<PAGE>
[GRAPHIC]
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
THE OAKMARK INTERNATIONAL SMALL CAP FUND
ANNUAL REPORT
SEPTEMBER 30, 2000
MANAGED BY HARRIS ASSOCIATES L.P. [LOGO]
<PAGE>
THE OAKMARK FAMILY OF FUNDS
2000 ANNUAL REPORT
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LETTER FROM THE CHAIRMAN AND PRESIDENT .......................................1
THE OAKMARK FUND
Letter from the Portfolio Managers .........................................2
Schedule of Investments ....................................................5
THE OAKMARK SELECT FUND
Letter from the Portfolio Managers .........................................8
Schedule of Investments ...................................................11
THE OAKMARK SMALL CAP FUND
Letter from the Portfolio Managers ........................................13
Schedule of Investments ...................................................16
THE OAKMARK EQUITY AND INCOME FUND
Letter from the Portfolio Managers ........................................19
Schedule of Investments ...................................................22
THE OAKMARK GLOBAL FUND
Letter from the Portfolio Managers ........................................26
Global Diversification Chart ..............................................29
Schedule of Investments ...................................................30
THE OAKMARK INTERNATIONAL FUND
Letter from the Portfolio Managers ........................................33
International Diversification Chart .......................................36
Schedule of Investments ...................................................37
THE OAKMARK INTERNATIONAL SMALL CAP FUND
Letter from the Portfolio Managers ........................................41
International Diversification Chart .......................................44
Schedule of Investments ...................................................45
FINANCIAL STATEMENTS
Statement of Assets and Liabilities .......................................50
Statement of Operations ...................................................52
Statement of Changes in Net Assets ........................................54
Notes to Financial Statements .............................................61
TRUSTEES AND OFFICERS .......................................................77
FOR MORE INFORMATION
Access our web site at www.oakmark.com to obtain a prospectus, an application or
periodic reports, or call 1-800-OAKMARK (1-800-625-6275) or (617) 578-1329.
WEB SITE AND 24-HOUR NET ASSET VALUE HOTLINE
Access our web site at www.oakmark.com to obtain the current net asset value of
a fund, or call 1-800-GROWOAK (1-800-476-9625).
TO COMMENT ON SHAREHOLDER SERVICES
E-mail us at [email protected].
<PAGE>
LETTER FROM THE CHAIRMAN AND PRESIDENT
--------------------------------------------------------------------------------
DEAR FELLOW
SHAREHOLDERS,
We are pleased to present the Annual Report for The Oakmark Family of
Funds. This past year has been noteworthy for value investors. At the end of
1999 and in early 2000 the market continued to favor growth and momentum
investors. However, throughout the year there has been a quiet and long overdue
turn toward value stocks, which has generally gone unnoticed. Value investors
should take heart -- recent performance speaks for itself.
From its high on March 10, 2000 through September 30, the NASDAQ declined
27.18%. Over that same time
[PHOTO]
period the S&P 500 gained only 3.60%. As investor focus on stock valuations
intensifies our Funds benefit significantly -- illustrating that, over time,
price and value do converge. We believe performance illustrates that there is
compelling evidence that domestic value stocks are starting to return to favor.
Since a NASDAQ market peak on March 10, our Funds have posted strong returns
compared to major indices:
<TABLE>
<CAPTION>
--------------------------------------
DOMESTIC FUNDS
% RETURN FROM MARKET PEAK
ON MARCH 10 TO SEPTEMBER 30, 2000
--------------------------------------
<S> <C>
The Oakmark Fund 24.88%
--------------------------------------
The Oakmark
Select Fund 19.90%
--------------------------------------
The Oakmark
Small Cap Fund 18.06%
--------------------------------------
The Oakmark Equity
and Income Fund 14.82%
--------------------------------------
S&P 500 3.60%
--------------------------------------
NASDAQ Composite (27.18%)
--------------------------------------
</TABLE>
Putting aside these short-term performance results, we continue to have
long-term optimism regarding our portfolio holdings. At a minimum, we believe
investors should consider rebalancing their portfolios to increase their
exposure to value funds, or, move more aggressively toward having a significant
value weighting in their portfolio. Our confidence in our value style is
confirmed through our hiring, as we have recently added more talent to our
dedicated investment team. We are investing and staffing for a positive change.
In November, three of our Funds celebrate their five-year anniversary --
Equity and Income, Small Cap, and International Small Cap. Each brings a level
of diversification to investors without straying from our strict value approach.
We are also very pleased to announce that effective November 6 we are capping
the total annual fund operating expenses for The Oakmark Equity and Income Fund
at 1.00%. Coupled with an excellent long-term performance record, we believe
this makes the Fund even more appealing to all investors.
Shareholders will be pleased with important additions we've made at
www.oakmark.com. Specifically, investors who visit our MY ACCOUNT area will
notice that we have enhanced its capabilities. Shareholders can now perform
transactions -- purchases, exchanges, and redemptions -- and also change their
address on-line. We will continue to post timely information on our site and
regularly evaluate how to enhance it.
We appreciate your continued investment. Our strongest statement is that we
are increasing ours.
/s/Victor A. Morgenstern
VICTOR A. MORGENSTERN
CHAIRMAN
/s/Robert M. Levy
ROBERT M. LEVY
PRESIDENT
October 6, 2000
[GRAPHIC]
1
<PAGE>
THE OAKMARK FUND
REPORT FROM BILL NYGREN AND KEVIN GRANT, PORTFOLIO MANAGERS
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[PHOTO]
[PHOTO]
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THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM ITS INCEPTION
(8/5/91) TO PRESENT (9/30/00) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX
<TABLE>
<CAPTION>
THE
OAKMARK
FUND S&P 500
<S> <C> <C>
8/91 $10,000 $10,000
12/91 $13,020 $10,909
3/92 $14,690 $10,634
6/92 $15,230 $10,836
9/92 $16,800 $11,178
12/92 $19,386 $11,741
3/93 $20,927 $12,253
6/93 $21,494 $12,313
9/93 $23,095 $12,631
12/93 $25,300 $12,924
3/94 $24,242 $12,434
6/94 $24,951 $12,486
9/94 $26,663 $13,097
12/94 $26,138 $13,095
3/95 $28,539 $14,370
6/95 $30,303 $15,741
9/95 $32,841 $16,992
12/95 $35,134 $18,015
3/96 $36,386 $18,982
6/96 $37,661 $19,834
9/96 $37,945 $20,447
12/96 $40,828 $22,152
3/97 $42,456 $22,746
6/97 $48,917 $26,716
9/97 $52,009 $28,717
12/97 $54,132 $29,542
3/98 $59,517 $33,663
6/98 $57,909 $34,775
9/98 $49,899 $31,316
12/98 $56,155 $37,985
3/99 $55,888 $39,877
6/99 $62,332 $42,688
9/99 $53,882 $40,023
12/99 $50,277 $45,977
3/00 $45,767 $47,032
6/00 $46,950 $45,783
9/00 $49,815 $45,339
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
9/30/00 NAV $26.95 THROUGH 9/30/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MONTHS 8/5/91
------------------------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK FUND 6.1% 19.2%
Standard & Poor's 500 Stock Index w/inc** -1.0% 17.9%
Dow Jones Industrial Average w/inc** 2.4% 17.4%
Value Line Composite Index** 2.9% 6.2%
</TABLE>
*Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
**Each of the three indexes or averages is an unmanaged group of stocks whose
composition is different from the Fund. The S&P 500 is a broad market-weighted
average dominated by blue-chip stocks. The Dow Jones Average includes only 30
big companies. The Value Line Index is an unweighted average of more than 1,000
stocks. Past performance is no guarantee of future results.
The Oakmark Fund increased 6.1% for the quarter ended September 30. As with last
quarter, we are pleased with this gain especially when compared to the loss in
the S & P 500. Turning to the fiscal year, to just say our fund lost 8% of its
value would miss the biggest financial story of the year. The year began with a
mass exodus from traditional stocks into the "new economy" stocks in the NASDAQ.
As the NASDAQ rose to its record high, from September 30, 1999 to March 10, 2000
your fund lost 26% of its value. But after March 10, the NASDAQ lost 27% and
investors started returning to value stocks like those in The Oakmark Fund. From
March 10 until September 30, your fund increased by 25%. Although we are not
pleased with the full year results, we are pleased with the second half of the
year and believe that our stocks will continue to benefit from this shift in
investor sentiment.
PORTFOLIO CHANGES
During the quarter we added five new companies to the portfolio and sold a high
profile stock. When we began managing the fund in March we were frequently asked
about Philip Morris because it had been a long-term holding of The Oakmark Fund.
We said that despite our concerns about tobacco litigation we felt that Philip
Morris' ownership of Kraft was not being properly valued. We thought Philip
Morris should sell in the $30's, not the $20's. Last quarter, Philip Morris did
trade up into the $30's and we used that opportunity to eliminate the position.
Here's a brief explanation of our new holdings:
2 THE OAKMARK FUND
<PAGE>
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JC PENNEY (JCP--12)
In 1998, JCP sold at $78 per share. Since then the retailer has lost sales to
discounters like Kohl's as well as to department stores like Macy's. Getting
squeezed from both sides, the company is struggling to find its niche. In July,
Allen Questrom was hired as CEO. Allen gained a reputation as perhaps the best
merchant in retailing today by rescuing Federated Department Stores and Macy's
from bankruptcy. We believe Questrom will also succeed in this turnaround.
<TABLE>
<CAPTION>
---------------------------------------------------------------
TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
---------------------------------------------------------------
<S> <C>
3 Months 6.1%
---------------------------------------------------------------
6 Months 8.8%
---------------------------------------------------------------
1 Year (7.6%)
---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
---------------------------------------------------------------
3 Year (1.4%)
---------------------------------------------------------------
5 Year 8.7%
---------------------------------------------------------------
Since inception 19.2%
---------------------------------------------------------------
</TABLE>
AT & T (T--29)
AT&T stock peaked at $64 last year after cable TV acquisitions made them a
"one-stop-shopping" provider of voice, data and video communications. After
price wars in long distance reduced AT&T's earnings the stock sharply declined.
We believe that the value of AT&T's various pieces including cable, wireless,
long-distance and business services are worth twice the stock price. We also
believe that AT&T's largest shareholder, John Malone (formerly of
Tele-Communications, Inc.), will help the company devise a strategic plan to
have that value recognized.
ROCKWELL (ROK--30)
This leader in electronic controls and industrial automation reached a stock
price of $65 last year. A slowdown in industrial orders resulted in earnings
reductions and the stock lost over half its value. The stock now sells at 8
times our estimate of next year's cash earnings, yields over 3% and should
achieve secular EPS growth in excess of 10% annually.
CVS CORPORATION (CVS--46)
CVS is the largest drugstore chain in the US. The stock hit a high last year of
$58 and a low last quarter of $35.
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HIGHLIGHTS
- WHILE THIS YEAR WAS DIFFICULT FOR US AND OUR INVESTORS, WE BELIEVE THE
TURNAROUND THAT BEGAN SEVEN MONTHS AGO IS LIKELY TO CONTINUE.
- THE TAX SITUATION FOR THE FUND IS EXTREMELY FAVORABLE FOR TAXABLE
SHAREHOLDERS, AS WE EXPECT NO CAPITAL GAINS DISTRIBUTION THIS YEAR, NOR FOR
THE NEXT COUPLE OF YEARS.
- DESPITE CATEGORY LABELS, WE BELIEVE INVESTORS SHOULD LOOK AT OAKMARK AS A
LARGE-COMPANY STOCK FUND, AND WE WILL CONTINUE BUYING STOCKS IN LARGE
COMPANIES THAT WE BELIEVE ARE PRICED AT BARGAIN LEVELS.
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Although both CVS and Walgreen's are expected to earn just over $700 million
this year on sales just over $20 billion, and are each growing at about 15% per
year, Walgreen's enterprise value (debt plus market value of its equity) is more
than twice CVS's enterprise value! That spread strikes us as unwarranted,
unlikely to persist, and therefore an opportunity.
FORD (F--26)
Ford stock fell from $43 last spring to $25 as interest rates rose, talk of
economic slowing increased, and Firestone's tire problems hit the front page. We
don't expect the Firestone recall to affect Ford's long-term value. We were
pleased to see Ford make a tender offer last quarter to repurchase $10 billion
of its stock. Ford is now selling at less than 7 times our estimate of next
year's earnings.
OAKMARK--A LARGE COMPANY FUND
When investors categorize equity mutual funds, they generally look at two
criteria: investment style and the size of the companies being purchased. For
investment style growth -- or value --The Oakmark Fund is clearly a value fund.
All our energy goes into identifying and buying inexpensive stocks, selling them
when they are no longer inexpensive, and then repeating the process. To
categorize us based on the size of companies we purchase is more difficult.
Since larger companies tend to have longer operating histories and more
predictable earnings streams, they
THE OAKMARK FUND 3
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------
TOP FIVE INDUSTRIES
AS OF SEPTEMBER 30, 2000
-------------------------------------------------------
<S> <C> <C>
Other Consumer
INDUSTRIES Goods & Services 16.0%
AND % OF Retail 9.6%
TOTAL NET Information Services 7.8%
ASSETS Household Products 7.0%
Computer Services 5.7%
-------------------------------------------------------
</TABLE>
tend to be less risky investments. Therefore, many investors prefer mutual funds
that focus on larger companies, as we do in The Oakmark Fund.
We believe The Oakmark Fund has always invested primarily in large companies.
That's because when we think of large, we think of fundamental characteristics
that measure the size of underlying businesses. Using measures like sales, net
income or shareholders' equity, most of our investments have been and still are
in stocks that are among the 250 largest businesses in the United States. But
most organizations that categorize mutual funds look instead at how Wall Street
values those businesses. For example, Morningstar calls the 250 stocks with the
biggest market capitalizations "large cap." Based on their definition, a "large
cap fund" primarily buys stocks that have market capitalizations over $10
billion. Because we own many stocks with market caps below $10 billion, in the
last quarter Morningstar moved The Oakmark Fund from the "large cap value" to
the "mid cap value" category.
This is important because we believe that investors who own funds that are still
called "large cap" may not be getting the lower risk level they expect from
investing in large companies. Last year, many small companies, mostly technology
companies, had such high stock prices that they were categorized as large-cap
stocks. By our count, the number of these small-company large-caps was five
<TABLE>
<CAPTION>
-----------------------------------------------------
TOP FIVE HOLDINGS
AS OF SEPTEMBER 30, 2000
-----------------------------------------------------
<S> <C> <C>
COMPANY Fortune Brands, Inc. 3.4%
AND % OF Washington Mutual, Inc. 3.4%
TOTAL NET Dun & Bradstreet
ASSETS Corporation 3.2%
Mattel, Inc. 3.2%
ACNielsen Corporation 3.1%
-----------------------------------------------------
</TABLE>
times as high as it was a decade ago! These stocks have a much higher risk
profile than is typically associated with large companies. Avoiding these stocks
is what has reduced the average market capitalization of our stock positions.
The Oakmark Fund will continue buying stocks in large companies that we believe
are priced at bargain levels. We believe this is simply acting rationally in a
market that has priced many securities irrationally. And, if that means that, in
this environment, our "large company value" fund gets categorized as "mid cap
value," it just shows we are doing our job!
One last comment: the tax situation for The Oakmark Fund is now extremely
favorable for taxable shareholders. As you can see in our financial statements,
The Oakmark Fund has a realized loss of $4.74 per share. Because of that loss
there will be no capital gain distribution this year (we will of course still
distribute dividend income) and likely no gains distribution for at least a
couple of more years.
Thank you for your patience. This was a difficult year for us, but we believe
the turnaround that began seven months ago is likely to continue.
/s/William C. Nygren
WILLIAM C. NYGREN, CFA
Portfolio Manager
[email protected]
/s/Kevin G. Grant
KEVIN G. GRANT, CFA
Portfolio Manager
[email protected]
October 5, 2000
4 THE OAKMARK FUND
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000
................................................................................
<TABLE>
<CAPTION>
Shares Held Market Value
------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--92.2%
FOOD & BEVERAGE--2.0%
H.J. Heinz Company 1,125,000 $ 41,695,313
APPAREL--3.0%
Jones Apparel Group, Inc. (a) 1,257,000 $ 33,310,500
NIKE, Inc., Class B 681,400 27,298,588
--------------
60,609,088
RETAIL--9.6%
The Kroger Co. (a) 2,200,000 $ 49,637,500
Toys `R' Us, Inc. (a) 3,000,000 48,750,000
Tricon Global Restaurants, Inc. (a) 1,350,000 41,343,750
CVS Corporation 700,000 32,418,750
J.C. Penney Company, Inc. 1,950,000 23,034,375
--------------
195,184,375
HOUSEHOLD PRODUCTS--7.0%
Fort James Corporation 1,400,000 $ 42,787,500
Newell Rubbermaid Inc. 1,700,000 38,781,250
Energizer Holdings, Inc. (a) 1,500,000 36,750,000
The Dial Corporation 2,052,900 23,864,962
--------------
142,183,712
HOUSEHOLD APPLIANCES--1.8%
Maytag Corporation 1,160,400 $ 36,044,925
OFFICE EQUIPMENT--1.6%
Xerox Corporation 2,150,000 $ 32,384,375
HARDWARE--3.9%
The Black & Decker Corporation 1,522,200 $ 52,040,213
The Stanley Works 1,224,900 28,249,256
--------------
80,289,469
OTHER CONSUMER GOODS & SERVICES--16.0%
Fortune Brands, Inc. 2,605,200 $ 69,037,800
Mattel, Inc. 5,864,400 65,607,975
Brunswick Corporation 2,971,800 54,235,350
H&R Block, Inc. 1,275,300 47,265,806
Cendant Corporation (a) 3,300,100 35,888,588
Ralston Purina Group 1,400,000 33,162,500
Galileo International, Inc. 1,396,200 21,641,100
--------------
326,839,119
BANKS & THRIFTS--5.1%
Washington Mutual, Inc. 1,730,000 $ 68,875,625
Bank One Corporation 900,548 34,783,666
--------------
103,659,291
</TABLE>
THE OAKMARK FUND 5
<PAGE>
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THE OAKMARK FUND
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SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
................................................................................
<TABLE>
<CAPTION>
Shares Held Market Value
------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--92.2% (CONT.)
INSURANCE--1.4%
MGIC Investment Corporation 475,000 $ 29,034,375
OTHER FINANCIAL--2.3%
USA Education Inc. 1,000,000 $ 48,187,500
INFORMATION SERVICES--7.8%
Dun & Bradstreet Corporation 1,907,500 $ 65,689,531
ACNielsen Corporation (a) 2,664,000 63,436,500
Equifax Inc. 1,300,000 35,018,750
Moody's Corporation, When Issued (a) (200,000) (5,262,500)
--------------
158,882,281
COMPUTER SERVICES--5.7%
First Data Corporation 1,040,000 $ 40,625,000
Electronic Data Systems Corporation 940,000 39,010,000
SunGard Data Systems Inc. (a) 840,800 35,996,750
--------------
115,631,750
TELECOMMUNICATIONS--3.6%
AT&T Corp. 1,425,000 $ 41,859,375
Citizens Communications Company (a) 2,350,000 31,578,125
--------------
73,437,500
PUBLISHING--1.7%
Knight Ridder, Inc. (a) 692,000 $ 35,162,250
PHARMACEUTICALS--0.5%
Chiron Corporation (a) 235,000 $ 10,575,000
MEDICAL PRODUCTS--2.0%
Sybron International Corporation (a) 1,673,600 $ 40,166,400
AUTOMOBILES--1.9%
Ford Motor Company 800,000 $ 20,250,000
DaimlerChrysler AG (b) 400,000 17,756,000
--------------
38,006,000
AEROSPACE & DEFENSE--3.1%
Lockheed Martin Corporation 1,000,000 $ 32,960,000
The B.F. Goodrich Company 770,000 30,174,375
--------------
63,134,375
INSTRUMENTS--1.6%
Rockwell International Corporation 1,067,300 $ 32,285,825
MACHINERY & INDUSTRIAL PROCESSING--4.5%
Cooper Industries, Inc. 1,698,400 $ 59,868,600
Eaton Corporation 511,700 31,533,512
--------------
91,402,112
</TABLE>
6 THE OAKMARK FUND
<PAGE>
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THE OAKMARK FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
................................................................................
<TABLE>
<CAPTION>
Shares Held/
Par Value Market Value
------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--92.2% (CONT.)
BUILDING MATERIALS & CONSTRUCTION--1.8%
Masco Corporation 1,933,000 $ 36,002,125
CHEMICALS--0.6%
PolyOne Corporation 1,613,200 $ 11,796,525
UTILITIES--2.1%
TXU Corp. 1,080,000 $ 42,795,000
RECREATION & ENTERTAINMENT--1.6%
Carnival Corporation 1,350,000 $ 33,243,750
TOTAL COMMON STOCKS (COST: $1,847,268,947) 1,878,632,435
SHORT TERM INVESTMENTS--6.5%
U.S. GOVERNMENT BILLS--1.2%
United States Treasury Bills, 6.10% due 11/24/2000 $25,000,000 $ 24,771,250
TOTAL U.S. GOVERNMENT BILLS (COST: $24,771,250) 24,771,250
COMMERCIAL PAPER--3.4%
American Express Credit Corporation, 6.55% due 10/4/2000 $10,000,000 $ 10,000,000
Ford Motor Credit Corp., 6.56% due 10/4/2000 10,000,000 10,000,000
General Electric Capital Corporation, 6.69% due 10/2/2000 50,000,000 50,000,000
--------------
TOTAL COMMERCIAL PAPER (COST: $70,000,000) 70,000,000
REPURCHASE AGREEMENTS--1.9%
State Street Repurchase Agreement, 6.42% due 10/2/2000 $37,913,000 $ 37,913,000
TOTAL REPURCHASE AGREEMENTS (COST: $37,913,000) 37,913,000
TOTAL SHORT TERM INVESTMENTS (COST: $132,684,250) 132,684,250
Total Investments (Cost $1,979,953,197)--98.7% (c) $2,011,316,685
Other Assets In Excess Of Other Liabilities--1.3% 27,412,122
TOTAL NET ASSETS--100% $2,038,728,807
==============
</TABLE>
(a) Non-income producing security.
(b) Represents foreign domiciled corporation.
(c) At September 30, 2000, net unrealized appreciation of $31,363,487, for
federal income tax purposes, consisted of gross unrealized appreciation of
$281,525,537 and gross unrealized depreciation of $250,162,050.
THE OAKMARK FUND 7
<PAGE>
THE OAKMARK SELECT FUND
REPORT FROM BILL NYGREN AND HENRY BERGHOEF, PORTFOLIO MANAGERS
.......................................................................
[PHOTO] [PHOTO]
--------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK SELECT FUND FROM ITS INCEPTION
(11/1/96) TO PRESENT (9/30/00) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX
[GRAPH]
<TABLE>
<CAPTION>
THE OAKMARK
SELECT FUND S&P 500
<S> <C> <C>
10/96 $10,000 $10,000
12/96 $11,420 $10,543
03/97 $12,140 $10,828
06/97 $14,180 $12,715
09/97 $16,340 $13,668
12/97 $17,704 $14,060
03/98 $20,078 $16,021
06/98 $20,462 $16,551
09/98 $16,936 $14,904
12/98 $20,575 $18,078
03/99 $22,766 $18,979
06/99 $24,482 $20,317
09/99 $22,028 $19,048
12/99 $23,557 $21,882
03/00 $25,667 $22,384
06/00 $24,324 $21,790
09/00 $27,432 $21,578
</TABLE>
<TABLE>
<CAPTION>
9/30/00 NAV $21.45 AVERAGE ANNUAL TOTAL RETURN*
THROUGH 9/30/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MONTHS 11/1/96
-----------------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK SELECT FUND 12.8% 29.4%
Standard & Poor's 500 Stock
Index w/inc** -1.0% 21.7%
Standard & Poor's MidCap 400
Index w/inc** 12.2% 24.2%
Value Line Composite Index** 2.9% 4.2%
</TABLE>
*Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
**Each of the three indexes or averages is an unmanaged group of stocks whose
composition is different from the Fund. The S&P 500 is a broad market-weighted
average dominated by blue-chip stocks. The S&P 400 consists of 400 domestic
stocks chosen for market size, liquidity, and industry group representation. The
Value Line Index is an unweighted average of more than 1,000 stocks. Past
performance is no guarantee of future results.
REVIEW OF 2000 PERFORMANCE
Fiscal 2000 was another good year for The Oakmark Select Fund. In the last
quarter, the Fund increased in value by 12.8%, bringing the gain for the fiscal
year to 24.5%. That gain again placed The Oakmark Select Fund in the top
quartile of funds classified by Morningstar as Midcap Value Funds. Since
inception of The Oakmark Select Fund, not quite four years ago, the Fund has
increased in value by 174%, outperforming all of our benchmark indices (S&P 500,
116%; S&P 400 Midcap, 134%; Value Line Composite, 18%). Not many funds have
accomplished that, especially funds that utilize an approach similar to ours,
namely, value investing.
We want to thank the research department of Harris Associates for finding the
stocks that have performed so well and, just as importantly, helping us avoid
those that haven't performed well. Our investment process relies on extensive
analysis of any company in which we consider investing. Just as in the TV ads
for one of our competitors, our analysts aren't glued to their desks: they spend
a great deal of time performing on-site visits, interviewing managements, and
polling customers and competitors. We rely heavily on our analysts because we
think they are the best in the business, and we could not have achieved these
results without them.
Looking back over the past year, our Fund's largest holding, WASHINGTON MUTUAL,
was a strong performer, gaining 40% as interest rates stabilized in the second
half. Acquisitions also had a positive effect on our performance. Corporate
buyers purchased STERLING COMMERCE and TIMES MIRROR at substantial premiums to
their market prices. In addi-
8 THE OAKMARK SELECT FUND
<PAGE>
................................................................................
tion, stocks of CHIRON, ENERGIZER and THERMO ELECTRON significantly added to our
Fund's results. Those positive results were somewhat offset by declines in USG,
US INDUSTRIES, and REYNOLDS & REYNOLDS. All three of these BUSINESSES, not just
the stocks, performed below our expectations. Because of this, we have allowed
their portfolio weightings to decrease, although we continue to believe each
stock is undervalued.
<TABLE>
<CAPTION>
---------------------------------------
TOTAL RETURNS
SEPTEMBER 30, 2000
---------------------------------------
<S> <C>
3 Months 12.8%
---------------------------------------
6 Months 6.9%
---------------------------------------
1 Year 24.5%
---------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SEPTEMBER 30, 2000
---------------------------------------
<S> <C>
3 Year 18.8%
---------------------------------------
5 Year N/A
---------------------------------------
Since inception 29.4%
---------------------------------------
</TABLE>
The end of this quarter marked an end and a new beginning for one of our
investments, DUN & BRADSTREET. It was just over a year ago that Dun & Bradstreet
reported poor operating results and we lost confidence in its top management.
With the stock below $24 last August, we began a very public debate with Dun &
Bradstreet about how to maximize its value. After their CEO resigned, we
applauded the board's new plan to split the company in two, separating the high
growth Moody's bond rating agency from the declining credit information
business. That split-up went into effect October 2 this year. The old Dun &
Bradstreet ended its corporate life with a stock price of $36, up 50% from last
August.
We are now very pleased with the management and outlook for both Moody's and
"new Dun & Bradstreet," and you can see that we added to our holdings in the new
Dun & Bradstreet shares. Their database of corporate credit histories is
unparalleled and new CEO Allan Loren plans to make that database more
profitable. In addition to cutting expenses, revenue can grow as D&B moves from
just selling data to selling decisions -- helping its customers decide whether
or not their potential customers
--------------------------------------------------------------------------------
HIGHLIGHTS
- FOR THE QUARTER ENDING 9/30 THE FUND WAS UP 12.8%, WITH A FISCAL YEAR GAIN
OF 24.5%. THIS PLACED IT IN THE TOP QUARTILE OF ALL MID-CAP VALUE FUNDS, AS
CLASSIFIED BY MORNINGSTAR.
- SINCE THE FUND'S INCEPTION ON 11/1/96 THROUGH 9/30, IT'S RANKED #1 OUT OF
ALL MID-CAP VALUE FUNDS BY LIPPER, INC.
- OUR LARGEST HOLDING, WASHINGTON MUTUAL, GAINED 40% OVER THE PAST YEAR AS
INTEREST RATES STABILIZED. ACQUISITIONS HAD A POSITIVE EFFECT AS CORPORATE
BUYERS PURCHASED TWO HOLDINGS, STERLING COMMERCE AND TIMES MIRROR, AT
SUBSTANTIAL PREMIUMS.
--------------------------------------------------------------------------------
are credit-worthy. The stock market is pricing D&B as if this turnaround will
fail -- we think the market is wrong.
TRIVIA TIME
What company is the largest Internet retailer? That's about as easy as a $100
question on "Who Wants to be a Millionaire?" With estimated sales this year of
nearly $3 billion, the distant leader in e-tailing is Amazon.com. The stock
market has certainly rewarded Amazon for this leadership. The company currently
loses lots of money, and even the bulls don't expect it to have a profitable
quarter until late 2002. Yet, the market value of Amazon.com's stock is $13
billion, over 4 times this year's expected revenue!
Now, without phoning-a-friend, who is the second largest Internet retailer? The
questions are getting tougher! The battle for second place is more competitive,
but we believe the second largest Internet retailer, with sales reaching a
run-rate by year-end of $1 billion, is OFFICE DEPOT. Surprised? So were we. But,
as the largest office supply company, Office Depot has had a large catalog
business for some time. The fulfillment infrastructure for an on-line business
was basically in place before the terms B2B and B2C were invented. Transitioning
the existing catalog and telephone orders to the Internet was a natural move,
and
THE OAKMARK SELECT FUND 9
<PAGE>
................................................................................
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
TOP FIVE INDUSTRIES
AS OF SEPTEMBER 30, 2000
-------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIES Retail 16.7%
AND % OF Banks & Thrifts 14.9%
TOTAL NET Information Services 11.8%
ASSETS Other Consumer
Goods & Services 7.6%
Computer Services 7.6%
-------------------------------------------------------------------------
</TABLE>
the reach of the Internet allowed for dramatic growth. Considering that Office
Depot has "bricks and mortar" sales of nearly $11 billion, it's not so
surprising that Internet sales are reaching $1 billion. And, unlike Amazon.com,
Office Depot makes a profit on Internet sales!
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
TOP FIVE HOLDINGS
AS OF SEPTEMBER 30, 2000
-------------------------------------------------------------------------
<S> <C> <C>
COMPANY Washington Mutual, Inc. 14.9%
AND % OF Toys `R ' Us, Inc. 8.3%
TOTAL NET The Reynolds &
ASSETS Reynolds Company,
Class A 6.7%
Dun & Bradstreet
Corporation 6.1%
Ceridian Corporation 5.2%
-------------------------------------------------------------------------
</TABLE>
Office Depot has an enterprise value (market capitalization plus debt) of less
than $3 billion -- 3 times its Internet revenue, but only 25% of its total
revenue. Earnings this year are expected to be around 80(cent) per share.
Because earnings haven't grown for two years, Office Depot stock has fallen from
$26 last year to just $6. So, for less than 10 times earnings and about book
value, we have taken a position in a large and rapidly growing e-tailer. New CEO
Bruce Nelson, who came to Office Depot with their Viking Office Products
acquisition in 1998, has a great track record of making sure his company
provides exceptional customer service, while keeping expenses tightly
controlled. Bruce personally bought more Office Depot stock this summer, shortly
before we did. We are confident he will measure his success the same way we
will, by looking at the stock price.
Thank you for your support.
/s/ Bill Nygren
WILLIAM C. NYGREN, CFA
Portfolio Manager
[email protected]
/s/ Henry Berghoef
HENRY R. BERGHOEF, CFA
Portfolio Manager
[email protected]
October 5, 2000
10 THE OAKMARK SELECT FUND
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
THE OAKMARK SELECT FUND
------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000
------------------------------------------------------------------------------------------
Shares Held Market Value
------------------------------------------------------------------------------------------
COMMON STOCKS--92.4%
<S> <C> <C>
APPAREL--3.6%
Liz Claiborne, Inc. 1,648,600 $ 63,471,100
RETAIL--16.7%
Toys `R' Us, Inc. (a) 9,048,500 $147,038,125
Tricon Global Restaurants, Inc. (a) 2,615,400 80,096,625
Office Depot, Inc. (a) 9,046,000 70,671,875
------------
297,806,625
HOUSEHOLD PRODUCTS--4.2%
Energizer Holdings, Inc. (a) 3,089,200 $ 75,685,400
OTHER CONSUMER GOODS & SERVICES--7.6%
H&R Block, Inc. 1,956,000 $ 72,494,250
Mattel, Inc. 5,600,000 62,650,000
------------
135,144,250
BANKS & THRIFTS--14.9%
Washington Mutual, Inc. 6,679,800 $265,939,537
OTHER FINANCIAL--1.9%
MBIA, Inc. 465,800 $ 33,130,025
INFORMATION SERVICES--11.8%
Dun & Bradstreet Corporation 3,143,600 $108,257,725
Ceridian Corporation 3,284,500 92,171,281
Dun & Bradstreet Corporation, When Issued (a) 536,400 9,118,800
------------
209,547,806
COMPUTER SERVICES--7.6%
First Data Corporation 1,810,200 $ 70,710,938
Electronic Data Systems Corporation 1,545,000 64,117,500
------------
134,828,438
COMPUTER SOFTWARE--6.7%
The Reynolds and Reynolds Company, Class A (b) 5,979,700 $118,846,538
PHARMACEUTICALS--1.7%
Chiron Corporation (a) 668,900 $ 30,100,500
AUTOMOTIVE--3.5%
Visteon Corporation 4,128,900 $ 62,449,613
</TABLE>
THE OAKMARK SELECT FUND 11
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
THE OAKMARK SELECT FUND
-----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
-----------------------------------------------------------------------------------------------
Shares Held/
Par Value Market Value
-----------------------------------------------------------------------------------------------
COMMON STOCKS--92.4% (CONT.)
<S> <C> <C>
MACHINERY & INDUSTRIAL PROCESSING--4.9%
Thermo Electron Corporation (a) 3,369,000 $ 87,594,000
BUILDING MATERIALS & CONSTRUCTION--4.9%
USG Corporation (b) 3,474,900 $ 87,089,681
DIVERSIFIED CONGLOMERATES--2.4%
U.S. Industries, Inc. (b) 4,286,800 $ 42,600,075
TOTAL COMMON STOCKS (COST: $1,457,018,607) 1,644,233,588
SHORT TERM INVESTMENTS--7.4%
U.S. GOVERNMENT BILLS--1.1%
United States Treasury Bills, 6.10% due 11/24/2000 $ 20,000,000 $ 19,817,000
TOTAL U.S. GOVERNMENT BILLS (COST: $19,817,000) 19,817,000
COMMERCIAL PAPER--3.4%
American Express Credit Corporation, 6.51% due 10/2/2000 $ 20,000,000 $ 20,000,000
Ford Motor Credit Corp., 6.56% due 10/4/2000 10,000,000 10,000,000
General Electric Capital Corporation, 6.69% due 10/2/2000 30,000,000 30,000,000
--------------
TOTAL COMMERCIAL PAPER (COST: $60,000,000) 60,000,000
REPURCHASE AGREEMENTS--2.9%
State Street Repurchase Agreement, 6.42% due 10/2/2000 $ 51,597,000 $ 51,597,000
TOTAL REPURCHASE AGREEMENTS (COST: $51,597,000) 51,597,000
TOTAL SHORT TERM INVESTMENTS (COST: $131,414,000) 131,414,000
Total Investments (Cost $1,588,432,607)--99.8% (c) $1,775,647,588
Other Assets In Excess Of Other Liabilities--0.2% 3,088,886
TOTAL NET ASSETS--100% $1,778,736,474
==============
</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, 2000, net unrealized appreciation of $187,214,980, for
federal income tax purposes, consisted of gross unrealized appreciation of
$302,941,071 and gross unrealized depreciation of $115,726,091.
12 THE OAKMARK SELECT FUND
<PAGE>
THE OAKMARK SMALL CAP FUND
REPORT FROM JAMES P. BENSON AND CLYDE S. MCGREGOR, PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
[PHOTO]
[PHOTO]
--------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK SMALL CAP FUND FROM ITS
INCEPTION (11/1/95) TO PRESENT (9/30/00) AS COMPARED TO THE RUSSELL 2000 INDEX
[GRAPH]
<TABLE>
<CAPTION>
THE OAKMARK
SMALL CAP FUND RUSSELL 2000
<S> <C> <C>
10/31/1995 $10,000 $10,000
12/31/1995 $10,330 $10,695
3/31/1996 $11,460 $11,241
6/30/1996 $12,470 $11,803
9/30/1996 $13,250 $11,843
12/31/1996 $14,440 $12,459
3/31/1997 $15,220 $11,815
6/30/1997 $17,660 $13,730
9/30/1997 $20,340 $15,774
12/31/1997 $20,290 $15,245
3/31/1998 $21,732 $16,779
6/30/1998 $20,467 $15,997
9/30/1998 $14,976 $12,774
12/31/1998 $17,620 $14,857
3/31/1999 $16,069 $14,051
6/30/1999 $18,205 $16,237
9/30/1999 $16,558 $15,210
12/31/1999 $16,224 $18,015
3/31/2000 $15,974 $19,292
6/30/2000 $15,926 $18,562
9/30/2000 $18,014 $18,768
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
9/30/00 NAV $15.10 THROUGH 9/30/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MONTHS 11/1/95
--------------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK SMALL CAP FUND 13.1% 12.7%
Lipper Small Cap Fund Index** 3.4% 16.1%
Russell 2000 w/inc** 1.1% 13.7%
S&P Small Cap 600 w/inc.** 3.3% 14.8%
</TABLE>
*Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
**Each of the three indexes or averages is an unmanaged group of stocks or funds
whose composition is different from the Fund. The Lipper Small Cap Fund Index is
comprised of 30 Small Cap Funds. The Russell 2000 Index measures the performance
of smaller companies, and represents approximately 10% of the total value of
publicly traded companies in the U.S. The S&P 600 Index measures the performance
of selected U.S. stocks with small market capitalization. Past performance is no
guarantee of future results.
The third calendar quarter of 2000 was a period where the portfolio actions that
we undertook in the first half of 2000 began to bear fruit. For the quarter,
your Fund was up 13.1% versus the Russell 2000 Index which rose by 1.1%. On a
calendar year-to-date basis, your Fund is up 11.0% compared to the Russell
2000's rise of 4.2%. While pleased with recent results, we believe we can
continue to improve our performance based upon the values that we can currently
find among small cap stocks. We will continue to work to position your Fund to
improve returns and liquidity while doing all we rationally can to minimize the
Fund's taxable gains.
BUILDING ON RECENT SUCCESS
In last quarter's letter, we indicated that we were trying to invest not just in
good companies trading at low valuations, but in companies that had a higher
probability of experiencing a positive catalyst. A positive catalyst can help
expose the undervaluation of a particular stock to a wider group of investors
which often results in these investors bidding up the stock's price. These
fortuitous events can sometime compound upon themselves resulting in excellent
investment returns. A good example of this phenomenon from your Fund's portfolio
has been our recent experience with DURA PHARMACEUTICALS. While it is unusual to
find a pharmaceutical stock trading at levels that are comfortable for value
investors, we often investigate stocks in this industry in the hopes that we can
find value. Our work was rewarded early this year as we came to know Dura and,
after our analytical work convinced us that the company's value greatly exceeded
its
THE OAKMARK SMALL CAP FUND 13
<PAGE>
--------------------------------------------------------------------------------
stock price, we accumulated a position in the stock at just under $13 per
share.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<S> <C>
3 Months 13.1%
--------------------------------------------------------------------------------
6 Months 12.8%
--------------------------------------------------------------------------------
1 Year (a) 8.8%
--------------------------------------------------------------------------------
</TABLE>
(a) During the year ended September 30, 2000, Initial Public Offerings ("IPOs")
contributed 1.10% to the performance of Small Cap. As the IPO environment
changes and the total assets of the Fund grows, the impact of IPOs on
performance will diminish.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<S> <C>
3 Year (4.0%)
--------------------------------------------------------------------------------
5 Year N/A
--------------------------------------------------------------------------------
Since inception 12.7%
--------------------------------------------------------------------------------
</TABLE>
What attracted us to Dura was that its rapidly growing drug business was being
overshadowed in their financial results by sizeable investments in research and
development for a new drug delivery technology. We believed that the drug
business was worth far more than $13 per share and that the new drug delivery
technology was likely to be additive to Dura's long-term value as well. Within
months following our purchase, Dura announced a downsizing of the drug delivery
research and development budget to improve profits. Strong quarterly financial
results showed good growth in revenues and profits from the core drug business
and, in September, Dura announced that Elan Pharmaceuticals was buying the
company. Over a five-month period, Dura's stock rose from $13 to $39 due mainly
to the combination of low initial valuation followed by positive catalysts.
While we do not expect this type of performance to be repeated often, we believe
that if we continue to invest in stocks with characteristics similar to Dura's,
the portfolio should experience success over time.
NEW INVESTMENTS
As we start the fourth calendar quarter of 2000, the Fund's portfolio has
expanded to forty-six stocks, up from forty stocks at June 30, 2000. During the
last quarter we added
--------------------------------------------------------------------------------
HIGHLIGHTS
- The stock market has been a difficult place to make money this year, in
part due to exaggerated moves in stock prices, with only moderate changes
in business fundamentals.
- For the third quarter 2000, Small Cap was up 13.1% versus the Russell 2000,
which rose by only 1.1%. Calendar year-to-date the Fund was up 11.03%
compared to the Russell 2000's rise of 4.2%.
- At the beginning of the 4th quarter 2000, the Fund's portfolio has expanded
to 46 stocks, up from 40 stocks on June 30.
--------------------------------------------------------------------------------
ten stocks to the portfolio while four stocks exited the
Fund (one company was purchased for cash while the other three stocks were
sold). The stocks that we bought were: AMERICAN GREETINGS CORP.(greeting cards),
CIBER, INC.(computer services), CONMED CORP.(medical instruments), GARDNER
DENVER, INC. (compressors and petroleum equipment), GEORGIA GULF CORP. (chemical
manufacturer), IMATION CORP. (computer storage products and services),
INTEGRATED ELECTRICAL SERVICES, INC. (electrical and communications
contracting), NCO GROUP, INC.(accounts receivable collection services), SCOTT
TECHNOLOGIES, INC. (self-contained breathing apparatus manufacturer) and SHOPKO
STORES, INC. (general retailer). While we believe each of these stocks has a
compelling investment case, we would like to highlight two issues that seem
particularly interesting at current prices.
The two new stocks your Fund owns that we would like to discuss in detail are:
American Greetings and Conmed. Both of these companies appear close to a turning
point and, despite the fact that we might be a quarter or two early, we are
excited about the long-term prospects for these firms.
American Greetings is the number two greeting card company behind Hallmark and
we believe the current uncertainty about the company's growth prospects has
resulted in an undervalued security. A reduction in inventory at
14 THE OAKMARK SMALL CAP FUND
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
TOP FIVE INDUSTRIES
AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIES Real Estate 12.0%
AND % OF Banks & Thrifts 8.6%
TOTAL NET Educational Services 8.2%
ASSETS Pharmaceuticals 7.0%
Insurance 6.5%
--------------------------------------------------------------------------------
</TABLE>
American Greeting's retail customers has caused some near-term sluggishness in
revenues, but this trend could be a longer-term positive as it should allow for
more timely inventory being on the shelves at greeting card retailers.
Additionally, the acquisition of Gibson Greetings has caused some unusual
variations in American Greetings' financial results. However, we believe over
time this acquisition will add to the firm's financial performance. Lastly, new
accounting rules that have resulted in the shifting of some quarterly revenues
and the losses associated with the building of the company's on-line offering
have further confused investors. However, when we strip away all the
aforementioned noise, we see a company that continues to build for the long-term
and is trading at a low multiple of its cash flow.
<TABLE>
<CAPTION>
-------------------------------------------------------
TOP FIVE HOLDINGS
AS OF SEPTEMBER 30, 2000
-------------------------------------------------------
<S> <C> <C>
COMPANY AND ITT Educational
% OF TOTAL Services, Inc. 8.2%
NET ASSETS Dura Pharmaceuticals,
Inc. 7.0%
Catellus Development
Corporation 6.3%
National Data
Corporation 5.7%
The PMI Group, Inc. 5.2%
-------------------------------------------------------
</TABLE>
Conmed is a medical instruments company that specializes in arthroscopy and
powered surgical instruments. This company experienced an earnings shortfall in
the second quarter and its stock was promptly cut in half. Cash flow, however,
remains robust since Conmed has large quarterly charges for goodwill. These
non-cash charges hurt reported earnings per share but they do not impact cash
generation. Since the key item that we evaluate is a company's free cash flow
generation, we became interested in Conmed.
OUTLOOK
The stock market has been a difficult place to make money this year in part due
to exaggerated moves in stock prices based upon only a moderate change in
business fundamentals. These excessive price fluctuations can provide
opportunities for long-term investors to acquire the stocks of good businesses
at attractive prices. We find it fascinating that many investors believe that
building a business is a linear process. It is not; indeed, almost every
business experiences ups and downs. Our goal remains the same: buy good
businesses at attractive prices and over time this should accrue to the benefit
of our shareholders despite short-term price fluctuations.
Once again we would like to thank you, our shareholders, for your support of The
Oakmark Small Cap Fund.
/s/ James P. Benson, CFA
JAMES P. BENSON, CFA
Portfolio Manager
[email protected]
/s/ Clyde S. McGregor, CFA
CLYDE S. MCGREGOR, CFA
Portfolio Manager
[email protected]
October 5, 2000
THE OAKMARK SMALL CAP FUND 15
<PAGE>
-------------------------------------------------------------------------------
THE OAKMARK SMALL CAP FUND
-------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held Market Value
-----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS-- 94.5%
FOOD & BEVERAGE--6.2%
Ralcorp Holdings, Inc. 465,000 $ 6,568,125
Del Monte Foods Company (a) 850,000 5,259,375
International Multifoods Corporation 127,500 2,215,312
M&F Worldwide Corp. (a) 225,000 1,307,813
-------------
15,350,625
APPAREL--1.0%
R.G. Barry Corporation (a)(c) 855,000 $ 2,565,000
RETAIL--6.2%
Ugly Duckling Corporation (a)(c) 1,750,000 $ 10,171,875
ShopKo Stores, Inc. (a) 500,000 5,187,500
-------------
15,359,375
OTHER CONSUMER GOODS & SERVICES--3.7%
Department 56, Inc. (a) 525,000 $ 6,923,437
American Greetings Corporation, Class A 135,000 2,362,500
-------------
9,285,937
BANKS & THRIFTS--8.6%
People's Bank of Bridgeport, Connecticut 360,000 $ 7,582,500
Golden State Bancorp Inc. (a) 200,000 4,725,000
BankAtlantic Bancorp, Inc., Class A 1,020,000 4,271,250
PennFed Financial Services, Inc. 250,000 3,843,750
Finger Lakes Financial Corp. 160,000 1,080,000
-------------
21,502,500
INSURANCE--6.5%
The PMI Group, Inc. 190,000 $ 12,872,500
The MONY Group Inc. (a) 80,000 3,190,000
-------------
16,062,500
OTHER FINANCIAL--0.5%
NCO Group, Inc. (a) 100,000 $ 1,187,500
EDUCATIONAL SERVICES--8.2%
ITT Educational Services, Inc. (a) 750,000 $ 20,343,750
INFORMATION SERVICES--5.7%
National Data Corporation 435,000 $ 14,273,437
DATA STORAGE--0.9%
Imation Corp. (a) 125,000 $ 2,328,125
COMPUTER SERVICES--0.7%
CIBER, Inc. (a) 200,000 $ 1,650,000
</TABLE>
16 THE OAKMARK SMALL CAP FUND
<PAGE>
-------------------------------------------------------------------------------
THE OAKMARK SMALL CAP FUND
-------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held Market Value
-----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--94.5% (CONT.)
COMPUTER SOFTWARE--4.1%
Mentor Graphics Corporation (a) 280,000 $ 6,597,500
MSC.Software Corp. (a) 225,000 2,385,000
Symantec Corporation (a) 30,000 1,320,000
-------------
10,302,500
COMPUTER SYSTEMS--3.0%
Micron Electronics, Inc. (a) 825,000 $ 7,425,000
SECURITY SYSTEMS--1.7%
Checkpoint Systems, Inc. (a) 550,000 $ 4,159,375
PHARMACEUTICALS--7.0%
Dura Pharmaceuticals, Inc. (a) 490,000 $ 17,333,750
MEDICAL RESEARCH--0.7%
Covance Inc. (a) 200,000 $ 1,637,500
MEDICAL PRODUCTS--2.9%
Hanger Orthopedic Group, Inc. (a)(c) 1,150,000 $ 4,312,500
CONMED Corporation (a) 215,000 2,942,813
-------------
7,255,313
AUTOMOTIVE--1.4%
Stoneridge, Inc. (a) 177,800 $ 1,711,325
Standard Motor Products, Inc. 210,000 1,680,000
-------------
3,391,325
AUTOMOBILE RENTALS--1.4%
Dollar Thrifty Automotive Group, Inc. (a) 175,000 $ 3,456,250
TRANSPORTATION SERVICES--3.8%
Teekay Shipping Corporation (b) 200,000 $ 9,387,500
MACHINERY & INDUSTRIAL PROCESSING--4.0%
Columbus McKinnon Corporation 495,000 $ 6,713,437
Sames Corporation (a)(c) 235,000 3,201,875
-------------
9,915,312
CHEMICALS--2.4%
Ferro Corporation 155,000 $ 2,954,688
H.B. Fuller Company 70,000 2,012,500
Georgia Gulf Corporation 100,000 1,143,750
-------------
6,110,938
</TABLE>
THE OAKMARK SMALL CAP FUND 17
<PAGE>
-------------------------------------------------------------------------------
THE OAKMARK SMALL CAP FUND
-------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held/
Par Value Market Value
-----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--94.5% (CONT.)
OTHER INDUSTRIAL GOODS & SERVICES--0.8%
Gardner Denver Inc. (a) 64,000 $ 1,040,000
Scott Technologies, Inc. (a) 45,000 797,344
Intergrated Electrical Services, Inc. (a) 37,500 257,812
-------------
2,095,156
REAL ESTATE--12.0%
Catellus Development Corporation (a) 900,000 $15,750,000
Prime Hospitality Corp. (a) 800,000 8,100,000
Trammell Crow Company (a) 400,000 6,000,000
-------------
29,850,000
DIVERSIFIED CONGLOMERATES--1.1%
U.S. Industries, Inc. 275,000 $ 2,732,813
TOTAL COMMON STOCKS (COST: $231,477,177) 234,961,481
SHORT TERM INVESTMENTS--5.8%
COMMERCIAL PAPER--2.8%
General Electric Capital Corporation, 6.69% due 10/2/2000 $ 7,000,000 $ 7,000,000
TOTAL COMMERCIAL PAPER (COST: $7,000,000) 7,000,000
REPURCHASE AGREEMENTS--3.0%
State Street Repurchase Agreement, 6.42% due 10/2/2000 $ 7,598,000 $ 7,598,000
TOTAL REPURCHASE AGREEMENTS (COST: $7,598,000) 7,598,000
TOTAL SHORT TERM INVESTMENTS (COST: $14,598,000) 14,598,000
TOTAL INVESTMENTS (COST $246,075,178)--100.3% (D) $249,559,481
CALL OPTIONS WRITTEN--0.0%
EQUITY OPTIONS--0.0%
INSURANCE--0.0%
The MONY Group Inc., November 40 Calls (21,000) $ (42,000)
TOTAL CALL OPTION WRITTEN (COST: $(64,578)) (42,000)
Other Liabilities In Excess Of Other Assets--(0.3)% (813,869)
TOTAL NET ASSETS--100% $248,703,612
=============
</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, 2000, net unrealized appreciation of $3,506,881, for
federal income tax purposes, consisted of gross unrealized appreciation of
$50,635,465 and gross unrealized depreciation of $47,128,584.
18 THE OAKMARK SMALL CAP FUND
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
REPORT FROM CLYDE S. MCGREGOR AND EDWARD A. STUDZINSKI, PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
[PHOTO]
[PHOTO]
--------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK EQUITY AND INCOME FUND FROM ITS
INCEPTION (11/1/95) TO PRESENT (9/30/00) AS COMPARED TO THE LIPPER BALANCED FUND
INDEX
[GRAPH]
<TABLE>
<CAPTION>
THE OAKMARK LIPPER BALANCED
EQUITY & INCOME FUND FUND INDEX
<S> <C> <C>
10/31/1995 $10,000 $10,000
12/31/1995 $10,240 $10,473
3/31/1996 $10,500 $10,707
6/30/1996 $11,040 $10,925
9/30/1996 $11,110 $11,213
12/31/1996 $11,805 $11,840
3/31/1997 $12,153 $11,895
6/30/1997 $13,430 $13,178
9/30/1997 $14,810 $14,024
12/31/1997 $14,941 $14,243
3/31/1998 $16,233 $15,370
6/30/1998 $16,320 $15,599
9/30/1998 $15,191 $14,701
12/31/1998 $16,792 $16,392
3/31/1999 $16,792 $16,655
6/30/1999 $18,457 $17,402
9/30/1999 $17,518 $16,682
12/31/1999 $18,119 $17,863
3/31/2000 $18,924 $18,396
6/30/2000 $18,886 $18,174
9/30/2000 $20,761 $18,535
</TABLE>
<TABLE>
<CAPTION>
9/30/00 NAV $16.50 AVERAGE ANNUAL TOTAL RETURN*
THROUGH 9/30/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 11/1/95
-----------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK EQUITY & INCOME FUND 9.9% 16.0%
Lipper Balanced Fund Index** 2.0% 13.4%
Lehman Govt./Corp. Bond** 2.9% 6.1%
S&P 500 w/inc.** -1.0% 22.2%
</TABLE>
*Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
**Each of the three indexes or averages is an unmanaged group of stocks or funds
whose composition is different from the Fund. The Lipper Balanced Fund Index
Composite is comprised of 30 balanced funds. The Lehman Govt./Corp. Bond Index
includes the Lehman Government and Lehman Corporate indices. The S&P 500 is a
broad market-weighted average dominated by blue-chip stocks. Past performance is
no guarantee of future results.
QUARTER AND ANNUAL REVIEW
After a slow start, fiscal 2000 proved quite rewarding for The Oakmark Equity
and Income Fund. The return for the 12 months was 18.5%, 7.4% better than the
return which the Lipper Balanced Fund Index, our primary standard of comparison,
registered. The result for the quarter ended September 30 was 9.9%, a handsome
absolute return in any three month period but, in this case, well in excess of
relevant competitive indices. While returns to the Fund's stocks were generally
strong in the quarter, it was the financial stocks that blossomed in the period,
an apparent outcome of the end of the Federal Reserve's effort to increase short
term interest rates.
As the Fund draws near to its five-year anniversary, it is satisfying to note
that the annualized rate of return has been 16%. This means that $10,000
invested in the Fund at inception is now worth approximately $21,000 (ignoring
taxes). And, this return has been achieved with less volatility than would be
present in an all-stock portfolio.
MIGHTY OAKS AWARDS
In October, we hand out awards to members of our firm's research team for their
important efforts in crafting the fiscal year's outcome. This task is
particularly happy in a strong year like 2000. Successful ideas were plentiful,
making the choice of award winners somewhat arbitrary. The final list is quite
diverse. It includes "old economy" issues as well as new, the smallest market
capitalization name in the portfolio as well as the largest, a company created
by spin-off during the year, and a pure technology company. The list should also
include CATELLUS DEVELOPMENT which Edward Studzinski follows. Ed, having put on
the portfolio manager mantle during the year, is no longer
THE OAKMARK EQUITY AND INCOME FUND 19
<PAGE>
--------------------------------------------------------------------------------
eligible to receive the honor, but we thought it appropriate to point out the
important role Catellus played in the Fund's fiscal 2000 success.
Kevin Grant, of our research department and a manager of The Oakmark Fund, wins
an award for two ideas. STERLING COMMERCE proved to be the largest contributor
to Fund returns in the fiscal year, though it left the portfolio six months ago
by way of a takeover. At Harris Associates, we all often labor under the
misguided notion that, as value managers, we do not consider technology
companies for investment. Our routine response to this comment is that we will
consider investing in any industry as long as we can do it on terms that are
biased to favor our shareholders. Our "eclecticness" is limited only by the
willingness of the market to mis-price securities.
<TABLE>
<CAPTION>
--------------------------------------
TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
--------------------------------------
<S> <C>
3 Months 9.9%
--------------------------------------
6 Months 9.7%
--------------------------------------
1 Year (a) 18.5%
--------------------------------------
</TABLE>
(a) During the year ended September 30, 2000, Initial Public Offerings ("IPOs")
contributed 2.08% to the performance of Equity and Income. As the IPO
environment changes and the total assets of the Fund grows, the impact of
IPOs on performance will diminish.
<TABLE>
<CAPTION>
--------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
--------------------------------------
<S> <C>
3 Year 11.9%
--------------------------------------
5 Year N/A
--------------------------------------
Since inception 16.0%
--------------------------------------
</TABLE>
Sterling is a prototypical example of what can become available to us in
technology. After the company's earnings disappointed investors, we were able to
acquire a position in the stock for a modest multiple of earnings. The fact that
the company's balance sheet had cash equal to more than one-quarter of the share
price gave us great comfort. Eventually, SBC Communications agreed with
--------------------------------------------------------------------------------
HIGHLIGHTS
- THE FUND CELEBRATES ITS FIVE-YEAR ANNIVERSARY ON 11/1/00.
- FOR THE 12 MONTHS ENDED 9/30 THE FUND WAS UP 18.5%, OUTPACING THE LIPPER
BALANCED FUND INDEX BY MORE THAN 7%.
- FINANCIAL STOCKS BLOSSOMED IN THE PAST QUARTER, AN APPARENT OUTCOME OF THE
END OF THE FEDERAL RESERVE'S EFFORT TO INCREASE SHORT-TERM INTEREST RATES.
- STERLING COMMERCE (BOUGHT OUT SIX MONTHS AGO) PROVED TO BE THE LARGEST
CONTRIBUTOR TO THE FUND'S RETURN, AND IS A PROTOTYPICAL EXAMPLE OF AN
ATTRACTIVELY PRICED STOCK IN THE TECHNOLOGY INDUSTRY.
--------------------------------------------------------------------------------
our assessment and purchased Sterling at a substantial premium to our
acquisition price.
Kevin's second highly successful idea for the Fund was ENERGIZER, the battery
company, which Ralston Purina spun off to its shareholders in April. Always a
reticent company, Ralston spun off Energizer without spoon-feeding earnings
guidance to Wall Street analysts. Soon thereafter Energizer surprised investors
with its first report, and the stock swooned. We took advantage of this
opportunity to initiate a position and were pleased to find out later that
company insiders had aggressively increased their holdings at the same time. We
do not expect that the recent rebound in the stock presages a similar rosy
future for the company; the consumer spending environment is simply too chancy
at present. We do believe, however, that the stock price had declined to a level
that was significantly below absolute value and offered opportunity absent an
economic depression.
Greg Jackson, of our research department and a manager of The Global Fund, wins
an award for his recommendation of CERIDIAN. Ceridian is in three businesses,
the smaller two of which have been doing well but the largest, payroll
processing, has suffered through a difficult period.
20 THE OAKMARK EQUITY AND INCOME FUND
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------
TOP FIVE INDUSTRIES
AS OF SEPTEMBER 30, 2000
------------------------------------------------------
<S> <C> <C>
INDUSTRIES U.S. Government
AND % OF Notes 24.9%
TOTAL NET Information Services 8.0%
ASSETS Real Estate 6.4%
Medical Products 5.4%
Banks & Thrifts 5.4%
</TABLE>
We expect the company to restructure while the payroll division fixes its
problems. Apparently the stock market agrees with our assessment as the strong
return to the stock gives evidence.
Last, but not least, is Jim Benson, an analyst and manager of The Small Cap
Fund. Jim scored with a very small manufacturer, ALAMO GROUP, and a very large
financial company, WASHINGTON MUTUAL. At this time last year, Alamo was a
classic smaller value situation as the stock sold for less than book value and
carried a low P/E ratio on depressed earnings. As well, an energetic new CEO
came on board in mid-1999. All that happened over the last 12 months is a
gradual return to historic trends in earnings, but the rebound in the stock has
been substantial. Washington Mutual (WM) is the nation's largest savings and
<TABLE>
<CAPTION>
------------------------------------------------------
TOP FIVE HOLDINGS
AS OF SEPTEMBER 30, 2000
------------------------------------------------------
<S> <C> <C>
COMPANY The Reynolds &
AND % OF Reynolds Company,
TOTAL NET Class A 4.3%
ASSETS Ceridian Corporation 4.1%
NOVA Corporation 3.9%
Catellus Development
Corporation 3.7%
Alamo Group Inc. 3.7%
</TABLE>
loan with operations extending from Florida to Washington state. During the
first part of the Fund's fiscal 2000, WM experienced a substantial decline in
stock price. The rationale appeared to be that investors forecasted a limitless
series of Federal Reserve moves to hike interest rates with the outcome that
thrift institutions would see diminishing profit margins. Six months ago, the
market began to sense the end of the series of interest rate hikes with the
effect that WM has nearly doubled from its low.
In closing, we would like to take this opportunity to thank our shareholders for
their interest and support. In particular, we would like to thank our investors
who have been with us from inception. While we are pleased with the cumulative
outcome of the last five years, our effort is to ensure that the best is yet to
come. As always, we welcome your e-mailed questions or comments.
/s/Clyde S. Mcgregor
CLYDE S. MCGREGOR, CFA
Portfolio Manager
[email protected]
/s/Edward A. Studzinski
EDWARD A. STUDZINSKI, CFA
Portfolio Manager
[email protected]
October 6, 2000
THE OAKMARK EQUITY AND INCOME FUND 21
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held Market Value
------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY AND EQUIVALENTS--62.2%
FOOD & BEVERAGE--2.9%
UST Inc. 68,900 $ 1,576,088
RETAIL--4.3%
Office Depot, Inc. (a) 200,000 $ 1,562,500
J.C. Penney Company, Inc. 67,500 797,344
----------------
2,359,844
HOUSEHOLD PRODUCTS--3.6%
Energizer Holdings, Inc. (a) 80,000 $ 1,960,000
OTHER CONSUMER GOODS & SERVICES--2.3%
H&R Block, Inc. 34,500 $ 1,278,656
BANKS & THRIFTS--3.4%
Washington Mutual, Inc. 47,000 $ 1,871,187
OTHER FINANCIAL--2.6%
Heller Financial, Inc. 50,000 $ 1,428,125
EDUCATIONAL SERVICES--1.2%
ITT Educational Services, Inc. (a) 25,000 $ 678,125
INFORMATION SERVICES--8.0%
Ceridian Corporation (a) 80,000 $ 2,245,000
NOVA Corporation (a) 125,000 2,140,625
----------------
4,385,625
COMPUTER SERVICES--3.4%
Electronic Data Systems Corporation 30,000 $ 1,245,000
SunGard Data Systems Inc. (a) 15,000 642,187
----------------
1,887,187
COMPUTER SOFTWARE--4.2%
The Reynolds and Reynolds Company, Class A 117,500 $ 2,335,312
TELECOMMUNICATIONS--2.6%
Citizens Communications Company (a) 105,000 $ 1,410,938
MEDICAL PRODUCTS--5.4%
Sybron International Corporation (a) 70,000 $ 1,680,000
Edwards Lifesciences Corporation (a) 60,000 1,308,750
----------------
2,988,750
</TABLE>
22 THE OAKMARK EQUITY AND INCOME FUND
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held Market Value
------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY AND EQUIVALENTS--62.2% (CONT.)
AUTOMOTIVE--1.7%
Borg-Warner, Inc. 27,900 $ 924,188
TRANSPORTATION SERVICES--3.9%
GATX Corporation 38,000 $ 1,591,250
Nordic American Tanker Shipping Limited 25,000 540,625
----------------
2,131,875
AGRICULTURAL EQUIPMENT--3.7%
Alamo Group Inc. 159,150 $ 2,019,216
INSTRUMENTS--1.1%
Rockwell International Corporation 20,000 $ 605,000
MACHINERY & INDUSTRIAL PROCESSING--0.5%
Gardner Denver Inc. (a) 16,000 $ 260,000
REAL ESTATE--6.2%
Catellus Development Corporation (a) 116,728 $ 2,042,740
The St. Joe Company 50,000 1,387,500
----------------
3,430,240
TOTAL EQUITY (COST: $26,552,422) 33,530,356
CONVERTIBLE PREFERRED STOCK--1.2%
TELECOMMUNICATIONS--1.2%
Metromedia International Group, Inc.,
Convertible Preferred, 7.25% 28,600 $ 650,650
TOTAL CONVERTIBLE PREFERRED STOCK (COST: $808,041) 650,650
TOTAL EQUITY AND EQUIVALENTS (COST: $27,360,463) 34,181,006
FIXED INCOME--35.2%
PREFERRED STOCK--3.1%
BANKS & THRIFTS--2.0%
Pennfed Capital Trust, Preferred, 8.90% 27,500 $ 598,125
Fidelity Capital Trust I, Preferred, 8.375% 43,500 372,469
BBC Capital Trust I, Preferred, 9.50% 6,000 114,000
----------------
1,084,594
TELECOMMUNICATIONS--0.9%
MediaOne Finance Trust III, Preferred, 9.04% 20,000 $ 503,750
</TABLE>
THE OAKMARK EQUITY AND INCOME FUND 23
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held/
Par Value Market Value
------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED INCOME--35.2% (CONT.)
REAL ESTATE--0.2%
Host Marriott Corporation, Preferred Class B, 10.00% 6,000 $ 141,750
TOTAL PREFERRED STOCK (COST: $1,847,110) 1,730,094
CORPORATE BONDS--3.5%
RETAIL--1.1%
Ugly Duckling Corporation, 12.00% due 10/15/2003,
Subordinated Debenture $ 650,000 $ 585,000
BUILDING MATERIALS & CONSTRUCTION--1.4%
Juno Lighting, Inc., 11.875% due 7/1/2009, Senior
Subordinated Note $ 750,000 $ 630,000
USG Corporation, 9.25% due 9/15/2001,
Senior Notes Series B 150,000 152,062
----------------
782,062
UTILITIES--1.0%
Midland Funding Corporation, 11.75% due 7/23/2005 $ 500,000 $ 556,875
TOTAL CORPORATE BONDS (COST: $1,931,691) 1,923,937
GOVERNMENT AND AGENCY SECURITIES--28.6%
U.S. GOVERNMENT NOTES--24.9%
United States Treasury Notes, 6.50% due 10/15/2006 $ 3,000,000 $ 3,082,500
United States Treasury Notes, 5.25% due 8/15/2003 2,500,000 2,453,125
United States Treasury Notes, 6.50% due 2/15/2010 2,000,000 2,082,500
United States Treasury Notes, 6.50% due 2/28/2002 2,000,000 2,009,376
United States Treasury Notes, 5.25% due 5/15/2004 2,000,000 1,956,876
United States Treasury Notes, 9.125% due 5/15/2009 1,000,000 1,095,625
United States Treasury Notes, 7.875% due 8/15/2001 1,000,000 1,013,438
----------------
13,693,440
U.S. GOVERNMENT AGENCIES--3.7%
Federal Home Loan Bank, 6.75% due 5/1/2002 $ 2,000,000 $ 2,007,832
TOTAL GOVERNMENT AND AGENCY SECURITIES
(COST: $15,489,609) 15,701,272
TOTAL FIXED INCOME (COST: $19,268,410) 19,355,303
</TABLE>
24 THE OAKMARK EQUITY AND INCOME FUND
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value Market Value
-----------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS--3.8%
COMMERCIAL PAPER--1.8%
General Electric Capital Corporation, 6.69% due 10/2/2000 $1,000,000 $ 1,000,000
TOTAL COMMERCIAL PAPER (COST: $1,000,000) 1,000,000
REPURCHASE AGREEMENTS--2.0%
State Street Repurchase Agreement, 6.42% due 10/2/2000 $1,058,000 $ 1,058,000
TOTAL REPURCHASE AGREEMENTS (COST: $1,058,000) 1,058,000
TOTAL SHORT TERM INVESTMENTS (COST: $2,058,000) 2,058,000
Total Investments (Cost $48,686,873)--101.2% (b) 55,594,309
Other Liabilities In Excess Of Other Assets--(1.2)% (658,472)
--------------
TOTAL NET ASSETS--100% $ 54,935,837
==============
</TABLE>
(a) Non-income producing security.
(b) At September 30, 2000, net unrealized appreciation of $6,907,435, for
federal income tax purposes, consisted of gross unrealized appreciation of
$7,676,838 and gross unrealized depreciation of $769,403.
THE OAKMARK EQUITY AND INCOME FUND 25
<PAGE>
THE OAKMARK GLOBAL FUND
REPORT FROM MICHAEL J. WELSH AND GREGORY L. JACKSON, PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
[PHOTO]
[PHOTO]
--------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK GLOBAL FUND FROM ITS INCEPTION
(8/4/99) TO PRESENT (9/30/00) AS COMPARED TO THE MSCI WORLD INDEX
[GRAPH]
<TABLE>
<CAPTION>
THE OAKMARK GLOBAL FUND MSCI WORLD INDEX
<S> <C> <C>
8/99 $10,000 $10,000
9/99 $9,180 $9,883
12/99 $9,981 $11,550
3/00 $10,061 $11,668
6/00 $10,381 $11,255
9/00 $10,922 $10,689
</TABLE>
<TABLE>
<CAPTION>
9/30/00 NAV $10.91 AVERAGE ANNUAL TOTAL RETURN*
THROUGH 9/30/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MONTHS 8/4/99
--------------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK GLOBAL FUND 5.2% 7.8%
MSCI World Index w/inc.** -5.0% 5.9%
Lipper Global Fund Index** -3.5% 15.2%
</TABLE>
*Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
**Each of the three indexes or averages is an unmanaged group of stocks whose
composition is different from the Fund. The MSCI World Index includes 22 country
sub-indexes. The Lipper Global Fund Index includes 30 mutual funds that invest
in securities throughout the world. Past performance is no guarantee of future
results.
FELLOW SHAREHOLDERS,
For the three-month period ending September 30, 2000, The Oakmark Global Fund
achieved a return of 5.2%. This compares favorably to the -5.0% decline in the
MSCI World Index and the -3.5% decline in the Lipper Global Fund Index. For the
past twelve months, the Fund returned 19.0% compared with the 8.2% and the 19.2%
returned by the MSCI World Index and the Lipper Global Fund Index, respectively.
We are happy with the solid performance of the Fund during this time of
exceptional market turbulence, both here and abroad.
During the past quarter, the Fund completed its first full year in operation. We
wish to thank all of you for the trust you have placed in us, and every one at
Harris Associates, for their dedication to and enthusiasm for The Oakmark Global
Fund. We look forward to searching the world for the most attractive value
opportunities for many years.
GROWTH AND VALUE
Over the past few quarters (and continuing into the current quarter in which we
are writing this letter) the tech-heavy NASDAQ has seen substantial drops in
many of its most turbo-charged constituents. We must admit that, like other
value investors, we take a good bit of pleasure in seeing the share prices of
many momentum market darlings crash and burn. But our pleasure is more than mere
schadenfreude (the German term that refers to a feeling of happiness at
another's misfortune). We are actually hoping to be able to pick through some of
the wreckage and pick up some excellent businesses at reasonable prices.
26 THE OAKMARK GLOBAL FUND
<PAGE>
--------------------------------------------------------------------------------
We believe several of our current holdings have the growth prospects and sizzle
of NASDAQ stocks but trade in the market at value prices. Companies in your
portfolio like NOVA CORP, REYNOLDS & REYNOLDS, FIRST DATA in the United States,
and TELEMIG in Brazil have prospects for profit growth which far outstrip that
of the NASDAQ composite, yet they trade at fractions of the index's current,
albeit lowered, valuation. It is the best possible scenario for us to be able to
buy quality companies growing faster than the market at prices below market
averages.
<TABLE>
<CAPTION>
----------------------------------------------
TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
----------------------------------------------
<S> <C>
3 Months 5.2%
----------------------------------------------
6 Months 8.6%
----------------------------------------------
1 Year (a) 19.0%
----------------------------------------------
(a) During the year ended September 30, 2000,
Initial Public Offerings ("IPOs")
contributed 11.86% to the performance of
Global. As the IPO environment changes and
the total assets of the Fund grows, the
impact of IPOs on performance will
diminish.
----------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
----------------------------------------------
<S> <C>
3 Year N/A
----------------------------------------------
5 Year N/A
----------------------------------------------
Since inception 7.8%
----------------------------------------------
</TABLE>
In fact, dogmatic cleaving of the market into two camps, "value" and "growth,"
has always made us somewhat uncomfortable. Our philosophy of value investing is
about finding companies trading at significant discounts to underlying business
value. Our estimate of the growth rate is a critical component to determining
underlying business value. We have nothing against growth - far from it. The
difficulty in is developing a reasonable level of confidence in the
sustainability of a fast growth rate for many "growth" companies. To us, where
some growth investors
----------------------------------------------
HIGHLIGHTS
- DURING THE PAST QUARTER THE FUND COMPLETED
ITS FIRST FULL YEAR IN OPERATION. GLOBAL
EQUITY MARKETS CONTINUE TO PROVIDE
EXCEPTIONAL VALUE OPPORTUNITIES, EVEN MORE
SO THAT WHEN WE STARTED IT IN AUGUST 1999.
- FOR THE PAST TWELVE MONTHS, THE FUND
RETURNED 19.0%, COMPARED WITH MSCI WORLD
INDEX RETURN OF 8.2% AND LIPPER GLOBAL FUND
INDEX OF 19.2%.
- WE BELIEVE SEVERAL OF OUR CURRENT HOLDINGS
HAVE THE GROWTH PROSPECTS AND SIZZLE OF
NASAQ STOCKS, BUT TRADE IN THE MARKET AT
VALUE PRICES.
----------------------------------------------
fail is by mindlessly projecting growth rates for businesses that may not have
defendable franchises, or by ignoring the inevitable competition that is
attracted to high economic returns, or even by ignoring simple truths like the
law of large numbers and reversion to the mean.
The focus on price is what sets value investors apart. For us, such measures as
book value or current earnings may or may not be relevant to determining
business value. A long-term disciplined value investing process is much more
than robotically buying companies that are cheap on stated earnings.
FIRST DATA ("FDC") is an example of a perfect combination of a quality,
high-return business with a faster-than-average growth rate trading at a value
price. Currently FDC trades around 8.5 times 2001 operating profit, and we have
a high level of confidence that their annual growth rate over the next three
years will be in the mid-teens percent. What gives us the confidence in the
rapid growth rate? The defensibility of their position in payment processing and
the inexorable expansion of electronic payments for
THE OAKMARK GLOBAL FUND 27
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------
TOP FIVE INDUSTRIES
AS OF SEPTEMBER 30, 2000
----------------------------------------------
<S> <C> <C>
INDUSTRIES Information Services 15.8%
AND % OF Retail 15.1%
TOTAL NET Other Consumer
ASSETS Goods & Services 8.4%
Food & Beverage 8.2%
Educational Services 6.0%
----------------------------------------------
</TABLE>
transactions (fueled further by the Internet). FDC has an unassailable low-cost
position in high-volume transaction processing. Their economies of scale are
difficult to replicate making it nearly impossible for a competitor to
economically take business away from them.
<TABLE>
<CAPTION>
----------------------------------------------
TOP FIVE HOLDINGS
AS OF SEPTEMBER 30, 2000
----------------------------------------------
<S> <C> <C>
COMPANY NOVA Corporation 6.9%
AND % OF ITT Educational
TOTAL NET Services, Inc. 6.0%
ASSETS The Reynolds &
Reynolds Company,
Class A 5.5%
Somerfield plc 5.2%
Ceridian Corporation 5.2%
----------------------------------------------
</TABLE>
LOOKING FORWARD
Global equity markets are currently providing exceptional value opportunities,
even more so than when we started the Fund last August. We believe the current
portfolio represents excellent long-term appreciation potential.
Thank you for your continued confidence and support.
/s/Michael J. Welsh
MICHAEL J. WELSH, CFA, CPA
Portfolio Manager
[email protected]
/s/Gregory L. Jackson
GREGORY L. JACKSON
Portfolio Manager
[email protected]
October 10, 2000
28 THE OAKMARK GLOBAL FUND
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
--------------------------------------------------------------------------------
GLOBAL DIVERSIFICATION--SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<S> <C>
UNITED STATES 50.3%
EUROPE 32.1%
PACIFIC RIM 9.9%
LATIN AMERICA 3.8%
</TABLE>
<TABLE>
<CAPTION>
% OF FUND
NET ASSETS
-------------------------------------
<S> <C>
UNITED STATES 50.3%
EUROPE 32.1%
Great Britain 18.9%
*France 4.3%
*Germany 3.4%
*Italy 2.9%
*Finland 2.6%
</TABLE>
<TABLE>
<CAPTION>
% OF FUND
NET ASSETS
-------------------------------------
<S> <C>
PACIFIC RIM 9.9%
New Zealand 4.1%
Korea 4.0%
Hong Kong 1.7%
Singapore 0.1%
LATIN AMERICA 3.8%
Panama 2.7%
Brazil 1.1%
</TABLE>
* Euro currency countries comprise 13.2% of the Fund.
THE OAKMARK GLOBAL FUND 29
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.5%
FOOD & BEVERAGE--8.2%
Diageo plc Beverages, Wines, & Spirits
(Great Britain) Manufacturer 130,000 $ 1,161,233
Hite Brewery Co., Ltd. Brewer
(Korea) 27,000 1,088,329
-----------
2,249,562
APPAREL--2.9%
Fila Holding S.p.A. Athletic Footwear & Apparel
(Italy), (a)(b) 87,900 $ 802,087
RETAIL--13.5%
Somerfield plc Food Retailer
(Great Britain) 1,198,000 $ 1,408,520
House of Fraser Plc Department Store
(Great Britain) 1,601,000 1,166,102
Toys `R' Us, Inc. Toy Retailer
(United States), (a) 50,000 812,500
Ugly Duckling Automobile Retailer & Financier
Corporation
(United States), (a) 50,000 290,625
-----------
3,677,747
OTHER CONSUMER GOODS & SERVICES--8.4%
Royal Doulton plc Tableware & Giftware
(Great Britain), (a) 700,000 $ 843,713
Department 56, Inc. Collectibles & Giftware Products
(United States), (a) 60,000 791,250
H&R Block, Inc. Financial Services Provider
(United States) 18,000 667,125
-----------
2,302,088
BANKS & THRIFTS--4.1%
Banco Latinoamericano Latin American Trade Bank
de Exportaciones, S.A.,
Class E (Panama), (b) 26,300 $ 729,825
Washington Mutual, Inc. Thrift
(United States) 10,000 398,125
-----------
1,127,950
HOTELS & MOTELS--0.1%
Mandarin Oriental Hotel Management
International Limited
(Singapore) 30,000 $ 19,500
HUMAN RESOURCES--1.3%
Spherion Corporation Workforce Management Services
(United States), (a) 30,000 $ 358,125
</TABLE>
30 THE OAKMARK GLOBAL FUND
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.5% (CONT.)
EDUCATIONAL SERVICES--6.0%
ITT Educational Services, Postsecondary Degree Programs
Inc.
(United States), (a) 60,000 $ 1,627,500
INFORMATION SERVICES--15.8%
NOVA Corporation Transaction Processing Services
(United States), (a) 110,000 $ 1,883,750
Ceridian Corporation Data Management Services
(United States), (a) 50,000 1,403,125
Equifax Inc. Consumer Credit Information
(United States) 37,000 996,687
Dun & Bradstreet Decision Support Services
Corporation,
When Issued
(United States), (a) 1,500 25,500
-----------
4,309,062
COMPUTER SERVICES--3.9%
First Data Corporation Electronic Commerce Services
(United States) 27,000 $ 1,054,687
COMPUTER SOFTWARE--5.5%
The Reynolds and Information Management Systems
Reynolds Company,
Class A (United States) 75,000 $ 1,490,625
PRINTING--4.1%
Valassis Communications, Product Promotions Printer
Inc. (United States), (a) 50,000 $ 1,112,500
TELECOMMUNICATIONS--1.1%
Telemig Celular Mobile Telecommunications
Participacoes S.A.
(Brazil), (a) 111,345,000 $ 290,597
MEDICAL PRODUCTS--1.4%
Hanger Orthopedic Group, Orthotics & Prosthetics
Inc. (United States), (a) Manufacturer 100,000 $ 375,000
MACHINERY & METAL PROCESSING--2.6%
Metso Oyj (Finland) Paper & Pulp Machinery 69,500 $ 706,337
MINING & BUILDING MATERIALS--4.1%
Fletcher Challenge Building Materials Manufacturer
Building (New Zealand) 1,107,186 $ 1,110,307
</TABLE>
THE OAKMARK GLOBAL FUND 31
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held/
Par Value Market Value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.5% (CONT.)
OTHER INDUSTRIAL GOODS & SERVICES--4.8%
Chargeurs SA (France) Wool, Textile Production & Trading 9,900 $ 599,315
GFI Industries SA (France) Industrial Fastener Manufacturer 26,600 564,656
Tomkins plc (Great Britain) Diversified Engineering 57,432 140,569
-----------
1,304,540
PRODUCTION EQUIPMENT--3.4%
Krones AG (Germany) Production Machinery Manufacturer 33,400 $ 929,793
DIVERSIFIED CONGLOMERATES--3.3%
First Pacific Company Diversified Operations
Limited (Hong Kong) 1,540,000 $ 459,245
Enodis plc (Great Britain) Food Processing Equipment 150,000 431,469
-----------
890,714
TOTAL COMMON STOCKS (COST: $23,392,410) 25,738,721
FIXED INCOME--1.6%
RETAIL--1.6%
Ugly Duckling Corporation,
Subordinated Debenture, 11.00% due 4/15/2007 $ 605,000 $ 423,500
TOTAL FIXED INCOME (COST: $436,404) 423,500
SHORT TERM INVESTMENTS--3.6%
COMMERCIAL PAPER--1.8%
General Electric Capital Corporation, 6.69% due 10/2/2000 $ 500,000 $ 500,000
TOTAL COMMERCIAL PAPER (COST: $500,000) 500,000
REPURCHASE AGREEMENTS--1.8%
State Street Repurchase Agreement, 6.42% due 10/2/2000 $ 473,000 $ 473,000
TOTAL REPURCHASE AGREEMENTS (COST: $473,000) 473,000
TOTAL SHORT TERM INVESTMENTS (COST: $973,000) 973,000
Total Investments (Cost $24,801,814)--99.7% (c) $27,135,222
Foreign Currencies (Proceeds $28)--0.0% 28
Other Assets In Excess Of Other Liabilities--0.3% (d) 91,989
TOTAL NET ASSETS--100% $27,227,239
===========
</TABLE>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) At September 30, 2000, net unrealized appreciation of $2,333,407, for
federal income tax purposes, consisted of gross unrealized appreciation
of $3,679,374 and gross unrealized depreciation of $1,345,967.
(d) Includes portfolio and transaction hedges.
32 THE OAKMARK GLOBAL FUND
<PAGE>
THE OAKMARK INTERNATIONAL FUND
REPORT FROM DAVID G. HERRO AND MICHAEL J. WELSH, PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
[PHOTO]
[PHOTO]
--------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL FUND FROM ITS
INCEPTION (9/30/92) TO PRESENT (9/30/00) COMPARED TO THE MSCI WORLD EX U.S.
INDEX
<TABLE>
<CAPTION>
THE OAKMARK MSCI WORLD EX
INTERNATIONAL FUND U.S. INDEX
<S> <C> <C>
9/30/1992 $10,000 $10,000
12/31/1992 $10,043 $9,628
3/31/1993 $11,890 $10,766
6/30/1993 $12,300 $11,834
9/30/1993 $13,387 $12,562
12/31/1993 $15,424 $12,729
3/31/1994 $15,257 $13,133
6/30/1994 $14,350 $13,748
9/30/1994 $15,278 $13,830
12/31/1994 $14,026 $13,664
3/31/1995 $13,563 $13,924
6/30/1995 $14,749 $14,060
9/30/1995 $15,507 $14,631
12/31/1995 $15,193 $15,222
3/31/1996 $17,021 $15,681
6/30/1996 $18,383 $15,937
9/30/1996 $18,347 $15,950
12/31/1996 $19,450 $16,268
3/31/1997 $20,963 $16,016
6/30/1997 $22,700 $18,094
9/30/1997 $23,283 $18,027
12/31/1997 $20,097 $16,637
3/31/1998 $22,994 $19,083
6/30/1998 $20,253 $19,233
9/30/1998 $16,322 $16,404
12/31/1998 $18,688 $19,759
3/31/1999 $21,258 $20,070
6/30/1999 $25,728 $20,650
9/30/1999 $23,896 $21,535
12/31/1999 $26,065 $25,277
3/31/2000 $26,012 $25,416
6/30/2000 $27,856 $24,530
9/30/2000 $27,306 $22,663
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
9/30/00 NAV $15.40 THROUGH 9/30/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MONTHS 9/30/92
------------------------------------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK INTERNATIONAL FUND -2.0% 13.4%
MSCI World ex U.S. Index w/inc.** -7.6% 10.8%
MSCI EAFE Index w/inc.** -8.1% 10.5%
Lipper International Fund Index** -7.3% 12.4%
</TABLE>
*Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
**Each of the three indexes or averages is an unmanaged group of stocks or funds
whose composition is different from the Fund. The MSCI World ex U.S. Index
includes 21 country sub-indexes. The MSCI EAFE Index refers to Europe, Asia and
the Far East and includes 20 country sub-indexes. The Lipper International Fund
Index includes 30 mutual funds that invest in securities whose primary markets
are outside the United States. Past performance is no guarantee of future
results.
FELLOW SHAREHOLDERS,
For the fiscal year 2000, The Oakmark International Fund produced a return of
14.3%. This compares very favorably to the MSCI EAFE Index, which was up 3.2%.
Although the Fund was down 2.0% for the fourth quarter of the fiscal year, this
compares favorably to the return of the MSCI EAFE Index that was -8.1% for the
same quarter.
Most importantly, since Oakmark International's inception eight years ago, it
has averaged a 13.4% annual return. This exceeds the MSCI EAFE Index return of
10.5% and the Lipper International Fund Index return of 12.4%. Though we are
pleased with these returns, there is room for improvement. Given the state of
the portfolio today and boundless opportunities, we hope to build upon the
return in the years to follow.
WINNERS OF THE 4TH QUARTER
Our top performer of the quarter was one of last year's worst performers,
SOMERFIELD PLC. Somerfield is a UK based grocery store, which we know very well.
Though the company has made some mistakes in the past, we are quite certain that
the market has greatly overreacted in terms of the Somerfield share price. The
share price does not reflect the company's business strengths and does not
factor in the impact of a new, very experienced and competent management.
Again, we believe patience is a virtue in the investment business and are
pleased that our patience has generally benefited our shareholders (CORDIANT,
CHARGEURS, TELMEX, ETC). Another 4th quarter winner, South Korean building
materials company KUMKANG, was up almost 15% in the
THE OAKMARK INTERNATIONAL FUND 33
<PAGE>
--------------------------------------------------------------------------------
last quarter. This was achieved in an extremely weak equity environment in South
Korea.
<TABLE>
-------------------------------------------------
TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
-------------------------------------------------
<S> <C> <C>
3 Months (2.0%)
-------------------------------------------------
6 Months 5.0%
-------------------------------------------------
1 Year 14.3%
-------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
-------------------------------------------------
3 Year 5.5%
-------------------------------------------------
5 Year 12.0%
-------------------------------------------------
Since inception 13.4%
-------------------------------------------------
</TABLE>
AND SOME LOSERS
ENODIS PLC, a British-based maker of food preparation equipment, was hit as a
few areas of their business showed some weakness. However, we are quite
confident that, on whole, the business is extremely strong. It is a global
leader in its industry and will benefit from growth in the restaurant business
as well as its wide product line which provides marketing and distribution
synergies. TOMKINS PLC, an engineering group which itself is being
re-engineered, also disappointed us over the last three months although it has
posted only good news. This one is a real puzzler: it has sold its lower profit
businesses, managed its cyclical yet profitable businesses well, has bought back
over 10% of its company, has lots of cash on its balance sheet, has grown its
dividend 15% a year for the last 15 years and trades at 6 times earnings with a
11% YIELD! Although a downturn in the growth of the US economy would not be good
for Tomkins, we believe the current price seems irrational.
WITHER THE EURO???
The Euro, the new European currency unit, has been extremely weak versus the
dollar, thus negatively impacting return of international equity funds like
ours. As a refresher, the Euro was introduced with great fanfare 21 months ago
at a price of E1.15. At this writing, it sits at E .87, a decline of around 25%.
It's ironic that when it was introduced and rising, the pundits, as one would
expect, were all over it claiming that E1.25 was a reasonable level.
--------------------------------------------------------------------------------
HIGHLIGHTS
- THE FUND RETURNED 14.3% FOR THE FISCAL YEAR ENDED 9/30, VERSUS THE MSCI
EAFE INDEX RETURN OF 3.2% AND THE LIPPER INTERNATIONAL FUND INDEX RETURN OF
10.8%.
- THIRD QUARTER TOP PERFORMER WAS ONE OF LAST YEAR'S WORST PERFORMERS --
SOMERFIELD PLC. ANOTHER WINNER, SOUTH KOREAN BUILDING MATERIALS COMPANY
KUMKANG, WAS UP ALMOST 15% FOR THE QUARTER.
- THE EURO, THE NEW EUROPEAN CURRENCY UNIT, HAS BEEN EXTREMELY WEAK VERSUS
THE DOLLAR, THUS NEGATIVELY IMPACTING THE RETURNS OF INTERNATIONAL EQUITY
FUNDS. HOWEVER, WITH POSITIVE CHANGES OCCURRING IN MANY COUNTRIES
THROUGHOUT EUROPE, WE ARE ENCOURAGED BY ITS PROSPECTS.
--------------------------------------------------------------------------------
Today, -25% later, the same people are saying that the Euro is dead. What is the
truth???
You may recall from past quarterly reports how we have explained that long-term
currency movements are ultimately derived from a nation's (or an area's)
competitiveness. As desired goods and services are produced from a currency
region, the demand for these goods and services will increase, as will the
demand for their underlying currency. This is also true for longer-term
investment in a particular region. If investors think a region is competitive,
they will invest there for the long term. Remember back in the days of a very
weak dollar (mid 90's), we argued that continued weakness was unsustainable
because the US was the most competitive nation in the world. As the dollar
dropped, foreign companies
34 THE OAKMARK INTERNATIONAL FUND
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------
TOP FIVE INDUSTRIES
AS OF SEPTEMBER 30, 2000
---------------------------------------------------------------------
<S> <C> <C>
INDUSTRIES Banks & Thrifts 18.4%
AND % OF Other Industrial
TOTAL NET Goods & Services 9.1%
ASSETS Food & Beverage 8.4%
Apparel 6.4%
Household Products 6.1%
---------------------------------------------------------------------
</TABLE>
continued to buy US companies, land, equipment, etc. Even BMW and Mercedes now
produce vehicles in the US!
Today, it seems markets have again overreacted. Europe, which has done so much
to become globally competitive, is not being rewarded for these efforts in the
global currency markets. Whether one speaks of micro, on the plant floor
changes, or macro, national economic changes, it is evident that Europe and its
companies are truly changing for the better. As an example, Germany has made
monumental changes in the areas of taxation and social welfare. France is
attempting to do the same. Spain is reforming its labor markets. And, hostile
takeovers are starting to happen. Who would have thought that a British phone
company, Vodafone, would ever be allowed to take over a German national champion
like Mannesman?
<TABLE>
<CAPTION>
-------------------------------------------------------------------
TOP FIVE HOLDINGS
AS OF SEPTEMBER 30, 2000
-------------------------------------------------------------------
<S> <C> <C>
COMPANY Somerfield plc 5.8%
AND % OF Diageo plc 4.0%
TOTAL NET Hunter Douglas N.V. 3.8%
ASSETS Metso Oyj 3.8%
Chargeurs SA 3.2%
-------------------------------------------------------------------
</TABLE>
These positive events, coupled with the current low price of the Euro, should
represent investment opportunity over the medium and longer term.
FUTURE OUTLOOK
With the continued deflation of the technology stock bubble and the bargain
basement prices of the stocks in our portfolio, we remain very enthusiastic
about future prospects. Whether it be as extreme an example as exists in Tomkins
or just the great values we are finding in financial services, consumer
non-durables and in the many well-managed, very profitable companies across the
industrial and geographic spectrum, we believe that future prospects are very
promising. Again, going into our ninth year, we thank all of our shareholders
for your trust and support.
/s/ David G. Herro
DAVID G. HERRO, CFA
Portfolio Manager
[email protected]
/s/ Michael J. Welsh
MICHAEL J. WELSH, CFA, CPA
Portfolio Manager
[email protected]
October 6, 2000
THE OAKMARK INTERNATIONAL FUND 35
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
--------------------------------------------------------------------------------
INTERNATIONAL DIVERSIFICATION--SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<S> <C>
EUROPE 66.8%
PACIFIC RIM 15.7%
LATIN AMERICA 10.1%
OTHER COUNTRIES 3.1%
</TABLE>
<TABLE>
<CAPTION>
% OF FUND
NET ASSETS
-----------------------------------
<S> <C>
EUROPE 66.8%
Great Britain 24.4%
* France 10.0%
* Finland 6.3%
Denmark 5.2%
*Netherlands 5.2%
Sweden 4.9%
*Italy 3.0%
*Germany 3.0%
*Ireland 2.1%
Switzerland 1.9%
*Austria 0.8%
</TABLE>
<TABLE>
<CAPTION>
% OF FUND
NET ASSETS
-----------------------------------
<S> <C>
LATIN AMERICA 10.1%
Brazil 3.9%
Panama 3.2%
Argentina 2.7%
Mexico 0.3%
PACIFIC RIM 15.7%
Korea 6.5%
Singapore 3.3%
Australia 2.7%
Hong Kong 2.3%
Japan 0.9%
Other 3.1%
Canada 3.1%
</TABLE>
* Euro currency countries comprise 30.4% of the Fund.
36 THE OAKMARK INTERNATIONAL FUND
<PAGE>
-------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
-------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.7%
FOOD & BEVERAGE--8.4%
Diageo plc (Great Britain) Beverages, Wines, & Spirits
Manufacturer 3,520,000 $ 31,442,608
Quilmes Industrial Brewer
S.A. (Argentina), (b) 2,032,000 21,336,000
Lotte Chilsung Beverage Soft Drinks, Juices, & Sport
Company (Korea) (d) Drinks Manufacturer 88,080 9,399,202
Lotte Confectionery Co., Confection Manufacturer
Ltd. (Korea) 37,270 3,275,308
------------
65,453,118
APPAREL--6.4%
Fila Holding S.p.A. Athletic Footwear & Apparel
(Italy), (a)(b)(d) 2,577,800 $ 23,522,425
Adidas-Salomon AG Worldwide Manufacturer/Marketer
(Germany) of Sportswear 335,100 18,399,461
Giordano International Pacific Rim Clothing Retailer &
Limited (Hong Kong) Manufacturer 14,286,000 8,291,432
------------
50,213,318
RETAIL--5.8%
Somerfield plc Food Retailer
(Great Britain) (d) 38,321,000 $ 45,054,993
HOUSEHOLD PRODUCTS--6.1%
Hunter Douglas N.V. Window Coverings Manufacturer
(Netherlands) 1,106,184 $ 30,012,009
Reckitt Benckiser plc Household Cleaners & Air
(Great Britain) Fresheners 1,443,000 17,755,325
------------
47,767,334
OTHER CONSUMER GOODS & SERVICES--0.9%
Shimano Inc. (Japan) Bicycle Components Manufacturer 345,000 $ 6,669,989
BANKS & THRIFTS--18.4%
Banco Latinoamericano Latin American Trade Bank
de Exportaciones, S.A.,
Class E (Panama), (b) 898,500 $ 24,933,375
Danske Bank Group Commercial Banking
(Denmark), (a) 177,700 22,597,004
Uniao de Bancos Commercial Banking
Brasileiros S.A.
(Brazil), (c) 623,300 20,568,900
Nordic Baltic Holding Commercial Banking
(NBH) AB (Denmark) 2,520,728 17,758,329
Bank of Ireland (Ireland) Commercial Banking 2,030,000 16,217,869
Canadian Imperial Bank of Commercial Banking
Commerce (Canada) 335,000 11,001,460
</TABLE>
THE OAKMARK INTERNATIONAL FUND 37
<PAGE>
-------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
-------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.7% (CONT.)
BANKS & THRIFTS--18.4% (CONTINUED)
BNP Paribas SA (France) Commercial Banking 108,500 $ 9,579,096
Svenska Handelsbanken AB Commercial Banking
(Sweden) 502,500 8,100,624
Kookmin Bank (Korea) Commercial Banking 430,000 5,128,458
United Overseas Bank Commercial Banking
Limited, Foreign Shares
(Singapore) 583,968 4,197,223
National Australia Bank Commercial Banking
Limited (Australia) 295,000 4,076,433
------------
144,158,771
INSURANCE--1.9%
Swiss Re (Switzerland) Reinsurance Provider 7,700 $ 14,724,886
HOTELS & MOTELS--2.7%
Mandarin Oriental Hotel Management
International Limited
(Singapore) 33,134,400 $ 21,537,360
PUBLISHING--1.4%
Wolters Kluwer NV Reference Material Publisher
(Netherlands) 535,000 $ 10,874,541
TELECOMMUNICATIONS--2.7%
SK Telecom Co., Ltd. Mobile Telecommunications
(Korea) 44,130 $ 10,763,897
Telemig Celular Mobile Telecommunications
Participacoes S.A.
(Brazil), (a) 2,297,800,000 5,996,971
Brasil Telecom Mobile Telecommunications
Participacoes S.A.
(Brazil), (a) 469,200,000 4,088,634
------------
20,849,502
PHARMACEUTICALS--2.5%
Aventis S.A. (France) Pharmaceuticals 152,000 $ 11,418,047
Glaxo Wellcome plc Pharmaceuticals
(Great Britain) 265,000 8,010,613
------------
19,428,660
AUTOMOTIVE--5.1%
Autoliv, Inc (Sweden) Automotive Safety Systems
Manufacturer 950,000 $ 18,723,349
Compagnie Generale des Tire Manufacturer
Establissements Michelin
(France) 644,000 17,927,748
</TABLE>
38 THE OAKMARK INTERNATIONAL FUND
<PAGE>
-------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
-------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.7% (CONT.)
AUTOMOTIVE--5.1% (CONTINUED)
Dongah Tire Industry Innertube Manufacturer
Company (Korea) (d) 166,290 $ 3,459,560
------------
40,110,657
AEROSPACE--2.1%
Rolls-Royce plc Aviation & Marine Power
(Great Britain) 6,638,702 $ 16,666,021
AIRPORT MAINTENANCE--1.1%
Flughafen Wien AG Airport Management & Operations
(Austria) 170,825 $ 6,189,629
Grupo Aeroportuario del Airport Operator
Sureste S.A. de C.V.
(Mexico), (a) (b) 170,000 2,581,875
------------
8,771,504
COMPONENTS--4.2%
Morgan Crucible Crucible & Components
Company plc Manufacturer
(Great Britain) 4,396,424 $ 16,807,344
IMI plc (Great Britain) Components Manufacturer 5,140,000 15,982,256
------------
32,789,600
CHEMICALS--2.2%
Nufarm Limited Agricultural & Industrial
(Australia) (d) Chemical Producer 10,381,415 $ 17,097,359
OIL & NATURAL GAS--1.8%
ISIS (France) Oil Services 200,950 $ 14,082,849
MACHINERY & METAL PROCESSING--3.8%
Metso Oyj (Finland) Paper & Pulp Machinery 2,937,987 $ 29,859,122
MINING & BUILDING MATERIALS--2.4%
Kumkang Korea Building Materials
Chemical Co., Ltd.
(Korea) 419,260 $ 18,798,367
OTHER INDUSTRIAL GOODS & SERVICES--9.1%
Chargeurs SA (France) (d) Wool, Textile Production &
Trading 418,930 $ 25,360,707
Tomkins plc (Great Britain) Diversified Engineering 8,698,685 21,290,731
Kone Corporation, Class B Elevators
(Finland) 313,110 19,093,052
Buderus AG (Germany) Industrial Manufacturing 327,820 5,455,255
------------
71,199,745
</TABLE>
THE OAKMARK INTERNATIONAL FUND 39
<PAGE>
-------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
-------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held/
Description Par Value Market Value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.7% (CONT.)
STEEL--1.5%
SSAB Svenskt Stal AB, Steel Producer
Series A (Sweden) 1,451,920 $ 11,551,938
DIVERSIFIED CONGLOMERATES--5.2%
Enodis plc (Great Britain) Food Processing Equipment 6,240,000 $ 17,949,120
Canadian Pacific Limited Diversified Operations
(Canada) 517,000 13,411,199
First Pacific Company Diversified Operations
Limited (Hong Kong) 31,760,868 9,471,431
------------
40,831,750
TOTAL COMMON STOCKS (COST: $792,892,042) 748,491,384
SHORT TERM INVESTMENTS--3.0%
COMMERCIAL PAPER--1.3%
General Electric Capital Corporation, 6.69%
due 10/2/2000 $10,000,000 $ 10,000,000
TOTAL COMMERCIAL PAPER (COST: $10,000,000) 10,000,000
REPURCHASE AGREEMENTS--1.7%
State Street Repurchase Agreement, 6.42%
due 10/2/2000 $13,828,000 $ 13,828,000
TOTAL REPURCHASE AGREEMENTS (COST: $13,828,000) 13,828,000
TOTAL SHORT TERM INVESTMENTS (COST: $23,828,000) 23,828,000
Total Investments (Cost $816,720,042)--98.7% (e) $772,319,384
Foreign Currencies (Proceeds $76)--0.0% 76
Other Assets In Excess Of Other Liabilities--1.3% (f) 10,194,506
TOTAL NET ASSETS--100% $782,513,966
============
</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, 2000, net unrealized depreciation of $44,400,657, for
federal income tax purposes, consisted of gross unrealized appreciation
of $88,414,759 and gross unrealized depreciation of $132,815,412.
(f) Includes portfolio and transaction hedges.
40 THE OAKMARK INTERNATIONAL FUND
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------------------------
REPORT FROM DAVID G. HERRO AND MICHAEL J. WELSH, PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
[PHOTO]
[PHOTO]
--------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND
FROM ITS INCEPTION (11/1/95) TO PRESENT (9/30/00) AS COMPARED TO THE MSCI WORLD
EX U.S.
<TABLE>
<CAPTION>
THE OAKMARK
INTERNATIONAL
SMALL CAP MSCI WORLD EX
FUND U.S. INDEX
<S> <C> <C>
10/95 $10,000 $10,000
12/95 $9,630 $10,684
3/96 $10,970 $11,006
6/96 $11,570 $11,186
9/96 $11,590 $11,195
12/96 $12,038 $11,418
3/97 $12,080 $11,241
6/97 $13,181 $12,699
9/97 $12,672 $12,652
12/97 $9,642 $11,677
3/98 $11,429 $13,394
6/98 $9,892 $13,499
9/98 $8,211 $11,513
12/98 $10,529 $13,868
3/99 $13,118 $14,086
6/99 $15,317 $14,493
9/99 $15,439 $15,114
12/99 $16,190 $17,741
3/00 $15,387 $17,839
6/00 $15,529 $17,217
9/00 $14,908 $15,906
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
9/30/00 NAV $11.51 THROUGH 9/30/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MONTHS 11/1/95
--------------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK INTERNATIONAL SMALL
CAP FUND -4.0% 8.5%
MSCI World ex U.S. Index w/inc.** -7.6% 9.9%
Lipper International Small Cap Fund
Average** -3.5% 18.5%
Micropal Equity International Small
Cap Index** -4.0% 18.5%
</TABLE>
*Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
**Each of the three indexes or averages is an unmanaged group of indexes or
funds whose composition is different from the Fund. The MSCI World ex U.S. Index
includes 21 country sub-indexes. The Lipper International Small Cap Fund Average
includes 76 mutual funds that invest in securities whose primary markets are
outside the United States. The Micropal Equity International Small Cap Index is
an unweighted index comprised of all funds within the international small
company fund sector. Past performance is no guarantee of future results.
FELLOW SHAREHOLDERS,
For the fourth quarter of the fiscal year, your fund was down 4.0%, compared to
negative returns of 7.6% and 3.5% for the MSCI World ex US index and the Lipper
International Small Cap Fund Average, respectively. For the nine months ended
September 30, 2000, the Fund was down 7.9%, compared to negative returns of
10.3% and 2.5% for the MSCI World ex US Index and the Lipper International Small
Cap Fund Average.
The past quarter was a rough one for most of the world's equity markets. The
areas of greatest market excess, the ubiquitous "T-M-T" favorites (Technology,
Media and Telecommunications) shouldered the brunt of the declines, but weakness
was nearly universal. As long-term shareholders remember, we believe it is often
in times of volatile share price movements that exceptional long-term values are
unearthed.
PRIVATE EQUITY IN EUROPE--DRY POWDER
For quite a few quarters now, we have written about the exceptional values we
are finding among the small and mid-cap stocks in Europe. Even with the latest
downturns in the market indices, a large valuation gap still exists between
huge, liquid, index names and everything else. A good question to ask is: "what
is going to change this?"
One possibility is private equity -- money that is raised from pension funds,
insurance companies, and other institutions, pooled with ample amounts of debt,
and used to buy pieces of businesses or entire companies. A healthy private
equity market helps maintain "honesty" in share prices by focusing on businesses
that are priced by the market
THE OAKMARK INTERNATIONAL SMALL CAP FUND 41
<PAGE>
--------------------------------------------------------------------------------
at significant discounts to business value. These financial investors can make a
bid for the entire enterprise, their non-core business lines, or
under-performing operations.
The trend is clear. We continue to see a pronounced increase in private equity,
raised both in the US and Europe, that is earmarked for deals in the UK and
Continental Europe. In the past quarter, some examples of private equity
investors raising significant funds include BC Partners (Euro3.5 bill), KKR
(US$3 bill), CVC Capital Partners (US$3.5 bill), and Schroder Ventures (Euro3
bill). Other firms actively involved in searching for European deals include
Hicks Muse Tate & Furst, Carlyle Group, ABN-AMRO Holdings, Morgan Grenfell
Private Equity, Texas Pacific Group, and Clayton, Dubilier, & Rice.
<TABLE>
<CAPTION>
--------------------------------------------
TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
--------------------------------------------
<S> <C>
3 Months (4.0%)
--------------------------------------------
6 Months (3.1%)
--------------------------------------------
1 Year (3.4%)
--------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPTEMBER 30, 2000
--------------------------------------------
<S> <C>
3 Year 5.6%
--------------------------------------------
5 Year N/A
--------------------------------------------
Since inception 8.5%
--------------------------------------------
</TABLE>
This year, your fund had two companies that were bought out by private equity
investors, each for similar reasons. The first, UK-based WASSALL, was purchased
in the first quarter by KKR for $1 billion. KKR saw Wassall as the perfect first
step in their plan to consolidate the fragmented European lighting business.
Wassall management will remain intact to assist KKR in this consolidation
effort. The second buyout was DE DIETRICH, one of the oldest industrial
companies founded in France over three hundred years ago. In this instance, when
one of the controlling families wanted to sell their ownership interest,
ABN-AMRO Holdings approached management with a full takeover offer. As with KKR,
the buyer wanted to keep the existing superb management intact and simply supply
the funding needed to grow the business.
--------------------------------------------------------------------------------
HIGHLIGHTS
- THE PAST QUARTER WAS QUITE A ROUGH ONE FOR MOST OF THE WORLD'S EQUITY
MARKETS. THE AREAS OF GREATEST MARKET EXCESS --THE TECHNOLOGY, MEDIA, AND
TELECOMMUNICATIONS FAVORITES --SHOULDERED THE BRUNT OF THE DECLINES.
- WE ARE FINDING EXCEPTIONAL VALUE IN SMALL AND MID-CAP STOCKS IN EUROPE.
HOWEVER, EVEN WITH THE LATEST DOWNTRUNS IN MARKET INDICES, A LARGE
VALUATION GAP STILL EXISTS BETWEEN LARGE, LIQUID, INDEX NAMES AND
EVERYTHING ELSE.
- WE ARE CONTINUING TO SEE A PRONOUNCED INCREASE IN PRIVATE EQUITY, RAISED
BOTH IN THE U.S. AND IN EUROPE, BEING SPECIFICALLY EARMARKED FOR DEALS IN
THE U.K. AND CONTINENTAL EUROPE.
--------------------------------------------------------------------------------
In both cases, it was apparent to the management teams that the market was not
giving them proper credit for substantial value creation, something that a
deep-pocketed private equity buyer was happy to do. Both companies continue to
operate as before, the only difference is they now have direct access to easy
capital instead of a low stock market valuation.
Another good example of a buyout by private equity investors occurred in the
past few weeks with LAPORTE PLC, the UK chemicals group. Our analyst, Dan
O'Keefe, was investigating the company for the Oakmark International Fund.
Laporte plc announced the sale of a part of their business which they considered
"non-core" to KKR for $1.2 billion, representing a huge valuation premium to the
multiple for which the entire business was trading at the time. The share price,
understandably, skyrocketed. As one market analyst put it: "Management has
exploited the wide gulf between equity market multiples and the valuations that
financial and trade buyers are willing to stomach."
42 THE OAKMARK INTERNATIONAL SMALL CAP FUND
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------
TOP FIVE INDUSTRIES
AS OF SEPTEMBER 30, 2000
-------------------------------------------------------------
<S> <C> <C>
INDUSTRIES Retail 11.0%
AND % OF Other Consumer
TOTAL NET Goods & Services 10.1%
ASSETS Food & Beverage 9.4%
Diversified Conglomerates 6.5%
Other Industrial Goods
& Services 6.4%
-------------------------------------------------------------
</TABLE>
We believe there is a substantial crop of low-hanging fruit to be harvested in
Europe by private equity buyers, especially considering the presence of
plentiful and cheap debt financing. The primary reasons you are not seeing a
greater volume of transactions are political and cultural. Unlike the United
States, it is still very early in Europe for these types of transactions to take
place and it will take more time and delicacy to overcome political problems.
Culturally, it will take time for top European managers to realize that
divestitures and sales do not always equal failure. Despite these obstacles, the
size and number of private equity transactions likely will grow in the years
ahead.
<TABLE>
<CAPTION>
--------------------------------------------------------------
TOP FIVE HOLDINGS
AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------
<S> <C> <C>
COMPANY Royal Doulton plc 5.5%
AND % OF GFI Industries SA 4.9%
TOTAL NET Hite Brewery Co., Ltd. 4.3%
ASSETS Fletcher Challenge
Building 4.2%
Jarvis Hotels plc 4.1%
--------------------------------------------------------------
</TABLE>
LOOKING FORWARD
We continue to find very attractive situations in the small cap area across the
globe. While the turbulence may continue for a bit, we believe the portfolio
represents terrific long-term value at current prices.
We appreciate your continued support.
/s/ David G. Herro
DAVID G. HERRO, CFA
Portfolio Manager
[email protected]
/s/ Michael J. Welsh
MICHAEL J. WELSH, CFA, CPA
Portfolio Manager
[email protected]
October 10, 2000
THE OAKMARK INTERNATIONAL SMALL CAP FUND 43
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------------------------
INTERNATIONAL DIVERSIFICATION--SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<S> <C>
EUROPE 42.6%
LATIN AMERICA 4.7%
PACIFIC RIM 44.5%
OTHER 2.9%
</TABLE>
<TABLE>
<CAPTION>
% OF FUND
NET ASSETS
----------------------------------
<S> <C>
EUROPE 42.6%
Great Britain 18.7%
* France 10.0%
* Germany 4.3%
* Italy 3.3%
* Austria 2.9%
* Finland 2.2%
Sweden 1.2%
<CAPTION>
<S> <C>
LATIN AMERICA 4.7%
Mexico 3.3%
Brazil 1.4%
</TABLE>
<TABLE>
<CAPTION>
% OF FUND
NET ASSETS
----------------------------------
<S> <C>
PACIFIC RIM 44.5%
Korea 10.3%
Hong Kong 9.7%
New Zealand 7.7%
Japan 6.7%
Singapore 5.3%
Philippines 2.5%
Thailand 2.3%
Other 2.9%
Bermuda 2.9%
</TABLE>
* Euro currency countries comprise 22.7% of the Fund.
44 THE OAKMARK INTERNATIONAL SMALL CAP FUND
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.7%
FOOD & BEVERAGE--9.4%
Hite Brewery Co., Ltd. Brewer
(Korea) 95,531 $ 3,850,709
Alaska Milk Corporation Milk Producer
(Philippines) 44,874,000 2,233,987
Grupo Continental, S.A. Soft Drink Manufacturer
(Mexico) 1,213,000 1,477,389
Mikuni Coca-Cola Soft Drink Manufacturer
Bottling Co., Ltd.
(Japan) 87,000 968,056
-----------
8,530,141
APPAREL--2.1%
Kingmaker Footwear Athletic Footwear Manufacturer
Holdings Limited
(Hong Kong) 12,300,000 $ 1,861,605
RETAIL--11.0%
House of Fraser Plc Department Store
(Great Britain) 4,195,000 $ 3,055,464
Carpetright plc Carpet Retailer
(Great Britain) 346,000 2,522,679
Denny's Japan Co., Restaurant Chain
Ltd. (Japan) 110,000 2,111,364
York-Benimaru Co., Supermarket Chain
Ltd. (Japan) 41,300 1,056,961
Jusco Stores Department Stores
(Hong Kong) Co.,
Limited (Hong Kong) 6,996,000 807,593
Harvey Nichols plc High Fashion Clothing Retailer
(Great Britain) 142,000 364,357
-----------
9,918,418
OTHER CONSUMER GOODS & SERVICES--10.1%
Royal Doulton plc Tableware & Giftware
(Great Britain), (a) 4,129,219 $ 4,976,964
Il Shin Spinning Fabric & Yarn Manufacturer
Company (Korea) 65,220 2,397,902
Dickson Concepts Jewlery Wholesaler & Retailer
(International)
Limited (Hong Kong) 1,315,000 877,060
Sanford Limited Fisheries
(New Zealand) 358,334 642,729
Designer Textiles (NZ) Knit Fabrics
Limited (New Zealand) (c) 1,960,000 191,758
-----------
9,086,413
</TABLE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND 45
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.7% (CONT.)
INSURANCE--2.6%
IPC Holdings, Ltd. Reinsurance Provider
(Bermuda) 87,700 $ 1,622,450
Hannover
Rueckversicherungs- Reinsurance Provider
AG (Germany) 8,000 685,790
-----------
2,308,240
OTHER FINANCIAL--5.6%
JCG Holdings Ltd. Investment Holding Company
(Hong Kong) 5,604,000 $ 3,162,650
Ichiyoshi Securities Co., Stock Broker
Ltd. (Japan) 345,000 1,919,421
-----------
5,082,071
HOTELS & MOTELS--4.1%
Jarvis Hotels plc Hotel Operator
(Great Britain) 2,537,000 $ 3,658,171
PUBLISHING--3.5%
Matichon Public Newspaper Publisher
Company Limited,
Foreign Shares
(Thailand) (c) 2,039,500 $2,105,571
VLT AB, Class B (Sweden) Newspaper Publisher 125,950 1,087,244
-----------
3,192,815
PRINTING--2.3%
Hung Hing Printing Printing Company
Group Limited
(Hong Kong) 5,498,000 $ 2,080,305
TELECOMMUNICATIONS--2.2%
Telemig Celular Mobile Telecommunications
Participacoes S.A.
(Brazil), (a) 475,000,000 $ 1,239,691
SK Telecom Co., Mobile Telecommunications
Ltd. (Korea) 2,960 721,983
-----------
1,961,674
AUTOMOTIVE--0.8%
Dongah Tire Industry Innertube Manufacturer
Company (Korea) 34,400 $ 715,670
AUTOMOBILES--3.3%
Ducati Motor Holding Motorcycle Manufacturer
S.p.A. (Italy), (a) 1,287,000 $ 2,974,264
</TABLE>
46 THE OAKMARK INTERNATIONAL SMALL CAP FUND
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.7% (CONT.)
TRANSPORTATION SERVICES--4.2%
Mainfreight Limited Logistics Services
(New Zealand) (c) 4,373,551 $ 2,317,741
DelGro Corporation Bus, Taxi, & Car Leasing
Limited (Singapore) 572,000 1,466,878
-----------
3,784,619
AIRPORT MAINTENANCE--4.6%
Flughafen Wien AG Airport Management & Operations
(Austria) 73,500 $ 2,663,180
Grupo Aeroportuario Airport Operator
del Sureste S.A. de
C.V. (Mexico), (a) (b) 100,000 1,518,750
-----------
4,181,930
CHEMICALS--0.6%
Kemira Oyj (Finland) Chemicals 111,000 $ 580,730
OIL & NATURAL GAS--3.8%
ISIS (France) Oil Services 32,477 $ 2,276,032
Cairn Energy plc Oil & Natural Gas Producer
(Great Britain), (a) 419,000 1,180,451
-----------
3,456,483
INSTRUMENTS--0.1%
Rotork plc Industrial Controls &
(Great Britain) Instruments Supplier 32,000 $ 113,580
MINING & BUILDING MATERIALS--5.3%
Fletcher Challenge Building Materials Manufacturer
Building (New Zealand) 3,753,251 $ 3,763,831
Anglian Group plc Window & Door Manufacturer
(Great Britain) 459,000 1,001,253
-----------
4,765,084
OTHER INDUSTRIAL GOODS & SERVICES--6.4%
GFI Industries SA Industrial Fastener Manufacturer
(France) 208,400 $ 4,423,847
Vaisala Oyj, Class A Atmospheric Observation
(Finland) Equipment 72,100 1,382,688
-----------
5,806,535
PRODUCTION EQUIPMENT--6.2%
Krones AG (Germany) Production Machinery
Manufacturer 115,700 $ 3,220,870
NSC Groupe (France) Textile Equipment Manufacturer 23,630 2,340,985
-----------
5,561,855
</TABLE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND 47
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held/
Description Par Value Market Value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.7% (CONT.)
DIVERSIFIED CONGLOMERATES--6.5%
Haw Par Corporation Healthcare & Leisure Products
Ltd. (Singapore) 1,972,000 $ 3,288,273
Jardine Strategic
Holdings Limited Diversified Operations
(Bermuda) 340,700 994,844
Tae Young Corporation Heavy Construction
(Korea) 64,000 1,601,220
-----------
5,884,337
TOTAL COMMON STOCKS (COST: $92,815,393) 85,504,940
SHORT TERM INVESTMENTS--3.7%
COMMERCIAL PAPER--1.6%
General Electric Capital Corporation, 6.69% due 10/2/2000 $1,500,000 $ 1,500,000
TOTAL COMMERCIAL PAPER (COST: $1,500,000) 1,500,000
REPURCHASE AGREEMENTS--2.1%
State Street Repurchase Agreement, 6.42% due 10/2/2000 $1,867,000 $ 1,867,000
TOTAL REPURCHASE AGREEMENTS (COST: $1,867,000) 1,867,000
TOTAL SHORT TERM INVESTMENTS (COST: $3,367,000) 3,367,000
Total Investments (Cost $96,182,393)--98.4% (d) $88,871,940
Foreign Currencies (Proceeds $75)--(0.0)% 70
Other Assets In Excess Of Other Liabilities--1.6% (e) 1,473,772
-----------
TOTAL NET ASSETS--100% $90,345,782
===========
</TABLE>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(d) At September 30, 2000, net unrealized depreciation of $7,310,458, for
federal income tax purposes, consisted of gross unrealized appreciation of
$8,729,481 and gross unrealized depreciation of $16,039,939.
(e) Includes portfolio and transaction hedges.
48 THE OAKMARK INTERNATIONAL SMALL CAP FUND
<PAGE>
(This page has been intentionally left blank.)
[LOGO]
THE OAKMARK FAMILY OF FUNDS 49
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF ASSETS AND LIABILITIES--SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
FUND SELECT SMALL CAP
FUND FUND
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at value $ 2,011,316,685 $ 1,775,647,588 $ 249,559,481
(cost: 1,979,953,197) (cost: 1,588,432,607) (cost: 246,075,178)
Cash 199 626 942
Foreign currency, at value 0 0 0
Receivable for:
Forward foreign currency contracts 0 0 0
Securities sold 28,311,454 24,325,561 559,320
Fund shares sold 5,751,925 2,225,652 48,707
Dividends and interest 4,017,332 1,264,708 96,313
--------------- --------------- --------------
Total receivables 38,080,711 27,815,921 704,340
Other assets 158,764 30,591 19,752
--------------- --------------- --------------
Total assets $ 2,049,556,359 $ 1,803,494,726 $ 250,284,515
--------------- --------------- --------------
---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
Options sold, at fair value $ 0 $ 0 $ 42,000
(premiums received: 64,578)
Payable for:
Securities purchased 6,097,075 23,506,634 578,950
Fund shares redeemed 3,378,486 604,856 704,562
Forward foreign currency contracts 0 0 0
Other 1,351,991 646,762 255,391
--------------- --------------- --------------
Total liabilities 10,827,552 24,758,252 1,580,903
--------------- --------------- --------------
Net assets applicable to fund shares outstanding $ 2,038,728,807 $ 1,778,736,474 $ 248,703,612
=============== =============== ==============
Fund shares outstanding 75,659,245 82,931,572 16,467,408
=============== =============== ==============
---------------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
Paid in capital $ 2,327,702,018 $ 1,443,945,477 $ 234,310,878
Accumulated undistributed net realized gain (loss) on sale
of investments, forward contracts and foreign currency
exchange transactions (358,898,002) 138,991,711 10,885,853
Net unrealized appreciation (depreciation) of investments 31,363,487 187,214,980 3,506,881
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) 38,561,304 8,584,306 0
--------------- --------------- --------------
Net assets applicable to Fund shares outstanding $ 2,038,728,807 $ 1,778,736,474 $ 248,703,612
=============== =============== ==============
---------------------------------------------------------------------------------------------------------------------------------
PRICE OF SHARES
Net asset value per share: Class I $ 26.95 $ 21.45 $ 15.10
Class I--Net assets $ 2,038,728,807 $ 1,771,965,140 $ 248,703,612
Class I--Shares outstanding 75,659,245 82,615,135 16,467,408
Net asset value per share: Class II $ 21.40
Class II--Net assets $ 6,771,334
Class II--Shares outstanding 316,437
50 THE OAKMARK FAMILY OF FUNDS
<PAGE>
<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 $ 55,594,309 $ 27,135,222 $ 772,319,384 $ 88,871,940
(cost: 48,686,873)(cost: 24,801,814) (cost: 816,720,042) (cost: 96,182,393)
Cash 692 751 341 425
Foreign currency, at value 0 28 76 70
Receivable for:
Forward foreign currency contracts 0 76,462 2,048,003 289,441
Securities sold 552,777 211,224 12,558,641 2,966,110
Fund shares sold 127,518 3,217 898,742 3,922
Dividends and interest 381,529 95,357 4,349,544 392,597
------------ ------------ ------------- ------------
Total receivables 1,061,824 386,260 19,854,930 3,652,070
Other assets 1,370 10,706 29,368 7,147
------------ ------------ ------------- ------------
Total assets $ 56,658,195 $ 27,532,967 $ 792,204,099 $ 92,531,652
------------ ------------ ------------- ------------
-----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
Options sold, at fair value $ 0 $ 0 $ 0 $ 0
Payable for:
Securities purchased 1,463,121 215,752 8,428,894 1,819,092
Fund shares redeemed 158,960 0 350,885 170,404
Forward foreign currency contracts 0 0 38,795 7,014
Other 100,277 89,976 871,559 189,360
------------ ------------ ------------- ------------
Total liabilities 1,722,358 305,728 9,690,133 2,185,870
------------ ------------ ------------- ------------
Net assets applicable to fund shares outstanding $ 54,935,837 $ 27,227,239 $ 782,513,966 $ 90,345,782
============ ============ ============= ============
Fund shares outstanding 3,329,607 2,495,109 50,813,807 7,852,136
============ ============ ============= ============
-----------------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
Paid in capital $ 42,415,052 $ 24,526,429 $ 773,453,511 $ 89,764,601
Accumulated undistributed net realized gain (loss) on sale
of investments, forward contracts and foreign currency
exchange transactions 4,605,687 11,546 27,284,016 4,660,607
Net unrealized appreciation (depreciation) of investments 6,907,435 2,333,407 (44,400,657) (7,310,458)
Net unrealized appreciation (depreciation) of foreign
currency portfolio hedges 0 76,462 2,048,003 289,441
Net unrealized appreciation (depreciation)--other 0 (1,515) (180,240) (25,686)
Accumulated undistributed net investment income (loss) 1,007,663 280,910 24,309,333 2,967,277
------------ ------------ ------------- ------------
Net assets applicable to Fund shares outstanding $ 54,935,837 $ 27,227,239 $ 782,513,966 $ 90,345,782
============ ============ ============= ============
-----------------------------------------------------------------------------------------------------------------------------------
PRICE OF SHARES
Net asset value per share: Class I $ 16.50 $ 10.91 $ 15.40 $ 11.51
Class I--Net assets $ 54,494,455 $ 27,227,239 $ 782,416,127 $ 90,345,782
Class I--Shares outstanding 3,302,834 2,495,109 50,807,440 7,852,136
Net asset value per share: Class II $ 16.49 $ 15.37
Class II--Net assets $ 441,382 $ 97,839
Class II--Shares outstanding 26,773 6,367
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 51
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF OPERATIONS--SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
FUND SELECT SMALL CAP
FUND FUND
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 62,217,821 $ 24,190,270 $ 2,270,400
Interest Income 11,152,574 6,316,298 868,545
Other Income 189,274 8,202 109
Foreign taxes withheld (153,721) 0 0
--------------- --------------- --------------
Total investment income 73,405,948 30,514,770 3,139,054
--------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 28,116,035 15,325,113 3,683,621
Transfer and dividend disbursing agent fees 2,144,292 959,533 282,517
Other shareholder servicing fees 1,407,173 1,058,557 144,292
Service Fee--Class II 0 10,765 0
Reports to shareholders 1,390,953 569,655 164,908
Custody and accounting fees 303,434 209,167 77,569
Registration and blue sky expenses 15,171 80,450 29,896
Trustee fees 117,583 67,881 36,760
Legal fees 37,929 25,327 10,729
Audit fees 24,116 23,005 22,105
Other 240,627 136,950 113,185
--------------- --------------- --------------
Total expenses 33,797,313 18,466,403 4,565,582
Expense reimbursement 0 0 (252,000)
Expense offset arrangements (9,433) (6,506) (832)
--------------- --------------- --------------
Net expenses 33,787,880 18,459,897 4,312,750
--------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (loss): 39,618,068 12,054,873 (1,173,696)
--------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments (358,898,002) 161,052,611 25,233,378
Net realized gain (loss) on foreign currency transactions 0 0 0
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies (135,635,885) 159,978,754 (12,748,906)
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: (494,533,887) 321,031,365 12,484,472
--------------- --------------- --------------
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ (454,915,819) $ 333,086,238 $ 11,310,776
=============== =============== ==============
</TABLE>
52 THE OAKMARK FAMILY OF FUNDS
<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>
INVESTMENT INCOME:
Dividends $ 1,149,410 $ 615,292 $ 25,208,892 $ 4,628,168
Interest Income 1,219,738 60,281 2,284,194 234,290
Other Income 911 0 0 0
Foreign taxes withheld (22,837) (56,319) (2,623,737) (579,417)
------------ ------------ ------------- ------------
Total investment income 2,347,222 619,254 24,869,349 4,283,041
-----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 410,864 267,710 7,849,938 1,451,394
Transfer and dividend disbursing agent fees 57,692 46,375 596,790 112,558
Other shareholder servicing fees 13,549 4,638 358,338 65,130
Service Fee--Class II 165 0 251 0
Reports to shareholders 28,049 44,681 305,840 59,570
Custody and accounting fees 50,428 51,259 868,495 201,396
Registration and blue sky expenses 40,366 41,928 53,092 32,622
Trustee fees 27,682 26,900 50,812 29,502
Legal fees 8,381 10,047 16,642 9,028
Audit fees 20,005 21,057 27,222 24,116
Other 24,440 14,772 80,226 32,150
------------ ------------ ------------- ------------
Total expenses 681,621 529,367 10,207,646 2,017,466
Expense reimbursement 0 (55,500) 0 0
Expense offset arrangements (1,017) (1,355) (2,912) (3,039)
------------ ------------ ------------- ------------
Net expenses 680,604 472,512 10,204,734 2,014,427
-----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (loss): 1,666,618 146,742 14,664,615 2,268,614
-----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments 4,310,645 96,088 60,562,992 4,863,798
Net realized gain (loss) on foreign currency transactions (645) 132,840 10,609,055 991,046
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies 3,084,969 4,122,450 13,902,115 (13,182,275)
Net change in appreciation (depreciation) of forward
currency exchange contracts 0 81,181 2,556,178 281,817
Net change in appreciation (depreciation)--other 159 (1,568) (111,145) (28,709)
-----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions: 7,395,128 4,430,991 87,519,195 (7,074,323)
------------ ------------ ------------- ------------
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ 9,061,746 $ 4,577,733 $ 102,183,810 $ (4,805,709)
============ ============ ============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 53
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------
THE OAKMARK FUND
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 39,618,068 $ 63,903,129
Net realized gain (loss) on sale of investments (358,898,002) 748,595,189
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies (135,635,885) (147,719,773)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (454,915,819) 664,778,545
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income (32,700,105) (89,026,890)
Net realized short-term gain (100,782,239) (128,028,090)
Net realized long-term gain (487,248,675) (195,972,927)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (620,731,019) (413,027,907)
----------------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 290,642,873 832,343,635
Reinvestment of dividends and capital gain distributions 603,462,527 391,307,098
Payments for shares redeemed, net of fees (2,552,562,124) (3,626,526,884)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (1,658,456,724) (2,402,876,151)
--------------- ---------------
----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (2,734,103,562) (2,151,125,513)
NET ASSETS:
Beginning of period 4,772,832,369 6,923,957,882
--------------- ---------------
End of period $ 2,038,728,807 $ 4,772,832,369
=============== ===============
Undistributed net investment income $ 38,561,304 $ 40,937,014
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.2632 $ 0.4401
Net realized short-term gain 0.8111 0.6329
Net realized long-term gain 3.9217 0.9686
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 4.9960 $ 2.0416
=============== ===============
</TABLE>
54 THE OAKMARK FAMILY OF FUNDS
<PAGE>
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------
THE OAKMARK
SELECT FUND
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 12,054,873 $ 15,427,356
Net realized gain (loss) on sale of investments 161,052,611 301,413,442
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies 159,978,754 18,463,317
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 333,086,238 335,304,115
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income--Class I (14,709,648) (3,491,747)
Net investment income--Class II 0 0
Net realized short-term gain (8,341,169) (497,653)
Net realized long-term gain (268,872,301) (50,206,634)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (291,923,118) (54,196,034)
----------------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 628,490,960 688,865,887
Proceeds from shares sold--Class II 7,021,801 0
Reinvestment of dividends and capital gain distributions 287,179,516 51,676,128
Payments for shares redeemed, net of fees--Class I (823,014,435) (610,635,670)
Payments for shares redeemed, net of fees--Class II (1,013,300) 0
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 98,664,542 129,906,345
--------------- ---------------
----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 139,827,662 411,014,426
NET ASSETS:
Beginning of period 1,638,908,812 1,227,894,386
--------------- ---------------
End of period $ 1,778,736,474 $ 1,638,908,812
=============== ===============
Undistributed net investment income $ 8,584,306 $ 13,170,342
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.1972 $ 0.0491
Net realized short-term gain 0.1118 0.0070
Net realized long-term gain 3.6040 0.7058
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 3.9130 $ 0.7619
=============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 55
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 2000 CONT.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------
THE OAKMARK
SMALL CAP FUND
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ (1,173,696) $ (2,516,832)
Net realized gain (loss) on sale of investments 25,233,378 (11,002,740)
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies (12,748,906) 82,350,204
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 11,310,776 68,830,632
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income 0 0
Net realized short-term gain 0 0
Net realized long-term gain 0 (4,508,112)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS 0 (4,508,112)
----------------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 51,615,294 262,182,135
Reinvestment of dividends and capital gain distributions 0 4,278,943
Payments for shares redeemed, net of fees (251,361,737) (511,639,081)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (199,746,443) (245,178,003)
--------------- ---------------
----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (188,435,667) (180,855,483)
NET ASSETS:
Beginning of period 437,139,279 617,994,762
--------------- ---------------
End of period $ 248,703,612 $ 437,139,279
=============== ===============
Undistributed net investment income $ 0 $ 0
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0 $ 0
Net realized short-term gain 0 0
Net realized long-term gain 0 0.0874
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0 $ 0.0874
=============== ===============
</TABLE>
56 THE OAKMARK FAMILY OF FUNDS
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------
THE OAKMARK
EQUITY AND INCOME FUND
----------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 1,666,618 $ 1,640,639
Net realized gain (loss) on sale of investments 4,310,645 6,246,386
Net realized gain (loss) on foreign currency transactions (645) (1,597)
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies 3,084,969 690,123
Net change in unrealized appreciation
(depreciation)--other 159 (159)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 9,061,746 8,575,392
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income--Class I (1,718,499) (855,395)
Net investment income--Class II 0 0
Net realized short-term gain 0 0
Net realized long-term gain (5,192,802) (829,557)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (6,911,301) (1,684,952)
----------------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 11,520,117 21,877,864
Proceeds from shares sold--Class II 418,255 0
Reinvestment of dividends and capital gain distributions 6,650,712 1,610,146
Payments for shares redeemed, net of fees--Class I (26,121,233) (27,806,714)
Payments for shares redeemed, net of fees--Class II (50) 0
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (7,532,199) (4,318,704)
--------------- ---------------
----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (5,381,754) 2,571,736
NET ASSETS:
Beginning of period 60,317,591 57,745,855
--------------- ---------------
End of period $ 54,935,837 $ 60,317,591
=============== ===============
Undistributed net investment income $ 1,007,663 $ 1,631,244
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.4509 $ 0.2118
Net realized short-term gain 0 0
Net realized long-term gain 1.3625 0.2053
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 1.8134 $ 0.4171
=============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 57
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 2000 CONT.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------
THE OAKMARK
GLOBAL FUND
-----------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999(a)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 146,742 $ 32,032
Net realized gain (loss) on sale of investments 96,088 (84,542)
Net realized gain (loss) on foreign currency transactions 132,840 (871)
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies 4,122,450 (1,789,042)
Net change in unrealized appreciation (depreciation) of
forward currency exchange contracts 81,181 (4,719)
Net change in unrealized appreciation
(depreciation)--other (1,568) 53
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 4,577,733 (1,847,089)
-----------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income (29,834) 0
Net realized short-term gain 0 0
Net realized long-term gain 0 0
------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (29,834) 0
-----------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 12,896,002 25,938,577
Reinvestment of dividends and capital gain distributions 28,883 0
Payments for shares redeemed, net of fees (14,198,899) (138,134)
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (1,274,014) 25,800,443
------------- --------------
-----------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,273,885 23,953,354
NET ASSETS:
Beginning of period 23,953,354 0
------------- --------------
End of period $ 27,227,239 $ 23,953,354
============= ==============
Undistributed net investment income $ 280,910 $ 31,161
============= ==============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.0098 $ 0
Net realized short-term gain 0 0
Net realized long-term gain 0 0
------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0.0098 $ 0
============= ==============
</TABLE>
(a) The date which Fund shares were first offered to the public was
August 4,1999.
58 THE OAKMARK FAMILY OF FUNDS
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------
THE OAKMARK
INTERNATIONAL FUND
-----------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 14,664,615 $ 15,632,479
Net realized gain (loss) on sale of investments 60,562,992 (28,187,781)
Net realized gain (loss) on foreign currency transactions 10,609,055 11,558,024
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies 13,902,115 290,561,381
Net change in unrealized appreciation (depreciation) of
forward currency exchange contracts 2,556,178 1,014,015
Net change in unrealized appreciation
(depreciation)--other (111,145) (274,516)
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 102,183,810 290,303,602
-----------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income--Class I (27,231,383) (16,590,763)
Net investment income--Class II (1,053) 0
Net realized short-term gain 0 (32,678,201)
Net realized long-term gain 0 (20,071,535)
------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (27,232,436) (69,340,499)
-----------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 172,133,473 370,563,788
Proceeds from shares sold--Class II 143,284 0
Reinvestment of dividends and capital gain distributions 26,258,587 65,432,760
Payments for shares redeemed, net of fees--Class I (302,066,042) (601,921,972)
Payments for shares redeemed, net of fees--Class II (48,697) 0
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (103,579,395) (165,925,424)
------------- --------------
-----------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (28,628,021) 55,037,679
NET ASSETS:
Beginning of period 811,141,987 756,104,308
------------- --------------
End of period $ 782,513,966 $ 811,141,987
============= ==============
Undistributed net investment income $ 24,309,333 $ (3,080,259)
============= ==============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.4861 $ 0.2440
Net realized short-term gain 0 0.4807
Net realized long-term gain 0 0.2953
------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0.4861 $ 1.0200
============= ==============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 59
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 2000 CONT.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------
THE OAKMARK INTERNATIONAL
SMALL CAP FUND
-----------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 2,268,614 $ 2,541,981
Net realized gain (loss) on sale of investments 4,863,798 12,338,825
Net realized gain (loss) on foreign currency transactions 991,046 968,518
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies (13,182,275) 34,768,296
Net change in unrealized appreciation (depreciation) of
forward currency exchange contracts 281,817 186,436
Net change in unrealized appreciation
(depreciation)--other (28,709) (2,615)
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (4,805,709) 50,801,441
-----------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income (1,252,257) (1,558,450)
Net realized short-term gain (3,278,736) 0
Net realized long-term gain (3,226,904) 0
------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (7,757,897) (1,558,450)
-----------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 39,669,014 253,467,836
Reinvestment of dividends and capital gain distributions 7,637,609 1,470,554
Payments for shares redeemed, net of fees (99,763,438) (200,585,753)
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (52,456,815) 54,352,637
------------- --------------
-----------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (65,020,421) 103,595,628
NET ASSETS:
Beginning of period 155,366,203 51,770,575
------------- --------------
End of period $ 90,345,782 $ 155,366,203
============= ==============
Undistributed net investment income $ 2,967,277 $ 3,165,289
============= ==============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.1135 $ 0.2049
Net realized short-term gain 0.2972 0
Net realized long-term gain 0.2923 0
------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0.7030 $ 0.2049
============= ==============
</TABLE>
60 THE OAKMARK FAMILY OF FUNDS
<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 accounting principles generally accepted in the United
States ("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.
CLASS DISCLOSURE--
Each Fund offers two classes of shares: Class I Shares and Class II Shares.
Class I Shares are offered to the general public. Class II Shares are offered
to certain retirement plans such as 401(k) and profit sharing plans. Class II
Shares pay a service fee at the annual rate of .25% of 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.
Expenses of the Funds that are not directly attributable to a specific class
of shares are prorated among the classes based on the relative net assets of
each class. Expenses directly attributable to a class of shares are recorded
to the specific class. At this time, expenses directly attributable to each
class are transfer agent fees, service fees and other shareholder servicing
fees.
SECURITY VALUATION--
Investments are stated at 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 2000, only the Global, International and Int'l Small Cap
Funds had foreign currency transactions. Net unrealized appreciation
(depreciation)-other includes the following components:
<TABLE>
<CAPTION>
INT'L
GLOBAL INTERNATIONAL SMALL CAP
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized appreciation
(depreciation) on
dividends and dividend
reclaims receivable $(1,594) $(191,459) $(25,844)
Unrealized appreciation
(depreciation) on open
securities purchases and sales 0 22,322 1,041
Unrealized appreciation
(depreciation) on
transaction hedge
purchases and sales 0 (29,882) (1,454)
Unrealized appreciation
(depreciation) on tax
expense payable 79 18,779 571
------- --------- --------
Net Unrealized
Appreciation
(Depreciation) - Other $(1,515) $(180,240) $(25,686)
======= ========= ========
</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
THE OAKMARK FAMILY OF FUNDS 61
<PAGE>
------------------------------------------------------------------------------
THE OAKMARK FAMILY OF FUNDS
------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
------------------------------------------------------------------------------
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, 2000, 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.
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, 2000:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1,185,825 750,000 Pound Sterling October 2000 $76,462
-------
$76,462
=======
</TABLE>
The International Fund had the following outstanding contracts at September
30, 2000:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$15,811,000 10,000,000 Pound Sterling October 2000 $1,019,496
27,659,700 18,000,000 Pound Sterling November 2000 1,021,282
3,811,339 400,000,000 Japanese Yen February 2001 7,225
----------
$2,048,003
==========
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1,352,619 1,533,755 Euro Currency October 2000 $2,837
133,806 151,553 Euro Currency October 2000 129
1,153,383 1,306,357 Euro Currency October 2000 1,110
362,329 410,902 Euro Currency October 2000 805
2,020,755 2,289,808 Euro Currency October 2000 2,862
825,839 935,795 Euro Currency October 2000 1,170
------
$8,913
======
</TABLE>
62 THE OAKMARK FAMILY OF FUNDS
<PAGE>
------------------------------------------------------------------------------
THE OAKMARK FAMILY OF FUNDS
------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
------------------------------------------------------------------------------
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1,474,421 1,669,975 Euro Currency October 2000 $ (1,419)
3,043,854 3,448,735 Euro Currency October 2000 (3,965)
2,023,098 1,385,304 Pound Sterling October 2000 (25,629)
41,124 28,119 Pound Sterling October 2000 (461)
2,570,357 1,742,969 Pound Sterling October 2000 (7,321)
--------
$(38,795)
========
</TABLE>
The Int'l Small Cap Fund had the following outstanding contracts at September
30, 2000:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$4,189,915 2,650,000 Pound Sterling October 2000 $270,166
2,882,398 300,000,000 Japanese Yen October 2000 19,275
--------
$289,441
========
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLARS SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$302,964 207,311 Pound Sterling October 2000 $3,628
------
$3,628
======
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLARS PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1,348,240 2,029,291 Canadian Dollar October 2000 $ 1,932
25,616 29,013 Euro Currency October 2000 (25)
32,537 36,852 Euro Currency October 2000 (31)
1,002,315 1,137,057 Euro Currency October 2000 (2,558)
20,704 23,460 Euro Currency October 2000 (29)
154,457 175,023 Euro Currency October 2000 (219)
200,724 138,323 Pound Sterling October 2000 (3,841)
42,854 74,695 Singapore Dollar October 2000 (95)
32,896 57,420 Singapore Dollar October 2000 (120)
100,684 175,270 Singapore Dollar October 2000 (96)
-------
$(5,082)
=======
</TABLE>
THE OAKMARK FAMILY OF FUNDS 63
<PAGE>
------------------------------------------------------------------------------
THE OAKMARK FAMILY OF FUNDS
------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
----------------------------------------------------------------------------
At September 30, 2000, Global, International and Int'l Small Cap Funds each
had sufficient cash and/or securities to cover any commitments under these
contracts.
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>
$0 $127,158 $10,886 $4,590 $0 $9,190 $4,864
</TABLE>
Income dividends and capital gains distributions are determined in accordance
with federal income tax regulations, which may differ from GAAP. To the
extent these tax and book 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 an unsecured line of credit with a syndication of banks. It is
a committed line of $300 million. Borrowings under this arrangement bear
interest at .45% above the Federal Funds Effective Rate. As of September 30,
2000, there were no outstanding borrowings.
ACCOUNTING FOR OPTIONS--
When the Fund writes an option, the premium received by the Fund is recorded
as a liability and is subsequently adjusted to the current market value of
the option written. Premiums received from writing options, which expire
unexercised, are recorded by the Fund on the expiration date as realized
gains from option transactions. The difference between the premium and the
amount paid on effecting a closing purchase transaction including brokerage
commissions, is also treated as a realized gain, or if the premium is less
than the amount paid for the closing purchase transaction, as a realized
loss. If a call option is exercised, the premium is added to the proceeds
from the sale of the underlying security or currency in determining whether
the Fund has realized a gain or a loss. If a put option is exercised, the
premium reduces the cost basis of the security or currency purchased by the
Fund. In writing an option, the Fund bears the market risk of an unfavorable
change in the price of the security or currency underlying the written
option. Exercise of an option written by the Fund could result in the Fund
selling or buying a security or currency at a price different from the
current market value.
During the year ended September 30, 2000, Small Cap wrote option contracts.
Portfolio securities valued at $837,375 were held in escrow by the custodian
as cover for call options written by the Small Cap.
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.
Select pays 1% on the first $1 billion of net assets, .95% on the next $500
million of net assets, .90% on the next $500 million of net assets, .85% on
the next $500 million of net assets, .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
of net assets, 1.10% on the next $500 million of net assets, 1.05% on the
next $500 million of net assets, and 1% on the excess of $2.5 billion of net
assets. Equity and Income pays .75% of net assets. Global pays 1.00% 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. Int'l Small Cap pays 1.25% of net assets. Each fee is
calculated on the total net assets as determined at the end of each preceding
calendar month. 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 the Global Fund.
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, 2000, the Funds incurred
brokerage commissions of $7,645,100, $4,102,031, $680,633, $200,588,
$256,580, $2,905,834, and $469,454 of which $2,765,022, $1,112,365, $226,659,
$100,258, $87,377, $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.
64 THE OAKMARK FAMILY OF FUNDS
<PAGE>
------------------------------------------------------------------------------
THE OAKMARK FAMILY OF FUNDS
------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
----------------------------------------------------------------------------
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>
TWELVE MONTHS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL CAP
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 11,007 32,899 3,743 784 1,361 11,609 3,311
Shares issued in
reinvestment of dividends 21,629 15,744 0 463 3 1,899 656
Less shares redeemed (95,833) (44,043) (18,761) (1,763) (1,477) (20,847) (8,406)
------- ------- ------- ------ ------ ------- ------
Net increase
(decrease) in
shares outstanding (63,197) 4,600 (15,018) (516) (113) (7,339) (4,439)
======= ======= ======= ====== ====== ======= ======
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------------------------------------------------------
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL CAP
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 22,559 32,332 18,587 1,449 2,623 27,499 21,542
Shares issued in
reinvestment of dividends 10,299 2,853 298 112 0 6,003 178
Less shares redeemed (100,457) (30,105) (36,338) (1,842) (15) (47,902) (16,944)
-------- ------- ------- ------ ----- ------- -------
Net increase
(decrease) in
shares outstanding (67,599) 5,080 (17,453) (281) 2,608 (14,400) 4,776
======= ======= ======= ====== ====== ======= ======
</TABLE>
(a) The date which Fund shares were first offered for sale to
the public was August 4, 1999.
4. INVESTMENT TRANSACTIONS
Transactions in investment securities (excluding short term securities) were
as follows (in thousands):
<TABLE>
<CAPTION>
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL CAP
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases $1,287,017 $1,007,676 $ 77,253 $45,616 $38,215 $473,207 $43,098
Proceeds from sales $3,249,901 $1,233,828 $285,248 $56,873 $39,785 $570,706 $95,650
</TABLE>
Transactions in options written by Small Cap during the year ended September
30, 2000 were as follows:
<TABLE>
<CAPTION>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at September 30, 1999 $ 0 $ 0
Options written 2,360 678,033
Options terminated in closing purchase transactions (200) (50,794)
Options expired (1,750) (538,261)
Options exercised (200) (24,400)
------- ---------
Options outstanding at September 30, 2000 $ 210 $ 64,578
======= =========
</TABLE>
THE OAKMARK FAMILY OF FUNDS 65
<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, 2000 is set forth below:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK SELECT FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET VALUE
AFFILIATES (COST) PROCEEDS INCOME SEPTEMBER 30, 2000
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Reynolds and Reynolds Company,
Class A $71,680,613 $17,864,227 $2,363,801 $118,846,538
U.S. Industries, Inc. 2,912,258 55,191,225 1,248,195 42,600,075
USG Corporation 17,059,825 16,769,233 2,147,190 87,089,681
----------- ----------- ---------- ------------
TOTALS $91,652,696 $89,824,685 $5,759,186 $248,536,294
</TABLE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK SMALL CAP FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET VALUE
AFFILIATES (COST) PROCEEDS INCOME SEPTEMBER 30, 2000
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hanger Orthopedic Group, Inc. $ 7,335,666 $ 61,472 $ 0 $ 4,312,500
R.G. Barry Corporation 49,200 192,456 0 2,565,000
Sames Corporation 0 242,030 0 3,201,875
Ugly Duckling Corporation 0 0 0 10,171,875
----------- ----------- ---------- ------------
TOTALS $ 7,384,866 $ 495,958 $ 0 $ 20,251,250
</TABLE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET VALUE
AFFILIATES (COST) PROCEEDS INCOME SEPTEMBER 30, 2000
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Chargeurs SA $ 0 $12,532,174 $1,336,880 $ 25,360,707
Dongah Tire Industry Company 0 0 222,263 3,459,560
Fila Holding S.p.A. 1,824,332 1,710,130 0 23,522,425
Lotte Chilsung Beverage Company 1,542,010 0 32,524 9,399,202
Nufarm Limited 32,936,973 0 0 17,097,359
Somerfield plc 42,112,018 12,444,936 813,479 45,054,993
----------- ----------- ---------- ------------
TOTALS $78,415,333 $26,687,240 $2,405,146 $123,894,246
</TABLE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL SMALL CAP FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET VALUE
AFFILIATES (COST) PROCEEDS INCOME SEPTEMBER 30, 2000
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Designer Textiles (NZ) Limited $ 0 $ 0 $ 20,634 $ 191,758
Mainfreight Limited 115,895 15,170 167,324 2,317,741
Matichon Public Company Limited,
Foreign Shares 0 0 215,963 2,105,571
----------- ----------- ---------- ------------
TOTALS $ 115,895 $ 15,170 $ 403,921 $ 4,615,070
</TABLE>
66 THE OAKMARK FAMILY OF FUNDS
<PAGE>
------------------------------------------------------------------------------
THE OAKMARK FUND
------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 1998 1997(d)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 34.37 $ 33.54 $ 41.21 $ 32.39
Income From Investment Operations:
Net Investment Income (Loss) 0.49 0.36 0.47 0.36
Net Gains or Losses on Securities
(both realized and unrealized) (2.91) 2.51 (1.73) 10.67
------------- ------------- ------------- -------------
Total From Investment Operations: (2.42) 2.87 (1.26) 11.03
Less Distributions:
Dividends (from net investment
income) (0.26) (0.44) (0.40) (0.34)
Distributions (from capital gains) (4.74) (1.60) (6.01) (1.87)
------------- ------------- ------------- -------------
Total Distributions (5.00) (2.04) (6.41) (2.21)
------------- ------------- ------------- -------------
Net Asset Value, End of Period $ 26.95 $ 34.37 $ 33.54 $ 41.21
============= ============= ============= =============
Total Return (7.55%) 7.98% (4.06%) 39.24%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 2,038.7 $ 4,772.8 $ 6,924.0 $ 6,614.9
Ratio of Expenses to Average
Net Assets 1.21% 1.11% 1.08% 1.08%*
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.42% 1.02% 1.22% 1.19%*
Portfolio Turnover Rate 50% 13% 43% 17%
<CAPTION>
YEAR ENDED OCTOBER 31, PERIOD ENDED
------------------------------------------------------------------------ OCTOBER 31,
1996 1995 1994 1993 1992 1991(a)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 28.47 $ 25.21 $ 24.18 $ 17.11 $ 12.10 $ 10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.34 0.30 0.27 0.17 (0.03) (0.01)
Net Gains or Losses on Securities
(both realized and unrealized) 4.70 4.66 1.76 7.15 5.04 2.11
------------ ------------- ------------- ------------- ------------- ---------
Total From Investment Operations: 5.04 4.96 2.03 7.32 5.01 2.10
Less Distributions:
Dividends (from net investment
income) (0.28) (0.23) (0.23) (0.04) 0 0
Distributions (from capital gains) (0.84) (1.47) (0.77) (0.21) 0 0
------------ ------------- ------------- ------------- ------------- ---------
Total Distributions (1.12) (1.70) (1.00) (0.25) 0 0
------------ ------------- ------------- ------------- ------------- ---------
Net Asset Value, End of Period $ 32.39 $ 28.47 $ 25.21 $ 24.18 $ 17.11 $ 12.10
============ ============= ============= ============= ============= =========
Total Return 18.07% 21.55% 8.77% 43.21% 41.40% 87.10%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 3,933.9 $ 2,827.1 $ 1,677.3 $ 1,107.0 $ 114.7 $ 4.8
Ratio of Expenses to Average
Net Assets 1.18% 1.17% 1.22% 1.32% 1.70% 2.50%(b)*
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.13% 1.27% 1.19% 0.94% (0.24)% (0.66)%(c)*
Portfolio Turnover Rate 24% 18% 29% 18% 34% 0%
</TABLE>
* Data has been annualized.
(a) From August 5, 1991, the date on which Fund shares were first offered for
sale to the public.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement by the Adviser, this annualized ratio would have been 4.92%
for the period.
(c) Computed giving effect to the Adviser's expense limitation undertaking.
(d) A move to a September 30th fiscal year end from an October 31st fiscal year
end resulted in an eleven-month fiscal year in 1997.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 65
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK SELECT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 31, 1999
YEAR ENDED THROUGH
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 YEAR ENDED YEAR ENDED
CLASS I CLASS II(a) SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.92 $ 18.42 $ 16.76 $ 16.34
Income From Investment Operations:
Net Investment Income (Loss) 0.13 0.10 0.19 0.03
Net Gains or Losses on Securities
(both realized and unrealized) 4.32 2.88 4.73 0.56
------------ ------------ ------------ ------------
Total From Investment Operations: 4.45 2.98 4.92 0.59
Less Distributions:
Dividends (from net investment income) (0.20) 0.00 (0.05) 0
Distributions (from capital gains) (3.72) 0.00 (0.71) (0.17)
------------ ------------ ------------ ------------
Total Distributions (3.92) 0.00 (0.76) (0.17)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $ 21.45 $ 21.40 $ 20.92 $ 16.76
============ ============ ============ ============
Total Return 24.53% 21.57%* 30.07% 3.64%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 1,772.0 $ 6.8 $ 1,638.9 $ 1,227.9
Ratio of Expenses to Average Net Assets 1.17% 1.41%* 1.16% 1.22%
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.76% 0.59%* 0.98% .17%
Portfolio Turnover Rate 69% 69% 67% 56%
<CAPTION>
ELEVEN MONTHS
ENDED
SEPTEMBER 30,
1997(b)
--------------------------------------------------------
<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) 6.35
------------
Total From Investment Operations: 6.34
Less Distributions:
Dividends (from net investment income) 0
Distributions (from capital gains) 0
------------
Total Distributions 0
------------
Net Asset Value, End of Period $ 16.34
============
Total Return 69.16%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 514.2
Ratio of Expenses to Average Net Assets 1.12%*
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.11)%*
Portfolio Turnover Rate 37%
</TABLE>
* Data has been annualized.
(a) The date which Class II shares were first sold to the public was December
31, 1999.
(b) A move to a September 30th fiscal year end from an October 31st fiscal year
end resulted in an eleven-month fiscal year in 1997.
66 THE OAKMARK FAMILY OF FUNDS
<PAGE>
------------------------------------------------------------------------------
THE OAKMARK SMALL CAP FUND
------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.88 $ 12.63 $ 20.34
Income From Investment Operations:
Net Investment Income (Loss) 0.00 0.14 (0.12)
Net Gains or Losses on Securities
(both realized and unrealized) 1.22 1.20 (4.73)
--------- --------- ---------
Total From Investment Operations: 1.22 1.34 (4.85)
Less Distributions:
Dividends (from net investment income) 0.00 0.00 0
Distributions (from capital gains) 0.00 (0.09) (2.86)
--------- --------- ---------
Total Distributions 0.00 (0.09) (2.86)
--------- --------- ---------
Net Asset Value, End of Period $ 15.10 $ 13.88 $ 12.63
========= ========= =========
Total Return 8.79% 10.56% (26.37%)
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $248.7 $437.1 $618.0
Ratio of Expenses to Average Net Assets 1.50%(a) 1.48% 1.45%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.41)%(a) (0.44)% (0.40)%
Portfolio Turnover Rate 28% 68% 34%
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1997(b) OCTOBER 31, 1996
------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 13.19 $ 10.00
Income From Investment Operations:
Net Investment Income (Loss) (0.01) (0.02)
Net Gains or Losses on Securities
(both realized and unrealized) 7.16 3.21
------------ -----------
Total From Investment Operations: 7.15 3.19
Less Distributions:
Dividends (from net investment income) 0 0
Distributions (from capital gains) 0 0
------------ -----------
Total Distributions 0 0
------------ -----------
Net Asset Value, End of Period $ 20.34 $ 13.19
============ ===========
Total Return 59.14%* 31.94%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 1,513.4 $ 218.4
Ratio of Expenses to Average Net Assets 1.37%* 1.61%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.25)%* (0.29)%
Portfolio Turnover Rate 27% 23%
</TABLE>
* Data has been annualized.
(a) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
September 30,
2000
--------------------------------------------------------------------------------
<S> <C>
Ratio of Expenses to Average Net Assets 1.59%
Ratio of Net Income (Loss) to Average Net Assets (0.50)%
</TABLE>
(b) A move to a September 30th fiscal year end from an October 31st fiscal year
end resulted in an eleven-month fiscal year in 1997.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 67
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK EQUITY AND INCOME FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JULY 13, 2000
YEAR ENDED THROUGH ELEVEN MONTHS
SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED YEAR ENDED ENDED YEAR ENDED
2000 2000 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, OCTOBER 31,
CLASS I CLASS II (a) 1999 1998 1997(c) 1996
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.68 $ 15.51 $ 13.99 $ 14.49 $ 11.29 $ 10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.35 0.30 0.39 0.29 0.21 0.10
Net Gains or Losses on Securities
(both realized and unrealized) 2.28 0.68 1.72 0.04 3.24 1.19
-------- -------- -------- --------- --------- ---------
Total From Investment Operations: 2.63 0.98 2.11 0.33 3.45 1.29
Less Distributions:
Dividends (from net investment income) (0.45) 0.00 (0.21) (0.24) (0.12) 0
Distributions (from capital gains) (1.36) 0.00 (0.21) (0.59) (0.13) 0
-------- -------- -------- --------- --------- ---------
Total Distributions (1.81) 0.00 (0.42) (0.83) (0.25) 0
-------- -------- -------- --------- --------- ---------
Net Asset Value, End of Period $ 16.50 $ 16.49 $ 15.68 $ 13.99 $ 14.49 $ 11.29
======== ======== ======== ========= ========= =========
Total Return 18.51% 30.34%* 15.32% 2.57% 34.01%* 12.91%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 54.5 $ 0.4 $ 60.3 $ 57.7 $ 33.5 $ 13.8
Ratio of Expenses to Average Net Assets 1.24% 1.32%* 1.18% 1.31% 1.50%*(b) 2.50%(b)
Ratio of Net Investment Income (Loss)
to Average Net Assets 3.04% 2.59%* 2.65% 2.39% 2.38%*(b) 1.21%(b)
Portfolio Turnover Rate 87% 87% 81% 46% 53% 66%
</TABLE>
*Data has been annualized.
(a) The date which Class II shares were first sold to the public was July 13,
2000.
(b) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
September 30, October 31,
1997 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>
(c) A move to a September 30th fiscal year end from an October 31st fiscal year
end resulted in an eleven-month fiscal year in 1997.
68 THE OAKMARK FAMILY OF FUNDS
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999(a)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 9.18 $10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.11 0.01
Net Gains or Losses on Securities
(both realized and unrealized) 1.63 (0.83)
------- ------
Total From Investment Operations: 1.74 (0.82)
Less Distributions:
Dividends (from net investment income) (0.01) 0.00
Distributions (from capital gains) 0.00 0.00
------- ------
Total Distributions (0.01) 0.00
------- ------
Net Asset Value, End of Period $10.91 $ 9.18
======= ======
Total Return 18.97% (51.60%)*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 27.2 $ 24.0
Ratio of Expenses to Average Net Assets 1.75%(b) 1.75%*(b)
Ratio of Net Investment Income (Loss) to Average Net Assets 0.54%(b) 0.98%*(b)
Portfolio Turnover Rate 147% 7%
</TABLE>
*Data has been annualized.
(a) The date which Fund shares were first offered for sale to the public was
August 4, 1999.
(b) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
September 30, September 30,
2000 1999
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ratio of Expenses to Average Net Assets 1.96% 2.22%
Ratio of Net Income (Loss) to Average Net Assets 0.34% 0.51%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 69
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 4, ELEVEN MONTHS
SEPTEMBER 30, 1999, THROUGH YEAR ENDED YEAR ENDED ENDED
2000 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
CLASS I 2000 CLASS II(a) 1999 1998 1997(c)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning Of Period $ 13.95 $ 14.36 $ 10.42 $ 18.77 $ 14.92
Income From Investment Operations:
Net Investment Income (Loss) 1.02 0.96 (0.34) 0.41 0.27
Net Gains or Losses on Securities
(both realized and unrealized) 0.92 0.54 4.89 (5.32) 3.74
-------- -------- -------- -------- -------
Total From Investment Operations: 1.94 1.50 4.55 (4.91) 4.01
Less Distributions:
Dividends (from net investment
income) (0.49) (0.49) (0.24) (0.58) (0.16)
Distributions (from capital gains) 0.00 0.00 (0.78) (2.86) 0
-------- -------- -------- -------- -------
Total Distributions (0.49) (0.49) (1.02) (3.44) (0.16)
-------- -------- -------- -------- -------
Net Asset Value, End of Period $ 15.40 $ 15.37 $ 13.95 $ 10.42 $ 18.77
======== ======== ======== ======== =======
Total Return 14.27% 11.77%* 46.41% (29.90)% 29.63%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 782.4 $ 0.1 $ 811.1 $ 756.1 $1,647.3
Ratio of Expenses to Average
Net Assets 1.30% 1.50%* 1.29% 1.32% 1.26%*
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.87% 1.98%* 1.94% 1.95% 2.09%*
Portfolio Turnover Rate 64% 64% 54% 43% 61%
<CAPTION>
YEAR ENDED OCTOBER 31, PERIOD ENDED
----------------------------------------- OCTOBER 31,
1996 1995 1994 1993 1992(b)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning Of Period $ 12.97 $ 14.50 $ 14.09 $ 9.80 $ 10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.09 0.30 0.21 0.06 0.26
Net Gains or Losses on Securities
(both realized and unrealized) 2.90 (0.77) 0.43 4.48 (0.46)
-------- --------- --------- -------- ---------
Total From Investment Operations: 2.99 (0.47) 0.64 4.54 (0.2)
Less Distributions:
Dividends (from net investment
income) 0 0 (0.08) (0.25) 0
Distributions (from capital gains) (1.04) (1.06) (0.15) 0 0
-------- --------- --------- -------- ---------
Total Distributions (1.04) (1.06) (0.23) (0.25) 0
-------- --------- --------- -------- ---------
Net Asset Value, End of Period $ 14.92 $ 12.97 $ 14.50 $ 14.09 $ 9.80
======== ========= ========= ======== =========
Total Return 24.90% (3.06)% 4.62% 47.49% (22.81)%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $1,172.8 $ 819.7 $ 1,286.0 $ 815.4 $ 23.5
Ratio of Expenses to Average
Net Assets 1.32% 1.40% 1.37% 1.26% 2.04%*
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.45% 1.40% 1.44% 1.55% 37.02%*
Portfolio Turnover Rate 42% 26% 55% 21% 0%
</TABLE>
*Data has been annualized.
(a) The date which Class II shares were first sold to the public was November
4, 1999.
(b) The date which Fund shares were first offered for sale to the public was
September 30, 1992.
(c) A move to a September 30th fiscal year end from an October 31st fiscal year
end resulted in an eleven-month fiscal year in 1997.
70 THE OAKMARK FAMILY OF FUNDS
<PAGE>
--------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997(b) OCTOBER 31, 1996
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.64 $ 6.89 $ 12.20 $ 11.41 $ 10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.23 0.24 0.18 0.13 0.04
Net Gains or Losses on Securities
(both realized and unrealized) (0.66) 5.71 (4.09) 1.10 1.37
---------- -------- --------- ---------- ---------
Total From Investment Operations: (0.43) 5.95 (3.91) 1.23 1.41
Less Distributions:
Dividends (from net investment income) (0.11) (0.20) (0.06) (0.08) 0
Distributions (from capital gains) (0.59) 0.00 (1.34) (0.36) 0
---------- -------- --------- ---------- ---------
Total Distributions (0.70) (0.20) (1.40) (0.44) 0
---------- -------- --------- ---------- ---------
Net Asset Value, End of Period $ 11.51 $ 12.64 $ 6.89 $ 12.20 $ 11.41
========== ======== ========= ========== =========
Total Return (3.44)% 88.02% (35.20)% 12.07%* 14.15%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 90.3 $ 155.4 $51.8 $66.0 $39.8
Ratio of Expenses to Average Net Assets 1.76% 1.79% 1.96% 1.93%* 2.50%(a)
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.98% 2.31% 2.17% 1.23%* 0.65%(a)
Portfolio Turnover Rate 40% 126% 69% 63% 27%
</TABLE>
*Data has been annualized.
(a) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
October 31,
1996
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Ratio of Expenses to Average Net Assets 2.65%
Ratio of Net Income (Loss) to Average Net Assets 0.50%
</TABLE>
(b) A move to a September 30th fiscal year end from an October 31st fiscal year
end resulted in an eleven-month fiscal year in 1997.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 71
<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 5-7, 11-12, 16-18, 22-25, 30-32, 37-40 AND 45-48, AS OF SEPTEMBER 30,
2000, 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 AUDITING STANDARDS GENERALLY
ACCEPTED IN THE UNITED STATES. 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, 2000, 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, 2000, THE RESULTS OF THEIR
OPERATIONS, THE CHANGES IN THEIR NET ASSETS, AND THEIR FINANCIAL HIGHLIGHTS FOR
THE PERIODS INDICATED THEREON IN CONFORMITY WITH ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES.
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 26, 2000
72 THE OAKMARK FAMILY OF FUNDS
<PAGE>
THE OAKMARK FAMILY OF FUNDS
TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
TRUSTEES
Michael J. Friduss
Thomas H. Hayden
Christine M. Maki
Victor A. Morgenstern
Allan J. Reich
Marv Rotter
Burton W. Ruder
Peter S. Voss
Gary Wilner, M.D.
OFFICERS
Victor A. Morgenstern--CHAIRMAN
Robert M. Levy--PRESIDENT
James P. Benson--VICE PRESIDENT
Henry R. Berghoef--VICE PRESIDENT
Kevin G. Grant--VICE PRESIDENT
David G. Herro--VICE PRESIDENT
Gregory L. Jackson--VICE PRESIDENT
Clyde S. McGregor--VICE PRESIDENT
William C. Nygren--VICE PRESIDENT
Edward A. Studzinski--VICE PRESIDENT
Michael J. Welsh--VICE PRESIDENT
Anita M. Nagler--SECRETARY
Ann W. Regan--VICE PRESIDENT--
SHAREHOLDER OPERATIONS AND ASSISTANT SECRETARY
Kristi L. Rowsell--TREASURER
John J. Kane--ASSISTANT TREASURER
OTHER INFORMATION
INVESTMENT ADVISER
Harris Associates L.P.
Two North LaSalle Street
Chicago, Illinois 60602-3790
TRANSFER AGENT
Nvest Services Company, Inc.
Attention: The Oakmark Family of Funds
P.O. Box 8510
Boston, Massachusetts 02266-8510
LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
FOR MORE INFORMATION:
Please call 1-800-OAKMARK
(1-800-625-6275)
or 617-578-1329
WEBSITE
www.oakmark.com
24-HOUR NAV HOTLINE
1-800-GROWOAK (1-800-476-9625)
E-MAIL ADDRESS
[email protected]
This report, including the audited financial statements contained herein, is
submitted for the general information of the shareholders of the Funds. The
report is not authorized for distribution to prospective investors in the Funds
unless it is accompanied or preceded by a currently effective prospectus of the
Funds. No sales charge to the shareholder or to the new investor is made in
offering the shares of the Funds.
<PAGE>
P.O. BOX 8510
BOSTON, MA 02266-8510
[LOGO]
1-800-OAKMARK
www.oakmark.com
<PAGE>
OARKMARK SELECT FUND CLASS II SHARES
CUMULATIVE RETURN: $10,000 INVESTMENT
TOTAL RETURN SINCE INCEPTION (12/31/99): 16.18%
<TABLE>
<CAPTION>
Oakmark Select S&P 500
class II shares W/INC
<S> <C> <C>
Dec-99 $10,000.00 $10,000.00
Jan-00 $9,457.00 $10,261.00
Feb-00 $9,549.00 $10,067.00
Mar-00 $10,885.00 $11,052.00
Apr-00 $10,847.00 $10,719.00
May-00 $10,939.00 $10,500.00
Jun-00 $10,309.00 $10,758.00
Jul-00 $10,651.00 $10,590.00
Aug-00 $11,520.00 $11,248.00
Sep-00 $11,618.00 $10,654.00
</TABLE>
OAKMARK INTERNATIONAL FUND CLASS II SHARES
CUMULATIVE RETURN: $10,000 INVESTMENT
TOTAL RETURN SINCE INCEPTION (11/04/99): 10.79%
<TABLE>
<CAPTION>
Oakmark
International
class II MSCI
shares WORLD EX U.S.
<S> <C> <C>
Oct-99 $10,000.00 $10,000.00
Nov-99 $9,825.00 $10,350.00
Dec-99 $10,596.00 $11,301.00
Jan-00 $10,286.00 $10,615.00
Feb-00 $9,991.00 $10,916.00
Mar-00 $10,567.00 $11,364.00
Apr-00 $10,366.00 $10,774.00
May-00 $10,632.00 $10,513.00
Jun-00 $11,303.00 $10,967.00
Jul-00 $11,108.00 $10,548.00
Aug-00 $11,274.00 $10,686.00
Sep-00 $11,079.00 $10,132.00
</TABLE>
