<PAGE>
The information in this Prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
AUGUST __, 1999
[Logo]
THE OAKMARK GLOBAL FUND
THE OAKMARK GLOBAL FUND is a series of Harris Associates Investment Trust. The
Fund offers two classes of shares, Class I and Class II, each of which is
offered in this prospectus.
The other series of the Trust--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--are offered by
a separate prospectus.
----------------------------------------------
MEMBER OF THE 100% NO-LOAD MUTUAL FUND COUNCIL
----------------------------------------------
Managed by Harris Associates, L.P.
Two North LaSalle Street, Suite 500
Chicago, Illinois 60602
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
OBJECTIVE, STRATEGIES AND RISKS ........................................... 3
Investment Objective ................................................. 3
Principal Strategies ................................................. 3
Principal Risks ...................................................... 4
HOW THE FUND INVESTS ...................................................... 6
Investment Techniques ................................................ 6
Risk Factors ......................................................... 7
Other Information .................................................... 8
FUND SERVICES ............................................................. 10
Eligibility to Buy Shares ............................................ 10
Share Classes ........................................................ 10
Investment Minimums .................................................. 10
HOW TO BUY SHARES ......................................................... 11
By Check ............................................................. 11
By Wire Transfer ..................................................... 11
By Electronic Transfer ............................................... 12
By Automatic Investment .............................................. 12
By Payroll Deduction ................................................. 13
By Exchange .......................................................... 13
Through Intermediaries ............................................... 14
General Purchasing Policies .......................................... 15
HOW TO SELL CLASS I SHARES ................................................ 17
In Writing ........................................................... 17
By Telephone ......................................................... 17
By Electronic Transfer ............................................... 18
By Exchange .......................................................... 18
By Wire Transfer ..................................................... 19
By Automatic Redemption .............................................. 19
General Redemption Policies .......................................... 20
Shareholder Services ................................................. 22
DISTRIBUTIONS AND TAXES ................................................... 24
Distributions ........................................................ 24
Taxes ................................................................ 24
MANAGEMENT OF THE FUNDS ................................................... 25
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
- ---------------------------------------------------------
INVESTMENT OBJECTIVE
- ---------------------------------------------------------
The Fund seeks long-term capital appreciation.
- ---------------------------------------------------------
PRINCIPAL STRATEGIES
- ---------------------------------------------------------
The Fund is a diversified fund that seeks to achieve its objective by investing
in equity securities which are primarily the common stock of U.S. and non-U.S.
companies. The Fund invests in the securities of companies located in at least
three countries. Although income is considered in the selection of securities,
the Fund is not designed for investors whose primary investment objective is
income.
- - Under normal market conditions, the Fund invests between 20-60% of its
total assets in the securities of U.S. companies, and between 40-80% of its
total assets in the securities of non-U.S. companies.
- - The Fund's foreign investments include 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 15% of its assets in securities of
issuers based in emerging markets.
- - Although there is no restriction on the size of the companies in which the
Fund invests, it is anticipated that ordinarily most of the Fund's
investments are in mid-sized companies with market capitalizations between
$1-8 billion.
- - The Fund may invest up to 25% of its total assets in debt securities of
both governmental and corporate issuers.
The Fund uses a value-oriented investment philosophy. This philosophy of
investing is based upon the belief that over time a company's stock market price
moves toward and meets with a company's true business value. Harris Associates,
L.P., the Fund's investment adviser (the "Adviser") uses this philosophy to
identify companies that the Adviser believes have discounted stock prices
compared to the true business value of the companies. After identifying such
companies, the Adviser looks for the following additional characteristics,
although not all of the companies selected will have these attributes:
- positive free cash flows
- favorable earnings growth potential
- competitive return on equity
- high level of manager ownership
As part of this selection process, typically, the Adviser's analysts visit
companies and talk to various industry sources.
Each company is analyzed on a case-by-case basis to select those that meet the
Adviser's standards of quality and value. This means that the Adviser focuses on
individual companies in making its investment decisions rather than on specific
economic factors or specific industries.
The chief consideration in the selection of stocks for the Fund is the size of
the discount of the stock's market price compared to the economic or underlying
value of the security as determined by the Adviser.
Once the Adviser determines that a stock sells at a significant discount to
its perceived intrinsic value, it will consider that stock for purchase by
analyzing the quality and motivation of the company's management as well as
the company's market position within its
3
<PAGE>
industry. The Adviser will generally buy a stock that
is priced below 60% of its estimated worth and has the other additional
qualities mentioned above. The Adviser generally sells a stock when the stock's
price approaches 90% of its estimated worth.
The Adviser monitors the Fund's investments and has set specific "buy" and
"sell" targets for each security held by the Fund. If the Adviser thinks it is
necessary, those targets are adjusted to reflect changes in a company's basic
characteristics.
- ---------------------------------------------------------
PRINCIPAL RISKS
- ---------------------------------------------------------
- - EQUITY SECURITIES. The Fund invests mostly in common stocks. Common stock
is one type of equity security which represents an equity interest
(ownership) in a corporation. Common stocks are subject to MARKET RISK. A
company's stock value may go up or down depending on the company's business
success or other economic or market factors that may affect the company's
business or investors' perception of the business. This potential for
fluctuation in the value of the stocks held in the Fund's portfolio has an
effect on the net asset value of the Fund. Mid-cap stocks are more volatile
and may be less liquid than large-cap stocks. Mid-cap companies may have a
shorter history of operations and a smaller market for their shares. WHEN
YOU SELL YOUR SHARES OF THE FUND, THEY MAY BE WORTH MORE OR LESS THAN YOU
PAID FOR THEM.
Because of the variable nature of the stock market, the Fund should be
considered a long-term investment, designed to provide the best results
when held for several years or more. THE FUND MAY NOT BE SUITABLE FOR YOU
IF YOU HAVE A SHORT-TERM INVESTMENT HORIZON OR ARE UNWILLING TO ACCEPT
FLUCTUATIONS IN SHARE PRICE, INCLUDING SIGNIFICANT DECLINES OVER A GIVEN
PERIOD.
- - FOREIGN SECURITIES. The Fund's investments in foreign securities present
risks which in some ways may be greater than the risks of investing in U.S.
securities. These additional risks include currency exchange rate
fluctuation, less available public information about issuers, less
stringent regulatory standards, lack of uniform accounting, auditing and
financial reporting standards, and country risks including less liquidity,
high inflation rates, unfavorable market practices and political
instability.
- - DEBT SECURITIES. The debt securities in which the Fund invests are subject
to CREDIT RISK, INTEREST RATE RISK and LIQUIDITY RISK.
Credit risk is the risk that the company that issued a debt security or
bond may become unable to meet its obligation to make payments of principal
and interest when due and includes the risk of default.
Interest rate risk is the risk that the Fund's investments in debt
securities will decline in value as a result of changes in interest rates.
Generally, the value of fixed income securities rises when prevailing
interest rates fall and falls when interest rates rise.
Liquidity risk is the risk that the Fund may not be able to sell the
medium- and lower-grade debt securities because there are too few buyers
for them.
- - NOT A BANK DEPOSIT. An investment in the Fund is not a deposit in a bank
and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. You risk losing money by
investing in the Fund.
For more information, see "How the Fund Invests--Risk Factors."
4
<PAGE>
- ----------------------------------------------------------
PERFORMANCE INFORMATION
- ----------------------------------------------------------
From time to time the Fund may quote total return figures in marketing
materials. "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. Because the Fund is new,
Total Return and Average Annual Total Return information is not available.
- ---------------------------------------------------------
FEES AND EXPENSES
- ---------------------------------------------------------
Below are the fees and expenses that you would pay if you buy and hold shares of
the Fund.
SHAREHOLDER TRANSACTION EXPENSES
(fees paid directly from your investment)
<TABLE>
<CAPTION>
Class I Class II
<S> <C> <C>
Sales charge None None
Redemption fee 2% if within 6 months of purchase None
Exchange fee None None
</TABLE>
FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
Class I Class II
<S> <C> <C>
Management fees 1.00% 1.00%
Distribution (12b-1) fees None None
Other expenses* .xx% .xx%
----- -----
Total Annual Fund Operating
Expenses .xx% .xx%
</TABLE>
- --------------
* "Other expenses" and "Total Annual Fund Operating Expenses" reflect the
expenses the Fund expects to incur during its initial partial fiscal year. The
Adviser has voluntarily agreed to reimburse Class I Shares of the Fund to the
extent that the annual ordinary operating expenses of that class exceed 1.75% of
the average net assets of Class I Shares, and 2.00% of the average net assets of
Class II Shares. The agreement is effective through January 31, 2000, subject to
earlier termination by the Adviser on 30 days' notice to the Fund.
EXAMPLE. This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 for the time periods indicated, reinvest all dividends and
distributions, earn a 5% return each year, and that operating expenses remain
constant. Your actual returns and costs may be higher or lower than those shown,
but based on these assumptions, your expenses would be:
<TABLE>
<CAPTION>
Class I Class II
<S> <C> <C>
1 year $xx $xx
3 years $xx $xx
5 years $xx $xx
10 years $xxx $xxx
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
HOW THE FUND INVESTS
- --------------------------------------------------------------------------------
The Fund seeks long-term capital appreciation by investing primarily in equity
securities of both U.S. and non-U.S. companies, in at least three countries.
Although income is considered in the selection of securities, the Fund is not
designed for investors whose primary investment objective is income.
The chief consideration in the selection of equity securities for the 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.
Under normal market conditions, the Fund invests between 20-60% of its total
assets in the securities of U.S. companies, and between 40-80% of its total
assets in the securities of non-U.S. companies. There is no restriction on the
size of the companies in which the Fund invests.
The Fund's foreign investments include 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 15% of its assets
in securities of companies based in emerging markets.
- ------------------------------------------------------------
INVESTMENT TECHNIQUES
- ------------------------------------------------------------
EQUITY SECURITIES. The Fund invests most of its assets in common stocks of both
U.S. and non-U.S. companies.
DEBT SECURITIES. The Fund may invest up to 25% of its total assets in debt
securities of both governmental and corporate issuers. The Fund may invest 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 Standard & Poor's Corporation
("S&P")or Ba or lower by Moody's Investors Service, Inc. ("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 rated medium-grade are considered to
have speculative characteristics. See "Risk Factors--Debt Securities." A
description of the ratings used by S&P and Moody's is included as an appendix to
the Statement of Additional Information.
SHORT-TERM INVESTMENTS. In seeking to achieve its investment objective, the 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 light of general
market or economic conditions or if a security achieves its price target in an
unexpected shorter period.
To the extent that investments meeting the Fund's criteria for investment are
not available, or when the Adviser considers a temporary defensive posture
advisable in response to adverse market, economic, political, or other
conditions, 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. During those periods, the Fund's assets may not be invested
in accordance with its strategy, and the Fund may not achieve its investment
objective.
6
<PAGE>
- ------------------------------------------------------------
RISK FACTORS
- ------------------------------------------------------------
GENERAL. All investments, including those in mutual funds, have risks, and no
investment is suitable for all investors. The Fund is intended for long-term
investors.
MARKET RISK. The Fund is subject to the market risk that always comes with
investments in equity securities. Stock prices may fluctuate widely over short
or extended periods in response to company, market, or economic news. Stock
markets also tend to move in cycles, with periods of rising stock prices and
periods of falling stock prices. The stocks of mid-cap companies are more
volatile and may be less liquid than large-cap stocks. Mid-cap companies
may have a shorter history of operations and a smaller market for their
shares.
INTERNATIONAL INVESTING. You should understand and consider carefully the
greater risks involved in investing internationally.
The Fund may invest between 40-80% of its total 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.
While from time to time many foreign economies have grown faster than the U.S.
economy, and, as a result, the returns on investments in those foreign countries
have been greater than the returns of similar U.S. investments, there can be no
assurance that economic conditions in any country will continue to be favorable.
Investing in securities of non-U.S. companies involves both opportunities and
risks not typically associated with investing in U.S. securities. These include:
fluctuations in exchange rates of foreign currencies; possible imposition of
exchange control regulation or currency restrictions that would prevent cash
from being brought back to the United States; less public information about the
companies issuing stock; 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 Fund tries 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 foreign 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.
The Fund may invest in the securities of "emerging market" countries. Emerging
market countries as determined by the Adviser are those countries not included
in Morgan Stanley's Europe, Australasia and Far East (EAFE) Index, an unmanaged
index that comprises 20 major international markets. 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 market 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. For more
information, please refer to the Statement of Additional Information.
7
<PAGE>
The cost of investing in securities of non-U.S. companies is higher than the
cost of investing in U.S. securities. The Fund provides an efficient way for an
individual to participate in foreign markets, but its expenses, including
advisory and custody fees, are higher than for a typical domestic equity fund.
INTEREST RATE RISK. The Fund may invest up to 25% of its total assets in debt
securities of both governmental and corporate issuers. A decline in prevailing
levels of interest rates generally increases the value of debt securities in the
Fund's portfolio, while an increase in rates usually reduces the value of those
securities. As a result, to the extent that the 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.
CREDIT RISK. The Fund may invest up to 25% of its total assets in debt
securities that are rated below investment grade or, if unrated, are considered
by the Adviser to be of comparable quality. Investment in medium- or lower-grade
debt securities involves greater investment risk, including the possibility of
issuer default or bankruptcy. 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 rated medium-grade are considered
to have speculative characteristics.
An economic downturn could severely disrupt the market in medium or lower grade
debt securities and adversely affect the value of outstanding bonds and the
ability of the issuers to repay principal and interest. In addition,
lower-quality bonds are less sensitive to interest rate changes than
higher-quality instruments and generally are more sensitive to adverse economic
changes or individual corporate developments. During a period of adverse
economic changes, including a period of rising interest rates, issuers of such
bonds may experience difficulty in servicing their principal and interest
payment obligations.
LIQUIDITY RISK. 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 of these debt securities. The market value of
these securities and their liquidity may be affected by adverse publicity and
investor perceptions.
- ------------------------------------------------------------
OTHER INFORMATION
- ------------------------------------------------------------
CHANGE IN OBJECTIVE. The 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 the Fund's objective. If there is a change
in investment objective, you should consider whether the Fund remains an
appropriate investment in light of your then current financial position and
needs. There can be no assurance that the Fund will achieve its investment
objective.
YEAR 2000. The smooth operation of the Fund depends on the ability of the Fund's
custodian, transfer agent and the other service providers to the Fund to provide
services without interruption. Some computer systems used today will be 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 Fund depends will continue to function properly.
8
<PAGE>
The Adviser is working with the service providers to the Fund, such as the
custodian, transfer agent and various broker-dealers through which portfolio
securities of the Fund 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 Fund.
In addition, Year 2000 issues may affect the business results and prospects of
companies whose stocks are held by the Fund, or the ability of issuers of bonds
held by the Fund to meet their interest and principal payment obligations to
their bond holders. Although the Adviser considers the status of companies'
preparations for Year 2000, it has not had a material affect on the decision to
buy or sell securities thus far.
9
<PAGE>
- --------------------------------------------------------------------------------
FUND SERVICES
- --------------------------------------------------------------------------------
The Fund is a "no-load" mutual fund, which means that it does not impose any
commission or sales charge when shares are purchased or sold, nor does the Fund
have any 12b-1 fees. However, the Fund does impose a redemption fee of 2% of
the proceeds if you redeem Class I shares within 6 months after you buy them.
The Fund is a series of Harris Associates Investment Trust (the "Trust"), which
is authorized to issue shares in separate series. The other series of the Trust
are 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 Fund is a separate portfolio of securities
and other assets, each with its own investment objective and policies. Those
funds are offered by a separate prospectus.
- ------------------------------------------------------------
ELIGIBILITY TO BUY SHARES
- ------------------------------------------------------------
The Fund is available for purchase only by residents of the United States,
Puerto Rico, Guam and the U.S. Virgin Islands.
- ------------------------------------------------------------
SHARE CLASSES
- ------------------------------------------------------------
The 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
the Fund are offered to members of the general public. Class II Shares of the
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.
If you invest in Class II Shares, the procedures by which you can buy and sell
shares are governed by the terms of your retirement plan. You must contact your
plan sponsor or service provider for information on how to buy and sell your
Class II Fund shares.
To buy and sell Class II Shares, you must do so through an Intermediary, such as
a broker-dealer, bank, retirement plan service provider or retirement plan
sponsor ("Intermediary"). The Intermediary accepts purchase and sale orders for
Class II Shares 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. See "Share Price," below.
- ---------------------------------------------------------
INVESTMENT MINIMUMS
- ---------------------------------------------------------
(APPLIES TO CLASS I SHARES ONLY)
<TABLE>
<CAPTION>
- ---------------------------------------------------------
INITIAL SUBSEQUENT
INVESTMENT INVESTMENTS
- ---------------------------------------------------------
<S> <C> <C>
Regular investing $1,000 $100
account:
- ---------------------------------------------------------
Traditional or Roth IRA: $1,000 $100
- ---------------------------------------------------------
Education IRA: $500 $100
- ---------------------------------------------------------
Automatic Investment $500 $100
Plan or Payroll
Deduction Plan:
- ---------------------------------------------------------
</TABLE>
- ---------------------------------------------------------
OAKMARK UNITS
- ---------------------------------------------------------
You may purchase shares of the Fund by exchange of shares of another
Oakmark Fund or by exchange of Service Units of the Government Portfolio of
the Goldman Sachs Trust ("Oakmark Units").
10
<PAGE>
- --------------------------------------------------------------------------------
HOW TO BUY CLASS I SHARES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BY CHECK
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
- - Complete and sign the New Account Registration
Form and make out a check for the appropriate
investment amount, payable to "State Street Bank and
Trust Company." THE TRUST WILL NOT ACCEPT CASH,
DRAFTS, "STARTER" CHECKS, THIRD PARTY CHECKS, OR
CHECKS DRAWN ON BANKS OUTSIDE OF THE UNITED STATES.
- - Mail your completed New Account Registration Form
along with your check to: State Street Bank and Trust
Company, Attention:
Oakmark Funds
P.O. Box 8510
Boston, MA 02266-8510
ADDING TO AN ACCOUNT
- - Make out a check for at least $100, payable to
"State Street Bank and Trust Company." THE TRUST
WILL NOT ACCEPT CASH, DRAFTS, "STARTER" CHECKS,
THIRD PARTY CHECKS, OR CHECKS DRAWN ON BANKS
OUTSIDE OF THE UNITED STATES.
- - Mail your check along with either the stub
from your Fund account confirmation statement or a
note indicating the amount of the purchase, your
account number, and the name in which your account
is registered. Your request should be mailed to
State Street Bank and Trust Company at the address
shown on the left.
- --------------------------------------------------------------------------------
BY WIRE TRANSFER
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
- - Call 1-800-OAKMARK and choose menu option 2 to request an account number
and wire transfer instructions.
- - You will be asked to furnish your social security number or other tax
identification number.
- - Your bank may charge you for the transfer.
ADDING TO AN ACCOUNT
- - Instruct your bank to transfer funds to State Street Bank & Trust Company,
ABA# 011000028, DDA# 9904-632-8
- - Specify the Fund name, your account number and the registered account
name(s) in the instructions.
- - Call your bank and advise them of your instructions for the wire transfer.
- - Your bank may charge you for the transfer.
11
<PAGE>
- --------------------------------------------------------------------------------
BY ELECTRONIC TRANSFER
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
- - You may not open a new account by electronic transfer.
ADDING TO AN ACCOUNT
- - If you established the electronic transfer privilege on your New Account
Registration Form, call the Fund's Voice Response System ("OAKLINK") at
1-800-OAKMARK, choose menu options 1 then 3, and follow the instructions
or call an investor service representative at 1-800-OAKMARK and choosing
menu option 2.
- - If you did not establish the electronic transfer privilege on your New
Account Registration Form, obtain a Shareholder Services Form by visiting
our website at www.oakmark.com or by calling an investor service
representative at 1-800-OAKMARK and choose menu option 2.
- - Confirm with your bank or credit union that it is a member of the Automated
Clearing House (ACH) system.
- --------------------------------------------------------------------------------
BY AUTOMATIC INVESTMENT
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
- - Choose the Automatic Investment Plan on your New Account Registration Form.
- - Your initial investment must be at least $500 and be made by check.
- - In addition to your investment check, send a check marked "Void" or a
deposit slip from your bank account along with your New Account
Registration Form.
ADDING TO AN ACCOUNT
- - If you chose the Automatic Investment Plan when you opened your account,
subsequent purchases of shares will be made automatically either monthly or
quarterly, by electronic transfer from your bank account in the dollar
amount you specified.
- - Your subsequent investments must be at least $100.
- - If you did not establish the electronic transfer privilege on your New
Account Registration Form and you wish to establish this privilege, obtain
a Shareholder Services Form by visiting our website at www.oakmark.com
and return the completed form to us or call an investor service
representative at 1-800-OAKMARK and choose menu option 2.
12
<PAGE>
- --------------------------------------------------------------------------------
BY PAYROLL DEDUCTION
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
- - Complete and sign the New Account Registration Form and the Payroll
Deduction Plan Application and return both forms along with a check for at
least $500 to: State Street Bank and Trust Company, Attention:
Oakmark Funds
P.O. Box 8510
Boston, MA 02266-8510
- - The Payroll Deduction Plan Application allows you to purchase shares of
the Fund on a monthly, bi-monthly, or quarterly basis by instructing your
employer to deduct from your paycheck a specified dollar amount.
ADDING TO AN ACCOUNT
- - If you completed the payroll deduction plan application, subsequent
purchases of shares will be made automatically, either monthly, bi-monthly
or quarterly, by deducting the dollar amount you specified from your pay.
- - Your subsequent investments must be at least $100.
- - If you want to establish the payroll deduction plan, obtain a Payroll
Deduction Plan Application by visiting our website at www.oakmark.com and
return the completed form to us or call an investor service representative
at 1-800-OAKMARK and choose menu option 2.
- --------------------------------------------------------------------------------
BY EXCHANGE
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
- - Call 1-800-OAKMARK and choose menu option 2. Register the new account into
which you are making the exchange exactly the same as the account from
which you are exchanging shares.
- - Your initial investment into your new account must be at least $1,000.
ADDING TO AN ACCOUNT
- - Call the Fund's Voice Response System, OAKLINK, at 1-800-OAKMARK and choose
menu options 1 then 3 and follow the instructions, or call an investor
service representative at 1-800-OAKMARK and choose menu option 2.
- - Send a letter of instruction, indicating the name of the Fund and your
name, and advising of the Fund account number from which you wish to redeem
shares and advising of the name of the Fund and the Fund account number
into which you wish to buy shares, to: State Street Bank and Trust
Company, Attention:
Oakmark Funds
P.O. Box 8510
Boston, MA 02266-8510
- - Your subsequent investments must be at least $100.
13
<PAGE>
- - EXCEPT FOR AUTOMATIC EXCHANGES FROM OAKMARK UNITS, YOU MAY NOT MAKE MORE
THAN FOUR EXCHANGES FROM THE FUND IN ANY CALENDAR YEAR, AND THE TRUST MAY
REFUSE REQUESTS FOR MORE FREQUENT EXCHANGES.
- - An exchange transaction is a sale and purchase of shares for federal income
tax purposes and may result in a capital gain or loss.
- - Obtain a current prospectus for the Fund into which you are exchanging by
calling the transfer agent at 1-800-OAKMARK.
Other restrictions apply - see "General Purchasing Policies."
- --------------------------------------------------------------------------------
THROUGH INTERMEDIARIES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
- - You may buy shares of the Fund through certain broker-dealers, banks and
other Intermediaries.
- - Those Intermediaries may charge a fee 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 shares of the Fund directly from the Trust without the
imposition of any charges other than those described in this prospectus.
- - Please note that an investment in the 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.
- - For further information about buying shares through Intermediaries, please
see "Share Price," below.
ADDING TO AN ACCOUNT
- - Please refer to the information on the left.
14
<PAGE>
- ------------------------------------------------------------
SHARE PRICE
- ------------------------------------------------------------
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 the 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 the 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.
An Intermediary, who accepts purchase and sale orders 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.
Trading in the securities of non-U.S. issuers held in the Fund's portfolio 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 bought
or sold.
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)
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Class I Shares of the Fund
is made at the net asset value of Class I Shares 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.
Each purchase of Class II Shares of the 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.
- ------------------------------------------------------------
GENERAL PURCHASING POLICIES
- ------------------------------------------------------------
- - The Trust cannot accept a purchase order specifying a particular purchase
date or price per share.
- - Each purchase order for the 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 the 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 to reject any purchase order that it
determines not to be
15
<PAGE>
in the best interest of the Trust or of the Fund's shareholders.
- - If your order to purchase shares of the Fund is canceled because your check
or electronic transfer does not clear, you will be responsible for any
resulting losses to the Fund.
- - Neither the Fund nor the Trust will be responsible for the consequences of
delays in processing a wire transfer, including delays in the banking or
Federal Reserve wire transfer systems.
- - 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.
- - An exchange transaction is a sale and purchase of shares for federal income
tax purposes and may result in a capital gain or loss.
- - 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 Fund.
THEREFORE, THE TRUST GENERALLY WILL NOT HONOR REQUESTS FOR TELEPHONE
EXCHANGES BY SHAREHOLDERS THE TRUST HAS REASON TO BELIEVE ARE
"MARKET-TIMERS."
16
<PAGE>
- --------------------------------------------------------------------------------
HOW TO SELL CLASS I SHARES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IN WRITING
- --------------------------------------------------------------------------------
You may sell some or all of your shares of the Fund by writing to the Trust's
transfer agent, State Street Bank and Trust Company, Attention:
Oakmark Funds
P.O. Box 8510
Boston, MA 02266-8510
Your redemption request must:
- - identify the Fund and give your account number;
- - specify the number of shares or dollar amount to be redeemed; and
- - 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 check is to be mailed to an address different from the one on your
account (record address);
- - the 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.
See "General Redemption Policies--Signature Guarantee" for more information.
- --------------------------------------------------------------------------------
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 an investor service
representative at 1-800-OAKMARK and choosing menu option 2.
- - A check for the proceeds will be sent to your address of record.
- - 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.
17
<PAGE>
- --------------------------------------------------------------------------------
BY ELECTRONIC TRANSFER
- --------------------------------------------------------------------------------
- - You may request that the payment of the proceeds of the sale of your shares
be made by electronic transfer to a checking account previously designated
by you at a bank that is a member of the Automated Clearing House (ACH)
system. Confirm with your bank or credit union that it is a member of ACH.
- - To redeem shares from your account, call the Funds' Voice Response System,
OAKLINK, at 1-800-OAKMARK and choose menu options 1 then 3 and follow the
instructions, or call an investor service representative at 1-800-OAKMARK
and choose menu option 2.
- - Payment of the proceeds of the sale of shares will normally be sent on the
next business day after receipt of your 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.
- - If the proceeds of your redemption are sent by electronic transfer, your
bank will be notified of the transfer on the business day following the
date of redemption, but your bank account will not receive "good funds"
for at least one week.
- --------------------------------------------------------------------------------
BY EXCHANGE
- --------------------------------------------------------------------------------
- - You may sell some or all of your shares of the Fund and use the proceeds to
buy shares of another Oakmark Fund or Oakmark Units either in writing or by
calling the Fund's Voice Response system, OAKLINK, at 1-800-OAKMARK and
choosing menu options 1 then 3 and following the instructions, or by
calling an investor service representative at 1-800-OAKMARK and choosing
menu option 2.
- - Obtain a current prospectus for the Fund into which you are exchanging by
calling the transfer agent at 1-800-OAKMARK.
- - An exchange request received by telephone after the close of regular
session trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) is deemed received on the next business day.
For more information on requesting an exchange, please refer to the section
entitled "How to Buy Shares--By Exchange."
18
<PAGE>
- --------------------------------------------------------------------------------
BY WIRE TRANSFER
- --------------------------------------------------------------------------------
- - You may sell shares of your Fund account and request that the proceeds be
paid by wire transfer to your bank account, provided the redemption
proceeds are at least $250.
- - Call a shareholder service representative at 1-800-OAKMARK and choose menu
option 2 for instructions.
- - The cost of the wire transfer (currently $5) will be deducted from your
account or if you redeem your entire account, 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.
Some transactions require a signature guarantee. See "General Redemption
Policies--Signature Guarantee."
- --------------------------------------------------------------------------------
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.
- - Because withdrawal payments may have tax consequences, you should consult
your tax adviser before establishing such a plan.
19
<PAGE>
- ------------------------------------------------------------
GENERAL REDEMPTION POLICIES
- ------------------------------------------------------------
SIGNATURE GUARANTEE. Your request to sell your Fund shares must include a
signature guarantee if any one 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. YOU CANNOT OBTAIN A
SIGNATURE GUARANTEE FROM 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 ACCOUNT TYPES. Special rules apply to redemptions by corporations,
trusts and partnerships:
- - In the case of a CORPORATION, the request must be signed in the name of the
corporation by an officer whose title must be stated, and must be
accompanied by a bylaw provision or resolution of the board of directors,
certified within 60 days, authorizing the officer to so act.
- - A redemption request from a PARTNERSHIP or a TRUST must be signed in the
name of the partnership or trust by a general partner or a trustee and
include a signature guarantee. If the trustee is not named in the account
registration, a redemption request by a trust must also include evidence of
the trustee's appointment as such (e.g., a certified copy of the relevant
portions of the trust instrument).
- - Under certain circumstances, before the shares can be redeemed, additional
documents may be required in order to verify the authority of the person
seeking to redeem.
OTHER POLICIES. Certain other policies apply to the sale of Fund shares. PLEASE
TELEPHONE AN INVESTOR 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 cannot accept a redemption request that specifies a particular
date or price for redemption or any special conditions.
- - You may not cancel or revoke your redemption order once your instructions
have been received and accepted.
- - During periods of volatile economic and market conditions, you may have
difficulty placing your exchange by telephone call to an investor service
representative; during such periods, you may wish to place your exchange by
mail or by telephone through the Funds' Voice Response System, OAKLINK at
1-800-OAKMARK, choose menu option 1 then 3 and follow the voice
instructions. See page __ for further information about OAKLINK.
- - 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 processed is the net asset
value next determined after proper redemption instructions are received.
See "Share Price--Net Asset Value." Because the redemption price you
receive depends upon the net asset value per share at the
20
<PAGE>
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.
- - The Trust reserves the right at any time without prior notice to suspend,
limit, modify or terminate any privilege, including the telephone exchange
privilege, or its use in any manner by any person or class.
- - The Trust believes that use of the telephone exchange privilege by
investors utilizing market-timing strategies adversely affects the Fund.
THEREFORE, THE TRUST GENERALLY WILL NOT HONOR REQUESTS FOR TELEPHONE
EXCHANGES BY SHAREHOLDERS WHICH THE FUND HAS REASON TO BELIEVE ARE
"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.
- - Shares in any account you maintain with a Fund may be redeemed to the
extent necessary to reimburse the 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).
TELEPHONE TRANSACTIONS. 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
Fund employs procedures reasonably designed to confirm that instructions
communicated by telephone are genuine.
Use of any telephone redemption or exchange privilege authorizes the Fund and
its transfer agent to tape record all instructions to redeem. In addition,
callers are asked to identify the account number and registration, and may be
required to provide other forms of identification. Written confirmations of
transactions are mailed promptly to the registered address; a legend on the
confirmation requests the shareholder to review the transactions and inform the
Fund immediately if there is a problem. If the 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.
REDEMPTION FEE--CLASS I SHARES. The Fund imposes a redemption fee equal to 2% of
the proceeds of the sale if you sell your Class I shares within 6 months after
you buy them.
SMALL ACCOUNT REDEMPTION. 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.
REDEMPTION IN KIND. The Fund intends to pay all redemptions in cash. The Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the 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.
21
<PAGE>
Brokerage costs may be incurred by a shareholder who receives securities and
desires to convert them to cash.
- ------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------
If you are a holder of CLASS I SHARES of the Fund, the following services are
available to you. If you are a holder of CLASS II SHARES of the Fund, 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.
REPORTING TO SHAREHOLDERS. You will receive a confirmation statement reflecting
each of your purchases and sales of shares of the Fund, as well as periodic
statements detailing distributions made by the Fund. Shares purchased by
reinvestment of dividends or pursuant to an automatic investment 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, Education 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 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. 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 the Fund. If you have
already established an account and want to add or change a privilege, visit
our website at www.oakmark.com to obtain a Shareholder Services Form and
return the completed form to us, or call an investor 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 account information or OAKLINK. Call
1-800-OAKMARK (choose menu option 2) and speak with an investor service
representative to obtain your PIN number. Your call will be recorded.
WEBSITE. For more information about the Fund, or about any of the other
Oakmark Funds, such as prospectuses, account applications, shareholder reports,
portfolio manager commentaries, or each Fund's daily NAV, access our website at
www.oakmark.com. To obtain information about your account, such as your account
balance, your last transaction and account history, click on "Account
Information" and follow the instructions.
ACCOUNT ADDRESS CHANGE. You may change the address of record for your 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 an investor
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
"General Redemption Policies--Signature Guarantee" regarding signature
guarantees.
22
<PAGE>
QUESTIONS ABOUT YOUR FUND ACCOUNT. If you have a question about your account,
you may telephone an investor service representative at 1-800-OAKMARK (choose
menu option 2).
23
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
DISTRIBUTIONS
- ------------------------------------------------------------
The 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 the Fund mailed to you is
returned as undeliverable or is not presented for payment within six months, the
Trust reserves the right to reinvest the check proceeds and future distributions
in additional Fund shares.
- ------------------------------------------------------------
TAXES
- ------------------------------------------------------------
Dividends from investment income and net short-term capital gains are taxable as
ordinary income. Distributions of long-term capital gains are taxable as
long-term capital gains regardless of the length of time you have held your Fund
shares. Distributions will be taxable to you whether received in cash or
reinvested in Fund shares.
You will be advised annually as to the source of your distributions for tax
purposes. If you are not subject to income taxation, you will not be required to
pay tax on amounts distributed to you.
If you purchase shares shortly before a record date for a distribution you will,
in effect, receive a return of a portion of your investment, but the
distribution will be taxable to you even if the net asset value of your shares
is reduced below your cost. However, for federal income tax purposes your
original cost would continue as your tax basis. If you redeem shares within six
months, any loss on the sale of those shares would be long-term capital loss to
the extent of any distributions of long-term capital gain that you have received
on those shares.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. If the Fund pays
nonrefundable taxes to foreign governments during the year, the taxes will
reduce the 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.
24
<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 limited partnership that owns investment
management and related firms. Nvest is part of an affiliated group that
includes Nvest, L.P., a publicly traded company listed on the New York Stock
Exchange. Metropolitan Life Insurance Company owns the general partner of
Nvest and approximately 48% of its outstanding partnership interests.
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 an advisory fee from the Fund at the
annual rate of 1.00% of the Fund's average net assets.
The Adviser has voluntarily agreed to reimburse Class I Shares of the Fund to
the extent that the annual ordinary operating expenses of that class exceed
1.75% of the average net assets of Class I Shares, and 2.00% of the average net
assets of Class II Shares. The 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
Fund 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 the Fund were developed by the Adviser
and by Gregory L. Jackson and Michael J. Welsh, C.F.A. and C.P.A., the Fund's
portfolio managers. Mr. Jackson is responsible for the day-to-day management of
the Fund's domestic portfolio, and Mr. Welsh manages the day-to-day affairs of
the Fund's foreign portfolio.
Mr. Jackson joined the adviser in July of 1998. He holds a B.S. in Finance from
the University of Utah, and an MBA in Finance from the University of Chicago.
Previously he had been a Portfolio Manager/analyst with Yacktman Asset
Management. 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).
Brokerage transactions for the Funds may be executed through Harris Associates
Securities L.P., a registered broker-dealer and an affiliate of the Adviser.
25
<PAGE>
You can obtain more information about the Fund's investments in its
semiannual and annual reports to shareowners.
You may wish to read the Statement of Additional Information (SAI) for
more information about the Fund. The SAI is incorporated by reference into this
prospectus, which means that it is considered to be part of this prospectus.
You can obtain free copies of the Fund's semiannual and annual reports
and the SAI, request other information, and discuss your questions about the
Fund by writing or calling:
OAKMARK FUNDS
P.O. BOX 8510
BOSTON, MA 02266-8510
1-800-OAKMARK
(1-800-625-6275)
Other information about the Fund may also be obtained by accessing the
Fund's website at www.oakmark.com. Text-only versions of all Fund documents can
be viewed online or downloaded from the SEC at http://www.sec.gov. You can also
obtain copies by visiting the SEC's Public Reference Room in Washington, DC, by
calling 800-SEC-0330, or by sending your request and the appropriate fee to the
SEC's Public Reference Section, 450 5th Street, N.W., Washington, DC 20549-6009.
Harris Associates Investment Trust 811-06279
<PAGE>
The information in this Statement of Additional Information is not complete
and may be changed. We may not sell these securities until the registration
statement filed with the Securities Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
STATEMENT OF ADDITIONAL INFORMATION
AUGUST __, 1999
THE OAKMARK GLOBAL FUND
No-Load Fund
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 Global Fund (the
"Fund"), a series of Harris Associates Investment Trust (the "Trust").
Information about the other series of the Trust, 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 is
contained in the separate prospectus and Statement of Additional Information for
those Funds. This Statement of Additional Information is not a prospectus but
provides information that should be read in conjunction with the Fund's
prospectus dated the same date as this Statement of Additional Information and
any supplement thereto. You may obtain a prospectus or semi-annual or annual
report from the Fund at no charge by writing, telephoning or accessing the Funds
at their address, telephone number or website shown above.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUNDS.......................................................2
INVESTMENT RESTRICTIONS.........................................2
HOW THE FUND INVESTS............................................4
PERFORMANCE INFORMATION........................................10
INVESTMENT ADVISER.............................................12
TRUSTEES AND OFFICERS..........................................13
PURCHASING AND REDEEMING SHARES................................15
ADDITIONAL TAX INFORMATION.....................................17
TAXATION OF FOREIGN SHAREHOLDERS...............................18
PORTFOLIO TRANSACTIONS.........................................18
DECLARATION OF TRUST...........................................19
CUSTODIAN......................................................20
INDEPENDENT PUBLIC ACCOUNTANTS.................................20
APPENDIX -- BOND RATINGS......................................A-1
</TABLE>
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<PAGE>
THE FUND
The Oakmark Global Fund invests for long-term capital appreciation. The
Fund is a series of Harris Associates Investment Trust, a diversified open-end
management investment company organized as a Massachusetts business trust under
the laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Declaration of Trust") dated February 1, 1991. For
more information, see the discussion set forth under the heading "Declaration of
Trust."
The Fund's shares are divided into two share 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. The shares of each class represent an interest in the same portfolio of
investments of the Fund. Each class has equal voting rights as (except as to
matters affecting the interests of only the class).
INVESTMENT RESTRICTIONS
In pursuing its investment objective the Fund will not:
1. In regard to 75% of its assets, invest more than 5% of its assets
(valued at the time of investment) in securities of any one issuer, except in
U.S. government obligations;
2. Acquire securities of any one issuer which at the time of investment
(a) represent more than 10% of the voting securities of the issuer or (b) have a
value greater than 10% of the value of the outstanding securities of the issuer;
3. Invest more than 25% of its assets (valued at the time of
investment) in securities of companies in any one industry, except that this
restriction does not apply to investments in U.S. government obligations;
4. Borrow money except from banks for temporary or emergency purposes
in amounts not exceeding 10% of the value of the Fund's assets at the time of
borrowing [the Fund will not purchase additional securities when its borrowings,
less receivables from portfolio securities sold, exceed 5% of the value of the
Fund's total assets];
5. Issue any senior security except in connection with permitted
borrowings;
6. Underwrite the distribution of securities of other issuers; however
the Fund may acquire "restricted" securities which, in the event of a resale,
might be required to be registered under the Securities Act of 1933 on the
ground that the Fund could be regarded as an underwriter as defined by that act
with respect to such resale;
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)
lending its portfolio securities
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1/ A repurchase agreement involves a sale of securities to the 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. The Fund may not invest more than 15% of its net assets in
repurchase agreements maturing in more than seven days and other illiquid
securities.
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[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
and 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. 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;
15. Invest in futures or options on futures, except that it may invest
in forward foreign currency contracts.
The first 10 restrictions listed above are fundamental policies and may
be changed only with the approval of the holders of a "majority of the
outstanding voting securities" of the 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 the Fund's investment objective, may be changed by the board
of trustees without shareholder approval. The Fund's investment objective will
not be changed without at least 30 days' notice to shareholders.
Notwithstanding the foregoing investment restrictions, the Fund may
purchase securities pursuant to the exercise of subscription rights, provided
that such purchase will not result in the Fund's ceasing to be a diversified
investment company. Japanese and European corporations frequently issue
additional capital stock by means of subscription rights offerings to existing
shareholders at a price substantially below the market price of the shares. The
failure to exercise such rights would result in the Fund's interest in the
issuing company being diluted. The market for such rights is not well developed
in all cases and, accordingly, the Fund may not always realize full value on the
sale of rights. The exception applies in cases where the limits set forth in
- ----------------
(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>
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 the 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 FUND INVESTS
COMMON STOCKS
The Fund invests mostly in common stocks, which represent an equity
interest (ownership) in a corporation. This ownership interest often gives
the Fund the right to vote on measures affecting the company's organization
and operations. Common stocks are subject to market risk. Over time, common
stocks have historically provided superior long-term capital growth
potential. Stock markets tend to move in cycles, with periods of rising stock
prices and periods of falling stock prices. A company's stock value may go up
or down depending on the company's business success or other economic or
market factors that may affect the company's business or investors'
perception of the business. This potential for fluctuation in the value of
the stocks held in the Fund's portfolio has an effect on the net asset value
of the Fund. As a result, the Fund should be considered a long-term
investment, designed to provide the best results when held for several years
or more. The Fund may not be a suitable investment if you have a short-term
investment horizon or are unwilling to accept fluctuations in share price,
including significant declines over a given period.
SECURITIES OF NON-U.S. ISSUERS
Under normal market conditions, the Fund invests between 40-80% of its
total assets 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 Fund 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 Fund
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, the 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 Fund tries 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
4
<PAGE>
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 the Fund in privatizations in appropriate circumstances. In certain of
those markets, the ability of foreign entities such as the Fund to participate
in privatizations may be limited by local law, and/or the terms on which the
Fund may be permitted to participate may be less advantageous than those
afforded local investors. There can be no assurance that governments will
continue to sell companies currently owned or controlled by them or that
privatization programs will be successful.
EMERGING MARKETS. The Fund invests in "emerging market" countries.
Emerging market countries, as determined by the Adviser, are those countries
not included in Morgan Stanley's Europe, Australasia and Far East (EAFE)
Index, an unmanaged index that comprises 20 major international 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 Fund to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Fund due to subsequent declines in the value of those securities or, if the
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. The 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 the 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 the Fund's securities in such markets may
not be readily available. The 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 the 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 the Fund's identification of such condition until the date of the SEC
action, the 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 the 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. The Fund's net asset value 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
5
<PAGE>
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 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 the 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. The 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.
Forward currency transactions may involve currencies of the different
countries in which the Fund may invest, and serve as hedges against possible
variations in the exchange rate between these currencies. The Fund's currency
transactions are limited to transaction hedging and portfolio hedging involving
either specific transactions or actual or anticipated portfolio positions.
Transaction hedging is the purchase or sale of a forward contract with respect
to specific receivables or payables of the Fund accruing in connection with the
purchase or sale of portfolio securities. Portfolio hedging is the use of a
forward contract with respect to an actual or anticipated portfolio security
position denominated or quoted in a particular currency. When the Fund owns or
anticipates owning securities in countries whose currencies are linked, the
Adviser may aggregate such positions as to the currency hedged.
If the 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,
the 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 the 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
6
<PAGE>
decision is made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some of the currency
received upon the sale of the portfolio security if its market value exceeds the
amount of currency the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between the Fund's
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in currency exchange transactions varies with such factors as the
currency involved, the length of the contract period, and prevailing market
conditions. Since currency exchange transactions are usually conducted on a
principal basis, no fees or commissions are involved.
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 European Union
countries not currently participating in the EMU are Great Britain, Denmark,
Sweden and Greece. A new European Central Bank manages the monetary policy of
the new unified region, and the exchange rates among the EMU member countries
are 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 the Fund may invest its assets. The change to the new euro
currency could have ongoing potential adverse effects on the Fund's ability
to value its portfolio holdings in foreign securities, and could increase the
costs associated with the Fund's operations. The Adviser is working with the
providers of services to the Fund in the areas of clearance and settlement of
trades in an effort to avoid any material impact on the Fund due to the euro
conversion; there can be no assurance, however, that the steps taken by the
Adviser will be sufficient to avoid any adverse impact on the Fund.
DEBT SECURITIES
The 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 the Fund or the
portion of the Fund's assets that may be invested in debt securities in a
particular ratings category.
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.
7
<PAGE>
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 the 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, DELAYED-DELIVERY AND OTHER SECURITIES
The 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 the Fund enters into the commitment, the securities may
be delivered and paid for a month or more after the date of purchase, when their
value may have changed. The 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. The
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 the 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 the Fund, may increase net asset value fluctuation.
The Fund may also enter into a contract with a third party that
provides for the sale of securities held by the Fund at a set price, with a
contingent right for the Fund to receive additional proceeds from the purchaser
upon the occurrence of designated future events, such as a tender offer for the
securities of the subject company by the purchaser, and satisfaction of any
applicable conditions. Under such an arrangement, the amount of contingent
proceeds that the Fund will receive from the purchaser, if any, will generally
not be determinable at the time such securities are sold. The Fund's rights
under such an arrangement will not be secured and the Fund may not receive the
contingent payment, if the stated contingency does not occur or if the purchaser
should default on its obligation. The Fund's rights under such an arrangement
also generally will be illiquid and subject to the limitations on ownership of
illiquid securities.
ILLIQUID SECURITIES
The Fund may not 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.
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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 the 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 or under the
direction of the board of trustees.
Notwithstanding the above, the 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 Fund, 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 the Fund's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
SHORT SALES
The 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. The 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, the 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. The 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. The Fund may close out a short position
by purchasing on the
9
<PAGE>
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 the 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
the 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
the Fund is able to enter into short sales. There is no limitation on the amount
of the 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. The Fund does
not currently expect that [more than 20%] of its total assets would be involved
in short sales against the box.
OPTIONS
The 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 that the 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
The 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, the 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 the 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 the Fund will employ defensive strategies.
In addition, pending investment of proceeds from new sales of Fund
shares or to meet ordinary daily cash needs, the 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 Fund 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
10
<PAGE>
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
Total Return and Average Annual Total Return of Class II Shares of the
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 Fund will assume reinvestment of
all dividends and distributions, but will not take into account income taxes
payable by shareholders. The Fund imposes no sales charge and pays no
distribution ("12b-1") expenses. The Fund imposes a 2% redemption fee on the
sale of Class I shares held less than 6 months from purchase. The 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 the 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 the 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 Fund. Comparison of the 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 Fund generally believes to be
accurate. The Fund may also refer to publicity (including performance rankings)
in newspapers, magazines, or other media from time to time. However, the Fund
assumes no responsibility for the accuracy of such data. Newspapers and
magazines that might mention the Fund include, but are not limited to, the
following:
<TABLE>
<S> <C> <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>
The Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation. The performance of the Fund
may also be compared to
11
<PAGE>
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, the Fund may compare its performance to the following
indexes and averages: Lipper International & Global Funds Average; Lipper
International Fund Index; Lipper International Equity Funds Average; Morgan
Stanley Capital International World ex the U.S. Index*; Morningstar
International Stock Average.
Lipper Indexes and Averages are calculated and published by Lipper
Analytical Services, Inc. ("Lipper"), an independent service that monitors the
performance of more than 1,000 funds. The Fund 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 the Fund to a different category or develop (and place the Fund into)
a new category, the Fund may compare its performance or ranking against other
funds in the newly assigned category, as published by the service. The Fund may
also compare its performance or ranking against all funds tracked by Lipper or
another independent service, including Morningstar, Inc.
The Fund may cite its rating, 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 Fund may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains)
very long-term (since 1926) total return data (including, for example, total
return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks; small company stocks; long-term corporate bonds; long-term government
bonds; intermediate-term government bonds; U.S. Treasury bills; and Consumer
Price Index.
INVESTMENT ADVISER
The Fund's investment adviser, Harris Associates L.P. (the "Adviser"),
furnishes continuing investment supervision to the Fund and is responsible for
overall management of the Fund's business affairs pursuant to an investment
advisory agreement (the "Agreement"). The
- ----------------
* With dividends reinvested.
12
<PAGE>
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.
The Fund pays the cost of its custodial, stock transfer, dividend
disbursing, bookkeeping, audit and legal services. The 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 the 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 the
Fund to the extent that the annual ordinary operating expenses of that class
exceed 1.75% of the average net assets of Class I Shares. The Adviser has
also voluntarily agreed to reimburse Class II Shares of the Fund to the
extent that the annual ordinary operating expenses of that class exceed 2.00%
of the average net assets of Class II Shares. The 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 the 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 the Fund, is
calculated daily and any reduction in fee or reimbursement is made monthly.
For its services as investment adviser, the Adviser receives from the
Fund a monthly fee at the annual rate of 1.00% of the Fund's average net assets
based on the 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 Agreement for the Fund is for an initial term expiring September
30, 2000. The 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. The 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 Litvack, Robert J. Sanborn and Peter S. Voss. Mr. Levy is the president and
chief executive officer of Harris Associates, Inc.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
The trustees and officers of the Trust and their principal business activities
during the past five years are:
NAME, ADDRESS, 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 President prior
Trustee and Chairman, 56 thereto; Chairman, Harris Partners, L.L.C., since September
1995
MICHAEL J. FRIDUSS Principal, M.J. Friduss & Associates, Inc. (telecommunications
Trustee, 56 consultants)
c/o M.J. Friduss & Associates, Inc.
1555 Museum Drive
Highland Park, Illinois 60035
THOMAS H. HAYDEN Executive Vice President and director, Bozell Worldwide, Inc.
Trustee, 47 (advertising and public relations)
c/o Bozell Worldwide, Inc.
625 North Michigan Avenue
Chicago, Illinois 60611-3110
CHRISTINE M. MAKI Vice President--Tax, Hyatt Corporation (hotel management)
Trustee, 38 since 1995; Tax Manager, Coopers & Lybrand (independent
c/o Hyatt Corporation accountants), prior thereto
200 West Madison Street
Chicago, Illinois 60606
ALLAN J. REICH Senior Partner and Chair of Corporate/Securities Practice
Trustee, 50 Group, D'Ancona & Pflaum (attorneys)
c/o D'Ancona & Pflaum LLC
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601
MARV R. ROTTER General Manager, Rotter & Associates (financial services)
Trustee, 52
c/o Rotter & Associates
5 Revere Drive, Suite 400
Northbrook, Illinois 60062-1571
BURTON W. RUDER President, The Academy Group (venture capital investments and
Trustee, 55 transaction financing)
c/o The Academy Group
707 Skokie Boulevard, Suite 410
Northbrook, Illinois 60062
13
<PAGE>
PETER S. VOSS* Chairman and Chief Executive Officer, Nvest Companies, Inc.
Trustee, 52 and Nvest Companies, L.P.
c/o Nvest Companies, L.P.
399 Boylston Street
Boston, Massachusetts 02116
GARY N. WILNER, M.D. Senior Attending Physician, Evanston Hospital, and Medical
Trustee, 58 Director - CardioPulmonary Wellness Program, Evanston Hospital
c/o Evanston Hospital Corporation
2650 Ridge Avenue
Evanston, Illinois 60201
ROBERT LEVY President and Chief Executive Officer, HAI, since 1997;
President, 48 Portfolio Manager, HALP prior thereto
ROBERT J. SANBORN Portfolio Manager and Analyst, HALP
Executive Vice President
and Portfolio Manager
(The Oakmark Fund), 40
DAVID G. HERRO Portfolio Manager and Analyst, HALP
Vice President and Portfolio Manager
(The Oakmark International Fund and
The Oakmark International Small Cap
Fund), 38
CLYDE S. MCGREGOR Portfolio Manager and Analyst, HALP
Vice President and Portfolio Manager (The
Oakmark Equity and Income Fund), 46
WILLIAM C. NYGREN Portfolio Manager and Director of Research, HALP
Vice president and Portfolio
Manager (The Oakmark Select Fund), 40
STEVEN J. REID Portfolio Manager and Analyst, HALP
Vice President and Portfolio Manager (The
Oakmark Small Cap Fund), 42
MICHAEL J. WELSH Portfolio Manager and Analyst, HALP
Vice President
and Co-portfolio Manager (The Oakmark Global
Fund, The Oakmark International Fund and The
Oakmark International Small Cap Fund), 35
GREGORY L. JACKSON Portfolio Manager and Analyst, HALP since July 1998; Portfolio
Vice President and Co-Portfolio Manager and Analyst, Yacktman Asset management, prior thereto
Manager (The Oakmark Global Fund), 32
ANN W. REGAN Director of Mutual Fund Operations, HALP, since 1996; Special
Vice President-Shareholder Operations and Projects Assistant to the General Counsel, HALP, 1995-1996;
Assistant Secretary, 50 Deputy Corporation Counsel, City of Chicago, prior thereto
DONALD TERAO Secretary, Treasurer and Chief Financial Officer, HAI, since
Vice President - Finance, 49 1995; Controller, HALP, prior thereto
ANITA M. NAGLER Vice President, HAI, since 1994; General Counsel, HALP, since
Secretary, 42 1993
KRISTI L. ROWSELL Assistant Treasurer, HALP, since 1996; Tax and Accounting
Treasurer, 32 Manager, HALP, 1995-1996; Vice President and Treasurer,
Calamos Asset Management, Inc., prior thereto
- ------------------------------------
</TABLE>
Unless otherwise noted, the business address of each officer and trustee
listed in the table is Two North LaSalle Street, Suite 500, Chicago,
Illinois 60602-3790.
# 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"
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.
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:
14
<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.
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Fund's prospectus under
the headings "How to Buy Shares," "How to Sell Shares," and "Fund Services."
The net asset value per share Class I or Class II of the Fund is
determined by the Trust's custodian, State Street Bank and Trust Company. The
net asset value of Class I Shares of the 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 the 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
15
<PAGE>
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 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 Fund's net asset value is 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 non-U.S. issuers in the Fund's
portfolio 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 the
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 the Fund 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 0.35% of the annual average value of those
accounts. The 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 the 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 the 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
16
<PAGE>
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 of Goldman Sachs Trust. For its services it receives a fee at the
rate of up to .50% of the average annual net assets of each account in that
portfolio. Transfer agency expenses associated with the services provided to
the shareholders of those accounts are paid by the Adviser.
ADDITIONAL TAX INFORMATION
GENERAL. The Fund intends 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, the
Fund's net asset value may reflect undistributed income, capital gains or net
unrealized appreciation of securities held by the 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.
Dividends and distributions paid by the Fund are not eligible for the
dividends-received deduction for corporate shareholders to the extent that the
Fund's income does not consist of dividends paid by United States corporations.
Capital gain distributions paid by the Fund 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 the Fund will be increased; if the
result is a loss, the income dividend paid by the Fund will be decreased.
Income received by the 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.
The Fund intends to meet the requirements of the Code to "pass through"
to its shareholders foreign income taxes paid, but there can be no assurance
that the Fund will be able to do so. Each shareholder will be notified within 60
days after the close of each taxable year of the 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.
17
<PAGE>
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 the Fund (see discussion of "pass through" of the foreign tax credit to U.S.
shareholders), will be subject to U.S. tax. For shareholders who are not engaged
in a business in the U.S., this tax would be imposed at the rate of 30% upon the
gross amount of the dividend in the absence of a Tax Treaty providing for a
reduced rate or exemption from U.S. taxation. Distributions of net long-term
capital gains realized by the Fund 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
The Fund's portfolio transactions are placed with those securities
brokers and dealers that the Adviser believes will provide the best value in
transaction and research services for the Fund, either in a particular
transaction or over a period of time. Subject to that standard, portfolio
transactions for the 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 the 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
Fund.
The Adviser is the principal source of information and advice to the
Fund, and is responsible for making and initiating the execution of the
investment decisions for the Fund. However, the board of trustees recognizes
that it is important for the Adviser, in performing its responsibilities to the
Fund, 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 Fund to take into account the value
of the information received for use in advising the Fund. 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 Fund
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 Fund, in the same manner that the Fund might also benefit from
information obtained by the Adviser in performing services to others.
HASLP may act as broker for the 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
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who are not "interested" trustees, has determined that portfolio transactions
for the Fund may be executed through HASLP if, in the judgment of the Adviser,
the use of HASLP is likely to result in prices and execution at least as
favorable to the Fund as those available from other qualified brokers and if, in
such transactions, HASLP charges the Fund commission rates at least as favorable
to the Fund as those charged by HASLP to comparable unaffiliated customers in
similar transactions. The board of trustees has also adopted procedures that are
reasonably designed to provide that any commissions, fees or other remuneration
paid to HASLP are consistent with the foregoing standard. The Fund will not
effect principal transactions with HASLP. In executing transactions through
HASLP, the Fund will be subject to, and intends to comply with, section 17(e) of
the 1940 Act and rules thereunder.
The reasonableness of brokerage commissions paid by the Fund 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 Fund's portfolio transactions are reviewed periodically by
the board of trustees.
The Fund's transactions 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 Fund 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 the Fund and one
or more other advisory clients. If both the Fund and other clients purchase
or sell the same class of securities within the same time period, the
transactions will be allocated as to amount and price in a manner considered
equitable to each over time.
The Fund does 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.
DECLARATION OF TRUST
The Agreement and Declaration of Trust under which the Trust has been
organized ("Declaration of Trust") provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The 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.
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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. All shares of the Fund will be fully paid and
non-assessable by the Trust and will have no preemptive or conversion rights.
Each share of any class of the Fund is entitled to share pro rata in any
dividends and other distributions of shares of that class declared by the board
of trustees, to one vote per share in elections of trustees and other matters
presented to shareholders, and to equal rights per share in the event of
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. 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 shareholder 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.
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 the 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 Fund, and
performing other administrative duties, all as directed by authorized persons of
the Trust. The custodian also performs certain portfolio accounting services for
the Fund, for which the Fund pays the custodian a monthly fee. 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
the Fund. The Trust has authorized the custodian to deposit certain portfolio
securities of the Fund in central depository systems as permitted under federal
law. The Fund 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 the Fund's annual financial statements, reviews certain
regulatory reports and the Fund's federal income tax returns, and performs other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust.
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APPENDIX -- BOND RATINGS
A rating by a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general and
are not absolute standards of quality or guarantees as to the credit-worthiness
of an issuer. Consequently, the Adviser believes that the quality of debt
securities in which the Fund invests should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell, or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the rating services
from other sources which they consider reliable. Ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
The following is a description of the characteristics of ratings used
by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
RATINGS BY MOODY'S:
Aaa. Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or an exceptionally stable margin and
principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in the Aaa bonds, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba. Bonds rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
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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.
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