<PAGE>
[GRAPHIC]
ANNUAL REPORT
SEPTEMBER 30, 1999
MEMBER OF 100% NO-LOAD MUTUAL FUND COUNCIL
MANAGED BY
HARRIS
ASSOCIATES L.P.
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
OAKMARK
<PAGE>
THE OAKMARK FAMILY OF FUNDS
1999 ANNUAL REPORT
........................................................................
<TABLE>
<S> <C>
LETTER FROM THE CHAIRMAN AND PRESIDENT...................... 1
THE OAKMARK FAMILY OF FUNDS SUMMARY......................... 2
THE OAKMARK FUND
Letter from the Portfolio Manager......................... 4
Schedule of Investments................................... 7
THE OAKMARK SELECT FUND
Letter from the Portfolio Manager......................... 10
Schedule of Investments................................... 12
THE OAKMARK SMALL CAP FUND
Letter from the Portfolio Manager......................... 14
Schedule of Investments................................... 16
THE OAKMARK EQUITY AND INCOME FUND
Letter from the Portfolio Manager......................... 19
Schedule of Investments................................... 21
THE OAKMARK GLOBAL FUND
Letter from the Portfolio Managers........................ 25
Global Diversification Chart.............................. 27
Schedule of Investments................................... 28
THE OAKMARK INTERNATIONAL FUND
Letter from the Portfolio Managers........................ 31
International Diversification Chart....................... 33
Schedule of Investments................................... 34
THE OAKMARK INTERNATIONAL SMALL CAP FUND
Letter from the Portfolio Managers........................ 38
International Diversification Chart....................... 40
Schedule of Investments................................... 41
FINANCIAL STATEMENTS
Statement of Assets and Liabilities....................... 46
Statement of Operations................................... 48
Statement of Changes in Net Assets........................ 50
Notes to Financial Statements............................. 57
TRUSTEES AND OFFICERS....................................... 73
</TABLE>
FOR MORE INFORMATION
Access our web site at www.oakmark.com to obtain a profile,
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...
........................................................................
[PHOTO]
DEAR FELLOW SHAREHOLDERS:
WE ARE PLEASED TO PRESENT THE ANNUAL REPORT FOR THE OAKMARK FAMILY OF FUNDS.
THE FOURTH QUARTER PERFORMANCE OF OUR FUNDS WAS MIXED AT BEST AND LEFT ALL OF US
FRUSTRATED. WE VIEW THIS QUARTER AS A TEMPORARY SETBACK THAT WILL BE OVERCOME BY
THE ULTIMATE RETURNS GENERATED BY THE COMPELLING VALUES THAT ARE CURRENTLY HELD
IN OUR PORTFOLIOS. YOUR PATIENCE AND LOYALTY IS SOMETHING THAT WE VALUE HIGHLY.
AS OUR DOMESTIC INVESTMENT STYLE RETURNS TO FAVOR, THE COMEBACK WILL NOT BE
SMOOTH AND STRAIGHT UP IN TERMS OF PERFORMANCE. MANY OF YOU HAVE ASKED OR ARE
LIKELY TO BE WONDERING WHAT IS BEHIND OUR RESOLVE AND CONVICTION THAT OUR
PERFORMANCE IS AT OR NEAR A TURNING POINT. IN BOTH OUR DOMESTIC AND
INTERNATIONAL PORTFOLIOS, SEVERAL FACTORS ARE THE SOURCE OF OUR CONFIDENCE. IN
ABSOLUTE AND RELATIVE TERMS, THE CURRENT VALUATION OF OUR INDIVIDUAL HOLDINGS IS
VERY ATTRACTIVE. EACH OF THE STOCKS IS SELLING BELOW, AND IN SOME CASES
SUBSTANTIALLY BELOW, THE BUSINESS VALUE OF THE COMPANY IN WHICH WE ARE INVESTED.
THIS GAP BETWEEN ABSOLUTE VALUE AND BUSINESS VALUE WILL ULTIMATELY CLOSE AS THE
STOCK PRICE AND BUSINESS VALUES CONVERGE. ON A RELATIVE BASIS, LOOKING AT A
VARIETY OF QUANTITATIVE FACTORS, OUR PORTFOLIOS ARE UNIFORMLY SELLING AT
VALUATIONS WELL BELOW THE AVERAGE FOR THE APPROPRIATE STOCK MARKET INDEX.
OUR CONFIDENCE THAT WE ARE CLOSER TO SEEING THIS VALUATION GAP CLOSE IS
REINFORCED BY THE SUBSTANTIAL AND BROAD BASED INCREASE IN SHARE REPURCHASES AND
INSIDER BUYING IN THE SECURITIES THAT WE OWN. THE PEOPLE WHO KNOW THESE
COMPANIES BEST ARE CLEARLY MAKING SUBSTANTIAL TANGIBLE STATEMENTS THAT THESE
SECURITIES ARE UNDERVALUED. AS WE HAVE ALWAYS SAID, THE PROSPECTS FOR INVESTMENT
SUCCESS ARE ENHANCED WHEN THE SHAREHOLDERS AND MANAGEMENT INTERESTS ARE ALIGNED.
FINALLY, THE INCREASE IN TAKEOVER ACTIVITY AIMED AT THE COMPANIES IN OUR
PORTFOLIOS IS A REMINDER THAT THE VALUATION GAP CAN BE CLOSED EITHER GRADUALLY
OR DRAMATICALLY. IN EITHER CASE, WE WILL ULTIMATELY BENEFIT.
WE CONTINUE TO BELIEVE THAT SUPERIOR SHAREHOLDER SERVICE CAN BUILD LOYALTY
TO THE FUNDS. THUS WE ARE ALWAYS LOOKING FOR WAYS TO IMPROVE THIS SERVICE. TO
THIS END, WE HAVE RECENTLY CHANGED OUR TRANSFER AGENT. THE NEW PROVIDER IS NVEST
SERVICES COMPANY WHICH IS COMMITTED TO BECOMING THE TOP PROVIDER OF INVESTOR
SERVICES. PLEASE LET US KNOW IF YOU EXPERIENCE UNUSUALLY GOOD OR BAD SERVICE
FROM THE NEW FIRM BY E-MAILING US AT [email protected].
AS THE END OF THE CENTURY RAPIDLY APPROACHES, WE REMAIN CONFIDENT THAT WE
ARE PREPARED FOR THE EVENT.
WE WOULD ALSO LIKE TO BE THE FIRST TO WISH YOU A HAPPY, HEALTHY AND
PROSPEROUS NEW YEAR AND WE LOOK FORWARD TO A SUCCESSFUL 2000.
[SIGNATURE]
VICTOR MORGENSTERN
CHAIRMAN
[SIGNATURE]
ROBERT M. LEVY
PRESIDENT
[LOGO]
1
<PAGE>
THE OAKMARK FAMILY OF FUNDS
SUMMARY INFORMATION
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK
PERFORMANCE FOR PERIOD ENDED THE OAKMARK SELECT SMALL CAP
SEPTEMBER 30, 1999 FUND FUND FUND
<S> <C> <C> <C>
---------------------- ---------------------- ----------------------
3 MONTHS -13.6% -10.0% -9.0%
.........................................................................................................
6 MONTHS -3.6% -3.2% 3.0%
.........................................................................................................
1 YEAR 8.0% 30.1% 10.6%
AVERAGE ANNUAL TOTAL RETURN
3 YEAR 12.4% N/A 7.7%
.........................................................................................................
5 YEAR 15.1% N/A N/A
.........................................................................................................
SINCE INCEPTION 22.9% 31.1% 13.7%
VALUE OF $10,000 $53,882 $22,028 $16,558
FROM INCEPTION DATE (8/5/91) (11/1/96) (11/1/95)
- ---------------------------------------------------------------------------------------------------------
TOP FIVE HOLDINGS Philip Morris USG Corporation 10.1% Symantec
AS OF SEPTEMBER 30, 1999 Companies Inc. 7.2% Washington Corporation 6.6%
COMPANY AND % OF TOTAL NET Knight Ridder, Mutual, Inc. 9.1% Duff & Phelps Credit
ASSETS Inc. 6.6% U.S. Industries, Rating Co. 5.5%
Nike, Inc., Inc. 8.2% SPX Corporation 4.2%
Class B 6.3% First Data Catellus Development
H&R Block, Inc. 5.8% Corporation 7.0% Corporation 3.8%
The Dun & Bradstreet The Dun & Bradstreet U.S. Industries,
Corporation 5.8% Corporation 6.6% Inc. 3.6%
- ---------------------------------------------------------------------------------------------------------
TOP FIVE INDUSTRIES Other Consumer Computer Banks & Thrifts 10.2%
AS OF SEPTEMBER 30, 1999 Goods & Services 17.5% Machinery & Industrial
INDUSTRIES AND % OF TOTAL NET Services 19.4% Banks & Thrifts 12.0% Processing 9.5%
ASSETS Aerospace & Building Materials & Retail 8.7%
Defense 9.2% Construction 10.1% Food & Beverage 7.6%
Food & Beverage 8.9% Diversified Automotive 7.4%
Information Conglomerates 8.2%
Services 8.1% Information
Banks & Thrifts 7.9% Services 6.6%
</TABLE>
THE OAKMARK FAMILY OF FUNDS
2
<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>
-------------------- -------------------- -------------------- --------------------
3 Months -5.1% -8.2% -7.1% 0.8%
(inception 8/4/99)
......................................................................................................................
6 Months 4.3% N/A 12.4% 17.7%
......................................................................................................................
1 Year 15.3% N/A 46.4% 88.0%
Average Annual Total Return
3 Year 16.4% N/A 9.2% 10.0%
......................................................................................................................
5 Year N/A N/A 9.4% N/A
......................................................................................................................
Since inception 15.4% N/A 13.3% 11.7%
Value of $10,000 $17,518 $9,180 $23,896 $15,439
from inception date (11/1/95) (8/4/99) (9/30/92) (11/1/95)
- ----------------------------------------------------------------------------------------------------------------------
TOP FIVE HOLDINGS Imation Corp. 5.4% The Dun & Metso Oyj 5.0% Royal Doulton
AS OF SEPTEMBER 30, 1999 Premark Bradstreet Chargeurs SA 4.9% plc 5.1%
COMPANY AND % OF TOTAL NET International, Inc. 3.9% Corporation 5.6% Fila Holdings Carpetright
ASSETS The Reynolds and Department S.p.A. 4.0% plc 4.9%
56, Inc. 5.2% Cordiant JCG
Reynolds Company 3.7% NOVA Communications Holdings Ltd. 4.8%
First Data Corporation 4.6% Group plc 4.0% House of Fraser
Corporation 3.6% Sterling Commerce, Citizen Watch Plc 4.7%
Amli Residential Inc. 4.4% Co. 3.9% Krones AG 4.3%
Properties Somerfield plc4.3%
Trust 3.5%
- ----------------------------------------------------------------------------------------------------------------------
TOP FIVE INDUSTRIES U.S. Government Information Other Industrial Retail 12.7%
AS OF SEPTEMBER 30, 1999 Bonds 25.4% Services 12.8% Goods & Diversified
INDUSTRIES AND % OF TOTAL NET Computer Retail 11.8% Services 16.5% Conglomerates 10.1%
ASSETS Services 12.7% Banks & Banks & Production
Real Estate 9.1% Thrifts 9.9% Thrifts 9.6% Equipment 9.7%
Banks & Computer Machinery and Mining & Building
Thrifts 8.9% Services 8.8% Metal Materials 9.5%
Data Storage 5.4% Other Consumer Processing 6.3% Other Consumer
Goods & Other Consumer Goods &
Services 8.2% Goods & Services 9.3%
Services 6.3%
Food &
Beverage 6.0%
</TABLE>
THE OAKMARK FAMILY OF FUNDS
3
<PAGE>
THE OAKMARK FUND
REPORT FROM ROBERT J. SANBORN, PORTFOLIO MANAGER
........................................................................
[PHOTO]
- --------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM ITS INCEPTION
(8/5/91) TO PRESENT (9/30/99) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE OAKMARK S & P 500
FUND
<S> <C> <C>
8/91 $10,000 $10,000
10/91 $12,100 $10,202
1/92 $13,910 $10,707
4/92 $14,660 $10,947
7/92 $15,910 $11,279
10/92 $17,110 $11,217
1/93 $19,913 $11,836
4/93 $20,136 $11,957
7/93 $22,052 $12,260
10/93 $24,504 $12,896
1/94 $25,648 $13,357
4/94 $24,855 $12,590
7/94 $25,321 $12,890
10/94 $26,653 $13,384
1/95 $26,480 $13,433
4/95 $28,846 $14,781
7/95 $30,883 $16,248
10/95 $32,397 $16,916
1/96 $36,091 $18,608
4/96 $36,823 $19,242
7/96 $35,559 $18,934
10/96 $38,252 $20,988
1/97 $43,112 $23,510
4/97 $44,197 $24,073
7/97 $51,606 $28,797
9/97 $52,009 $28,668
12/97 $54,132 $29,494
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 $53,822 $40,023
</TABLE>
<TABLE>
<CAPTION>
9/30/99
NAV AVERAGE ANNUAL TOTAL RETURN*
$34.37 THROUGH 9/30/99
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 8/5/91
<S> <C> <C>
- --------------------------------------------------------------------------
THE OAKMARK FUND -13.6% 22.9%
Standard & Poor's 500 Stock
Index w/inc** -6.2% 18.5%
Dow Jones Industrial Average
w/ inc** -5.4% 19.1%
Value Line Composite Index** -10.3% 6.9%
</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.
PORTFOLIO UPDATE
The fiscal year ending September 30, 1999 was very disappointing to me. Your
Fund lagged significantly behind the overall market, and this is especially
frustrating after our lackluster 1998. While your Fund generated positive
absolute returns each year, it has dramatically lagged a very strong overall
market.
On the one hand, your Fund has had a dearth of big winners to compensate for
some disappointments. Of our sixteen positions greater than 3 percent of assets,
only four performed better than the Standard & Poor's 500--Brunswick, Nike,
Boeing, and Eaton. This does not really surprise me, because in general the big
winners in this market have been the fast-growing technology stocks that
represent a big portion of the overall market. As most of you know, we find
these stocks to be grossly overpriced and do not own any (see next item for
more).
However, your Fund had a number of losers during the year that are more
troubling and deserve discussion. Of our aforementioned sixteen largest
holdings, five stocks--Lockheed Martin, Mattel, Philip Morris, Bank One, and
Washington Mutual--were down for the year. Individual declines ranged from
13 percent for Washington Mutual to 35 percent for Lockheed Martin.
One needs to differentiate between stocks that went down due to a decline in
underlying business value, and those that went down because...they went down.
Our investment methodology involves buying stocks in businesses we understand,
with owner-oriented management, and, most important, that sell at a significant
discount to underlying value. In our view, two of our losers--Philip Morris and
Washington Mutual--have performed as expected as BUSINESSES and our buy-and-sell
targets are at least as high today as they were a year ago. While we monitor
developments closely, we view the declines in these two stocks as opportunities.
Bank One did experience a fundamental disappointment during the year as growth
at its large credit card business was less than expected. While we have adjusted
our earnings estimates somewhat, we do not view this development as a major hit
to underlying value. We still have great respect for the First USA
THE OAKMARK FUND
4
<PAGE>
........................................................................
credit card operation and, selling at less than 10x next year's earnings, we
view ONE as a bargain.
Mattel and Lockheed Martin both experienced major declines in our estimate of
underlying value. In the case of Mattel, the culprit was the disastrous
acquisition of The Learning Company. After closing this deal in the second
quarter of this year, MAT announced in the THIRD quarter that TLC was nowhere
near as profitable as originally thought. In fact, at this date, the Company is
still apparently trying to ascertain the extent of the problems at TLC. We have
dramatically lowered our earnings estimates and our buy-and-sell targets.
In the case of Lockheed Martin, this is a case of The Gang That Cannot Launch a
Satellite Straight. Very poor execution in a number of its businesses and in
some cost-cutting initiatives have caused our earnings estimates for the years
1999 and 2000 to be cut in half versus prior expectations. Our buy-and-sell
targets have been similarly cut.
When doing a post-mortem on these two, it is clear in the case of MAT that
management was not up to the critical job of capital allocation. When a
management issues stock equal to more than one-third of its shares outstanding,
it better have a firm handle on what it is buying. It is clear in the instance
of TLC that management's due diligence is highly suspect. In the case of
Lockheed Martin, management also is to blame for its problems. As we watched
this company make a very large number of acquisitions--each of which was logical
on its face--we concluded that management was up to the task of integrating
these disparate cultures. In retrospect, we were wrong.
In the case of both Mattel and Lockheed, we have had extensive and continuous
contact with top management. Despite this, we clearly misjudged management's
abilities. This is especially frustrating, because we as a firm traditionally
seek out superior managements and have spent a lot of time with a lot of CEOs.
While we as a group are not known as being bashful, we recognize that our
questioning of management must be even more direct and pointed in the future.
What are we doing with these stocks? As our schedule of investments indicates,
we have retained the vast majority of our shares in both companies at the
current time. While I am discomfited about holding shares in companies in which
we have serious doubts about management, the market has driven the shares of
both stocks to levels that are too cheap. Both stocks sell at less than 10x next
year's cash earnings, huge discounts to the overall market. With both vulnerable
to either financial or strategic buyers, with both companies leaders in their
industries, and with management under the gun to produce, I have elected to
retain both holdings for now.
While it is important to look back and understand one's investment results, it
is even more crucial always to look to the future and not be burdened by
history. While the past couple of years have produced unacceptable performance,
I am more confident about your Fund's prospective relative performance than I
have ever been. My colleagues and I have experienced similar periods before and
we have seen our patience rewarded.
A TALE OF TWO ACQUISITIONS
The history of financial markets tells us that the more things appear to change,
the more they stay the same. Reading about the South Sea Company in 1720s
England reminded me of the stock market in 1999 America. Despite the grandiose
name, the South Sea Company had no business except converting illiquid
government annuities into stock shares. The intrinsic value per share was easily
obtained. Despite this, South Sea stock became a sensation and soared far above
this value, attracting first government officials and royalty, then professional
traders, and then, towards the end of the bubble, the proverbial widows and
orphans.
The rapid price rise above value stimulated entrepreneurs to float other
"bubble" companies. These companies had a huge variety of purposes. One was
formed merely to trade South Sea stock; others were to settle Australia, to
gather saltpeter by cleaning out all the loos in England, and to make an air
pump for the brain. As an aside, there are days (and quarters) I wish that last
one had panned out!
Now let's advance to 1999. The awesome albeit irregular rise in technology
stocks continues and the awesome increase in IPOs to take advantage of this
reality also continues. What is driving these deals, in my opinion, is the same
thing that propelled the emergence of the "bubble companies" over 220 years
ago--public market prices that far exceed intrinsic value.
I have discussed at length how the US stock market is roughly divided into two
camps, the large-cap growth (primarily technology) companies on the one hand and
everything else on the other. "Everything else" hasn't been winning, as if you
did not already know. This situation has created a pervasive psychology in
today's stock market, exemplified by two acquisitions that occurred the same
week in September: Cisco/Cerent and H. & R. Block/ Olde.
Cisco, a leading networking company, announced the over-$7 billion purchase of a
private company, Cerent, that has been in business only two years and
THE OAKMARK FUND
5
<PAGE>
........................................................................
possesses an apparently nice evolutionary technology. Cerent is unprofitable and
has lost $60 million to date. It has only $10 million in revenue, which is
expected to grow to $300 million by 2001; it has 266 employees. By my
calculations, this deal occurred at 700x revenues, 23x 2001 expected revenues,
and $26 million per employee. A venture capital firm that recently invested
$8 million in Cerent will soon receive more than $2.1 billion in Cisco stock.
(This is a better-annualized return than even a certain First Lady's foray into
the commodity markets!). The "Wall Street Journal" wrote that this transaction
"...is the latest sign of the Internet's mind-boggling impact on corporate
valuations."
The stock market likes this deal.
H&R Block, the tax-preparation company, is one of your Fund's larger holdings.
It also announced an acquisition, buying Olde, the discount brokerage company.
Block is paying 2.5x revenues and 16.5x earnings for Olde. While we have serious
reservations about this deal and believe that Block could have found a far
better return for its capital, we would concede that there is a credible
strategic rationale for this deal.
The market hates, hates, hates this deal, and in the two trading days after the
announcement, Block's market value fell by MORE than the purchase price for
Olde. The market is apparently saying, "Not only is Olde worth zero, but it has
negative value."
What explains the market's different reactions to the two deals? Well, my belief
is that a deep-rooted psychology has taken root among investors (not to mention
venture capitalists, investment bankers, and even corporate executives), that in
the technology arena, particularly anything related to the Internet, valuation
does not matter. One can pay virtually any multiple for any well-positioned tech
company because, of course, the world has changed and the growth is going to be
there. After all, the stocks keep going up, right?
Let's compare what one can own in the "brick-and-mortar" toy world versus what
can own in the Net toy world. Mattel and Hasbro COMBINED have approximately the
same market capitalization ($8 billion) as eToys, an Internet toy retailer that
has been in business for less than three years. Mattel and Hasbro are the two
biggest toy companies in the US and own great brands such as Barbie, G.I. Joe,
Fisher-Price, Hot Wheels, and many others.
Combined, Mattel and Hasbro have sales of about $10 billion and generate over
$1.6 billion in pre-tax profits. eToys, in its most recent quarter, generated
less than $8 million (that's with an "m") in revenues and lost $20 million. If
the market is right, eToys is going to experience decades of excellent results.
Personally, I think it is exceedingly remote that the market is valuing these
respective businesses correctly.
There are countless examples in history of such psychology taking root for a
long period of time. Of course, in the long run, the piper must be paid. In 1720
England, the fate of the London banker John Martin is instructive. Early in the
summer, watching the price of South Sea soar, he argued, "When the rest of the
world is mad, we must imitate them in some measure." Alas, it turned out he was
late to the game, and failed to sell out before the crash. Losing his fortune,
he complained of being "blinded by other people's advice."
I get many letters from you, the shareholders, complaining about my stubborn
refusal to buy the tech stocks. I share--believe me!--your frustration. However,
I remain very confident about our Fund and its relative value.
As I write this, investment banks are about to float a huge number of IPOs, most
of which have an Internet connection of some sort. (I note that there are now a
number of mutual funds that focus on investing in IPOs, and more are on the
way!). All of the money raised by these IPOs will go into competing with other
players. The laws of economics dictate that this capital will retard returns. In
addition, venture capital firms are no doubt observing the valuations the stock
market is placing on Internet plays. According to the National Venture Capital
Association, the dollar value of Internet venture outlays has more than
quadrupled in the last year. In that last year, the percentage of venture
investments geared to the Internet has gone from 25 percent to over 50 percent.
This capital will make the sector more competitive.
So, I concede that many of you must be very frustrated by our Fund's anemic
performance, and I continue to appreciate your support and patience. I am not
tempted to imitate the madness we see in much of the stock market and remain
very confident in our portfolio. In the fullness of time, I am confident that
our approach will be validated.
/S/ ROBERT SANBORN
ROBERT J. SANBORN
Portfolio Manager
[email protected]
October 13, 1999
THE OAKMARK FUND
6
<PAGE>
THE OAKMARK FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS--90.8%
FOOD & BEVERAGE--8.9%
Philip Morris Companies Inc. 10,010,700 $ 342,240,806
Nabisco Holdings Corporation, Class A 2,372,100 81,985,706
-------------
424,226,512
APPAREL--6.3%
Nike, Inc., Class B 5,257,100 $ 298,997,563
RETAIL--0.2%
GC Companies, Inc. (a) 266,200 $ 7,986,000
HARDWARE--6.8%
The Black & Decker Corporation (b) 5,412,200 $ 247,269,887
The Stanley Works 3,124,900 78,708,419
-------------
325,978,306
OTHER CONSUMER GOODS & SERVICES--19.4%
H&R Block, Inc. (b) 6,415,500 $ 278,673,281
Mattel, Inc. 12,164,400 231,123,600
Brunswick Corporation (b) 7,280,800 181,109,900
Fortune Brands, Inc. 4,861,100 156,770,475
Galileo International, Inc. 1,980,000 79,695,000
-------------
927,372,256
BANKS & THRIFTS--7.9%
Washington Mutual, Inc. 7,480,000 $ 218,790,000
Bank One Corporation 4,600,548 160,156,577
-------------
378,946,577
INSURANCE--1.8%
Old Republic International Corporation 5,820,330 $ 84,031,014
INFORMATION SERVICES--8.1%
The Dun & Bradstreet Corporation (b) 9,322,500 $ 278,509,687
ACNielsen Corporation (a)(b) 4,764,000 108,083,250
-------------
386,592,937
COMPUTER SERVICES--2.6%
First Data Corporation 2,873,200 $ 126,061,650
PUBLISHING--6.6%
Knight Ridder, Inc. (b) 5,716,100 $ 313,670,988
MEDICAL CENTERS--3.0%
Columbia/HCA Healthcare Corporation 6,746,600 $ 142,943,588
MEDICAL PRODUCTS--1.6%
Sybron International Corporation (a) 2,935,600 $ 78,894,250
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FUND
7
<PAGE>
THE OAKMARK FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--90.8% (CONT.)
AEROSPACE & DEFENSE--9.2%
Lockheed Martin Corporation 7,150,000 $ 233,715,625
The Boeing Company 4,799,400 204,574,425
-------------
438,290,050
MACHINERY & INDUSTRIAL PROCESSING--7.3%
Eaton Corporation 2,113,600 $ 182,430,100
Cooper Industries, Inc. 3,558,400 166,355,200
-------------
348,785,300
BUILDING MATERIALS & CONSTRUCTION--0.0%
Juno Lighting, Inc. 63,702 $ 760,443
OTHER INDUSTRIAL GOODS & SERVICES--1.1%
Bandag, Incorporated, Class A 1,104,100 $ 27,878,525
The Geon Company 956,600 24,632,450
-------------
52,510,975
TOTAL COMMON STOCKS (COST: $4,169,051,189) 4,336,048,409
SHORT TERM INVESTMENTS--8.9%
U.S. GOVERNMENT BILLS--1.6%
United States Treasury Bills, 4.51%-4.65%
due 10/7/1999-12/2/1999 $75,000,000 $ 74,744,459
-------------
TOTAL U.S. GOVERNMENT BILLS (COST: $74,742,306) 74,744,459
COMMERCIAL PAPER--5.5%
American Express Credit Corp., 5.26%-5.31%
due 10/1/1999-10/8/1999 $80,000,000 $ 80,000,000
Ford Motor Credit Corp., 5.28%-5.29% due
10/4/1999-10/6/1999 60,000,000 60,000,000
General Electric Capital Corporation, 5.53%
due 10/1/1999 125,000,000 125,000,000
-------------
TOTAL COMMERCIAL PAPER (COST: $265,000,000) 265,000,000
</TABLE>
THE OAKMARK FUND
8
<PAGE>
THE OAKMARK FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS--8.9% (CONT.)
REPURCHASE AGREEMENTS--1.8%
State Street Repurchase Agreement, 5.20%
due 10/1/1999 $83,761,000 $ 83,761,000
-------------
TOTAL REPURCHASE AGREEMENTS (COST: $83,761,000) 83,761,000
TOTAL SHORT TERM INVESTMENTS (COST: $423,503,306) 423,505,459
Total Investments (Cost $4,592,554,495)--99.7% (c) $4,759,553,868
Other Assets In Excess Of Other Liabilities--0.3% 13,278,501
-------------
TOTAL NET ASSETS--100% $4,772,832,369
=============
</TABLE>
(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(c) At September 30, 1999, net unrealized appreciation of $166,999,373, for
federal income tax purposes, consisted of gross unrealized appreciation of
$654,481,043 and gross unrealized depreciation of $487,481,670.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FUND
9
<PAGE>
THE OAKMARK SELECT FUND
REPORT FROM BILL NYGREN, PORTFOLIO MANAGER
........................................................................
[PHOTO]
- --------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK
SELECT FUND FROM ITS INCEPTION (11/1/96) TO PRESENT
(9/30/99) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE OAKMARK S & P 500
SELECT FUND
<S> <C> <C>
10/96 $10,000 $10,000
1/97 $12,500 $11,202
4/97 $12,250 $11,470
7/97 $15,290 $13,721
9/97 $16,340 $13,659
12/97 $17,704 $14,053
3/98 $20,078 $16,021
6/98 $20,462 $16,551
9/98 $16,936 $14,904
12/98 $20,575 $18,078
3/99 $22,766 $18,979
6/99 $24,482 $20,317
9/99 $22,028 $19,048
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURN*
THROUGH 9/30/99
TOTAL RETURN FROM FUND INCEPTION
9/30/99 NAV $20.92 LAST 3 MOS. 11/1/96
- -----------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK SELECT FUND -10.0% 31.1%
Standard & Poor's 500 Stock
Index w/inc** -6.2% 24.7%
Standard & Poor's MidCap 400
Index w/ inc** -8.4% 18.3%
Value Line Composite Index** -10.3% 5.5%
</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 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.
For fiscal 1999, The Oakmark Select Fund increased in value by 30.1%. This
performance somewhat exceeded the 25.5% gain in the S&P MidCap 400, and the
27.8% gain in the S&P 500. Your fund also outperformed 95% of the other funds
classified by Morningstar as midcap value funds. I want to thank our research
department for another year of outstanding contribution. Their hard work and
insights are the foundation for the results we have achieved. The chart below
shows that, unlike the full year, the fourth fiscal quarter was somewhat
disappointing as the fund's NAV declined by more than the relevant indices.
I continue to believe that the valuation of The Oakmark Select Fund makes it a
very attractive alternative to a popular market index like the S&P 500. At
quarter's end, the S&P 500 sold above 23x estimated year 2000 earnings. The
average P/E ratio on year 2000 estimates for The Oakmark Select Fund was
11x--less than half the market multiple. When the market will "discover" our
stocks is anyone's guess. But, while we wait, most of our companies are
aggressively repurchasing their own shares, increasing the remaining shares'
value. One of our holdings, Premark, found a corporate buyer. Illinois Tool
Works agreed with us that Premark stock was a bargain and offered to purchase it
for a 60% premium. Congratulations to Premark's Jim Ringler for an outstanding
job of maximizing value for Premark's owners. Thanks also to Gucci's Dominico
DeSole for fighting off a hostile attempt to acquire Gucci at a bargain price
and his speedy demonstration that Gucci could maximize its value by remaining a
public company.
Managers like these are great to have working for us. They accept the obligation
to their owners to evaluate what the business is worth and to have a strategic
plan that will see that value recognized in the public market. They also
understand that selling the company above that value benefits shareholders. We
strive to be aligned with this type of management in all our stocks. When
management acts contrary to this thought process, we will usually sell our stock
and move on. In extreme cases of undervaluation, we will encourage the board of
directors to adopt our perspective. We took such a step last quarter
THE OAKMARK SELECT FUND
10
<PAGE>
........................................................................
with the board of Dun & Bradstreet, urging them to solicit offers for the
company. This effort will continue as we work toward having the strong Dun &
Bradstreet franchise value reflected in its stock price.
This quarter was another relatively quiet one for your portfolio with only one
new addition, Chiron. As a leading biotechnology company selling at 45x this
year's earnings, Chiron is hardly a typical holding for a value fund. Chiron's
earnings are depressed by heavy R&D spending. This spending provides no current
benefit but is very important for Chiron's long-term growth. Unlike
manufacturing companies that capitalize and depreciate their growth
expenditures, R&D spending is fully expensed as incurred. In our opinion, the
result is an understatement of Chiron's earnings. We faced the same accounting
issue when we bought Amgen two years ago, so the measure we used to compare it
to other drug companies was enterprise value divided by pre-tax, pre-R&D
cashflow. On that measure, Chiron sells at about 8x, while other biotech and
drug companies average over 15x. Acquisition prices have also confirmed that 15x
multiple. We believe new management at Chiron now has the company focused on
growing business value and expect they will be successful attaining that goal.
THE ILLUSION OF CERTAINTY
The financial media today is full of forecasts by prognosticators. Magazines for
investors, stock market Internet sites and shows on CNBC all provide forums for
professional investors to share their views on their favorite stocks. The
well-articulated reasons why certain stocks are favorites make it sound nearly
impossible that the pundits could be wrong. This illusion of certainty is in
direct conflict with the reality that most professional investors, including
mutual fund managers, underperform the market. This is a dangerous
misperception. The most obvious danger is that naive users of these forecasts
may take inappropriate risks believing the forecasters are right. The more
subtle danger is that portfolio managers, believing their clients or
shareholders want them to be infallible, become incapable of admitting and
correcting their mistakes.
A great long-term track record is one that exceeds the market's return by just a
couple of percentage points annually. The truth is that even great long-term
records include many, many mistakes. In fact, if our stock picks are right a
little more often than they are wrong, and the magnitude of the winners exceeds
the magnitude of the losers, the results will be outstanding. One of the most
powerful tools in acheiving that goal is the ability to unemotionally re-assess
our successes and failures and to reposition the portfolio in response to new
information and changed share prices.
With that as background, I'd like to look back at our performance in fiscal
1999. During the year, The Oakmark Select Fund held positions in a total of 24
stocks. Of those, 18 moved our relative performance by more than 50 basis
points, or one-half percent. Ten of these were positive, eight were negative.
The largest winner, Gucci, added more to our performance than the largest loser,
Washington Mutual, subtracted. Looking at the ten biggest movers, six were
successes (Gucci, Cablevision, First Data, Premark, Weatherford, Amgen) and, as
you should expect, our exposure to that group of stocks has decreased. Our
exposure to the four biggest failures (Washington Mutual, PartnerRe, Host
Marriott, Sterling Commerce) has also declined over the last couple quarters,
but that has more to do with tax-loss selling than any change in my conviction.
Although I wish we had not owned Washington Mutual last year, the best we can do
now is re-assess the situation and react accordingly. Washington Mutual ended
the quarter at a price of $29. It sells at less than 8x our estimate of next
year's earnings. A growing customer base and intelligent use of excess capital
should allow for continued double-digit EPS growth. Further, Washington Mutual
has established a very strong West Coast franchise, has top-notch management and
is using every dollar of excess capital to repurchase their shares. I was early
in purchasing Washington Mutual and, although I could be wrong, I remain
convinced that it will make a strong positive contribution to our future
results. We will continue to re-evaluate our Washington Mutual holding as new
information becomes available, but at this point, I believe Washington Mutual is
one of the most attractive stocks in our portfolio and intend to increase our
commitment to it.
Thank you for your support.
[SIGNATURE]
WILLIAM C. NYGREN
Portfolio Manager
[email protected]
October 8, 1999
THE OAKMARK SELECT FUND
11
<PAGE>
THE OAKMARK SELECT FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS--94.5%
APPAREL--4.1%
Liz Claiborne, Inc. 2,166,600 $ 67,164,600
RETAIL--1.7%
Gucci Group (b) 325,000 $ 27,137,500
OTHER CONSUMER GOODS & SERVICES--4.0%
Ralston Purina Group 2,372,600 $ 65,987,937
BANKS & THRIFTS--12.0%
Washington Mutual, Inc. 5,074,800 $ 148,437,900
People's Bank of Bridgeport, Connecticut 2,038,400 48,157,200
-------------
196,595,100
INSURANCE--4.7%
PartnerRe Ltd. (c) 2,222,300 $ 77,224,925
INFORMATION SERVICES--6.6%
The Dun & Bradstreet Corporation 3,643,600 $ 108,852,550
COMPUTER SERVICES--17.5%
First Data Corporation 2,605,000 $ 114,294,375
The Reynolds and Reynolds Company, Class A 3,875,000 78,953,125
Electronic Data Systems Corporation 1,360,900 72,042,644
Sterling Commerce, Inc. (a) 1,168,000 21,681,000
-------------
286,971,144
PUBLISHING--4.6%
The Times Mirror Company, Class A 1,146,300 $ 75,440,869
PHARMACEUTICALS--3.6%
Chiron Corporation (a) 2,150,000 $ 59,528,125
MACHINERY & INDUSTRIAL PROCESSING--3.9%
Thermo Electron Corporation (a) 4,693,500 $ 63,068,906
BUILDING MATERIALS & CONSTRUCTION--10.1%
USG Corporation (d) 3,499,900 $ 166,245,250
OIL FIELD SERVICES & EQUIPMENT--4.9%
Weatherford International, Inc. (a) 2,480,800 $ 79,385,600
OTHER INDUSTRIAL GOODS & SERVICES--5.9%
Premark International, Inc. 1,915,600 $ 96,737,800
REAL ESTATE--2.7%
Host Marriott Corporation 4,680,863 $ 44,468,199
</TABLE>
THE OAKMARK SELECT FUND
12
<PAGE>
THE OAKMARK SELECT FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--94.5% (CONT.)
DIVERSIFIED CONGLOMERATES--8.2%
U.S. Industries, Inc. (d) 8,486,000 $ 133,654,500
-------------
TOTAL COMMON STOCKS (COST: $1,522,118,201) 1,548,463,005
OTHER ASSETS--0.0%
RETAIL--0.0%
Gucci Group Contingent Receivables 1,781,125 $ 890,562
-------------
TOTAL OTHER ASSETS (COST: $0) 890,562
SHORT TERM INVESTMENTS--5.1%
U.S. GOVERNMENT BILLS--0.6%
United States Treasury Bills, 4.65% due
12/2/1999 $10,000,000 $ 9,920,778
-------------
TOTAL U.S. GOVERNMENT BILLS (COST: $9,919,917) 9,920,778
COMMERCIAL PAPER--3.1%
American Express Credit Corp., 5.26% due
10/1/1999 $10,000,000 $ 10,000,000
Ford Motor Credit Corp., 5.34% due
10/5/1999 10,000,000 10,000,000
General Electric Capital Corporation, 5.53%
due 10/1/1999 30,000,000 30,000,000
-------------
TOTAL COMMERCIAL PAPER (COST: $50,000,000) 50,000,000
REPURCHASE AGREEMENTS--1.4%
State Street Repurchase Agreement, 5.20%
due 10/1/1999 $23,073,000 $ 23,073,000
-------------
TOTAL REPURCHASE AGREEMENTS (COST: $23,073,000) 23,073,000
TOTAL SHORT TERM INVESTMENTS (COST: $82,992,917) 82,993,778
Total Investments (Cost $1,605,111,118)--99.6% (e) $1,632,347,345
Other Assets In Excess Of Other Liabilities--0.4% 6,561,467
-------------
TOTAL NET ASSETS--100% $1,638,908,812
=============
</TABLE>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) Represents foreign domiciled corporation.
(d) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(e) At September 30, 1999, net unrealized appreciation of $24,656,664, for
federal income tax purposes, consisted of gross unrealized appreciation of
$187,822,431 and gross unrealized depreciation of $163,165,767.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK SELECT FUND
13
<PAGE>
THE OAKMARK SMALL CAP FUND
REPORT FROM STEVEN J. REID, PORTFOLIO MANAGER
........................................................................
[PHOTO]
- --------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK SMALL
CAP FUND FROM ITS INCEPTION (11/1/95) TO PRESENT (9/30/99)
AS COMPARED TO THE RUSSELL 2000 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE OAKMARK RUSSELL 2000
SMALL CAP FUND
<S> <C> <C>
10/95 $10,000 $10,000
1/96 $10,180 $10,684
4/96 $12,180 $11,841
7/96 $11,830 $10,772
10/96 $13,190 $11,661
1/97 $15,180 $12,708
4/97 $15,170 $11,848
7/97 $18,730 $14,369
9/97 $20,340 $15,774
12/97 $20,290 $15,245
3/98 $21,732 $16,779
6/98 $20,467 $15,997
9/98 $14,976 $12,774
12/98 $17,620 $14,857
3/99 $16,069 $14,051
6/99 $18,205 $16,237
9/99 $16,558 $15,210
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURN*
THROUGH 9/30/99
TOTAL RETURN FROM FUND INCEPTION
9/30/99 NAV $13.88 LAST 3 MOS. 11/1/95
- ----------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK SMALL CAP FUND -9.0% 13.7%
Lipper Small Cap Fund Index** -2.1% 10.1%
Russell 2000 w/inc** -6.3% 11.3%
S&P Small Cap 600 w/inc** -4.8% 12.5%
</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 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 Oakmark Small Cap Fund's fiscal year ended on September 30, 1999. Results
for the fourth quarter and the fiscal year were a disappointment. The Fund lost
9.0% in the quarter and gained only 10.6% for the year. These results lagged the
relevant small cap indices. It is worth noting that since inception The Oakmark
Small Cap Fund has outperformed the relevant indices. While we do not believe
that our investment philosophy is flawed, it is definitely out of favor. Still,
we are taking steps to improve the investment performance of the Fund.
WHAT ARE WE DOING?
We are firmly committed to our style of value investing. Over time, it has
produced results that best accomplish our long-term investment objectives. In
the last year we have been much more active in the portfolio. Although we try to
keep turnover as low as possible to limit taxable events, buy and sell decisions
are not driven by tax considerations. However, if I have scared any shareholders
away by the thought of a year-end distribution, rest assured that our
expectation is that there will not be a distribution this year.
During the past year we have had substantial changes in the holdings of The
Oakmark Small Cap Fund. This activity increased the net number of holdings to
45. What drove this activity? Succinctly, investment opportunities. Our
investment process requires that we continually scan and monitor the small cap
stock universe for new ideas. In a difficult small cap stock environment it is
only natural that we should come across new ideas that are more attractive than
some of our existing holdings. My primary responsibilities are to see that the
portfolio is composed of the most attractive investment ideas available and
adhere to our disciplined style of value investing. I am very encouraged by the
attractive valuation level of the portfolio, the mix and quality of the
businesses we own, and the strength of the people who guide these companies.
THE OAKMARK SMALL CAP FUND
14
<PAGE>
........................................................................
The past year had its disappointments, but also had its bright spots. The Fund's
three largest holdings Symantec Corp., SPX Corp., and Duff & Phelps Credit
Rating Co. gained 173%, 120%, and 74%, respectively. I credit much of the
appreciation of these companies share prices to the due diligence of our
research staff. Sourcing of ideas is not a simple task and this group is a
valuable asset in helping to produce investment results.
Another encouraging sign is that we were not the only ones to recognize the
value of our holdings. In the course of the fiscal year five of our holdings
were acquired by other companies that saw the values we had also discovered.
First Brands Corporation, Paymentech, Inc., Scotsman Industries, Inc., Sequent
Computer Systems, Inc., and American Heritage Life Investment Corporation were
all acquired in the past fiscal year.
This begs the question: what went wrong? There are two parts to this answer.
First, small cap stocks and, in particular, value stocks remain out of favor.
The valuation gap between large cap stocks and small cap stocks, and growth
stocks and value stocks, has continued to widen. Since I have made this point ad
nauseam in previous shareholder letters, there is no point in belaboring it.
Second, our investment in ARM Financial turned into nothing short of an
investment disaster. We eliminated the holding from the portfolio in the fourth
quarter, but not before significant losses were realized. The full story on all
that went wrong at ARM is still not known from public information available to
investors. Suffice it to say that by the number of lawsuits filed against the
company it appears likely that we won't know all the facts until these issues
circulate through the courts.
WHAT ELSE ARE WE DOING?
I have received numerous comments that as shareholders you would like to hear
more about the holdings of the Fund. We added a number of new holdings to the
portfolio in the quarter. A brief description of four of them follows:
Hudson City Bancorp, Inc. (HCBK) is a very well run thrift based in New Jersey.
It recently converted to public ownership through the Mutual Holding Company
structure. HCBK has a significant share of loans and deposits in their market.
We believe their shares are trading at a significant discount to their
underlying value.
The Great Atlantic & Pacific Tea Company, Inc. (GAP) is an old-line grocery
store chain based in the Northeast. GAP is controlled by the Haub family that
has stepped in to operate the business. Their goal is to improve the margins and
achieve industry-like returns from the company.
ITT Educational Services, Inc. (ESI) is a leading provider of
technology-oriented post-secondary degree programs. We see demographics
benefiting their business and are highly intrigued by the high free cash flow
characteristics of their operations.
National Data Corporation (NDC) is a merchant processor of credit card
transactions and a health care information service provider. NDC should have
tremendous internal and external growth opportunities. The shares are close to
their 52-week low and very attractively valued.
Once again, I would like to thank everyone involved, especially our
shareholders, for your support of The Oakmark Small Cap Fund.
[SIGNATURE]
STEVEN J. REID
Portfolio Manager
[email protected]
October 11, 1999
THE OAKMARK SMALL CAP FUND
15
<PAGE>
THE OAKMARK SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS--98.5%
FOOD & BEVERAGE--7.6%
Del Monte Foods Company (a) 1,000,000 $ 14,125,000
Ralcorp Holdings, Inc. (a) 500,000 8,843,750
International Multifoods Corporation 275,000 6,325,000
M & F Worldwide Corp. (a) 500,000 4,000,000
-------------
33,293,750
APPAREL--1.8%
Reebok International Ltd. (a) 750,000 $ 8,015,625
RETAIL--8.7%
The Great Atlantic & Pacific Tea
Company, Inc. 500,000 $ 15,156,250
Ugly Duckling Corporation (a)(c) 1,750,000 12,468,750
Michaels Stores, Inc. (a) 350,000 10,325,000
-------------
37,950,000
HARDWARE--1.0%
Jore Corporation (a) 353,000 $ 4,213,938
OTHER CONSUMER GOODS & SERVICES--7.0%
Department 56, Inc. (a) 500,000 $ 11,968,750
Libbey, Inc. 300,000 8,868,750
Barry (R.G.) Corporation (a)(c) 900,000 5,512,500
Harman International Industries,
Incorporated 100,000 4,206,250
-------------
30,556,250
BANKS & THRIFTS--10.2%
People's Bank of Bridgeport, Connecticut 500,000 $ 11,812,500
Golden State Bancorp Inc. (a) 600,000 10,762,500
BankAtlantic Bancorp, Inc., Class A 1,150,001 6,396,881
Hudson City Bancorp, Inc. (a) 400,000 5,500,000
Northwest Bancorp, Inc. 500,000 4,312,500
PennFed Financial Services, Inc. 260,000 3,900,000
Finger Lakes Financial Corp. (c) 185,500 1,808,625
-------------
44,493,006
INSURANCE--6.6%
The MONY Group Inc. (a) 500,000 $ 14,437,500
The PMI Group, Inc. 350,000 14,306,250
-------------
28,743,750
OTHER FINANCIAL--5.5%
Duff & Phelps Credit Rating Co. (c) 300,000 $ 23,981,250
EDUCATIONAL SERVICES--2.7%
ITT Educational Services, Inc. (a) 600,000 $ 11,700,000
INFORMATION SERVICES--1.8%
National Data Corporation 300,000 $ 7,800,000
</TABLE>
THE OAKMARK SMALL CAP FUND
16
<PAGE>
THE OAKMARK SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS--98.5% (CONT.)
COMPUTER SERVICES--6.6%
Symantec Corporation (a) 800,000 $ 28,775,000
COMPUTER SYSTEMS--1.8%
Micron Electronics, Inc. (a) 750,000 $ 7,875,000
MANAGED CARE SERVICES--2.0%
First Health Group Corp. (a) 400,000 $ 8,975,000
AUTOMOTIVE--7.4%
SPX Corporation (a) 200,000 $ 18,150,000
Standard Motor Products, Inc. 500,000 9,718,750
Stoneridge, Inc. (a) 250,000 4,343,750
-------------
32,212,500
TRANSPORTATION SERVICES--2.5%
Teekay Shipping Corporation (b) 700,000 $ 10,937,500
INSTRUMENTS--0.5%
Varian Inc. (a) 135,000 $ 2,396,250
MACHINERY & INDUSTRIAL PROCESSING--9.5%
Columbus McKinnon Corporation 600,000 $ 10,350,000
Graco Inc. 250,000 8,203,125
MagneTek, Inc. (a) 900,000 8,043,750
Tokheim Corporation (a)(c) 860,000 7,686,250
Sames Corporation (c) 250,000 4,468,750
Northwest Pipe Company (a) 185,000 2,890,625
-------------
41,642,500
CHEMICALS--4.8%
H.B. Fuller Company 200,000 $ 12,175,000
Ferro Corporation 404,200 8,614,512
-------------
20,789,512
REAL ESTATE--6.9%
Catellus Development Corporation (a) 1,400,000 $ 16,450,000
Prime Hospitality Corp. (a) 900,000 7,200,000
Trammell Crow Company (a) 500,000 6,625,000
-------------
30,275,000
DIVERSIFIED CONGLOMERATES--3.6%
U.S. Industries, Inc. 1,000,000 $ 15,750,000
TOTAL COMMON STOCKS (COST: $414,120,043) 430,375,831
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK SMALL CAP FUND
17
<PAGE>
THE OAKMARK SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS--3.0%
COMMERCIAL PAPER--2.3%
General Electric Capital Corporation, 5.53%
due 10/1/1999 $10,000,000 $ 10,000,000
-------------
TOTAL COMMERCIAL PAPER (COST: $10,000,000) 10,000,000
REPURCHASE AGREEMENTS--0.7%
State Street Repurchase Agreement, 5.20%
due 10/1/1999 $3,325,000 $ 3,325,000
-------------
TOTAL REPURCHASE AGREEMENTS (COST: $3,325,000) 3,325,000
TOTAL SHORT TERM INVESTMENTS (COST: $13,325,000) 13,325,000
Total Investments (Cost $427,445,043)--101.5% (d) $ 443,700,831
Other Liabilities In Excess Of Other Assets--(1.5)% (6,561,552)
-------------
TOTAL NET ASSETS--100% $ 437,139,279
=============
</TABLE>
(a) Non-income producing security.
(b) Represents foreign domiciled corporation.
(c) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(d) At September 30, 1999, net unrealized appreciation of $16,255,788, for
federal income tax purposes, consisted of gross unrealized appreciation of
$71,981,161 and gross unrealized depreciation of $55,725,373.
THE OAKMARK SMALL CAP FUND
18
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
REPORT FROM CLYDE S. MCGREGOR, PORTFOLIO MANAGER
........................................................................
[PHOTO]
- --------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK EQUITY AND INCOME FUND FROM ITS
INCEPTION (11/1/95) TO PRESENT (9/30/99) AS COMPARED TO THE LIPPER BALANCED FUND
INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE OAKMARK LIPPER BALANCED
EQUITY & INCOME FUND FUND INDEX
<S> <C> <C>
10/95 $10,000 $10,000
1/96 $10,290 $10,662
4/96 $10,630 $10,778
7/96 $10,660 $10,665
10/96 $11,290 $11,449
1/97 $12,255 $12,197
4/97 $12,429 $12,244
7/97 $14,289 $13,909
9/97 $14,810 $14,005
12/97 $14,941 $14,243
3/98 $16,233 $15,370
6/98 $16,320 $15,599
9/98 $15,191 $14,701
12/98 $16,792 $16,392
3/99 $16,792 $16,655
6/99 $18,457 $17,402
9/99 $17,518 $16,682
</TABLE>
<TABLE>
<CAPTION>
9/30/99
NAV AVERAGE ANNUAL TOTAL RETURN*
$15.68 THROUGH 9/30/99
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 11/1/95
<S> <C> <C>
- ----------------------------------------------------------------------------
THE OAKMARK EQUITY & INCOME
FUND -5.1% 15.4%
Lipper Balanced Fund Index** -4.1% 14.0%
Lehman Govt./ Corp. Bond** .5% 5.9%
S&P 500 w/ inc** -6.2% 24.6%
</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.
FISCAL 1999: IT WAS THE BEST OF TIMES, IT WAS THE WORST OF TIMES
Oakmark Equity and Income's fiscal year ended on September 30. For fiscal 1999
as a whole, the Fund returned 15.3%, a solid absolute level of return and nearly
2% better than the Lipper Balanced Fund Index. The year exhibited a curious
pattern, however: strong results in quarters one and three, weak in two and
four. In fact, the September quarter was only the second in the Fund's four-year
history to register a loss, the previous example being last year's September
quarter (whatever happened to the "summer rally?").
As I wrote this letter one-year ago, stock prices were rapidly eroding,
culminating in a panic on October 8. Soon thereafter Alan Greenspan and the
Federal Reserve restored the equilibrium of the markets with three interest rate
cuts. Today the environment is quite different. The overall economic and
political situation appears promising, and the distractions originating abroad
which have bedeviled the markets have mostly dissipated. Probably the biggest
negative for investors is the fact that the Federal Reserve has now taken away
two of last year's rate reductions and noisily threatens to increase rates yet
again.
Despite the recent quarter's difficulties, I remain optimistic in my outlook for
the security markets. The current economic expansion may be one of the
longest-lived, but it is also the slowest on record. This means that the kinds
of imbalances that develop during periods of growth are less prevalent this
cycle. Instead, the imbalances have surfaced in the stock market where some
sectors trade at unprecedented multiples while others suffer through a bear
market. This "aversion to the mean" runs counter to powerful economic forces; we
value investors eagerly await the inevitable trend reversal.
MIGHTY OAKS AWARDS
My tradition at the fiscal year-end is to honor the analysts in our firm whose
THE OAKMARK EQUITY AND INCOME FUND
19
<PAGE>
........................................................................
ideas had the greatest positive impact on the Fund in both equity and fixed
income investments. (The name "Mighty Oaks" derives from our firm's splendid
athletic teams.) In the first three years of the Fund's existence it was easy to
determine the winners. In fiscal 1999, however, price considerations caused me
to sell several very successful holdings early in the year, complicating the
analysis. Rather than be too arbitrary, I have decided to make four awards for
equities.
Greg Jackson, co-manager of the new Oakmark Global Fund, wins an award for his
recommendation of First Data (FDC). FDC more than doubled over the fiscal year
as investors regained confidence in management. As a processor of transactions
which involve the use of credit and debit cards, the company is a beneficiary of
changing consumer preferences. Increased immigration lies behind the strength of
FDC's Western Union unit.
Following close behind is analyst Kevin Grant with Premark International. In
September, Premark announced that it would merge into Illinois Tool Works at a
price of $55/share. Back in April, Jim Ringler, Premark CEO, stopped by our
office to give us an update. During the meeting he pointed out that the company
had been growing earnings at 18% per year yet the investing community did not
seem to notice. We commended him and his team on their fine work and averred
that eventually their efforts would be rewarded. Now, as it happened, the CEO of
Illinois Tool sat on Premark's board of directors. With ITW's stock price much
more highly valued than Premark's, he was able to make a deal that should
continue to produce shareholder value for many years to come.
One footnote is in order concerning this merger. Most stocks experience some
increase in their share price in the period leading up to a deal announcement.
Occasionally this price increase is natural, but it often is the result of some
sort of information leak. The Premark announcement came after the stock market
closed on September 9. On that day the stock price rose a mere 6 cents, and its
price had actually declined over the previous week. Congratulations to all
involved for their professionalism and integrity!
Jim Benson of our research team receives a sort of group award for his
recommendations of Lexmark International, Imation, and Ugly Duckling debentures,
all of which I have discussed in detail in previous reports.
I am also granting Ed Studzinski a special award for "best performance by an
income-oriented equity in an industry with collapsing stock prices." Ed has
worked diligently to develop ideas which would build up the Fund's income
generation. His Legacy Hotels not only had a better than 13% dividend yield at
the time of my purchase for the Fund but also earned a 30% return over the last
nine months. Thanks Ed, Jim, Kevin, and Greg for your contributions.
On the fixed income side of the ledger, the Ugly Duckling debentures mentioned
above clearly take the prize. One other issue is worthy of comment, however. As
I have often noted, it is a great advantage for this Fund to be in a group of
funds which invest in different market segments. In particular, Steve Reid's
Small Cap Fund has been a fertile source of fixed-income ideas. In December of
1997, one of Steve's holdings, Scotsman Industries, acquired a division of
another company in which his Fund held an investment. To finance this purchase,
Scotsman issued debentures for the first time in its corporate history. I
purchased a position in this issue for your Fund, merely expecting to earn a
comfortable income return over the 10-year life of the security. In August,
1999, Scotsman itself was acquired. In order to effect this transaction the
purchaser tendered for our bonds at a healthy premium to the pre-acquisition
price. The result was a 19% return to the issue for the fiscal year, not bad for
a bond in a period where the returns to bond indices were close to zero. Thanks
to research director John Raitt for this successful idea.
At the close of this rather lumpy fiscal year I would certainly be remiss not to
thank the Fund's long-term shareholders for their support. Those who have been
with the Fund since inception have enjoyed a 15% rate of return compounded
annually which falls in the top 20% of similar funds. Thanks for your interest,
questions, and e-mails.
[SIGNATURE]
CLYDE S. MCGREGOR
Portfolio Manager
[email protected]
October 8, 1999
THE OAKMARK EQUITY AND INCOME FUND
20
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
SHARES HELD MARKET VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
EQUITY AND EQUIVALENTS--59.4%
FOOD & BEVERAGE--3.0%
UST Inc. 60,000 $ 1,811,250
BANKS & THRIFTS--4.3%
Washington Mutual, Inc. 67,000 $ 1,959,750
Bank One Corporation 18,724 651,829
-----------
2,611,579
INSURANCE--2.9%
IPC Holdings, Ltd. (b) 50,000 $ 937,500
PartnerRe Ltd. (b) 23,000 799,250
-----------
1,736,750
OTHER FINANCIAL--2.6%
Heller Financial, Inc. 70,000 $ 1,575,000
INFORMATION SERVICES--3.1%
The Dun & Bradstreet Corporation 63,500 $ 1,897,062
COMPUTER SERVICES--12.7%
The Reynolds and Reynolds Company 110,200 $ 2,245,325
First Data Corporation 50,000 2,193,750
Electronic Data Systems Corporation 32,500 1,720,469
Sterling Commerce, Inc. (a) 80,000 1,485,000
-----------
7,644,544
DATA STORAGE--5.4%
Imation Corp. (a) 104,300 $ 3,233,300
PUBLISHING--2.0%
Lee Enterprises, Incorporated 43,900 $ 1,201,763
MEDICAL PRODUCTS--3.0%
Sybron International Corporation (a) 68,000 $ 1,827,500
AUTOMOTIVE--2.6%
Lear Corporation (a) 45,000 $ 1,583,438
AGRICULTURAL EQUIPMENT--1.5%
Alamo Group Inc. 100,000 $ 925,000
OTHER INDUSTRIAL GOODS & SERVICES--3.9%
Premark International, Inc. 46,500 $ 2,348,250
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK EQUITY AND INCOME
FUND
21
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
EQUITY AND EQUIVALENTS--59.4% (CONT.)
REAL ESTATE--9.1%
Amli Residential Properties Trust 100,000 $ 2,100,000
Legacy Hotels Real Estate Investment
Trust (b) 350,000 1,989,042
Catellus Development Corporation (a) 116,728 1,371,554
-----------
5,460,596
DIVERSIFIED CONGLOMERATES--0.8%
U.S. Industries, Inc. 30,000 $ 472,500
TOTAL EQUITY (COST: $29,851,840) 34,328,532
CONVERTIBLE PREFERRED STOCK--2.5%
TELECOMMUNICATIONS--2.5%
Metromedia International Group, Inc.,
Convertible Preferred, 7.25% 60,000 $ 1,477,500
TOTAL CONVERTIBLE PREFERRED STOCK (COST: $1,946,738) 1,477,500
TOTAL EQUITY AND EQUIVALENTS (COST: $31,798,578) 35,806,032
FIXED INCOME--35.8%
PREFERRED STOCK--5.4%
TELECOMMUNICATIONS--0.8%
MediaOne Finance Trust III, Preferred,
9.04% 20,000 $ 505,000
BANKS & THRIFTS--4.6%
Pennfed Capital Trust, Preferred, 8.90% 27,500 $ 677,187
BBC Capital Trust I, Preferred, 9.50% 28,000 661,500
PennFirst Capital Trust I, Preferred,
8.625% 70,000 630,000
RBI Capital Trust I, Preferred, 9.10% 42,500 401,094
Fidelity Capital Trust I, Preferred, 8.375% 43,500 396,938
-----------
2,766,719
TOTAL PREFERRED STOCK (COST: $3,470,738) 3,271,719
CORPORATE BONDS--4.5%
RETAIL--1.0%
Ugly Duckling Corporation, 12.00% due
10/23/2003, Subordinated Debenture $650,000 $ 604,500
</TABLE>
THE OAKMARK EQUITY AND INCOME FUND
22
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
FIXED INCOME--35.8% (CONT.)
AEROSPACE & AUTOMOTIVE--0.3%
Coltec Industries, Inc., 9.75% due 4/1/2000 $150,000 $ 150,750
Coltec Industries, Inc., 9.75% due
11/1/1999 25,000 25,063
-----------
175,813
MACHINERY & INDUSTRIAL PROCESSING--0.8%
Tokheim Corporation, 11.375% due 8/1/2008,
Senior Subordinated Note (c) 500,000 $ 491,250
BUILDING MATERIALS & CONSTRUCTION--1.5%
Juno Lighting Inc., 11.875% due 7/1/2009,
Senior Subordinated Note (c) 750,000 $ 742,500
USG Corporation, 9.25% due 9/15/2001,
Senior Notes Series B 150,000 158,062
-----------
900,562
UTILITIES--0.4%
Midland Funding Corporation, 11.75% due
7/23/2005 200,000 $ 220,750
OTHER INDUSTRIAL GOODS & SERVICES--0.5%
UCAR Global Enterprises Inc., 12.00% due
1/15/2005, Senior Subordinated Note 300,000 $ 316,875
TOTAL CORPORATE BONDS (COST: $2,613,725) 2,709,750
GOVERNMENT AND AGENCY SECURITIES--25.9%
U.S. GOVERNMENT BONDS--25.4%
United States Treasury Notes, 6.625% due
5/15/2007 5,250,000 $ 5,412,242
United States Treasury Notes, 6.25% due
6/30/2002 4,000,000 4,052,757
United States Treasury Notes, 4.75% due
2/15/2004 4,000,000 3,835,563
United States Treasury Notes, 6.00% due
8/15/2009 2,000,000 2,014,868
-----------
15,315,430
U.S. GOVERNMENT AGENCIES--0.5%
Federal Home Loan Bank, 6.405% due
4/10/2001, Consolidated Bond 300,000 $ 301,695
TOTAL GOVERNMENT AND AGENCY SECURITIES (COST: $15,699,118) 15,617,125
TOTAL FIXED INCOME (COST: $21,783,581) 21,598,594
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK EQUITY AND INCOME
FUND
23
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS--5.0%
COMMERCIAL PAPER--2.5%
General Electric Capital Corporation, 5.53%
due 10/1/1999 $1,500,000 $ 1,500,000
-----------
TOTAL COMMERCIAL PAPER (COST: $1,500,000) 1,500,000
REPURCHASE AGREEMENTS--2.5%
State Street Repurchase Agreement, 5.20%
due 10/1/1999 $1,507,000 $ 1,507,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST: $1,507,000) 1,507,000
TOTAL SHORT TERM INVESTMENTS (COST: $3,007,000) 3,007,000
Total Investments (Cost $56,589,159)--100.2% (d) $60,411,626
Other Liabilities In Excess Of Other Assets--(0.2)% (94,035)
-----------
TOTAL NET ASSETS--100% $60,317,591
===========
</TABLE>
(a) Non-income producing security.
(b) Represents foreign domiciled corporation.
(c) Restricted security.
(d) At September 30, 1999, net unrealized appreciation of $3,822,467, for
federal income tax purposes, consisted of gross unrealized appreciation of
$6,404,058 and gross unrealized depreciation of $2,581,591.
THE OAKMARK EQUITY AND INCOME FUND
24
<PAGE>
THE OAKMARK GLOBAL FUND
REPORT FROM GREGORY L. JACKSON AND MICHAEL J. WELSH, PORTFOLIO MANAGERS
........................................................................
[PHOTO] [PHOTO]
- --------------------------------------------------------------------
RESULTS FROM FUND INCEPTION (8/4/99)
THROUGH 9/30/99
<TABLE>
<CAPTION>
9/30/99 NAV $9.18 TOTAL RETURN
FROM FUND
INCEPTION
8/4/99
<S> <C>
- --------------------------------------------
THE OAKMARK GLOBAL FUND -8.2%
MSCI World w/inc.* -1.2%
Lipper Global Fund Index* -1.0%
</TABLE>
*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:
We are pleased to present the first quarterly report of The Oakmark Global Fund!
While the Fund's first two months were disappointing, we are extremely excited
about the appreciation potential of our current portfolio. The recent weakness
in share prices throughout most of the world's equity markets has given us the
chance to buy into very high quality businesses at very attractive prices.
PHILOSOPHY
As investors in The Oakmark Family of Funds, you are well aware of our long-
term, disciplined value philosophy. As this is our first direct communication we
think it is important to clearly outline the process with which we will
implement this philosophy with The Global Fund.
As with the other Oakmark Funds, we believe superior, long-term results are
achieved by investing in quality companies purchased at significant discounts to
their underlying business value. Equally important, we must have confidence that
the priority of management is to make money for the owners -- us. No matter how
cheap the stock, we will never invest unless we believe management's top
priority is to build the value of the business.
Inherent in our philosophy is the belief that, over time, a company's share
price will increase and ultimately reflect underlying business value. It may
take time for this gap to close, perhaps, if the short-term uncertainty that
created the opportunity persists. It is our job as
THE OAKMARK GLOBAL FUND
25
<PAGE>
........................................................................
analysts to determine whether the current share price is properly compensating
us for this uncertainty.
PORTFOLIO CONSTRUCTION
The portfolio of companies in The Global Fund is built from the bottom-up on a
stock-by-stock basis. We will never allocate money, as many global investors do,
based solely on macro-economic predictions of the various regions of the world.
Too often this sort of top-down investing ignores valuation and, more important,
the quality of the underlying companies in a particular economy. We will
certainly consider macroeconomic factors in our investments, but will use them
as important inputs to determining the underlying business value of a specific
company.
The Fund's largest positions will be those we perceive to have the largest gaps
between price and value. Before purchasing a single share of stock we establish
a firm Sell Price for that business. Portfolio construction then becomes, in
general, an optimization function. We want the most money invested in those
businesses with the largest gap between the current price and our Sell Price. Of
course we are also cognizant of other factors, including the amount invested in
a particular industry or country, but the valuation gap will be the biggest
driver of position size.
We like to characterize the construction process as "ideas battling their way
into the portfolio on a stock-by-stock basis." Whether it is Dun & Bradstreet or
Citi-
zen Watch, each idea is judged strictly on appreciation potential, not whether
it is a large cap or small cap, or whether it is located in Murray Hill, New
Jersey or Tokyo, Japan.
As with the other Oakmark Funds, concentration is another important part of
portfolio construction -- we want our best ideas to have significant impact on
the Fund's net asset value.
Currently, the Fund is invested in 34 companies, with 43% of the assets invested
in the US market and 55% internationally. The international portion breaks down
regionally as 32% Europe, 11% Asia, and 8% Latin America. The United Kingdom is
far and away the largest country weighting overseas, representing around 19% of
the portfolio.
FLEXIBILITY
As both managers and large personal investors, we feel flexibility is the most
exciting aspect of The Global Fund. We are able to participate in the firm's
best ideas regardless of where they are located. We are also able to invest in
companies of any size capitalization, from small to large. This flexibility
allows us to go wherever value takes us.
As value investors, short-term market volatility gives us an assist in
implementing our investment philosophy -- greater volatility affords us greater
opportunities to purchase stocks trading at significant discounts to their
perceived true business value. The fact that The Global Fund can invest
regardless of company size, location, region, etc.
gives it even more flexibility to seize these opportunities. We recognize that
the value discipline inherent in our process is the most important element of
success in using short-term fluctuations to the Fund's advantage.
At this time we see great opportunities worldwide in mid-size and smaller
companies. The already large valuation gap has been widening between this sector
and the large caps for a number of years throughout the world (the lone
exception is Japan). We believe the size of this gap cannot persist.
We would like to thank you for your confidence in the newest fund in the Oakmark
Family. We look forward to a long and prosperous future.
[SIGNATURE]
GREG JACKSON
Portfolio Manager
[email protected]
[SIGNATURE]
MICHAEL WELSH
Portfolio Manager
[email protected]
October 7, 1999
THE OAKMARK GLOBAL FUND
26
<PAGE>
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------
GLOBAL DIVERSIFICATION--SEPTEMBER 30, 1999
........................................................................
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
UNITED STATES 43.4%
EUROPE 32.1%
PACIFIC RIM 11.3%
LATIN AMERICA 7.8%
OTHER COUNTRIES 3.6%
% OF FUND NET ASSETS
UNITED STATES 43.4%
EUROPE 32.1%
Great Britain 19.3%
*Finland 3.9%
*France 3.9%
*Italy 2.6%
*Germany 2.4%
LATIN AMERICA 7.8%
Brazil 5.3%
Panama 2.5%
% OF FUND NET ASSETS
PACIFIC RIM 11.3%
Japan 4.7%
New Zealand 3.7%
Australia 2.9%
OTHER 3.6%
Bermuda 3.6%
*Euro currency countries comprise 12.8% of the Fund.
</TABLE>
THE OAKMARK GLOBAL FUND
27
<PAGE>
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--98.2%
CONSUMER NON-DURABLES--2.9%
Citizen Watch Co. (Japan) Watch Manufacturer & Retailer 96,000 $ 687,769
APPAREL--4.6%
Fila Holding S.p.A. (Italy), (b) Athletic Footwear & Apparel 49,200 $ 615,000
Reebok International Ltd. (United Athletic Apparel
States), (a) 45,200 483,075
-----------
1,098,075
RETAIL--11.8%
Somerfield plc Food Retailer
(Great Britain) 478,500 $ 1,020,141
House Of Fraser Plc Department Store
(Great Britain) 712,300 914,674
Denny's Japan Co., Ltd. (Japan) Restaurant Chain 19,000 444,840
Ugly Duckling Corporation (United Automobile Retailer & Financier
States), (a) 62,000 441,750
-----------
2,821,405
OTHER CONSUMER GOODS & SERVICES--8.2%
Department 56, Inc. (United Collectibles & Giftware Products
States), (a) 52,000 $ 1,244,750
Royal Doulton plc Tableware & Giftware
(Great Britain) 411,700 732,004
-----------
1,976,754
BANKS & THRIFTS--9.9%
Uniao de Bancos Brasileiros S.A. Major Brazilian Bank
(Brazil), (c) 54,700 $ 967,506
Washington Mutual, Inc. (United Thrift
States) 27,700 810,225
Banco Latinoamericano de Latin American Trade Bank
Exportaciones, S.A., Class E
(Panama), (b) 26,300 601,613
-----------
2,379,344
INSURANCE--6.5%
PartnerRe Ltd. (Bermuda) Reinsurance Company 25,000 $ 868,750
Reinsurance Australia Corporation
Limited
(Australia) Reinsurance Company 1,297,700 682,741
-----------
1,551,491
HOTELS & MOTELS--1.5%
Promus Hotel Corporation (United Hotel Operator
States), (a) 11,000 $ 358,188
</TABLE>
THE OAKMARK GLOBAL FUND
28
<PAGE>
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--98.2% (CONT.)
TEMPORARY STAFFING--2.9%
Robert Half International Inc. (United Temporary Staffing Services
States), (a) 29,000 $ 696,000
EDUCATIONAL SERVICES--2.3%
ITT Educational Services, Inc. Postsecondary Degree Programs
(United States), (a) 29,000 $ 565,500
INFORMATION SERVICES--12.8%
The Dun & Bradstreet Corporation Financial Information Services
(United States) 45,000 $ 1,344,375
NOVA Corporation (United States) Transaction Processing Services 44,000 1,100,000
Keane, Inc. (United States) Information Technology Consulting 27,000 615,938
-----------
3,060,313
COMPUTER SERVICES--8.8%
Sterling Commerce, Inc. (United Electronic Commerce Services
States), (a) 56,500 $ 1,048,781
The Reynolds and Reynolds Company, Information Management Systems
Class A (United States) 30,500 621,438
First Data Corporation (United States) Electronic Commerce Services 10,000 438,750
-----------
2,108,969
TELECOMMUNICATIONS--1.3%
Telemig Celular Participacoes S.A. Telecommunications
(Brazil), (a) 161,645,000 $ 252,570
Telesp Celular Participacoes S.A. Telecommunications
(Brazil) 9,600,000 53,900
-----------
306,470
MACHINERY & METAL PROCESSING--6.5%
Metso Oyj (Finland), (a) Pulp Machinery 82,600 $ 932,518
Tokheim Corporation (United Petroleum Dispensing Systems
States), (a) Manufacturer 69,000 616,687
-----------
1,549,205
MINING & BUILDING MATERIALS--3.7%
Fletcher Challenge Building (New Building Materials Manufacturer
Zealand) 714,200 $ 879,220
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK GLOBAL FUND
29
<PAGE>
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
DESCRIPTION PAR VALUE MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--98.2% (CONT.)
OTHER INDUSTRIAL GOODS & SERVICES--6.2%
Tomkins plc (Great Britain) Diversified Engineering 130,500 $ 549,996
Chargeurs SA (France) Wool Production & Trading 7,900 483,344
GFI Industries SA (France) Industrial Fastener Manufacturer 18,900 460,330
-----------
1,493,670
PRODUCTION EQUIPMENT--2.4%
Krones AG (Germany) Manufacturer of Production Machinery 19,500 $ 570,596
DIVERSIFIED CONGLOMERATES--5.9%
TT Group PLC Diversified Manufacturing
(Great Britain) 319,500 $ 721,925
Wassall PLC (Great Britain) Diversified Consumer Goods 176,200 688,935
-----------
1,410,860
TOTAL COMMON STOCKS (COST: $25,302,871) 23,513,829
</TABLE>
<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENTS--1.8%
COMMERCIAL PAPER--1.0%
General Electric Capital Corporation, 5.53% due 10/1/1999 $250,000 $ 250,000
-----------
TOTAL COMMERCIAL PAPER (COST: $250,000) 250,000
REPURCHASE AGREEMENTS--0.8%
State Street Repurchase Agreement, 5.20% due 10/1/1999 $192,000 $ 192,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST: $192,000) 192,000
TOTAL SHORT TERM INVESTMENTS (COST: $442,000) 442,000
Total Investments (Cost $25,744,871)--100.0% (d) $23,955,829
Other Liabilities In Excess Of Other Assets--(0.0)% (e) (2,475)
-----------
TOTAL NET ASSETS--100% $23,953,354
===========
</TABLE>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) Represents a Global Depository Receipt.
(d) At September 30, 1999, net unrealized depreciation of $1,789,042,
for federal income tax purposes, consisted of gross unrealized
appreciation of $650,351 and gross unrealized depreciation of
$2,439,393.
(e) Includes portfolio hedges.
THE OAKMARK GLOBAL FUND
30
<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 (9/30/99) COMPARED TO THE MSCI WORLD EX U.S. INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE OAKMARK MSCI WORLD EX
INTERNATIONAL FUND U.S. INDEX
<S> <C> <C>
9/92 $10,000 $10,000
10/92 $9,800 $9,505
1/93 $10,833 $9,621
4/93 $12,105 $11,764
7/93 $12,608 $12,233
10/93 $14,454 $12,981
1/94 $16,488 $13,786
4/94 $15,382 $13,664
7/94 $15,195 $13,899
10/94 $15,122 $14,265
1/95 $13,698 $13,124
4/95 $14,399 $14,437
7/95 $15,507 $14,911
10/95 $14,659 $14,248
1/96 $16,248 $15,312
4/96 $18,162 $16,144
7/96 $17,635 $15,471
10/96 $18,310 $15,843
1/97 $19,909 $15,761
4/97 $21,149 $16,114
7/97 $22,960 $18,426
9/97 $23,283 $18,027
12/97 $20,097 $16,637
3/98 $22,994 $19,083
6/98 $20,253 $19,233
9/98 $16,322 $16,404
12/98 $18,688 $19,759
3/99 $21,258 $20,070
6/99 $25,728 $20,650
9/99 $23,896 $21,535
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURN*
THROUGH 9/30/99
TOTAL RETURN FROM FUND INCEPTION
9/30/99 NAV $13.95 LAST 3 MOS. 9/30/92
- ----------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK INTERNATIONAL FUND -7.1% 13.3%
MSCI World ex U.S. w/inc.** 4.3% 11.6%
MSCI EAFE w/ inc** 4.4% 11.5%
Lipper International Fund
Index** 3.4% 12.6%
</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 fiscal year 1999, The Oakmark International Fund increased in value by
46.4%. This compares very favorably with the MSCI World ex U.S. Index which was
up 31.3% and the Lipper International Fund Index which was up 27.6%. However, in
the last quarter ending September 30, the Fund gave back 7.1% of the large gains
achieved in the fiscal year. This compares to the quarterly return of the MSCI
World ex U.S. Index which was up 4.3%.
PERFORMANCE ATTRIBUTION FOR QUARTER 4
There were a couple of reasons why we had an off quarter. One was the weakness
in the Pacific Rim and Latin America. These areas were extremely over-sold going
into the fourth quarter of 1998 and had recovered quite strongly until the third
quarter of 1999. FERNZ, a New Zealand-based agri-company, SK TELECOM, a South
Korean mobile phone company, UNIBANCO, a Brazilian bank, and MANDARIN ORIENTAL
HOTELS each cost your Fund between 1/2 and 1% of quarterly performance. From an
investment perspective, though all these companies had rough calendar third
quarters, we still think all are high quality, long-term investments with
outstanding upside potential. In most cases, we have taken advantage of share
price weakness to bolster our positions.
In the United Kingdom, one of our positions cost us almost 3% this past quarter.
SOMERFIELD, the UK's fifth largest grocer, dropped 56%. We think this company
offers outstanding value selling at around 5x's earnings power and yielding over
10%. They have had some problems integrating an acquisition but their basic
business is outperforming a very weak U.K. retail
THE OAKMARK INTERNATIONAL FUND
31
<PAGE>
........................................................................
environment. The company is financially sound and has authorized a sizable stock
buyback.
Being underweighted in Japan also cost the Fund. Japan achieved a U.S. dollar
return of over 15% in the latest quarter, being the top rated developed market.
We are still significantly underweighted in this market. Apart from Citizen
Watch and Canon, we have found it difficult to find any "real" companies that
are undervalued enough to warrant your investment dollars. Most large
corporations in Japan still are unprofitable, wasteful capital allocators who
care more about their creditors (who are hurting) and their suppliers (who are
hurting) than their shareholders (who have been hurting for a decade).
PROSPECTS LOOK GREAT!
Looking forward, we believe that our shareholders will continue to be rewarded
as prospects around the globe are rapidly improving for investors. Though the
Pacific Rim has had a bit of a rally over the last 12 months, there is still
huge potential as economies are recovering much faster than expected and real
structural reform has occurred in most of Asia. As an example of this, we point
to South Korea which continues to open its economy at a rate unthinkable only 18
months ago. Further, the big business groups known as "chaebols," which have had
a strong hand in South Korea's collapse at the end of 1997, are under constant
pressure to reform. Contrast the Kim administration's quick response in Korea to
the paralysis of the Japanese powers that be. Though the Japanese economy has
rebounded, it remains to be seen if it is for real. Little, if any, real
structural reform has occurred.
In the United Kingdom, where The Oakmark International Fund has over 25% of its
assets, companies are cheap, well run and based in the soundest, most
capital-friendly European economy. Our holdings there have generally done well
(with the exception of Somerfield, mentioned above) and continue to have bright
prospects. We continue to find new names, as well, that fit our very strict
criteria.
Continental Europe is also looking attractive again. Though company managements
are nowhere near as shareholder-oriented as in the UK or the US, they are slowly
changing. Further, share prices have lagged, offering some decent value,
especially in places like Finland and Sweden. Metso, one of the Fund's largest
holdings in one of the top two manufacturers of paper making machines in the
world, is thoroughly restructuring its business to enhance profitability in all
of its divisions, and has benefited by the bankruptcy of one of its largest
competitors. We think it has a good chance of doubling in price based on the
above!
IN CLOSING....
As large shareholders of this Fund, we too are very aware of the ups and downs
of international investing. But, as we have said many times before, volatility
breeds opportunity! We are committed to making lemonade out of lemons and
welcome the opportunities that short-term traders drop on our laps. Rather than
try to guess short-term price movements, changes in economic policy, election
winners or the movements in exchange and/or interest rates, we would rather
apply our research to something we are confident in: our ability to value a
business. As suggested many times in the past, if one wants to gamble, one
should try casinos. If a more certain outcome is desired, wager on the Green Bay
Packers, for they will most likely win the next Super Bowl.
[SIGNATURE]
DAVID HERRO
Portfolio Manager
[email protected]
[SIGNATURE]
MICHAEL WELSH
Portfolio Manager
[email protected]
October 8, 1999
THE OAKMARK INTERNATIONAL FUND
32
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
INTERNATIONAL DIVERSIFICATION--SEPTEMBER 30, 1999
........................................................................
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
EUROPE 54.9%
PACIFIC RIM 24.2%
LATIN AMERICA 14.9%
OTHER COUNTRIES 1.1%
% OF FUND NET ASSETS
EUROPE 54.9%
Great Britain 25.2%
*Finland 8.1%
*France 6.7%
*Italy 4.0%
*Netherlands 3.5%
Sweden 2.5%
*Germany 2.0%
Denmark 1.7%
Switzerland 1.2%
LATIN AMERICA 14.9%
Brazil 8.1%
Panama 3.5%
Argentina 3.3%
% OF FUND NET ASSETS
PACIFIC RIM 24.2%
Japan 8.0%
Korea 5.6%
Hong Kong 4.9%
Singapore 3.1%
New Zealand 2.6%
OTHER 1.1%
Bermuda 0.8%
Canada 0.3%
*Euro currency countries comprise 24.3% of the Fund.
</TABLE>
THE OAKMARK INTERNATIONAL FUND
33
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--95.1%
CONSUMER NON-DURABLES--3.9%
Citizen Watch Co. (Japan) Watch Manufacturer & Retailer 4,392,000 $ 31,465,443
FOOD & BEVERAGE--6.0%
Quilmes Industrial SA (Argentina), (b) Brewer 2,795,000 $ 26,727,188
Diageo plc (Great Britain) Manufacturer of Beverages, Wines, & 1,300,000 13,290,573
Spirits
Lotte Confectionery Company (Korea) Confection Manufacturer 37,270 4,549,605
Lotte Chilsung Beverage Company Manufacturer of Soft Drinks, Juices, &
(Korea), (d) Sport Drinks 73,000 4,428,607
-------------
48,995,973
APPAREL--4.0%
Fila Holding S.p.A. (Italy), (b)(d) Athletic Footwear & Apparel 2,572,800 $ 32,160,000
HOUSEHOLD PRODUCTS--4.7%
Hunter Douglas N.V. (Netherlands) Manufacturer of Window Coverings 802,700 $ 21,737,162
Reckitt & Colman plc (Great Britain) Household Cleaners & Air Fresheners 1,305,000 16,285,027
-------------
38,022,189
RETAIL--6.0%
Somerfield plc (Great Britain) Food Retailer 12,969,995 $ 27,651,478
Giordano International Limited (Hong East Asian Clothing Retailer &
Kong) Manufacturer 26,306,000 20,826,980
-------------
48,478,458
OTHER CONSUMER GOODS & SERVICES--6.3%
Canon, Inc. (Japan) Office & Video Equipment 1,039,000 $ 30,163,889
Mandarin Oriental International Hotel Management
Limited (Singapore) 29,253,000 20,769,630
-------------
50,933,519
BANKS & THRIFTS--9.6%
Uniao de Bancos Brasileiros S.A. Major Brazilian Bank
(Brazil), (c) 1,769,900 $ 31,305,106
Banco Latinoamericano de Latin American Trade Bank
Exportaciones, S.A., Class E
(Panama), (b)(d) 1,252,800 28,657,800
Den Danske Bank Group (Denmark) Commercial Banking 64,000 7,284,285
</TABLE>
THE OAKMARK INTERNATIONAL FUND
34
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--95.1% (CONT.)
BANKS & THRIFTS--9.6% (CONT.)
Unidanmark A/S, Class A (Denmark) Commercial Banking 94,000 $ 6,365,446
United Overseas Bank Ltd., Foreign Commercial Banking
Shares (Singapore) 553,000 4,196,294
-------------
77,808,931
INSURANCE--0.8%
IPC Holdings, Ltd. (Bermuda) Reinsurance Provider 345,000 $ 6,468,750
TEMPORARY STAFFING--0.3%
Vedior NV (Netherlands) Temporary Staffing 150,500 $ 2,634,294
MARKETING SERVICES--5.3%
Cordiant Communications Group plc Advertising Services
(Great Britain) 10,798,877 $ 32,000,729
Saatchi & Saatchi plc (Great Britain) Advertising Services 3,202,497 11,071,763
-------------
43,072,492
BROADCASTING & PUBLISHING--0.2%
Torstar Corporation, Class B (Canada) Newspaper Publisher 195,000 $ 2,116,824
TELECOMMUNICATIONS--5.7%
SK Telecom Co. Ltd. (Korea) Telecommunications 13,162 $ 12,172,010
Telesp Celular Participacoes S.A. Telecommunications
(Brazil) 2,096,500,000 11,770,974
Telesp Participacoes S.A. (Brazil) Telecommunications 631,100,000 6,573,958
Tele Centro Sul Participacoes S.A. Telecommunications
(Brazil), (a) 712,600,000 4,943,662
Telemig Celular Participacoes S.A. Telecommunications
(Brazil), (a) 2,372,600,000 3,707,188
Embratel Participacoes S.A. Telecommunications
(Brazil), (a) 526,100,000 3,534,734
Tele Sudeste Celular Participacoes Telecommunications
S.A. (Brazil) 1,351,100,000 3,518,490
-------------
46,221,016
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK INTERNATIONAL FUND
35
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--95.1% (CONT.)
MEDICAL PRODUCTS--2.5%
Getinge Industrier AB, Class B Medical Instruments Manufacturer
(Sweden) 1,619,100 $ 20,552,472
AEROSPACE--1.5%
Rolls-Royce plc (Great Britain) Aviation & Marine Power 3,588,552 $ 12,421,213
COMPONENTS--4.6%
IMI plc (Great Britain) Components Manufacturer 4,655,000 $ 21,381,228
Varitronix International Limited (Hong Liquid Crystal Displays
Kong) 5,318,000 11,604,179
Morgan Crucible Company plc (Great Crucible & Components Manufacturer
Britain) 1,000,000 4,263,915
-------------
37,249,322
CHEMICALS--3.5%
Fernz Corporation Limited (New Agricultural & Industrial Chemical
Zealand), (d) Producer 9,862,554 $ 21,170,836
European Vinyls Corporation PVC Manufacturer
International N.V. (Netherlands) 579,550 4,316,689
Nagase & Co., Ltd. (Japan) Chemical Wholesaler 579,000 2,868,431
-------------
28,355,956
OIL & NATURAL GAS--1.9%
ISIS (France) Oil Services 208,250 $ 15,112,321
MACHINERY & METAL PROCESSING--6.3%
Metso Oyj (Finland), (a) Pulp Machinery 3,562,977 $ 40,224,457
Outokumpu Oyj (Finland) Metal Producer 945,000 10,970,296
-------------
51,194,753
MINING & BUILDING MATERIALS--2.3%
Keumkang Ltd. (Korea), (d) Building Materials 340,460 $ 18,471,319
OTHER INDUSTRIAL GOODS & SERVICES--16.5%
Chargeurs SA (France), (d) Wool Production & Trading 644,824 $ 39,452,164
Tomkins plc (Great Britain) Diversified Engineering 7,442,640 31,367,199
Buderus AG (Germany) Industrial Manufacturing 970,320 16,519,494
Charter plc (Great Britain) Welding Products Manufacturer 2,806,014 16,052,897
</TABLE>
THE OAKMARK INTERNATIONAL FUND
36
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
SHARES HELD/
DESCRIPTION PAR VALUE MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.1% (CONT.)
Kone Corporation, Class B (Finland) Elevators 112,930 $ 14,864,175
Sika Finanz AG (Switzerland) Corrosion Protection Products 32,350 10,054,875
Dongah Tire Industry Company Tire Manufacturer
(Korea), (d) 166,290 5,399,470
-------------
133,710,274
DIVERSIFIED CONGLOMERATES--3.2%
Berisford plc (Great Britain) Diversified Operations 3,745,700 $ 18,838,788
First Pacific Company Ltd. (Hong Kong) Diversified Operations 11,966,000 7,240,078
-------------
26,078,866
TOTAL COMMON STOCKS (COST: $829,827,804) 771,524,385
</TABLE>
<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENTS--3.8%
COMMERCIAL PAPER--3.1%
American Express Credit Corp., 5.31% due 10/7/1999 $5,000,000 $ 5,000,000
Ford Motor Credit Corp., 5.34% due 10/5/1999 5,000,000 5,000,000
General Electric Capital Corporation, 5.53% due 10/1/1999 15,000,000 15,000,000
-------------
TOTAL COMMERCIAL PAPER (COST: $25,000,000) 25,000,000
REPURCHASE AGREEMENTS--0.7%
State Street Repurchase Agreement, 5.20% due 10/1/1999 $5,761,000 $ 5,761,000
-------------
TOTAL REPURCHASE AGREEMENTS (COST: $5,761,000) 5,761,000
TOTAL SHORT TERM INVESTMENTS (COST: $30,761,000) 30,761,000
Total Investments (Cost $860,588,804)--98.9% (e) $ 802,285,385
Foreign Currencies (Proceeds $300,051)--0.0% 300,697
Other Assets In Excess Of Other Liabilities--1.1% (f) 8,555,905
-------------
TOTAL NET ASSETS--100% $ 811,141,987
=============
</TABLE>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) Represents a Global Depository Receipt.
(d) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(e) At September 30, 1999, net unrealized depreciation of $58,302,773, for
federal income tax purposes, consisted of gross unrealized appreciation of
$96,229,261 and gross unrealized depreciation of $154,532,034.
(f) Includes portfolio and transaction hedges.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK INTERNATIONAL FUND
37
<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 (9/30/99) AS COMPARED TO THE MSCI
WORLD EX U.S. INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE OAKMARK INTERNATIONAL MSCI WORLD EX
SMALL CAP FUND U.S. INDEX
<S> <C> <C>
10/95 $10,000 $10,000
1/96 $10,530 $10,747
4/96 $11,340 $11,331
7/96 $11,040 $10,858
10/96 $11,410 $11,120
1/97 $12,142 $11,062
4/97 $12,152 $11,310
7/97 $13,253 $12,933
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
</TABLE>
<TABLE>
<CAPTION>
9/30/99
NAV AVERAGE ANNUAL TOTAL RETURN*
$12.64 THROUGH 9/30/99
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 11/1/95
<S> <C> <C>
- ---------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL
SMALL CAP FUND 0.8% 11.7%
MSCI World ex U.S. w/inc.** 4.3% 11.1%
Lipper International Small Cap
Fund Average** 9.1% 15.1%
Micropal Equity International
Small Cap Index** 9.7% 15.1%
</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 70 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,
Over the last fiscal year, The Oakmark International Small Cap Fund achieved a
return of 88.0%, smashing the MSCI World ex U.S. Index which was up 31.3% and
the Lipper International Small Cap Average which was up 47.2%. The Fund posted a
return of 0.8% for the quarter ending September 30. This compares with returns
of 4.3% and 9.1% for the MSCI World ex U.S. Index and the Lipper International
Small Cap Average respectively. Since inception, your Fund has averaged 11.7%
per annum which compares to 11.1% for the MSCI Index and 15.1% for the Lipper
Average.
A QUIET QUARTER
After some volatile price movements over the last few years, this quarter was a
quiet one. Our star performers continue to be located in the Pacific Rim.
ICHIYOSHI SECURITIES, based in Japan, added close to 2.5 percentage points of
return. Ichiyoshi is a regional brokerage firm that continues to benefit from
the pick-up of stockmarket activity. JCG HOLDINGS, a Hong Kong based consumer
credit company added over 1 percentage point to return. It continues to improve
its business as the Hong Kong economy lifts out of recession.
On the negative side, a couple of our newer positions have hurt. REINSURANCE
AUSTRALIA cost the Fund almost 1.5% as an abundance of natural disasters hit the
insurance industry very hard. "ReAC" is a smaller reinsurer with a new, more
profit-focused Managing Director; even after losses from increased claims, the
current share price
THE OAKMARK INTERNATIONAL SMALL CAP FUND
38
<PAGE>
........................................................................
is at less than half of book value. We have used the short-term price weakness
to add to our position. DYLEX, a Canadian retail company, cost the Fund 1.3%. We
have sold this company because we have lost faith in the company's management
team. Though the stock is cheap on paper, the company was performing differently
than expected and we were unable to ascertain why after numerous discussions
with management.
The last point above highlights a part of our philosophy that merits expansion.
Though we are dogmatic value investors, we will NEVER invest in a company that
either has consistently impaired value or starts to do so after we have invested
in them. Part of our due diligence is to examine a management's past record. We
also continue to monitor them while we own the investment. If things change,
like with Dylex, we will not hesitate to sell the stock.
WHY AND WHY NOT TO INVEST IN OAKEX
As many of you may have noticed, The Oakmark International Small Cap Fund
(OAKEX) has had a great 1-year run. Though we are heartened by the returns, keep
in mind, past performance is no reason to invest in a mutual fund. In fact, we
strongly discourage "momentum" TRADERS for this is a fund for long-term
INVESTORS. As you have noticed, we instituted a redemption fee, payable to the
Fund, for those traders who leave the Fund in less than 90 days. The people who
frequently trade in and out hurt those who truly invest for the long term by
creating volatility in our cash position. We are confident that a 2% redemption
fee will solve this problem.
Though the Fund's performance has been strong, we continue to feel quite
confident that there is significant long-term investment potential within our
portfolio. The Fund is full of high quality, undervalued companies. HOUSE OF
FRASER, for example, is a UK-based department store company that yields 7% and
has a normal P/E of 5.5 times earnings. In fact, we love it when the sustainable
yield is greater than the normal p/e, as in this case! FLETCHER BUILDING is a
New Zealand-based building materials company that could be one of the cheapest
of its kind in the world. It has high quality assets, huge market positions and
its main market is in a cyclical trough. Fletcher has a normal p/e of about 7
times earnings and yields almost 8%. We are happy to say that we have an entire
portfolio of good quality, value stocks that should provide us with great
returns going forward.
THE WORLD IS LOOKING UP!
Over the history of the Fund, short-term crises have often provided us with the
OPPORTUNITY to invest in quality companies at extremely low prices. Today,
though, the world seems to have stabilized. Asia is growing again and even
Europe seems to be showing signs of life. This may well mean that though it will
be harder to find "fire sales," the operating environment will be more conducive
for smaller companies to grow. This invariably means more growth in earnings,
cashflow and usually shareholder value. As two of the Fund's largest
shareholders, we remain enthusiastic about the prospects of our small companies
and look forward to their future performance.
[SIGNATURE]
DAVID HERRO
Portfolio Manager
[email protected]
[SIGNATURE]
MICHAEL WELSH
Portfolio Manager
[email protected]
October 8, 1999
THE OAKMARK INTERNATIONAL SMALL CAP FUND
39
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
INTERNATIONAL DIVERSIFICATION--SEPTEMBER 30, 1999
........................................................................
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
EUROPE 54.2%
PACIFIC RIM 40.0%
% OF FUND NET ASSETS
EUROPE 54.2%
Great Britain 27.0%
*France 12.6%
*Germany 7.0%
*Portugal 3.9%
*Italy 1.7%
Sweden 1.0%
*Finland 0.7%
Poland 0.3%
% OF FUND NET ASSETS
PACIFIC RIM 40.0%
New Zealand 9.8%
Hong Kong 8.5%
Japan 7.2%
Australia 4.4%
Singapore 3.4%
Korea 2.8%
Thailand 2.1%
Philippines 1.8%
*Euro currency countries comprise 25.9% of the Fund.
</TABLE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
40
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--94.2%
CONSUMER NON-DURABLES--1.7%
Kingmaker Footwear Holdings Limited Athletic Footwear Manufacturer
(Hong Kong) 8,040,000 $ 1,200,633
Il Shin Spinning Company (Korea) Fabric & Yarn Manufacturer 20,200 1,145,746
Designer Textiles (NZ) Limited (New Knit Fabrics
Zealand), (b) 1,960,000 314,281
------------
2,660,660
FOOD & BEVERAGE--2.7%
Alaska Milk Corporation Milk Producer
(Philippines), (a) 42,544,000 $ 2,808,528
Hite Brewery Company (Korea) Brewer 42,861 1,419,892
------------
4,228,420
RETAIL--12.7%
Carpetright plc (Great Britain) Carpet Retailer 1,115,000 $ 7,682,085
House Of Fraser Plc (Great Britain) Department Store 5,640,000 7,242,399
Denny's Japan Co., Ltd. (Japan) Restaurant Chain 181,000 4,237,685
Jusco Stores (Hong Kong) Co., Limited Department Stores
(Hong Kong) 6,888,000 647,310
------------
19,809,479
OFFICE EQUIPMENT--1.0%
Neopost SA (France), (a) Mailroom Equipment Supplier 50,000 $ 1,484,349
OTHER CONSUMER GOODS & SERVICES--9.3%
Royal Doulton plc (Great Britain), (b) Tableware & Giftware 4,490,000 $ 7,983,234
Cewe Color Holding AG (Germany) Photo Equipment & Supplies 186,340 4,084,464
Sanford Limited (New Zealand) Fisheries 838,134 2,167,624
Shaw Brothers (Hong Kong) Ltd. (Hong Media and Entertainment Services
Kong) 270,000 232,882
------------
14,468,204
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK INTERNATIONAL SMALL
CAP FUND
41
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--94.2% (CONT.)
INSURANCE--5.7%
Reinsurance Australia Corporation Reinsurance Company
Limited (Australia) 8,422,211 $ 4,431,065
Lambert Fenchurch Group plc (Great Insurance Broker
Britain) 3,336,000 4,393,643
------------
8,824,708
OTHER FINANCIAL--7.6%
JCG Holdings Ltd. (Hong Kong) Investment Holding Company 12,624,000 $ 7,394,431
Ichiyoshi Securities Co., Ltd. (Japan) Stock Broker 638,000 4,361,678
------------
11,756,109
HOTELS & MOTELS--2.7%
Jarvis Hotels plc (Great Britain) Hotel Operator 2,045,000 $ 4,174,685
COMPUTER SOFTWARE--1.7%
Koei Co., Ltd. (Japan) Computer Software 56,500 $ 2,650,918
BROADCASTING & PUBLISHING--3.1%
Matichon Public Company Limited, Newspaper Publisher
Foreign Shares (Thailand), (b) 2,039,500 $ 3,261,806
VLT AB, Class B (Sweden) Newspaper Publisher 139,950 1,520,267
------------
4,782,073
PRINTING--1.0%
Hung Hing Printing Group Limited (Hong Printing Company
Kong) 3,680,000 $ 1,563,357
TELECOMMUNICATIONS--0.6%
SK Telecom Co. Ltd. (Korea) Telecommunications 1,016 $ 939,581
PHARMACEUTICALS--1.7%
Recordati (Italy), (b) Pharmaceuticals 573,000 $ 2,597,323
TRANSPORTATION SERVICES--2.3%
Mainfreight Limited (New Zealand), (b) Logistics Services 4,243,351 $ 3,511,797
OIL & NATURAL GAS--2.5%
ISIS (France) Oil Services 53,165 $ 3,858,087
</TABLE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
42
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
DESCRIPTION SHARES HELD MARKET VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--94.2% (CONT.)
MINING & BUILDING MATERIALS--9.5%
Fletcher Challenge Building (New Building Materials Manufacturer
Zealand) 5,245,000 $ 6,456,884
Semapa-Sociedade de Investimento e Cement Manufacturer
Gestao, SGPS, SA (Portugal) 333,012 6,037,974
Parbury Limited (Australia), (b) Building Products 12,517,553 2,328,688
------------
14,823,546
OTHER INDUSTRIAL GOODS & SERVICES--6.9%
GFI Industries SA (France) Industrial Fastener Manufacturer 175,680 $ 4,278,878
Yip's Hang Cheung (Holdings) Ltd. Paint & Solvent Manufacturer
(Hong Kong), (b) 35,472,000 2,237,578
Chargeurs SA (France) Wool Production & Trading 26,750 1,636,641
Vaisala Oyj (Finland) Atmospheric Observation Equipment 15,350 1,140,054
Dongah Tire Industry Company (Korea) Tire Manufacturer 26,900 873,448
Polifarb Cieszyn-Wroclaw S.A. (Poland) Paint & Varnish Manufacturer 347,983 509,219
------------
10,675,818
PRODUCTION EQUIPMENT--9.7%
Krones AG (Germany) Manufacturer of Production Machinery 230,100 $ 6,733,039
NSC Groupe (France), (b) Manufacturer of Textile Equipment 55,523 5,842,934
De Dietrich et Compagnie SA (France) Manufacturer of Production Machinery 39,000 2,518,924
------------
15,094,897
STEEL--1.7%
Steel & Tube Holdings Limited (New Produces and Distributes Steel
Zealand) 3,292,370 $ 2,724,766
DIVERSIFIED CONGLOMERATES--10.1%
Wassall PLC (Great Britain) Diversified Consumer Goods 1,718,000 $ 6,717,312
Haw Par Corporation Ltd. (Singapore) Healthcare and Leisure Products 3,205,000 5,335,383
TT Group PLC (Great Britain) Diversified Manufacturing 1,635,000 3,694,357
------------
15,747,052
TOTAL COMMON STOCKS (COST: $140,503,948) 146,375,829
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK INTERNATIONAL SMALL
CAP FUND
43
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS--6.1%
COMMERCIAL PAPER--4.5%
American Express Credit Corporation, 5.31% due 10/7/1999 $1,000,000 $ 1,000,000
Ford Motor Credit Corp., 5.34% due 10/5/1999 2,000,000 2,000,000
General Electric Capital Corporation, 5.53% due 10/1/1999 4,000,000
------------
TOTAL COMMERCIAL PAPER (COST: $7,000,000) 7,000,000
REPURCHASE AGREEMENTS--1.6%
State Street Repurchase Agreement, 5.20% due 10/1/1999 $ 2,405,000
------------
TOTAL REPURCHASE AGREEMENTS (COST: $2,405,000) 2,405,000
TOTAL SHORT TERM INVESTMENTS (COST: $9,405,000) 9,405,000
Total Investments (Cost $149,908,948)--100.3% (c) 155,780,829
Foreign Currencies (Proceeds $6,580)--(0.0)% 6,516
Other Liabilities In Excess Of Other Assets--(0.3)% (d) (421,142)
------------
TOTAL NET ASSETS--100% $155,366,203
============
</TABLE>
(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(c) At September 30, 1999, net unrealized appreciation of $5,871,817, for
federal income tax purposes, consisted of gross unrealized appreciation of
$18,082,868 and gross unrealized depreciation of $12,211,051.
(d) Includes portfolio and transaction hedges.
THE OAKMARK INTERNATIONAL SMALL CAP FUND
44
<PAGE>
[LOGO]
(This page has been intentionally left blank.)
THE OAKMARK FAMILY OF FUNDS 45
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF ASSETS AND LIABILITIES--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
FUND SELECT SMALL CAP
FUND FUND
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value $ 4,759,553,868 $ 1,632,347,345 $ 443,700,831
(cost: 4,592,554,495) (cost: 1,605,111,118) (cost: 427,445,043)
Cash 556 836 500
Foreign currency, at value 0 0 0
Receivable for:
Forward foreign currency
contracts 0 0 0
Securities sold 21,219,292 15,179,570 2,054,841
Fund shares sold 1,347,311 1,468,976 308,751
Dividends and interest 12,465,607 1,721,557 190,847
--------------- --------------- -------------
Total receivables 35,032,210 18,370,103 2,554,439
Other assets 156,740 29,811 20,999
--------------- --------------- -------------
Total assets $ 4,794,743,374 $ 1,650,748,095 $ 446,276,769
=============== =============== =============
......................................................................................................
LIABILITIES AND NET ASSETS
Payable for:
Securities purchased $ 545,733 $ 7,550,881 $ 7,789,614
Fund shares redeemed 15,409,302 2,300,778 591,967
Due to adviser 4,174,405 1,365,482 485,886
Forward foreign currency
contracts 0 0 0
Other 1,781,565 622,142 270,023
--------------- --------------- -------------
Total liabilities 21,911,005 11,839,283 9,137,490
--------------- --------------- -------------
Net assets applicable to
fund shares outstanding $ 4,772,832,369 $ 1,638,908,812 $ 437,139,279
=============== =============== =============
Fund shares outstanding 138,855,787 78,332,068 31,485,265
=============== =============== =============
......................................................................................................
PRICE OF SHARES
Net asset value per share $ 34.37 $ 20.92 $ 13.88
=============== =============== =============
......................................................................................................
ANALYSIS OF NET ASSETS
Paid in capital $ 3,821,186,642 $ 1,298,678,085 $ 434,024,162
Accumulated undistributed
net realized gain (loss)
on sale of investments,
forward contracts and
foreign currency exchange
transactions 743,709,340 299,824,158 (13,140,671)
Net unrealized appreciation
(depreciation) of
investments 166,999,373 27,236,227 16,255,788
Net unrealized appreciation
(depreciation) of foreign
currency portfolio hedges 0 0 0
Net unrealized appreciation
(depreciation)--other 0 0 0
Accumulated undistributed
net investment income
(loss) 40,937,014 13,170,342 0
--------------- --------------- -------------
Net assets applicable to
Fund shares outstanding $ 4,772,832,369 $ 1,638,908,812 $ 437,139,279
=============== =============== =============
</TABLE>
THE OAKMARK FAMILY OF FUNDS
46
<PAGE>
............................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK THE OAKMARK
EQUITY AND GLOBAL INTERNATIONAL INTERNATIONAL
INCOME FUND FUND FUND SMALL CAP FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value $ 60,411,626 $ 23,955,829 $ 802,285,385 $ 155,780,829
(cost: 56,589,159) (cost: 25,744,871) (cost: 860,588,804) (cost: 149,908,948)
Cash 648 225 8 981
Foreign currency, at value 0 0 300,697 6,516
Receivable for:
Forward foreign currency
contracts 0 0 596,807 7,756
Securities sold 0 12,537 10,270,655 197,161
Fund shares sold 8,255 178,640 2,502,167 323,831
Dividends and interest 406,110 68,013 6,012,218 758,957
------------ ------------ ------------- -------------
Total receivables 414,365 259,190 19,381,847 1,287,705
Other assets 2,781 10,680 19,661 2,949
------------ ------------ ------------- -------------
Total assets $ 60,829,420 $ 24,225,924 $ 821,987,598 $ 157,078,980
============ ============ ============= =============
..............................................................................................................................
LIABILITIES AND NET ASSETS
Payable for:
Securities purchased $ 268,100 $ 213,966 $ 6,610,271 $ 1,134,610
Fund shares redeemed 114,269 0 1,257,055 143,744
Due to adviser 37,626 3,045 734,839 169,370
Forward foreign currency
contracts 0 4,720 1,098,344 376
Other 91,834 50,839 1,145,102 264,677
------------ ------------ ------------- -------------
Total liabilities 511,829 272,570 10,845,611 1,712,777
------------ ------------ ------------- -------------
Net assets applicable to
fund shares outstanding $ 60,317,591 $ 23,953,354 $ 811,141,987 $ 155,366,203
============ ============ ============= =============
Fund shares outstanding 3,846,006 2,608,650 58,153,195 12,292,100
============ ============ ============= =============
..............................................................................................................................
PRICE OF SHARES
Net asset value per share $ 15.68 $ 9.18 $ 13.95 $ 12.64
============ ============ ============= =============
..............................................................................................................................
ANALYSIS OF NET ASSETS
Paid in capital $ 48,625,541 $ 25,800,443 $ 876,279,147 $ 135,198,375
Accumulated undistributed
net realized gain (loss)
on sale of investments,
forward contracts and
foreign currency exchange
transactions 6,238,498 (84,542) (3,176,858) 11,120,075
Net unrealized appreciation
(depreciation) of
investments 3,822,467 (1,789,042) (58,302,773) 5,871,817
Net unrealized appreciation
(depreciation) of foreign
currency portfolio hedges 0 (4,719) (508,175) 7,624
Net unrealized appreciation
(depreciation)--other (159) 53 (69,095) 3,023
Accumulated undistributed
net investment income
(loss) 1,631,244 31,161 (3,080,259) 3,165,289
------------ ------------ ------------- -------------
Net assets applicable to
Fund shares outstanding $ 60,317,591 $ 23,953,354 $ 811,141,987 $ 155,366,203
============ ============ ============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS
47
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF OPERATIONS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
FUND SELECT SMALL CAP
FUND FUND
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 112,444,285 $ 27,208,265 $ 4,644,655
Interest Income 21,271,005 6,488,832 1,194,223
Securities lending income 0 75,764 33,811
Foreign taxes withheld (126,816) (63,600) 0
-------------- ------------- ------------
Total investment income 133,588,474 33,709,261 5,872,689
......................................................................................................
EXPENSES:
Investment advisory fee 59,957,947 15,358,029 7,251,751
Transfer and dividend
disbursing agent fees 3,518,298 998,731 507,287
Other shareholder servicing
fees 2,966,381 957,631 264,350
Reports to shareholders 1,855,038 473,189 217,200
Custody and accounting fees 693,549 212,400 108,278
Registration and blue sky
expenses 24,183 71,067 (95,846)
Trustee fees 166,808 66,691 46,996
Legal fees 58,406 28,572 16,418
Audit fees 28,181 28,629 31,454
Other 418,999 95,840 47,192
-------------- ------------- ------------
Total expenses 69,687,790 18,290,779 8,395,080
Expense reimbursement 0 0 0
Expense offset
arrangements (2,445) (8,874) (5,559)
-------------- ------------- ------------
Net expenses 69,685,345 18,281,905 8,389,521
......................................................................................................
NET INVESTMENT INCOME (LOSS): 63,903,129 15,427,356 (2,516,832)
......................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on
investments 748,595,189 301,413,442 (11,002,740)
Net realized gain (loss) on
foreign currency
transactions 0 0 0
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies (147,719,773) 18,463,317 82,350,204
Net change in appreciation
(depreciation) of forward
currency exchange
contracts 0 0 0
Net change in appreciation
(depreciation)--other 0 0 0
......................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS: 600,875,416 319,876,759 71,347,464
-------------- ------------- ------------
......................................................................................................
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 664,778,545 $ 335,304,115 $ 68,830,632
============== ============= ============
</TABLE>
(a) From August 4, 1999, the date on which fund shares were first offered for
sale to the public.
THE OAKMARK FAMILY OF FUNDS
48
<PAGE>
............................................................................
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK THE OAKMARK
EQUITY AND GLOBAL INTERNATIONAL INTERNATIONAL
INCOME FUND FUND(A) FUND SMALL CAP FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 1,158,904 $ 74,217 $ 27,387,199 $ 4,445,739
Interest Income 1,227,611 23,658 1,612,869 606,224
Securities lending income 6,921 0 114,999 1,799
Foreign taxes withheld (23,405) (8,764) (3,070,519) (539,396)
----------- ------------ ------------- ------------
Total investment income 2,370,031 89,111 26,044,548 4,514,366
..............................................................................................................................
EXPENSES:
Investment advisory fee 464,454 18,520 8,068,806 1,330,000
Transfer and dividend
disbursing agent fees 65,540 7,434 639,040 97,700
Other shareholder servicing
fees 16,086 803 315,585 61,056
Reports to shareholders 29,051 1,650 304,430 38,271
Custody and accounting fees 49,870 10,044 958,112 256,163
Registration and blue sky
expenses 22,967 16,590 (32,848) 43,024
Trustee fees 34,721 5,134 52,671 35,454
Legal fees 12,909 2,100 17,730 13,415
Audit fees 24,079 10,000 30,280 39,731
Other 9,765 278 58,778 57,836
----------- ------------ ------------- ------------
Total expenses 729,442 72,553 10,412,584 1,972,650
Expense reimbursement 0 (15,474) 0 0
Expense offset
arrangements (50) 0 (515) (265)
----------- ------------ ------------- ------------
Net expenses 729,392 57,079 10,412,069 1,972,385
..............................................................................................................................
NET INVESTMENT INCOME (LOSS): 1,640,639 32,032 15,632,479 2,541,981
..............................................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on
investments 6,246,386 (84,542) (28,187,781) 12,338,825
Net realized gain (loss) on
foreign currency
transactions (1,597) (871) 11,558,024 968,518
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 690,123 (1,789,042) 290,561,381 34,768,296
Net change in appreciation
(depreciation) of forward
currency exchange
contracts 0 (4,719) 1,014,015 186,436
Net change in appreciation
(depreciation)--other (159) 53 (274,516) (2,615)
..............................................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS: 6,934,753 (1,879,121) 274,671,123 48,259,460
----------- ------------ ------------- ------------
..............................................................................................................................
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 8,575,392 $ (1,847,089) $ 290,303,602 $ 50,801,441
=========== ============ ============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS
49
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1999
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 63,903,129 $ 94,480,595
Net realized gain (loss) on
sale of investments 748,595,189 1,258,937,339
Net realized gain (loss) on
foreign currency
transactions 0 (8,898)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies (147,719,773) (1,704,966,868)
---------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 664,778,545 (351,557,832)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (89,026,890) (66,321,023)
Net realized short-term
gain (128,028,090) (25,210,618)
Net realized long-term gain (195,972,927) (1,098,260,243)
---------------- ----------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (413,027,907) (1,189,791,884)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 832,343,635 2,836,315,983
Reinvestment of dividends
and capital gain
distributions 391,307,098 1,133,761,068
Payments for shares
redeemed, net of fees (3,626,526,884) (2,119,718,081)
---------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS (2,402,876,151) 1,850,358,970
---------------- ----------------
..............................................................................
TOTAL INCREASE (DECREASE) IN
NET ASSETS (2,151,125,513) 309,009,254
NET ASSETS:
Beginning of period 6,923,957,882 6,614,948,628
---------------- ----------------
End of period $ 4,772,832,369 $ 6,923,957,882
================ ================
Undistributed net
investment income $ 52,730,692 $ 77,854,453
================ ================
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.4401 $ 0.3996
Net realized short-term
gain 0.6329 0.1519
Net realized long-term gain 0.9686 5.8556
---------------- ----------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 2.0416 $ 6.4071
================ ================
</TABLE>
THE OAKMARK FAMILY OF FUNDS
50
<PAGE>
.............................................................................
<TABLE>
<CAPTION>
THE OAKMARK
SELECT FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 15,427,356 $ 1,948,524
Net realized gain (loss) on
sale of investments 301,413,442 69,415,172
Net realized gain (loss) on
foreign currency
transactions 0 0
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 18,463,317 (78,902,257)
--------------- ---------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 335,304,115 (7,538,561)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (3,491,747) 0
Net realized short-term
gain (497,653) (6,882,359)
Net realized long-term gain (50,206,634) 0
--------------- ---------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (54,196,034) (6,882,359)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 688,865,887 1,440,695,723
Reinvestment of dividends
and capital gain
distributions 51,676,128 6,568,333
Payments for shares
redeemed, net of fees (610,635,670) (719,123,322)
--------------- ---------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 129,906,345 728,140,734
--------------- ---------------
..............................................................................
TOTAL INCREASE IN NET ASSETS 411,014,426 713,719,814
NET ASSETS:
Beginning of period 1,227,894,386 514,174,572
--------------- ---------------
End of period $ 1,638,908,812 $ 1,227,894,386
=============== ===============
Undistributed net
investment income $ 13,637,247 $ 1,701,638
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.0491 $ 0
Net realized short-term
gain 0.0070 0.1678
Net realized long-term gain 0.7058 0
--------------- ---------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.7619 $ 0.1678
=============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 51
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK
SMALL CAP FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (2,516,832) $ (4,959,862)
Net realized gain (loss) on
sale of investments (11,002,740) 124,757,914
Net realized gain (loss) on
foreign currency
transactions 0 0
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 82,350,204 (374,056,372)
-------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 68,830,632 (254,258,320)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income 0 0
Net realized short-term
gain 0 (35,041,133)
Net realized long-term gain (4,508,112) (129,772,888)
-------------- ----------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (4,508,112) (164,814,021)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 262,182,135 416,817,749
Reinvestment of dividends
and capital gain
distributions 4,278,943 156,645,973
Payments for shares
redeemed, net of fees (511,639,081) (1,049,792,259)
-------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS (245,178,003) (476,328,537)
-------------- ----------------
..............................................................................
TOTAL INCREASE IN NET ASSETS (180,855,483) (895,400,878)
NET ASSETS:
Beginning of period 617,994,762 1,513,395,640
-------------- ----------------
End of period $ 437,139,279 $ 617,994,762
============== ================
Undistributed net
investment income $ (9,437,333) $ (6,920,501)
============== ================
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0 $ 0
Net realized short-term
gain 0 0.4738
Net realized long-term gain 0.0874 2.3874
-------------- ----------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.0874 $ 2.8612
============== ================
</TABLE>
THE OAKMARK FAMILY OF FUNDS
52
<PAGE>
.............................................................................
<TABLE>
<CAPTION>
THE OAKMARK
EQUITY AND INCOME FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 1,640,639 $ 1,166,564
Net realized gain (loss) on
sale of investments 6,246,386 1,578,730
Net realized gain (loss) on
foreign currency
transactions (1,597) 0
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 690,123 (2,325,892)
Net change in unrealized
appreciation
(depreciation) of
forward currency exchange
contracts 0 0
Net change in unrealized
appreciation
(depreciation)--other (159) 0
------------- -------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 8,575,392 419,402
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (855,395) (594,007)
Net realized short-term
gain 0 (882,071)
Net realized long-term gain (829,557) (599,021)
------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (1,684,952) (2,075,099)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 21,877,864 43,125,943
Reinvestment of dividends
and capital gain
distributions 1,610,146 1,964,129
Payments for shares
redeemed, net of fees (27,806,714) (19,151,033)
------------- -------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS (4,318,704) 25,939,039
------------- -------------
..............................................................................
TOTAL INCREASE IN NET ASSETS 2,571,736 24,283,342
NET ASSETS:
Beginning of period 57,745,855 33,462,513
------------- -------------
End of period $ 60,317,591 $ 57,745,855
============= =============
Undistributed net
investment income $ 1,806,607 $ 1,021,363
============= =============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.2118 $ 0.2359
Net realized short-term
gain 0 0.3503
Net realized long-term gain 0.2053 0.2379
------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.4171 $ 0.8241
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 53
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK
GLOBAL FUND
<S> <C>
--------------------
PERIOD ENDED
SEPTEMBER 30,
1999(a)
------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 32,032
Net realized gain (loss) on
sale of investments (84,542)
Net realized gain (loss) on
foreign currency
transactions (871)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies (1,789,042)
Net change in unrealized
appreciation
(depreciation) of forward
currency exchange
contracts (4,719)
Net change in unrealized
appreciation
(depreciation)--other 53
------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS (1,847,089)
......................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income 0
Net realized short-term
gain 0
Net realized long-term gain 0
------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS 0
......................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 25,938,577
Reinvestment of dividends
and capital gain
distributions 0
Payments for shares
redeemed, net of fees (138,134)
------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 25,800,443
------------
......................................................
TOTAL INCREASE IN NET
ASSETS 23,953,354
NET ASSETS:
Beginning of period 0
------------
End of period $ 23,953,354
============
Undistributed net
investment income $ 32,032
============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0
Net realized short-term
gain 0
Net realized long-term gain 0
------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0
============
</TABLE>
(a) From August 4, 1999, the date on which fund shares were first offered for
sale to the public
THE OAKMARK FAMILY OF FUNDS
54
<PAGE>
.............................................................................
<TABLE>
<CAPTION>
THE OAKMARK
INTERNATIONAL FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 15,632,479 $ 23,809,423
Net realized gain (loss) on
sale of investments (28,187,781) 86,532,713
Net realized gain (loss) on
foreign currency
transactions 11,558,024 (3,890,444)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 290,561,381 (502,914,491)
Net change in unrealized
appreciation
(depreciation) of forward
currency exchange
contracts 1,014,015 (2,045,738)
Net change in unrealized
appreciation
(depreciation)--other (274,516) 195,384
-------------- ---------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 290,303,602 (398,313,153)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (16,590,763) (46,460,573)
Net realized short-term
gain (32,678,201) (57,985,224)
Net realized long-term gain (20,071,535) (173,099,244)
-------------- ---------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (69,340,499) (277,545,041)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 370,563,788 482,976,228
Reinvestment of dividends
and capital gain
distributions 65,432,760 263,415,429
Payments for shares
redeemed, net of fees (601,921,972) (961,776,686)
-------------- ---------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS (165,925,424) (215,385,029)
-------------- ---------------
..............................................................................
TOTAL INCREASE IN NET ASSETS 55,037,679 (891,243,223)
NET ASSETS:
Beginning of period 756,104,308 1,647,347,531
-------------- ---------------
End of period $ 811,141,987 $ 756,104,308
============== ===============
Undistributed net
investment income $ 37,780,575 $ 38,738,859
============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.2440 $ 0.5758
Net realized short-term
gain 0.4807 0.7186
Net realized long-term gain 0.2953 2.1453
-------------- ---------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 1.0200 $ 3.4397
============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 55
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 1999 CONT.
........................................................................
<TABLE>
<CAPTION>
THE OAKMARK INTERNATIONAL
SMALL CAP FUND
<S> <C> <C>
--------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 2,541,981 $ 1,415,157
Net realized gain (loss) on
sale of investments 12,338,825 (96,290)
Net realized gain (loss) on
foreign currency
transactions 968,518 (162,499)
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies 34,768,296 (27,728,327)
Net change in unrealized
appreciation
(depreciation) of forward
currency exchange
contracts 186,436 (179,057)
Net change in unrealized
appreciation
(depreciation)--other (2,615) 2,414
-------------- -------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS 50,801,441 (26,748,602)
..............................................................................
DISTRIBUTION TO SHAREHOLDERS
FROM (1):
Net investment income (1,558,450) (308,015)
Net realized short-term
gain 0 (3,477,982)
Net realized long-term gain 0 (3,890,139)
-------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (1,558,450) (7,676,136)
..............................................................................
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 253,467,836 77,339,314
Reinvestment of dividends
and capital gain
distributions 1,470,554 7,427,846
Payments for shares
redeemed, net of fees (200,585,753) (64,544,647)
-------------- -------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE
TRANSACTIONS 54,352,637 20,222,513
-------------- -------------
..............................................................................
TOTAL INCREASE (DECREASE) IN
NET ASSETS 103,595,628 (14,202,225)
NET ASSETS:
Beginning of period 51,770,575 65,972,800
-------------- -------------
End of period $ 155,366,203 $ 51,770,575
============== =============
Undistributed net
investment income $ 2,612,604 $ 1,629,075
============== =============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.2049 $ 0.0559
Net realized short-term
gain 0 0.6312
Net realized long-term gain 0 0.7060
-------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ 0.2049 $ 1.3931
============== =============
</TABLE>
THE OAKMARK FAMILY OF FUNDS
56
<PAGE>
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
........................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of The Oakmark Fund
("Oakmark"), The Oakmark Select Fund ("Select"), The Oakmark Small Cap Fund
("Small Cap"), The Oakmark Equity and Income Fund ("Equity and Income"), The
Oakmark Global Fund ("Global"), The Oakmark International Fund
("International"), and The Oakmark International Small Cap Fund ("Int'l Small
Cap") collectively referred to as "the Funds", each a series of the Harris
Associates Investment Trust (a Massachusetts business trust). These policies are
in conformity with generally accepted accounting principles ("GAAP"). The
presentation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates and assumptions.
SECURITY VALUATION--
Investments are stated at current market value. Securities traded on securities
exchanges and securities traded on the NASDAQ National Market are valued at the
last sales price on the day of valuation, or if lacking any reported sales that
day, at the most recent bid quotation. Over-the-counter securities not so traded
are valued at the most recent bid quotation. Money market instruments having a
maturity of 60 days or less from the date of valuation are valued on an
amortized cost basis which approximates market value. Securities for which
quotations are not readily available are valued at a fair value as determined by
the Pricing Committee appointed by the Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS--
Values of investments and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars using the mean of the bid and offer
prices of such currencies at the time of valuation. Purchases and sales of
investments and dividend and interest income are converted at the prevailing
rate of exchange on the respective dates of such transactions.
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized gain or loss from investments.
Net realized gains on foreign currency transactions arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Funds' books,
and the U.S. dollar equivalent of the amounts actually received or paid, and the
realized gains or losses resulting from the portfolio and transaction hedges.
At September 30, 1999, only the Equity and Income, Global, International and
Int'l Small Cap Funds had foreign currency transactions. Net unrealized
appreciation (depreciation)-other includes the following components:
<TABLE>
<CAPTION>
EQUITY
AND INT'L SMALL
INCOME GLOBAL INTERNATIONAL CAP
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
Unrealized appreciation (depreciation)
on dividends and dividend reclaims
receivable $(187) $29 $(85,076) $ 4,448
Unrealized appreciation (depreciation)
on open securities purchases and
sales -- -- (13,762) (1,286)
Unrealized appreciation (depreciation)
on transaction hedge purchases and
sales -- -- 6,638 (245)
Unrealized appreciation (depreciation)
on tax expense payable 28 24 23,105 106
------ --- -------- -------
Net Unrealized Appreciation
(Depreciation) - Other $(159) $53 $(69,095) $ 3,023
====== === ======== =======
</TABLE>
SECURITY TRANSACTIONS AND INVESTMENT INCOME--
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on the accrual basis.
Fund shares are sold and redeemed on a continuing basis at net asset value. Net
asset value per share is determined daily as of the close of regular trading on
the New York Stock Exchange on each day the Exchange is open for trading by
dividing the total value of the Fund's investments and other assets, less
liabilities, by the number of Fund shares outstanding.
FORWARD FOREIGN CURRENCY CONTRACTS--
At September 30, 1999, Global, International and Int'l Small Cap had entered
into forward foreign currency contracts under which they are obligated to
exchange currencies at specified future dates. The Funds' currency transactions
are limited to transaction hedging and portfolio hedging involving either
specific transactions or portfolio positions. These contracts are valued daily
and the fund's net equity therein, representing unrealized gain or loss on the
contracts as measured by the difference between the forward foreign exchange
rates at the dates of entry into the contracts and the forward rates at the
reporting date, is included in the statement of assets and liabilities. Realized
and unrealized gains and losses are included in the statement of operations.
THE OAKMARK FAMILY OF FUNDS
57
<PAGE>
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
........................................................................
The contractual amounts of forward foreign exchange contracts do not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. Risks arise from the possible inability
of counter parties to meet the terms of their contracts and from movements in
currency values.
The Global Fund had the following outstanding contracts at September 30, 1999:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
-------------------------------------------------------------------------------------------------------------
$300,000 32,523,000 Japanese Yen February 2000 $(11,766)
300,000 30,456,000 Japanese Yen March 2000 7,047
--------
$ (4,719)
========
</TABLE>
The International Fund had the following outstanding contracts at September 30,
1999:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
-------------------------------------------------------------------------------------------------------
$29,496,600 18,000,000 Pound Sterling November 1999 $(138,396)
24,400,000 2,645,204,000 Japanese Yen February 2000 (956,994)
25,000,000 2,538,000,000 Japanese Yen March 2000 587,215
---------
$(508,175)
=========
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
----------------------------------------------------------------------------------------------------------
$ 271,353 1,894,725 Danish Krone October 1999 $ (93)
427,188 406,266 Euro Currency October 1999 5,098
1,522,910 926,006 Pound Sterling October 1999 1,574
1,014,403 616,284 Pound Sterling October 1999 185
1,539,504 934,506 Pound Sterling October 1999 (1,029)
1,547,003 939,057 Pound Sterling October 1999 (1,034)
-------
$ 4,701
=======
</TABLE>
THE OAKMARK FAMILY OF FUNDS
58
<PAGE>
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
----------------------------------------------------------------------------------------------------------
$ 53,592 78,700 Canadian Dollar October 1999 $ 29
341,801 320,790 Euro Currency October 1999 465
248,930 233,124 Euro Currency October 1999 874
2,007,902 1,219,867 Pound Sterling October 1999 (365)
1,985,610 1,205,299 Pound Sterling October 1999 1,327
80,586 625,993 Hong Kong Dollar October 1999 (1)
3,044,739 23,605,862 Norwegian Krone October 1999 (2,555)
536,900 4,381,103 Swedish Krone October 1999 2,163
-------
$ 1,937
=======
</TABLE>
The Int'l Small Cap Fund had the following outstanding contracts at September
30, 1999:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
----------------------------------------------------------------------------------------------------------
$2,800,000 303,548,000 Japanese Yen February 2000 $(109,819)
5,000,000 507,600,000 Japanese Yen March 1999 117,443
---------
$ 7,624
=========
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLARS SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
-------------------------------------------------------------------------------------------------------------
$ 44,340 42,168 Euro Currency October 1999 $ 529
269,843 253,159 Euro Currency October 1999 (469)
11,140 10,542 Euro Currency October 1999 77
205,888 193,232 Euro Currency October 1999 (280)
252,990 153,569 Pound Sterling October 1999 (169)
97,670 59,287 Pound Sterling October 1999 (65)
-----
$(377)
=====
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLARS PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 1999
<C> <C> <S> <C> <C>
--------------------------------------------------------------------------------------------------------------
$197,293 119,760 Pound Sterling October 1999 $132
====
</TABLE>
At September 30, 1999, Global, International and Int'l Small Cap Funds each had
sufficient cash and/or securities to cover any commitments under these
contracts.
THE OAKMARK FAMILY OF FUNDS
59
<PAGE>
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
........................................................................
SECURITIES LENDING--
Each Fund except The Oakmark Fund may lend portfolio securities to broker-
dealers and banks. As of December 31, 1998, the Funds discontinued participation
in a securities lending program and any securities previously loaned to
borrowers have been returned.
FEDERAL INCOME TAXES, DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--
No provision is made for Federal income taxes. The Funds elect to be taxed as
"regulated investment companies" and make such distributions to their
shareholders as to be relieved of all Federal income taxes under provisions of
current Federal tax law.
The Funds hereby designate the approximate long term capital gains for purposes
of the dividends paid deduction (in thousands):
<TABLE>
<CAPTION>
SMALL EQUITY & INT'L SMALL
OAKMARK SELECT CAP INCOME GLOBAL INT'L CAP
<S> <C> <C> <C> <C> <C> <C>
$618,028 $296,551 $0 $6,231 $0 $0 $5,912
</TABLE>
The amount of income dividends and capital gains distributions are determined in
accordance with federal income tax regulations, which may differ from GAAP. To
the extent these book and tax differences are permanent in nature, such amounts
are reclassified among paid in capital, undistributed net investment income and
undistributed net realized gain (loss) on investments. These differences are
primarily related to foreign currency transactions, deferral of losses on wash
sales, and character of capital loss carryforwards. The Funds also utilize
earnings and profits distributed to shareholders on redemption of shares as a
part of the dividends paid deduction for income tax purposes.
BANK LOANS--
The Funds have two unsecured lines of credit with a syndication of banks. One
line of credit is a committed line of $350 million and the other is an
uncommitted line of $250 million. Borrowings under this arrangement bear
interest at .50% above the Federal Funds Effective Rate. As of September 30,
1999, there were no outstanding borrowings.
2. TRANSACTIONS WITH AFFILIATES
Each fund has an investment advisory agreement with Harris Associates L.P.
(Adviser). For management services and facilities furnished, the Funds pay the
Adviser monthly fees at annual rates as follows. Oakmark pays 1% on the first
$2.5 billion of net assets, .95% on the next $1.25 billion of net assets, .90%
on the next $1.25 billion of net assets, .85% on the next $5 billion of net
assets, and .80% on the excess of $10 billion of net assets. International pays
1% on the first $2.5 billion of net assets, .95% on the next $2.5 billion of net
assets, and .90% on the excess of $5 billion of net assets. Select pays 1% on
the first $1 billion, .95% on the next $500 million, .90% on the next
$500 million, .85% on the next $500 million, .80% on the next $2.5 million of
net assets, and .75% on the excess of $5 billion of net assets. Small Cap pays
1.25% on the first $1 billion of net assets, 1.15% on the next $500 million,
1.10% on the next $500 million, 1.05% on the next $500 million, and 1% on the
excess of $2.5 billion. Equity and Income pays .75% of net assets, Int'l Small
Cap pays 1.25% of net assets, and Global pays 1.00% of net assets. Each fee is
calculated on the total net assets as determined at the end of each preceding
calendar month. The Adviser has voluntarily agreed to reimburse the Funds to the
extent that annual expenses, excluding certain expenses, exceed 1.5% for
domestic funds, 2.0% for international funds, and 1.75% for Global.
In connection with the organization of the Funds, expenses of approximately
$7,283 were advanced each to Small Cap, Equity and Income and Int'l Small Cap,
and $3,500 to Select by the Adviser. These expenses are being amortized on a
straight line basis through October, 2000 for Small Cap, Equity and Income and
Int'l Small Cap, and October, 2001 for Select.
During the twelve months ended September 30, 1999, the Funds incurred brokerage
commissions of $5,015,100, $2,890,278, $2,569,414, $128,972, $93,787, $3,642,521
and $1,155,829 of which $1,944,758, $725,722, $213,191, $56,545, $29,127, $0 and
$0 were paid by Oakmark, Select, Small Cap, Equity and Income, Global,
International and Int'l Small Cap, respectively, to an affiliate of the Adviser.
The Funds' Trustees may participate in a Deferred Compensation Plan which may be
terminated at any time. The obligations of the Plan are paid solely out of the
assets of the Funds. All amounts payable under the Plan as of September 30, 1999
have been accrued.
THE OAKMARK FAMILY OF FUNDS
60
<PAGE>
3. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund shares as shown in the Statement of Changes in Net
Assets are in respect of the following number of shares (in thousands):
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1999
-----------------------------------------
EQUITY &
OAKMARK SELECT SMALL CAP INCOME
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
Shares sold 22,559 32,332 18,587 1,449
Shares issued in reinvestment of
dividends 10,299 2,853 297 112
Less shares redeemed (100,457) (30,105) (36,338) (1,842)
---------- ------- -------- -------
Net increase (decrease) in shares
outstanding (67,599) 5,080 (17,454) (281)
========== ======= ======== =======
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1999
-------------------------------------
INT'L SMALL
GLOBAL(A) INTERNATIONAL CAP
<S> <C> <C> <C>
-------------------------------------
---------------------------------------
Shares sold 2,623 27,499 21,542
Shares issued in reinvestment of
dividends -- 6,003 178
Less shares redeemed (15) (47,902) (16,944)
-------- ---------- ---------
Net increase (decrease) in shares
outstanding 2,608 (14,400) 4,776
======== ========== =========
</TABLE>
(a) From August 4, 1999, the date on which fund shares were first offered for
sale to the public.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
------------------------------------------------------------------
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME INTERNATIONAL CAP
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
Shares sold 68,340 81,093 22,121 3,014 34,513 8,604
Shares issued in reinvestment of
dividends 30,513 410 9,667 149 20,108 786
Less shares redeemed (52,910) (39,717) (57,261) (1,344) (69,820) (7,284)
------- ------- -------- ------- ---------- ---------
Net increase (decrease) in shares
outstanding 45,943 41,786 (25,473) 1,819 (15,199) 2,106
======= ======= ======== ======= ========== =========
</TABLE>
Effective January, 1999, the Funds offer two classes of shares. Class I shares
are offered to the general public and Class II shares are offered to certain
401(k) and other tax qualified plans. Because no Class II shares have been
issued as of September 30, 1999, no financial data is presented.
4. INVESTMENT TRANSACTIONS
Transactions in investment securities (excluding short term securities) were as
follows (in thousands):
<TABLE>
<CAPTION>
EQUITY &
OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Purchases $ 734,144 $1,114,254 $ 370,124 $45,738 $27,010 $408,596
Proceeds from sales 3,124,576 968,958 4,661,866 49,281 1,595 611,623
<CAPTION>
INT'L SMALL
CAP
<S> <C>
-----------
---------------------------------------
Purchases $175,083
Proceeds from sales 125,384
</TABLE>
THE OAKMARK FAMILY OF FUNDS
61
<PAGE>
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
........................................................................
5. TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS
Affiliated issuers, as defined under the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the Fund's
transactions in the securities of these issuers during the year ended
September 30, 1999 is set forth below:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
ACNielsen Corporation $ -- $ -- $ -- $ 108,083,250
Brunswick Corporation -- -- 3,640,400 181,109,900
H & R Block, Inc. -- 59,237,433 7,114,713 278,673,281
Knight Ridder, Inc. 13,380,889 76,860,097 5,585,106 313,670,988
The Black & Decker Corporation -- 163,345,561 3,201,948 247,269,887
The Dun & Bradstreet Corporation 12,433,629 57,927,867 7,103,390 278,509,687
----------- ------------ ----------- --------------
TOTALS $25,814,518 $357,370,958 $26,645,557 $1,407,316,993
</TABLE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK SELECT FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
USG Corporation $53,055,089 $ 13,554,188 $ 1,238,350 $ 166,245,250
US Industries Inc. 44,696,796 27,494,375 1,586,420 133,654,500
----------- ------------ ----------- --------------
TOTALS $97,751,885 $ 41,048,563 $ 2,824,770 $ 299,899,750
</TABLE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK SMALL CAP FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Barry (R.G.) Corporation $ 683,865 $ -- $ -- $ 5,512,500
Duff & Phelps Credit Rating Co. -- 2,576,539 39,000 23,981,250
Finger Lakes Financial Corp. -- 22,374 45,120 1,808,625
Sames Corporation -- 448,735 -- 4,468,750
Tokheim Corporation 9,617,102 -- -- 7,686,250
Ugly Duckling Corporation 366,408 -- -- 12,468,750
----------- ------------ ----------- --------------
TOTALS $10,667,375 $ 3,047,648 $ 84,120 $ 55,926,125
</TABLE>
THE OAKMARK FAMILY OF FUNDS
62
<PAGE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Banco Latinoamericano de Exportaciones,
S.A. Class E $ 8,398,520 $ 10,993,184 $ 1,380,960 $ 28,657,800
Chargeurs International SA 487,752 -- 388,650 39,452,164
Dongah Tire Industry Company -- -- 140,181 5,399,470
Fernz Corporation Ltd. 3,621,336 14,034,949 1,034,503 21,170,836
Fila Holding S.p.A. 691,130 989,957 -- 32,160,000
Keumkang Ltd. -- 7,957,641 307,101 18,471,319
Lotte Chilsung Beverage Company -- 4,600,021 36,291 4,428,607
----------- ------------ ----------- --------------
TOTALS $13,198,738 $ 38,575,752 $ 3,287,686 $ 149,740,196
</TABLE>
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL SMALL CAP FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Designer Textiles (NZ) Limited $ -- $ 158,585 $ 42,398 $ 314,281
Mainfreight Limited 3,661,625 -- 51,467 3,511,797
Matichon Public Company Limited,
Foreign Share -- -- 162,053 3,261,806
NSC Groupe 3,693,254 -- 349,183 5,842,934
Parbury Limited 255,279 -- 131,268 2,328,688
Recordati 2,860,638 -- 47,131 2,597,323
Royal Doulton PLC 6,916,864 1,773,353 -- 7,983,234
Yip's Hang Cheung (Holdings) Ltd. 671,588 112,764 164,944 2,237,578
----------- ------------ ----------- --------------
TOTALS $18,059,248 $ 2,044,702 $ 948,444 $ 28,077,641
</TABLE>
THE OAKMARK FAMILY OF FUNDS
63
<PAGE>
THE OAKMARK FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED OCTOBER 31,
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, ----------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 33.54 $ 41.21 $ 32.39 $ 28.47 $ 25.21
Income From Investment
Operations:
Net Investment Income
(Loss) 0.44 0.47 0.36 0.34 0.30
Net Gains or Losses on
Securities (both
realized and unrealized) 2.43 (1.73 ) 10.67 4.70 4.66
--------- --------- --------- --------- ---------
Total From Investment
Operations: 2.87 (1.26 ) 11.03 5.04 4.96
Less Distributions:
Dividends (from net
investment income) (0.44) (0.40 ) (0.34) (0.28) (0.23)
Distributions (from capital
gains) (1.60) (6.01 ) (1.87) (0.84) (1.47)
--------- --------- --------- --------- ---------
Total Distributions (2.04) (6.41 ) (2.21) (1.12) (1.70)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 34.37 $ 33.54 $ 41.21 $ 32.39 $ 28.47
========= ========= ========= ========= =========
Total Return 7.98% (4.06 )% 39.24%* 18.07% 21.55%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $4,772.8 6$,924.0 $6,614.9 $3,933.9 $2,827.1
Ratio of Expenses to
Average Net Assets 1.11% 1.08 % 1.08%* 1.18% 1.17%
Ratio of Net Income (Loss)
to Average Net Assets 1.02% 1.22 % 1.19%* 1.13% 1.27%
Portfolio Turnover Rate 13 % 43 % 17 % 24% 18%
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------- OCTOBER 31,
1994 1993 1992 1991(A)
<S> <C> <C> <C> <C>
- ------------------------------
Net Asset Value, Beginning of
Period $ 24.18 $ 17.11 $ 12.10 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.27 0.17 (0.03) (0.01 )
Net Gains or Losses on
Securities (both
realized and unrealized) 1.76 7.15 5.04 2.11
--------- --------- ------- ------
Total From Investment
Operations: 2.03 7.32 5.01 2.10
Less Distributions:
Dividends (from net
investment income) (0.23) (0.04) -- --
Distributions (from capital
gains) (0.77) (0.21) -- --
--------- --------- ------- ------
Total Distributions (1.00) (0.25) -- --
--------- --------- ------- ------
Net Asset Value, End of Period $ 25.21 $ 24.18 $ 17.11 $12.10
========= ========= ======= ======
Total Return 8.77% 43.21% 41.40% 87.10 %*
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $1,677.3 $1,107.0 $114.7 $4.8
Ratio of Expenses to
Average Net Assets 1.22% 1.32% 1.70% 2.50 %(b)*
Ratio of Net Income (Loss)
to Average Net Assets 1.19% 0.94% (0.24)% (0.66 )%(c)*
Portfolio Turnover Rate 29% 18% 34 % 0 %
</TABLE>
*Data has been annualized.
(a) From August 5, 1991, the date on which Fund shares were first offered for
sale to the public.
(b) If the Fund had paid all of its expenses and there had been no reimbursement
by the Adviser, this annualized ratio would have been 4.92% for the period.
(c) Computed giving effect to the Adviser's expense limitation undertaking.
THE OAKMARK FAMILY OF FUNDS
64
<PAGE>
THE OAKMARK SELECT FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 16.76 $ 16.34 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.20 0.03 (0.01 )
Net Gains or Losses on
Securities (both
realized and unrealized) 4.72 0.56 6.35
--------- --------- -------
Total From Investment
Operations: 4.92 0.59 6.34
Less Distributions:
Dividends (from net
investment income) (0.05) -- --
Distributions (from capital
gains) (0.71) (0.17 ) --
--------- --------- -------
Total Distributions (0.76) (0.17 ) --
--------- --------- -------
Net Asset Value, End of Period $ 20.92 $ 16.76 $16.34
========= ========= =======
Total Return 30.07% 3.64 % 69.16 %*
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $1,638.9 $1,227.9 $514.2
Ratio of Expenses to
Average Net Assets 1.16% 1.22 % 1.12 %*
Ratio of Net Income (Loss)
to Average Net Assets 0.98% .17 % (0.11 )%*
Portfolio Turnover Rate 67 % 56 % 37 %
</TABLE>
*Ratios have been annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 65
<PAGE>
THE OAKMARK SMALL CAP FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31,
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 1997 1996
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 12.63 $ 20.34 $ 13.19 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) (0.16) (0.12) (0.01) (0.02 )
Net Gains or Losses on
Securities (both
realized and unrealized) 1.50 (4.73) 7.16 3.21
------- ------- --------- -------
Total From Investment
Operations: 1.34 (4.85) 7.15 3.19
Less Distributions:
Dividends (from net
investment income) 0.00 -- -- --
Distributions (from capital
gains) (0.09) (2.86) -- --
------- ------- --------- -------
Total Distributions (0.09) (2.86) -- --
------- ------- --------- -------
Net Asset Value, End of Period $ 13.88 $ 12.63 $ 20.34 $13.19
======= ======= ========= =======
Total Return 10.56% (26.37)% 59.14%* 31.94 %
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $437.1 $618.0 $ 1,513.4 $218.4
Ratio of Expenses to
Average Net Assets 1.48% 1.45% 1.37%* 1.61 %
Ratio of Net Income (Loss)
to Average Net Assets (0.44)% (0.40)% (0.25)%* (0.29 )%
Portfolio Turnover Rate 68 % 34 % 27 % 23 %
</TABLE>
*Data has been annualized.
THE OAKMARK FAMILY OF FUNDS
66
<PAGE>
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31,
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 1997 1996
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 13.99 $ 14.49 $11.29 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.43 0.29 0.21 0.10
Net Gains or Losses on
Securities (both
realized and unrealized) 1.68 0.04 3.24 1.19
------ ------ ------ ------
Total From Investment
Operations: 2.11 0.33 3.45 1.29
Less Distributions:
Dividends (from net
investment income) (0.21) (0.24) (0.12) --
Distributions (from capital
gains) (0.21) (0.59) (0.13) --
------ ------ ------ ------
Total Distributions (0.42) (0.83) (0.25) --
------ ------ ------ ------
Net Asset Value, End of Period 15.68 13.99 $14.49 $11.29
====== ====== ====== ======
Total Return 15.32% 2.57% 34.01%* 12.91%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $ 60.3 $ 57.7 $33.5 $13.8
Ratio of Expenses to
Average Net Assets 1.18% 1.31% 1.50%*(a) 2.50%(a)
Ratio of Net Income (Loss)
to Average Net Assets 2.65% 2.39% 2.38%*(a) 1.21%(a)
Portfolio Turnover Rate 81 % 46 % 53 % 66 %
</TABLE>
*Data has been annualized.
(a) If the fund had paid all of its expenses and there had been no expense
reimbursement by the investment adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 OCTOBER 31, 1996
<S> <C> <C>
- --------------------------------------------------------------------------
Ratio of Expenses to
Average Net Assets 1.70% 2.64%
Ratio of Net Income (Loss)
to Average Net Assets 2.18% 1.08%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 67
<PAGE>
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 30, 1999(a)
<S> <C>
- --------------------------------------------------------
Net Asset Value, Beginning of
Period $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.01
Net Gains or Losses on
Securities (both realized
and unrealized) (0.83)
------
Total From Investment
Operations: (0.82)
Less Distributions:
Dividends (from net
investment income) 0.00
Distributions (from capital
gains) 0.00
------
Total Distributions 0.00
------
Net Asset Value, End of Period $ 9.18
======
Total Return (8.18%)
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $24.0
Ratio of Expenses to
Average Net Assets 1.75%*(b)
Ratio of Net Income (Loss)
to Average Net Assets 0.98%*(b)
Portfolio Turnover Rate 7.23%
</TABLE>
*Data has been annualized.
(a) From August 4, 1999, the date on which fund shares were first offered for
sale to the public.
(b) If the fund had paid all of its expenses and there had been no expense
reimbursement by the investment advisor, the ratio of expenses to average
net assets would have been 2.22% and the ratio of net income (loss) to
average net assets would have been 0.51%.
THE OAKMARK FAMILY OF FUNDS
68
<PAGE>
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED OCTOBER 31,
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, ----------------------------------------------
1999 1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 10.42 $ 18.77 $ 14.92 $ 12.97 $ 14.50 $ 14.09 $ 9.80
Income From Investment
Operations:
Net Investment Income
(Loss) 0.36 0.41 0.27 0.09 0.30 0.21 0.06
Net Gains or Losses on
Securities (both
realized and unrealized) 4.19 (5.32) 3.74 2.90 (0.77) 0.43 4.48
------- ------- --------- --------- ------- --------- -------
Total From Investment
Operations: 4.55 (4.91) 4.01 2.99 (0.47) 0.64 4.54
Less Distributions:
Dividends (from net
investment income) (0.24) (0.58) (0.16) -- -- (0.08) (0.25)
Distributions (from capital
gains) (0.78) (2.86) -- (1.04) (1.06) (0.15) --
------- ------- --------- --------- ------- --------- -------
Total Distributions (1.02) (3.44) (0.16) (1.04) (1.06) (0.23) (0.25)
------- ------- --------- --------- ------- --------- -------
Net Asset Value, End of Period $ 13.95 $ 10.42 $ 18.77 $ 14.92 $ 12.97 $ 14.50 $ 14.09
======= ======= ========= ========= ======= ========= =======
Total Return 46.41% (29.90)% 29.63%* 24.90% (3.06)% 4.62% 47.49%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $811.1 $756.1 $1,647.3 $1,172.8 $819.7 $1,286.0 $815.4
Ratio of Expenses to
Average Net Assets 1.29% 1.32% 1.26%* 1.32% 1.40% 1.37% 1.26%
Ratio of Net Income (Loss)
to Average Net Assets 1.94% 1.95% 2.09%* 1.45% 1.40% 1.44% 1.55%
Portfolio Turnover Rate 54 % 43 % 61 % 42% 26 % 55% 21 %
<CAPTION>
PERIOD ENDED
OCTOBER 31,
1992(A)
<S> <C>
- ------------------------------
Net Asset Value, Beginning of
Period $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.26
Net Gains or Losses on
Securities (both
realized and unrealized) (0.46 )
-------
Total From Investment
Operations: (0.2 )
Less Distributions:
Dividends (from net
investment income) --
Distributions (from capital
gains) --
-------
Total Distributions --
-------
Net Asset Value, End of Period 9.80
=======
Total Return (22.81 )%*
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $23.5
Ratio of Expenses to
Average Net Assets 2.04 %*
Ratio of Net Income (Loss)
to Average Net Assets 37.02 %*
Portfolio Turnover Rate 0 %
</TABLE>
*Ratios have been annualized.
(a) From September 30, 1992, the date on which Fund shares were first offered
for sale to the public.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 69
<PAGE>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 OCTOBER 31, 1996
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $ 6.89 $12.20 $11.41 $10.00
Income From Investment
Operations:
Net Investment Income
(Loss) 0.20 0.18 0.13 0.04
Net Gains or Losses on
Securities (both
realized and unrealized) 5.75 (4.09 ) 1.10 1.37
------- ------- ------ ------
Total From Investment
Operations: 5.95 (3.91 ) 1.23 1.41
Less Distributions:
Dividends (from net
investment income) (0.20 ) (0.06 ) (0.08) --
Distributions (from capital
gains) 0.00 (1.34 ) (0.36) --
------- ------- ------ ------
Total Distributions (0.20 ) (1.40 ) (0.44) --
------- ------- ------ ------
Net Asset Value, End of Period $12.64 $ 6.89 $12.20 $11.41
======= ======= ====== ======
Total Return 88.02 % (35.20 )% 12.07%* 14.15%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $155.4 $51.8 $66.0 $39.8
Ratio of Expenses to
Average Net Assets 1.79 % 1.96 % 1.93%* 2.50%(a)
Ratio of Net Income (Loss)
to Average Net Assets 2.31 % 2.17 % 1.23%* 0.65%(a)
Portfolio Turnover Rate 126 % 69 % 63 % 27 %
</TABLE>
* Ratios have been annualized.
(a) If the fund had paid all of its expenses and there had been no expense
reimbursement by the investment advisor, the ratio of expenses to average
net assets would have been 2.65% and the ratio of net income (loss) to
average net assets would have been .50%.
70 THE OAKMARK FAMILY OF FUNDS
<PAGE>
THE OAKMARK FAMILY OF FUNDS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
........................................................................
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF HARRIS
ASSOCIATES INVESTMENT TRUST:
WE HAVE AUDITED THE ACCOMPANYING STATEMENTS OF ASSETS AND
LIABILITIES OF THE OAKMARK FUND, THE OAKMARK SELECT FUND, THE OAKMARK
SMALL CAP FUND, THE OAKMARK EQUITY AND INCOME FUND, THE OAKMARK GLOBAL
FUND, THE OAKMARK INTERNATIONAL FUND, AND THE OAKMARK INTERNATIONAL
SMALL CAP FUND (EACH A SERIES OF HARRIS ASSOCIATES INVESTMENT TRUST),
INCLUDING THE SCHEDULES OF INVESTMENTS ON PAGES 7-9, 12-13, 16-18,
21-24, 28-30, 34-37, AND 41-44, AS OF SEPTEMBER 30, 1999, AND THE
RELATED STATEMENTS OF OPERATIONS, STATEMENTS OF CHANGES IN NET ASSETS
AND THE FINANCIAL HIGHLIGHTS FOR THE PERIODS INDICATED THEREON. THESE
FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS ARE THE RESPONSIBILITY OF
THE TRUST'S MANAGEMENT. OUR RESPONSIBILITY IS TO EXPRESS AN OPINION ON
THESE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS BASED ON OUR AUDITS.
WE CONDUCTED OUR AUDITS IN ACCORDANCE WITH GENERALLY ACCEPTED
AUDITING STANDARDS. THOSE STANDARDS REQUIRE THAT WE PLAN AND PERFORM THE
AUDITS TO OBTAIN REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL
STATEMENTS AND FINANCIAL HIGHLIGHTS ARE FREE OF MATERIAL MISSTATEMENT.
AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING THE
AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENTS. OUR PROCEDURES
INCLUDED CONFIRMATION OF SECURITIES OWNED AS OF SEPTEMBER 30, 1999, BY
CORRESPONDENCE WITH THE CUSTODIAN AND BROKERS. AS TO SECURITIES
PURCHASED BUT NOT RECEIVED, WE REQUESTED CONFIRMATION FROM BROKERS, AND
WHEN REPLIES WERE NOT RECEIVED, WE CARRIED OUT ALTERNATIVE AUDITING
PROCEDURES. AN AUDIT ALSO INCLUDES ASSESSING THE ACCOUNTING PRINCIPLES
USED AND SIGNIFICANT ESTIMATES MADE BY MANAGEMENT, AS WELL AS EVALUATING
THE OVERALL FINANCIAL STATEMENT PRESENTATION. WE BELIEVE THAT OUR AUDITS
PROVIDE A REASONABLE BASIS FOR OUR OPINION.
IN OUR OPINION, THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
REFERRED TO ABOVE PRESENT FAIRLY, IN ALL MATERIAL RESPECTS, THE
FINANCIAL POSITIONS OF THE OAKMARK FUND, THE OAKMARK SELECT FUND, THE
OAKMARK SMALL CAP FUND, THE OAKMARK EQUITY AND INCOME FUND, THE OAKMARK
GLOBAL FUND, THE OAKMARK INTERNATIONAL FUND, AND THE OAKMARK
INTERNATIONAL SMALL CAP FUND OF THE HARRIS ASSOCIATES INVESTMENT TRUST
AS OF SEPTEMBER 30, 1999, THE RESULTS OF THEIR OPERATIONS, THE CHANGES
IN THEIR NET ASSETS, AND THEIR FINANCIAL HIGHLIGHTS FOR THE PERIODS
INDICATED THEREON IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 25, 1999
THE OAKMARK FAMILY OF FUNDS
71
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THE OAKMARK FAMILY OF FUNDS
72
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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
Robert J. Sanborn--EXECUTIVE VICE PRESIDENT
David G. Herro--VICE PRESIDENT
Gregory L. Jackson--VICE PRESIDENT
Clyde S. McGregor--VICE PRESIDENT
William C. Nygren--VICE PRESIDENT
Steven J. Reid--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 profile and/or
prospectus of the Funds. No sales charge to the shareholder or to the new
investor is made in offering the shares of the Funds.
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OAKMARK
FAMILY OF FUNDS
P.O. BOX 8510
BOSTON, MA 02266-8510
