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STATEMENT OF ADDITIONAL INFORMATION
January 29, 2000
As supplemented November 17, 2000
THE OAKMARK FAMILY OF FUNDS
No-Load Funds
Two North LaSalle Street
Chicago, Illinois 60602-3790
Telephone 1-800-OAKMARK
(1-800-625-6275)
www.oakmark.com
This Statement of Additional Information relates to The Oakmark Fund ("Oakmark
Fund"), The Oakmark Select Fund ("Select Fund"), The Oakmark Small Cap Fund
("Small Cap Fund"), The Oakmark Equity and Income Fund, ("Equity and Income
Fund"), The Oakmark Global Fund ("Global Fund"), The Oakmark International Fund
("International Fund") and The Oakmark International Small Cap Fund
("International Small Cap Fund"), each a series of Harris Associates Investment
Trust (the "Trust"). This Statement of Additional Information is not a
prospectus but provides information that should be read in conjunction with the
Funds' prospectus dated the same date as this Statement of Additional
Information and any supplement thereto. You may obtain a prospectus or
semi-annual or annual report from the Funds at no charge by writing, telephoning
or accessing the Funds at their address, telephone number or website shown
above.
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TABLE OF CONTENTS
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THE FUNDS..........................................................2
INVESTMENT RESTRICTIONS............................................2
HOW THE FUNDS INVEST...............................................4
PERFORMANCE INFORMATION...........................................13
INVESTMENT ADVISER................................................16
CODE OF ETHICS....................................................18
TRUSTEES AND OFFICERS.............................................18
PRINCIPAL SHAREHOLDERS............................................21
PURCHASING AND REDEEMING SHARES...................................22
ADDITIONAL TAX INFORMATION........................................24
PORTFOLIO TRANSACTIONS............................................26
DECLARATION OF TRUST..............................................28
CUSTODIAN AND TRANSFER AGENT......................................28
INDEPENDENT PUBLIC ACCOUNTANTS....................................29
APPENDIX A -- BOND RATINGS.......................................A-1
APPENDIX B -- FINANCIAL STATEMENTS...............................B-1
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THE FUNDS
Oakmark Fund, Select Fund, Small Cap Fund, Global Fund, International Fund
and International Small Cap Fund seek long-term capital appreciation.
Equity and Income Fund seeks high current income and preservation and
growth of capital.
The Funds are series of the Trust, an open-end management investment
company, and each Fund other than Select Fund is diversified. The Trust is a
Massachusetts business trust organized under an Agreement and Declaration of
Trust dated February 1, 1991.
Each 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 retirement and profit sharing
plans. Class II Shares of a Fund pay a service fee at the annual rate of .25%
of the average net assets of Class II Shares of the Fund. This service fee is
paid to an administrator for performing the services associated with the
administration of such retirement plans. The shares of each class of a Fund
represent an interest in the same portfolio of investments of the Fund. All
shares of a Fund have equal voting rights (except as to matters affecting the
interests of only one class).
INVESTMENT RESTRICTIONS
In pursuing their respective investment objectives no Fund will:
1. [THIS RESTRICTION DOES NOT APPLY TO SELECT FUND] In regard to 75%
of its assets, invest more than 5% of its assets (valued at the time of
investment) in securities of any one issuer, except in U.S. government
obligations;
2. Acquire securities of any one issuer which at the time of
investment (a) represent more than 10% of the voting securities of the issuer or
(b) have a value greater than 10% of the value of the outstanding securities of
the issuer;
3. Invest more than 25% of its assets (valued at the time of
investment) in securities of companies in any one industry, except that this
restriction does not apply to investments in U.S. government obligations;
4. Borrow money except from banks for temporary or emergency purposes
in amounts not exceeding 10% of the value of the Fund's assets at the time of
borrowing [the Fund will not purchase additional securities when its borrowings,
less receivables from portfolio securities sold, exceed 5% of the value of the
Fund's total assets];
5. Issue any senior security except in connection with permitted
borrowings;
6. Underwrite the distribution of securities of other issuers;
however the Fund may acquire "restricted" securities which, in the event of a
resale, might be required to be registered under the Securities Act of 1933 on
the ground that the Fund could be regarded as an underwriter as defined by that
act with respect to such resale;
7. Make loans, but this restriction shall not prevent the Fund from
(a) investing in debt obligations, (b) investing in repurchase agreements,(1) or
(c) [FUNDS OTHER THAN OAKMARK
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(1) A repurchase agreement involves a sale of securities to a Fund with the
concurrent agreement of the seller (bank or securities dealer) to
repurchase the securities at the same
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FUND] lending its portfolio securities [the Fund will not lend securities having
a value in excess of 33% of its assets, including collateral received for loaned
securities (valued at the time of any loan)];
8. Purchase and sell real estate or interests in real estate,
although it may invest in marketable securities of enterprises which invest in
real estate or interests in real estate;
9. Purchase and sell commodities or commodity contracts, except that
it may enter into forward foreign currency contracts;
10. Acquire securities of other investment companies except (a) by
purchase in the open market, where no commission or profit to a sponsor or
dealer results from such purchase other than the customary broker's commission
or (b) where the acquisition results from a dividend or a merger, consolidation
or other reorganization;(2)
11. Make margin purchases or participate in a joint or on a joint or
several basis in any trading account in securities;
12. Invest in companies for the purpose of management or the exercise
of control;
13. Invest more than 15% of its net assets (valued at the time of
investment) in illiquid securities, including repurchase agreements maturing in
more than seven days;
14. [OAKMARK FUND, SELECT FUND, SMALL CAP FUND AND EQUITY AND INCOME
FUND ONLY] Invest more than 2% of its net assets (valued at the time of
investment) in warrants not listed on the New York or American stock exchanges,
valued at cost, nor more than 5% of its net assets in all warrants, provided
that warrants acquired in units or attached to other securities shall be deemed
to be without value for purposes of this restriction; [INTERNATIONAL FUND AND
INTERNATIONAL SMALL CAP FUND ONLY] Invest more than 10% of its net assets
(valued at the time of investment) in warrants valued at the lower of cost or
market, provided that warrants acquired in units or attached to securities shall
be deemed to be without value for purposes of this restriction;
15. [OAKMARK FUND, SELECT FUND AND SMALL CAP FUND ONLY] Invest more
than 25% of its total assets (valued at the time of investment) in securities of
non-U.S. issuers (other than securities represented by American Depositary
Receipts) [EQUITY AND INCOME FUND ONLY] Invest more than 10% of its total assets
(valued at the time of investment) in securities of non-U.S. issuers (other than
securities represented by American Depositary Receipts);(3)
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price plus an amount equal to an agreed-upon interest rate within a
specified time. In the event of a bankruptcy or other default of a seller
of a repurchase agreement, the Fund could experience both delays in
liquidating the underlying securities and losses. No Fund may invest more
than 15% of its net assets in repurchase agreements maturing in more than
seven days and other illiquid securities.
(2) In addition to this investment restriction, the Investment Company Act of
1940 provides that a Fund may neither purchase more than 3% of the voting
securities of any one investment company nor invest more than 10% of the
Fund's assets (valued at the time of investment) in all investment company
securities purchased by the Fund. Investment in the shares of another
investment company would require the Fund to bear a portion of the
management and advisory fees paid by that investment company, which might
duplicate the fees paid by the Fund.
(3) Although securities represented by American Depositary Receipts ("ADRs")
are not subject to restriction 15, none of these Funds has any present
intention to invest more than the indicated percentage of its total assets
in ADRs and securities of foreign issuers.
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16. Make short sales of securities unless (i) the Fund owns at least an
equal amount of such securities, or of securities that are convertible or
exchangeable, or anticipated to be convertible or exchangeable, into at least an
equal amount of such securities with no restriction other than the payment of
additional consideration; or (ii) immediately after such a short sale, the
aggregate value of all securities that the Fund is short (excluding short
sales against-the-box) does not exceed 5% of the value of the Fund's net
assets, and the Fund covers such short sales as required by the current rules
and positions of the Securities and Exchange Commission or it staff;
17. Purchase or write a call option or a put option if the aggregate
premium paid for all call and put options then held exceed 20% of its net assets
(less the amount by which any such positions are in-the-money);
18. Invest in futures or options on futures, except that it may invest
in forward foreign currency contracts.
The first 10 restrictions listed above, except the bracketed portions, are
fundamental policies and may be changed only with the approval of the holders of
a "majority of the outstanding voting securities" of the respective Fund, which
is defined in the Investment Company Act of 1940 (the "1940 Act") as the lesser
of (i) 67% of the shares of the Fund present at a meeting if more than 50% of
the outstanding shares of the Fund are present in person or represented by proxy
or (ii) more than 50% of the outstanding shares of the Fund. Those restrictions
not designated as "fundamental," and a Fund's investment objective, may be
changed by the board of trustees without shareholder approval. A Fund's
investment objective will not be changed without at least 30 days' notice to
shareholders.
Notwithstanding the foregoing investment restrictions, a Fund may purchase
securities pursuant to the exercise of subscription rights, provided, in the
case of each Fund other than Select Fund, that such purchase will not result in
the Fund's ceasing to be a diversified investment company. Japanese and European
corporations frequently issue additional capital stock by means of subscription
rights offerings to existing shareholders at a price substantially below the
market price of the shares. The failure to exercise such rights would result in
a Fund's interest in the issuing company being diluted. The market for such
rights is not well developed in all cases and, accordingly, a Fund may not
always realize full value on the sale of rights. The exception applies in cases
where the limits set forth in the investment restrictions would otherwise be
exceeded by exercising rights or would have already been exceeded as a result of
fluctuations in the market value of a Fund's portfolio securities with the
result that the Fund would be forced either to sell securities at a time when it
might not otherwise have done so, or to forego exercising the rights.
HOW THE FUNDS INVEST
SECURITIES OF NON-U.S. ISSUERS
International Fund and International Small Cap Fund invest primarily in
securities of non-U.S. issuers, Global Fund typically invests between 40-80% of
its total assets in securities of non-U.S. issuers and the other Funds each may
invest a minor portion of their assets (up to 25% for Oakmark Fund, Select Fund
and Small Cap Fund and up to 10% for Equity and Income Fund) in securities of
non-U.S. issuers.
International investing permits an investor to take advantage of the
growth in markets outside the United States. Investing in securities of non-U.S.
issuers may entail a greater degree of risk (including risks relating to
exchange rate fluctuations, tax provisions, or expropriation of assets) than
does investment in securities of domestic issuers. The Funds may invest in
securities of non-U.S. issuers directly or in the form of American Depositary
Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary Receipts
(GDRs), or other securities representing underlying shares of foreign issuers.
Positions in these securities are not necessarily denominated in the same
currency as the common stocks into which they may be converted. ADRs are
receipts typically issued by an American bank or trust company and trading
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in U.S. markets evidencing ownership of the underlying securities. EDRs are
European receipts evidencing a similar arrangement. Generally ADRs, in
registered form, are designed for use in the U.S. securities markets and EDRs,
in bearer form, are designed for use in European securities markets. GDRs are
receipts that may trade in U.S. or non-U.S. markets. The Funds may invest in
both "sponsored" and "unsponsored" ADRs, EDRs or GDRs. In a sponsored depositary
receipt, the issuer typically pays some or all of the expenses of the depository
and agrees to provide its regular shareholder communications to depositary
receipt holders. An unsponsored depositary receipt is created independently of
the issuer of the underlying security. The depositary receipt holders generally
pay the expenses of the depository and do not have an undertaking from the
issuer of the underlying security to furnish shareholder communications.
With respect to portfolio securities of non-U.S. issuers or denominated in
foreign currencies, a Fund's investment performance is affected by the strength
or weakness of the U.S. dollar against these currencies. For example, if the
dollar falls in value relative to the Japanese yen, the dollar value of a
yen-denominated stock held in the portfolio will rise even though the price of
the stock remains unchanged. Conversely, if the dollar rises in value relative
to the yen, the dollar value of the yen-denominated stock will fall. See
discussion of transaction hedging and portfolio hedging under "Currency Exchange
Transactions."
You should understand and consider carefully the risks involved in
international investing. Investing in securities of non-U.S. issuers, 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; imposition of foreign taxes; and sometimes
less advantageous legal, operational and financial protections applicable to
foreign subcustodial arrangements.
Although the Funds try to invest in companies and governments of countries
having stable political environments, there is the possibility of expropriation
of assets, confiscatory taxation, seizure or nationalization of foreign bank
deposits or other assets, establishment of exchange controls, the adoption of
foreign government restrictions, or other political, social or diplomatic
developments that could adversely affect investment in these countries.
PRIVATIZATIONS. Some governments have been engaged in programs of selling
part or all of their stakes in government owned or controlled enterprises
("privatizations"). The Adviser believes that privatizations may offer
opportunities for significant capital appreciation, and intends to invest assets
of International Fund, International Small Cap Fund and Global Fund in
privatizations in appropriate circumstances. In certain of those markets, the
ability of foreign entities such as International Fund, International Small Cap
Fund and Global Fund to participate in privatizations may be limited by local
law, and/or the terms on which such Funds may be permitted to participate may be
less advantageous than those afforded local investors. There can be no assurance
that governments will continue to sell companies currently owned or controlled
by them or that privatization programs will be successful.
EMERGING MARKETS. Investments in emerging markets securities include
special risks in addition to those generally associated with foreign investing.
Many investments in emerging markets can be considered speculative, and the
value of those investments can be more volatile than in more developed foreign
markets. This difference reflects the greater uncertainties of investing in less
established markets and economies. Emerging markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have not kept pace with the volume of securities
transactions, making it difficult to
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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 a Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to a Fund due to subsequent declines in the value of
those securities or, if a 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. A 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 a Fund's securities in such markets may
not be readily available. A 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 a 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 a Fund's identification of such condition until the date of the SEC action,
that Fund's securities in the affected markets will be valued at fair value
determined in good faith by or under the direction of the Trust's board of
trustees.
Income from securities held by a Fund could be reduced by taxes withheld
from that income, or other taxes that may be imposed by the emerging market
countries in which the Fund invests. Net asset value of a Fund may also be
affected by changes in the rates or methods of taxation applicable to the Fund
or to entities in which the Fund has invested. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain emerging market
countries. In an attempt to control inflation, certain emerging market countries
have imposed wage and price controls. Of these countries, some, in recent years,
have begun to control inflation through prudent economic policies.
Emerging market governmental issuers are among the largest debtors to
commercial banks, foreign governments, international financial organizations and
other financial institutions. Certain emerging market governmental issuers have
not been able to make payments of interest or principal on debt obligations as
those payments have come due. Obligations arising from past restructuring
agreements may affect the economic performance and political and social
stability of those issuers.
Governments of many emerging market countries have exercised and continue
to exercise substantial influence over many aspects of the private sector
through ownership or control of many companies. The future actions of those
governments could have a significant effect on economic conditions in emerging
markets, which in turn, may adversely affect companies in the private sector,
general market conditions and prices and yields of certain of the securities in
a Fund's portfolio. Expropriation, confiscatory taxation, nationalization,
political, economic and social instability have occurred throughout the history
of certain emerging market countries and could adversely affect Fund assets
should any of those conditions recur.
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CURRENCY EXCHANGE TRANSACTIONS. Each Fund may enter into currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate for purchasing
or selling currency prevailing in the foreign exchange market or through a
forward currency exchange contract ("forward contract"). A forward contract is
an agreement to purchase or sell a specified currency at a specified future date
(or within a specified time period) and price set at the time of the contract.
Forward contracts are usually entered into with banks, foreign exchange dealers
or broker-dealers, are not exchange-traded and are usually for less than one
year, but may be renewed.
Forward currency transactions may involve currencies of the different
countries in which a Fund may invest, and serve as hedges against possible
variations in the exchange rate between these currencies. A Fund's currency
transactions are limited to transaction hedging and portfolio hedging involving
either specific transactions or actual or anticipated portfolio positions.
Transaction hedging is the purchase or sale of a forward contract with respect
to specific receivables or payables of a Fund accruing in connection with the
purchase or sale of portfolio securities. Portfolio hedging is the use of a
forward contract with respect to an actual or anticipated portfolio security
position denominated or quoted in a particular currency. When a Fund owns or
anticipates owning securities in countries whose currencies are linked, the Fund
may aggregate such positions as to the currency hedged.
If a Fund enters into a forward contract hedging an anticipated or actual
holding of portfolio securities, liquid assets of the Fund, having a value at
least as great as the amount of the excess, if any, of the Fund's commitment
under the forward contract over the value of the portfolio position being
hedged, will be segregated on the books of the Fund and held by the Fund's
custodian and marked to market daily, while the contract is outstanding.
At the maturity of a forward contract to deliver a particular currency, a
Fund may sell the portfolio security related to such contract and make delivery
of the currency received from the sale, or it may retain the security and either
purchase the currency on the spot market or terminate its contractual obligation
to deliver the currency by entering into an offsetting contract with the same
currency trader for the purchase on the same maturity date of the same amount of
the currency.
It is impossible to forecast precisely the market value of a portfolio
security being hedged with a forward currency contract. Accordingly, at the
maturity of a contract it may be necessary for a Fund to purchase additional
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of currency the Fund is
obligated to deliver under the forward contract and if a decision is made to
sell the security and make delivery of the currency. Conversely, it may be
necessary to sell on the spot market some of the currency received upon the sale
of the portfolio security if the sale proceeds exceed 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
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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 impact significantly the European capital
markets in which the Funds, and in particular International Fund,
International Small Cap Fund and Global Funds may invest their assets. The
change to the new euro currency could have adverse effects on a 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 Funds in the areas of clearance
and settlement of trades in an effort to avoid any material impact on the
Funds 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 Funds.
DEBT SECURITIES
Each Fund may invest in debt securities, including lower-rated securities
(i.e., securities rated BB or lower by Standard & Poor's ("S&P") or Ba or lower
by Moody's Investor Services, Inc. ("Moody's"), commonly called "junk bonds")
and securities that are not rated. There are no restrictions as to the ratings
of debt securities acquired by a Fund or the portion of a Fund's assets that may
be invested in debt securities in a particular ratings category, except that
International Fund and International Small Cap Fund will not invest more than
10% of their respective total assets in securities rated below investment grade,
Equity and Income Fund will not invest more than 20% of its total assets in such
securities, and each of the other Funds will not invest more than 25% of its
total assets in such securities.
Securities rated BBB or Baa are considered to be medium grade and to have
speculative characteristics. Lower-rated debt securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer default or
bankruptcy. An economic downturn could severely disrupt the market for such
securities and adversely affect the value of such securities. In addition,
lower-quality bonds are less sensitive to interest rate changes than
higher-quality instruments and generally are more sensitive to adverse economic
changes or individual corporate developments. During a period of adverse
economic changes, including a period of rising interest rates, issuers of such
bonds may experience difficulty in making their principal and interest payments.
Medium- and lower-quality debt securities may be less marketable than
higher-quality debt securities because the market for them is less broad. The
market for unrated debt securities is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely
to increase significantly, and a Fund may have greater difficulty selling its
portfolio securities. See "Investing with The Oakmark Family of Funds --
Share Price," The market
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value of those 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
Each Fund may purchase securities on a when-issued or delayed-delivery
basis. Although the payment and interest terms of these securities are
established at the time a Fund enters into the commitment, the securities may be
delivered and paid for a month or more after the date of purchase, when their
value may have changed. A Fund makes such commitments only with the intention of
actually acquiring the securities, but may sell the securities before settlement
date if the Adviser deems it advisable for investment reasons. A Fund may
utilize spot and forward foreign currency exchange transactions to reduce the
risk inherent in fluctuations in the exchange rate between one currency and
another when securities are purchased or sold on a when-issued or
delayed-delivered basis.
At the time a Fund enters into a binding obligation to purchase securities
on a when-issued basis, liquid assets of the Fund having a value at least as
great as the purchase price of the securities to be purchased will be segregated
on the books of the Fund and held by the custodian throughout the period of the
obligation. The use of these investment strategies, as well as any borrowing by
a Fund, may increase net asset value fluctuation.
A 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 purchaser does not have the resources to make the
payment. 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
No Fund may invest in illiquid securities, if as a result such securities
would comprise more than 15% of the value of the Fund's assets.
If through the appreciation of illiquid securities or the depreciation of
liquid securities, the Fund should be in a position where more than 15% of the
value of its net assets are invested in illiquid assets, including restricted
securities, the Fund will take appropriate steps to protect liquidity.
Illiquid securities may include restricted securities, which may be sold
only in privately negotiated transactions or in a public offering with respect
to which a registration statement is in effect under the Securities Act of 1933
(the "1933 Act"). Where a Fund holds restricted securities and registration is
required, the Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, the Fund might obtain a less favorable price than
prevailed when it decided to sell. Restricted securities will be priced at fair
value as determined in good faith by the board of trustees.
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Notwithstanding the above, each Fund may purchase securities that,
although privately placed, are eligible for purchase and sale under Rule 144A
under the 1933 Act. This rule permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. The Adviser, under the
supervision of the board of trustees, may consider whether securities purchased
under Rule 144A are liquid and thus not subject to the Fund's restriction of
investing no more than 15% of its assets in illiquid securities. (See
restriction 13 under "Investment Restrictions.") A determination of whether a
Rule 144A security is liquid or not is a question of fact. In making this
determination the Adviser will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, the Adviser could consider the (1) frequency of trades and quotes, (2)
number of dealers and potential purchasers, (3) dealer undertakings to make a
market, (4) and the nature of the security and of market place trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities would be monitored
and, if as a result of changed conditions, it is determined that a Rule 144A
security is no longer liquid, the Fund's holdings of illiquid securities would
be reviewed to determine what, if any, steps are required to assure that the
Fund does not invest more than 15% of its assets in illiquid securities.
Investing in Rule 144A securities could have the effect of increasing the amount
of a Fund's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
SHORT SALES
Each Fund may make short sales of securities if (a) the Fund owns at
least an equal amount of such securities, or of securities that are convertible
or exchangeable, or anticipated to be convertible or exchangeable, into at least
an equal amount of such securities with no restriction other than the payment of
additional consideration or (b) immediately after such a short sale the
aggregate value of all securities that the Fund is short (excluding the value of
securities sold short against-the-box) does not exceed 5% of the value of the
Fund's net assets, and the Fund covers such short sales as described in the
following paragraph.
In a short sale, a Fund does not deliver from its portfolio the securities
sold and does not receive immediately the proceeds from the short sale. Instead,
the Fund borrows the securities sold short from a broker-dealer through which
the short sale is executed, and the broker-dealer delivers such securities, on
behalf of the Fund, to the purchaser of such securities. Such broker-dealer is
entitled to retain the proceeds from the short sale until the Fund delivers to
such broker-dealer the securities sold short. In addition, the Fund is required
to pay to the broker-dealer the amount of any dividends paid on shares sold
short. Finally, in order to cover its short positions, the Fund must deposit and
continuously maintain in a separate account with the Fund's custodian either (1)
an equivalent amount of the securities sold short or securities convertible into
or exchangeable for such securities without the payment of additional
consideration or (2) cash, U.S. government securities or other liquid securities
having a value equal to the excess of (a) the market value of the securities
sold short over (b) the value of any cash, U.S. government securities or other
liquid securities deposited as collateral with the broker in connection with the
short sale. A Fund is said to have a short position in the securities sold
until it delivers to the broker-dealer the securities sold, at which time the
Fund receives the proceeds of the sale. A Fund may close out a short position by
purchasing on the open market and delivering to the broker-dealer an equal
amount of the securities sold short, rather than by delivering portfolio
securities.
Short sales may protect a Fund against the risk of losses in the value of
its portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding loss in the
short position. The extent to which such gains or losses are offset will depend
upon the amount of securities sold short relative to the amount the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the conversion premium.
10
<PAGE>
Short sale transactions involve certain risks. If the price of the
security sold short increases between the time of the short sale and the time a
Fund replaces the borrowed security, the Fund will incur a loss and if the price
declines during this period, the Fund will realize a short-term capital gain.
Any realized short-term capital gain will be decreased, and any incurred loss
increased, by the amount of transaction costs and any premium, dividend or
interest which the Fund may have to pay in connection with such short sale.
Certain provisions of the Internal Revenue Code may limit the degree to which a
Fund is able to enter into short sales. There is no limitation on the amount of
each Fund's assets that, in the aggregate, may be deposited as collateral for
the obligation to replace securities borrowed to effect short sales and
allocated to segregated accounts in connection with short sales.
PRIVATE PLACEMENTS
Each Fund may acquire securities in private placements. Because an active
trading market may not exist for such securities, the sale of such securities
may be subject to delay and additional costs. No Fund will purchase such a
security if more than 15% of the value of such Fund's net assets would be
invested in illiquid securities.
LENDING OF PORTFOLIO SECURITIES
Each Fund except Oakmark Fund may lend its portfolio securities to
broker-dealers and banks to the extent indicated in restriction 7 under
"Investment Restrictions." Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current basis in an
amount at least equal to the market value of the securities loaned by a Fund.
The Fund would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and would also receive an
additional return that may be in the form of a fixed fee or a percentage of the
earnings on the collateral. The Fund would have the right to call the loan and
obtain the securities loaned at any time on notice of not more than five
business days. In the event of bankruptcy or other default of the borrower, the
Fund could experience delays in liquidating the loan collateral or recovering
the loaned securities and incur expenses related to enforcing its rights. In
addition, there could be a decline in the value of the collateral or in the
value of the securities loaned while the Fund seeks to enforce its rights
thereto and the Fund could experience subnormal levels of income and lack of
access to income during this period.
OTHER INVESTMENT COMPANIES
Certain markets are closed in whole or in part to direct equity
investments by foreigners. A Fund may be able to invest in such markets solely
or primarily through governmentally authorized investment vehicles or companies.
Each Fund generally may invest up to 10% of its assets in the aggregate in
shares of other investment companies and up to 5% of its assets in any one
investment company, as long as no investment represents more than 3% of the
outstanding voting stock of the acquired investment company at the time of
investment.
Investment in another investment company may involve the payment of a
premium above the value of such issuers' portfolio securities, and is subject to
market availability. The Funds do not intend to invest in such vehicles or funds
unless, in the judgment of the Adviser, the potential benefits of the investment
justify the payment of any applicable premium or sales charge. As a shareholder
in an investment company, a Fund would bear its ratable share of that investment
company's expenses, including its advisory and administration fees. At the same
time the Fund would continue to pay its own management fees and other expenses.
11
<PAGE>
OPTIONS
Each Fund may purchase and sell both call options and put options on
securities. An option on a security is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call)
or sell to (put) the seller (writer) of the option the security underlying
the option at a specified exercise price at any time during the term of the
option. The writer of an option on an individual security has the obligation
upon exercise of a call option to deliver the underlying security upon
payment of the exercise price or upon exercise of a put option to pay the
exercise price upon delivery of the underlying security.
It is expected that a Fund will not purchase a call option or a put
option if the aggregate value of all call and put options held by the Fund
would exceed 5% of the Fund's net assets.
Each Fund will write call options and put options only if they are
"covered." For example, in the case of a call option, the option is "covered"
if the Fund owns the security underlying the option or has an absolute and
immediate right to acquire that security without additional consideration
(or, if additional consideration is required, assets having a value at least
equal to that amount are segregated on the books of a fund) upon conversion
or exchange of other securities held in its portfolio.
If an option written by a Fund expires, the Fund realizes a capital
gain equal to the premium received at the time the option was written. If an
option purchased by a Fund expires, the Fund realizes a capital loss equal to
the premium paid.
Prior to the earlier of exercise or expiration, the writer may close
out the option by an offsetting purchase or sale of an option of the same
series (type, exchange, underlying security or index, exercise price and
expiration). There can be no assurance, however, that a closing purchase or
sale transaction can be effected when a Fund desires.
If a Fund closes out an option it has written, it will realize a
capital gain from a closing purchase transaction if the cost of the closing
option is less than the premium received from writing the option, or, if it
is more, the Fund will realize a capital loss. If the premium received from a
closing sale transaction is more than the premium paid to purchase the
option, the Fund will realize a capital gain or, if it is less, the Fund will
realize a capital loss. The principal factors affecting the market value of a
put or a call option include supply and demand, interest rates, the current
market price of the underlying security in relation to the exercise price of
the option, the volatility of the underlying security or index, and the time
remaining until the expiration date.
A put or call option purchased by a Fund is an asset of the Fund, valued
initially at the premium paid for the option. The premium received for an option
written by a Fund is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at the closing
price on the exchange on which it is traded, or, if not traded on an exchange or
no closing price is available, at the mean between the last bid and asked
prices.
There are several risks associates with transactions in options. For
example, there are significant differences between the securities markets and
the options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when, and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when a Fund
seeks to close out an option position. If a Fund was unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option would expire and become worthless.
If a Fund was unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until the option
expired. As the writer of a covered call option on a security, a Fund foregoes,
during the option's life, the
12
<PAGE>
opportunity to profit from increases in the market value of the security
covering the call option above the sum of the premium and the exercise price of
the call. If trading were suspended in an option purchased or written by a Fund,
that Fund would not able to close out the option. If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it has purchased.
TEMPORARY STRATEGIES
Each Fund has the flexibility to respond promptly to changes in market and
economic conditions. In the interest of preserving shareholders' capital, the
Adviser may employ a temporary defensive investment strategy if it determines
such a strategy to be warranted. Pursuant to such a defensive strategy, a Fund
temporarily may hold cash (U.S. dollars, foreign currencies, or multinational
currency units) and/or invest up to 100% of its assets in high quality debt
securities or money market instruments of U.S. or foreign issuers, and most or
all of the investments of International Fund, International Small Cap Fund and
Global Fund may be made in the United States and denominated in U.S. dollars. It
is impossible to predict whether, when or for how long a Fund will employ
defensive strategies.
In addition, pending investment of proceeds from new sales of Fund shares
or to meet ordinary daily cash needs, each Fund temporarily may hold cash (U.S.
dollars, foreign currencies or multinational currency units) and may invest any
portion of its assets in money market instruments.
PERFORMANCE INFORMATION
From time to time the Funds may quote total return figures in sales
material. "Total Return" for a period is the percentage change in value
during the period of an investment in Fund shares, including the value of
shares acquired through reinvestment of all dividends and capital gains
distributions. Total return figures quoted by the Funds will assume
reinvestment of all dividends and distributions, but will not take into
account income taxes payable by shareholders. Total return is not intended
to indicate future performance. "Average Annual Total Return" is the average
annual compounded rate of change in value represented by the Total Return for
the period.
Average Annual Total Return will be computed as follows:
ERV = P(1+T)to the power of n
Where: P = the amount of an assumed initial investment in Fund shares
T = average annual total return
n = number of years from initial investment to the end of the
period
ERV = ending redeemable value of shares held at the end of the
period
For example, Total Return and Average Annual Total Return on a $1,000
investment in Class I Shares of each Fund for the following periods ended
September 30, 1999 were:
<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
<S> <C> <C>
Oakmark Fund Class I
One year..................................... 7.98% --
Five years................................... 102.08 15.10%
Life of Fund*................................ 438.82 22.93
Select Fund Class I
One year..................................... 30.07 --
Life of Fund*................................ 120.28 31.12
Small Cap Fund Class I
One year..................................... 10.56 --
Life of Fund*................................ 65.58 13.74
13
<PAGE>
Equity and Income Fund Class I
One year..................................... 15.32 --
Life of Fund*................................ 75.18 15.39
International Fund Class I
One year..................................... 46.41 --
Five years................................... 56.41 9.35
Life of Fund*................................ 138.96 13.25
International Small Cap Fund Class I
One year..................................... 88.02 --
Life of Fund*................................ 54.39 11.72
Global Fund Class I
Life of Fund*................................ (8.20) --
</TABLE>
------------------
* Life of Fund commenced with the public offering of Class I shares as
follows: Oakmark, 8/5/91; Select, 11/1/96; International, 9/30/92;
Small Cap, Equity and Income, International Small Cap, 11/1/95; and
Global, 8/4/99.
No information is provided for Class II Shares, because no Class II Shares had
been issued as of September 30, 1999.
The Funds also may, from time to time, quote their yield. Yield is based on
historical earnings and is not intended to indicate future performance. The
yield of a Fund refers to the income generated by an investment in that Fund
over a one-month period (which period will be stated in the sales material).
This income is then "annualized." That is, the amount of income generated by
the investment during the month is assumed to be generated each month over a 12
month period and is shown as a percentage of the investment.
Yield quotations are based on a 30-day (or one month) period, and are
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
a-b
Yield = 2 [( --- +1) raised to the power of 6 - 1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Although they may do so in the future, each Fund typically has not
calculated or advertised its yield.
The Funds impose no sales charge and pay no distribution ("12b-1")
expenses. Each Fund's performance is a function of conditions in the
securities markets, portfolio management, and operating expenses. Although
information such as yield and total return is useful in reviewing a Fund's
performance and in providing some basis for comparison with other investment
alternatives, it should not be used for comparison with other investments
using different reinvestment assumptions or time periods.
In advertising and sales literature, the performance of a Fund may be
compared with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial assets or data, and other competing
investment and deposit products available from or through other financial
institutions. The composition of these indexes or averages differs from that of
the Funds. Comparison of a Fund to an alternative investment should consider
differences in features and expected performance.
All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Funds generally believe to be
accurate. The Funds may also refer to publicity (including performance rankings)
in newspapers, magazines, or other media from time to time. However, the Funds
assume no responsibility for the accuracy of such data. Newspapers and magazines
that might mention the Funds include, but are not limited to, the following:
Barron's
Business Week
Changing Times
Chicago Tribune
Chicago Sun-Times
Crain's Chicago Business
Consumer Reports
Consumer Digest
Financial World
Forbes
Fortune
Global Finance
Investor's Business Daily
Kiplinger's Personal Finance
Los Angeles Times
Money
Mutual Fund Letter
Mutual Funds Magazine
Morningstar
Newsweek
The New York Times
Pensions and Investments
Personal Investor
Smart Money
Stanger Reports
Time
14
<PAGE>
A Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation. The performance of a Fund may
also be compared to the Morgan Stanley Capital International 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*
Standard & Poor's 500 Stock Index*
Standard & Poor's 400 Industrials
Standard & Poor's Small Cap 600*
Standard & Poor's Mid Cap 400*
Russell 2000
Wilshire 5000
New York Stock Exchange Composite Index
American Stock Exchange Composite Index
NASDAQ Composite
NASDAQ Industrials
In addition, each of Oakmark Fund, Select Fund, Small Cap Fund and
Equity and Income Fund may compare its performance to the following indexes
and averages: Value Line Index; Lipper Capital Appreciation Fund Average;
Lipper Growth Funds Average; Lipper Small Company Growth Funds Average;
Lipper General Equity Funds Average; Lipper Equity Funds Average; Lipper
Small Company Growth Fund Index; and Lehman Brothers Government/Corporate
Bond Index. Each of International Fund, International Small Cap Fund and
Global Fund may compare its performance to the following indexes and
averages: Lipper International & Global Funds Average; Lipper Global Fund
Index; Lipper International Fund Index; Lipper International Equity Funds
Average; Micropal International Small Company Fund Index; Morgan Stanley
Capital International World ex the U.S. Index*; and Morningstar International
Stock Average.
Lipper Indexes and Averages are calculated and published by Lipper, Inc.
("Lipper"), an independent service that monitors the performance of more than
1,000 funds. The Funds may also use comparative performance as computed in a
ranking by Lipper or category averages and rankings provided by another
independent service. Should Lipper or another service reclassify a Fund to a
different category or develop (and place a Fund into) a new category, that Fund
may compare its performance or ranking against other funds in the newly assigned
category, as published by the service. Each Fund may also compare its
performance or ranking against all funds tracked by Lipper or another
independent service, including Morningstar, Inc.
The Funds may cite their ratings, recognition, or other mention by
Morningstar or any other entity. Morningstar's rating system is based on
risk-adjusted total return performance and is expressed in a star-rating format.
The risk-adjusted number is computed by subtracting a fund's risk score (which
is a function of the fund's monthly returns less the 3-month T-bill return) from
the fund's load-adjusted total return score. This numerical score is then
translated into rating categories, with the top 10% labeled five star, the next
22.5% labeled four star, the next 35% labeled three star, the next 22.5% labeled
two star, and the bottom 10% one star. A high rating reflects either
above-average returns or below-average risk or both.
To illustrate the historical returns on various types of financial assets,
the Funds may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains)
very long-term (since 1926) total return data (including, for example, total
return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks; small company stocks;
---------------------------
* With dividends reinvested.
15
<PAGE>
long-term corporate bonds; long-term government bonds; intermediate-term
government bonds; U.S. Treasury bills; and Consumer Price Index.
INVESTMENT ADVISER
The Funds' investment adviser, Harris Associates L.P. (the "Adviser"),
furnishes continuing investment supervision to the Funds and is responsible for
overall management of the Funds' business affairs pursuant to investment
advisory agreements relating to the respective Funds (the "Agreements"). The
Adviser furnishes office space, equipment and personnel to the Funds, and
assumes the expenses of printing and distributing the Funds' prospectus,
profiles and reports to prospective investors.
Each Fund pays the cost of its custodial, stock transfer, dividend
disbursing, bookkeeping, audit and legal services. Each Fund also pays other
expenses such as the cost of proxy solicitations, printing and distributing
notices and copies of the prospectus and shareholder reports furnished to
existing shareholders, taxes, insurance premiums, the expenses of maintaining
the registration of that Fund's shares under federal and state securities laws
and the fees of trustees not affiliated with the Adviser.
The Adviser has voluntarily agreed to reimburse Class I Shares of each
Fund to the extent that the annual ordinary operating expenses of that class
exceed the following percentages of the average net assets of Class I Shares:
1.50% in the case of Oakmark Fund, Select Fund or Small Cap Fund; 1.00% in
the case of Equity and Income Fund; 1.75% in the case of Global Fund; and
2.00% in the case of International Fund and International Small Cap Fund. The
Adviser has also voluntarily agreed to reimburse Class II Shares of each Fund
to the extent that the annual ordinary operating expenses of that class
exceed the following percentages of the average net assets of Class II
Shares: Oakmark Fund, Select Fund or Small Cap Fund, 1.75% (1.50% + .25%);
Equity and Income Fund, 1.25% (1.00% + .25%); Global Fund, 2.00% (1.75% +
.25%); and International Fund and International Small Cap Fund, 2.25% (2.00%
+ .25%). Each such agreement is effective through January 31, 2001, subject
to earlier termination by the Adviser on 30 days' notice to the Fund.
For the purpose of determining whether a share class of a Fund is entitled
to any reduction in advisory fee or expense reimbursement, the pro rata portion
of the Fund's expenses attributable to a share class of that Fund, is calculated
daily and any reduction in fee or reimbursement is made monthly.
For its services as investment adviser, the Adviser receives from each
Fund a monthly fee based on that Fund's net assets at the end of the preceding
month. Basing the fee on net assets at the end of the preceding month has the
effect of (i) delaying the impact of changes in assets on the amount of the fee
and (ii) in the first year of a fund's operation, reducing the amount of the
aggregate fee by providing for no fee in the first month of operation. The
annual rates of fees as a percentage of each Fund's net assets are as follows:
<TABLE>
<CAPTION>
FUND FEE
----------------- ----------------------------------------------
<S> <C>
Equity and Income .75%
Oakmark 1.00% up to $2.5 billion; .95% on the next
$1.25 billion; .90% on the next $1.25 billion;
.85% on net assets in excess of $5 billion;
and .80% on net assets in excess of $10
billion
International 1.00% up to $2.5 billion; .95% on the next
$2.5 billion; and .90% on net assets in excess
of $5 billion
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
FUND FEE
----------------- ----------------------------------------------
<S> <C>
Select 1.00% up to $1 billion; .95% on the next $500
million; .90% on the next $500 million;
.85% on the next $500 million; .80% over
$2.5 billion; and .75% over $5 billion
Small Cap 1.25% up to $1 billion; 1.15% on the next
$500 million; 1.10% on the next $500 million;
1.05% on the next $500 million; 1.00% over
$2.5 billion
International Small Cap 1.25%
Global Fund 1.00%
</TABLE>
The table below shows gross advisory fees paid by the Funds and any
expense reimbursements by the Adviser to them, which are described in the
prospectus.
<TABLE>
<CAPTION>
TYPE OF YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
FUND PAYMENT SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------- ------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Oakmark Advisory fee $59,957,947 $72,196,251 $43,705,462
Select Advisory fee 15,358,029 11,525,158 1,731,599
Small Cap Advisory fee 7,251,751 15,863,707 7,705,828
Equity and Advisory fee 464,454 359,708 140,973
Income Reimbursement -- -- 39,450
International Advisory fee 8,068,806 12,623,371 13,040,702
International
Small Cap Advisory fee 1,330,000 827,611 648,148
Global Advisory fee 18,520 -- --
Reimbursement 15,474 -- --
</TABLE>
The Agreement for each Fund, except Global Fund, was for an initial
term expiring September 30, 1997, and for Global Fund was for an initial term
expiring September 30, 2000. Each Agreement continues from year to year
thereafter so long as such continuation is approved at least annually by (1)
the board of trustees or the vote of a majority of the outstanding voting
securities of the Fund, and (2) a majority of the trustees who are not
interested persons of any party to the Agreement, cast in person at a meeting
called for the purpose of voting on such approval. Each Agreement may be
terminated at any time, without penalty, by either the Trust or the Adviser
upon 60 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. ("HAI"), whose directors are David G. Herro, Robert
M. Levy, Roxanne M. Martino, Victor A. Morgenstern, Anita M. Nagler, William
C. Nygren, Neil Ryland, and Peter S. Voss. Mr. Levy is the president and
chief executive officer of HAI. HAI is a wholly-owned subsidiary of Nvest
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 and is an affiliate of Nvest, L.P. Nvest and
Nvest, L.P. are also affiliates of Nvest Services Co., the Funds' Transfer
Agent.
Nvest and Nvest, L.P. are indirect wholly-owned subsidiaries of CDC
Asset Management ("CDC AM"), which in turn is 60% owned by CDC Finance, a
wholly-owned subsidiary of Caisse des Depots et Consignations ("CDC").
Founded in 1816, CDC is a major diversified financial institution with a
strong global presence in the banking, insurance, investment banking, asset
management and global custody industries. In addition to its 60% ownership of
CDC AM through CDC Finance, CDC owns 40% of CNP Assurances, the leading
French insurance company, which itself owns 20% of CDC AM. CDC also owns 35%
of Caisse National des Caisses d'Epargne, which also owns 20% of CDC AM. CDC
is 100% owned by the French state. The main place of business of CDC AM is 7,
place des Cinq Martyrs du Lycee Buffon, 75015 Paris, France. The registered
address of CDC Finance is 56, rue de Lille, 75007 Paris, France. The
registered address of CDC is 56, rue de Lille, 75007 Paris, France. The
registered address of CNP Assurance is 4, place Raoul Dautry, 75015 Paris,
France. The registered address of Caisse National des Caisses d'Epargne is 5,
rue Masseran, 75007 Paris, France.
17
<PAGE>
CODE OF ETHICS
The 1940 Act and rules thereunder require that the Trust and the Adviser
establish standards and procedures for the detection and prevention of certain
conflicts of interest, including activities by which persons having knowledge of
the investments and investment intentions of the Trust might take advantage of
that knowledge for their own benefit. The Trust and the Adviser have adopted a
Code of Ethics to meet those concerns and legal requirements. Although the Code
does not prohibit employees who have knowledge of the investments and investment
intentions of any of the Funds from engaging in personal securities investing,
it does regulate such personal securities investing by these employees as a part
of the effort by the Trust and the Adviser to detect and prevent conflicts of
interest.
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal business
activities during the past five years are:
<TABLE>
<CAPTION>
<S><C>
NAME, ADDRESS, POSITION(S) WITH TRUST
AND AGE AT SEPTEMBER 30, 1999 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS#
------------------------------------- ----------------------------------------------
<S> <C>
VICTOR A. MORGENSTERN* Chairman of the Board, HAI, since 1996 and
Trustee and Chairman, 56 President prior thereto; Chairman, Harris Partners,
L.L.C., since September 1995; and a director of
Nvest Corporation since 1996
MICHAEL J. FRIDUSS Principal, M.J. Friduss & Associates, Inc.
Trustee, 57 (telecommunications consultants)
c/o M.J. Friduss & Associates, Inc.
1555 Museum Drive
Highland Park, Illinois 60035
THOMAS H. HAYDEN Executive Vice President and director, Bozell
Trustee, 48 Worldwide, Inc. (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
Trustee, 38 management) since 1995
c/o Hyatt Corporation
200 West Madison Street
Chicago, Illinois 60606
ALLAN J. REICH Managing Member and Chair of
Trustee, 51 Corporate/Securities Practice Group, D'Ancona &
c/o D'Ancona & Pflaum LLC Pflaum LLC (attorneys)
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S><C>
NAME, ADDRESS, POSITION(S) WITH TRUST
AND AGE AT SEPTEMBER 30, 1999 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS#
------------------------------------- ----------------------------------------------
<S> <C>
MARV R. ROTTER President - Central Region, AXA Advisors, LLC
Trustee, 53 (formerly known as Rotter & Associates), since
c/o AXA Advisors, LLC 1999, and General Manager prior thereto (financial
5 Revere Drive, Suite 400 services)
Northbrook, Illinois 60062-1571
BURTON W. RUDER President, The Academy Group (venture capital
Trustee, 55 investments and transaction financing)
c/o The Academy Group
707 Skokie Boulevard, Suite 410
Northbrook, Illinois 60062
PETER S. VOSS* Chairman, President and Chief Executive Officer,
Trustee, 52 Nvest Corporation, Nvest Companies, L.P. and
c/o Nvest Companies, L.P. Nvest L.P. (investment management)
399 Boylston Street
Boston, Massachusetts 02116
GARY N. WILNER, M.D. Senior Attending Physician, Evanston Hospital, and
Trustee, 59 Medical Director - CardioPulmonary Wellness
c/o Evanston Hospital Program, Evanston Hospital Corporation
2650 Ridge Avenue
Evanston, Illinois 60201
ROBERT LEVY President and Chief Executive Officer, HAI, since
President, 49 1997; Portfolio Manager, HALP, prior thereto
ROBERT J. SANBORN Portfolio Manager and Analyst, HALP
Executive Vice President
and Portfolio Manager
(The Oakmark Fund), 41
JAMES P. BENSON Portfolio Manager and Analyst, HALP since 1997;
Co-Portfolio Manager (The Oakmark Director of Equity Research, Ryan Beck & Co.
Small Cap Fund), 42 (broker/dealer and investment banking), prior thereto
DAVID G. HERRO Portfolio Manager and Analyst, HALP
Vice President and Co-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
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S><C>
NAME, ADDRESS, POSITION(S) WITH TRUST
AND AGE AT SEPTEMBER 30, 1999 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS#
------------------------------------- ----------------------------------------------
<S> <C>
WILLIAM C. NYGREN Portfolio Manager, HALP
Vice president and Portfolio
Manager (The Oakmark Select Fund), 41
STEVEN J. REID Portfolio Manager and Analyst, HALP
Vice President and Co-Portfolio Manager
(The Oakmark Small Cap Fund), 43
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), 36
GREGORY L. JACKSON Portfolio Manager and Analyst, HALP, since July
Vice President and Co-Portfolio Manager 1998; Portfolio Manager and Analyst, Yacktman
(The Oakmark Global Fund), 33 Asset Management, prior thereto
ANN W. REGAN Director of Mutual Fund Operations, HALP, since
Vice President-Shareholder Operations 1996; Special Projects Assistant to the General
and Assistant Secretary, 51 Counsel, HALP, 1995-1996
ANITA M. NAGLER Chief Operating Officer, HAI, Since January 2000,
Secretary, 43 Vice President, HAI and General Counsel, HALP
KRISTI L. ROWSELL Chief Financial Officer, HAI, since October, 1999;
Treasurer, 33 Treasurer, HALP, since 1996; Tax and Accounting
Manager, HALP, 1995-1996
JOHN J. KANE Manager - Fund Accounting, HALP
Assistant Treasurer, 28
</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.
20
<PAGE>
At September 30, 1999, the trustees and officers as a group owned
beneficially less than 1% of Oakmark Fund and the following percentages of the
outstanding shares of each of the other Funds: Select, 1.26%; Small Cap, 1.78%;
Equity and Income, 9.35%; Global, 28.77%; International, 1.31%; and
International Small Cap, 8.29%.
The following table shows the compensation paid by the Trust for the year
ended September 30, 1999 to each trustee who was not an "interested person" of
the Trust:
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF TRUSTEE FROM THE TRUST*
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Christine M. Maki $56,000
Michael J. Friduss 58,000
Thomas H. Hayden 58,000
Allan J. Reich 57,000
Marv R. Rotter 50,000
Burton W. Ruder 56,000
Gary N. Wilner, M.D. 63,000
------------------------------------------------------------------------------------------------------
</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 commencing in 2000
to elect to defer receipt of all or a portion of his or her compensation as a
trustee for two or more years. The deferred compensation of a participating
trustee is credited to a book reserve account of the Trust when the
compensation would otherwise have been paid to the trustee. The value of the
trustee's deferral account at any time is equal to the value that the account
would have had if contributions to the account had been invested and
reinvested in shares of one or more of the Oakmark Funds or the Goldman Sachs
Institutional Liquid Assets Government Portfolio as designated by the
trustee. At the time for commencing distributions from a trustee's deferral
account, which is no later than when the trustee ceases to be a member of the
board, the trustee may elect to receive distributions in a lump sum or over a
period of five years. Each Fund's obligation to make distributions under the
Plan is a general obligation of that Fund. No Fund will be liable for any
other Fund's obligations to make distributions under the Plan.
PRINCIPAL SHAREHOLDERS
The only persons known by the Trust to own of record or "beneficially"
(within the meaning of that term as defined in rule 13d-3 under the Securities
Exchange Act of 1934) 5% or more of the outstanding shares of any Fund as of
September 30, 1999 were:
21
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
NAME AND ADDRESS FUND SHARES HELD
---------------- ---- -----------
<S> <C> <C>
Banc of America Securities LLC CNSV (1) International Small Cap 8.73%
600 Montgomery Street Global 11.54
San Francisco, CA 94111-2702
Charles Schwab & Co. Inc. (1) Oakmark 29.87%
101 Montgomery Street Select 33.17
San Francisco, CA 94104-4122 Small Cap 32.52
Equity and Income 16.65
International 30.18
International Small Cap 32.20
Global 5.45
Clyde S. and Joan K. McGregor (2) Equity and Income 6.97%(2)
Two North LaSalle Street, #500
Chicago, IL 60602
National Financial Services Corp. (1) Oakmark 7.62%
P.O. Box 3908 Select 19.14
Church Street Station Small Cap 9.01
New York, NY 10008-3908 International 6.13
International Small Cap 12.97
National Investor Services Corp. (1) International Small Cap 5.11%
55 Water Street, Floor 32
New York, NY 10041-3299
</TABLE>
------------------
(1) Shares are held for accounts of customers.
(2) 5.48% of these shares are held beneficially by Clyde S. and Joan K.
McGregor and 1.49% of these shares are held beneficially by Clyde S.
McGregor.
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Funds' prospectus under
the headings "Investing with The Oakmark Family of Funds," "How to Buy Class
I Shares," "How to Sell Class I Shares" and "Shareholder Services."
NET ASSET VALUE
The net asset value per Class I Share or per Class II Share of each Fund
is determined by the Trust's custodian, State Street Bank and Trust Company. The
net asset value of Class I Shares of a Fund is determined by dividing the value
of the assets attributable to Class I Shares of the Fund, less liabilities
attributable to that class, by the number of Class I Shares outstanding.
Similarly, the net asset value of Class II Shares of a Fund is determined by
dividing the value of the assets attributable to Class II Shares of the Fund,
less liabilities attributable to that class, by the number of Class II Shares
outstanding. Securities traded on securities exchanges, or in the
over-the-counter market in which transaction prices are reported on the NASDAQ
National Market System, are valued at the last sales prices at the time of
valuation or, lacking any reported sales on that day, at the most recent bid
quotations. Other securities traded over-the-counter are also
22
<PAGE>
valued at the most recent bid quotations. Money market instruments having a
maturity of 60 days or less from the valuation date are valued on an amortized
cost basis. The values of securities of foreign issuers are generally based upon
market quotations which, depending upon local convention or regulation, may be
last sale price, last bid or asked price, or the mean between last bid and asked
prices as of, in each case, the close of the appropriate exchange or other
designated time. Securities for which quotations are not available and any other
assets are valued at a fair value as determined in good faith by or under the
direction of the board of trustees. All assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars at the mean of
the bid and offer prices of such currencies against U.S. dollars quoted by any
major bank or dealer. If such quotations are not available, the rate of exchange
will be determined in accordance with policies established in good faith by the
Board.
The Funds' net asset values are determined only on days on which the New
York Stock Exchange is open for trading. The NYSE is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in January and
February, Good Friday, the last Monday in May, Independence Day, Labor Day,
Thanksgiving and Christmas. If one of these holidays falls on a Saturday or
Sunday, the NYSE will be closed on the preceding Friday or the following Monday,
respectively.
Trading in the portfolio securities of International Fund, International
Small Cap Fund or Global Fund (and of any other Fund, to the extent it invests
in securities of non-U.S. issuers) takes place in various foreign markets on
certain days (such as Saturday) when the Fund is not open for business and does
not calculate its net asset value. In addition, trading in the Fund's portfolio
securities may not occur on days when the Fund is open. Therefore, the
calculation of net asset value does not take place contemporaneously with the
determinations of the prices of many of the Fund's portfolio securities and the
value of the Fund's portfolio may be significantly affected on days when shares
of the Fund may not be purchased or redeemed.
Computation of net asset value (and the sale and redemption of a Fund's
shares) may be suspended or postponed during any period when (a) trading on the
New York Stock Exchange is restricted, as determined by the Securities and
Exchange Commission, or that exchange is closed for other than customary weekend
and holiday closings, (b) the Commission has by order permitted such suspension,
or (c) an emergency, as determined by the Commission, exists making disposal of
portfolio securities or valuation of the net assets of a Fund not reasonably
practicable.
SHARES PURCHASED THROUGH INTERMEDIARIES
Class I Shares of any of the Funds may be purchased through certain
financial service companies, who are agents of the Funds for the limited purpose
of completing purchases and sales. 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. Each
Fund may pay a portion of those fees, not to exceed the estimated fees that the
Fund would pay to its own transfer agent if the shares of the Fund held by such
customers of the company were registered directly in their names on the books of
the Fund's transfer agent. The balance of those fees are paid by the Adviser.
Purchases through intermediaries that are authorized agents of the
Trust are made at the net asset value next determined after receipt of the
orders by such intermediaries. 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.
23
<PAGE>
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 pursuant to a written agreement. 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.
REDEMPTION IN KIND
The Funds have elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which it is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of a Fund during any 90-day
period for any one shareholder. Redemptions in excess of those amounts will
normally be paid in cash, but may be paid wholly or partly by a distribution in
kind of marketable securities. Brokerage costs may be incurred by a shareholder
who receives securities and desires to convert them to cash.
REDEMPTION OF SMALL ACCOUNTS
Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem at net asset value the shares of any shareholder
whose account in any Fund has a value as a result of redemptions of less than
the minimum amount specified by the board of trustees, which currently is
$1,000. Before such a redemption, the shareholder will be notified that the
account value is less than the minimum and will be allowed at least 30 days to
bring the value of the account up to the minimum. The agreement and declaration
of trust also authorizes the Trust to redeem shares under certain other
circumstances as may be specified by the board of trustees.
90-DAY REDEMPTION FEE - CLASS I SHARES
Each Fund except Oakmark Fund and Equity and Income Fund imposes a short-term
trading fee on redemptions of Class I Shares held less than 90 days to offset
two types of costs to the Fund caused by short-term trading: portfolio
transaction and market impact costs associated with erratic redemption activity
and administrative costs associated with processing redemptions. The fee is 2%
of the redemption value and is deducted from the redemption proceeds. The
"first-in, first-out" (FIFO) method is used to determine the holding period,
which means that if you bought shares on different days, the shares purchased
first will be redeemed first for purposes of determining whether the short-term
trading fee applies.
No Fund Imposes a redemption fee on a redemption of:
- shares acquired by reinvestment of dividends or distributions of a Fund; or
- shares held in an account of certain retirement plans or profit sharing
plans or purchased through certain Intermediaries.
MONEY MARKET EXCHANGE FUND
The Adviser acts as a Service Organization for the Institutional Liquid
Assets Service Units ("Units") of the Government Portfolio of Goldman Sachs
Trust, which Units may be purchased directly or by exchanging shares of a
Fund. For its services, the Adviser receives fees at a rate of .50% of the
average annual net assets of the portfolio, pursuant to a 12b-1 plan adopted
by the Goldman Sachs Trust.
ADDITIONAL TAX INFORMATION
GENERAL. Each Fund intends to continue to qualify to be taxed as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, so as to be relieved of federal
24
<PAGE>
income tax on its capital gains and net investment income currently distributed
to its shareholders. At the time of your purchase, a Fund's net asset value may
reflect undistributed income, capital gains or net unrealized appreciation of
securities held by that Fund. A subsequent distribution to you of such amounts,
although constituting a return of your investment, would be taxable either as
dividends or capital gain distributions.
INTERNATIONAL FUND AND INTERNATIONAL SMALL CAP FUND. Dividends and
distributions paid by International Fund and International Small Cap Fund are
not eligible for the dividends-received deduction for corporate shareholders, if
as expected, none of such Funds' income consists of dividends paid by United
States corporations. Capital gain distributions paid by the Funds are never
eligible for this deduction.
Certain foreign currency gains and losses, including the portion of gain
or loss on the sale of debt securities attributable to foreign exchange rate
fluctuations are taxable as ordinary income. If the net effect of these
transactions is a gain, the dividend paid by any of these Funds will be
increased; if the result is a loss, the income dividend paid by any of these
Funds will be decreased.
Income received by a 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.
International Fund, International Small Cap Fund and Global Fund intend to
meet the requirements of the Code to "pass through" to their shareholders
foreign income taxes paid, but there can be no assurance that they will be able
to do so. Each shareholder will be notified within 60 days after the close of
each taxable year of a Fund, if the foreign taxes paid by the Fund will "pass
through" for that year, and, if so, the amount of each shareholder's pro rata
share (by country) of (i) the foreign taxes paid, and (ii) the Fund's gross
income from foreign sources. Of course, shareholders who are not liable for
federal income taxes, such as retirement plans qualified under Section 401 of
the Code, will not be affected by any such "pass through" of foreign tax
credits.
25
<PAGE>
PORTFOLIO TRANSACTIONS
Portfolio transactions for each Fund are placed with those securities
brokers and dealers that the Adviser believes will provide the best value in
transaction and research services for that Fund, either in a particular
transaction or over a period of time. Subject to that standard, portfolio
transactions for each Fund may be executed through Harris Associates Securities
L.P. ("HASLP"), a registered broker-dealer and an affiliate of the Adviser.
In valuing brokerage services, the Adviser makes a judgment as to which
brokers are capable of providing the most favorable net price (not necessarily
the lowest commission) and the best execution in a particular transaction. Best
execution connotes not only general competence and reliability of a broker, but
specific expertise and effort of a broker in overcoming the anticipated
difficulties in fulfilling the requirements of particular transactions, because
the problems of execution and the required skills and effort vary greatly among
transactions.
Although some transactions involve only brokerage services, many involve
research services as well. In valuing research services, the Adviser makes a
judgment of the usefulness of research and other information provided by a
broker to the Adviser in managing a Fund's investment portfolio. In some cases,
the information, e.g., data or recommendations concerning particular securities,
relates to the specific transaction placed with the broker, but for the greater
part the research consists of a wide variety of information concerning
companies, industries, investment strategy and economic, financial and political
conditions and prospects, useful to the Adviser in advising the Funds.
The Adviser is the principal source of information and advice to the
Funds, and is responsible for making and initiating the execution of the
investment decisions for each Fund. However, the board of trustees recognizes
that it is important for the Adviser, in performing its responsibilities to the
Funds, to continue to receive and evaluate the broad spectrum of economic and
financial information that many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of the Funds to take into account the
value of the information received for use in advising the Funds. Consequently,
the commission paid to brokers (other than HASLP) providing research services
may be greater than the amount of commission another broker would charge for the
same transaction. The extent, if any, to which the obtaining of such information
may reduce the expenses of the Adviser in providing management services to the
Funds is not determinable. In addition, it is understood by the board of
trustees that other clients of the Adviser might also benefit from the
information obtained for the Funds, in the same manner that the Funds might also
benefit from information obtained by the Adviser in performing services to
others.
HASLP may act as broker for a Fund in connection with the purchase or sale
of securities by or to the Fund if and to the extent permitted by procedures
adopted from time to time by the board of trustees of the Trust. The board of
trustees, including a majority of the trustees who are not "interested"
trustees, has determined that portfolio transactions for a Fund may be executed
through HASLP if, in the judgment of the Adviser, the use of HASLP is likely to
result in prices and execution at least as favorable to the Fund as those
available from other qualified brokers and if, in such transactions, HASLP
charges the Fund commission rates at least as favorable to the Fund as those
charged by HASLP to comparable unaffiliated customers in similar transactions.
The board of trustees has also adopted procedures that are reasonably designed
to provide that any commissions, fees or other remuneration paid to HASLP are
consistent with the foregoing standard. The Funds will not effect principal
transactions with HASLP. In executing transactions through HASLP, the Funds will
be subject to, and intend to comply with, section 17(e) of the 1940 Act and
rules thereunder.
26
<PAGE>
The reasonableness of brokerage commissions paid by the Funds in relation
to transaction and research services received is evaluated by the staff of the
Adviser on an ongoing basis. The general level of brokerage charges and other
aspects of the Funds' portfolio transactions are reviewed periodically by the
board of trustees.
Transactions of the Funds in the over-the-counter market and the third
market are executed with primary market makers acting as principal except where
it is believed that better prices and execution may be obtained otherwise.
Although investment decisions for the Funds are made independently from
those for other investment advisory clients of the Adviser, it may develop that
the same investment decision is made for both a Fund and one or more other
advisory clients. If both a Fund and other clients purchase or sell the same
class of securities on the same day, the transactions will be allocated as to
amount and price in a manner considered equitable to each over time.
The Funds do not purchase securities with a view to rapid turnover.
However, there are no limitations on the length of time that portfolio
securities must be held. Portfolio turnover can occur for a number of reasons,
including general conditions in the securities market, more favorable investment
opportunities in other securities, or other factors relating to the desirability
of holding or changing a portfolio investment. A high rate of portfolio turnover
would result in increased transaction expense, which must be borne by the Fund.
High portfolio turnover may also result in the realization of capital gains or
losses and, to the extent net short-term capital gains are realized, any
distributions resulting from such gains will be considered ordinary income for
federal income tax purposes. The portfolio turnover rates for the Funds are set
forth in the prospectus under "Financial Highlights."
The following table shows the aggregate brokerage commissions (excluding
the gross underwriting spread on securities purchased in initial public
offerings) paid by each Fund during the periods indicated, as well as the
aggregate commissions paid to affiliated persons of the Trust.
<TABLE>
<CAPTION>
Year Ended Year Ended Eleven Months Ended
September 30, 1999 September 30, 1998 September 30, 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Oakmark Fund
Aggregate commissions............ $5,015,100(100%) $7,578,511 (100%) $3,094,186 (100%)
Commissions paid to affiliates*.. 1,944,758(38.8%) 2,068,690 (27.3%) 997,845 (32.2%)
Select Fund
Aggregate commissions............ 2,890,228(100%) 2,408,373 (100%) 750,698 (100%)
Commissions paid to affiliates*.. 725,722(25.1%) 589,564 (24.5%) 341,805 (45.5%)
Small Cap Fund
Aggregate commissions............ 1,681,150(100%) 1,956,668 (100%) 1,906,488 (100%)
Commissions paid to affiliates*.. 213,191(12.7%) 193,708 (9.9%) 401,345 (21.0%)
Equity and Income Fund
Aggregate commission............. 100,156(100%) 66,195 (100%) 24,588 (100%)
Commissions paid to affiliates*.. 56,545(56.5%) 41,979 (63.4%) 15,611 (63.5%)
International Fund
Aggregate commissions............ 2,994,368(100%) 4,287,619 (100%) 5,319,725 (100%)
Commissions paid to affiliates*.. -- -- 9,732 (0.2%)
27
<PAGE>
International Small Cap Fund
Aggregate commissions............ 1,153,858(100%) 387,461 (100%) 332,214 (100%)
Commissions paid to affiliates*.. -- -- 732 (0.2%)
Global Fund
Aggregate commissions............ 89,492(100%) -- --
Commissions paid to affiliates*.. 29,127(32.6%) -- --
</TABLE>
--------------------------
* The percent of the dollar amount of each Fund's aggregate transactions
involving the Fund's payment of brokerage commissions that were executed
through affiliates for each of the periods is shown below.
<TABLE>
<CAPTION>
Year Ended Year Ended Eleven Months Ended
Fund September 30, 1999 September 30, 1998 September 30, 1997
---- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Oakmark 44.1% 29.5% 36.5%
Select 31.0 33.01 48.0
Small Cap 19.1 14.5 23.2
Equity and Income 69.6 63.5 67.0
International - - 0.4
International Small Cap - - 0.5
Global 43.2 - -
</TABLE>
Of the aggregate brokerage transactions during the year ended September
30, 1999, the Funds paid the following commissions on transactions directed
to brokers because of research services they provided: Oakmark, $1,245,894;
Select, $761,747; Small Cap, $554,573; Equity and Income, $22,334;
International, $1,638,791; International Small Cap, $624,173; Global,
$24,441; and the aggregate dollar amounts involved in those transactions for
the respective Funds were $871,059,471, $419,568,321, $212,099,755,
$5,773,753, $502,126,328, $169,474,647 and $6,867,910, respectively.
DECLARATION OF TRUST
The Agreement and Declaration of Trust under which the Trust has been
organized ("Declaration of Trust") disclaims liability of the shareholders,
trustees and officers of the Trust for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation,
or contract entered into or executed by the Trust or the board of trustees. The
Declaration of Trust provides for indemnification out of the Trust's assets for
all losses and expenses of any shareholder held personally liable for
obligations of the Trust. Thus, although shareholders of a business trust may,
under certain circumstances, be held personally liable under Massachusetts law
for the obligations of the Trust, the risk of a shareholder incurring financial
loss on account of shareholder liability is believed to be remote because it is
limited to circumstances in which the disclaimer is inoperative and the Trust
itself is unable to meet its obligations. The Trust and the Adviser believe that
the risk to any one series of sustaining a loss on account of liabilities
incurred by another series is remote.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company, P.O. Box 8510, Boston Massachusetts
02266-8510 is the custodian for the Trust. It is responsible for holding all
securities and cash of each Fund, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Funds, and performing
other administrative duties, all as directed by authorized persons of the
28
<PAGE>
Trust. The custodian also performs certain portfolio accounting services for
the Funds, for which each Fund pays the custodian a monthly fee. The fee paid
by Oakmark Fund is $2,500 per month. The fee paid by Oakmark International is
$3,000 per month. The fee paid by each of Select Fund, Small Cap Fund and
Equity and Income Fund is $2,500 per month and the fee paid by International
Small Cap Fund is $3,000 per month. The fee paid by Global Fund is $3,000 per
month; however, such fee has been waived for the first six months of the
Fund's operations. The custodian does not exercise any supervisory function
in such matters as the purchase and sale of portfolio securities, payment of
dividends, or payment of expenses of a Fund. The Trust has authorized the
custodian to deposit certain portfolio securities of each Fund in central
depository systems as permitted under federal law. The Funds may invest in
obligations of the custodian and may purchase or sell securities from or to
the custodian.
Nvest Services Company, Inc., an affiliate of the Adviser ("NSC"), 399
Boylston Street, 5th Floor, Boston, Massachusetts 02116, performs transfer
agency services for the Funds. NSC maintains shareholder accounts and prepares
and mails shareholder account statements, processes shareholder transactions,
mails shareholders reports, prepares and mails distribution payments, maintains
records of Fund transactions and provides blue sky reporting services. The Trust
pays NSC for its services based on the number of open accounts and transactions
it performs on behalf of the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603,
audits and reports on each Fund's annual financial statements, reviews certain
regulatory reports and the Funds' federal income tax returns, and performs other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust.
29
<PAGE>
APPENDIX A -- BOND RATINGS
A rating by a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general and
are not absolute standards of quality or guarantees as to the credit-worthiness
of an issuer. Consequently, the Adviser believes that the quality of debt
securities in which the Fund invests should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell, or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the rating services
from other sources which they consider reliable. Ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
The following is a description of the characteristics of ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's ("S&P").
RATINGS BY MOODY'S:
Aaa. Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or an exceptionally stable
margin and principal is secure. Although the various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in the Aaa bonds, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba. Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
other good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B. Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
A-1
<PAGE>
Ca. Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C. Bonds rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Ratings By Standard & Poor's:
AAA. Debt rated AAA has the highest rating. Capacity to pay interest and
repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A. Debt rated A has a very strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB-B-CCC-CC. Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
C. This rating is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
NOTE: The ratings from AA to B may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within the major rating
categories.
A-2
<PAGE>
APPENDIX B -- FINANCIAL STATEMENTS
B-1
<PAGE>
THE OAKMARK FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
----------------------------------------------------------------------------
COMMON STOCKS--90.8%
FOOD & BEVERAGE--8.9%
Philip Morris Companies Inc. 10,010,700 $ 342,240,806
Nabisco Holdings Corporation, Class A 2,372,100 81,985,706
-------------
424,226,512
APPAREL--6.3%
Nike, Inc., Class B 5,257,100 $ 298,997,563
RETAIL--0.2%
GC Companies, Inc. (a) 266,200 $ 7,986,000
HARDWARE--6.8%
The Black & Decker Corporation (b) 5,412,200 $ 247,269,887
The Stanley Works 3,124,900 78,708,419
-------------
325,978,306
OTHER CONSUMER GOODS & SERVICES--19.4%
H&R Block, Inc. (b) 6,415,500 $ 278,673,281
Mattel, Inc. 12,164,400 231,123,600
Brunswick Corporation (b) 7,280,800 181,109,900
Fortune Brands, Inc. 4,861,100 156,770,475
Galileo International, Inc. 1,980,000 79,695,000
-------------
927,372,256
BANKS & THRIFTS--7.9%
Washington Mutual, Inc. 7,480,000 $ 218,790,000
Bank One Corporation 4,600,548 160,156,577
-------------
378,946,577
INSURANCE--1.8%
Old Republic International Corporation 5,820,330 $ 84,031,014
INFORMATION SERVICES--8.1%
The Dun & Bradstreet Corporation (b) 9,322,500 $ 278,509,687
ACNielsen Corporation (a)(b) 4,764,000 108,083,250
-------------
386,592,937
COMPUTER SERVICES--2.6%
First Data Corporation 2,873,200 $ 126,061,650
PUBLISHING--6.6%
Knight Ridder, Inc. (b) 5,716,100 $ 313,670,988
MEDICAL CENTERS--3.0%
Columbia/HCA Healthcare Corporation 6,746,600 $ 142,943,588
MEDICAL PRODUCTS--1.6%
Sybron International Corporation (a) 2,935,600 $ 78,894,250
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-2
<PAGE>
THE OAKMARK FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
PAR VALUE MARKET VALUE
----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--90.8% (CONT.)
AEROSPACE & DEFENSE--9.2%
Lockheed Martin Corporation 7,150,000 $ 233,715,625
The Boeing Company 4,799,400 204,574,425
-------------
438,290,050
MACHINERY & INDUSTRIAL PROCESSING--7.3%
Eaton Corporation 2,113,600 $ 182,430,100
Cooper Industries, Inc. 3,558,400 166,355,200
-------------
348,785,300
BUILDING MATERIALS & CONSTRUCTION--0.0%
Juno Lighting, Inc. 63,702 $ 760,443
OTHER INDUSTRIAL GOODS & SERVICES--1.1%
Bandag, Incorporated, Class A 1,104,100 $ 27,878,525
The Geon Company 956,600 24,632,450
-------------
52,510,975
TOTAL COMMON STOCKS (COST: $4,169,051,189) 4,336,048,409
SHORT TERM INVESTMENTS--8.9%
U.S. GOVERNMENT BILLS--1.6%
United States Treasury Bills, 4.51%-4.65%
due 10/7/1999-12/2/1999 $75,000,000 $ 74,744,459
-------------
TOTAL U.S. GOVERNMENT BILLS (COST: $74,742,306) 74,744,459
COMMERCIAL PAPER--5.5%
American Express Credit Corp., 5.26%-5.31%
due 10/1/1999-10/8/1999 $80,000,000 $ 80,000,000
Ford Motor Credit Corp., 5.28%-5.29% due
10/4/1999-10/6/1999 60,000,000 60,000,000
General Electric Capital Corporation, 5.53%
due 10/1/1999 125,000,000 125,000,000
-------------
TOTAL COMMERCIAL PAPER (COST: $265,000,000) 265,000,000
</TABLE>
B-3
<PAGE>
THE OAKMARK FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
----------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS--8.9% (CONT.)
REPURCHASE AGREEMENTS--1.8%
State Street Repurchase Agreement, 5.20%
due 10/1/1999 $83,761,000 $ 83,761,000
-------------
TOTAL REPURCHASE AGREEMENTS (COST: $83,761,000) 83,761,000
TOTAL SHORT TERM INVESTMENTS (COST: $423,503,306) 423,505,459
Total Investments (Cost $4,592,554,495)--99.7% (c) $4,759,553,868
Other Assets In Excess Of Other Liabilities--0.3% 13,278,501
-------------
TOTAL NET ASSETS--100% $4,772,832,369
=============
</TABLE>
(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(c) At September 30, 1999, net unrealized appreciation of $166,999,373, for
federal income tax purposes, consisted of gross unrealized appreciation of
$654,481,043 and gross unrealized depreciation of $487,481,670.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-4
<PAGE>
THE OAKMARK SELECT FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
----------------------------------------------------------------------------
COMMON STOCKS--94.5%
APPAREL--4.1%
Liz Claiborne, Inc. 2,166,600 $ 67,164,600
RETAIL--1.7%
Gucci Group (b) 325,000 $ 27,137,500
OTHER CONSUMER GOODS & SERVICES--4.0%
Ralston Purina Group 2,372,600 $ 65,987,937
BANKS & THRIFTS--12.0%
Washington Mutual, Inc. 5,074,800 $ 148,437,900
People's Bank of Bridgeport, Connecticut 2,038,400 48,157,200
-------------
196,595,100
INSURANCE--4.7%
PartnerRe Ltd. (c) 2,222,300 $ 77,224,925
INFORMATION SERVICES--6.6%
The Dun & Bradstreet Corporation 3,643,600 $ 108,852,550
COMPUTER SERVICES--17.5%
First Data Corporation 2,605,000 $ 114,294,375
The Reynolds and Reynolds Company, Class A 3,875,000 78,953,125
Electronic Data Systems Corporation 1,360,900 72,042,644
Sterling Commerce, Inc. (a) 1,168,000 21,681,000
-------------
286,971,144
PUBLISHING--4.6%
The Times Mirror Company, Class A 1,146,300 $ 75,440,869
PHARMACEUTICALS--3.6%
Chiron Corporation (a) 2,150,000 $ 59,528,125
MACHINERY & INDUSTRIAL PROCESSING--3.9%
Thermo Electron Corporation (a) 4,693,500 $ 63,068,906
BUILDING MATERIALS & CONSTRUCTION--10.1%
USG Corporation (d) 3,499,900 $ 166,245,250
OIL FIELD SERVICES & EQUIPMENT--4.9%
Weatherford International, Inc. (a) 2,480,800 $ 79,385,600
OTHER INDUSTRIAL GOODS & SERVICES--5.9%
Premark International, Inc. 1,915,600 $ 96,737,800
REAL ESTATE--2.7%
Host Marriott Corporation 4,680,863 $ 44,468,199
</TABLE>
B-5
<PAGE>
THE OAKMARK SELECT FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
PAR VALUE MARKET VALUE
----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--94.5% (CONT.)
DIVERSIFIED CONGLOMERATES--8.2%
U.S. Industries, Inc. (d) 8,486,000 $ 133,654,500
-------------
TOTAL COMMON STOCKS (COST: $1,522,118,201) 1,548,463,005
OTHER ASSETS--0.0%
RETAIL--0.0%
Gucci Group Contingent Receivables 1,781,125 $ 890,562
-------------
TOTAL OTHER ASSETS (COST: $0) 890,562
SHORT TERM INVESTMENTS--5.1%
U.S. GOVERNMENT BILLS--0.6%
United States Treasury Bills, 4.65% due
12/2/1999 $10,000,000 $ 9,920,778
-------------
TOTAL U.S. GOVERNMENT BILLS (COST: $9,919,917) 9,920,778
COMMERCIAL PAPER--3.1%
American Express Credit Corp., 5.26% due
10/1/1999 $10,000,000 $ 10,000,000
Ford Motor Credit Corp., 5.34% due
10/5/1999 10,000,000 10,000,000
General Electric Capital Corporation, 5.53%
due 10/1/1999 30,000,000 30,000,000
-------------
TOTAL COMMERCIAL PAPER (COST: $50,000,000) 50,000,000
REPURCHASE AGREEMENTS--1.4%
State Street Repurchase Agreement, 5.20%
due 10/1/1999 $23,073,000 $ 23,073,000
-------------
TOTAL REPURCHASE AGREEMENTS (COST: $23,073,000) 23,073,000
TOTAL SHORT TERM INVESTMENTS (COST: $82,992,917) 82,993,778
Total Investments (Cost $1,605,111,118)--99.6% (e) $1,632,347,345
Other Assets In Excess Of Other Liabilities--0.4% 6,561,467
-------------
TOTAL NET ASSETS--100% $1,638,908,812
=============
</TABLE>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) Represents foreign domiciled corporation.
(d) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(e) At September 30, 1999, net unrealized appreciation of $24,656,664, for
federal income tax purposes, consisted of gross unrealized appreciation of
$187,822,431 and gross unrealized depreciation of $163,165,767.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-6
<PAGE>
THE OAKMARK SMALL CAP FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
----------------------------------------------------------------------------
COMMON STOCKS--98.5%
FOOD & BEVERAGE--7.6%
Del Monte Foods Company (a) 1,000,000 $ 14,125,000
Ralcorp Holdings, Inc. (a) 500,000 8,843,750
International Multifoods Corporation 275,000 6,325,000
M & F Worldwide Corp. (a) 500,000 4,000,000
-------------
33,293,750
APPAREL--1.8%
Reebok International Ltd. (a) 750,000 $ 8,015,625
RETAIL--8.7%
The Great Atlantic & Pacific Tea
Company, Inc. 500,000 $ 15,156,250
Ugly Duckling Corporation (a)(c) 1,750,000 12,468,750
Michaels Stores, Inc. (a) 350,000 10,325,000
-------------
37,950,000
HARDWARE--1.0%
Jore Corporation (a) 353,000 $ 4,213,938
OTHER CONSUMER GOODS & SERVICES--7.0%
Department 56, Inc. (a) 500,000 $ 11,968,750
Libbey, Inc. 300,000 8,868,750
Barry (R.G.) Corporation (a)(c) 900,000 5,512,500
Harman International Industries,
Incorporated 100,000 4,206,250
-------------
30,556,250
BANKS & THRIFTS--10.2%
People's Bank of Bridgeport, Connecticut 500,000 $ 11,812,500
Golden State Bancorp Inc. (a) 600,000 10,762,500
BankAtlantic Bancorp, Inc., Class A 1,150,001 6,396,881
Hudson City Bancorp, Inc. (a) 400,000 5,500,000
Northwest Bancorp, Inc. 500,000 4,312,500
PennFed Financial Services, Inc. 260,000 3,900,000
Finger Lakes Financial Corp. (c) 185,500 1,808,625
-------------
44,493,006
INSURANCE--6.6%
The MONY Group Inc. (a) 500,000 $ 14,437,500
The PMI Group, Inc. 350,000 14,306,250
-------------
28,743,750
OTHER FINANCIAL--5.5%
Duff & Phelps Credit Rating Co. (c) 300,000 $ 23,981,250
EDUCATIONAL SERVICES--2.7%
ITT Educational Services, Inc. (a) 600,000 $ 11,700,000
INFORMATION SERVICES--1.8%
National Data Corporation 300,000 $ 7,800,000
</TABLE>
B-7
<PAGE>
THE OAKMARK SMALL CAP FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
----------------------------------------------------------------------------
COMMON STOCKS--98.5% (CONT.)
COMPUTER SERVICES--6.6%
Symantec Corporation (a) 800,000 $ 28,775,000
COMPUTER SYSTEMS--1.8%
Micron Electronics, Inc. (a) 750,000 $ 7,875,000
MANAGED CARE SERVICES--2.0%
First Health Group Corp. (a) 400,000 $ 8,975,000
AUTOMOTIVE--7.4%
SPX Corporation (a) 200,000 $ 18,150,000
Standard Motor Products, Inc. 500,000 9,718,750
Stoneridge, Inc. (a) 250,000 4,343,750
-------------
32,212,500
TRANSPORTATION SERVICES--2.5%
Teekay Shipping Corporation (b) 700,000 $ 10,937,500
INSTRUMENTS--0.5%
Varian Inc. (a) 135,000 $ 2,396,250
MACHINERY & INDUSTRIAL PROCESSING--9.5%
Columbus McKinnon Corporation 600,000 $ 10,350,000
Graco Inc. 250,000 8,203,125
MagneTek, Inc. (a) 900,000 8,043,750
Tokheim Corporation (a)(c) 860,000 7,686,250
Sames Corporation (c) 250,000 4,468,750
Northwest Pipe Company (a) 185,000 2,890,625
-------------
41,642,500
CHEMICALS--4.8%
H.B. Fuller Company 200,000 $ 12,175,000
Ferro Corporation 404,200 8,614,512
-------------
20,789,512
REAL ESTATE--6.9%
Catellus Development Corporation (a) 1,400,000 $ 16,450,000
Prime Hospitality Corp. (a) 900,000 7,200,000
Trammell Crow Company (a) 500,000 6,625,000
-------------
30,275,000
DIVERSIFIED CONGLOMERATES--3.6%
U.S. Industries, Inc. 1,000,000 $ 15,750,000
TOTAL COMMON STOCKS (COST: $414,120,043) 430,375,831
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-8
<PAGE>
THE OAKMARK SMALL CAP FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
----------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS--3.0%
COMMERCIAL PAPER--2.3%
General Electric Capital Corporation, 5.53%
due 10/1/1999 $10,000,000 $ 10,000,000
-------------
TOTAL COMMERCIAL PAPER (COST: $10,000,000) 10,000,000
REPURCHASE AGREEMENTS--0.7%
State Street Repurchase Agreement, 5.20%
due 10/1/1999 $3,325,000 $ 3,325,000
-------------
TOTAL REPURCHASE AGREEMENTS (COST: $3,325,000) 3,325,000
TOTAL SHORT TERM INVESTMENTS (COST: $13,325,000) 13,325,000
Total Investments (Cost $427,445,043)--101.5% (d) $ 443,700,831
Other Liabilities In Excess Of Other Assets--(1.5)% (6,561,552)
-------------
TOTAL NET ASSETS--100% $ 437,139,279
=============
</TABLE>
(a) Non-income producing security.
(b) Represents foreign domiciled corporation.
(c) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(d) At September 30, 1999, net unrealized appreciation of $16,255,788, for
federal income tax purposes, consisted of gross unrealized appreciation of
$71,981,161 and gross unrealized depreciation of $55,725,373.
B-9
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
----------------------------------------------------------------------------
EQUITY AND EQUIVALENTS--59.4%
FOOD & BEVERAGE--3.0%
UST Inc. 60,000 $ 1,811,250
BANKS & THRIFTS--4.3%
Washington Mutual, Inc. 67,000 $ 1,959,750
Bank One Corporation 18,724 651,829
-----------
2,611,579
INSURANCE--2.9%
IPC Holdings, Ltd. (b) 50,000 $ 937,500
PartnerRe Ltd. (b) 23,000 799,250
-----------
1,736,750
OTHER FINANCIAL--2.6%
Heller Financial, Inc. 70,000 $ 1,575,000
INFORMATION SERVICES--3.1%
The Dun & Bradstreet Corporation 63,500 $ 1,897,062
COMPUTER SERVICES--12.7%
The Reynolds and Reynolds Company 110,200 $ 2,245,325
First Data Corporation 50,000 2,193,750
Electronic Data Systems Corporation 32,500 1,720,469
Sterling Commerce, Inc. (a) 80,000 1,485,000
-----------
7,644,544
DATA STORAGE--5.4%
Imation Corp. (a) 104,300 $ 3,233,300
PUBLISHING--2.0%
Lee Enterprises, Incorporated 43,900 $ 1,201,763
MEDICAL PRODUCTS--3.0%
Sybron International Corporation (a) 68,000 $ 1,827,500
AUTOMOTIVE--2.6%
Lear Corporation (a) 45,000 $ 1,583,438
AGRICULTURAL EQUIPMENT--1.5%
Alamo Group Inc. 100,000 $ 925,000
OTHER INDUSTRIAL GOODS & SERVICES--3.9%
Premark International, Inc. 46,500 $ 2,348,250
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-10
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
PAR VALUE MARKET VALUE
----------------------------------------------------------------------------
<S> <C> <C>
EQUITY AND EQUIVALENTS--59.4% (CONT.)
REAL ESTATE--9.1%
Amli Residential Properties Trust 100,000 $ 2,100,000
Legacy Hotels Real Estate Investment
Trust (b) 350,000 1,989,042
Catellus Development Corporation (a) 116,728 1,371,554
-----------
5,460,596
DIVERSIFIED CONGLOMERATES--0.8%
U.S. Industries, Inc. 30,000 $ 472,500
TOTAL EQUITY (COST: $29,851,840) 34,328,532
CONVERTIBLE PREFERRED STOCK--2.5%
TELECOMMUNICATIONS--2.5%
Metromedia International Group, Inc.,
Convertible Preferred, 7.25% 60,000 $ 1,477,500
TOTAL CONVERTIBLE PREFERRED STOCK (COST: $1,946,738) 1,477,500
TOTAL EQUITY AND EQUIVALENTS (COST: $31,798,578) 35,806,032
FIXED INCOME--35.8%
PREFERRED STOCK--5.4%
TELECOMMUNICATIONS--0.8%
MediaOne Finance Trust III, Preferred,
9.04% 20,000 $ 505,000
BANKS & THRIFTS--4.6%
Pennfed Capital Trust, Preferred, 8.90% 27,500 $ 677,187
BBC Capital Trust I, Preferred, 9.50% 28,000 661,500
PennFirst Capital Trust I, Preferred,
8.625% 70,000 630,000
RBI Capital Trust I, Preferred, 9.10% 42,500 401,094
Fidelity Capital Trust I, Preferred, 8.375% 43,500 396,938
-----------
2,766,719
TOTAL PREFERRED STOCK (COST: $3,470,738) 3,271,719
CORPORATE BONDS--4.5%
RETAIL--1.0%
Ugly Duckling Corporation, 12.00% due
10/23/2003, Subordinated Debenture $650,000 $ 604,500
</TABLE>
B-11
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
----------------------------------------------------------------------------
<S> <C> <C>
FIXED INCOME--35.8% (CONT.)
AEROSPACE & AUTOMOTIVE--0.3%
Coltec Industries, Inc., 9.75% due 4/1/2000 $150,000 $ 150,750
Coltec Industries, Inc., 9.75% due
11/1/1999 25,000 25,063
-----------
175,813
MACHINERY & INDUSTRIAL PROCESSING--0.8%
Tokheim Corporation, 11.375% due 8/1/2008,
Senior Subordinated Note (c) 500,000 $ 491,250
BUILDING MATERIALS & CONSTRUCTION--1.5%
Juno Lighting Inc., 11.875% due 7/1/2009,
Senior Subordinated Note (c) 750,000 $ 742,500
USG Corporation, 9.25% due 9/15/2001,
Senior Notes Series B 150,000 158,062
-----------
900,562
UTILITIES--0.4%
Midland Funding Corporation, 11.75% due
7/23/2005 200,000 $ 220,750
OTHER INDUSTRIAL GOODS & SERVICES--0.5%
UCAR Global Enterprises Inc., 12.00% due
1/15/2005, Senior Subordinated Note 300,000 $ 316,875
TOTAL CORPORATE BONDS (COST: $2,613,725) 2,709,750
GOVERNMENT AND AGENCY SECURITIES--25.9%
U.S. GOVERNMENT BONDS--25.4%
United States Treasury Notes, 6.625% due
5/15/2007 5,250,000 $ 5,412,242
United States Treasury Notes, 6.25% due
6/30/2002 4,000,000 4,052,757
United States Treasury Notes, 4.75% due
2/15/2004 4,000,000 3,835,563
United States Treasury Notes, 6.00% due
8/15/2009 2,000,000 2,014,868
-----------
15,315,430
U.S. GOVERNMENT AGENCIES--0.5%
Federal Home Loan Bank, 6.405% due
4/10/2001, Consolidated Bond 300,000 $ 301,695
TOTAL GOVERNMENT AND AGENCY SECURITIES (COST: $15,699,118) 15,617,125
TOTAL FIXED INCOME (COST: $21,783,581) 21,598,594
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-12
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
----------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS--5.0%
COMMERCIAL PAPER--2.5%
General Electric Capital Corporation, 5.53%
due 10/1/1999 $1,500,000 $ 1,500,000
-----------
TOTAL COMMERCIAL PAPER (COST: $1,500,000) 1,500,000
REPURCHASE AGREEMENTS--2.5%
State Street Repurchase Agreement, 5.20%
due 10/1/1999 $1,507,000 $ 1,507,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST: $1,507,000) 1,507,000
TOTAL SHORT TERM INVESTMENTS (COST: $3,007,000) 3,007,000
Total Investments (Cost $56,589,159)--100.2% (d) $60,411,626
Other Liabilities In Excess Of Other Assets--(0.2)% (94,035)
-----------
TOTAL NET ASSETS--100% $60,317,591
===========
</TABLE>
(a) Non-income producing security.
(b) Represents foreign domiciled corporation.
(c) Restricted security.
(d) At September 30, 1999, net unrealized appreciation of $3,822,467, for
federal income tax purposes, consisted of gross unrealized appreciation of
$6,404,058 and gross unrealized depreciation of $2,581,591.
B-13
<PAGE>
THE OAKMARK GLOBAL FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--98.2%
CONSUMER NON-DURABLES--2.9%
Citizen Watch Co. (Japan) Watch Manufacturer & Retailer 96,000 $ 687,769
APPAREL--4.6%
Fila Holding S.p.A. (Italy), (b) Athletic Footwear & Apparel 49,200 $ 615,000
Reebok International Ltd. (United Athletic Apparel
States), (a) 45,200 483,075
-----------
1,098,075
RETAIL--11.8%
Somerfield plc Food Retailer
(Great Britain) 478,500 $ 1,020,141
House Of Fraser Plc Department Store
(Great Britain) 712,300 914,674
Denny's Japan Co., Ltd. (Japan) Restaurant Chain 19,000 444,840
Ugly Duckling Corporation (United Automobile Retailer & Financier
States), (a) 62,000 441,750
-----------
2,821,405
OTHER CONSUMER GOODS & SERVICES--8.2%
Department 56, Inc. (United Collectibles & Giftware Products
States), (a) 52,000 $ 1,244,750
Royal Doulton plc Tableware & Giftware
(Great Britain) 411,700 732,004
-----------
1,976,754
BANKS & THRIFTS--9.9%
Uniao de Bancos Brasileiros S.A. Major Brazilian Bank
(Brazil), (c) 54,700 $ 967,506
Washington Mutual, Inc. (United Thrift
States) 27,700 810,225
Banco Latinoamericano de Latin American Trade Bank
Exportaciones, S.A., Class E
(Panama), (b) 26,300 601,613
-----------
2,379,344
INSURANCE--6.5%
PartnerRe Ltd. (Bermuda) Reinsurance Company 25,000 $ 868,750
Reinsurance Australia Corporation
Limited
(Australia) Reinsurance Company 1,297,700 682,741
-----------
1,551,491
HOTELS & MOTELS--1.5%
Promus Hotel Corporation (United Hotel Operator
States), (a) 11,000 $ 358,188
</TABLE>
B-14
<PAGE>
THE OAKMARK GLOBAL FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--98.2% (CONT.)
TEMPORARY STAFFING--2.9%
Robert Half International Inc. (United Temporary Staffing Services
States), (a) 29,000 $ 696,000
EDUCATIONAL SERVICES--2.3%
ITT Educational Services, Inc. Postsecondary Degree Programs
(United States), (a) 29,000 $ 565,500
INFORMATION SERVICES--12.8%
The Dun & Bradstreet Corporation Financial Information Services
(United States) 45,000 $ 1,344,375
NOVA Corporation (United States) Transaction Processing Services 44,000 1,100,000
Keane, Inc. (United States) Information Technology Consulting 27,000 615,938
-----------
3,060,313
COMPUTER SERVICES--8.8%
Sterling Commerce, Inc. (United Electronic Commerce Services
States), (a) 56,500 $ 1,048,781
The Reynolds and Reynolds Company, Information Management Systems
Class A (United States) 30,500 621,438
First Data Corporation (United States) Electronic Commerce Services 10,000 438,750
-----------
2,108,969
TELECOMMUNICATIONS--1.3%
Telemig Celular Participacoes S.A. Telecommunications
(Brazil), (a) 161,645,000 $ 252,570
Telesp Celular Participacoes S.A. Telecommunications
(Brazil) 9,600,000 53,900
-----------
306,470
MACHINERY & METAL PROCESSING--6.5%
Metso Oyj (Finland), (a) Pulp Machinery 82,600 $ 932,518
Tokheim Corporation (United Petroleum Dispensing Systems
States), (a) Manufacturer 69,000 616,687
-----------
1,549,205
MINING & BUILDING MATERIALS--3.7%
Fletcher Challenge Building (New Building Materials Manufacturer
Zealand) 714,200 $ 879,220
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-15
<PAGE>
THE OAKMARK GLOBAL FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
DESCRIPTION PAR VALUE MARKET VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--98.2% (CONT.)
OTHER INDUSTRIAL GOODS & SERVICES--6.2%
Tomkins plc (Great Britain) Diversified Engineering 130,500 $ 549,996
Chargeurs SA (France) Wool Production & Trading 7,900 483,344
GFI Industries SA (France) Industrial Fastener Manufacturer 18,900 460,330
-----------
1,493,670
PRODUCTION EQUIPMENT--2.4%
Krones AG (Germany) Manufacturer of Production Machinery 19,500 $ 570,596
DIVERSIFIED CONGLOMERATES--5.9%
TT Group PLC Diversified Manufacturing
(Great Britain) 319,500 $ 721,925
Wassall PLC (Great Britain) Diversified Consumer Goods 176,200 688,935
-----------
1,410,860
TOTAL COMMON STOCKS (COST: $25,302,871) 23,513,829
</TABLE>
<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENTS--1.8%
COMMERCIAL PAPER--1.0%
General Electric Capital Corporation, 5.53% due 10/1/1999 $250,000 $ 250,000
-----------
TOTAL COMMERCIAL PAPER (COST: $250,000) 250,000
REPURCHASE AGREEMENTS--0.8%
State Street Repurchase Agreement, 5.20% due 10/1/1999 $192,000 $ 192,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST: $192,000) 192,000
TOTAL SHORT TERM INVESTMENTS (COST: $442,000) 442,000
Total Investments (Cost $25,744,871)--100.0% (d) $23,955,829
Other Liabilities In Excess Of Other Assets--(0.0)% (e) (2,475)
-----------
TOTAL NET ASSETS--100% $23,953,354
===========
</TABLE>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) Represents a Global Depository Receipt.
(d) At September 30, 1999, net unrealized depreciation of $1,789,042,
for federal income tax purposes, consisted of gross unrealized
appreciation of $650,351 and gross unrealized depreciation of
$2,439,393.
(e) Includes portfolio hedges.
B-16
<PAGE>
THE OAKMARK INTERNATIONAL FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--95.1%
CONSUMER NON-DURABLES--3.9%
Citizen Watch Co. (Japan) Watch Manufacturer & Retailer 4,392,000 $ 31,465,443
FOOD & BEVERAGE--6.0%
Quilmes Industrial SA (Argentina), (b) Brewer 2,795,000 $ 26,727,188
Diageo plc (Great Britain) Manufacturer of Beverages, Wines, & 1,300,000 13,290,573
Spirits
Lotte Confectionery Company (Korea) Confection Manufacturer 37,270 4,549,605
Lotte Chilsung Beverage Company Manufacturer of Soft Drinks, Juices, &
(Korea), (d) Sport Drinks 73,000 4,428,607
-------------
48,995,973
APPAREL--4.0%
Fila Holding S.p.A. (Italy), (b)(d) Athletic Footwear & Apparel 2,572,800 $ 32,160,000
HOUSEHOLD PRODUCTS--4.7%
Hunter Douglas N.V. (Netherlands) Manufacturer of Window Coverings 802,700 $ 21,737,162
Reckitt & Colman plc (Great Britain) Household Cleaners & Air Fresheners 1,305,000 16,285,027
-------------
38,022,189
RETAIL--6.0%
Somerfield plc (Great Britain) Food Retailer 12,969,995 $ 27,651,478
Giordano International Limited (Hong East Asian Clothing Retailer &
Kong) Manufacturer 26,306,000 20,826,980
-------------
48,478,458
OTHER CONSUMER GOODS & SERVICES--6.3%
Canon, Inc. (Japan) Office & Video Equipment 1,039,000 $ 30,163,889
Mandarin Oriental International Hotel Management
Limited (Singapore) 29,253,000 20,769,630
-------------
50,933,519
BANKS & THRIFTS--9.6%
Uniao de Bancos Brasileiros S.A. Major Brazilian Bank
(Brazil), (c) 1,769,900 $ 31,305,106
Banco Latinoamericano de Latin American Trade Bank
Exportaciones, S.A., Class E
(Panama), (b)(d) 1,252,800 28,657,800
Den Danske Bank Group (Denmark) Commercial Banking 64,000 7,284,285
</TABLE>
B-17
<PAGE>
THE OAKMARK INTERNATIONAL FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--95.1% (CONT.)
BANKS & THRIFTS--9.6% (CONT.)
Unidanmark A/S, Class A (Denmark) Commercial Banking 94,000 $ 6,365,446
United Overseas Bank Ltd., Foreign Commercial Banking
Shares (Singapore) 553,000 4,196,294
-------------
77,808,931
INSURANCE--0.8%
IPC Holdings, Ltd. (Bermuda) Reinsurance Provider 345,000 $ 6,468,750
TEMPORARY STAFFING--0.3%
Vedior NV (Netherlands) Temporary Staffing 150,500 $ 2,634,294
MARKETING SERVICES--5.3%
Cordiant Communications Group plc Advertising Services
(Great Britain) 10,798,877 $ 32,000,729
Saatchi & Saatchi plc (Great Britain) Advertising Services 3,202,497 11,071,763
-------------
43,072,492
BROADCASTING & PUBLISHING--0.2%
Torstar Corporation, Class B (Canada) Newspaper Publisher 195,000 $ 2,116,824
TELECOMMUNICATIONS--5.7%
SK Telecom Co. Ltd. (Korea) Telecommunications 13,162 $ 12,172,010
Telesp Celular Participacoes S.A. Telecommunications
(Brazil) 2,096,500,000 11,770,974
Telesp Participacoes S.A. (Brazil) Telecommunications 631,100,000 6,573,958
Tele Centro Sul Participacoes S.A. Telecommunications
(Brazil), (a) 712,600,000 4,943,662
Telemig Celular Participacoes S.A. Telecommunications
(Brazil), (a) 2,372,600,000 3,707,188
Embratel Participacoes S.A. Telecommunications
(Brazil), (a) 526,100,000 3,534,734
Tele Sudeste Celular Participacoes Telecommunications
S.A. (Brazil) 1,351,100,000 3,518,490
-------------
46,221,016
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-18
<PAGE>
THE OAKMARK INTERNATIONAL FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--95.1% (CONT.)
MEDICAL PRODUCTS--2.5%
Getinge Industrier AB, Class B Medical Instruments Manufacturer
(Sweden) 1,619,100 $ 20,552,472
AEROSPACE--1.5%
Rolls-Royce plc (Great Britain) Aviation & Marine Power 3,588,552 $ 12,421,213
COMPONENTS--4.6%
IMI plc (Great Britain) Components Manufacturer 4,655,000 $ 21,381,228
Varitronix International Limited (Hong Liquid Crystal Displays
Kong) 5,318,000 11,604,179
Morgan Crucible Company plc (Great Crucible & Components Manufacturer
Britain) 1,000,000 4,263,915
-------------
37,249,322
CHEMICALS--3.5%
Fernz Corporation Limited (New Agricultural & Industrial Chemical
Zealand), (d) Producer 9,862,554 $ 21,170,836
European Vinyls Corporation PVC Manufacturer
International N.V. (Netherlands) 579,550 4,316,689
Nagase & Co., Ltd. (Japan) Chemical Wholesaler 579,000 2,868,431
-------------
28,355,956
OIL & NATURAL GAS--1.9%
ISIS (France) Oil Services 208,250 $ 15,112,321
MACHINERY & METAL PROCESSING--6.3%
Metso Oyj (Finland), (a) Pulp Machinery 3,562,977 $ 40,224,457
Outokumpu Oyj (Finland) Metal Producer 945,000 10,970,296
-------------
51,194,753
MINING & BUILDING MATERIALS--2.3%
Keumkang Ltd. (Korea), (d) Building Materials 340,460 $ 18,471,319
OTHER INDUSTRIAL GOODS & SERVICES--16.5%
Chargeurs SA (France), (d) Wool Production & Trading 644,824 $ 39,452,164
Tomkins plc (Great Britain) Diversified Engineering 7,442,640 31,367,199
Buderus AG (Germany) Industrial Manufacturing 970,320 16,519,494
Charter plc (Great Britain) Welding Products Manufacturer 2,806,014 16,052,897
</TABLE>
B-19
<PAGE>
THE OAKMARK INTERNATIONAL FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
DESCRIPTION PAR VALUE MARKET VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.1% (CONT.)
Kone Corporation, Class B (Finland) Elevators 112,930 $ 14,864,175
Sika Finanz AG (Switzerland) Corrosion Protection Products 32,350 10,054,875
Dongah Tire Industry Company Tire Manufacturer
(Korea), (d) 166,290 5,399,470
-------------
133,710,274
DIVERSIFIED CONGLOMERATES--3.2%
Berisford plc (Great Britain) Diversified Operations 3,745,700 $ 18,838,788
First Pacific Company Ltd. (Hong Kong) Diversified Operations 11,966,000 7,240,078
-------------
26,078,866
TOTAL COMMON STOCKS (COST: $829,827,804) 771,524,385
</TABLE>
<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENTS--3.8%
COMMERCIAL PAPER--3.1%
American Express Credit Corp., 5.31% due 10/7/1999 $5,000,000 $ 5,000,000
Ford Motor Credit Corp., 5.34% due 10/5/1999 5,000,000 5,000,000
General Electric Capital Corporation, 5.53% due 10/1/1999 15,000,000 15,000,000
-------------
TOTAL COMMERCIAL PAPER (COST: $25,000,000) 25,000,000
REPURCHASE AGREEMENTS--0.7%
State Street Repurchase Agreement, 5.20% due 10/1/1999 $5,761,000 $ 5,761,000
-------------
TOTAL REPURCHASE AGREEMENTS (COST: $5,761,000) 5,761,000
TOTAL SHORT TERM INVESTMENTS (COST: $30,761,000) 30,761,000
Total Investments (Cost $860,588,804)--98.9% (e) $ 802,285,385
Foreign Currencies (Proceeds $300,051)--0.0% 300,697
Other Assets In Excess Of Other Liabilities--1.1% (f) 8,555,905
-------------
TOTAL NET ASSETS--100% $ 811,141,987
=============
</TABLE>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) Represents a Global Depository Receipt.
(d) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(e) At September 30, 1999, net unrealized depreciation of $58,302,773, for
federal income tax purposes, consisted of gross unrealized appreciation
of $96,229,261 and gross unrealized depreciation of $154,532,034.
(f) Includes portfolio and transaction hedges.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-20
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
w
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--94.2%
CONSUMER NON-DURABLES--1.7%
Kingmaker Footwear Holdings Limited Athletic Footwear Manufacturer
(Hong Kong) 8,040,000 $ 1,200,633
Il Shin Spinning Company (Korea) Fabric & Yarn Manufacturer 20,200 1,145,746
Designer Textiles (NZ) Limited (New Knit Fabrics
Zealand), (b) 1,960,000 314,281
------------
2,660,660
FOOD & BEVERAGE--2.7%
Alaska Milk Corporation Milk Producer
(Philippines), (a) 42,544,000 $ 2,808,528
Hite Brewery Company (Korea) Brewer 42,861 1,419,892
------------
4,228,420
RETAIL--12.7%
Carpetright plc (Great Britain) Carpet Retailer 1,115,000 $ 7,682,085
House Of Fraser Plc (Great Britain) Department Store 5,640,000 7,242,399
Denny's Japan Co., Ltd. (Japan) Restaurant Chain 181,000 4,237,685
Jusco Stores (Hong Kong) Co., Limited Department Stores
(Hong Kong) 6,888,000 647,310
------------
19,809,479
OFFICE EQUIPMENT--1.0%
Neopost SA (France), (a) Mailroom Equipment Supplier 50,000 $ 1,484,349
OTHER CONSUMER GOODS & SERVICES--9.3%
Royal Doulton plc (Great Britain), (b) Tableware & Giftware 4,490,000 $ 7,983,234
Cewe Color Holding AG (Germany) Photo Equipment & Supplies 186,340 4,084,464
Sanford Limited (New Zealand) Fisheries 838,134 2,167,624
Shaw Brothers (Hong Kong) Ltd. (Hong Media and Entertainment Services
Kong) 270,000 232,882
------------
14,468,204
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-21
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--94.2% (CONT.)
INSURANCE--5.7%
Reinsurance Australia Corporation Reinsurance Company
Limited (Australia) 8,422,211 $ 4,431,065
Lambert Fenchurch Group plc (Great Insurance Broker
Britain) 3,336,000 4,393,643
------------
8,824,708
OTHER FINANCIAL--7.6%
JCG Holdings Ltd. (Hong Kong) Investment Holding Company 12,624,000 $ 7,394,431
Ichiyoshi Securities Co., Ltd. (Japan) Stock Broker 638,000 4,361,678
------------
11,756,109
HOTELS & MOTELS--2.7%
Jarvis Hotels plc (Great Britain) Hotel Operator 2,045,000 $ 4,174,685
COMPUTER SOFTWARE--1.7%
Koei Co., Ltd. (Japan) Computer Software 56,500 $ 2,650,918
BROADCASTING & PUBLISHING--3.1%
Matichon Public Company Limited, Newspaper Publisher
Foreign Shares (Thailand), (b) 2,039,500 $ 3,261,806
VLT AB, Class B (Sweden) Newspaper Publisher 139,950 1,520,267
------------
4,782,073
PRINTING--1.0%
Hung Hing Printing Group Limited (Hong Printing Company
Kong) 3,680,000 $ 1,563,357
TELECOMMUNICATIONS--0.6%
SK Telecom Co. Ltd. (Korea) Telecommunications 1,016 $ 939,581
PHARMACEUTICALS--1.7%
Recordati (Italy), (b) Pharmaceuticals 573,000 $ 2,597,323
TRANSPORTATION SERVICES--2.3%
Mainfreight Limited (New Zealand), (b) Logistics Services 4,243,351 $ 3,511,797
OIL & NATURAL GAS--2.5%
ISIS (France) Oil Services 53,165 $ 3,858,087
</TABLE>
B-22
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--94.2% (CONT.)
MINING & BUILDING MATERIALS--9.5%
Fletcher Challenge Building (New Building Materials Manufacturer
Zealand) 5,245,000 $ 6,456,884
Semapa-Sociedade de Investimento e Cement Manufacturer
Gestao, SGPS, SA (Portugal) 333,012 6,037,974
Parbury Limited (Australia), (b) Building Products 12,517,553 2,328,688
------------
14,823,546
OTHER INDUSTRIAL GOODS & SERVICES--6.9%
GFI Industries SA (France) Industrial Fastener Manufacturer 175,680 $ 4,278,878
Yip's Hang Cheung (Holdings) Ltd. Paint & Solvent Manufacturer
(Hong Kong), (b) 35,472,000 2,237,578
Chargeurs SA (France) Wool Production & Trading 26,750 1,636,641
Vaisala Oyj (Finland) Atmospheric Observation Equipment 15,350 1,140,054
Dongah Tire Industry Company (Korea) Tire Manufacturer 26,900 873,448
Polifarb Cieszyn-Wroclaw S.A. (Poland) Paint & Varnish Manufacturer 347,983 509,219
------------
10,675,818
PRODUCTION EQUIPMENT--9.7%
Krones AG (Germany) Manufacturer of Production Machinery 230,100 $ 6,733,039
NSC Groupe (France), (b) Manufacturer of Textile Equipment 55,523 5,842,934
De Dietrich et Compagnie SA (France) Manufacturer of Production Machinery 39,000 2,518,924
------------
15,094,897
STEEL--1.7%
Steel & Tube Holdings Limited (New Produces and Distributes Steel
Zealand) 3,292,370 $ 2,724,766
DIVERSIFIED CONGLOMERATES--10.1%
Wassall PLC (Great Britain) Diversified Consumer Goods 1,718,000 $ 6,717,312
Haw Par Corporation Ltd. (Singapore) Healthcare and Leisure Products 3,205,000 5,335,383
TT Group PLC (Great Britain) Diversified Manufacturing 1,635,000 3,694,357
------------
15,747,052
TOTAL COMMON STOCKS (COST: $140,503,948) 146,375,829
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-23
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS--6.1%
COMMERCIAL PAPER--4.5%
American Express Credit Corporation, 5.31% due 10/7/1999 $1,000,000 $ 1,000,000
Ford Motor Credit Corp., 5.34% due 10/5/1999 2,000,000 2,000,000
General Electric Capital Corporation, 5.53% due 10/1/1999 4,000,000
------------
TOTAL COMMERCIAL PAPER (COST: $7,000,000) 7,000,000
REPURCHASE AGREEMENTS--1.6%
State Street Repurchase Agreement, 5.20% due 10/1/1999 $ 2,405,000
------------
TOTAL REPURCHASE AGREEMENTS (COST: $2,405,000) 2,405,000
TOTAL SHORT TERM INVESTMENTS (COST: $9,405,000) 9,405,000
Total Investments (Cost $149,908,948)--100.3% (c) 155,780,829
Foreign Currencies (Proceeds $6,580)--(0.0)% 6,516
Other Liabilities In Excess Of Other Assets--(0.3)% (d) (421,142)
------------
TOTAL NET ASSETS--100% $155,366,203
============
</TABLE>
(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(c) At September 30, 1999, net unrealized appreciation of $5,871,817, for
federal income tax purposes, consisted of gross unrealized appreciation
of $18,082,868 and gross unrealized depreciation of $12,211,051.
(d) Includes portfolio and transaction hedges.
B-24
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF ASSETS AND LIABILITIES--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
FUND SELECT SMALL CAP
FUND FUND
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value $ 4,759,553,868 $ 1,632,347,345 $ 443,700,831
(cost: 4,592,554,495) (cost: 1,605,111,118) (cost: 427,445,043)
Cash 556 836 500
Foreign currency, at value 0 0 0
Receivable for:
Forward foreign currency
contracts 0 0 0
Securities sold 21,219,292 15,179,570 2,054,841
Fund shares sold 1,347,311 1,468,976 308,751
Dividends and interest 12,465,607 1,721,557 190,847
--------------- --------------- -------------
Total receivables 35,032,210 18,370,103 2,554,439
Other assets 156,740 29,811 20,999
--------------- --------------- -------------
Total assets $ 4,794,743,374 $ 1,650,748,095 $ 446,276,769
=============== =============== =============
......................................................................................................
LIABILITIES AND NET ASSETS
Payable for:
Securities purchased $ 545,733 $ 7,550,881 $ 7,789,614
Fund shares redeemed 15,409,302 2,300,778 591,967
Due to adviser 4,174,405 1,365,482 485,886
Forward foreign currency
contracts 0 0 0
Other 1,781,565 622,142 270,023
--------------- --------------- -------------
Total liabilities 21,911,005 11,839,283 9,137,490
--------------- --------------- -------------
Net assets applicable to
fund shares outstanding $ 4,772,832,369 $ 1,638,908,812 $ 437,139,279
=============== =============== =============
Fund shares outstanding 138,855,787 78,332,068 31,485,265
=============== =============== =============
......................................................................................................
PRICE OF SHARES
Net asset value per share $ 34.37 $ 20.92 $ 13.88
=============== =============== =============
......................................................................................................
ANALYSIS OF NET ASSETS
Paid in capital $ 3,821,186,642 $ 1,298,678,085 $ 434,024,162
Accumulated undistributed
net realized gain (loss)
on sale of investments,
forward contracts and
foreign currency exchange
transactions 743,709,340 299,824,158 (13,140,671)
Net unrealized appreciation
(depreciation) of
investments 166,999,373 27,236,227 16,255,788
Net unrealized appreciation
(depreciation) of foreign
currency portfolio hedges 0 0 0
Net unrealized appreciation
(depreciation)--other 0 0 0
Accumulated undistributed
net investment income
(loss) 40,937,014 13,170,342 0
--------------- --------------- -------------
Net assets applicable to
Fund shares outstanding $ 4,772,832,369 $ 1,638,908,812 $ 437,139,279
=============== =============== =============
</TABLE>
B-25
<PAGE>
............................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK THE OAKMARK
EQUITY AND GLOBAL INTERNATIONAL INTERNATIONAL
INCOME FUND FUND FUND SMALL CAP FUND
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value $ 60,411,626 $ 23,955,829 $ 802,285,385 $ 155,780,829
(cost: 56,589,159) (cost: 25,744,871) (cost: 860,588,804) (cost: 149,908,948)
Cash 648 225 8 981
Foreign currency, at value 0 0 300,697 6,516
Receivable for:
Forward foreign currency
contracts 0 0 596,807 7,756
Securities sold 0 12,537 10,270,655 197,161
Fund shares sold 8,255 178,640 2,502,167 323,831
Dividends and interest 406,110 68,013 6,012,218 758,957
------------ ------------ ------------- -------------
Total receivables 414,365 259,190 19,381,847 1,287,705
Other assets 2,781 10,680 19,661 2,949
------------ ------------ ------------- -------------
Total assets $ 60,829,420 $ 24,225,924 $ 821,987,598 $ 157,078,980
============ ============ ============= =============
..............................................................................................................................
LIABILITIES AND NET ASSETS
Payable for:
Securities purchased $ 268,100 $ 213,966 $ 6,610,271 $ 1,134,610
Fund shares redeemed 114,269 0 1,257,055 143,744
Due to adviser 37,626 3,045 734,839 169,370
Forward foreign currency
contracts 0 4,720 1,098,344 376
Other 91,834 50,839 1,145,102 264,677
------------ ------------ ------------- -------------
Total liabilities 511,829 272,570 10,845,611 1,712,777
------------ ------------ ------------- -------------
Net assets applicable to
fund shares outstanding $ 60,317,591 $ 23,953,354 $ 811,141,987 $ 155,366,203
============ ============ ============= =============
Fund shares outstanding 3,846,006 2,608,650 58,153,195 12,292,100
============ ============ ============= =============
..............................................................................................................................
PRICE OF SHARES
Net asset value per share $ 15.68 $ 9.18 $ 13.95 $ 12.64
============ ============ ============= =============
..............................................................................................................................
ANALYSIS OF NET ASSETS
Paid in capital $ 48,625,541 $ 25,800,443 $ 876,279,147 $ 135,198,375
Accumulated undistributed
net realized gain (loss)
on sale of investments,
forward contracts and
foreign currency exchange
transactions 6,238,498 (84,542) (3,176,858) 11,120,075
Net unrealized appreciation
(depreciation) of
investments 3,822,467 (1,789,042) (58,302,773) 5,871,817
Net unrealized appreciation
(depreciation) of foreign
currency portfolio hedges 0 (4,719) (508,175) 7,624
Net unrealized appreciation
(depreciation)--other (159) 53 (69,095) 3,023
Accumulated undistributed
net investment income
(loss) 1,631,244 31,161 (3,080,259) 3,165,289
------------ ------------ ------------- -------------
Net assets applicable to
Fund shares outstanding $ 60,317,591 $ 23,953,354 $ 811,141,987 $ 155,366,203
============ ============ ============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-26
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF OPERATIONS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
FUND SELECT SMALL CAP
FUND FUND
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 112,444,285 $ 27,208,265 $ 4,644,655
Interest Income 21,271,005 6,488,832 1,194,223
Securities lending income 0 75,764 33,811
Foreign taxes withheld (126,816) (63,600) 0
-------------- ------------- ------------
Total investment income 133,588,474 33,709,261 5,872,689
......................................................................................................
EXPENSES:
Investment advisory fee 59,957,947 15,358,029 7,251,751
Transfer and dividend
disbursing agent fees 3,518,298 998,731 507,287
Other shareholder servicing
fees 2,966,381 957,631 264,350
Reports to shareholders 1,855,038 473,189 217,200
Custody and accounting fees 693,549 212,400 108,278
Registration and blue sky
expenses 24,183 71,067 (95,846)
Trustee fees 166,808 66,691 46,996
Legal fees 58,406 28,572 16,418
Audit fees 28,181 28,629 31,454
Other 418,999 95,840 47,192
-------------- ------------- ------------
Total expenses 69,687,790 18,290,779 8,395,080
Expense reimbursement 0 0 0
Expense offset
arrangements (2,445) (8,874) (5,559)
-------------- ------------- ------------
Net expenses 69,685,345 18,281,905 8,389,521
......................................................................................................
NET INVESTMENT INCOME (LOSS): 63,903,129 15,427,356 (2,516,832)
......................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on
investments 748,595,189 301,413,442 (11,002,740)
Net realized gain (loss) on
foreign currency
transactions 0 0 0
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies (147,719,773) 18,463,317 82,350,204
Net change in appreciation
(depreciation) of forward
currency exchange
contracts 0 0 0
Net change in appreciation
(depreciation)--other 0 0 0
......................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS: 600,875,416 319,876,759 71,347,464
-------------- ------------- ------------
......................................................................................................
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 664,778,545 $ 335,304,115 $ 68,830,632
============== ============= ============
</TABLE>
(a) From August 4, 1999, the date on which fund shares were first offered for
sale to the public.
B-27
<PAGE>
............................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK THE OAKMARK
EQUITY AND GLOBAL INTERNATIONAL INTERNATIONAL
INCOME FUND FUND(A) FUND SMALL CAP FUND
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 1,158,904 $ 74,217 $ 27,387,199 $ 4,445,739
Interest Income 1,227,611 23,658 1,612,869 606,224
Securities lending income 6,921 0 114,999 1,799
Foreign taxes withheld (23,405) (8,764) (3,070,519) (539,396)
----------- ------------ ------------- ------------
Total investment income 2,370,031 89,111 26,044,548 4,514,366
..............................................................................................................................
EXPENSES:
Investment advisory fee 464,454 18,520 8,068,806 1,330,000
Transfer and dividend
disbursing agent fees 65,540 7,434 639,040 97,700
Other shareholder servicing
fees 16,086 803 315,585 61,056
Reports to shareholders 29,051 1,650 304,430 38,271
Custody and accounting fees 49,870 10,044 958,112 256,163
Registration and blue sky
expenses 22,967 16,590 (32,848) 43,024
Trustee fees 34,721 5,134 52,671 35,454
Legal fees 12,909 2,100 17,730 13,415
Audit fees 24,079 10,000 30,280 39,731
Other 9,765 278 58,778 57,836
----------- ------------ ------------- ------------
Total expenses 729,442 72,553 10,412,584 1,972,650
Expense reimbursement 0 (15,474) 0 0
Expense offset
arrangements (50) 0 (515) (265)
----------- ------------ ------------- ------------
Net expenses 729,392 57,079 10,412,069 1,972,385
..............................................................................................................................
NET INVESTMENT INCOME (LOSS): 1,640,639 32,032 15,632,479 2,541,981
..............................................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on
investments 6,246,386 (84,542) (28,187,781) 12,338,825
Net realized gain (loss) on
foreign currency
transactions (1,597) (871) 11,558,024 968,518
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 690,123 (1,789,042) 290,561,381 34,768,296
Net change in appreciation
(depreciation) of forward
currency exchange
contracts 0 (4,719) 1,014,015 186,436
Net change in appreciation
(depreciation)--other (159) 53 (274,516) (2,615)
..............................................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS: 6,934,753 (1,879,121) 274,671,123 48,259,460
----------- ------------ ------------- ------------
..............................................................................................................................
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 8,575,392 $ (1,847,089) $ 290,303,602 $ 50,801,441
=========== ============ ============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-28
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 63,903,129 $ 94,480,595
Net realized gain (loss) on
sale of investments 748,595,189 1,258,937,339
Net realized gain (loss) on
foreign currency
transactions 0 (8,898)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies (147,719,773) (1,704,966,868)
---------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 664,778,545 (351,557,832)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (89,026,890) (66,321,023)
Net realized short-term
gain (128,028,090) (25,210,618)
Net realized long-term gain (195,972,927) (1,098,260,243)
---------------- ----------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (413,027,907) (1,189,791,884)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 832,343,635 2,836,315,983
Reinvestment of dividends
and capital gain
distributions 391,307,098 1,133,761,068
Payments for shares
redeemed, net of fees (3,626,526,884) (2,119,718,081)
---------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS (2,402,876,151) 1,850,358,970
---------------- ----------------
..............................................................................
TOTAL INCREASE (DECREASE) IN
NET ASSETS (2,151,125,513) 309,009,254
NET ASSETS:
Beginning of period 6,923,957,882 6,614,948,628
---------------- ----------------
End of period $ 4,772,832,369 $ 6,923,957,882
================ ================
Undistributed net
investment income $ 52,730,692 $ 77,854,453
================ ================
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.4401 $ 0.3996
Net realized short-term
gain 0.6329 0.1519
Net realized long-term gain 0.9686 5.8556
---------------- ----------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 2.0416 $ 6.4071
================ ================
</TABLE>
B-29
<PAGE>
.............................................................................
<TABLE>
<CAPTION>
THE OAKMARK
SELECT FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 15,427,356 $ 1,948,524
Net realized gain (loss) on
sale of investments 301,413,442 69,415,172
Net realized gain (loss) on
foreign currency
transactions 0 0
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 18,463,317 (78,902,257)
--------------- ---------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 335,304,115 (7,538,561)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (3,491,747) 0
Net realized short-term
gain (497,653) (6,882,359)
Net realized long-term gain (50,206,634) 0
--------------- ---------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (54,196,034) (6,882,359)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 688,865,887 1,440,695,723
Reinvestment of dividends
and capital gain
distributions 51,676,128 6,568,333
Payments for shares
redeemed, net of fees (610,635,670) (719,123,322)
--------------- ---------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 129,906,345 728,140,734
--------------- ---------------
..............................................................................
TOTAL INCREASE IN NET ASSETS 411,014,426 713,719,814
NET ASSETS:
Beginning of period 1,227,894,386 514,174,572
--------------- ---------------
End of period $ 1,638,908,812 $ 1,227,894,386
=============== ===============
Undistributed net
investment income $ 13,637,247 $ 1,701,638
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.0491 $ 0
Net realized short-term
gain 0.0070 0.1678
Net realized long-term gain 0.7058 0
--------------- ---------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.7619 $ 0.1678
=============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-30
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK
SMALL CAP FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (2,516,832) $ (4,959,862)
Net realized gain (loss) on
sale of investments (11,002,740) 124,757,914
Net realized gain (loss) on
foreign currency
transactions 0 0
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 82,350,204 (374,056,372)
-------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 68,830,632 (254,258,320)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income 0 0
Net realized short-term
gain 0 (35,041,133)
Net realized long-term gain (4,508,112) (129,772,888)
-------------- ----------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (4,508,112) (164,814,021)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 262,182,135 416,817,749
Reinvestment of dividends
and capital gain
distributions 4,278,943 156,645,973
Payments for shares
redeemed, net of fees (511,639,081) (1,049,792,259)
-------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS (245,178,003) (476,328,537)
-------------- ----------------
..............................................................................
TOTAL INCREASE IN NET ASSETS (180,855,483) (895,400,878)
NET ASSETS:
Beginning of period 617,994,762 1,513,395,640
-------------- ----------------
End of period $ 437,139,279 $ 617,994,762
============== ================
Undistributed net
investment income $ (9,437,333) $ (6,920,501)
============== ================
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0 $ 0
Net realized short-term
gain 0 0.4738
Net realized long-term gain 0.0874 2.3874
-------------- ----------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.0874 $ 2.8612
============== ================
</TABLE>
B-31
<PAGE>
.............................................................................
<TABLE>
<CAPTION>
THE OAKMARK
EQUITY AND INCOME FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 1,640,639 $ 1,166,564
Net realized gain (loss) on
sale of investments 6,246,386 1,578,730
Net realized gain (loss) on
foreign currency
transactions (1,597) 0
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 690,123 (2,325,892)
Net change in unrealized
appreciation
(depreciation) of
forward currency exchange
contracts 0 0
Net change in unrealized
appreciation
(depreciation)--other (159) 0
------------- -------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 8,575,392 419,402
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (855,395) (594,007)
Net realized short-term
gain 0 (882,071)
Net realized long-term gain (829,557) (599,021)
------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (1,684,952) (2,075,099)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 21,877,864 43,125,943
Reinvestment of dividends
and capital gain
distributions 1,610,146 1,964,129
Payments for shares
redeemed, net of fees (27,806,714) (19,151,033)
------------- -------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS (4,318,704) 25,939,039
------------- -------------
..............................................................................
TOTAL INCREASE IN NET ASSETS 2,571,736 24,283,342
NET ASSETS:
Beginning of period 57,745,855 33,462,513
------------- -------------
End of period $ 60,317,591 $ 57,745,855
============= =============
Undistributed net
investment income $ 1,806,607 $ 1,021,363
============= =============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.2118 $ 0.2359
Net realized short-term
gain 0 0.3503
Net realized long-term gain 0.2053 0.2379
------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.4171 $ 0.8241
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-32
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK
GLOBAL FUND
<S> <C>
--------------------
PERIOD ENDED
SEPTEMBER 30,
1999(a)
------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 32,032
Net realized gain (loss) on
sale of investments (84,542)
Net realized gain (loss) on
foreign currency
transactions (871)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies (1,789,042)
Net change in unrealized
appreciation
(depreciation) of forward
currency exchange
contracts (4,719)
Net change in unrealized
appreciation
(depreciation)--other 53
------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS (1,847,089)
......................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income 0
Net realized short-term
gain 0
Net realized long-term gain 0
------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS 0
......................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 25,938,577
Reinvestment of dividends
and capital gain
distributions 0
Payments for shares
redeemed, net of fees (138,134)
------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 25,800,443
------------
......................................................
TOTAL INCREASE IN NET
ASSETS 23,953,354
NET ASSETS:
Beginning of period 0
------------
End of period $ 23,953,354
============
Undistributed net
investment income $ 32,032
============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0
Net realized short-term
gain 0
Net realized long-term gain 0
------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0
============
</TABLE>
(a) From August 4, 1999, the date on which fund shares were first offered for
sale to the public
B-33
<PAGE>
.............................................................................
<TABLE>
<CAPTION>
THE OAKMARK
INTERNATIONAL FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 15,632,479 $ 23,809,423
Net realized gain (loss) on
sale of investments (28,187,781) 86,532,713
Net realized gain (loss) on
foreign currency
transactions 11,558,024 (3,890,444)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 290,561,381 (502,914,491)
Net change in unrealized
appreciation
(depreciation) of forward
currency exchange
contracts 1,014,015 (2,045,738)
Net change in unrealized
appreciation
(depreciation)--other (274,516) 195,384
-------------- ---------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 290,303,602 (398,313,153)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (16,590,763) (46,460,573)
Net realized short-term
gain (32,678,201) (57,985,224)
Net realized long-term gain (20,071,535) (173,099,244)
-------------- ---------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (69,340,499) (277,545,041)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 370,563,788 482,976,228
Reinvestment of dividends
and capital gain
distributions 65,432,760 263,415,429
Payments for shares
redeemed, net of fees (601,921,972) (961,776,686)
-------------- ---------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS (165,925,424) (215,385,029)
-------------- ---------------
..............................................................................
TOTAL INCREASE IN NET ASSETS 55,037,679 (891,243,223)
NET ASSETS:
Beginning of period 756,104,308 1,647,347,531
-------------- ---------------
End of period $ 811,141,987 $ 756,104,308
============== ===============
Undistributed net
investment income $ 37,780,575 $ 38,738,859
============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.2440 $ 0.5758
Net realized short-term
gain 0.4807 0.7186
Net realized long-term gain 0.2953 2.1453
-------------- ---------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 1.0200 $ 3.4397
============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-34
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK INTERNATIONAL
SMALL CAP FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 2,541,981 $ 1,415,157
Net realized gain (loss) on
sale of investments 12,338,825 (96,290)
Net realized gain (loss) on
foreign currency
transactions 968,518 (162,499)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 34,768,296 (27,728,327)
Net change in unrealized
appreciation
(depreciation) of forward
currency exchange
contracts 186,436 (179,057)
Net change in unrealized
appreciation
(depreciation)--other (2,615) 2,414
-------------- -------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 50,801,441 (26,748,602)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (1,558,450) (308,015)
Net realized short-term
gain 0 (3,477,982)
Net realized long-term gain 0 (3,890,139)
-------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (1,558,450) (7,676,136)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 253,467,836 77,339,314
Reinvestment of dividends
and capital gain
distributions 1,470,554 7,427,846
Payments for shares
redeemed, net of fees (200,585,753) (64,544,647)
-------------- -------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 54,352,637 20,222,513
-------------- -------------
..............................................................................
TOTAL INCREASE (DECREASE) IN
NET ASSETS 103,595,628 (14,202,225)
NET ASSETS:
Beginning of period 51,770,575 65,972,800
-------------- -------------
End of period $ 155,366,203 $ 51,770,575
============== =============
Undistributed net
investment income $ 2,612,604 $ 1,629,075
============== =============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.2049 $ 0.0559
Net realized short-term
gain 0 0.6312
Net realized long-term gain 0 0.7060
-------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.2049 $ 1.3931
============== =============
</TABLE>
B-35
<PAGE>
THE OAKMARK FAMILY OF FUNDS
--------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
........................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of The Oakmark Fund
("Oakmark"), The Oakmark Select Fund ("Select"), The Oakmark Small Cap Fund
("Small Cap"), The Oakmark Equity and Income Fund ("Equity and Income"), The
Oakmark Global Fund ("Global"), The Oakmark International Fund
("International"), and The Oakmark International Small Cap Fund ("Int'l Small
Cap") collectively referred to as "the Funds", each a series of the Harris
Associates Investment Trust (a Massachusetts business trust). These policies are
in conformity with generally accepted accounting principles ("GAAP"). The
presentation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates and assumptions.
SECURITY VALUATION--
Investments are stated at current market value. Securities traded on securities
exchanges and securities traded on the NASDAQ National Market are valued at the
last sales price on the day of valuation, or if lacking any reported sales that
day, at the most recent bid quotation. Over-the-counter securities not so traded
are valued at the most recent bid quotation. Money market instruments having a
maturity of 60 days or less from the date of valuation are valued on an
amortized cost basis which approximates market value. Securities for which
quotations are not readily available are valued at a fair value as determined by
the Pricing Committee appointed by the Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS--
Values of investments and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars using the mean of the bid and offer
prices of such currencies at the time of valuation. Purchases and sales of
investments and dividend and interest income are converted at the prevailing
rate of exchange on the respective dates of such transactions.
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized gain or loss from investments.
Net realized gains on foreign currency transactions arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Funds' books,
and the U.S. dollar equivalent of the amounts actually received or paid, and the
realized gains or losses resulting from the portfolio and transaction hedges.
At September 30, 1999, only the Equity and Income, Global, International and
Int'l Small Cap Funds had foreign currency transactions. Net unrealized
appreciation (depreciation)-other includes the following components:
<TABLE>
<CAPTION>
EQUITY
AND INT'L SMALL
INCOME GLOBAL INTERNATIONAL CAP
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
Unrealized appreciation (depreciation)
on dividends and dividend reclaims
receivable $(187) $29 $(85,076) $ 4,448
Unrealized appreciation (depreciation)
on open securities purchases and
sales -- -- (13,762) (1,286)
Unrealized appreciation (depreciation)
on transaction hedge purchases and
sales -- -- 6,638 (245)
Unrealized appreciation (depreciation)
on tax expense payable 28 24 23,105 106
------ --- -------- -------
Net Unrealized Appreciation
(Depreciation) - Other $(159) $53 $(69,095) $ 3,023
====== === ======== =======
</TABLE>
SECURITY TRANSACTIONS AND INVESTMENT INCOME--
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on the accrual basis.
Fund shares are sold and redeemed on a continuing basis at net asset value. Net
asset value per share is determined daily as of the close of regular trading on
the New York Stock Exchange on each day the Exchange is open for trading by
dividing the total value of the Fund's investments and other assets, less
liabilities, by the number of Fund shares outstanding.
FORWARD FOREIGN CURRENCY CONTRACTS--
At September 30, 1999, Global, International and Int'l Small Cap had entered
into forward foreign currency contracts under which they are obligated to
exchange currencies at specified future dates. The Funds' currency transactions
are limited to transaction hedging and portfolio hedging involving either
specific transactions or portfolio positions. These contracts are valued daily
and the fund's net equity therein, representing unrealized gain or loss on the
contracts as measured by the difference between the forward foreign exchange
rates at the dates of entry into the contracts and the forward rates at the
reporting date, is included in the statement of assets and liabilities. Realized
and unrealized gains and losses are included in the statement of operations.
B-36
<PAGE>
THE OAKMARK FAMILY OF FUNDS
--------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
........................................................................
The contractual amounts of forward foreign exchange contracts do not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. Risks arise from the possible inability
of counter parties to meet the terms of their contracts and from movements in
currency values.
The Global Fund had the following outstanding contracts at September 30, 1999:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
-------------------------------------------------------------------------------------------------------------
$300,000 32,523,000 Japanese Yen February 2000 $(11,766)
300,000 30,456,000 Japanese Yen March 2000 7,047
--------
$ (4,719)
========
</TABLE>
The International Fund had the following outstanding contracts at September 30,
1999:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
-------------------------------------------------------------------------------------------------------
$29,496,600 18,000,000 Pound Sterling November 1999 $(138,396)
24,400,000 2,645,204,000 Japanese Yen February 2000 (956,994)
25,000,000 2,538,000,000 Japanese Yen March 2000 587,215
---------
$(508,175)
=========
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
----------------------------------------------------------------------------------------------------------
$ 271,353 1,894,725 Danish Krone October 1999 $ (93)
427,188 406,266 Euro Currency October 1999 5,098
1,522,910 926,006 Pound Sterling October 1999 1,574
1,014,403 616,284 Pound Sterling October 1999 185
1,539,504 934,506 Pound Sterling October 1999 (1,029)
1,547,003 939,057 Pound Sterling October 1999 (1,034)
-------
$ 4,701
=======
</TABLE>
B-37
<PAGE>
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
----------------------------------------------------------------------------------------------------------
$ 53,592 78,700 Canadian Dollar October 1999 $ 29
341,801 320,790 Euro Currency October 1999 465
248,930 233,124 Euro Currency October 1999 874
2,007,902 1,219,867 Pound Sterling October 1999 (365)
1,985,610 1,205,299 Pound Sterling October 1999 1,327
80,586 625,993 Hong Kong Dollar October 1999 (1)
3,044,739 23,605,862 Norwegian Krone October 1999 (2,555)
536,900 4,381,103 Swedish Krone October 1999 2,163
-------
$ 1,937
=======
</TABLE>
The Int'l Small Cap Fund had the following outstanding contracts at September
30, 1999:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
----------------------------------------------------------------------------------------------------------
$2,800,000 303,548,000 Japanese Yen February 2000 $(109,819)
5,000,000 507,600,000 Japanese Yen March 1999 117,443
---------
$ 7,624
=========
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLARS SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
-------------------------------------------------------------------------------------------------------------
$ 44,340 42,168 Euro Currency October 1999 $ 529
269,843 253,159 Euro Currency October 1999 (469)
11,140 10,542 Euro Currency October 1999 77
205,888 193,232 Euro Currency October 1999 (280)
252,990 153,569 Pound Sterling October 1999 (169)
97,670 59,287 Pound Sterling October 1999 (65)
-----
$(377)
=====
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLARS PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
--------------------------------------------------------------------------------------------------------------
$197,293 119,760 Pound Sterling October 1999 $132
====
</TABLE>
At September 30, 1999, Global, International and Int'l Small Cap Funds each had
sufficient cash and/or securities to cover any commitments under these
contracts.
B-38
<PAGE>
THE OAKMARK FAMILY OF FUNDS
--------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
........................................................................
SECURITIES LENDING--
Each Fund except The Oakmark Fund may lend portfolio securities to broker-
dealers and banks. As of December 31, 1998, the Funds discontinued participation
in a securities lending program and any securities previously loaned to
borrowers have been returned.
FEDERAL INCOME TAXES, DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--
No provision is made for Federal income taxes. The Funds elect to be taxed as
"regulated investment companies" and make such distributions to their
shareholders as to be relieved of all Federal income taxes under provisions of
current Federal tax law.
The Funds hereby designate the approximate long term capital gains for purposes
of the dividends paid deduction (in thousands):
<TABLE>
<CAPTION>
SMALL EQUITY & INT'L SMALL
OAKMARK SELECT CAP INCOME GLOBAL INT'L CAP
<S> <C> <C> <C> <C> <C> <C>
$618,028 $296,551 $0 $6,231 $0 $0 $5,912
</TABLE>
The amount of income dividends and capital gains distributions are determined in
accordance with federal income tax regulations, which may differ from GAAP. To
the extent these book and tax differences are permanent in nature, such amounts
are reclassified among paid in capital, undistributed net investment income and
undistributed net realized gain (loss) on investments. These differences are
primarily related to foreign currency transactions, deferral of losses on wash
sales, and character of capital loss carryforwards. The Funds also utilize
earnings and profits distributed to shareholders on redemption of shares as a
part of the dividends paid deduction for income tax purposes.
BANK LOANS--
The Funds have two unsecured lines of credit with a syndication of banks. One
line of credit is a committed line of $350 million and the other is an
uncommitted line of $250 million. Borrowings under this arrangement bear
interest at .50% above the Federal Funds Effective Rate. As of September 30,
1999, there were no outstanding borrowings.
2. TRANSACTIONS WITH AFFILIATES
Each fund has an investment advisory agreement with Harris Associates L.P.
(Adviser). For management services and facilities furnished, the Funds pay the
Adviser monthly fees at annual rates as follows. Oakmark pays 1% on the first
$2.5 billion of net assets, .95% on the next $1.25 billion of net assets, .90%
on the next $1.25 billion of net assets, .85% on the next $5 billion of net
assets, and .80% on the excess of $10 billion of net assets. International pays
1% on the first $2.5 billion of net assets, .95% on the next $2.5 billion of net
assets, and .90% on the excess of $5 billion of net assets. Select pays 1% on
the first $1 billion, .95% on the next $500 million, .90% on the next
$500 million, .85% on the next $500 million, .80% on the next $2.5 million of
net assets, and .75% on the excess of $5 billion of net assets. Small Cap pays
1.25% on the first $1 billion of net assets, 1.15% on the next $500 million,
1.10% on the next $500 million, 1.05% on the next $500 million, and 1% on the
excess of $2.5 billion. Equity and Income pays .75% of net assets, Int'l Small
Cap pays 1.25% of net assets, and Global pays 1.00% of net assets. Each fee is
calculated on the total net assets as determined at the end of each preceding
calendar month. The Adviser has voluntarily agreed to reimburse the Funds to the
extent that annual expenses, excluding certain expenses, exceed 1.5% for
domestic funds, 2.0% for international funds, and 1.75% for Global.
In connection with the organization of the Funds, expenses of approximately
$7,283 were advanced each to Small Cap, Equity and Income and Int'l Small Cap,
and $3,500 to Select by the Adviser. These expenses are being amortized on a
straight line basis through October, 2000 for Small Cap, Equity and Income and
Int'l Small Cap, and October, 2001 for Select.
During the twelve months ended September 30, 1999, the Funds incurred brokerage
commissions of $5,015,100, $2,890,278, $2,569,414, $128,972, $93,787, $3,642,521
and $1,155,829 of which $1,944,758, $725,722, $213,191, $56,545, $29,127, $0 and
$0 were paid by Oakmark, Select, Small Cap, Equity and Income, Global,
International and Int'l Small Cap, respectively, to an affiliate of the Adviser.
The Funds' Trustees may participate in a Deferred Compensation Plan which may be
terminated at any time. The obligations of the Plan are paid solely out of the
assets of the Funds. All amounts payable under the Plan as of September 30, 1999
have been accrued.
B-39
<PAGE>
3. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund shares as shown in the Statement of Changes in Net
Assets are in respect of the following number of shares (in thousands):
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1999
-----------------------------------------
EQUITY &
OAKMARK SELECT SMALL CAP INCOME
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
Shares sold 22,559 32,332 18,587 1,449
Shares issued in reinvestment of
dividends 10,299 2,853 297 112
Less shares redeemed (100,457) (30,105) (36,338) (1,842)
---------- ------- -------- -------
Net increase (decrease) in shares
outstanding (67,599) 5,080 (17,454) (281)
========== ======= ======== =======
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1999
-------------------------------------
INT'L SMALL
GLOBAL(a) INTERNATIONAL CAP
<S> <C> <C> <C>
-------------------------------------
---------------------------------------
Shares sold 2,623 27,499 21,542
Shares issued in reinvestment of
dividends -- 6,003 178
Less shares redeemed (15) (47,902) (16,944)
-------- ---------- ---------
Net increase (decrease) in shares
outstanding 2,608 (14,400) 4,776
======== ========== =========
</TABLE>
(a) From August 4, 1999, the date on which fund shares were first offered for
sale to the public.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
------------------------------------------------------------------
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME INTERNATIONAL CAP
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
Shares sold 68,340 81,093 22,121 3,014 34,513 8,604
Shares issued in reinvestment of
dividends 30,513 410 9,667 149 20,108 786
Less shares redeemed (52,910) (39,717) (57,261) (1,344) (69,820) (7,284)
------- ------- -------- ------- ---------- ---------
Net increase (decrease) in shares
outstanding 45,943 41,786 (25,473) 1,819 (15,199) 2,106
======= ======= ======== ======= ========== =========
</TABLE>
Effective January, 1999, the Funds offer two classes of shares. Class I shares
are offered to the general public and Class II shares are offered to certain
401(k) and other tax qualified plans. Because no Class II shares have been
issued as of September 30, 1999, no financial data is presented.
4. INVESTMENT TRANSACTIONS
Transactions in investment securities (excluding short term securities) were as
follows (in thousands):
<TABLE>
<CAPTION>
EQUITY &
OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Purchases $ 734,144 $1,114,254 $ 370,124 $45,738 $27,010 $408,596
Proceeds from sales 3,124,576 968,958 4,661,866 49,281 1,595 611,623
<CAPTION>
INT'L SMALL
CAP
<S> <C>
-----------
---------------------------------------
Purchases $175,083
Proceeds from sales 125,384
</TABLE>
B-40
<PAGE>
THE OAKMARK FAMILY OF FUNDS
--------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
........................................................................
5. TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS
Affiliated issuers, as defined under the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the Fund's
transactions in the securities of these issuers during the year ended
September 30, 1999 is set forth below:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
ACNielsen Corporation $ -- $ -- $ -- $ 108,083,250
Brunswick Corporation -- -- 3,640,400 181,109,900
H & R Block, Inc. -- 59,237,433 7,114,713 278,673,281
Knight Ridder, Inc. 13,380,889 76,860,097 5,585,106 313,670,988
The Black & Decker Corporation -- 163,345,561 3,201,948 247,269,887
The Dun & Bradstreet Corporation 12,433,629 57,927,867 7,103,390 278,509,687
----------- ------------ ----------- --------------
TOTALS $25,814,518 $357,370,958 $26,645,557 $1,407,316,993
</TABLE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK SELECT FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
USG Corporation $53,055,089 $ 13,554,188 $ 1,238,350 $ 166,245,250
US Industries Inc. 44,696,796 27,494,375 1,586,420 133,654,500
----------- ------------ ----------- --------------
TOTALS $97,751,885 $ 41,048,563 $ 2,824,770 $ 299,899,750
</TABLE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK SMALL CAP FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Barry (R.G.) Corporation $ 683,865 $ -- $ -- $ 5,512,500
Duff & Phelps Credit Rating Co. -- 2,576,539 39,000 23,981,250
Finger Lakes Financial Corp. -- 22,374 45,120 1,808,625
Sames Corporation -- 448,735 -- 4,468,750
Tokheim Corporation 9,617,102 -- -- 7,686,250
Ugly Duckling Corporation 366,408 -- -- 12,468,750
----------- ------------ ----------- --------------
TOTALS $10,667,375 $ 3,047,648 $ 84,120 $ 55,926,125
</TABLE>
B-41
<PAGE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Banco Latinoamericano de Exportaciones,
S.A. Class E $ 8,398,520 $ 10,993,184 $ 1,380,960 $ 28,657,800
Chargeurs International SA 487,752 -- 388,650 39,452,164
Dongah Tire Industry Company -- -- 140,181 5,399,470
Fernz Corporation Ltd. 3,621,336 14,034,949 1,034,503 21,170,836
Fila Holding S.p.A. 691,130 989,957 -- 32,160,000
Keumkang Ltd. -- 7,957,641 307,101 18,471,319
Lotte Chilsung Beverage Company -- 4,600,021 36,291 4,428,607
----------- ------------ ----------- --------------
TOTALS $13,198,738 $ 38,575,752 $ 3,287,686 $ 149,740,196
</TABLE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL SMALL CAP FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Designer Textiles (NZ) Limited $ -- $ 158,585 $ 42,398 $ 314,281
Mainfreight Limited 3,661,625 -- 51,467 3,511,797
Matichon Public Company Limited,
Foreign Share -- -- 162,053 3,261,806
NSC Groupe 3,693,254 -- 349,183 5,842,934
Parbury Limited 255,279 -- 131,268 2,328,688
Recordati 2,860,638 -- 47,131 2,597,323
Royal Doulton PLC 6,916,864 1,773,353 -- 7,983,234
Yip's Hang Cheung (Holdings) Ltd. 671,588 112,764 164,944 2,237,578
----------- ------------ ----------- --------------
TOTALS $18,059,248 $ 2,044,702 $ 948,444 $ 28,077,641
</TABLE>
B-42
<PAGE>
THE OAKMARK FUND
--------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED OCTOBER 31,
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, ----------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 33.54 $ 41.21 $ 32.39 $ 28.47 $ 25.21
Income From Investment
Operations:
Net Investment Income
(Loss) 0.44 0.47 0.36 0.34 0.30
Net Gains or Losses on
Securities (both
realized and unrealized) 2.43 (1.73) 10.67 4.70 4.66
--------- --------- --------- --------- ---------
Total From Investment
Operations: 2.87 (1.26) 11.03 5.04 4.96
Less Distributions:
Dividends (from net
investment income) (0.44) (0.40) (0.34) (0.28) (0.23)
Distributions (from capital
gains) (1.60) (6.01) (1.87) (0.84) (1.47)
--------- --------- --------- --------- ---------
Total Distributions (2.04) (6.41) (2.21) (1.12) (1.70)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 34.37 $ 33.54 $ 41.21 $ 32.39 $ 28.47
========= ========= ========= ========= =========
Total Return 7.98% (4.06)% 39.24%* 18.07% 21.55%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $4,772.8 6$,924.0 $6,614.9 $3,933.9 $2,827.1
Ratio of Expenses to
Average Net Assets 1.11% 1.08% 1.08%* 1.18% 1.17%
Ratio of Net Income (Loss)
to Average Net Assets 1.02% 1.22% 1.19%* 1.13% 1.27%
Portfolio Turnover Rate 13% 43% 17% 24% 18%
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------- OCTOBER 31,
1994 1993 1992 1991(a)
<S> <C> <C> <C> <C>
------------------------------
Net Asset Value, Beginning of
Period $ 24.18 $ 17.11 $ 12.10 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.27 0.17 (0.03) (0.01)
Net Gains or Losses on
Securities (both
realized and unrealized) 1.76 7.15 5.04 2.11
--------- --------- ------- ------
Total From Investment
Operations: 2.03 7.32 5.01 2.10
Less Distributions:
Dividends (from net
investment income) (0.23) (0.04) -- --
Distributions (from capital
gains) (0.77) (0.21) -- --
--------- --------- ------- ------
Total Distributions (1.00) (0.25) -- --
--------- --------- ------- ------
Net Asset Value, End of Period $ 25.21 $ 24.18 $ 17.11 $12.10
========= ========= ======= ======
Total Return 8.77% 43.21% 41.40% 87.10 %*
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $1,677.3 $1,107.0 $114.7 $4.8
Ratio of Expenses to
Average Net Assets 1.22% 1.32% 1.70% 2.50%(b)*
Ratio of Net Income (Loss)
to Average Net Assets 1.19% 0.94% (0.24)% (0.66)%(c)*
Portfolio Turnover Rate 29% 18% 34% 0%
</TABLE>
*Data has been annualized.
(a) From August 5, 1991, the date on which Fund shares were first offered for
sale to the public.
(b) If the Fund had paid all of its expenses and there had been no reimbursement
by the Adviser, this annualized ratio would have been 4.92% for the period.
(c) Computed giving effect to the Adviser's expense limitation undertaking.
B-43
<PAGE>
THE OAKMARK SELECT FUND
--------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 16.76 $ 16.34 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.20 0.03 (0.01)
Net Gains or Losses on
Securities (both
realized and unrealized) 4.72 0.56 6.35
--------- --------- -------
Total From Investment
Operations: 4.92 0.59 6.34
Less Distributions:
Dividends (from net
investment income) (0.05) -- --
Distributions (from capital
gains) (0.71) (0.17) --
--------- --------- -------
Total Distributions (0.76) (0.17) --
--------- --------- -------
Net Asset Value, End of Period $ 20.92 $ 16.76 $16.34
========= ========= =======
Total Return 30.07% 3.64% 69.16%*
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $1,638.9 $1,227.9 $514.2
Ratio of Expenses to
Average Net Assets 1.16% 1.22% 1.12%*
Ratio of Net Income (Loss)
to Average Net Assets 0.98% .17% (0.11)%*
Portfolio Turnover Rate 67% 56% 37%
</TABLE>
*Ratios have been annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-44
<PAGE>
THE OAKMARK SMALL CAP FUND
--------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31,
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 1997 1996
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 12.63 $ 20.34 $ 13.19 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) (0.16) (0.12) (0.01) (0.02)
Net Gains or Losses on
Securities (both
realized and unrealized) 1.50 (4.73) 7.16 3.21
------- ------- --------- -------
Total From Investment
Operations: 1.34 (4.85) 7.15 3.19
Less Distributions:
Dividends (from net
investment income) 0.00 -- -- --
Distributions (from capital
gains) (0.09) (2.86) -- --
------- ------- --------- -------
Total Distributions (0.09) (2.86) -- --
------- ------- --------- -------
Net Asset Value, End of Period $ 13.88 $ 12.63 $ 20.34 $13.19
======= ======= ========= =======
Total Return 10.56% (26.37)% 59.14%* 31.94%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $437.1 $618.0 $ 1,513.4 $218.4
Ratio of Expenses to
Average Net Assets 1.48% 1.45% 1.37%* 1.61%
Ratio of Net Income (Loss)
to Average Net Assets (0.44)% (0.40)% (0.25)%* (0.29)%
Portfolio Turnover Rate 68% 34% 27% 23%
</TABLE>
*Data has been annualized.
B-45
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31,
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 1997 1996
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 13.99 $ 14.49 $11.29 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.43 0.29 0.21 0.10
Net Gains or Losses on
Securities (both
realized and unrealized) 1.68 0.04 3.24 1.19
------ ------ ------ ------
Total From Investment
Operations: 2.11 0.33 3.45 1.29
Less Distributions:
Dividends (from net
investment income) (0.21) (0.24) (0.12) --
Distributions (from capital
gains) (0.21) (0.59) (0.13) --
------ ------ ------ ------
Total Distributions (0.42) (0.83) (0.25) --
------ ------ ------ ------
Net Asset Value, End of Period 15.68 13.99 $14.49 $11.29
====== ====== ====== ======
Total Return 15.32% 2.57% 34.01%* 12.91%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $ 60.3 $ 57.7 $33.5 $13.8
Ratio of Expenses to
Average Net Assets 1.18% 1.31% 1.50%*(a) 2.50%(a)
Ratio of Net Income (Loss)
to Average Net Assets 2.65% 2.39% 2.38%*(a) 1.21%(a)
Portfolio Turnover Rate 81% 46% 53% 66%
</TABLE>
*Data has been annualized.
(a) If the fund had paid all of its expenses and there had been no expense
reimbursement by the investment adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 OCTOBER 31, 1996
<S> <C> <C>
--------------------------------------------------------------------------
Ratio of Expenses to
Average Net Assets 1.70% 2.64%
Ratio of Net Income (Loss)
to Average Net Assets 2.18% 1.08%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-46
<PAGE>
THE OAKMARK GLOBAL FUND
--------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 30, 1999(a)
<S> <C>
--------------------------------------------------------
Net Asset Value, Beginning of
Period $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.01
Net Gains or Losses on
Securities (both realized
and unrealized) (0.83)
------
Total From Investment
Operations: (0.82)
Less Distributions:
Dividends (from net
investment income) 0.00
Distributions (from capital
gains) 0.00
------
Total Distributions 0.00
------
Net Asset Value, End of Period $ 9.18
======
Total Return (8.18%)
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $24.0
Ratio of Expenses to
Average Net Assets 1.75%*(b)
Ratio of Net Income (Loss)
to Average Net Assets 0.98%*(b)
Portfolio Turnover Rate 7.23%
</TABLE>
*Data has been annualized.
(a) From August 4, 1999, the date on which fund shares were first offered
for sale to the public.
(b) If the fund had paid all of its expenses and there had been no expense
reimbursement by the investment advisor, the ratio of expenses to average
net assets would have been 2.22% and the ratio of net income (loss) to
average net assets would have been .51%.
B-47
<PAGE>
THE OAKMARK INTERNATIONAL FUND
--------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED OCTOBER 31,
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, ----------------------------------------------
1999 1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 10.42 $ 18.77 $ 14.92 $ 12.97 $ 14.50 $ 14.09 $ 9.80
Income From Investment
Operations:
Net Investment Income
(Loss) 0.36 0.41 0.27 0.09 0.30 0.21 0.06
Net Gains or Losses on
Securities (both
realized and unrealized) 4.19 (5.32) 3.74 2.90 (0.77) 0.43 4.48
------- ------- --------- --------- ------- --------- -------
Total From Investment
Operations: 4.55 (4.91) 4.01 2.99 (0.47) 0.64 4.54
Less Distributions:
Dividends (from net
investment income) (0.24) (0.58) (0.16) -- -- (0.08) (0.25)
Distributions (from capital
gains) (0.78) (2.86) -- (1.04) (1.06) (0.15) --
------- ------- --------- --------- ------- --------- -------
Total Distributions (1.02) (3.44) (0.16) (1.04) (1.06) (0.23) (0.25)
------- ------- --------- --------- ------- --------- -------
Net Asset Value, End of Period $ 13.95 $ 10.42 $ 18.77 $ 14.92 $ 12.97 $ 14.50 $ 14.09
======= ======= ========= ========= ======= ========= =======
Total Return 46.41% (29.90)% 29.63%* 24.90% (3.06)% 4.62% 47.49%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $811.1 $756.1 $1,647.3 $1,172.8 $819.7 $1,286.0 $815.4
Ratio of Expenses to
Average Net Assets 1.29% 1.32% 1.26%* 1.32% 1.40% 1.37% 1.26%
Ratio of Net Income (Loss)
to Average Net Assets 1.94% 1.95% 2.09%* 1.45% 1.40% 1.44% 1.55%
Portfolio Turnover Rate 54% 43% 61% 42% 26% 55% 21%
<CAPTION>
PERIOD ENDED
OCTOBER 31,
1992(a)
<S> <C>
------------------------------
Net Asset Value, Beginning of
Period $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.26
Net Gains or Losses on
Securities (both
realized and unrealized) (0.46)
-------
Total From Investment
Operations: (0.2)
Less Distributions:
Dividends (from net
investment income) --
Distributions (from capital
gains) --
-------
Total Distributions --
-------
Net Asset Value, End of Period 9.80
=======
Total Return (22.81)%*
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $23.5
Ratio of Expenses to
Average Net Assets 2.04%*
Ratio of Net Income (Loss)
to Average Net Assets 37.02%*
Portfolio Turnover Rate 0%
</TABLE>
*Ratios have been annualized.
(a) From September 30, 1992, the date on which Fund shares were first offered
for sale to the public.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-48
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 OCTOBER 31, 1996
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 6.89 $12.20 $11.41 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.20 0.18 0.13 0.04
Net Gains or Losses on
Securities (both
realized and unrealized) 5.75 (4.09) 1.10 1.37
------- ------- ------ ------
Total From Investment
Operations: 5.95 (3.91) 1.23 1.41
Less Distributions:
Dividends (from net
investment income) (0.20) (0.06) (0.08) --
Distributions (from capital
gains) 0.00 (1.34) (0.36) --
------- ------- ------ ------
Total Distributions (0.20) (1.40) (0.44) --
------- ------- ------ ------
Net Asset Value, End of Period $12.64 $ 6.89 $12.20 $11.41
======= ======= ====== ======
Total Return 88.02% (35.20)% 12.07%* 14.15%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $155.4 $51.8 $66.0 $39.8
Ratio of Expenses to
Average Net Assets 1.79% 1.96% 1.93%* 2.50%(a)
Ratio of Net Income (Loss)
to Average Net Assets 2.31% 2.17% 1.23%* 0.65%(a)
Portfolio Turnover Rate 126% 69% 63% 27%
</TABLE>
* Ratios have been annualized.
(a) If the fund had paid all of its expenses and there had been no expense
reimbursement by the investment advisor, the ratio of expenses to average
net assets would have been 2.65% and the ratio of net income (loss) to
average net assets would have been .50%.
B-49
<PAGE>
THE OAKMARK FAMILY OF FUNDS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
........................................................................
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF HARRIS
ASSOCIATES INVESTMENT TRUST:
WE HAVE AUDITED THE ACCOMPANYING STATEMENTS OF ASSETS AND
LIABILITIES OF THE OAKMARK FUND, THE OAKMARK SELECT FUND, THE OAKMARK
SMALL CAP FUND, THE OAKMARK EQUITY AND INCOME FUND, THE OAKMARK GLOBAL
FUND, THE OAKMARK INTERNATIONAL FUND, AND THE OAKMARK INTERNATIONAL
SMALL CAP FUND (EACH A SERIES OF HARRIS ASSOCIATES INVESTMENT TRUST),
INCLUDING THE SCHEDULES OF INVESTMENTS ON PAGES 7-9, 12-13, 16-18,
21-24, 28-30, 34-37, AND 41-44, AS OF SEPTEMBER 30, 1999, AND THE
RELATED STATEMENTS OF OPERATIONS, STATEMENTS OF CHANGES IN NET ASSETS
AND THE FINANCIAL HIGHLIGHTS FOR THE PERIODS INDICATED THEREON. THESE
FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS ARE THE RESPONSIBILITY OF
THE TRUST'S MANAGEMENT. OUR RESPONSIBILITY IS TO EXPRESS AN OPINION ON
THESE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS BASED ON OUR AUDITS.
WE CONDUCTED OUR AUDITS IN ACCORDANCE WITH GENERALLY ACCEPTED
AUDITING STANDARDS. THOSE STANDARDS REQUIRE THAT WE PLAN AND PERFORM THE
AUDITS TO OBTAIN REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL
STATEMENTS AND FINANCIAL HIGHLIGHTS ARE FREE OF MATERIAL MISSTATEMENT.
AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING THE
AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENTS. OUR PROCEDURES
INCLUDED CONFIRMATION OF SECURITIES OWNED AS OF SEPTEMBER 30, 1999, BY
CORRESPONDENCE WITH THE CUSTODIAN AND BROKERS. AS TO SECURITIES
PURCHASED BUT NOT RECEIVED, WE REQUESTED CONFIRMATION FROM BROKERS, AND
WHEN REPLIES WERE NOT RECEIVED, WE CARRIED OUT ALTERNATIVE AUDITING
PROCEDURES. AN AUDIT ALSO INCLUDES ASSESSING THE ACCOUNTING PRINCIPLES
USED AND SIGNIFICANT ESTIMATES MADE BY MANAGEMENT, AS WELL AS EVALUATING
THE OVERALL FINANCIAL STATEMENT PRESENTATION. WE BELIEVE THAT OUR AUDITS
PROVIDE A REASONABLE BASIS FOR OUR OPINION.
IN OUR OPINION, THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
REFERRED TO ABOVE PRESENT FAIRLY, IN ALL MATERIAL RESPECTS, THE
FINANCIAL POSITIONS OF THE OAKMARK FUND, THE OAKMARK SELECT FUND, THE
OAKMARK SMALL CAP FUND, THE OAKMARK EQUITY AND INCOME FUND, THE OAKMARK
GLOBAL FUND, THE OAKMARK INTERNATIONAL FUND, AND THE OAKMARK
INTERNATIONAL SMALL CAP FUND OF THE HARRIS ASSOCIATES INVESTMENT TRUST
AS OF SEPTEMBER 30, 1999, THE RESULTS OF THEIR OPERATIONS, THE CHANGES
IN THEIR NET ASSETS, AND THEIR FINANCIAL HIGHLIGHTS FOR THE PERIODS
INDICATED THEREON IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 25, 1999
B-50
