HARRIS ASSOCIATES INVESTMENT TRUST, 497, 1999-01-08

HARRIS ASSOCIATES INVESTMENT TRUST
497, 1999-01-08

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<PAGE>

PROSPECTUS

JANUARY 4, 1999

THE OAKMARK FUND

THE OAKMARK SELECT FUND

THE OAKMARK SMALL CAP FUND

THE OAKMARK EQUITY AND INCOME FUND

THE OAKMARK INTERNATIONAL FUND

THE OAKMARK INTERNATIONAL SMALL CAP FUND

MEMBER OF 100% NO-LOAD MUTUAL FUND COUNCIL

MANAGED BY HARRIS ASSOCIATES L.P.

OAKMARK
<PAGE>
THE OAKMARK FAMILY OF FUNDS

1999 PROSPECTUS

......................................................

HIGHLIGHTS..................................................................2
SHAREHOLDER TRANSACTION EXPENSES..........................................4
ANNUAL FUND OPERATING EXPENSES............................................4
FINANCIAL HIGHLIGHTS......................................................7
THE FUNDS..................................................................14
HOW THE FUNDS INVEST.....................................................14
INVESTMENT TECHNIQUES....................................................18
RISK FACTORS.............................................................22
RESTRICTIONS ON THE FUNDS' INVESTMENTS...................................26
PURCHASING SHARES..........................................................28
HOW TO PURCHASE SHARES-CLASS I...........................................28
HOW TO PURCHASE SHARES-CLASS II..........................................30
REDEEMING SHARES...........................................................32
HOW TO REDEEM SHARES-CLASS I.............................................32
HOW TO REDEEM SHARES-CLASS II............................................36
SHAREHOLDER SERVICES-CLASS I.............................................37
SHAREHOLDER SERVICES-CLASS II............................................39
NET ASSET VALUE..........................................................39
DISTRIBUTIONS..............................................................39
TAXES......................................................................39
MANAGEMENT OF THE FUNDS....................................................41
PERFORMANCE INFORMATION....................................................46
OTHER INFORMATION..........................................................47
FOR MORE INFORMATION:
Access our website at www.oakmark.com to obtain a
prospectus, an application, periodic reports or your
account information, or call 1-800-OAKMARK
(1-800-625-6275).

[LOGO]
WEBSITE AND 24-HOUR NET ASSET VALUE HOTLINE:
Access our website at www.oakmark.com to
obtain the current net asset value per share of a Fund, or
call 1-800-GROWOAK (1-800-476-9625).

THE OAKMARK FAMILY OF FUNDS
<PAGE>
JANUARY 4, 1999

...............................................................................

<TABLE>
<S> <C>
FUND/CLASS I TICKER SYMBOL INVESTMENT OBJECTIVE
- -------------------------------------------------------------
THE OAKMARK FUND Long-Term Capital
OAKMX Appreciation
The Fund invests primarily
in U.S. equity securities.
.............................................................
THE OAKMARK Long-Term Capital
SELECT FUND Appreciation
OAKLX The Fund invests primarily
in a non-diversified
portfolio of U.S. equity
securities.
.............................................................
THE OAKMARK Long-Term Capital
SMALL CAP FUND Appreciation
OAKSX The Fund invests primarily
(RE-OPENED TO NEW INVESTORS AS in U.S. equity securities of
OF AUGUST 31, 1998) companies with small market
capitalizations.
.............................................................
THE OAKMARK High Current Income and
EQUITY AND INCOME FUND Preservation and Growth of
OAKBX Capital
The Fund invests primarily
in a diversified portfolio
of U.S. equity and
fixed-income securities.
.............................................................
THE OAKMARK Long-Term Capital
INTERNATIONAL FUND Appreciation
OAKIX The Fund invests primarily
in equity securities of
non-U.S. issuers.
.............................................................
THE OAKMARK Long-Term Capital
INTERNATIONAL SMALL CAP FUND Appreciation
OAKEX The Fund invests primarily
in equity securities of
non-U.S. issuers with small
market capitalizations.
.............................................................
NO LOAD, NO SALES CHARGE, NO 12b-1 FEES
MINIMUM INITIAL INVESTMENT-- $1,000 or $500 for Automatic
Investment Plan, Payroll
Deduction Plan or Education
IRA
MINIMUM SUBSEQUENT $100 (see "Purchasing
INVESTMENTS-- Shares")
</TABLE>

Each "Fund" is a series of Harris Associates Investment Trust. Each Fund offers
two classes of shares, Class I and Class II, each of which is offered in this
prospectus. The Funds may invest to a limited extent in high-yield, high-risk
bonds and in other securities that entail certain risks. See "The Funds-Risk
Factors."
This prospectus contains information you should know before investing. Please
retain it for future reference. A Statement of Additional Information regarding
the Funds dated the date of this prospectus has been filed with the Securities
and Exchange Commission and (together with any supplement to it) is incorporated
by reference. That Statement may be obtained at no charge by writing or
telephoning the transfer agent at its address or telephone number shown inside
the back cover. The Statement, material incorporated by reference and other
information regarding registrants that file electronically with the Commission
is available at website http://www.sec.gov.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

PROSPECTUS 1
<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 six 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 six series are: The Oakmark Fund ("Oakmark Fund"), The
Oakmark Select Fund ("Select Fund"), The Oakmark Small Cap Fund ("Small Cap
Fund"), The Oakmark Equity and Income Fund ("Equity and Income Fund"), The
Oakmark International Fund ("International Fund") and The Oakmark International
Small Cap Fund ("International Small Cap Fund"). Each is a "no-load" fund, and
there are no sales or 12b-1 charges.

As of the date of this prospectus, the Trust offers two classes of shares of
each Fund. The classes are designated Class I Shares and Class II Shares. Class
II Shares are the new class of shares being offered as of the date of this
prospectus. The Class II Shares of each Fund are offered to certain 401(k) plans
and certain other tax-qualified plans. Class I Shares of each Fund are offered
to the general public. If you held shares of a Fund on January 1, 1999, those
shares have been renamed Class I Shares so that you now hold Class I Shares of
your Fund. Although the name of your shares is now different, the shares will
remain the same in all other respects, and if, in the future, you want to
purchase additional shares for your Fund account, you will purchase the Class I
Shares offered to the general public. Since Class II Shares of each Fund are
being offered to certain 401(k) plans and other tax-qualified plans, Class II
Shares of the Fund pay a service fee at the annual rate of .25% of the average
net assets of Class II Shares of the Fund for the administrative services
associated with the administration of such tax-qualified retirement plans.

When newspapers and other media report the net asset value (NAV) or the
performance of shares of a Fund, they will use the Class I and Class II
designations to differentiate between the classes.

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 plans

2 THE OAKMARK FAMILY OF FUNDS
<PAGE>
(including tax-qualified retirement plans and Individual Retirement Account
(IRA) plans and Educational IRAs), and NOT FOR INVESTORS WHO INTEND TO LIQUIDATE
THEIR INVESTMENTS AFTER A SHORT PERIOD OF TIME. Only Equity and Income 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 long-term capital appreciation.

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

SELECT FUND seeks long-term capital appreciation by investing primarily in a
non-diversified portfolio of U.S. equity securities.

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

EQUITY AND INCOME FUND seeks high current income and preservation and growth of
capital by investing primarily in a diversified portfolio of U.S. equity and
fixed-income securities.

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

INTERNATIONAL SMALL CAP FUND seeks long-term capital appreciation by investing
primarily in equity securities of non-U.S. issuers with small market
capitalizations.

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 each Fund is $1,000 or $500 in the case of
the Automatic Investment Plan, Payroll Deduction Plan, or Education IRA; each
additional investment must be at least $100. For

PROSPECTUS 3
<PAGE>
information on purchasing Fund shares, see "Purchasing Shares."

REDEMPTIONS

For information on redeeming Fund shares, see "Redeeming Shares."

NET ASSET VALUE

The purchase and redemption price of either class of a Fund's shares is the net
asset value per share of that class. 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."

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
ALL FUNDS
<S> <C>
- -----------------------------------------------------------------------------
COMMISSION TO PURCHASE SHARES (SALES LOAD) NONE
.............................................................................
COMMISSION TO REINVEST DIVIDENDS NONE
.............................................................................
DEFERRED SALES LOAD NONE
.............................................................................
REDEMPTION FEE* NONE
.............................................................................
FEE TO EXCHANGE SHARES NONE
.............................................................................
</TABLE>

* If you request payment of redemption proceeds by wire transfer, you must pay
the cost of the wire transfer (currently $5).

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

The following tables are 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 "Purchasing Shares" and "Management of
the Funds," as well as the Statement of Additional Information incorporated by
reference into this prospectus.

4 THE OAKMARK FAMILY OF FUNDS
<PAGE>
The Class I Shares of each Fund incurred the following expenses during the
fiscal year ended September 30, 1998:

<TABLE>
<CAPTION>
EQUITY AND INT'L
OAKMARK SELECT SMALL CAP INCOME INT'L SMALL CAP
FUND FUND FUND FUND FUND FUND
CLASS I CLASS I CLASS I CLASS I CLASS I CLASS I
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT MANAGEMENT FEES .93% .98% 1.28% .74% 1.03% 1.27%
.................................................................................................................................
12b-1 FEES NONE NONE NONE NONE NONE NONE
.................................................................................................................................
OTHER EXPENSES .15 .24 .17 .57 .29 .69
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.08% 1.22% 1.45% 1.31% 1.32% 1.96%
.................................................................................................................................
</TABLE>

It is estimated that Class II Shares of each Fund will incur the following
expenses (annualized) during their initial partial fiscal year ending September
30, 1999:

<TABLE>
<CAPTION>
OAKMARK EQUITY AND INT'L
FUND SELECT SMALL CAP INCOME INT'L SMALL CAP
CLASS FUND FUND FUND FUND FUND
II CLASS II CLASS II CLASS II CLASS II CLASS II
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT MANAGEMENT FEES .93% .98% 1.28% .74% 1.03% 1.27%
..................................................................................................................................
12b-1 FEES NONE NONE NONE NONE NONE NONE
..................................................................................................................................
SERVICE FEE .25 .25 .25 .25 .25 .25
..................................................................................................................................
OTHER EXPENSES .15 .24 .17 .57 .29 .69
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.33% 1.47% 1.70% 1.56% 1.57% 2.21%
..................................................................................................................................
</TABLE>

PROSPECTUS 5
<PAGE>
The following examples illustrate the expenses that you would pay on a $1,000
investment in shares of each class of each Fund over various time periods
assuming (1) a 5% annual rate of return, (2) the operating expense percentages
listed in the applicable 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.

The projected expenses for Class I Shares of each Fund are shown below:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
OAKMARK FUND CLASS I $11 $34 $59 $131
...................................................................................................................................
SELECT FUND CLASS I 12 38 66 147
...................................................................................................................................
SMALL CAP FUND CLASS I 15 46 79 174
...................................................................................................................................
EQUITY AND INCOME FUND CLASS I 13 41 71 157
...................................................................................................................................
INTERNATIONAL FUND CLASS I 13 41 72 159
...................................................................................................................................
INTERNATIONAL SMALL CAP FUND CLASS I 20 62 106 229
...................................................................................................................................
</TABLE>

The projected expenses for Class II Shares of each Fund are shown below:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
OAKMARK FUND CLASS II $14 $43 $74 $161
.................................................................................................................................
SELECT FUND CLASS II 15 46 80 175
.................................................................................................................................
SMALL CAP FUND CLASS II 17 53 92 200
.................................................................................................................................
EQUITY AND INCOME FUND CLASS II 16 49 85 186
.................................................................................................................................
INTERNATIONAL FUND CLASS II 16 50 86 188
.................................................................................................................................
INTERNATIONAL SMALL CAP FUND CLASS II 22 69 118 254
.................................................................................................................................
</TABLE>

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

6 THE OAKMARK FAMILY OF FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------
The tables below for Oakmark Fund, Select Fund, Small Cap Fund, Equity and
Income Fund, International Fund and International Small Cap Fund reflect the
results of the operations for a Class I Share outstanding throughout the periods
shown and have been audited by Arthur Andersen LLP, independent public
accountants. Because no Class II Shares had been issued as of September 30,
1998, similar information does not exist for them. 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.

OAKMARK FUND CLASS I

<TABLE>
<CAPTION>
YEAR 11 MONTHS
ENDED ENDED YEAR ENDED OCTOBER 31,
SEPT. 30, SEPT. 30, ---------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 41.21 $ 32.39 $ 28.47 $ 25.21 $ 24.18 $ 17.11 $ 12.10 $ 10.00
.......................................................................................................................
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (LOSS) 0.47 0.36 0.34 0.30 0.27 0.17 (0.03) (0.01)
.......................................................................................................................
NET GAINS OR LOSSES ON
SECURITIES (BOTH REALIZED
AND UNREALIZED) (1.73) 10.67 4.70 4.66 1.76 7.15 5.04 2.11
......... ......... ........ ........ ........ ........
TOTAL FROM INVESTMENT
OPERATIONS (1.26) 11.03 5.04 4.96 2.03 7.32 5.01 2.10
LESS DISTRIBUTIONS:
DIVIDENDS (FROM NET
INVESTMENT INCOME) (0.40) (0.34) (0.28) (0.23) (0.23) (0.04) - -
.......................................................................................................................
DISTRIBUTIONS (FROM CAPITAL
GAINS) (6.01) (1.87) (0.84) (1.47) (0.77) (0.21) - -
.......................................................................................................................
TOTAL DISTRIBUTIONS (6.41) (2.21) (1.12) (1.70) (1.00) (0.25) - -
.......................................................................................................................
NET ASSET VALUE,
END OF PERIOD $ 33.54 $ 41.21 $ 32.39 $ 28.47 $ 25.21 $ 24.18 $ 17.11 $ 12.10
......... ......... ........ ........ ........ ........
TOTAL RETURN (4.06)% 39.24%* 18.07% 21.55% 8.77% 43.21% 41.40% 87.10%*
.......................................................................................................................
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD
($ MILLION) $6,924.0 $6,614.9 $3,933.9 $2,827.1 $1,677.3 $1,107.0 $114.7 $4.8
.......................................................................................................................
RATIO OF EXPENSES TO AVERAGE
NET ASSETS 1.08% 1.08%* 1.18% 1.17% 1.22% 1.32% 1.70% 2.50%(b)*
.......................................................................................................................
RATIO OF NET INCOME (LOSS)
TO AVERAGE NET ASSETS 1.22% 1.19%* 1.13% 1.27% 1.19% 0.94% (.24)% (0.66)%(c)*
.......................................................................................................................
PORTFOLIO TURNOVER RATE 43% 17% 24% 18% 29% 18% 34% 0%
.......................................................................................................................
</TABLE>

- ----------------------------------
*Data has been annualized.

(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.

PROSPECTUS 7
<PAGE>
SELECT CLASS I

<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED
YEAR ENDED SEPT. 30,
SEPT. 30, 1998 1997
<S> <C> <C>
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.34 $10.00
............................................................................................
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (LOSS) 0.03 (0.01)
............................................................................................
NET GAINS OR LOSSES ON SECURITIES
(BOTH REALIZED AND UNREALIZED) 0.56 6.35
............................................................................................
TOTAL FROM INVESTMENT OPERATIONS 0.59 6.34
............................................................................................
LESS DISTRIBUTIONS:
............................................................................................
DIVIDENDS (FROM NET INVESTMENT INCOME) 0.00 0.00
............................................................................................
DISTRIBUTIONS (FROM CAPITAL GAINS) (0.17) 0.00
....... ........
TOTAL DISTRIBUTIONS (0.17) 0.00
....... ........
NET ASSET VALUE, END OF PERIOD $ 16.76 $16.34
....... ........
TOTAL RETURN 3.64% 69.16%*
............................................................................................
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD ($ MILLION) $1,227.9 $514.2
............................................................................................
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.22% 1.12%*
............................................................................................
RATIO OF NET INCOME (LOSS) TO AVERAGE NET ASSETS 0.17% (0.11)%*
............................................................................................
PORTFOLIO TURNOVER RATE 56% 37%
............................................................................................
</TABLE>

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

*Data has been annualized.

8 THE OAKMARK FAMILY OF FUNDS
<PAGE>
SMALL CAP CLASS I

<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED
YEAR ENDED SEPT. 30, YEAR ENDED
SEPT. 30, 1998 1997 OCT. 31, 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.34 $ 13.19 $10.00
............................................................................................................
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (LOSS) (0.12) (0.01) (0.02)
............................................................................................................
NET GAINS OR LOSSES ON SECURITIES
(BOTH REALIZED AND UNREALIZED) (4.73) 7.16 3.21
............................................................................................................
TOTAL FROM INVESTMENT OPERATIONS (4.85) 7.15 3.19
............................................................................................................
LESS DISTRIBUTIONS:
............................................................................................................
DIVIDENDS (FROM NET INVESTMENT INCOME) 0.00 0.00 0.00
............................................................................................................
DISTRIBUTIONS (FROM CAPITAL GAINS) (2.86) 0.00 0.00
...... ....... .........
TOTAL DISTRIBUTIONS (2.86) 0.00 0.00
...... ....... .........
NET ASSET VALUE, END OF PERIOD $ 12.63 $ 20.34 $13.19
...... ....... .........
TOTAL RETURN (26.37)% 59.14%* 31.94%
............................................................................................................
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD ($ MILLION) $ 618.0 $1,513.4 $218.4
............................................................................................................
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.45% 1.37%* 1.61%
............................................................................................................
RATIO OF NET INCOME (LOSS) TO AVERAGE NET ASSETS (0.40)% (0.25)%* (0.29)%
............................................................................................................
PORTFOLIO TURNOVER RATE 34% 27% 23%
............................................................................................................
</TABLE>

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

*Data has been annualized.

PROSPECTUS 9
<PAGE>
EQUITY AND INCOME CLASS I

<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED
YEAR ENDED SEPT. 30, YEAR ENDED
SEPT. 30, 1998 1997 OCT. 31, 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $14.49 $11.29 $10.00
............................................................................................................
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (LOSS) 0.29 0.21 0.10
............................................................................................................
NET GAINS OR LOSSES ON SECURITIES (BOTH REALIZED AND
UNREALIZED) 0.04 3.24 1.19
............................................................................................................
TOTAL FROM INVESTMENT OPERATIONS 0.33 3.45 1.29
............................................................................................................
LESS DISTRIBUTIONS:
............................................................................................................
DIVIDENDS (FROM NET INVESTMENT INCOME) (0.24) (0.12) 0.00
............................................................................................................
DISTRIBUTIONS (FROM CAPITAL GAINS) (0.59) (0.13) 0.00
.... .... .........
TOTAL DISTRIBUTIONS (0.83) (0.25) 0.00
.... .... .........
NET ASSET VALUE, END OF PERIOD $13.99 $14.49 $11.29
.... .... .........
TOTAL RETURN 2.57% 34.01%* 12.91%
............................................................................................................
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD ($ MILLION) $ 57.7 $ 33.5 $ 13.8
............................................................................................................
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.31% 1.50%*(a) 2.50%(a)
............................................................................................................
RATIO OF NET INCOME (LOSS) TO AVERAGE NET ASSETS 2.39% 2.38%*(a) 1.21%(a)
............................................................................................................
PORTFOLIO TURNOVER RATE 46% 53% 66%
............................................................................................................
</TABLE>

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

*Data has been annualized.

(a) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the investment adviser, ratios would have been as follows:

<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1997 OCTOBER 31, 1996
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.70% 2.64%
...................................................................................................
RATIO OF NET INCOME (LOSS) TO AVERAGE NET ASSETS 2.18% 1.08%
...................................................................................................
</TABLE>

10 THE OAKMARK FAMILY OF FUNDS
<PAGE>
INTERNATIONAL FUND CLASS I

<TABLE>
<CAPTION>
11 MONTHS
YEAR ENDED ENDED YEAR ENDED OCTOBER 31,
SEPT. 30, SEPT. 30, ----------------------------------------------------
1998 1997 1996 1995 1994 1993 1992(a)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.77 $ 14.92 $ 12.97 $14.50 $ 14.09 $ 9.80 $ 10.00
..................................................................................................................
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (LOSS) 0.41 0.27 0.09 0.30 0.21 0.06 0.26
..................................................................................................................
NET GAINS OR LOSSES ON SECURITIES
(BOTH REALIZED AND UNREALIZED) (5.32) 3.74 2.90 (0.77) 0.43 4.48 (0.46)
....... ....... ......... ...... ........ ...... .......
TOTAL FROM INVESTMENT OPERATIONS (4.91) 4.01 2.99 (0.47) 0.64 4.54 (0.20)
..................................................................................................................
LESS DISTRIBUTIONS:
..................................................................................................................
DIVIDENDS (FROM NET INVESTMENT
INCOME) (0.58) (0.16) 0.00 0.00 (0.08) (0.25) -
..................................................................................................................
DISTRIBUTIONS (FROM CAPITAL
GAINS) (2.86) 0.00 (1.04) (1.06) (0.15) - -
....... ....... ......... ...... ........ ...... .......
TOTAL DISTRIBUTIONS (3.44) (0.16) (1.04) (1.06) (0.23) (0.25) -
....... ....... ......... ...... ........ ...... .......
NET ASSET VALUE, END OF PERIOD $ 10.42 $ 18.77 $ 14.92 $12.97 $ 14.50 $14.09 $ 9.80
....... ....... ......... ...... ........ ...... .......
TOTAL RETURN (29.90%) 29.63%* 24.90% (3.06%) 4.62% 47.49% $(22.81%)*
..................................................................................................................
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD
($ MILLION) $ 756.1 $1.647.3 $1,172.8 $819.7 $1,286.0 $815.4 $ 23.5
..................................................................................................................
RATIO OF EXPENSES TO AVERAGE NET
ASSETS 1.32% 1.26%* 1.32% 1.40% 1.37% 1.26% 2.04%
..................................................................................................................
RATIO OF NET INCOME (LOSS) TO
AVERAGE NET ASSETS 1.95% 2.09%* 1.45% 1.40% 1.44% 1.55% 37.02%
..................................................................................................................
PORTFOLIO TURNOVER RATE 43% 61% 42% 26% 55% 21% 0%
..................................................................................................................
</TABLE>

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

* Ratios have been annualized.

(a) From September 30, 1992, the date on which Fund shares were first offered
for sale to the public.

PROSPECTUS 11
<PAGE>
INTERNATIONAL SMALL CAP FUND CLASS I

<TABLE>
<CAPTION>
YEAR ELEVEN YEAR
ENDED MONTHS ENDED ENDED
SEPT. 30, 1998 SEPT. 30, 1997 OCT. 31, 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.20 $11.41 $10.00
.............................................................................................................
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (LOSS) 0.18 0.13 0.04
.............................................................................................................
NET GAINS OR LOSSES ON SECURITIES (BOTH REALIZED AND
UNREALIZED) (4.09) 1.10 1.37
...... .... .........
TOTAL FROM INVESTMENT OPERATIONS (3.91) 1.23 1.41
.............................................................................................................
LESS DISTRIBUTIONS:
.............................................................................................................
DIVIDENDS (FROM NET INVESTMENT INCOME) (0.06) (0.08) 0.00
.............................................................................................................
DISTRIBUTIONS (FROM CAPITAL GAINS) (1.34) (0.36) 0.00
...... .... .........
TOTAL DISTRIBUTIONS (1.40) (0.44) 0.00
...... .... .........
NET ASSET VALUE, END OF PERIOD $ 6.89 $12.20 $11.41
...... .... .........
TOTAL RETURN (35.20%) 12.07%* 14.15%
.............................................................................................................
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD
($ MILLION) $ 51.8 $ 66.0 $ 39.8
.............................................................................................................
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.96% 1.93%* 2.50%(a)
.............................................................................................................
RATIO OF NET INCOME (LOSS)
TO AVERAGE NET ASSETS 2.17% 1.23%* 0.65%(b)
.............................................................................................................
PORTFOLIO TURNOVER RATE 69% 63% 27%
.............................................................................................................
</TABLE>

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

* Ratios have been annualized.

(a) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the investment adviser, the ratio of expenses to average
net assets would have been 2.65%.

(b) Computed giving effect to the Adviser's expense limitation undertaking.

12 THE OAKMARK FAMILY OF FUNDS
<PAGE>
For the Funds named below, bank borrowing activity for the 11 months ended
September 30, 1997 was as follows:

<TABLE>
<CAPTION>
AVERAGE DEBT MAXIMUM AMOUNT
WEIGHTED OUTSTANDING OUTSTANDING
DEBT OUTSTANDING AVERAGE DURING PERIOD DURING PERIOD
AT END OF PERIOD INTEREST RATE (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
SELECT FUND $0 6.217% $126 $10,000
..................................................................................................................................
SMALL CAP FUND 0 6.318 198 19,000
..................................................................................................................................
EQUITY AND INCOME FUND 0 6.125 6 1,000
..................................................................................................................................
</TABLE>

For the Funds named below, bank borrowing activity for the year ended September
30, 1998 was as follows:

PROSPECTUS 13
<PAGE>
THE FUNDS

The mutual funds offered by this prospectus are OAKMARK FUND, SELECT FUND, SMALL
CAP FUND, EQUITY AND INCOME FUND, INTERNATIONAL FUND AND INTERNATIONAL SMALL CAP
FUND. Each of the Funds is a no-load "mutual fund" and, except for Select Fund,
is a diversified 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 Fund is a separate
portfolio of securities and other assets, with its own investment objective and
policies. The Funds are available for purchase by residents of the United
States, Puerto Rico, Guam and the U.S. Virgin Islands.

Each Fund offers two classes of shares: Class I Shares and Class II Shares. Each
class is offered at net asset value per share of that class. Class I Shares of
each Fund are offered to members of the general public. The shares of each Fund
that were outstanding on January 1, 1999 have been designated Class I Shares of
that Fund. Class II Shares of each Fund are offered to certain 401(k) plans and
other tax-qualified plans. Class II Shares of the Fund pay a service fee at the
annual rate of .25% of the average net assets of Class II Shares of the Fund for
the administrative services associated with the administration of such
tax-qualified retirement plans.

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 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.

14 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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 of issuers based in emerging markets. See "Risk
Factors-International Investing" below.

SELECT FUND seeks long-term capital appreciation by investing primarily in a
non-diversified portfolio of equity securities.

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 of issuers based in emerging markets. See "Risk
Factors-International Investing" below.

As a "non-diversified" fund, the Fund is not limited under the Investment
Company Act of 1940 in the percentage of its assets that it may invest in any
one issuer. See "Risk Factors-Non-diversification of Select Fund."

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, valued at the time of investment, in "small cap companies,"
as defined below under "How the Funds Invest-Small Cap Companies." Although
income is considered in the selection of securities, the Fund is not designed
for investors whose primary investment objective is income.

At September 30, 1998 the median market capitalization of the companies held in
the Fund's portfolio was

PROSPECTUS 15
<PAGE>
$365.3 million. See "How the Funds Invest-Median Market Capitalization" below.

EQUITY AND INCOME 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).

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
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. 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
of issuers based 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. Although income is considered in the
selection of securities, the Fund is not designed for investors whose primary
investment objective is income.

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 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.

16 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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. Under normal market conditions, the Fund invests at least
65% of its total assets, valued at the time of investment, in securities of
non-U.S. issuers.

INTERNATIONAL SMALL CAP FUND seeks long-term capital appreciation by investing
primarily in equity securities of non-U.S. issuers with small market
capitalizations. Under normal market conditions, the Fund invests at least 65%
of its total assets, valued at the time of investment, in "small cap companies,"
as defined below under "Small Cap Companies." Although income is considered in
the selection of securities, the Fund is not designed for investors whose
primary investment objective is income.

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. 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.

At September 30, 1998 the median market capitalization of the companies held in
the Fund's portfolio was $125.3 million. See "How the Funds Invest-Median Market
Capitalization" below.

OTHER STRATEGIES. Under normal market conditions, each Fund expects to be
substantially fully invested in the types of securities described in the
preceding paragraphs. Within the limitations described in this prospectus, the
percentages of Fund assets invested in various types of securities will vary in

PROSPECTUS 17
<PAGE>
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.

SMALL CAP COMPANIES. As used in this prospectus a "small cap company" is one
whose market capitalization is no larger than the largest market capitalization
of the companies included in the S&P Small Cap 600 Index (the "S&P Index") as
most recently reported. The market capitalization of a company is the total
market value of its outstanding common stock. The S&P Index is a broad index of
600 small capitalization companies. As of September 30, 1998 the largest market
capitalization of companies included in the S&P Index was $3.2 billion.

MEDIAN MARKET CAPITALIZATION. The "median market capitalization" of the
companies held in the portfolio of Small Cap Fund or of International Small Cap
Fund stated above is a measure of the size of the companies in which the Fund
invests. One-half of the Fund's equity investments as of the stated date were in
securities of companies with market capitalizations at or below the stated
median market capitalization of the Fund's portfolio.

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.

18 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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, Select Fund and Small Cap Fund may
invest up to 25% of its assets, Equity and Income Fund may invest up to 20% of
its assets, and International Fund and International Small Cap Fund may invest
up to 10% of its assets (valued at the time of 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

PROSPECTUS 19
<PAGE>
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. The Funds' forward 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 a specific receivable or payable 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. 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

20 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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.

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 earnings on 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 delays in liquidating the loan collateral or
recovering the loaned securities and incur expenses related to enforcing its
rights. In addition, there could be a decline in the value of the collateral or
in the value of the securities loaned while the Fund seeks to enforce its rights
thereto and the Fund could experience subnormal levels of income and lack of
access to income during this period.

OPTIONS. Each Fund may purchase both call options and put options on securities.
A call or put option is a contract that gives the Fund, in return for a premium
paid on purchase of the option, the right to buy from, or to sell to, the seller
of the option the security underlying the option at a specified

PROSPECTUS 21
<PAGE>
exercise price during the term of the option.

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 Equity and Income 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 Small Cap 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 case of Equity and Income 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

22 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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 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 Small Cap
Fund provide an efficient way for an individual to participate in foreign
markets, but their expenses, including advisory and custody fees,

PROSPECTUS 23
<PAGE>
are higher than for a typical domestic equity fund.

The European Monetary Union has established a common European currency for
participating countries called the "euro." Each participating country will
supplement its existing currency with the euro effective January 1, 1999 and
replace its existing currency with the euro on July 2, 2002. The consequences of
the euro conversion for foreign exchange rates, interest rates and the value of
European securities are currently unclear. Uncertainties include whether
operational systems of banks and other financial institutions will be able to
deal with the euro conversion both before and after the effective date; whether
exchange rates for existing currencies and the euro will be applied
successfully; whether suitable clearing and settlement systems will be created
for the new currency; how certain financial contracts that refer to existing
currencies rather than the euro will be interpreted; and whether the interest
rate, tax and labor regimes of European countries participating in the euro will
converge over time. These and other factors, including economic and political
risks, could cause market disruptions before or after the introduction of the
euro, and could adversely affect the value of securities held by International
Fund and International Small Cap 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

24 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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 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.

NON-DIVERSIFICATION OF SELECT FUND. As a "non-diversified" fund, Select Fund is
not limited under the Investment Company Act of 1940 in the percentage of its
assets that it may invest in any one issuer. However, the Fund intends to comply
with the diversification standards applicable to regulated investment companies
under the Internal Revenue Code of 1986. In order to meet those standards, among
other requirements, at the close of each quarter of its taxable year (a) at
least 50% of the value of the Fund's total assets must be represented by one or
more of the following: (i) cash and cash items, including receivables; (ii) U.S.
Government securities; (iii) securities of other regulated investment companies;
and (iv) securities (other than those in items (ii) and (iii) above) of any one
or more issuers as to which the Fund's investment in an issuer does not exceed
5% of the value of the Fund's total assets (valued at the time of investment);
and (b) not more than 25% of its total assets (valued at the time of investment)
may be invested in the securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).

Since Select Fund may invest more than 5% of its assets in a single portfolio
security, the appreciation or depreciation of such a security will have a
greater impact on the net asset value of the Fund, and the net asset value per
share of the Fund can be expected to fluctuate more than would the net asset
value of a comparable "diversified" fund. See Investment Restriction number 1,
below.

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

PROSPECTUS 25
<PAGE>
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.

YEAR 2000. The smooth operation of the Funds depends on the ability of the
Funds' custodian and the other service providers to the Funds to provide
services without interruption. Some computer systems used today are unable to
process date-related information because they are not programmed to distinguish
between the year 2000 and the year 1900. The Adviser, like many other
businesses, is taking steps to ensure that the computer systems on which the
smooth operation of the Funds depends will continue to function properly. The
Adviser is working with the service providers to the Funds, such as the
custodian and various broker-dealers through which portfolio securities of the
Funds are traded, to arrange for testing of internal and external systems. Based
on the information currently available, the Adviser does not anticipate any
material impact on the delivery of services currently provided. There can be no
guarantee, however, that the steps taken by the Adviser in preparation for the
year 2000 will be sufficient to avoid any adverse impact on the Funds.

RESTRICTIONS ON THE FUNDS' INVESTMENTS
No Fund will:

1. [THIS RESTRICTION DOES NOT APPLY TO SELECT FUND] 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

26 THE OAKMARK FAMILY OF FUNDS
<PAGE>
5. Make loans, except that each Fund may invest in debt obligations and
repurchase agreements, * and each Fund other than Oakmark Fund may lend its
portfolio securities [a Fund will not lend securities having a value in excess
of 33% of its assets, including collateral received for loaned securities
(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.

* 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.

PROSPECTUS 27
<PAGE>
PURCHASING SHARES

The Funds are available for purchase by residents of the United States, Puerto
Rico, Guam and the U.S. Virgin Islands.

HOW TO PURCHASE SHARES-CLASS I
The following purchase procedures apply ONLY TO CLASS I SHARES.

You may purchase shares of any of the Funds by check, by wire transfer, by
electronic transfer or by exchange. There are no sales commissions or
underwriting discounts. The minimum initial investment for each Fund is $1,000
or $500 in the case of an Education IRA or participation in the Automatic
Investment Plan or Payroll Deduction Plan. 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 New
Account Registration Form 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.

To make subsequent purchases of shares, submit a check along with the stub from
your Fund account confirmation statement or submit a check and a note indicating
the amount of the purchase, your account number, and the name in which your
account is registered. THE TRUST WILL NOT ACCEPT CASH, DRAFTS, "STARTER" CHECKS,
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 TRANSFER. You may also purchase shares by instructing your bank to wire
transfer money to the Trust's custodian bank. Your bank may charge you a fee for
sending the wire transfer. IF YOU ARE OPENING A NEW ACCOUNT BY WIRE TRANSFER,
YOU MUST FIRST TELEPHONE THE TRANSFER AGENT AT 1-800-OAKMARK (CHOOSE MENU OPTION
2) TO REQUEST AN ACCOUNT NUMBER AND TO 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 transfer systems.

BY TELEPHONE CALL AND ELECTRONIC TRANSFER. If you have an established Fund
account with an established electronic transfer privilege, you may

28 THE OAKMARK FAMILY OF FUNDS
<PAGE>
pay for subsequent purchases of shares by having the purchase price transferred
electronically from your bank account by calling the Funds' Voice Response
System ("OAKLINK") at 1-800-OAKMARK and choosing menu options 1 then 3 and
following the instructions, or by calling a shareholder service representative
at 1-800-OAKMARK and choosing menu option 2. 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 AUTOMATIC INVESTMENT. You may authorize the monthly or quarterly subsequent
purchase of shares of a Fund for a specified dollar amount to be transferred
electronically from your bank account each month or quarter. You may choose the
Automatic Investment Plan on your New Account Registration Form. If you choose
the Automatic Investment Plan, your minimum initial investment is $500.

BY PAYROLL DEDUCTION. You may also make subsequent purchases of shares of a Fund
on a monthly, bi-monthly or quarterly basis by authorizing your employer to
deduct from your paycheck a specified dollar amount (minimum subsequent
investment $100 per Fund). To enroll in the Payroll Deduction Plan, you must
complete the Payroll Deduction Plan Application. If you choose the Payroll
Deduction Plan, your minimum initial investment is $500.

BY EXCHANGE. You may purchase shares of a Fund by exchange of shares from
another Fund or by exchange of "Oakmark Units." (Oakmark Units are Service Units
of GS Short Duration Tax-Free Fund, a portfolio of Goldman Sachs Trust, or ILA
Service Units of Government Portfolio or Tax-Exempt Portfolio, each a portfolio
of Goldman Sachs-Institutional Liquid Assets). You may initiate a purchase by
exchange either by calling the Funds'-Voice Response System, OAKLINK, at
1-800-OAKMARK and choosing menu options 1 then 3 and following the instructions,
or by calling a shareholder service representative at 1-800-OAKMARK and choosing
menu option 2 (if the telephone exchange privilege has been established on the
account from which the exchange is being made), or by mail, or you may authorize
a monthly or quarterly redemption of a specified dollar amount of Oakmark Units
to be used to purchase shares of a Fund. AN EXCHANGE TRANSACTION IS A SALE AND
PURCHASE OF SHARES FOR FEDERAL INCOME TAX PURPOSES AND MAY RESULT IN CAPITAL
GAIN OR LOSS. EXCEPT FOR AUTOMATIC EXCHANGES FROM OAKMARK UNITS, YOU MAY NOT
MAKE MORE THAN FOUR EXCHANGES FROM ANY FUND IN ANY CALENDAR YEAR, AND THE TRUST
MAY REFUSE REQUESTS FOR MORE FREQUENT EXCHANGES. Restrictions apply; please
review the information under

PROSPECTUS 29
<PAGE>
"Redeeming Shares-How to Redeem Shares-Class I-By Exchange."

PURCHASES THROUGH INTERMEDIARIES. You may purchase or redeem shares of the Funds
through certain broker-dealers, banks or other intermediaries
("Intermediaries"). These Intermediaries may charge 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 any charges other than those described
in this prospectus. An investment in a Fund is not a deposit in any bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.

An Intermediary, who accepts orders that are processed at the net asset value
next determined after receipt of the order by the Intermediary, accepts such
orders as an authorized agent of the Trust. The Intermediary is required to
segregate any orders received on a business day after the close of regular
session trading on the New York Stock Exchange and transmit those orders
separately for execution at the net asset value next determined after that
business day.

PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Class I Shares of a Fund is
made at the net asset value of Class I Shares (see "Net Asset Value") next
determined as follows:

A purchase BY CHECK, WIRE TRANSFER OR ELECTRONIC TRANSFER is made at the net
asset value next determined after receipt by the Trust's transfer agent of your
check or wire transfer or your electronic transfer investment instruction.

A purchase THROUGH AN INTERMEDIARY that IS NOT an authorized agent of the Trust
for the receipt of orders is made at the net asset value next determined after
receipt of your order by the Trust's transfer agent.

A purchase THROUGH AN INTERMEDIARY that is an authorized agent of the Trust for
the receipt of orders is made at the net asset value next determined after
receipt of the order by the Intermediary.

HOW TO PURCHASE SHARES-CLASS II
Class II Shares are offered to certain 401(k) and other tax-qualified retirement
plans. Class II Shares pay a service fee for administrative services associated
with the administration of such retirement plans. IF YOU INVEST IN CLASS II
SHARES, THE PROCEDURES BY WHICH YOU CAN PURCHASE SHARES ARE GOVERNED BY THE
TERMS OF YOUR RETIREMENT PLAN. CALL YOUR PLAN SPONSOR OR SERVICE PROVIDER FOR
INFORMATION ON HOW TO PURCHASE SHARES.

To purchase Class II Shares, you must do so through an Intermediary, such

30 THE OAKMARK FAMILY OF FUNDS
<PAGE>
as a broker-dealer, bank, retirement plan service provider or retirement plan
sponsor. The Intermediary accepts purchase orders as an authorized agent of the
Trust. The Intermediary is required to segregate any orders received on a
business day after the close of regular session trading on the New York Stock
Exchange and transmit those orders separately for execution at the net asset
value next determined after that business day. An investment in a Fund is not a
deposit in any bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.

PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Class II Shares of a Fund
through an Intermediary is made at the net asset value of Class II Shares next
determined after receipt of the order by the Intermediary (see "Net Asset
Value").

GENERAL PURCHASING POLICIES. 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 agent or 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
loss resulting from an unauthorized transaction 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.

PROSPECTUS 31
<PAGE>
REDEEMING SHARES

HOW TO REDEEM SHARES-CLASS I
The following redemption procedures apply ONLY TO CLASS I 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 account owners exactly as their names appear on the
account registration.

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

- 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 transmit the proceeds to a bank account that you
have not previously designated as the recipient of such proceeds.

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

32 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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 TELEPHONE. You may redeem shares from your account by calling the Funds'
Voice Response System, OAKLINK, at 1-800-OAKMARK and choosing menu options 1
then 3 and following the instructions, or by calling a shareholder service
representative at 1-800-OAKMARK and choosing menu option 2. The proceeds may be
sent by check to your registered address or you may request of the shareholder
service representative that payment be made by wire transfer, or by electronic
transfer, to a checking account previously designated by you at a bank that is a
member of the Automated Clearing House. Redemption proceeds payable by wire
transfer or by electronic transfer will normally be sent on the next business
day after receipt of the redemption request. 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 NYSE closes before 4 p.m.) is
deemed received on the next business day. You may not redeem by telephone shares
held in an IRA account or an account for which you have changed the address
within the preceding 30 days.

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 Registration Form 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. EXCEPT FOR AUTOMATIC
EXCHANGES FROM OAKMARK UNITS, YOU MAY NOT MAKE MORE THAN FOUR 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 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

PROSPECTUS 33
<PAGE>
"By Mail" 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.

You may exchange among shares of the Funds and Oakmark Units "By Telephone" by
calling the Funds' Voice Response System, OAKLINK, at 1-800-OAKMARK and choosing
menu options 1 then 3 and following the instructions, or by calling a
shareholder service representative at 1-800-OAKMARK and choosing menu option 2.
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 NYSE
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." EXCEPT FOR AUTOMATIC
EXCHANGES FROM OAKMARK UNITS, YOU MAY NOT MAKE MORE THAN FOUR 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 "Redeeming Shares-How to Redeem
Shares-Class I-By Exchange."

During periods of volatile economic and market conditions, you may have
difficulty placing your exchange by telephone call to a shareholder service
representative; during such periods, you may wish to consider placing your
exchange by mail or by telephone through the Funds' Voice Response System,
OAKLINK.

BY AUTOMATIC REDEMPTION. You may automatically redeem a fixed dollar amount of
shares each month or quarter and have the proceeds sent by check to you or
deposited by electronic transfer into your bank account by so electing on your
New Account Registration Form.

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

34 THE OAKMARK FAMILY OF FUNDS
<PAGE>
CONDITIONS. PLEASE TELEPHONE A SHAREHOLDER SERVICE REPRESENTATIVE AT
1-800-OAKMARK AND CHOOSE MENU OPTION 2 IF YOU HAVE ANY QUESTIONS ABOUT
REQUIREMENTS FOR A REDEMPTION BEFORE SUBMITTING YOUR REQUEST. The Trust reserves
the right to require a properly completed New Account Registration Form 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 the 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.

The Trust will generally mail redemption proceeds that are payable by check
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 shares has been
(or will be) collected. To reduce such delays, the Trust recommends that your
purchase be made by wire transfer through your bank.

If you so request, the proceeds of your redemption may be paid by wire transfer
to your bank account, provided the redemption proceeds are at least $250, but
the cost of the wire transfer (currently $5) will be deducted from the
redemption proceeds. A wire transfer will normally result in your bank account
receiving "good funds" on the business day following the date of redemption of
your shares. If the proceeds of your redemption are sent by electronic transfer,
your bank will be notified of the transfer, but your bank account will not
receive "good funds" for at least one week.

Neither the Trust, its transfer agent, nor their respective officers, trustees,
directors, employees, or agents will be responsible for the authenticity of
instructions provided by telephone, 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 are genuine. Use
of any telephone redemption or exchange 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

PROSPECTUS 35
<PAGE>
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
loss 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).

HOW TO REDEEM SHARES-CLASS II
Class II Shares are offered to certain 401(k) and other tax-qualified retirement
plans. IF YOU INVEST IN CLASS II SHARES, THE PROCEDURES BY WHICH YOU CAN REDEEM
SHARES ARE GOVERNED BY THE TERMS OF YOUR RETIREMENT PLAN. CALL YOUR PLAN SPONSOR
OR SERVICE PROVIDER FOR INFORMATION ON HOW TO REDEEM SHARES.

To redeem Class II Shares, you must do so through an Intermediary, such as a
broker-dealer, bank, retirement plan service provider or retirement plan
sponsor. The Intermediary accepts redemption orders as an authorized agent of
the Trust. The Intermediary is required to segregate any orders received on a
business day after the close of regular session trading on the New York Stock
Exchange and transmit those orders separately for execution at the net asset
value next determined after that business day.

36 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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.

The Trust will generally mail redemption proceeds that are payable by check
within seven days after proper instructions are received.

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. An Intermediary would be notified that the account is below
the minimum and allowed 30 days to bring the account value up to the minimum.

SHAREHOLDER SERVICES-CLASS I
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. Shares purchased by
reinvestment of dividends or pursuant to an automatic plan will be confirmed to
you quarterly. In addition, the Trust will send you periodic reports showing
Fund portfolio holdings and will provide you annually with tax information.

IRA PLANS. The Trust has a master individual retirement account (IRA) plan that
allows you to invest in a Regular IRA, Roth IRA or SIMPLE-IRA 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 Regular IRA a lump sum distribution from a qualified pension or

PROSPECTUS 37
<PAGE>
profit-sharing plan, thereby postponing federal income tax on the distribution.
If your employer has a Simplified Employee Pension Plan (SEP), you may establish
a Regular IRA with the Fund to which your employer may contribute, subject to
special rules designed to avoid discrimination. The Trust also offers an
Educational IRA. Information on IRAs may be obtained by calling the transfer
agent at 1-800-OAKMARK (choose menu option 3).

ESTABLISHING PRIVILEGES. You may establish any of the shareholder privileges
when you complete an application to purchase shares of a Fund. If you have
already established an account and want to add or change a privilege, please
call a shareholder service representative at 1-800-OAKMARK (choose menu option
2) to request the appropriate form. Your call will be recorded.

VOICE RESPONSE SYSTEM ("OAKLINK"). To obtain information about your account,
such as account balance, last transaction and distribution information, to
purchase, redeem or exchange shares of a Fund or Oakmark Units, or to order
duplicate statements, call the Funds' Voice Response System, OAKLINK, at
1-800-OAKMARK (choose menu option 1). Please note: you must have a personal
identification ("PIN") number to access OAKLINK. Call 1-800-OAKMARK (choose menu
option 2) and speak with a customer service representative to obtain your PIN
number. Your call will be recorded.

WEBSITE. To obtain information about your account, such as your account balance,
your last transaction and account history, as well as the daily net asset value
of your Fund, access our website at www.oakmark.com.

ACCOUNT ADDRESS CHANGE. You may change your address of record for a Fund account
by sending written instructions to the transfer agent at its address shown on
the inside back cover of this prospectus or by telephoning a shareholder service
representative at 1-800-OAKMARK (choose menu option 2). Your call will be
recorded.

ACCOUNT REGISTRATION CHANGE. You may change your account registration only by
sending your written instructions with a signature guarantee to the transfer
agent at its address shown on the inside back cover of this prospectus. See
"Redeeming Shares-How to Redeem Shares-Class I-By Mail" regarding signature
guarantees.

QUESTIONS ABOUT YOUR ACCOUNT. If you have a question about your account, you may
telephone a shareholder service representative at 1-800-OAKMARK (choose menu
option 2).

38 THE OAKMARK FAMILY OF FUNDS
<PAGE>
SHAREHOLDER SERVICES-CLASS II
If you are a holder of Class II Shares, your 401(k) or other retirement plan
will provide shareholder services to you as required in accordance with your
plan agreement. You should contact your plan sponsor or service provider for
information about the services available to you under the terms of your plan.

NET ASSET VALUE
The net asset value of a share of Class I or Class II 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. The net
asset value of Class I Shares of a Fund is determined by dividing the value of
the assets attributable to Class I Shares of the Fund, less liabilities
attributable to that class, by the number of Class I Shares outstanding.
Similarly, the net asset value of Class II Shares of a Fund is determined by
dividing the value of the assets attributable to Class II Shares of the Fund,
less liabilities attributable to that class, by the number of Class II Shares
outstanding. Trading in the portfolio securities of International Fund or
International Small Cap 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 may be obtained by accessing the Funds' website at
www.oakmark.com or 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

PROSPECTUS 39
<PAGE>
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.

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 Registration Form that should be
completed and returned when opening 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.

40 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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.

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 Nvest Companies,
L.P. (formerly known as New England Investment Companies, L.P.) ("Nvest"). Nvest
owns all of the limited partnership interests in the Adviser. Nvest is a
publicly traded limited partnership that owns investment management firms and
that is a subsidiary of Metropolitan Life Insurance Company.

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, the Adviser receives from each Fund the following advisory
fee, stated as a percentage of average net assets: Equity and Income, .75%;
Oakmark, 1% up to $2.5 billion, .95% on the next $1.25 billion, .90% on the next
$1.25 billion, .85% over $5 billion and .80% over $10 billion; International, 1%
up to $2.5 billion, .95% on the next $2.5 billion, and .90% over $5 billion;
Select, 1% up to $1 billion, .95% on the next $500 million, .90% on the next
$500 million, .85% on the next $500 million, .80% over $2.5 billion and .75%
over $5 billion; Small Cap, 1.25% up to $1 billion, 1.15% on the next $500
million, 1.10% on the next $500 million, 1.05% on the next $500 million, and 1%
over $2.5 billion; International Small Cap, 1.25%.

PROSPECTUS 41
<PAGE>
The Adviser has voluntarily agreed to reimburse Class I Shares of each Fund to
the extent that the annual ordinary operating expenses of that class exceed the
following percentages of the average net assets of Class I Shares: 1.5% in the
case of Oakmark Fund, Select Fund, Small Cap Fund or Equity and Income Fund and
2% in the case of International Fund and International Small Cap Fund. The
Adviser has also voluntarily agreed to reimburse Class II Shares of each Fund to
the extent that the annual ordinary operating expenses of that class exceed the
following percentages of the average net assets of Class II Shares: Oakmark
Fund, Select Fund, Small Cap Fund or Equity and Income Fund, 1.75% (1.50% +
.25%); International Fund and International Small Cap Fund, 2.25% (2.00% +
.25%). Each such agreement is effective through January 31, 2000, 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 Select Fund were developed by the
Adviser and by William C. Nygren, C.F.A., the Fund's portfolio manager. Mr.
Nygren joined the Adviser as an analyst in 1983, and was the Adviser's Director
of Research from September, 1990 to April, 1998. Prior thereto, he had been an
analyst with Northwestern Mutual Life Insurance Company. Mr. Nygren holds an
M.S. in Finance from the University of Wisconsin (1981) and a B.S. in Accounting
from the University of Minnesota (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 Equity and Income Fund were

42 THE OAKMARK FAMILY OF FUNDS
<PAGE>
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., and Michael J. Welsh, C.F.A. and
C.P.A., the Fund's portfolio managers. 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 (1985) and a B.S. in Business and Economics from the
University of Wisconsin-Platteville (1983). 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 Accounting from the University
of Kansas (1985).

The investment objective and policies of International Small Cap Fund were
developed by the Adviser and by David G. Herro and Michael J. Welsh, the Fund's
portfolio managers.

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

PROSPECTUS 43
<PAGE>
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
AND AGE AT SEPTEMBER 30,
1998 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS#
<S> <C>
- ------------------------------------------------------------------------------

VICTOR A. MORGENSTERN* Chairman of the Board, HAI, since 1996 and
Trustee and President prior thereto; Chairman, Harris
Chairman, 56 Partners, L.L.C., since September 1995

MICHAEL J. FRIDUSS Principal, MJ Friduss & Associates
Trustee, 56 (telecommunications consultants)

THOMAS H. HAYDEN Executive Vice President and director, Bozell
Trustee, 47 Worldwide, Inc. (advertising and public
relations)

CHRISTINE M. MAKI Vice President, Tax, Hyatt Corporation (hotel
Trustee, 38 management) since 1995; Tax Manager, Coopers &
Lybrand (independent accountants), prior thereto

ALLAN J. REICH Senior Partner and Chair of Corporate/
Trustee, 50 Securities Practice Group, D'Ancona & Pflaum
(attorneys)

MARV R. ROTTER General Manager, Rotter & Associates (financial
Trustee, 52 services)

BURTON W. RUDER President, The Academy Group (venture capital
Trustee, 55 investments and transaction financing)

PETER S. VOSS* Chairman and Chief Executive Officer, Nvest
Trustee, 52 Companies, Inc. and Nvest Companies, L.P.

GARY N. WILNER, M.D. Senior Attending Physician, Evanston Hospital,
Trustee, 58 and Medical Director-CardioPulmonary Wellness
Program, Evanston Hospital Corporation

ROBERT LEVY President and Chief Executive Officer, HAI,
President, 48 since 1997; Portfolio Manager, HALP prior
thereto
</TABLE>

44 THE OAKMARK FAMILY OF FUNDS
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH TRUST
AND AGE AT SEPTEMBER 30,
1998 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS#
<S> <C>
- ------------------------------------------------------------------------------

ROBERT J. SANBORN Portfolio Manager and Analyst, HALP
Executive Vice President and
Portfolio Manager (Oakmark
Fund), 40

DAVID G. HERRO Portfolio Manager and Analyst, HALP
Vice President and Portfolio
Manager (International Fund
and International Small Cap
Fund), 38

CLYDE S. MCGREGOR Portfolio Manager and Analyst, HALP
Vice President and Portfolio
Manager (Equity and Income
Fund), 46

WILLIAM C. NYGREN Portfolio Manager, HALP, since 1996;
Vice president and Director of Research, HALP, 1990-1998
Portfolio Manager
(Select Fund), 40

STEVEN J. REID Portfolio Manager and Analyst, HALP
Vice President and Portfolio
Manager (Small Cap Fund), 42

MICHAEL J. WELSH Portfolio Manager and Analyst, HALP
Vice President and Co-
portfolio Manager
(International Fund and
International Small Cap
Fund), 35

ANN W. REGAN Director of Mutual Fund Operations, HALP, since
Vice President-Shareholder 1996; Special Projects Assistant to the General
Operations and Assistant Counsel, HALP, 1995-1996; Deputy Corporation
Secretary, 50 Counsel, City of Chicago, prior thereto
</TABLE>

PROSPECTUS 45
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH TRUST
AND AGE AT SEPTEMBER 30,
1998 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS#
<S> <C>
- ------------------------------------------------------------------------------

DONALD TERAO Secretary, Treasurer and Chief Financial
Vice President-Finance, 49 Officer, HAI, since 1995; Controller, HALP,
prior thereto

ANITA M. NAGLER Vice President, HAI, since 1994; General
Secretary, 42 Counsel, HALP, since 1993

KRISTI L. ROWSELL Assistant Treasurer, HALP, since 1996; Tax and
Treasurer, 32 Accounting Manager, HALP, 1995-1996; Vice
President and Treasurer, Calamos Asset
Management, Inc., 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 HAI.

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.

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 an investment in 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 "The Funds-How the

46 THE OAKMARK FAMILY OF FUNDS
<PAGE>
Funds Invest" and "The Funds-Restrictions on the Funds' Investments."
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 management investment company, and each Fund other than Select Fund is
diversified. Prior to July 15, 1997, the name of Equity and Income Fund was The
Oakmark Balanced Fund. The International Small Cap Fund was formerly known as
The Oakmark International Emerging Value Fund. 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 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.

The board of trustees has authorized the issuance of two classes of shares of
each Fund. The shares of a Fund that were outstanding on January 1, 1999 are now
known as Class I Shares of that Fund, and have the same rights and privileges
that they had before they were designated as Class I. Class II Shares are new,
and are offered to certain 401(k) plans and other tax-qualified retirement
plans. The shares of each class represent an interest in the same portfolio of
investments of a Fund. Each class has equal rights as to voting, redemption,
dividends and liquidation.

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.

PROSPECTUS 47
<PAGE>
However, special meetings may be called for purposes such as electing or
removing trustees, changing fundamental policies, or approving an investment
advisory contract. On any matter submitted to a vote of shareholders, shares are
voted in the aggregate and not by individual series or class 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 or classes, in which case shareholders of the unaffected
series or classes 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 Advisor or Transfer
Agent of the Trust at its address or telephone number shown on the inside back
cover.

48 THE OAKMARK FAMILY OF FUNDS
<PAGE>
THE OAKMARK FAMILY OF FUNDS

1999 PROSPECTUS
........................................
INVESTMENT ADVISER
Harris Associates L.P.
Two North LaSalle Street
Chicago, Illinois 60602-3790

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

INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois

LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois

FOR MORE INFORMATION
Access our website at www.oakmark.com to obtain a
prospectus, an application, periodic reports or your
account information, or call 1-800-OAKMARK
(1-800-625-6275).

[LOGO]
WEBSITE AND 24-HOUR NET ASSET VALUE HOTLINE
Access our website at www.oakmark.com to
obtain the current net asset value per share of a Fund, or
call 1-800-GROWOAK (1-800-476-9625).

THE OAKMARK FAMILY OF FUNDS
<PAGE>

[LOGO]

OAKMARK
FAMILY OF FUNDS

P.O. BOX 8510
BOSTON, MA 02266-8510
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

JANUARY 4, 1999

THE OAKMARK FAMILY OF FUNDS
No-Load Funds

Two North LaSalle Street
Chicago, Illinois 60602-3790
Telephone 1-800-OAKMARK
(1-800-625-6275)
www.oakmark.com

This Statement of Additional Information relates to The Oakmark Fund ("Oakmark
Fund"), The Oakmark Select Fund ("Select Fund"), The Oakmark Small Cap Fund
("Small Cap Fund"), The Oakmark Equity and Income Fund, ("Equity and Income
Fund"), The Oakmark International Fund ("International Fund") and The Oakmark
International Small Cap Fund ("International Small Cap 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. You may obtain a prospectus or annual report from the
Funds at no charge by writing, telephoning or accessing the Funds at their
address, telephone number or website shown above.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Table of Contents
<S> <C>
THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . 2
HOW THE FUNDS INVEST. . . . . . . . . . . . . . . . . . . . . . . 4
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . 12
INVESTMENT ADVISER. . . . . . . . . . . . . . . . . . . . . . . . 15
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . 17
PRINCIPAL SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . 18
PURCHASING AND REDEEMING SHARES . . . . . . . . . . . . . . . . . 19
ADDITIONAL TAX INFORMATION. . . . . . . . . . . . . . . . . . . . 21
TAXATION OF FOREIGN SHAREHOLDERS. . . . . . . . . . . . . . . . . 21
PORTFOLIO TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . 22
DECLARATION OF TRUST. . . . . . . . . . . . . . . . . . . . . . . 25
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
INDEPENDENT PUBLIC ACCOUNTANTS. . . . . . . . . . . . . . . . . . 25
APPENDIX A -- BOND RATINGS. . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B -- FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . B-1
- --------------------------------------------------------------------------------
</TABLE>

<PAGE>

THE FUNDS

Oakmark Fund seeks long-term capital appreciation by investing primarily in
U.S. equity securities.

SELECT FUND seeks long-term capital appreciation by investing primarily in
a non-diversified portfolio of U.S. equity securities.

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

EQUITY AND INCOME FUND seeks high current income with regard for both
preservation and growth of capital by investing primarily in a diversified
portfolio of U.S. equity and fixed-income securities.

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

INTERNATIONAL SMALL CAP FUND seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers with small market
capitalizations.

As of the date of this Statement of Additional Information, each Fund began
offering a second class of shares, so that it now offers two classes: Class I
Shares and Class II Shares. Class I Shares of each Fund are offered to members
of the general public. As described more fully in the prospectus, Class II
Shares of each Fund are offered to certain 401(k) plans and other tax-qualified
plans. Class II Shares of the Fund pay a service fee at the annual rate of .25%
of the average net assets of Class II Shares of the Fund for the administrative
services associated with the administration of such tax-qualified retirement
plans.

INVESTMENT RESTRICTIONS

In pursuing their respective investment objectives no Fund will:

1. [THIS RESTRICTION DOES NOT APPLY TO SELECT FUND] 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

2
<PAGE>

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;

7. Make loans, but this restriction shall not prevent the Fund from (a)
investing in debt obligations, (b) investing in repurchase agreements,(1) or (c)
[FUNDS OTHER THAN OAKMARK FUND] lending its portfolio securities [the Fund will
not lend securities having a value in excess of 33% of its assets, including
collateral received for loaned securities (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;

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;(2)

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

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

13. 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;

14. 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;

15. [OAKMARK FUND, SELECT FUND, SMALL CAP FUND AND EQUITY AND INCOME 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
SMALL CAP FUND ONLY] Invest more than 10% of its net assets (valued at the time
of investment) in

- -------------------------
(1) 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.

(2) 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. 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.

3
<PAGE>

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;

16. [OAKMARK FUND, SELECT FUND AND SMALL CAP FUND 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) [EQUITY AND INCOME 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);(3)

17. 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;

18. Purchase a call option or a put option if the aggregate premium paid
for all call and put options then held exceed 20% of its net assets (less the
amount by which any such positions are in-the-money);

19. Invest in 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.

Notwithstanding the foregoing investment restrictions, a Fund may purchase
securities pursuant to the exercise of subscription rights, provided, in the
case of each Fund other than Select Fund, 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 Small Cap 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

- -------------------------
(3) Although securities represented by American Depositary Receipts ("ADRs")
are not subject to restriction 16, 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.

4
<PAGE>

Oakmark Fund, Select Fund and Small Cap Fund and up to 10% for Equity and Income
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 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 Small Cap Fund in privatizations in
appropriate circumstances. In certain of those markets, the ability of foreign
entities such as International Fund and International Small Cap 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

5
<PAGE>

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.

EMERGING MARKETS. Investments in emerging markets securities include
special risks in addition to those generally associated with foreign investing.
Many investments in emerging markets can be considered speculative, and the
value of those investments can be more volatile than in more developed foreign
markets. This difference reflects the greater uncertainties of investing in
less established markets and economies. Emerging markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have not kept pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when a portion of the assets is
uninvested and no return is earned thereon. The inability to make intended
security purchases due to settlement problems could cause the International Fund
and International Small Cap Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to those Funds due to subsequent declines in the value
of those securities or, if either Fund has entered into a contract to sell a
security, in possible liability to the purchaser. Costs associated with
transactions in emerging markets securities are typically higher than costs
associated with transactions in U.S. securities. Such transactions also involve
additional costs for the purchase or sale of foreign currency.

Certain foreign markets (including emerging markets) may require
governmental approval for the repatriation of investment income, capital or the
proceeds of sales of securities by foreign investors. In addition, if a
deterioration occurs in an emerging market's balance of payments or for other
reasons, a country could impose temporary restrictions on foreign capital
remittances. International Fund and International Small Cap Fund could be
adversely affected by delays in, or a refusal to grant, required governmental
approval for repatriation of capital, as well as by the application to either
Fund of any restrictions on investments.

The risk also exists that an emergency situation may arise in one or more
emerging markets. As a result, trading of securities may cease or may be
substantially curtailed and prices for either Fund's securities in such markets
may not be readily available. International Fund and International Small Cap
Fund may suspend redemption of its shares for any period during which an
emergency exists, as determined by the Securities and Exchange Commission (the
"SEC"). Accordingly, if either Fund believes that appropriate circumstances
exist, it will promptly apply to the SEC for a determination that such an
emergency is present. During the period commencing from either Fund's
identification of such condition until the date of the SEC action, that Fund's
securities in the affected markets will be valued at fair value determined in
good faith by or under the direction of the Trust's board of trustees.

Income from securities held by International Fund or International Small
Cap Fund could be reduced by taxes withheld from that income, or other taxes
that may be imposed by the emerging market countries in which the Fund invests.
Net asset value of a Fund may also be affected by changes in the rates or
methods of taxation applicable to the Fund or to entities in which the Fund has
invested. Many emerging markets have experienced substantial rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had
and may continue to have adverse effects on the economies and securities markets
of certain emerging market countries. In an attempt to control inflation,
certain emerging market countries have imposed wage and price controls. Of
these countries, some, in recent years, have begun to control inflation through
prudent economic policies.

Emerging market governmental issuers are among the largest debtors to
commercial banks, foreign governments, international financial organizations and
other financial institutions. Certain emerging market governmental issuers have
not been able to make payments of interest or principal on debt obligations as
those payments have come due. Obligations arising from past

6
<PAGE>

restructuring agreements may affect the economic performance and political and
social stability of those issuers.

Governments of many emerging market countries have exercised and continue
to exercise substantial influence over many aspects of the private sector
through ownership or control of many companies. The future actions of those
governments could have a significant effect on economic conditions in emerging
markets, which in turn, may adversely affect companies in the private sector,
general market conditions and prices and yields of certain of the securities in
a Fund's portfolio. Expropriation, confiscatory taxation, nationalization,
political, economic and social instability have occurred throughout the history
of certain emerging market countries and could adversely affect Fund assets
should any of those conditions recur.

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, foreign exchange dealers
or broker-dealers, are not exchange-traded and are usually for less than one
year, but may be renewed.

If a Fund enters into a forward contract hedging an anticipated or actual
holding of portfolio securities, liquid assets of the Fund, having a value at
least as great as the amount of the excess, if any, of the Fund's commitment
under the forward contract over the value of the portfolio position being
hedged, will be segregated on the books of the Fund and held by the Fund's
custodian and marked to market daily, 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.

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

7
<PAGE>

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.

EUROPEAN CURRENCY UNIFICATION. Effective January 1, 1999, eleven of the
fifteen member countries of the European Union adopted a single European
currency, the euro. The countries participating in the Economic and Monetary
Union ("EMU") are Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, the Netherlands, Portugal and Spain. The four countries missing from
the new unified currency are Great Britain, Denmark, Sweden and Greece. A new
European Central Bank ("ECB") will manage the monetary policy of the new unified
region, and the exchange rates among the EMU member countries will be
permanently fixed. National currencies will continue to circulate until they
are replaced by euro coins and bank notes by the middle of 2002.

This change is likely to significantly impact the European capital markets
in which International Fund and International Small Cap Fund may invest their
assets. The biggest changes will be the additional risks that the Funds may
face in pursuing their investment objectives. All of the risks described below
may increase the volatility of the prices of securities that are traded
principally in EMU member countries.

TAXES. IRS regulations generally provide that the euro conversion will not
cause a U.S. taxpayer to realize gain or loss to the extent the taxpayer's
rights and obligations are altered solely by reason of the euro conversion.
However, there may be changes in indices, accrual periods or holiday conventions
that may require the realization of a gain or loss.

VOLATILITY OF CURRENCY EXCHANGE RATES. Exchange rates between the U.S.
dollar and European currencies could become more volatile and unstable. In
addition, because some European countries will not be participants in the euro,
there could be greater volatility in the exchange rates between those
non-participating countries and the euro. That risk is expected to remain during
the period following unification.

CAPITAL MARKET REACTION. Uncertainty during the period leading up to the
introduction of the euro may cause a shift by institutional money managers away
from European currencies and into other currencies. Such a reaction could
depress the prices of securities and make markets less liquid and thus more
difficult for International Fund and International Small Cap Fund to pursue
their investment strategies.

CONVERSION COSTS. European issuers of securities, particularly those that
deal in goods and services, may face substantial conversion costs. Those costs
may not be accurately anticipated and therefore present another risk factor that
may affect issuer profitability and creditworthiness.

8
<PAGE>

CONTRACT CONTINUITY. Some financial contracts may become unenforceable
when the currencies are unified. Those financial contracts may include bank loan
agreements, master agreements for swaps and other derivatives, master agreements
for foreign exchange and currency option transactions and debt securities. The
risk of unenforceability may arise in a number of ways. For example, a contract
used to hedge against exchange rate volatility between two EU currencies will
become "fixed," rather than "variable," as a result of the conversion since the
currencies have, in effect, disappeared for exchange purposes.

The European Council has enacted laws and regulations designed to ensure
that financial contracts will continue to be enforceable after conversion.
There is no guarantee, however, that those laws will be effective in preventing
disputes and litigation over those financial contracts. Such disputes could
negatively impact a Fund's portfolio holdings, and may create uncertainties in
the valuation of those contracts.

ECB POLICYMAKING. As the ECB and European market participants search for a
common understanding of policy targets and instruments, interest rates and
exchange rates could become more volatile.

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 Small Cap Fund will not invest
more than 10% of their respective total assets in securities rated below
investment grade, Equity and Income 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.

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

9
<PAGE>

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.

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 are
liquid and thus not subject to the Fund's restriction of investing no more than
15% of its assets in illiquid securities. (See restriction 13 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.

10
<PAGE>

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.

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.

OPTIONS

Each Fund may purchase both call options and put options on securities. A
call or put option is a contract that gives the Fund, in return for a premium
paid upon purchase of the option, the right during the term of the option to buy
from, or to sell to, the seller of the option the security underlying the option
at a specified exercise price. The option is valued initially at the premium
paid for the option. Thereafter, the value of the option is marked-to-market
daily. It is expected

11
<PAGE>

that a Fund will not purchase a call option or a put option if the aggregate
value of all call and put options held by the Fund would exceed 5% of the Fund's
net assets.

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 Small Cap 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:

n
ERV = P(1+T)

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

For example, Total Return and Average Annual Total Return on a $1,000
investment in each Fund for the following periods ended September 30, 1998 were:

<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
<S> <C> <C>
Oakmark Fund Class I
One year . . . . . . . . . . . . . . . -4.06% -4.06%
Five years . . . . . . . . . . . . . . 116.06 16.65
Life of Fund*. . . . . . . . . . . . . 398.99 25.17

Select Fund Class I
One year . . . . . . . . . . . . . . . 3.64 3.64
Life of Fund*. . . . . . . . . . . . . 69.36 31.67

Small Cap Fund Class I
One year . . . . . . . . . . . . . . . -26.37 -26.37
Life of Fund*. . . . . . . . . . . . . 49.76 14.85

12
<PAGE>

Equity and Income Fund Class I
One year . . . . . . . . . . . . . . . 2.57 2.57
Life of Fund*. . . . . . . . . . . . . 51.91 15.41
International Fund Class I
One year . . . . . . . . . . . . . . . -29.90 -29.90
Five years . . . . . . . . . . . . . . 21.92 4.04
Life of Fund*. . . . . . . . . . . . . 63.22 8.50
International Small Cap Fund Class I
One year . . . . . . . . . . . . . . . -35.20 -35.20
Life of Fund*. . . . . . . . . . . . . -17.90 -6.53
</TABLE>
--------------------
* Life of Fund commenced with the public offering of its shares as
follows: Oakmark, 8/5/91; Select, 11/1/96; International, 9/30/92;
Small Cap, Equity and Income and International Small Cap, 11/1/95.

Total Return and Average Annual Total Return of Class II Shares of each
Fund will be calculated in the same way as for Class I Shares, but the
performance of Class II Shares will likely be different from the performance of
Class I Shares because the expense allocation for each class will be different.
Because the expense ratio for Class II Shares is expected to be higher, the
Total Return and Average Annual Total Return of Class II Shares are expected to
be lower than for Class I Shares.

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:

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

13
<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:

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
Russell 2000

In addition, each of Oakmark Fund, Select Fund, Small Cap Fund and Equity
and Income 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; Lipper Small Company Growth
Fund Index; and Lehman Brothers Government/Corporate Bond Index. Each of
International Fund and International Small Cap 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; Micropal International Small Company Fund Index; 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;

- -------------------------
(*) With dividends reinvested.

14
<PAGE>

long-term corporate bonds; long-term government bonds; intermediate-term
government bonds; U.S. Treasury bills; and Consumer Price Index.

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 (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 Adviser has voluntarily agreed to reimburse Class I Shares of each Fund
to the extent that the annual ordinary operating expenses of that class exceed
the following percentages of the average net assets of Class I Shares: 1.5% in
the case of Oakmark Fund, Select Fund, Small Cap Fund or Equity and Income Fund
and 2% in the case of International Fund and International Small Cap Fund. The
Adviser has also voluntarily agreed to reimburse Class II Shares of each Fund to
the extent that the annual ordinary operating expenses of that class exceed the
following percentages of the average net assets of Class II Shares: Oakmark
Fund, Select Fund, Small Cap Fund or Equity and Income Fund, 1.75%
(1.50% + .25%); International Fund and International Small Cap Fund, 2.25%
(2.00% + .25%). Each such agreement is effective through January 31, 2000,
subject to earlier termination by the Adviser on 30 days' notice to the Fund.

For the purpose of determining whether a share class of a Fund is entitled
to any reduction in advisory fee or expense reimbursement, the pro rata portion
of the Fund's expenses attributable to a share class of that Fund, is 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.
Basing the fee on net assets at the end of the preceding month has the effect of
(i) delaying the impact of changes in assets on the amount of the fee and (ii)
in the first year of a fund's operation, reducing the amount of the aggregate
fee by providing for no fee in the first month of operation. The annual rates
of fees as a percentage of each Fund's net assets are as follows:

15
<PAGE>

FUND FEE
- ----------------- --------------------------------------------------
<S> <C>
Equity and Income .75%

Oakmark 1% up to $2.5 billion; .95% on the next
$1.25 billion; .90% on the next $1.25 billion;
.85% on net assets in excess of $5 billion; and
.80% on net assets in excess of $10 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

Select 1% up to $1 billion; .95% on the next
$500 million; .90% on the next $500 million; .85%
on the next $500 million; .80% over $2.5 billion;
and .75% over $5 billion.

Small Cap 1.25% up to $1 billion; 1.15% on the next
$500 million; 1.10% on the next $500 million;
1.05% on the next $500 million; 1% over
$2.5 billion.

International Small Cap 1.25%
</TABLE>

The table below shows gross advisory fees paid by the Funds and any expense
reimbursements by the Adviser to them, which are described in the prospectus.

<TABLE>
<CAPTION>
TYPE OF YEAR ENDED ELEVEN MONTHS ENDED YEAR ENDED
FUND PAYMENT SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 OCTOBER 31, 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oakmark Advisory fee $72,196,251 $43,705,462 $36,082,925

Select Advisory fee 11,525,158 1,731,599 --

Small Cap Advisory fee 15,863,707 7,705,828 956,809

Equity and Advisory fee 359,708 140,973 69,005
Income Reimbursement -- 39,450 14,245

International Advisory fee 12,623,371 13,040,702 10,113,272

International Advisory fee 827,611 648,148 258,427
Small Cap Reimbursement -- -- 35,441
</TABLE>

The Agreement for each Fund was for an initial term expiring September
30, 1997. 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 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, Anita M. Nagler, William C. Nygren, Neal Ryland,
Robert J. Sanborn and Peter S. Voss. Mr. Levy is the president and chief
executive officer of Harris Associates, Inc.

16
<PAGE>

TRUSTEES AND OFFICERS

Information on the trustees and officers of the Trust is included in the
Funds' prospectus under "Management of the Funds."

The addresses of the trustees are as follows:

Michael J. Friduss c/o MJ Friduss & Associates, Inc.
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 LaSalle Street, Suite 500
Chicago, Illinois 60602

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

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 Nvest 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 September 30, 1998, the trustees and officers as a group owned
beneficially the following percentages of the outstanding shares of the Funds:
Select, 1.36%; Small Cap, 1.30%; International Small Cap, 17.92%; and less than
1% in the case of each other Fund.

The following table shows the compensation paid by the Trust for the year
ended September 30, 1998 to each trustee who was not an "interested person" of
the Trust:

17
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF TRUSTEE FROM THE TRUST*
- --------------------------------------------------------------------------------
<S> <C>
Christine M. Maki $37,250

Michael J. Friduss 37,250

Thomas H. Hayden 37,750

Allan J. Reich 37,750

Marv R. Rotter 37,250

Burton W. Ruder 35,250

Gary N. Wilner, M.D. 41,250
- --------------------------------------------------------------------------------
</TABLE>

* The Trust is not part of a fund complex.

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.

The Trust has a deferred compensation plan (the "Plan") that permits any
trustee who is not an "interested person" of the Trust to elect to defer receipt
of all or a portion of his or her compensation as a trustee for two or more
years. The deferred compensation of a participating trustee is credited to a
book reserve account of the Trust when the compensation would otherwise have
been paid to the trustee. The value of the trustee's deferral account at any
time is equal to the value that the account would have had if contributions to
the account had been invested and reinvested in shares of one or more of the
Oakmark Funds or the Goldman Sachs Institutional Liquid Assets Government
Portfolio as designated by the trustee. At the time for commencing
distributions from a trustee's deferral account, which is no later than when the
trustee ceases to be a member of the board, the trustee may elect to receive
distributions in a lump sum or over a period of five years. Each Fund's
obligation to make distributions under the Plan is a general obligation of that
Fund. No Fund will be liable for any other Fund's obligations to make
distributions under the Plan.

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
September 30, 1998 were:

<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
NAME AND ADDRESS FUND SHARES HELD
- ---------------- ---- -----------
<S> <C> <C>
Charles Schwab & Co. Inc. (1) Oakmark 33.67%
101 Montgomery Street Select 31.96
San Francisco, CA 94104-4122 Small Cap 33.65
Equity and Income 18.30
International 31.44
International Small Cap 29.43

18
<PAGE>

<CAPTION>
PERCENTAGE OF
OUTSTANDING
NAME AND ADDRESS FUND SHARES HELD
- ---------------- ---- -----------
<S> <C> <C>
David G. Herro (2) International Small Cap 9.42
Two North LaSalle Street, #500
Chicago, IL 60602

Clyde S. and Joan K. McGregor Equity and Income 5.20
Two North LaSalle Street, #500
Chicago, IL 60602

Morgan Stanley & Co., Inc. (1) Equity and Income 6.51
1 Pierrepont Plaza, 10th Floor International Small Cap 18.00
Brooklyn, NY 11201-2776

National Financial Services Corp. (1) Oakmark 8.06
P.O. Box 3908 Select 20.62
Church Street Station Small Cap 9.04
New York, NY 10008-3908 International 5.91
International Small Cap 6.29
</TABLE>
- -------------------------
(1) Shares are held for accounts of customers.
(2) 416,646 of these shares are included in shares held by
Morgan Stanley & Co., Inc.

PURCHASING AND REDEEMING SHARES

Purchases and redemptions are discussed in the Funds' prospectus under the
headings "Purchasing Shares," "Redeeming Shares," and "Shareholder Services."

The net asset value per share Class I or Class II of each Fund is
determined by the Trust's custodian, State Street Bank and Trust Company. The
net asset value of Class I Shares of a Fund is determined by dividing the value
of the assets attributable to Class I Shares of the Fund, less liabilities
attributable to that class, by the number of Class I Shares outstanding.
Similarly, the net asset value of Class II Shares of a Fund is determined by
dividing the value of the assets attributable to Class II Shares of the Fund,
less liabilities attributable to that class, by the number of Class II Shares
outstanding. 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 or under
the direction of 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

19
<PAGE>

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 NYSE is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in January and
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 NYSE will be closed on the preceding Friday or the following Monday,
respectively.

Trading in the portfolio securities of International Fund or International
Small Cap 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 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 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 0.30% of the annual average
value of those accounts. Each Fund may pay 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 those amounts will
normally be paid in cash, but may be paid wholly or partly by a distribution in
kind of marketable securities. Brokerage costs may be incurred by a shareholder
who receives securities and desires to convert them to cash.

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.

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

20
<PAGE>

the average annual net assets of each account in those portfolios, 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.

INTERNATIONAL FUND AND INTERNATIONAL SMALL CAP FUND. Dividends and
distributions paid by International Fund and International Small Cap 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 Small Cap 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 Small Cap 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 Small Cap 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

21
<PAGE>

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.

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

22
<PAGE>

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.

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 the Funds are
set forth in the prospectus under "Financial Highlights."

<PAGE>

The following table shows the aggregate brokerage commissions (excluding
the gross underwriting spread on securities purchased in initial public
offerings) paid by each Fund during the periods indicated, as well as the
aggregate commissions paid to affiliated persons of the Trust.

Year Ended Eleven Months Ended Year Ended
September 30,1998 September 30, 1997 October 31, 1996
----------------- ------------------ ----------------
<S> <C> <C> <C>
Oakmark Fund
Aggregate commissions . . . . . . . . $7,578,511 (100%) $3,094,186 (100%) $2,863,961 (100%)
Commissions paid to affiliates* . . . 2,068,690 (27.3%) 997,845 (32.2%) 1,192,641 (41.6%)

Select Fund
Aggregate commissions . . . . . . . . 2,408,373 (100%) 750,698 (100%) ---
Commissions paid to affiliates* . . . 589,564 (24.5%) 341,805 (45.5%) ---

Small Cap Fund
Aggregate commissions . . . . . . . . 1,956,668 (100%) 1,906,488 (100%) 404,602 (100%)
Commissions paid to affiliates* . . . 193,708 (9.9%) 401,345 (21.0%) 132,729 (32.8%)

Equity and Income Fund
Aggregate commission. . . . . . . . . 66,195 (100%) 24,588 (100%) 19,797 (100%)
Commissions paid to affiliates* . . . 41,979 (63.4%) 15,611 (63.5%) 14,487 (73.2%)

International Fund
Aggregate commissions . . . . . . . . 4,287,619 (100%) 5,319,725 (100%) 2,804,611 (100%)
Commissions paid to affiliates* . . . --- 9,732 (0.2%) 82,872 (3.0%)

International Small Cap Fund
Aggregate commissions . . . . . . . . 387,461 (100%) 332,214 (100%) 198,847 (100%)
Commissions paid to affiliates* . . . --- 732 (0.2%) 6,128 (3.1%)
</TABLE>

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

* The percent of the dollar amount of each Fund's aggregate transactions
involving the Fund's payment of brokerage commissions that were executed
through affiliates for each of the periods is shown below.

<TABLE>
<CAPTION>
Year Ended Eleven Months Ended Year Ended
Fund September 30, 1998 September 30, 1997 October 31, 1996
---- ------------------ ------------------ ----------------
<S> <C> <C> <C>
Oakmark 29.50% 36.5% 47.0%
Select 33.06 48.0 --
Small Cap 14.51 23.2 40.0
Equity and Income 63.50 67.0 78.0
International -- 0.4 5.0
International Small Cap -- 0.5 0.4
</TABLE>

Of the aggregate brokerage transactions during the year ended September
30, 1998, the Funds paid the following commissions on transactions directed
to brokers because of research services they provided: Oakmark, $1,142,374;
Select, $201,272; Small Cap, $237,696; Equity and Income, $5,196;
International, $4,084,575; and International Small Cap, $362,321; and the
aggregate dollar amounts involved in those transactions for the respective
Funds were $880,711,989, $112,769,699, $122,006,697, $3,817,981,
$1,304,968,668 and $89,091,569, respectively.

24
<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 Select Fund, Small Cap Fund and Equity and
Income Fund is $2,500 per month and the fee paid by International Small Cap Fund
is $3,000 per month. 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.

25
<PAGE>

APPENDIX A -- 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.

A-1
<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.

A-2
<PAGE>

APPENDIX B -- FINANCIAL STATEMENTS

B-1

<PAGE>
THE OAKMARK FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998
........................................................................

<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--88.5%

FOOD & BEVERAGE--15.2%
Philip Morris Companies Inc. 13,810,700 $ 636,155,369
H.J. Heinz Company 4,007,250 204,870,656
Gallaher Group Plc (b) 3,835,500 112,667,812
Nabisco Holdings Corporation, Class A 2,572,100 92,434,844
The Quaker Oats Company 118,000 6,962,000
--------------
1,053,090,681

APPAREL--6.1%
Nike, Inc., Class B 11,457,100 $ 421,764,494

RETAIL--0.3%
American Stores Company 648,400 $ 20,870,375

OTHER CONSUMER GOODS & SERVICES--20.1%
Mattel, Inc. 13,439,400 $ 376,303,200
The Black & Decker Corporation (c) 8,267,000 344,113,875
H&R Block, Inc. (c) 7,665,800 317,172,475
Polaroid Corporation (c) 4,552,400 111,818,325
Brunswick Corporation (c) 7,280,800 94,195,350
Fortune Brands, Inc. 2,746,800 81,373,950
Juno Lighting, Inc. (c) 1,085,000 24,276,875
First Brands Corporation 1,070,400 23,348,100
GC Companies, Inc. (a)(c) 397,000 15,334,125
--------------
1,387,936,275

BANKS & THRIFTS--14.0%
Banc One Corporation 8,800,548 $ 375,123,359
Washington Mutual, Inc. 10,100,000 340,875,000
Mellon Bank Corporation 4,540,500 250,011,281
--------------
966,009,640

INSURANCE--1.3%
Old Republic International Corporation 4,122,930 $ 92,765,925

PUBLISHING--4.8%
Knight-Ridder, Inc. (c) 6,929,400 $ 308,358,300
R. H. Donnelley Corporation (c) 2,098,260 25,965,967
--------------
334,324,267

INFORMATION SERVICES--5.6%
The Dun & Bradstreet Corporation (c) 10,491,300 $ 283,265,100
ACNielsen Corporation (c) 4,764,000 105,999,000
--------------
389,264,100

COMPUTER SERVICES--2.2%
Electronic Data Systems Corporation 4,588,000 $ 152,264,250
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FUND
7
<PAGE>
THE OAKMARK FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
PRINCIPAL VALUE MARKET VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--88.5% (CONT.)

MEDICAL CENTERS--3.9%
Columbia/HCA Healthcare Corporation 13,601,000 $ 272,870,063

MEDICAL PRODUCTS--0.9%
Sybron International Corporation (a) 3,135,600 $ 59,968,350

AUTOMOTIVE--0.5%
SPX Corporation (a)(c) 875,200 $ 36,156,700

AEROSPACE & DEFENSE--9.1%
Lockheed Martin Corporation 3,625,000 $ 365,445,312
The Boeing Company 7,599,400 260,754,413
--------------
626,199,725

MACHINERY & INDUSTRIAL PROCESSING--2.5%
Eaton Corporation 2,721,100 $ 170,578,956

FORESTRY PRODUCTS--0.1%
Fort James Corporation 237,200 $ 7,783,125

MINING--1.2%
DeBeers Centenary AG (b) 6,546,000 $ 82,234,125

OTHER INDUSTRIAL GOODS & SERVICES--0.7%
Bandag Incorporated, Class A 1,104,100 $ 34,227,100
The Geon Company 971,600 17,245,900
--------------
51,473,000

TOTAL COMMON STOCKS (COST: $5,810,888,085) 6,125,554,051

SHORT TERM INVESTMENTS--11.0%

GOVERNMENT AND AGENCY SECURITIES--1.4%

U.S. GOVERNMENT BILLS--1.4%
United States Treasury Bills, 4.29%-5.15%
due 10/15/1998-1/14/1999 $100,000,000 $ 99,199,666
--------------
TOTAL GOVERNMENT AND AGENCY SECURITIES (COST: $99,146,486) 99,199,666
</TABLE>

8
THE OAKMARK FUND
<PAGE>
THE OAKMARK FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................
<TABLE>
<CAPTION>
PRINCIPAL VALUE MARKET VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS--11.0% (CONT.)

COMMERCIAL PAPER--7.4%
American Express Credit Corp., 5.27%-5.55%
due 10/1/1998-10/14/1998 $180,000,000 $ 180,000,000
Ford Motor Credit Corp., 5.40%-5.55% due
10/1/1998-10/9/1998 160,000,000 160,000,000
General Electric Capital Corporation,
5.45%-5.70% due 10/1/1998-10/5/1998 170,000,000 170,000,000
--------------
TOTAL COMMERCIAL PAPER (COST: $510,000,000) 510,000,000

REPURCHASE AGREEMENTS--2.2%
State Street Repurchase Agreement, 5.30%
due 10/1/1998 $153,865,000 $ 153,865,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST: $153,865,000) 153,865,000

TOTAL SHORT TERM INVESTMENTS (COST: $763,011,486) 763,064,666

Total Investments (Cost $6,573,899,571)--99.5% (d) $6,888,618,717
Other Assets In Excess Of Other Liabilities--0.5% 35,339,165
--------------

TOTAL NET ASSETS--100% $6,923,957,882
--------------
--------------
</TABLE>

(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) See footnote number five in the Notes to Financial Statements
regarding transactions in affiliated issuers.
(d) At September 30, 1998, net unrealized appreciation of
$314,719,146, for federal income tax purposes consisted of
gross unrealized appreciation of $1,142,918,937 and gross unrealized
depreciation of $828,199,791.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FUND
9
<PAGE>
THE OAKMARK SELECT FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998
........................................................................

<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--88.3%

RETAIL--8.2%
Gucci Group (b) 2,787,900 $ 100,712,887

OTHER CONSUMER GOODS & SERVICES--5.8%
Host Marriott Corporation (a) 3,260,900 $ 41,372,669
Ralston Purina Group 1,016,400 29,729,700
--------------
71,102,369

BANKS & THRIFTS--8.0%
Washington Mutual, Inc. 1,725,000 $ 58,218,750
People's Bank of Bridgeport, Connecticut 1,642,600 40,243,700
--------------
98,462,450

INSURANCE--8.2%
PartnerRe Ltd. (c) 2,522,600 $ 101,061,662

BROADCASTING & CABLE TV--13.8%
Cablevision Systems Corporation, Class A
(a) 3,930,200 $ 169,735,512

TV PROGRAMMING--4.4%
Tele-Communications, Liberty Media, Class A
(a) 1,453,550 $ 53,327,116

INFORMATION SERVICES--4.0%
The Dun & Bradstreet Corporation 1,818,600 $ 49,102,200

COMPUTER SERVICES--7.2%
First Data Corporation 1,900,000 $ 44,650,000
Electronic Data Systems Corporation 1,310,900 43,505,494
--------------
88,155,494

MEDICAL PRODUCTS--6.0%
Amgen, Inc. (a) 975,000 $ 73,673,438

BUILDING MATERIALS & CONSTRUCTION--9.7%
USG Corporation (d) 2,740,800 $ 118,539,600

OTHER INDUSTRIAL GOODS & SERVICES--3.8%
Premark International, Inc. 1,678,800 $ 47,111,325

DIVERSIFIED CONGLOMERATES--9.2%
U.S. Industries, Inc. (d) 7,514,000 $ 113,179,625

TOTAL COMMON STOCKS (COST: $1,075,412,040) 1,084,163,678
</TABLE>

12
THE OAKMARK SELECT FUND
<PAGE>
THE OAKMARK SELECT FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................

<TABLE>
<CAPTION>
PRINCIPAL VALUE MARKET VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS--12.0%

GOVERNMENT AND AGENCY SECURITIES--3.2%

U.S. GOVERNMENT BILLS--3.2%
United States Treasury Bills, 4.29%-5.07%
due 10/8/1998-1/14/1999 $40,000,000 $ 39,709,859
--------------
TOTAL GOVERNMENT AND AGENCY SECURITIES (COST: $39,688,587) 39,709,859

COMMERCIAL PAPER--6.1%
American Express Credit Corp., 5.27%-5.55%
due 10/1/1998-10/9/1998 $25,000,000 $ 25,000,000
Ford Motor Credit Corp., 5.30%-5.53% due
10/1/1998-10/7/1998 20,000,000 20,000,000
General Electric Capital Corporation, 5.70%
due 10/1/1998 30,000,000 30,000,000
--------------
TOTAL COMMERCIAL PAPER (COST: $75,000,000) 75,000,000

REPURCHASE AGREEMENTS--2.7%
State Street Repurchase Agreement, 5.30%
due 10/1/1998 $32,399,000 $ 32,399,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST: $32,399,000) 32,399,000

TOTAL SHORT TERM INVESTMENTS (COST: $147,087,587) 147,108,859

Total Investments (Cost $1,222,499,627)--100.3% (e) $1,231,272,537
Other Liabilities In Excess Of Other Assets--(0.3)% (3,378,151)
--------------

TOTAL NET ASSETS--100% $1,227,894,386
--------------
--------------
</TABLE>

(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) Represents foreign domiciled corporation.
(d) See footnote number five in the Notes to Financial Statements
regarding transactions in affiliated issuers.
(e) At September 30, 1998, net unrealized appreciation of $8,772,910,
for federal income tax purposes consisted of gross unrealized
appreciation of $155,507,575 and gross unrealized depreciation of
$146,734,665.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK SELECT FUND
13

<PAGE>
THE OAKMARK SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998
........................................................................

<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--91.9%

FOOD & BEVERAGE--11.2%
Ralcorp Holdings, Inc. (a)(b) 1,750,000 $ 24,500,000
Triarc Companies, Inc. (a)(b) 1,250,000 19,453,125
Vlasic Foods International Inc. (a) 500,000 9,343,750
International Multifoods Corporation 500,000 8,218,750
M & F Worldwide Corp. (a) 750,000 7,453,125
--------------
68,968,750

RETAIL--3.7%
Department 56, Inc. (a) 520,000 $ 14,040,000
Ugly Duckling Corporation (a)(b) 1,676,200 8,695,288
--------------
22,735,288

OTHER CONSUMER GOODS & SERVICES--13.0%
First Brands Corporation 1,250,000 $ 27,265,625
Scotsman Industries, Inc. (b) 983,000 22,240,375
Libbey, Inc. 420,500 12,404,750
Barry (R.G.) Corporation (a)(b) 849,100 11,781,262
P.H. Glatfelter Company 500,000 6,531,250
--------------
80,223,262

BANKS & THRIFTS--11.5%
People's Bank of Bridgeport, Connecticut 2,000,000 $ 49,000,000
BankAtlantic Bancorp, Inc., Class A 1,000,001 7,187,507
Northwest Bancorp Inc. 550,000 5,637,500
Niagara Bancorp Inc. (a) 400,000 3,925,000
PennFed Financial Services, Inc. 260,000 3,445,000
Finger Lakes Financial Corp. (b) 188,000 2,068,000
--------------
71,263,007

INSURANCE--2.3%
Financial Security Assurance Holdings Ltd. 292,600 $ 14,264,250

OTHER FINANCIAL--5.5%
ARM Financial Group, Inc., Class A 1,000,000 $ 17,750,000
Duff & Phelps Credit Rating Co. (b) 350,000 16,121,875
--------------
33,871,875

BROADCASTING & CABLE TV--6.8%
Cablevision Systems Corporation, Class A
(a) 689,800 $ 29,790,737
Ascent Entertainment Group, Inc. (a)(b) 1,500,000 12,000,000
--------------
41,790,737

TELECOMMUNICATIONS--0.9%
ROHN Industries, Inc. (b) 3,000,000 $ 5,812,500

COMPUTER SERVICES--1.5%
Symantec Corporation (a) 725,000 $ 9,560,938
</TABLE>

16
THE OAKMARK SMALL CAP FUND
<PAGE>
THE OAKMARK SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
PRINCIPAL VALUE MARKET VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--91.9% (CONT.)

AUTOMOTIVE--7.9%
SPX Corporation (a) 500,000 $ 20,656,250
Stoneridge, Inc. (a) 1,000,000 16,187,500
Standard Motor Products, Inc. 500,000 12,187,500
--------------
49,031,250

TRANSPORTATION SERVICES--2.7%
Teekay Shipping Corporation (c) 900,000 $ 16,368,750

MACHINERY & INDUSTRIAL PROCESSING--1.9%
Northwest Pipe Company (a)(b) 500,000 $ 9,250,000
The Carbide/Graphite Group, Inc. (a) 240,000 2,670,000
--------------
11,920,000

FORESTRY PRODUCTS--0.8%
Schweitzer-Mauduit International, Inc. 216,500 $ 4,708,875

OTHER INDUSTRIAL GOODS & SERVICES--10.3%
Ferro Corporation 900,000 $ 17,887,500
Columbus McKinnon Corporation (b) 900,000 17,325,000
MagneTek, Inc. (a) 1,500,000 16,406,250
H.B. Fuller Company 200,000 7,575,000
Binks Sames Corporation (b) 275,000 4,675,000
--------------
63,868,750

COMMERCIAL REAL ESTATE--4.1%
Catellus Development Corporation (a) 1,500,000 $ 19,500,000
Prime Hospitality Corp. 800,000 5,600,000
--------------
25,100,000

DIVERSIFIED CONGLOMERATES--7.8%
U.S. Industries, Inc. 3,200,000 $ 48,200,000

TOTAL COMMON STOCKS (COST: $633,782,649) 567,688,232

SHORT TERM INVESTMENTS--7.8%

COMMERCIAL PAPER--5.6%
American Express Credit Corp., 5.27%-5.55%
due 10/1/1998-10/6/1998 $15,000,000 $ 15,000,000
Ford Motor Credit Corp., 5.40% due
10/2/1998 5,000,000 5,000,000
General Electric Capital Corporation, 5.70%
due 10/1/1998 15,000,000 15,000,000
--------------
TOTAL COMMERCIAL PAPER (COST: $35,000,000) 35,000,000
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK SMALL CAP FUND
17
<PAGE>
THE OAKMARK SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................

<TABLE>
<CAPTION>
PRINCIPAL VALUE MARKET VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------

REPURCHASE AGREEMENTS--2.2%
State Street Repurchase Agreement, 5.30%
due 10/1/1998 $13,543,000 $ 13,543,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST: $13,543,000) 13,543,000

TOTAL SHORT TERM INVESTMENTS (COST: $48,543,000) 48,543,000

Total Investments (Cost $682,325,649)--99.7% (d) $ 616,231,232
Other Assets In Excess Of Other Liabilities--0.3% 1,763,530
--------------

TOTAL NET ASSETS--100% $ 617,994,762
--------------
--------------
</TABLE>

(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements
regarding transactions in affiliated issuers.
(c) Represents foreign domiciled corporation.
(d) At September 30, 1998, net unrealized depreciation of $66,094,417,
for federal income tax purposes consisted of gross unrealized
appreciation of $47,329,047 and gross unrealized depreciation of
$113,423,464.

18
THE OAKMARK SMALL CAP FUND SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998
........................................................................

<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--57.4%

OFFICE EQUIPMENT--3.1%
Lexmark International Group, Inc., Class A
(a) 26,000 $ 1,802,125

OTHER CONSUMER GOODS & SERVICES--6.4%
Juno Lighting, Inc. 76,300 $ 1,707,213
H&R Block, Inc. 33,000 1,365,375
National Presto Industries, Inc. 17,000 637,500
--------------
3,710,088

BANKS & THRIFTS--4.7%
Washington Mutual, Inc. 50,000 $ 1,687,500
Banc One Corporation 23,674 1,009,104
--------------
2,696,604

INSURANCE--4.2%
PartnerRe Ltd. (b) 32,500 $ 1,302,031
Old Republic International Corporation 49,500 1,113,750
--------------
2,415,781

TV PROGRAMMING--3.4%
Tele-Communications, Liberty Media, Class A
(a) 52,800 $ 1,937,100

PUBLISHING--1.5%
Lee Enterprises, Inc. 33,900 $ 879,281

INFORMATION SERVICES--3.3%
The Dun & Bradstreet Corporation 70,000 $ 1,890,000

COMPUTER SERVICES--5.8%
First Data Corporation 80,000 $ 1,880,000
Electronic Data Systems Corporation 45,000 1,493,438
--------------
3,373,438

DATA STORAGE--4.0%
Imation Corp. (a) 125,000 $ 2,312,500

MEDICAL PRODUCTS--3.1%
Sybron International Corporation (a) 93,000 $ 1,778,625

AUTOMOTIVE--6.5%
Chrysler Corporation 42,000 $ 2,010,750
Lear Corporation (a) 40,000 1,750,000
--------------
3,760,750

OTHER INDUSTRIAL GOODS & SERVICES--2.7%
Premark International, Inc. 56,500 $ 1,585,531
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK EQUITY AND INCOME
FUND
21
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
PRINCIPAL VALUE MARKET VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--57.4% (CONT.)

COMMERCIAL REAL ESTATE--6.2%
Amli Residential Properties Trust 90,000 $ 1,918,125
Catellus Development Corporation (a) 127,728 1,660,464
--------------
3,578,589

DIVERSIFIED CONGLOMERATES--2.5%
U.S. Industries, Inc. 94,000 $ 1,415,875

TOTAL COMMON STOCKS (COST: $30,820,268) 33,136,287

FIXED INCOME--33.7%

PREFERRED STOCK--5.1%

BANKS & THRIFTS--5.1%
BBC Capital Trust I, Preferred, 9.50% 28,000 $ 714,000
Pennfed Capital Trust, Preferred, 8.90% 27,500 687,500
PennFirst Capital Trust 1, Preferred,
8.625% 70,000 673,750
RBI Capital Trust I, Preferred, 9.10% 42,500 430,312
Fidelity Capital Trust I, Preferred, 8.375% 43,500 424,125
--------------
2,929,687
TOTAL PREFERRED STOCK (COST: $2,970,738) 2,929,687

CORPORATE BONDS--2.4%

AEROSPACE & AUTOMOTIVE--0.3%
Coltec Industries, Inc., 9.75% due 4/1/2000 $150,000 $ 157,687
Coltec Industries, Inc., 9.75% due
11/1/1999 25,000 26,188
--------------
183,875

BUILDING MATERIALS & CONSTRUCTION--0.3%
USG Corporation, 9.25% due 9/15/2001,
Senior Notes Series B 150,000 $ 160,313

UTILITIES--0.3%
Midland Funding Corporation, 11.75% due
7/23/2005 150,000 $ 173,438

OTHER INDUSTRIAL GOODS & SERVICES--1.5%
Scotsman Industries, Inc., 8.625% due
12/15/2007, Senior Subordinated Note 565,000 $ 560,762
UCAR Global Enterprises Inc., 12.00% due
1/15/2005, Senior Subordinated Note 300,000 304,500
--------------
865,262

TOTAL CORPORATE BONDS (COST: $1,395,124) 1,382,888
</TABLE>

22
THE OAKMARK EQUITY AND INCOME FUND
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................
<TABLE>
<CAPTION>
PRINCIPAL VALUE MARKET VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
FIXED INCOME--33.7% (CONT.)

GOVERNMENT AND AGENCY SECURITIES--26.2%

U.S. GOVERNMENT BONDS--25.7%
United States Treasury Notes, 7.875% due
11/15/2004 $6,000,000 $ 7,107,720
United States Treasury Notes, 7.50% due
5/15/2002 6,000,000 6,616,140
United States Treasury Notes, 6.25% due
2/15/2007 1,000,000 1,122,490
--------------
14,846,350

U.S. GOVERNMENT AGENCIES--0.5%
Federal Home Loan Bank, 6.405% due
4/10/2001, Consolidated Bond 300,000 $ 311,895

TOTAL GOVERNMENT AND AGENCY SECURITIES (COST: $14,288,633) 15,158,245

TOTAL FIXED INCOME (COST: $18,654,495) 19,470,820

SHORT TERM INVESTMENTS--8.5%

COMMERCIAL PAPER--6.1%
American Express Credit Corp., 5.27% due
10/5/1998 $500,000 $ 500,000
Ford Motor Credit Corp., 5.55% due
10/1/1998 1,500,000 1,500,000
General Electric Capital Corporation, 5.70%
due 10/1/1998 1,500,000 1,500,000
--------------
TOTAL COMMERCIAL PAPER (COST: $3,500,000) 3,500,000

REPURCHASE AGREEMENTS--2.4%
State Street Repurchase Agreement, 5.30%
due 10/1/1998 $1,390,000 $ 1,390,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST: $1,390,000) 1,390,000

TOTAL SHORT TERM INVESTMENTS (COST: $4,890,000) 4,890,000

Total Investments (Cost $54,364,763)--99.6% (c) $ 57,497,107
Other Assets In Excess Of Other Liabilities--0.4% 248,748
--------------

TOTAL NET ASSETS--100% $ 57,745,855
--------------
--------------
</TABLE>

(a) Non-income producing security.
(b) Represents foreign domiciled corporation.
(c) At September 30, 1998, net unrealized appreciation of $3,132,344,
for federal income tax purposes consisted of gross unrealized
appreciation of $5,429,008 and gross unrealized depreciation of
$2,296,664.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK EQUITY AND INCOME
FUND
23
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998
........................................................................

<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS--94.3%

CONSUMER NON-DURABLES--5.7%
Fila Holding S.p.A. (Italy), Athletic Footwear Manufacturing
(b)(e) 2,574,800 $ 21,885,800
Citizen Watch Co. (Japan) Watch Manufacturer and Retailer 3,166,000 21,438,086
--------------
43,323,886

FOOD & BEVERAGE--10.1%
Quilmes Industrial SA Brewer
(Argentina), (b) 4,724,300 $ 38,680,206
Pernod Ricard (France) Manufactures Wines, Spirits, & Fruit 228,579 16,837,894
Juices
Tate & Lyle PLC (Great Sugar Producer & Distributor
Britain) 2,665,700 14,774,171
Lotte Chilsung Beverage Manufacturer of Soft Drinks, Juices, &
Company (Korea) (e) Sport Drinks 123,000 3,095,452
Lotte Confectionery Company Confection Manufacturer
(Korea) 65,270 2,933,219
--------------
76,320,942

HOUSEHOLD PRODUCTS--1.6%
Amway Japan Limited (Japan) Marketing of Household Products 1,630,300 $ 11,934,409

RETAIL--1.2%
Giordano International East Asian Clothing Retailer &
Limited (Hong Kong) (e) Manufacturer 69,304,000 $ 9,391,028

OTHER CONSUMER GOODS & SERVICES--6.8%
Canon, Inc. (Japan) Office and Video Equipment 1,007,000 $ 20,419,383
Sankyo Company, Ltd. (Japan) Pachinko Machine Manufacturer 1,234,800 16,722,520
Mandarin Oriental Hotel Management
International Limited
(Singapore) 30,539,000 14,353,330
--------------
51,495,233
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK INTERNATIONAL FUND
27
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................

BANKS--8.2%
Uniao de Bancos Brasileiros Major Brazilian Bank
S.A. (Brazil), (c) 1,834,900 $ 24,771,150
Banco Latinoamericano de Multinational Bank
Exportaciones, S.A.,
Class E (Panama), (b)(e) 1,316,500 21,146,282
United Overseas Bank Ltd., Commercial Banking
Foreign Shares
(Singapore) 5,443,000 15,864,668
--------------
61,782,100

OTHER FINANCIAL--3.4%
Sedgwick Group plc (Great Insurance Broker, Financial Services
Britain) 7,510,000 $ 25,343,973

MARKETING SERVICES--9.5%
Cordiant Communications Advertising Services
Group plc (Great Britain)
(e) 21,997,578 $ 40,015,927
Saatchi & Saatchi plc (Great Advertising Services
Britain), (e) 17,757,578 31,699,125
--------------
71,715,052

BROADCASTING & PUBLISHING--5.3%
Singapore Press Holdings Newspaper Publisher
Ltd. (Singapore) 2,740,000 $ 22,725,119
Europe 1 Communication Television Production
(France) 74,020 14,804,529
Woongjin Publishing Company Publisher
(Korea) (e) 148,410 1,259,204
South China Morning Post Newspaper Publisher
(Holdings) Ltd. (Hong
Kong) 3,130,000 1,231,997
--------------
40,020,849

TELECOMMUNICATIONS--2.8%
Telesp Participacoes S.A. Telecommunications
(Brazil), (a) 401,100,000 $ 6,293,357
Embratel Participacoes S.A. Telecommunications
(Brazil), (a) 401,100,000 3,315,855
SK Telecom Co. Ltd. (Korea) Telecommunications 10,395 3,146,716
Tele Centro Sul Telecommunications
Participacoes S.A.
(Brazil), (a) 401,100,000 2,233,127
Tele Norte Leste Telecommunications
Participacoes S.A.
(Brazil), (a) 401,100,000 2,030,115
</TABLE>

28
THE OAKMARK INTERNATIONAL FUND
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................

<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.3% (CONT.)
TELECOMMUNICATIONS--2.8% (CONT.)
Telesp Celular Participacoes Telecommunications
S.A. (Brazil), (a) 401,100,000 $ 1,691,763
Tele Sudeste Celular Telecommunications
Participacoes S.A.
(Brazil), (a) 401,100,000 676,705
Technology Resources Telecommunications
Industries Berhad
(Malaysia) 1,485,000 472,855
Tele Celular Sul Telecommunications
Participacoes S.A.
(Brazil), (a) 401,100,000 304,517
Tele Centro Oeste Celular Telecommunications
Participacoes S.A.
(Brazil), (a) 401,100,000 213,162
Telemig Celular Telecommunications
Participacoes S.A.
(Brazil), (a) 401,100,000 179,327
Tele Nordeste Celular Telecommunications
Participacoes S.A.
(Brazil), (a) 401,100,000 172,560
Tele Leste Celular Telecommunications
Participacoes (Brazil),
(a) 401,100,000 111,656
Tele Norte Celular Telecommunications
Participacoes S.A.
(Brazil), (a) 401,100,000 84,588
Telecomunicacoes Brasileiras Telecommunications
S.A. (Brazil) 401,100,000 84,588
--------------
21,010,891

AEROSPACE--6.0%
Rolls-Royce plc (Great Jet Engines
Britain) 9,228,552 $ 31,928,037
Hong Kong Aircraft Commercial Aircraft Overhaul &
Engineering Company Ltd. Maintenance
(Hong Kong) (e) 11,096,900 13,175,134
--------------
45,103,171

AIRLINES--2.2%
Qantas Airways Limited International Airline
(Australia) 10,798,714 $ 16,828,789

OIL & NATURAL GAS--0.5%
ISIS (France), (a) Oil Services 57,000 $ 3,867,995
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK INTERNATIONAL FUND
29
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................

CHEMICALS--6.7%
Fernz Corporation Limited Agricultural & Industrial Chemical
(New Zealand) (e) Producer 13,373,250 $ 33,797,841
European Vinyls Corporation PVC Manufacturer
International N.V.
(Netherlands) (e) 1,212,299 15,126,783
Nagase & Co., Ltd. (Japan) Chemical Wholesaler 569,000 2,032,663
--------------
50,957,287

COMPONENTS--3.4%
Varitronix International Liquid Crystal Displays
Limited (Hong Kong) 13,421,000 $ 26,066,752

MACHINERY & METAL PROCESSING--2.2%
Outokumpu Oyj (Finland) Metal Producer 1,235,000 $ 10,250,172
The Rauma Group (Finland) Pulp Machinery 544,300 6,155,423
--------------
16,405,595

MINING AND BUILDING MATERIALS--0.7%
Keumkang Ltd. (Korea) (e) Building Materials 560,460 $ 4,956,792
Asia Cement Manufacturing Cement Producer
Company Ltd. (Korea) 10,500 42,581
--------------
4,999,373

OTHER INDUSTRIAL GOODS & SERVICES--13.7%
Tomkins plc (Great Britain) Industrial Management Company 9,065,000 $ 42,496,931
Chargeurs SA (France) (e) Wool Production Holding Company 524,387 25,752,067
Kone Corporation, Class B Elevators
(Finland) 103,870 10,418,665
Charter plc (Great Britain) Welding Products Manufacturer 1,884,100 10,250,102
Groupe Legris Industries SA European Crane Manufacturer
(France) 217,815 9,720,341
Dongah Tire Industry Company Tire Manufacturer
(Korea), (a)(e) 166,290 4,603,390
--------------
103,241,496

STEEL--2.9%
USIMINAS (Brazil), (e) Steel Production 7,401,370 $ 21,852,288
Pohang Iron & Steel Company Manufactures Steel Products
Ltd. (Korea) 14,000 443,933
--------------
22,296,221
</TABLE>

30
THE OAKMARK INTERNATIONAL FUND
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................

<TABLE>
<CAPTION>
SHARES HELD/
DESCRIPTION PRINCIPAL VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.3% (CONT.)

DIVERSIFIED CONGLOMERATES--1.4%
First Pacific Company Ltd. Diversified Operations
(Hong Kong) 19,948,000 $ 5,856,610
Tae Young Corporation Heavy Construction
(Korea) (e) 518,300 4,770,261
Lamex Holdings Ltd. (Hong Office Furniture Supplier
Kong) (e) 14,040,000 322,517
--------------
10,949,388

TOTAL COMMON STOCKS (COST: $1,061,918,399) 713,054,430
</TABLE>

<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENTS--3.5%

COMMERCIAL PAPER--2.0%
General Electric Capital Corporation, 5.70% due 10/1/1998 $15,000,000 $ 15,000,000
--------------
TOTAL COMMERCIAL PAPER (COST: $15,000,000) 15,000,000

REPURCHASE AGREEMENTS--1.5%
State Street Repurchase Agreement, 5.30% due 10/1/1998 $11,121,000 $ 11,121,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST: $11,121,000) 11,121,000

TOTAL SHORT TERM INVESTMENTS (COST: $26,121,000) 26,121,000

Total Investments (Cost $1,088,039,399)--97.8% (f) $ 739,175,430
Foreign Currencies (Proceeds $1,367,998)--0.2% 1,367,813
Other Assets In Excess Of Other Liabilities--2.0% (d) 15,561,065
--------------
TOTAL NET ASSETS--100% $ 756,104,308
--------------
--------------
</TABLE>

(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) Represents a Global Depository Receipt.
(d) Includes portfolio and transaction hedges.
(e) See footnote number five in the Notes to Financial Statements
regarding transactions in affiliated issuers.
(f) At September 30, 1998, net unrealized depreciation of
$348,863,969, for federal income tax purposes consisted of gross
unrealized appreciation of $42,503,436 and gross unrealized
depreciation of $391,367,405.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK INTERNATIONAL FUND
31
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998
........................................................................

CONSUMER NON-DURABLES--3.9%
Royal Doulton plc (Great Britain) Tableware and Giftware 990,000 $ 1,540,035
Designer Textiles (NZ) Limited Knit Fabrics
(New Zealand) (c) 2,960,000 459,213
Dickson Concepts International Jewlery Wholesaler and Retailer
Limited (Hong Kong) 20,000 15,615
--------------
2,014,863

FOOD & BEVERAGE--9.6%
Matthew Clark plc (Great Britain) Spirits & Drinks 1,054,000 $ 2,150,285
Alaska Milk Corporation Milk Producer
(Philippines), (a) 39,327,000 1,707,915
Hite Brewery Company (Korea) Brewer 165,010 761,722
Souza Cruz S/A (Brazil) Tobacco Products 55,000 347,969
--------------
4,967,891

RETAIL--11.3%
Carpetright plc (Great Britain) Carpet Retailer 650,000 $ 2,375,889
Daimon (Japan) (c) Liquor Retailer & Distributor 657,700 1,516,602
Paris Miki Inc. (Japan) Optical Supplies Retailer 85,100 1,140,024
Giordano International Limited East Asian Clothing Retailer &
(Hong Kong) Manufacturer 3,112,000 421,691
Jusco Stores Co., Limited (Hong Department Stores
Kong) 4,244,000 410,773
--------------
5,864,979

OTHER CONSUMER GOODS & SERVICES--6.5%
Sanford Limited (New Zealand) Fisheries 1,275,240 $ 1,595,485
CeWe Color Holding AG (Germany) Photo Equipment & Supplies 9,400 1,519,806
CDL Hotels International Limited Hotel Operator
(Hong Kong) 1,072,000 246,252
--------------
3,361,543

BANKS--0.3%
Shinhan Bank (Korea) Commercial Bank 47,764 $ 110,931
Kookmin Bank (Korea) Commercial Bank 11,351 27,587
--------------
138,518

OTHER FINANCIAL--11.0%
Lambert Fenchurch Group plc Insurance Broker
(Great Britain) 1,411,000 $ 2,470,805
JCG Holdings Ltd. (Hong Kong) Investment Holding Company 9,461,000 1,709,348
Ichiyoshi Securities (Japan) Stock Broker 1,575,000 1,498,847
--------------
5,679,000
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK INTERNATIONAL SMALL
CAP FUND
35
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.7% (CONT.)

COMPUTER SOFTWARE--7.5%
Enix Corporation (Japan) Entertainment Software 129,100 $ 2,778,478
Koei (Japan) Computer Software 196,000 1,120,574
--------------
3,899,052

COMPUTER SYSTEMS--3.9%
Solution 6 Holdings Limited Systems Design & Consulting
(Australia), (a)(c) 4,150,893 $ 1,992,286

MARKETING SERVICES--5.0%
Cordiant Communications Group plc Advertising Services
(Great Britain) 1,428,500 $ 2,598,593

BROADCASTING & PUBLISHING--5.2%
Matichon Public Company Limited, Newspaper Publisher
Foreign Shares (Thailand) (c) 2,038,900 $ 1,801,468
Woongjin Publishing Company Publisher
(Korea) 107,076 908,501
Matichon Public Company Limited Newspaper Publisher
(Thailand) 600 505
--------------
2,710,474

TELECOMMUNICATIONS--0.5%
SK Telecom Co. Ltd. (Korea) Telecommunications 803 $ 243,080

CHEMICALS--2.0%
European Vinyls Corporation PVC Manufacturer
International N.V.
(Netherlands) 83,100 $ 1,036,902

MACHINERY & METAL PROCESSING--1.5%
Denyo Co., Ltd. (Japan) Welding Machines & Power Generators 184,000 $ 793,353

MINING AND BUILDING MATERIALS--3.1%
Parbury Limited (Australia) (c) Building Products 11,119,712 $ 1,581,357

OTHER INDUSTRIAL GOODS & SERVICES--11.6%
Elevadores Atlas, SA (Brazil) Elevators 229,200 $ 2,378,135
Dongah Tire Industry Company Tire Manufacturer
(Korea), (a) 43,900 1,215,280
Nishio Rent All Company (Japan) Construction Equipment Rental 163,900 995,842
Yip's Hang Cheung Ltd. (Hong Paint & Solvents
Kong) (c) 24,724,000 845,532
</TABLE>

36
THE OAKMARK INTERNATIONAL SMALL CAP FUND
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1998 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
DESCRIPTION PRINCIPAL VALUE MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.7% (CONT.)
OTHER INDUSTRIAL GOODS & SERVICES--11.6% (CONT.)
Groupe Legris Industries SA European Crane Manufacturer
(France) 12,800 $ 571,220
--------------
6,006,009

PRODUCTION EQUIPMENT--3.9%
NSC Groupe (France) Manufacturer of Textile Equipment 11,532 $ 1,637,191
Skyjack Inc. (Canada), (a) Producer of Elevating Platforms & Lifts 32,200 406,339
--------------
2,043,530

STEEL--4.3%
Steel & Tube Holdings Ltd. (New Produces and Distributes Steel
Zealand) 2,995,400 $ 2,023,714
Pohang Iron & Steel Company Ltd. Manufactures Steel Products
(Korea) 6,580 208,649
--------------
2,232,363

DIVERSIFIED CONGLOMERATES--4.6%
Haw Par Corporation Ltd. Healthcare and Leisure Products
(Singapore) 3,113,000 $ 2,397,452

TOTAL COMMON STOCKS (COST: $78,457,722) 49,561,245
</TABLE>

<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENTS--1.9%

REPURCHASE AGREEMENTS--1.9%
State Street Repurchase Agreement,
5.30% due 10/1/1998 $967,000 $ 967,000
--------------

TOTAL REPURCHASE AGREEMENTS (COST: $967,000) 967,000

TOTAL SHORT TERM INVESTMENTS (COST: $967,000) 967,000

Total Investments (Cost $79,424,722)--97.6% (d) $ 50,528,245
Foreign Currencies (Proceeds $31,439)--0.1% 31,436
Other Assets In Excess Of Other Liabilities--2.3% (b) 1,210,894
--------------

TOTAL NET ASSETS--100% $ 51,770,575
--------------
--------------
</TABLE>

(a) Non-income producing security.
(b) Includes portfolio and transaction hedges.
(c) See footnote number five in the Notes to Financial Statements
regarding transactions in affiliated issuers.
(d) At September 30, 1998, net unrealized depreciation of $28,896,477,
for federal income tax purposes consisted of gross unrealized
appreciation of $437,043 and gross unrealized depreciation of
$29,333,520.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK INTERNATIONAL SMALL
CAP FUND
37
<PAGE>
THE OAKMARK FAMILY OF FUNDS

STATEMENT OF ASSETS AND LIABILITIES--SEPTEMBER 30, 1998
........................................................................

<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK
FUND SELECT FUND
<S> <C> <C>
------------------------- -------------------------
- ---------------------------------------------------------------------------------
ASSETS
Investments, at market
value $ 6,888,618,717 $ 1,231,272,537
(cost: $6,573,899,571) (cost: $1,222,499,627)
Cash 47,767 652
Foreign currency, at value 0 0
Collateral for securities
loaned, at value 0 159,033,480
Receivable for:
Forward foreign currency
contracts 0 0
Securities sold 23,602,941 467,123
Fund shares sold 9,105,820 2,884,796
Dividends and interest 17,548,208 750,119
------------------------- -------------------------
Total receivables 50,256,969 4,102,038
Other assets 37,203 8,444
------------------------- -------------------------
Total assets $ 6,938,960,656 $ 1,394,417,151
------------------------- -------------------------
------------------------- -------------------------
.................................................................................
LIABILITIES AND NET ASSETS
Payable for:
Collateral for securities
loaned, at value $ 0 $ 159,033,480
Securities purchased 0 4,837,276
Fund shares redeemed 7,227,480 1,045,502
Due to adviser 5,290,462 957,981
Forward foreign currency
contracts 0 0
Other 2,484,832 648,526
------------------------- -------------------------
Total liabilities 15,002,774 166,522,765
------------------------- -------------------------
Net assets applicable to
fund shares outstanding $ 6,923,957,882 $ 1,227,894,386
------------------------- -------------------------
------------------------- -------------------------
Fund shares outstanding 206,454,614 73,251,709
------------------------- -------------------------
------------------------- -------------------------
.................................................................................
PRICE OF SHARES
Net asset value per share $ 33.54 $ 16.76
------------------------- -------------------------
------------------------- -------------------------
.................................................................................
ANALYSIS OF NET ASSETS
Paid in capital $ 6,156,111,515 $ 1,149,816,590
Accumulated undistributed
net realized gain (loss)
on sale of investments,
forward contracts and
foreign currency exchange
transactions 375,272,768 67,603,248
Net unrealized appreciation
(depreciation) of
investments 314,719,146 8,772,910
Net unrealized appreciation
(depreciation) of foreign
currency portfolio hedges 0 0
Net unrealized appreciation
(depreciation)--other 0 0
Accumulated undistributed
net investment income
(loss) 77,854,453 1,701,638
------------------------- -------------------------
Net assets applicable to
Fund shares outstanding $ 6,923,957,882 $ 1,227,894,386
------------------------- -------------------------
------------------------- -------------------------
</TABLE>

38 THE OAKMARK FAMILY OF FUNDS
<PAGE>
......................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
SMALL CAP EQUITY AND INTERNATIONAL
FUND INCOME FUND FUND
<S> <C> <C> <C>
------------------------- ------------------------- -------------------------
- -----------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market
value $ 616,231,232 $ 57,497,107 $ 739,175,430
(cost: $682,325,649) (cost: $54,364,763) (cost: $1,088,039,399)
Cash 1,013,396 585 601
Foreign currency, at value 0 0 1,367,813
Collateral for securities
loaned, at value 26,009,161 1,759,177 73,675,393
Receivable for:
Forward foreign currency
contracts 0 0 2,446,315
Securities sold 12,674,906 0 15,095,665
Fund shares sold 1,033,409 15,175 203,924
Dividends and interest 532,476 461,512 5,128,670
------------------------- ------------------------- -------------------------
Total receivables 14,240,791 476,687 22,874,574
Other assets 8,548 3,274 5,399
------------------------- ------------------------- -------------------------
Total assets $ 657,503,128 $ 59,736,830 $ 837,099,210
------------------------- ------------------------- -------------------------
------------------------- ------------------------- -------------------------
...........................................................................................................
LIABILITIES AND NET ASSETS
Payable for:
Collateral for securities
loaned, at value $ 26,009,161 $ 1,759,177 $ 73,675,393
Securities purchased 11,122,483 0 0
Fund shares redeemed 1,436,217 135,567 2,048,641
Due to adviser 670,322 34,324 683,804
Forward foreign currency
contracts 0 0 3,977,540
Other 270,183 61,907 609,524
------------------------- ------------------------- -------------------------
Total liabilities 39,508,366 1,990,975 80,994,902
------------------------- ------------------------- -------------------------
Net assets applicable to
fund shares outstanding $ 617,994,762 $ 57,745,855 $ 756,104,308
------------------------- ------------------------- -------------------------
------------------------- ------------------------- -------------------------
Fund shares outstanding 48,938,247 4,127,329 72,552,725
------------------------- ------------------------- -------------------------
------------------------- ------------------------- -------------------------
...........................................................................................................
PRICE OF SHARES
Net asset value per share $ 12.63 $ 13.99 $ 10.42
------------------------- ------------------------- -------------------------
------------------------- ------------------------- -------------------------
...........................................................................................................
ANALYSIS OF NET ASSETS
Paid in capital $ 684,807,280 $ 52,589,935 $ 1,015,075,572
Accumulated undistributed
net realized gain (loss)
on sale of investments,
forward contracts and
foreign currency exchange
transactions 6,202,400 1,002,213 52,470,799
Net unrealized appreciation
(depreciation) of
investments (66,094,417) 3,132,344 (348,864,154)
Net unrealized appreciation
(depreciation) of foreign
currency portfolio hedges 0 0 (1,515,552)
Net unrealized appreciation
(depreciation)--other 0 0 198,784
Accumulated undistributed
net investment income
(loss) (6,920,501) 1,021,363 38,738,859
------------------------- ------------------------- -------------------------
Net assets applicable to
Fund shares outstanding $ 617,994,762 $ 57,745,855 $ 756,104,308
------------------------- ------------------------- -------------------------
------------------------- ------------------------- -------------------------

<CAPTION>
THE OAKMARK
INTERNATIONAL
SMALL CAP FUND
<S> <C>
------------------------- -------------------------
-------------------------
- ------------------------------
ASSETS
Investments, at market
value $ 50,528,245
(cost: $79,424,722)
Cash 940
Foreign currency, at value 31,436
Collateral for securities
loaned, at value 3,218,851
Receivable for:
Forward foreign currency
contracts 1,877
Securities sold 1,087,279
Fund shares sold 24,414
Dividends and interest 512,069
-------------------------
Total receivables 1,625,639
Other assets 3,350
-------------------------
Total assets $ 55,408,461
-------------------------
-------------------------
..............................
LIABILITIES AND NET ASSETS
Payable for:
Collateral for securities
loaned, at value $ 3,218,851
Securities purchased 0
Fund shares redeemed 34,598
Due to adviser 58,195
Forward foreign currency
contracts 179,274
Other 146,968
-------------------------
Total liabilities 3,637,886
-------------------------
Net assets applicable to
fund shares outstanding $ 51,770,575
-------------------------
-------------------------
Fund shares outstanding 7,514,807
-------------------------
-------------------------
..............................
PRICE OF SHARES
Net asset value per share $ 6.89
-------------------------
-------------------------
..............................
ANALYSIS OF NET ASSETS
Paid in capital $ 80,845,737
Accumulated undistributed
net realized gain (loss)
on sale of investments,
forward contracts and
foreign currency exchange
transactions (1,634,583)
Net unrealized appreciation
(depreciation) of
investments (28,896,480)
Net unrealized appreciation
(depreciation) of foreign
currency portfolio hedges (179,057)
Net unrealized appreciation
(depreciation)--other 5,883
Accumulated undistributed
net investment income
(loss) 1,629,075
-------------------------
Net assets applicable to
Fund shares outstanding $ 51,770,575
-------------------------
-------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 39
<PAGE>
THE OAKMARK FAMILY OF FUNDS

STATEMENT OF OPERATIONS--YEAR ENDED SEPTEMBER 30, 1998
........................................................................

<TABLE>
<CAPTION>
THE OAKMARK
THE OAKMARK SELECT
FUND FUND
<S> <C> <C>
------------------------- -------------------------
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 132,309,356 $ 10,572,619
Interest Income 47,671,926 5,735,556
Securities lending income 0 109,602
Foreign taxes withheld (1,820,235) (169,788)
------------------------- -------------------------
Total investment income 178,161,047 16,247,989
.........................................................................................
EXPENSES:
Investment advisory fee 72,196,251 11,525,158
Transfer and dividend
disbursing agent fees 4,376,441 1,063,152
Other shareholder servicing
fees 3,387,013 764,027
Reports to shareholders 1,664,357 318,511
Custody and accounting fees 868,661 178,446
Registration and blue sky
expenses 673,806 335,384
Trustees fees 90,748 30,422
Legal fees 58,259 19,206
Audit fees 27,925 20,999
Other 343,480 46,872
------------------------- -------------------------
Total expenses 83,686,941 14,302,177
Expense offset
arrangements (6,489) (2,712)
------------------------- -------------------------
Net expenses 83,680,452 14,299,465
------------------------- -------------------------
.........................................................................................
NET INVESTMENT INCOME (LOSS): 94,480,595 1,948,524
.........................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss)
on investments 1,258,937,339 69,415,172
Net realized gain (loss)
on foreign currency
transactions (8,898) 0
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies (1,704,966,868) (78,902,257)
Net change in
appreciation of forward
currency exchange
contracts 0 0
Net change in
appreciation
(depreciation)--other 0 0
------------------------- -------------------------
.........................................................................................
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS AND
FOREIGN CURRENCY
TRANSACTIONS: (446,038,427) (9,487,085)
------------------------- -------------------------
.........................................................................................
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (351,557,832) $ (7,538,561)
------------------------- -------------------------
------------------------- -------------------------
</TABLE>

40 THE OAKMARK FAMILY OF FUNDS
<PAGE>
......................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
SMALL CAP EQUITY AND INTERNATIONAL
FUND INCOME FUND FUND
<S> <C> <C> <C>
------------------------- ------------------------- -------------------------
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 8,702,112 $ 737,103 $ 38,964,663
Interest Income 3,864,378 1,064,634 2,761,336
Securities lending income 434,864 5,635 1,625,921
Foreign taxes withheld 0 (1,560) (3,542,574)
------------------------- ------------------------- -------------------------
Total investment income 13,001,354 1,805,812 39,809,346
.......................................................................................................................
EXPENSES:
Investment advisory fee 15,863,707 359,708 12,623,371
Transfer and dividend
disbursing agent fees 780,579 95,816 967,291
Other shareholder servicing
fees 700,403 12,676 580,069
Reports to shareholders 301,533 20,847 335,053
Custody and accounting fees 179,707 49,662 1,350,813
Registration and blue sky
expenses 55,750 43,519 53,679
Trustees fees 30,535 18,442 27,749
Legal fees 20,157 11,337 17,726
Audit fees 21,041 19,544 26,722
Other 56,482 7,909 123,111
------------------------- ------------------------- -------------------------
Total expenses 18,009,894 639,460 16,105,584
Expense offset
arrangements (48,678) (212) (105,661)
------------------------- ------------------------- -------------------------
Net expenses 17,961,216 639,248 15,999,923
------------------------- ------------------------- -------------------------
.......................................................................................................................
NET INVESTMENT INCOME (LOSS): (4,959,862) 1,166,564 23,809,423
.......................................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss)
on investments 124,757,914 1,578,730 86,532,713
Net realized gain (loss)
on foreign currency
transactions 0 0 (3,890,444)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies (374,056,372) (2,325,892) (502,914,491)
Net change in
appreciation of forward
currency exchange
contracts 0 0 (2,045,738)
Net change in
appreciation
(depreciation)--other 0 0 195,384
------------------------- ------------------------- -------------------------
.......................................................................................................................
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS AND
FOREIGN CURRENCY
TRANSACTIONS: (249,298,458) (747,162) (422,122,576)
------------------------- ------------------------- -------------------------
.......................................................................................................................
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (254,258,320) $ 419,402 $ (398,313,153)
------------------------- ------------------------- -------------------------
------------------------- ------------------------- -------------------------

<CAPTION>
THE OAKMARK
INTERNATIONAL
SMALL CAP FUND
<S> <C>
------------------------- ------------------
-------------------------
- ------------------------------
INVESTMENT INCOME:
Dividends $ 2,777,457
Interest Income 214,453
Securities lending income 7,556
Foreign taxes withheld (304,967)
-------------------------
Total investment income 2,694,499
..............................
EXPENSES:
Investment advisory fee 827,611
Transfer and dividend
disbursing agent fees 112,828
Other shareholder servicing
fees 27,531
Reports to shareholders 31,378
Custody and accounting fees 176,922
Registration and blue sky
expenses 35,377
Trustees fees 18,433
Legal fees 12,111
Audit fees 24,144
Other 13,299
-------------------------
Total expenses 1,279,634
Expense offset
arrangements (292)
-------------------------
Net expenses 1,279,342
-------------------------
..............................
NET INVESTMENT INCOME (LOSS): 1,415,157
..............................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss)
on investments (96,290)
Net realized gain (loss)
on foreign currency
transactions (162,499)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies (27,728,327)
Net change in
appreciation of forward
currency exchange
contracts (179,057)
Net change in
appreciation
(depreciation)--other 2,414
-------------------------
..............................
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS AND
FOREIGN CURRENCY
TRANSACTIONS: (28,163,759)
-------------------------
..............................
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (26,748,602)
-------------------------
-------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 41
<PAGE>
THE OAKMARK FAMILY OF FUNDS

STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1998
........................................................................

<TABLE>
<CAPTION>
THE OAKMARK FUND
<S> <C> <C>
-------------------------------------------------------
YEAR ENDED ELEVEN MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- -----------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 94,480,595 $ 55,858,346
Net realized gain on sale
of investments 1,258,937,339 239,442,987
Net realized gain (loss) on
foreign currency
transactions (8,898) (2,673)
Net change in unrealized
appreciation (1,704,966,868) 1,231,138,352
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS (351,557,832) 1,526,437,012
.........................................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (66,321,023) (41,659,757)
Net realized short-term
gain (25,210,618) (13,947,126)
Net realized long-term gain (1,098,260,243) (212,039,549)
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (1,189,791,884) (267,646,432)
.........................................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 2,836,315,983 2,107,074,877
Reinvestment of dividends
and capital gain
distributions 1,133,761,068 256,384,877
Payments for shares
redeemed (2,119,718,081) (941,237,366)
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 1,850,358,970 1,422,222,388
------------------------- -------------------------
.........................................................................................
TOTAL INCREASE IN NET ASSETS 309,009,254 2,681,012,968
NET ASSETS:
Beginning of period 6,614,948,628 3,933,935,660
------------------------- -------------------------
End of period $ 6,923,957,882 $ 6,614,948,628
------------------------- -------------------------
------------------------- -------------------------
Undistributed net
investment income $ 77,854,452 $ 49,694,881
------------------------- -------------------------
------------------------- -------------------------

(1) DISTRIBUTIONS PER SHARE:
Net investment income 0.3996 0.3441
Net realized short-term
gain 0.1519 0.1152
Net realized long-term gain 5.8556 1.7514
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 6.4071 $ 2.2107
</TABLE>

42 THE OAKMARK FAMILY OF FUNDS
<PAGE>
......................................................................

<TABLE>
<CAPTION>
THE OAKMARK SELECT FUND
<S> <C> <C>
-------------------------------------------------------
YEAR ENDED ELEVEN MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- -----------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 1,948,524 $ (246,886)
Net realized gain on sale
of investments 69,415,172 5,070,435
Net realized gain (loss) on
foreign currency
transactions 0 0
Net change in unrealized
appreciation (78,902,257) 87,675,167
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS (7,538,561) 92,498,716
.........................................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income 0 0
Net realized short-term
gain (6,882,359) 0
Net realized long-term gain -- 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (6,882,359) 0
.........................................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 1,440,695,723 571,117,746
Reinvestment of dividends
and capital gain
distributions 6,568,333 0
Payments for shares
redeemed (719,123,322) (149,441,890)
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 728,140,734 421,675,856
------------------------- -------------------------
.........................................................................................
TOTAL INCREASE IN NET ASSETS 713,719,814 514,174,572
NET ASSETS:
Beginning of period 514,174,572 0
------------------------- -------------------------
End of period $ 1,227,894,386 $ 514,174,572
------------------------- -------------------------
------------------------- -------------------------
Undistributed net
investment income $ 1,701,638 $ (246,886)
------------------------- -------------------------
------------------------- -------------------------

(1) DISTRIBUTIONS PER SHARE:
Net investment income 0 0
Net realized short-term
gain 0.1678 0
Net realized long-term gain 0 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.1678 $ 0
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 43
<PAGE>
THE OAKMARK FAMILY OF FUNDS

STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1998 CONT.
........................................................................

<TABLE>
<CAPTION>
THE OAKMARK SMALL CAP FUND
<S> <C> <C>
-------------------------------------------------------
YEAR ENDED ELEVEN MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- -----------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ (4,959,862) $ (1,684,439)
Net realized gain on sale
of investments 124,757,914 46,501,798
Net realized gain (loss) on
foreign currency
transactions 0 0
Net change in unrealized
appreciation (374,056,372) 287,859,202
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS (254,258,320) 332,676,561
.........................................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM: (1)
Net investment income 0 0
Net realized short-term
gain (35,041,133) 0
Net realized long-term gain (129,772,888) 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (164,814,021) 0
.........................................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 416,817,749 1,289,718,462
Reinvestment of dividends
and capital gain
distributions 156,645,973 0
Payments for shares
redeemed (1,049,792,259) (327,419,790)
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS (476,328,537) 962,298,672
------------------------- -------------------------
.........................................................................................
TOTAL INCREASE IN NET ASSETS (895,400,878) 1,294,975,233
NET ASSETS:
Beginning of period 1,513,395,640 218,420,407
------------------------- -------------------------
End of period $ 617,994,762 $ 1,513,395,640
------------------------- -------------------------
------------------------- -------------------------
Undistributed net
investment income $ (6,920,502) $ (1,960,639)
------------------------- -------------------------
------------------------- -------------------------

(1) DISTRIBUTIONS PER SHARE:
Net investment income 0 0
Net realized short-term
gain 0.4738 0
Net realized long-term gain 2.3874 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 2.8612 $ 0
</TABLE>

44 THE OAKMARK FAMILY OF FUNDS
<PAGE>
......................................................................

THE OAKMARK EQUITY AND INCOME FUND
<S> <C> <C>
-------------------------------------------------------
YEAR ENDED ELEVEN MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- -----------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 1,166,564 $ 471,744
Net realized gain on sale
of investments 1,578,730 904,824
Net realized gain (loss) on
foreign currency
transactions 0 0
Net change in unrealized
appreciation (2,325,892) 4,554,518
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 419,402 5,931,086
.........................................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM: (1)
Net investment income (594,007) (148,466)
Net realized short-term
gain (882,071) (162,188)
Net realized long-term gain (599,021) 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (2,075,099) (310,654)
.........................................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 43,125,943 24,903,007
Reinvestment of dividends
and capital gain
distributions 1,964,129 288,850
Payments for shares
redeemed (19,151,033) (11,148,702)
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 25,939,039 14,043,155
------------------------- -------------------------
.........................................................................................
TOTAL INCREASE IN NET ASSETS 24,283,342 19,663,587
NET ASSETS:
Beginning of period 33,462,513 13,798,926
------------------------- -------------------------
End of period $ 57,745,855 $ 33,462,513
------------------------- -------------------------
------------------------- -------------------------
Undistributed net
investment income $ 1,021,363 $ 448,806
------------------------- -------------------------
------------------------- -------------------------

(1) DISTRIBUTIONS PER SHARE:
Net investment income 0.2359 0.1202
Net realized short-term
gain 0.3503 0.1311
Net realized long-term gain 0.2379 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.8241 $ 0.2513
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 45
<PAGE>
THE OAKMARK FAMILY OF FUNDS

STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1998 CONT.
........................................................................

<TABLE>
<CAPTION>
THE OAKMARK INTERNATIONAL FUND
<S> <C> <C>
-------------------------------------------------------
YEAR ENDED ELEVEN MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- -----------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 23,809,423 $ 27,666,383
Net realized gain on sale
of investments 86,532,713 217,090,057
Net realized gain (loss) on
foreign currency
transactions (3,890,444) 17,724,883
Net change in unrealized
appreciation
(depreciation) (502,914,491) 70,717,122
Net change in unrealized
appreciation
(depreciation) of forward
currency exchange
contracts (2,045,738) 3,426,674
Net change in unrealized
appreciation
(depreciation)--other 195,384 197,532
------------------------- -------------------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS (398,313,153) 336,822,651
.........................................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM: (1)
Net investment income (46,460,573) (12,477,945)
Net realized short-term
gain (57,985,224) 0
Net realized long-term gain (173,099,244) 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (277,545,041) (12,477,945)
.........................................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 482,976,228 710,447,882
Reinvestment of dividends
and capital gain
distributions 263,415,429 11,903,359
Payments for shares
redeemed (961,776,686) (572,115,610)
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS (215,385,029) 150,235,631
------------------------- -------------------------
.........................................................................................
TOTAL INCREASE (DECREASE) IN
NET ASSETS (891,243,223) 474,580,337
NET ASSETS:
Beginning of period 1,647,347,531 1,172,767,194
------------------------- -------------------------
End of period $ 756,104,308 $ 1,647,347,531
------------------------- -------------------------
------------------------- -------------------------
Undistributed net
investment income $ 38,738,859 $ 61,390,009
------------------------- -------------------------
------------------------- -------------------------

(1) DISTRIBUTIONS PER SHARE:
Net investment income 0.5758 0.1617
Net realized short-term
gain 0.7186 0
Net realized long-term gain 2.1453 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 3.4397 $ 0.1617
</TABLE>

46 THE OAKMARK FAMILY OF FUNDS
<PAGE>
......................................................................

<TABLE>
<CAPTION>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
<S> <C> <C>
-------------------------------------------------------
YEAR ENDED ELEVEN MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- -----------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 1,415,157 $ 646,048
Net realized gain on sale
of investments (96,290) 6,250,624
Net realized gain (loss) on
foreign currency
transactions (162,499) (232,740)
Net change in unrealized
appreciation
(depreciation) (27,728,327) (1,464,546)
Net change in unrealized
appreciation
(depreciation) of forward
currency exchange
contracts (179,057) 0
Net change in unrealized
appreciation
(depreciation)--other 2,414 5,257
------------------------- -------------------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS (26,748,602) 5,204,643
.........................................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM: (1)
Net investment income (308,015) (279,216)
Net realized short-term
gain (3,477,982) (1,285,114)
Net realized long-term gain (3,890,139) 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (7,676,136) (1,564,330)
.........................................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 77,339,314 63,012,100
Reinvestment of dividends
and capital gain
distributions 7,427,846 1,523,977
Payments for shares
redeemed (64,544,647) (41,955,631)
------------------------- -------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 20,222,513 22,580,446
------------------------- -------------------------
.........................................................................................
TOTAL INCREASE (DECREASE) IN
NET ASSETS (14,202,225) 26,220,759
NET ASSETS:
Beginning of period 65,972,800 39,752,041
------------------------- -------------------------
End of period $ 51,770,575 $ 65,972,800
------------------------- -------------------------
------------------------- -------------------------
Undistributed net
investment income $ 1,629,074 $ 521,933
------------------------- -------------------------
------------------------- -------------------------

(1) DISTRIBUTIONS PER SHARE:
Net investment income 0.0559 0.0777
Net realized short-term
gain 0.6312 0.3581
Net realized long-term gain 0.7060 0
------------------------- -------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 1.3931 $ 0.4358
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 47
<PAGE>
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
........................................................................

1. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of The Oakmark Fund
("Oakmark"), The Oakmark Select Fund ("Select"), The Oakmark Small Cap Fund
("Small Cap"), The Oakmark Equity and Income Fund ("Equity and Income"), The
Oakmark International Fund ("International"), and The Oakmark International
Small Cap Fund ("Int'l Small Cap") collectively referred to as "the Funds", each
a series of the Harris Associates Investment Trust (a Massachusetts business
trust). These policies are in conformity with generally accepted accounting
principles ("GAAP"). The presentation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates and
assumptions.

SECURITY VALUATION--
Investments are stated at current value. Securities traded on securities
exchanges and securities traded on the NASDAQ National Market are valued at the
last sales price on the day of valuation, or if lacking any reported sales that
day, at the most recent bid quotation. Over-the-counter securities not so traded
are valued at the most recent bid quotation. Money market instruments having a
maturity of 60 days or less from the date of valuation are valued on an
amortized cost basis which approximates market value. Securities for which
quotations are not readily available are valued at a fair value as determined by
the Trustees.

FOREIGN CURRENCY TRANSLATIONS--
Values of investments and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars using the mean of the bid and offer
prices of such currencies at the time of valuation. Purchases and sales of
investments and dividend and interest income are converted at the prevailing
rate of exchange on the respective dates of such transactions.

The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized gain or loss from investments.

Net realized gains on foreign currency transactions arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Funds' books,
and the U.S. dollar equivalent of the amounts actually received or paid, and the
realized gains or losses resulting from the portfolio and transaction hedges.

At September 30, 1998, only the International and Int'l Small Cap Funds had
foreign currency transactions. Net unrealized appreciation (depreciation)-other
includes the following components:

<TABLE>
<CAPTION>
INTERNATIONAL
INTERNATIONAL SMALL CAP
<S> <C> <C>
- ----------------------------------------------------------
Unrealized appreciation on
dividends and dividend
reclaims receivable $238,449 $ 12,428
Unrealized depreciation on
open securities purchases
and sales (17,431) (6,912)
Unrealized appreciation
(depreciation) on
transaction hedge purchases
and sales (15,673) 1,660
Unrealized depreciation on tax
expense payable (6,561) (1,293)
--------- ----------
Net Unrealized Appreciation
- Other $198,784 $ 5,883
--------- ----------
--------- ----------
</TABLE>

SECURITY TRANSACTIONS AND INVESTMENT INCOME--
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on the accrual basis.

Fund shares are sold and redeemed on a continuing basis at net asset value. Net
asset value per share is determined daily as of the close of regular trading on
the New York Stock Exchange on each day the Exchange is open for trading by
dividing the total value of the Fund's investments and other assets, less
liabilities, by the number of Fund shares outstanding.

FORWARD FOREIGN CURRENCY CONTRACTS--
At September 30, 1998, International and Int'l Small Cap had entered into
forward foreign currency contracts under which they are obligated to exchange
currencies at specified future dates. The Funds' currency transactions are
limited to transaction hedging and portfolio hedging involving either specific
transactions or portfolio positions.

48
THE OAKMARK FAMILY OF FUNDS
<PAGE>
The contractual amounts of forward foreign exchange contracts do not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. Risks arise from the possible inability
of counter parties to meet the terms of their contracts and from movements in
currency values.

The International Fund had the following outstanding contracts at September 30,
1998:

PORTFOLIO HEDGES--

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLARS PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1998
<C> <C> <S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$25,000,000 31,235,000 Brazilian Real January 1998 $ 1,310,201
20,000,000 24,992,000 Brazilian Real January 1998 1,112,769
30,654,500 18,500,000 Pound Sterling October 1998 (753,068)
37,289,250 22,500,000 Pound Sterling November 1998 (894,688)
14,801,400 9,000,000 Pound Sterling November 1998 (466,449)
14,794,200 9,000,000 Pound Sterling November 1998 (473,649)
14,607,000 9,000,000 Pound Sterling November 1998 (658,415)
14,233,120 8,800,000 Pound Sterling November 1998 (692,253)
-------------------
$(1,515,552)
-------------------
-------------------
</TABLE>

TRANSACTION HEDGES: FOREIGN CURRENCY SALES--

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLARS PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1998
<C> <C> <S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
$3,738,928 20,963,421 French Franc October 1998 $ (4,674)
3,143,545 1,865,827 Pound Sterling October 1998 (28,545)
1,594,391 933,429 Pound Sterling October 1998 7,468
3,223,084 1,886,499 Pound Sterling October 1998 15,848
1,844,181 1,087,820 Pound Sterling October 1998 (5,221)
472,144 278,043 Pound Sterling October 1998 (556)
14,664 20,353,856 South Korean Won October 1998 29
24,850 49,700 New Zealand Dollar October 1998 (22)
----------
$ (15,673)
----------
----------
</TABLE>

The Int'l Small Cap Fund had the following outstanding contracts:

PORTFOLIO HEDGES--

TRANSACTION HEDGES: FOREIGN CURRENCY SALES--

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLARS PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1998
<C> <C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
$ 36,402 55,680 Canadian Dollar October 1998 $ (99)
441,298 259,480 Pound Sterling October 1998 156
214,840 125,748 Pound Sterling October 1998 1,057
7,541 1,025,913 Japanese Yen October 1998 31
60,660 8,252,168 Japanese Yen October 1998 251
92,447 12,576,472 Japanese Yen October 1998 382
131,033 262,066 New Zealand Dollar October 1998 (118)
------
$1,660
------
------
</TABLE>

At September 30, 1998, International and Int'l Small Cap Funds each had
sufficient cash and/or securities to cover any commitments under these
contracts.

THE OAKMARK FAMILY OF FUNDS
49
<PAGE>
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
........................................................................

SECURITIES LENDING--
Each Fund except The Oakmark Fund may lend portfolio securities to broker-
dealers and banks.

Security loans are required to be secured at all times by collateral at least
equal to the market value of securities loaned. The Funds receive income from
lending securities by investing the collateral and continue to earn income on
the loaned securities. Security loans are subject to the risk of failure by the
borrower to return the loaned securities, in which case the lending Fund could
incur a loss. The market values (in thousands) of securities on loan to
broker-dealers at September 30, 1998 are shown below.

<TABLE>
<CAPTION>
INT'L
SMALL EQUITY & SMALL
SELECT CAP INCOME INTERNATIONAL CAP
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Market Value of Securities
Loaned $153,993 $24,519 $ 1,696 $67,416 $ 2,988
Collateral (Cash and U.S.
Treasuries) 159,033 26,009 1,759 73,675 3,219
</TABLE>

FEDERAL INCOME TAXES, DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--
No provision is made for Federal income taxes since the Funds elect to be taxed
as "regulated investment companies" and make such distributions to their
shareholders as to be relieved of all Federal income taxes under provisions of
current Federal tax law.

The Funds hereby designate the following long term capital gain distributions
for purposes of the dividends received deduction (in thousands):

<TABLE>
<CAPTION>
INT'L
SMALL EQUITY & SMALL
OAKMARK SELECT CAP INCOME INTERNATIONAL CAP
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Long Term Capital Gain $1,111,813 $ 67,892 $124,758 $ 1,111 $23,108 $ 0
</TABLE>

BANK LOANS--
The Funds have two unsecured lines of credit with a syndication of banks. One
line of credit is a committed line of $350 million and the other is an
uncommitted line of $250 million. Borrowings under this arrangement bear
interest at .50% above the Federal Funds Effective Rate. As of September 30,
1998, there were no outstanding borrowings.

2. TRANSACTIONS WITH AFFILIATES
Each fund has an investment advisory agreement with Harris Associates L.P.
(Adviser). For management services and facilities furnished, the Funds pay the
Adviser monthly fees at annual rates as follows. Oakmark pays 1% on the first
$2.5 billion of net assets, .95% on the next $1.25 billion of net assets, .90%
on the next $1.25 billion of net assets and .85% on the excess of $5 billion of
net assets. International pays 1% on the first $2.5 billion of net assets, .95%
on the next $2.5 billion of net assets and .90% on the excess of $5 billion of
net assets. Select pays 1% on the first $1 billion and .95% on the next $500
million, .90% on the next $500 million, .85% on the next $500 million and .80%
on the excess of $2.5 million of net assets. Small Cap pays 1.25% on the first
$1 billion of net assets, 1.15% on the next $500 million, 1.10% on the next $500
million, 1.05% on the next $500 million, and 1% on the excess of $2.5 billion.
Equity and Income pays .75% of net assets and Int'l Small Cap pays 1.25% of net
assets. Each fee is calculated on the total net assets as determined at the end
of each preceding calendar month. Beginning October 1, 1998, additional
breakpoints will be as follows: Oakmark will pay .80% on net assets in excess of
$10 billion and Select will pay .75% on excess of $5 billion of net assets. The
Adviser has voluntarily agreed to reimburse the Funds to the extent that annual
expenses, excluding certain expenses, exceed 1.5% for domestic funds and 2.0%
for international funds.

In connection with the organization of the Funds, expenses of approximately
$146,500 and $47,000 were advanced to Oakmark and International, approximately
$7,283 each to Small Cap, Equity and Income and Int'l Small Cap, and $3,500 to
Select by the Adviser. These expenses are being amortized on a straight line
basis through October, 2000 for Small Cap, Equity and Income and Int'l Small
Cap, and October, 2001 for Select. Oakmark and International have fully
amortized all organization expenses.

During the year ended September 30, 1998, the Funds incurred brokerage
commissions of $7,658,348, $2,399,359, $1,956,260, $66,195, $4,295,208 and
$384,909 of which $2,068,690, $589,570, $193,708, $41,979, $0, and $0 were paid
by Oakmark, Select, Small Cap, Equity and Income, International and Int'l Small
Cap, respectively, to an affiliate of the Adviser.

50
THE OAKMARK FAMILY OF FUNDS
<PAGE>
3. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund shares as shown in the Statement of Changes in Net
Assets are in respect of the following number of shares (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
--------------------------------------------------------------------
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME INTERNATIONAL CAP
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Shares sold 68,340 81,093 22,121 3,014 34,513 8,604
Shares issued in reinvestment of
dividends 30,513 410 9,667 149 20,108 786
Less shares redeemed (52,910) (39,717) (57,261) (1,344) (69,820) (7,284)
------- ------- --------- -------- ------------- -----
Net increase (decrease) in shares
outstanding 45,943 41,786 (25,473) 1,819 (15,199) 2,106
------- ------- --------- -------- ------------- -----
------- ------- --------- -------- ------------- -----
</TABLE>

<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------------------------------
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME INTERNATIONAL CAP
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Shares sold 57,226 42,529 78,065 1,941 41,288 5,229
Shares issued in reinvestment of
dividends 7,962 0 0 25 793 135
Less shares redeemed (26,115) (11,063) (20,201) (880) (32,946) (3,438)
------- ------- --------- -------- ------ -----------
Net increase in shares outstanding 39,073 31,466 57,864 1,086 9,135 1,926
------- ------- --------- -------- ------ -----------
------- ------- --------- -------- ------ -----------
</TABLE>

4. INVESTMENT TRANSACTIONS
Transactions in investment securities (excluding short term securities) were as
follows (in thousands):

<TABLE>
<CAPTION>
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME INTERNATIONAL CAP
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Purchases $3,681,990 $1,219,648 $391,185 $41,789 $502,915 $57,346
Proceeds from sales 2,991,049 601,544 968,060 20,783 923,456 41,576
</TABLE>

THE OAKMARK FAMILY OF FUNDS
51
<PAGE>
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
........................................................................

5. TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS
Affiliated issuers, as defined under the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the Fund's
transactions in the securities of these issuers during the year ended September
30, 1998 is set forth below:

SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK FUND

<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST PROCEEDS INCOME VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
AC Nielsen Corporation $ - $ - $ - $ 105,999,000
Brunswick Corporation 47,321,680 - 1,789,400 94,195,350
GC Companies, Inc. - - - 15,334,125
H & R Block, Inc. 340,780,489 - 2,941,950 317,172,475
Juno Lighting, Incorporated - - 390,600 24,276,875
Knight Ridder 128,013,079 - 4,480,340 308,358,300
Polaroid Corporation 11,171,805 - 2,731,440 111,818,325
R. H. Donnelley Corporation 10,418,862 - 1,835,978 25,965,967
SPX Corporation - - - 36,156,700
The Black & Decker Corporation 46,677,053 - 3,899,160 344,113,875
The Dun & Bradstreet Corporation 107,175,516 - 6,115,747 283,265,100
------------ ----------- ----------- --------------
TOTALS $691,558,484 - $24,184,615 $1,666,656,092
</TABLE>

SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK SELECT FUND

<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST PROCEEDS INCOME VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
USG Corporation $ 96,334,193 $ 3,793,551 $ 26,492 $ 118,539,600
US Industries Inc. 148,983,455 16,251,897 1,212,415 113,179,625
------------ ----------- ----------- --------------
TOTALS $245,317,648 $20,045,448 $ 1,238,907 $ 231,719,225
</TABLE>

SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK SMALL CAP FUND

<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST PROCEEDS INCOME VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Ascent Entertainment Group, Inc. $ 3,794,484 $ 5,437,319 $ - $ 12,000,000
Barry (R.G.) Corporation 3,388,252 - - 11,781,263
Binks Sames Corporation 1,078,125 - 24,700 4,675,000
Columbus McKinnon Corporation 5,432,270 1,724,192 249,816 17,325,000
Duff & Phelps Credit Rating Company 3,082,142 - 38,808 16,121,875
Finger Lakes Financial Corp. - - 41,360 2,068,000
Northwest Pipe Company 1,520,000 2,103,411 - 9,250,000
Ralcorp Holdings, Inc. - 23,429,934 - 24,500,000
ROHN Industries, Inc. 17,335,121 - 50,000 5,812,500
Scotsman Industries, Inc. - 1,664,975 100,612 22,240,375
Triarc Companies, Inc. 1,959,905 10,981,722 - 19,453,125
Ugly Duckling Corporation 20,320,181 8,194,979 - 8,695,288
------------ ----------- ----------- --------------
TOTALS $ 57,910,480 $53,536,532 $ 505,296 $ 153,922,426
</TABLE>

52
THE OAKMARK FAMILY OF FUNDS
<PAGE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL FUND

<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST PROCEEDS INCOME VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Banco Latinoamericano de
Exportaciones,S.A. Class E $ 39,751,365 $ 3,301,540 $ 849,888 $ 21,146,282
Chargeurs International SA - 9,934,608 1,430,885 25,752,067
Cordiant Communications Group PLC 2,891,044 - 420,931 40,015,927
Dongah Tire Industry Company 5,643,713 - - 4,603,390
European Vinyls Corporation Intl. NV - 3,188,031 1,951,039 15,126,783
Fernz Corporation Ltd. 6,718,676 2,115,546 1,574,294 33,797,841
Fila Holding S.p.A. 20,288,049 187,177 685,787 21,885,800
Giordano International Limited 8,556,185 98,829 89,476 9,391,028
Hong Kong Aircraft Engineering Company 3,216,275 607,632 1,026,373 13,175,134
Keumkang Ltd. 2,940,243 - 159,292 4,956,792
Lamex Holdings Ltd. - - 181,184 322,517
Lotte Chilsung Beverage Company 3,009,525 - 17,504 3,095,452
Saatchi & Saatchi PLC 523,408 7,666,881 492,036 31,699,125
Tae Young Corporation 13,975,221 1,023,976 88,023 4,770,261
USIMINAS 12,560,055 - 5,885,389 21,852,288
Woongjin Publishing Company 2,936,743 - 34,695 1,259,204
------------ ----------- ----------- ------------
TOTALS $123,010,502 $28,124,220 $14,886,796 $252,849,891
</TABLE>

SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL SMALL CAP FUND

<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST PROCEEDS INCOME VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Daimon $ 836,251 $ 61,037 $ 63,270 $ 1,516,602
Designer Textiles (NZ) Limited - - 56,322 459,213
Matichon Public Company Limited,
Foreign Shares 648,794 - 75,237 1,746,991
Parbury Limited 2,899,156 - 65,550 1,581,357
Solution 6 Holdings Ltd. 431,130 - - 1,992,286
Yip's Hang Cheung Ltd. 539,149 2,540 89,119 845,532
------------ ----------- ----------- ------------
TOTALS $ 5,354,480 $ 63,577 $ 349,498 $ 8,141,981
</TABLE>

6. INTRODUCTION OF THE EURO
The European Monetary Union intends to establish a common European currency for
participating countries to be called the "euro." Each participating country will
supplement its existing currency with the euro on January 1, 1999 and replace
its existing currency with the euro on July 2, 2002. The consequences of the
euro conversion for foreign exchange rates, interest rates and the value of
European securities are presently unclear. Uncertainties include whether
operational systems of banks and other financial institutions will be ready by
January 1, 1999; the application of exchange rates for existing currencies and
the euro; the creation of suitable clearing and settlement systems for the new
currency; the legal treatment of certain outstanding financial contracts after
January 1, 1999 that refer to existing currencies rather than the euro; and
whether the interest rate, tax and labor regimes of European countries
participating in the euro will converge over time. These and other factors,
including economic and political risks, could cause market disruptions before or
after the introduction of the euro, and could adversely affect the value of
securities held by the Funds.

THE OAKMARK FAMILY OF FUNDS
53
<PAGE>
THE OAKMARK FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
...............................................................................

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED OCTOBER 31,
SEPTEMBER 30, SEPTEMBER 30, ------------------------------------------------
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 41.21 $ 32.39 $ 28.47 $ 25.21 $ 24.18 $ 17.11
Income From Investment
Operations:
Net Investment Income
(Loss) 0.47 0.36 0.34 0.30 0.27 0.17
Net Gains or Losses on
Securities (both realized
and unrealized) (1.73) 10.67 4.70 4.66 1.76 7.15
-------- -------------- --------- --------- --------- ---------
Total From Investment
Operations: (1.26) 11.03 5.04 4.96 2.03 7.32
Less Distributions:
Dividends (from net
investment income) (0.40) (0.34) (0.28) (0.23) (0.23) (0.04)
Distributions (from capital
gains) (6.01) (1.87) (0.84) (1.47) (0.77) (0.21)
-------- -------------- --------- --------- --------- ---------
Total Distributions (6.41) (2.21) (1.12) (1.70) (1.00) (0.25)
-------- -------------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 33.54 $ 41.21 $ 32.39 $ 28.47 $ 25.21 $ 24.18
-------- -------------- --------- --------- --------- ---------
-------- -------------- --------- --------- --------- ---------
Total Return (4.06)% 39.24%* 18.07% 21.55% 8.77% 43.21%
Ratios/Supplemental Data:
Net Assets, End of Period
($ million) $ 6,924.0 $ 6,614.9 $ 3,933.9 $ 2,827.1 $ 1,677.3 $ 1,107.0
Ratio of Expenses to
Average Net Assets 1.08% 1.08%* 1.18% 1.17% 1.22% 1.32%
Ratio of Net Income (Loss)
to Average Net Assets 1.22% 1.19%* 1.13% 1.27% 1.19% 0.94%
Portfolio Turnover Rate 43% 17% 24% 18% 29% 18%

<CAPTION>
PERIOD
ENDED
OCTOBER 31,
1992 1991(A)
<S> <C> <C>
- ------------------------------
Net Asset Value, Beginning of
Period $ 12.10 $ 10.00
Income From Investment
Operations:
Net Investment Income
(Loss) (0.03) (0.01)
Net Gains or Losses on
Securities (both realized
and unrealized) 5.04 2.11
--------- -----------
Total From Investment
Operations: 5.01 2.10
Less Distributions:
Dividends (from net
investment income) -- --
Distributions (from capital
gains) -- --
--------- -----------
Total Distributions -- --
--------- -----------
Net Asset Value, End of Period $ 17.11 $ 12.10
--------- -----------
--------- -----------
Total Return 41.40% 87.10%*
Ratios/Supplemental Data:
Net Assets, End of Period
($ million) $ 114.7 $ 4.8
Ratio of Expenses to
Average Net Assets 1.70% 2.50%(b)*
Ratio of Net Income (Loss)
to Average Net Assets (0.24)% (0.66)%(c)*
Portfolio Turnover Rate 34% 0%
</TABLE>

*Data has been annualized.

(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.

54 THE OAKMARK FAMILY OF FUNDS
<PAGE>
THE OAKMARK SELECT FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
...............................................................................

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
ELEVEN
MONTHS
YEAR ENDED ENDED
SEPTEMBER SEPTEMBER
30, 1998 30, 1997
<S> <C> <C>
- -----------------------------------------------------------
Net Asset Value, Beginning of
Period $ 16.34 $ 10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.03 (0.01)
Net Gains or Losses on
Securities (both realized
and unrealized) 0.56 6.35
---------- ----------
Total From Investment
Operations: 0.59 6.34
Less Distributions:
Dividends (from net
investment income) 0.00 0.00
Distributions (from capital
gains) (0.17) 0.00
---------- ----------
Total Distributions (0.17) 0.00
---------- ----------
Net Asset Value, End of Period $ 16.76 $ 16.34
---------- ----------
---------- ----------
Total Return 3.64% 69.16%*
Ratios/Supplemental Data:
Net Assets, End of Period
($ million) $ 1,227.9 $ 514.2
Ratio of Expenses to
Average Net Assets (a) 1.22% 1.12%*
Ratio of Net Income (Loss)
to Average Net Assets (a) 0.17% (0.11)%*
Portfolio Turnover Rate 56% 37%
</TABLE>

Notes
*Ratios have been annualized.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 55
<PAGE>
THE OAKMARK SMALL CAP FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
...............................................................................

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
ELEVEN
MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER SEPTEMBER OCTOBER
30, 1998 30, 1997 31, 1996
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 20.34 $ 13.19 $ 10.00
Income From Investment
Operations:
Net Investment Income
(Loss) (0.12) (0.01) (0.02)
Net Gains or Losses on
Securities (both realized
and unrealized) (4.73) 7.16 3.21
---------- ---------- ----------
Total From Investment
Operations: (4.85) 7.15 3.19
Less Distributions:
Dividends (from net
investment income) 0.00 0.00 0.00
Distributions (from capital
gains) (2.86) 0.00 0.00
---------- ---------- ----------
Total Distributions (2.86) 0.00 0.00
---------- ---------- ----------
Net Asset Value, End of Period $ 12.63 $ 20.34 $ 13.19
---------- ---------- ----------
---------- ---------- ----------
Total Return (26.37%) 59.14%* 31.94%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $ 618.0 $ 1,513.4 $ 218.4
Ratio of Expenses to
Average Net Assets 1.45% 1.37%* 1.61%
Ratio of Net Income (Loss)
to Average Net Assets (0.40%) (0.25%)* (0.29%)
Portfolio Turnover Rate 34% 27% 23%
</TABLE>

*Data has been annualized.

56 THE OAKMARK FAMILY OF FUNDS
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
...............................................................................

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
ELEVEN
MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER SEPTEMBER OCTOBER
30, 1998 30, 1997 31, 1996
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 14.49 $ 11.29 $ 10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.29 0.21 0.10
Net Gains or Losses on
Securities (both realized
and unrealized) 0.04 3.24 1.19
---------- ---------- ----------
Total From Investment
Operations: 0.33 3.45 1.29
Less Distributions:
Dividends (from net
investment income) (0.24) (0.12) 0.00
Distributions (from capital
gains) (0.59) (0.13) 0.00
---------- ---------- ----------
Total Distributions (0.83) (0.25) 0.00
---------- ---------- ----------
Net Asset Value, End of Period $ 13.99 $ 14.49 $ 11.29
---------- ---------- ----------
---------- ---------- ----------
Total Return 2.57% 34.01%* 12.91%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $ 57.7 $ 33.5 $ 13.8
Ratio of Expenses to
Average Net Assets 1.31% 1.50%*(a) 2.50%(a)
Ratio of Net Income (Loss)
to Average Net Assets 2.39% 2.38%*(a) 1.21%(a)
Portfolio Turnover Rate 46% 53% 66%
</TABLE>

*Data has been annualized

(a) If the fund had paid all of its expenses and there had been no expense
reimbursement by the investment adviser, ratios would have been as follows:

<TABLE>
<CAPTION>
SEPTEMBER OCTOBER
30, 1997 31, 1996
<S> <C> <C>
- ------------------------------------------------------
Ratio of Expenses to Average
Net Assets 1.70 % 2.64 %
Ratio of Net Income (Loss) to
Average Net Assets 2.18 % 1.08 %
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 57
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
...............................................................................

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
ELEVEN PERIOD
MONTHS ENDED
YEAR ENDED ENDED YEAR ENDED OCTOBER 31, OCTOBER
SEPTEMBER SEPTEMBER -------------------------------------------- 31,
30, 1998 30, 1997 1996 1995 1994 1993 1992(A)
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 18.77 $ 14.92 $ 12.97 $ 14.50 $ 14.09 $ 9.80 $ 10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.41 0.27 0.09 0.30 0.21 0.06 0.26
Net Gains or Losses on
Securities (both realized
and unrealized) (5.32) 3.74 2.90 (0.77) 0.43 4.48 (0.46)
---------- ---------- -------- -------- -------- -------- ----------
Total From Investment
Operations: (4.91) 4.01 2.99 (0.47) 0.64 4.54 (0.20)
Less Distributions:
Dividends (from net
investment income) (0.58) (0.16) 0.00 0.00 (0.08) (0.25) --
Distributions (from capital
gains) (2.86) 0.00 (1.04) (1.06) (0.15) -- --
---------- ---------- -------- -------- -------- -------- ----------
Total Distributions (3.44) (0.16) (1.04) (1.06) (0.23) (0.25) --
---------- ---------- -------- -------- -------- -------- ----------
Net Asset Value, End of Period $ 10.42 $ 18.77 $ 14.92 $ 12.97 $ 14.50 $ 14.09 9.80
---------- ---------- -------- -------- -------- -------- ----------
---------- ---------- -------- -------- -------- -------- ----------
Total Return (29.90%) 29.63%* 24.90% (3.06%) 4.62% 47.49% (22.81%)*
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $ 756.1 $ 1,647.3 $1,172.8 $ 819.7 $1,286.0 $ 815.4 $ 23.5
Ratio of Expenses to
Average Net Assets 1.32% 1.26%* 1.32% 1.40% 1.37% 1.26% 2.04%*
Ratio of Net Income (Loss)
to Average Net Assets 1.95% 2.09%* 1.45% 1.40% 1.44% 1.55% 37.02%*
Portfolio Turnover Rate 43% 61% 42% 26% 55% 21% 0%
</TABLE>

*Ratios have been annualized.

(a) From September 30, 1992, the date on which Fund shares were first offered
for sale to the public.

58 THE OAKMARK FAMILY OF FUNDS
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
...............................................................................

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
ELEVEN
MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER SEPTEMBER OCTOBER
30, 1998 30, 1997 31, 1996
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 12.20 $ 11.41 $ 10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.18 0.13 0.04
Net Gains or Losses on
Securities (both realized
and unrealized) (4.09) 1.10 1.37
---------- ---------- ----------
Total From Investment
Operations: (3.91) 1.23 1.41
Less Distributions:
Dividends (from net
investment income) (0.06) (0.08) 0.00
Distributions (from capital
gains) (1.34) (0.36) 0.00
---------- ---------- ----------
Total Distributions (1.40) (0.44) 0.00
---------- ---------- ----------
Net Asset Value, End of Period $ 6.89 $ 12.20 $ 11.41
---------- ---------- ----------
---------- ---------- ----------
Total Return (35.20%) 12.07%* 14.15%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $ 51.8 $ 66.0 $ 39.8
Ratio of Expenses to
Average Net Assets 1.96% 1.93%* 2.50%(a)
Ratio of Net Income (Loss)
to Average Net Assets 2.17% 1.23%* 0.65%(a)
Portfolio Turnover Rate 69% 63% 27%
</TABLE>

Notes
*Ratios have been annualized.

(a) If the fund had paid all of its expenses and there had been no expense
reimbursement by the investment advisor, the ratio of expenses to average
net assets would have been 2.65% and the ratio of net income (loss) to
average net assets would have been .50%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 59
<PAGE>
THE OAKMARK FAMILY OF FUNDS

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
........................................................................

TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF HARRIS
ASSOCIATES INVESTMENT TRUST:

WE HAVE AUDITED THE ACCOMPANYING STATEMENTS OF ASSETS AND
LIABILITIES OF THE OAKMARK FUND, THE OAKMARK SELECT FUND, THE OAKMARK
SMALL CAP FUND, THE OAKMARK EQUITY AND INCOME FUND, THE OAKMARK
INTERNATIONAL FUND, AND THE OAKMARK INTERNATIONAL SMALL CAP FUND (EACH A
SERIES OF HARRIS ASSOCIATES INVESTMENT TRUST), INCLUDING THE SCHEDULES
OF INVESTMENTS ON PAGES 7-9, 12-13, 16-18, 21-23, 27-31, AND 35-37, AS
OF SEPTEMBER 30, 1998, AND THE RELATED STATEMENTS OF OPERATIONS,
STATEMENTS OF CHANGES IN NET ASSETS AND THE FINANCIAL HIGHLIGHTS FOR THE
PERIODS INDICATED THEREON. THESE FINANCIAL STATEMENTS AND FINANCIAL
HIGHLIGHTS ARE THE RESPONSIBILITY OF THE TRUST'S MANAGEMENT. OUR
RESPONSIBILITY IS TO EXPRESS AN OPINION ON THESE FINANCIAL STATEMENTS
AND FINANCIAL HIGHLIGHTS BASED ON OUR AUDITS.
WE CONDUCTED OUR AUDITS IN ACCORDANCE WITH GENERALLY ACCEPTED
AUDITING STANDARDS. THOSE STANDARDS REQUIRE THAT WE PLAN AND PERFORM THE
AUDITS TO OBTAIN REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL
STATEMENTS AND FINANCIAL HIGHLIGHTS ARE FREE OF MATERIAL MISSTATEMENT.
AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING THE
AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENTS. OUR PROCEDURES
INCLUDED CONFIRMATION OF SECURITIES OWNED AS OF SEPTEMBER 30, 1998, BY
CORRESPONDENCE WITH THE CUSTODIAN AND BROKERS. AS TO SECURITIES
PURCHASED BUT NOT RECEIVED, WE REQUESTED CONFIRMATION FROM BROKERS, AND
WHEN REPLIES WERE NOT RECEIVED, WE CARRIED OUT ALTERNATIVE AUDITING
PROCEDURES. AN AUDIT ALSO INCLUDES ASSESSING THE ACCOUNTING PRINCIPLES
USED AND SIGNIFICANT ESTIMATES MADE BY MANAGEMENT, AS WELL AS EVALUATING
THE OVERALL FINANCIAL STATEMENT PRESENTATION. WE BELIEVE THAT OUR AUDITS
PROVIDE A REASONABLE BASIS FOR OUR OPINION.
IN OUR OPINION, THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
REFERRED TO ABOVE PRESENT FAIRLY, IN ALL MATERIAL RESPECTS, THE
FINANCIAL POSITIONS OF THE OAKMARK FUND, THE OAKMARK SELECT FUND, THE
OAKMARK SMALL CAP FUND, THE OAKMARK EQUITY AND INCOME FUND, THE OAKMARK
INTERNATIONAL FUND, AND THE OAKMARK INTERNATIONAL SMALL CAP FUND OF THE
HARRIS ASSOCIATES INVESTMENT TRUST AS OF SEPTEMBER 30, 1998, THE RESULTS
OF THEIR OPERATIONS, THE CHANGES IN THEIR NET ASSETS, AND THEIR
FINANCIAL HIGHLIGHTS FOR THE PERIODS INDICATED THEREON IN CONFORMITY
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.

ARTHUR ANDERSEN LLP
Chicago, Illinois
October 21, 1998

60
THE OAKMARK FAMILY OF FUNDS