inc.
625 North Michigan Avenue
Chicago, Illinois 60611-3110

Christine M. Maki c/o Hyatt Corporation
200 West Madison Street
Chicago, Illinois 60606

Victor A. Morgenstern c/o Harris Associates L.P.
Two North La Salle Street, Suite 500
Chicago, Illinois 60602

Allan J. Reich c/o D'Ancona & Pflaum
30 North La Salle Street, Suite 2900
Chicago, Illinois 60602

13
<PAGE>

Marv R. Rotter c/o Rotter & Associates
5 Revere Drive, Suite 400
Northbrook, Illinois 60062-1571

Burton W. Ruder c/o The Academy Group
707 Skokie Boulevard, Suite 410
Northbrook, Illinois 60062

Peter S. Voss c/o New England Investment Companies, L.P.
399 Boylston Street
Boston, Massachusetts 02116

Gary N. Wilner, M.D. c/o Evanston Hospital
2650 Ridge Avenue
Evanston, Illinois 60201

Messrs. Morgenstern and Voss are trustees who are "interested persons" of
the Trust as defined in the 1940 Act. They and Dr. Wilner are members of the
executive committee, which has authority during intervals between meetings of
the board of trustees to exercise the powers of the board, with certain
exceptions.

At November 15, 1995, the trustees and officers as a group owned
beneficially less than one percent of the outstanding shares of each Fund.

The following table shows the compensation paid by the Trust in the fiscal
year ended October 31, 1995 to each trustee who was not an "interested person"
of the Trust:

AGGREGATE
COMPENSATION
NAME OF TRUSTEE FROM THE TRUST*
- --------------------------------------------------------------------------------

James W. Ford $18,500
Michael J. Friduss 0
Thomas H. Hayden 0
Christine M. Maki 0
Allan J. Reich 17,500
Burton W. Ruder 0
Gary N. Wilner, M.D. 17,500
- --------------------------------------------------------------------------------

* The Trust is not part of a fund complex. Ms. Bucher and Messrs. Friduss,
Hayden and Ruder became trustees on September 29, 1995. Mr. Rotter did not
become a trustee until after October 5, 1995.

Other trustees who are "interested persons" of The Trust, as well as the
officers of the Trust, are compensated by the Adviser and not by The Trust. The
Trust does not provide any pension or retirement benefits to its trustees.

14
<PAGE>

PRINCIPAL SHAREHOLDERS

The only persons known by the Trust to own of record or "beneficially"
(within the meaning of that term as defined in rule 13d-3 under the Securities
Exchange Act of 1934) 5% or more of the outstanding shares of any Fund as of
November 15, 1995 were Donald Terao, as Trustee of the Harris Associates L.P.
Profit Sharing Trust, who held 8.6% of the shares of Small Cap Fund, 8.5% of the
shares of Balanced Fund and 12.2% of the shares of International Emerging Fund;
Victor A. Morgenstern, who owned beneficially 6.3% of the shares of Small Cap
Fund and 15.4% of the shares of International Emerging Fund; Clyde and Joan
McGregor, who owned beneficially 22.7% of the shares of Balanced Fund; David G.
Herro, who owned 16.8% of the shares of International Emerging Fund, and
American National Bank & Trust Co. of Chicago, as Trustee of the Donald Levin
Revocable Trust, who owned 5.0% of the shares of International Emerging Fund.
The address of American National Bank & Trust Co. of Chicago is 33 North La
Salle Street, Chicago, Illinois 60690 and the address of the other named
beneficial holders is Two North La Salle Street, Chicago, Illinois 60602.

PURCHASING AND REDEEMING SHARES

Purchases and redemptions are discussed in the Funds' prospectus under the
headings "How to Purchase Shares," "How to Redeem Shares," and "Shareholder
Services." All of that information is incorporated herein by reference.

The net asset value per share of each Fund is determined by the Trust's
custodian, State Street Bank and Trust Company. Securities traded on securities
exchanges, or in the over-the-counter market in which transaction prices are
reported on the NASDAQ National Market System, are valued at the last sales
prices at the time of valuation or, lacking any reported sales on that day, at
the most recent bid quotations. Other securities traded over-the-counter are
also valued at the most recent bid quotations. Money market instruments having a
maturity of 60 days or less from the valuation date are valued on an amortized
cost basis. The values of securities of foreign issuers are generally based upon
market quotations which, depending upon local convention or regulation, may be
last sale price, last bid or asked price, or the mean between last bid and asked
prices as of, in each case, the close of the appropriate exchange or other
designated time. Securities for which quotations are not available and any other
assets are valued at a fair value as determined in good faith by the board of
trustees. All assets and liabilities initially expressed in foreign currencies
are converted into U.S. dollars at the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by any major bank or dealer. If such
quotations are not available, the rate of exchange will be determined in
accordance with policies established in good faith by the Board.

The Funds' net asset values are determined only on days on which the New
York Stock Exchange is open for trading. The Exchange is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in February, Good
Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving and
Christmas. If one of these holidays falls on a Saturday or Sunday, the Exchange
will be closed on the preceding Friday or the following Monday, respectively.

Trading in the portfolio securities of International Fund or International
Emerging Fund (and of any other Fund, to the extent it invests in securities of
non-U.S. issuers) takes place in various foreign markets on certain days (such
as Saturday) when the Fund is not open for business and does not calculate its
net asset value. In addition, trading in the Fund's portfolio securities may not
occur on days when the Fund is open. Therefore, the calculation of net asset
value does not take place contemporaneously with the determinations of the
prices of many of the

15
<PAGE>

Fund's portfolio securities and the value of the Fund's portfolio may be
significantly affected on days when shares of the Fund may not be purchased or
redeemed.

Computation of net asset value (and the sale and redemption of a Fund's
shares) may be suspended or postponed during any period when (a) trading on the
New York Stock Exchange is restricted, as determined by the Securities and
Exchange Commission, or that exchange is closed for other than customary weekend
and holiday closings, (b) the Commission has by order permitted such suspension,
or (c) an emergency, as determined by the Commission, exists making disposal of
portfolio securities or valuation of the net assets of a Fund not reasonably
practicable.

Shares of any of the Funds may be purchased through certain financial
service companies, without incurring any transaction fee. For accounting and
shareholder servicing services provided by such a company with respect to Fund
shares held by that company for its customers, the company may charge a fee of
up to 0.35% of the annual average value of those accounts. Each Fund pays a
portion of those fees not to exceed the estimated fees that the Fund would pay
to its own transfer agent if the shares of the Fund held by such customers of
the company were registered directly in their names on the books of the Fund's
transfer agent. The balance of those fees are paid by the Adviser.

The Trust has elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which it is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of a Fund during any 90-day
period for any one shareholder. Redemptions in excess of the above amounts will
normally be paid in cash, but may be paid wholly or partly by a distribution in
kind of marketable securities.

Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem at net asset value the shares of any shareholder
whose account in any Fund has a value of less than the minimum amount specified
by the board of trustees, which currently is $1,000. Before such a redemption,
the shareholder will be notified that the account value is less than the minimum
and will be allowed at least 30 days to bring the value of the account up to the
minimum. The agreement and declaration of trust also authorizes the Trust to
redeem shares under certain other circumstances as may be specified by the board
of trustees.

In connection with the Exchange Plan, the Adviser acts as a Service
Organization for the Government Portfolio and the Tax-Exempt Diversified
Portfolio of Goldman Sachs Money Market Trust and the GS Short Duration Fund
Portfolio of Goldman Sachs Trust. For its services it receives fees at rates of
up to .50% of the average annual net assets of each account in those portfolios
established through the Exchange Plan, pursuant to 12b-1 plans adopted by those
investment companies.

ADDITIONAL TAX INFORMATION

GENERAL. Each Fund intends to continue to qualify to be taxed as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, so as to be relieved of federal income tax on its capital gains and net
investment income currently distributed to its shareholders. At the time of your
purchase, a Fund's net asset value may reflect undistributed income, capital
gains or net unrealized appreciation of securities held by that Fund. A
subsequent distribution to you of such amounts, although constituting a return
of your investment, would be taxable either as dividends or capital gain
distributions.

16
<PAGE>

INTERNATIONAL FUND AND INTERNATIONAL EMERGING FUND. Dividends and
distributions paid by International Fund and International Emerging Fund are not
eligible for the dividends-received deduction for corporate shareholders, if as
expected, none of such Funds' income consists of dividends paid by United States
corporations. Capital gain distributions paid by the Funds are never eligible
for this deduction.

Certain foreign currency gains and losses, including the portion of gain or
loss on the sale of debt securities attributable to foreign exchange rate
fluctuations are taxable as ordinary income. If the net effect of these
transactions is a gain, the dividend paid by either of these Funds will be
increased; if the result is a loss, the income dividend paid by either of these
Funds will be decreased.

Income received by International Fund or International Emerging Fund from
sources within various foreign countries will be subject to foreign income taxes
withheld at the source. Under the Code, if more than 50% of the value of the
Fund's total assets at the close of its taxable year comprise securities issued
by foreign corporations, the Fund may file an election with the Internal Revenue
Service to "pass through" to the Fund's shareholders the amount of foreign
income taxes paid by the Fund. Pursuant to this election, shareholders will be
required to: (i) include in gross income, even though not actually received,
their respective pro rata share of foreign taxes paid by the Fund; (ii) treat
their pro rata share of foreign taxes as paid by them; and (iii) either deduct
their pro rata share of foreign taxes in computing their taxable income, or use
it as a foreign tax credit against U.S. income taxes (but not both). No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions.

Both International Fund and International Emerging Fund intend to meet the
requirements of the Code to "pass through" to its shareholders foreign income
taxes paid, but there can be no assurance that a Fund will be able to do so.
Each shareholder will be notified within 60 days after the close of each taxable
year of a Fund, if the foreign taxes paid by the Fund will "pass through" for
that year, and, if so, the amount of each shareholder's pro rata share (by
country) of (i) the foreign taxes paid, and (ii) the Fund's gross income from
foreign sources. Of course, shareholders who are not liable for federal income
taxes, such as retirement plans qualified under Section 401 of the Code, will
not be affected by any such "pass through" of foreign tax credits.

TAXATION OF FOREIGN SHAREHOLDERS

The Code provides that dividends from net income (which are deemed to
include for this purpose each shareholder's pro rata share of foreign taxes paid
by International Fund and International Emerging Fund (see discussion of "pass
through" of the foreign tax credit to U.S. shareholders), will be subject to
U.S. tax. For shareholders who are not engaged in a business in the U.S., this
tax would be imposed at the rate of 30% upon the gross amount of the dividend in
the absence of a Tax Treaty providing for a reduced rate or exemption from U.S.
taxation. Distributions of net long-term capital gains realized by these Funds
are not subject to tax unless the foreign shareholder is a nonresident alien
individual who was physically present in the U.S. during the tax year for more
than 182 days.

PORTFOLIO TRANSACTIONS

Portfolio transactions for each Fund are placed with those securities
brokers and dealers that the Adviser believes will provide the best value in
transaction and research services for that Fund, either in a particular
transaction or over a period of time. Subject to that standard, portfolio
transactions for each Fund may be executed through Harris Associates Securities
L.P. ("HASLP"), a registered broker-dealer and an affiliate of the Adviser.

17
<PAGE>

In valuing brokerage services, the Adviser makes a judgment as to which
brokers are capable of providing the most favorable net price (not necessarily
the lowest commission) and the best execution in a particular transaction. Best
execution connotes not only general competence and reliability of a broker, but
specific expertise and effort of a broker in overcoming the anticipated
difficulties in fulfilling the requirements of particular transactions, because
the problems of execution and the required skills and effort vary greatly among
transactions.

Although some transactions involve only brokerage services, many involve
research services as well. In valuing research services, the Adviser makes a
judgment of the usefulness of research and other information provided by a
broker to the Adviser in managing a Fund's investment portfolio. In some cases,
the information, e.g., data or recommendations concerning particular securities,
relates to the specific transaction placed with the broker, but for the greater
part the research consists of a wide variety of information concerning
companies, industries, investment strategy and economic, financial and political
conditions and prospects, useful to the Adviser in advising the Funds.

The Adviser is the principal source of information and advice to the Funds,
and is responsible for making and initiating the execution of the investment
decisions for each Fund. However, the board of trustees recognizes that it is
important for the Adviser, in performing its responsibilities to the Funds, to
continue to receive and evaluate the broad spectrum of economic and financial
information that many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of the Funds to take into account the
value of the information received for use in advising the Funds. Consequently,
the commission paid to brokers (other than HASLP) providing research services
may be greater than the amount of commission another broker would charge for the
same transaction. The extent, if any, to which the obtaining of such information
may reduce the expenses of the Adviser in providing management services to the
Funds is not determinable. In addition, it is understood by the board of
trustees that other clients of the Adviser might also benefit from the
information obtained for the Funds, in the same manner that the Funds might also
benefit from information obtained by the Adviser in performing services to
others.

HASLP may act as broker for a Fund in connection with the purchase or sale
of securities by or to the Fund if and to the extent permitted by procedures
adopted from time to time by the board of trustees of the Trust. The board of
trustees, including a majority of the trustees who are not "interested"
trustees, has determined that portfolio transactions for a Fund may be executed
through HASLP if, in the judgment of the Adviser, the use of HASLP is likely to
result in prices and execution at least as favorable to the Fund as those
available from other qualified brokers and if, in such transactions, HASLP
charges the Fund commission rates at least as favorable to the Fund as those
charged by HASLP to comparable unaffiliated customers in similar transactions.
The board of trustees has also adopted procedures that are reasonably designed
to provide that any commissions, fees or other remuneration paid to HASLP are
consistent with the foregoing standard. The Funds will not effect principal
transactions with HASLP. In executing transactions through HASLP, the Funds will
be subject to, and intend to comply with, section 17(e) of the 1940 Act and
rules thereunder.

The reasonableness of brokerage commissions paid by the Funds in relation
to transaction and research services received is evaluated by the staff of the
Adviser on an ongoing basis. The general level of brokerage charges and other
aspects of the Funds' portfolio transactions are reviewed periodically by the
board of trustees.

Transactions of the Funds in the over-the-counter market and the third
market are executed with primary market makers acting as principal except where
it is believed that better prices and execution may be obtained otherwise.

18
<PAGE>

Although investment decisions for the Funds are made independently from
those for other investment advisory clients of the Adviser, it may develop that
the same investment decision is made for both a Fund and one or more other
advisory clients. If both a Fund and other clients purchase or sell the same
class of securities on the same day, the transactions will be allocated as to
amount and price in a manner considered equitable to each.

The Funds do not purchase securities with a view to rapid turnover.
However, there are no limitations on the length of time that portfolio
securities must be held. Portfolio turnover can occur for a number of reasons,
including general conditions in the securities market, more favorable investment
opportunities in other securities, or other factors relating to the desirability
of holding or changing a portfolio investment. A high rate of portfolio turnover
would result in increased transaction expense, which must be borne by the Fund.
High portfolio turnover may also result in the realization of capital gains or
losses and, to the extent net short-term capital gains are realized, any
distributions resulting from such gains will be considered ordinary income for
federal income tax purposes. The portfolio turnover rates for Oakmark Fund and
International Fund are set forth in the prospectus under "Financial Highlights."
The portfolio turnover rate of each of Small Cap Fund, Balanced Fund and
International Emerging Fund is not expected to exceed 100%.

The following table shows the aggregate brokerage commissions (excluding
the gross underwriting spread on securities purchased in initial public
offerings) paid by each of Oakmark Fund and International Fund during the
periods indicated, as well as the aggregate commissions paid to affiliated
persons of the Trust. The other Funds did not commence operations until November
1, 1995.

<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------------
1995 1994 1993
------------------- ----------------- -----------------
<S> <C> <C> <C>
Oakmark Fund
Aggregate commissions........... $2,100,849 (100%) $1,594,102 (100%) $1,307,780 (100%)
Commissions paid to affiliates.. 389,339 (18.5%) 244,055 ( 15%) 336,495 ( 26%)

International Fund
Aggregate commissions........... $2,609,780 (100%) $5,170,141 (100%) $2,336,588 (100%)
Commissions paid to affiliates.. 71,600 (2.7%) 6,980 (0.1%) -0-

</TABLE>

Of the aggregate brokerage commissions paid during the 1995 fiscal year,
Oakmark Fund and International Fund paid $2,098,694 and $2,609, respectively, to
brokers who furnished research services.

The brokerage commissions paid by Oakmark Fund to an affiliated person
during fiscal years 1995, 1994 and 1993 were paid in connection with
transactions aggregating 7.5%, 17% and 24%, respectively, of the aggregate
dollar amount of transactions involving the payment of brokerage commissions by
the Fund.

The brokerage commissions paid by International Fund to an affiliated
person during fiscal years 1995 and 1994 were paid in connection with
transactions aggregating 1.6% and 0.3%, respectively, of the aggregate dollar
amount of transactions involving the payment of brokerage commissions by the
Fund.

19
<PAGE>

DECLARATION OF TRUST

The Agreement and Declaration of Trust under which the Trust has been
organized ("Declaration of Trust") disclaims liability of the shareholders,
trustees and officers of the Trust for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation,
or contract entered into or executed by the Trust or the board of trustees. The
Declaration of Trust provides for indemnification out of the Trust's assets for
all losses and expenses of any shareholder held personally liable for
obligations of the Trust. Thus, although shareholders of a business trust may,
under certain circumstances, be held personally liable under Massachusetts law
for the obligations of the Trust, the risk of a shareholder incurring financial
loss on account of shareholder liability is believed to be remote because it is
limited to circumstances in which the disclaimer is inoperative and the Trust
itself is unable to meet its obligations. The risk to any one series of
sustaining a loss on account of liabilities incurred by another series is also
believed to be remote.

CUSTODIAN

State Street Bank and Trust Company, P.O. Box 8510, Boston Massachusetts
02266-8510 is the custodian for the Trust. It is responsible for holding all
securities and cash of each Fund, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Funds, and performing
other administrative duties, all as directed by authorized persons of the Trust.
The custodian also performs certain portfolio accounting services for the Funds,
for which each Fund pays the custodian a monthly fee. The fee paid by Oakmark
Fund is $2,500 per month. The fee paid by Oakmark International is $3,000 per
month. The fee paid by each of Small Cap Fund and Balanced Fund is $2,500 per
month and the fee paid by International Emerging Fund is $3,000 per month, which
fees have been waived during the first six months of operations of each of the
Funds. The custodian does not exercise any supervisory function in such matters
as the purchase and sale of portfolio securities, payment of dividends, or
payment of expenses of a Fund. The Trust has authorized the custodian to deposit
certain portfolio securities of each Fund in central depository systems as
permitted under federal law. The Funds may invest in obligations of the
custodian and may purchase or sell securities from or to the custodian.

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603, audits
and reports on each Fund's annual financial statements, reviews certain
regulatory reports and the Funds' federal income tax returns, and performs other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust.

FINANCIAL STATEMENTS

Copies of the annual reports for Oakmark Fund and International Fund for
the fiscal year ended October 31, 1995 accompany this Statement of Additional
Information. Those reports contain financial statements, notes thereto,
supplementary information entitled "Condensed Financial Information" and reports
of independent auditors, all of which (but no other part of the reports) are
incorporated herein by reference.

A copy of the Funds' Prospectus and additional copies of the reports to
shareholders of Oakmark Fund and International Fund may be obtained from the
Trust at no charge by writing to the Trust at the address shown on the cover
page of this statement of additional information, or by telephoning the number
shown on the cover page.

20
<PAGE>

APPENDIX -- BOND RATINGS

A rating by a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general and
are not absolute standards of quality or guarantees as to the credit-worthiness
of an issuer. Consequently, the Adviser believes that the quality of debt
securities in which the Fund invests should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell, or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the rating services
from other sources which they consider reliable. Ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.

The following is a description of the characteristics of ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").

RATINGS BY MOODY'S:

AAA. Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or an exceptionally stable margin and
principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.

AA. Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in the Aaa bonds, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.

A. Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

BAA. Bonds rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

BA. Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
other good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B. Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA. Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

21
<PAGE>

CA. Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

C. Bonds rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

Ratings By Standard & Poor's:

AAA. Debt rated AAA has the highest rating. Capacity to pay interest and
repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.

A. Debt rated A has a very strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.

BB-B-CCC-CC. Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

C. This rating is reserved for income bonds on which no interest is being
paid.

D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

NOTE: The ratings from AA to B may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within the major rating
categories.