<PAGE>
[GRAPHIC]
THE OAKMARK FUND
THE OAKMARK
SELECT FUND
THE OAKMARK SMALL
CAP FUND
THE OAKMARK EQUITY
AND INCOME FUND
THE OAKMARK
GLOBAL FUND
THE OAKMARK
INTERNATIONAL FUND
THE OAKMARK
INTERNATIONAL SMALL
CAP FUND
SEMI-ANNUAL REPORT
MARCH 31, 2000
MANAGED BY HARRIS ASSOCIATES L.P. [LOGO]
<PAGE>
THE OAKMARK FAMILY OF FUNDS
2000 SEMI-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 ...................................6
THE OAKMARK SELECT FUND
Letter from the Portfolio Manager .........................9
Schedule of Investments ..................................11
THE OAKMARK SMALL CAP FUND
Letter from the Portfolio Managers .......................13
Schedule of Investments ..................................15
THE OAKMARK EQUITY AND INCOME FUND
Letter from the Portfolio Manager ........................18
Schedule of Investments ..................................20
THE OAKMARK GLOBAL FUND
Letter from the Portfolio Managers .......................23
Global Diversification Chart .............................25
Schedule of Investments ..................................26
THE OAKMARK INTERNATIONAL FUND
Letter from the Portfolio Managers .......................29
International Diversification Chart ......................31
Schedule of Investments ..................................32
THE OAKMARK INTERNATIONAL SMALL CAP FUND
Letter from the Portfolio Managers .......................36
International Diversification Chart ......................38
Schedule of Investments ..................................39
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ......................44
Statement of Operations ..................................46
Statement of Changes in Net Assets .......................48
Notes to Financial Statements ............................55
TRUSTEES AND OFFICERS .......................................69
</TABLE>
FOR MORE INFORMATION
Access our web site at www.oakmark.com to obtain a prospectus, an
application or periodic reports, or call 1-800-OAKMARK (1-800-625-6275) or
(617) 578-1329.
WEB SITE AND 24-HOUR NET ASSET VALUE HOTLINE
Access our web site at www.oakmark.com to obtain the current net asset
value of a fund, or call 1-800-GROWOAK (1-800-476-9625).
TO COMMENT ON SHAREHOLDER SERVICES
E-mail us at [email protected].
<PAGE>
LETTER FROM THE CHAIRMAN AND PRESIDENT
- --------------------------------------------------------------------------------
DEAR FELLOW SHAREHOLDERS:
We are pleased to present the Semi-Annual Report for The Oakmark Family of
Funds. After a difficult start, the last month of the quarter provided
reinforcing evidence that value investing is nearing a positive turn.
One of the most important hallmarks of a successful investment firm is the
ability to create a team of focused and disciplined individuals that can define
and execute its investment philosophy in environments that can, at times, be
extremely challenging.
[PHOTO]
On the next several pages, you will notice some changes in our "lineup." As you
know, Robert Sanborn has stepped down from the management of The Oakmark Fund.
His very positive contribution to our long-term success is obvious, but it was
time for a change. We expect him to continue to play a significant role in our
firm. In the meantime, our careful planning leaves us in the enviable position
of seamlessly changing the management of The Oakmark Fund. Additional changes in
our "lineup" include adding a second manager to three of our funds.
The message should be very clear. We have the depth and commitment to bring a
large group of talented individuals into the spotlight to help insure the
long-term success of our fund family.
On many recent occasions, we have indicated a growing confidence that value
investing will come back. This quarter, our buy list has expanded to levels not
seen since 1990, and takeovers of "old economy" stocks at significant price
premiums are accelerating. These are classic signs that our turn is near. Your
patience will be rewarded.
We are happy to announce that in the coming months we will be making exciting
improvements to our web site. In the future on www.oakmark.com, you will be able
to purchase shares, change your address, or order duplicate statements on-line.
You will also find a new page design with improved navigation to make the site
easier to use. We appreciate your feedback on our current site and we used your
valuable comments to develop these improvements.
/s/ Victor Morgenstern
VICTOR MORGENSTERN
CHAIRMAN
/s/ Robert M. Levy
ROBERT M. LEVY
PRESIDENT
April 6, 2000
[LOGO]
1
<PAGE>
THE OAKMARK FAMILY OF FUNDS
SUMMARY INFORMATION
-------------------
<TABLE>
<CAPTION>
PERFORMANCE FOR PERIOD THE OAKMARK THE OAKMARK
ENDED THE OAKMARK SELECT SMALL CAP
MARCH 31, 2000 FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3 MONTHS (9.0%) 9.0% (1.5%)
- -----------------------------------------------------------------------------------------------------------------------
6 MONTHS (15.1%) 16.5% (3.5%) (a)
- -----------------------------------------------------------------------------------------------------------------------
1 YEAR (18.1%) 12.8% (0.6%)
- -----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL
RETURN FOR:
3 YEAR 2.5% 28.3% 1.6%
- -----------------------------------------------------------------------------------------------------------------------
5 YEAR 9.9% N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION 19.2% 31.8% 11.2%
- -----------------------------------------------------------------------------------------------------------------------
VALUE OF $10,000 $45,767 $25,667 $15,974
FROM INCEPTION DATE (8/5/91) (11/1/96) (11/1/95)
- -----------------------------------------------------------------------------------------------------------------------
TOP FIVE HOLDINGS Fortune Brands, Inc. 4.8% Washington Catellus Development
AS OF MARCH 31, 2000 Washington Mutual, Inc. 13.5% Corporation 6.8%
Mutual, Inc. 4.1% USG Corporation 9.7% Ugly Duckling
Brunswick The Reynolds & Corporation 5.3%
COMPANY AND % OF TOTAL Corporation 3.8% Reynolds Company 8.3% ITT Educational
NET ASSETS The Dun & Bradstreet Toys `R' Us, Inc. 8.2% Services, Inc. 4.7%
Corporation 3.8% The Dun & Bradstreet National Data
ACNielsen Corporation 6.9% Corporation 4.4%
Corporation 3.8% People's Bank of
Bridgeport, CT 3.9%
- -----------------------------------------------------------------------------------------------------------------------
TOP FIVE INDUSTRIES Other Consumer Banks & Thrifts 15.7% Real Estate 11.0%
AS OF MARCH 31, 2000 Goods & Services 19.5% Information Services 11.2% Banks & Thrifts 10.2%
Information Services 8.1% Retail 9.8% Insurance 7.5%
Food & Beverage 7.6% Building Materials Food & Beverage 7.4%
COMPANY AND % OF TOTAL Banks & Thrifts 7.0% & Construction 9.7% Retail 6.8%
NET ASSETS Machinery & Computer Software 8.3%
Industrial Processing 6.5%
</TABLE>
(a) During the six months ended March 31, 2000, Initial Public Offerings
("LPOs") contributed .34%, 1.6% and 10% to the performance of Small Cap,
Equity and Income and Global, respectively. As the IPO environment changes
and the total assets of the Funds grow, the impact of IPOs on performance
will diminish.
2 THE OAKMARK FAMILY OF FUNDS
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE FOR PERIOD THE OAKMARK THE OAKMARK THE OAKMARK
ENDED EQUITY AND GLOBAL INTERNATIONAL
MARCH 31, 2000 INCOME FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3 MONTHS 4.4% 0.8% (0.2%)
- ---------------------------------------------------------------------------------------------------------------------
6 MONTHS 8.0% (a) 9.6% (a) 8.9%
- ---------------------------------------------------------------------------------------------------------------------
1 YEAR 12.7% N/A 22.4%
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL
RETURN FOR:
3 YEAR 15.9% N/A 7.5%
- ---------------------------------------------------------------------------------------------------------------------
5 YEAR N/A N/A 13.9%
- ---------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION 15.5% N/A 13.6%
- ---------------------------------------------------------------------------------------------------------------------
VALUE OF $10,000 $18,924 $10,061 $26,012
FROM INCEPTION DATE (11/1/95) (8/4/99) (9/30/92)
- ---------------------------------------------------------------------------------------------------------------------
TOP FIVE HOLDINGS The Reynolds & Department 56, Inc. 5.3% Tomkins plc 4.8%
AS OF MARCH 31, 2000 Reynolds Company 6.1% Ceridian Diageo plc 4.8%
Ceridian Corporation 5.1% Metso Oyj 4.7%
Corporation 4.4% The Reynolds & Somerfield plc 4.3%
COMPANY AND % OF TOTAL Alamo Group Inc. 4.4% Reynolds Company 5.0% Banco
NET ASSETS Legacy Hotels Real NOVA Corporation 5.0% Latinoamericano
Estate Investment Fletcher Challenge de Exportaciones,
Trust 3.8% Building 4.7% S.A. 4.1%
Catellus Development
Corporation 3.6%
- ---------------------------------------------------------------------------------------------------------------------
TOP FIVE INDUSTRIES U.S. Government Retail 18.1% Banks & Thrifts 16.7%
AS OF MARCH 31, 2000 Bonds 24.4% Information Services 13.6% Other Industrial
Real Estate 13.0% Other Consumer Goods & Services 14.3%
Banks & Thrifts 7.1% Goods & Services 9.4% Food & Beverage 8.9%
COMPANY AND % OF TOTAL Computer Software 6.1% Banks & Thrifts 9.1% Household Products 8.4%
NET ASSETS Computer Services 5.7% Other Industrial Retail 6.0%
Goods & Services 8.1%
<CAPTION>
PERFORMANCE FOR PERIOD THE OAKMARK
ENDED INTERNATIONAL
MARCH 31, 2000 SMALL CAP FUND
- -----------------------------------------------------------
<S> <C> <C>
3 MONTHS (5.0%)
- -----------------------------------------------------------
6 MONTHS (0.3%)
- -----------------------------------------------------------
1 YEAR 17.3%
- -----------------------------------------------------------
AVERAGE ANNUAL TOTAL
RETURN FOR:
3 YEAR 8.4%
- -----------------------------------------------------------
5 YEAR N/A
- -----------------------------------------------------------
SINCE INCEPTION 10.2%
- -----------------------------------------------------------
VALUE OF $10,000 $15,387
FROM INCEPTION DATE (11/1/95)
- -----------------------------------------------------------
TOP FIVE HOLDINGS Krones AG 6.4%
AS OF MARCH 31, 2000 Fletcher Challenge
Building 5.8%
GFI Industries SA 5.4%
COMPANY AND % OF TOTAL House Of Fraser Plc 4.9%
NET ASSETS Royal Doulton plc 4.9%
- -----------------------------------------------------------
TOP FIVE INDUSTRIES Production
AS OF MARCH 31, 2000 Equipment 12.4%
Retail 11.8%
Other Industrial
COMPANY AND % OF TOTAL Goods & Services 8.6%
NET ASSETS Other Consumer
Goods & Services 8.2%
Other Financial 8.2%
</TABLE>
(a) During the six months ended March 31, 2000, Initial Public Offerings
("IPOs") contributed .34%, 1.6% and 10% to the performance of Small Cap,
Equity and Income and Global, respectively. As the IPO environment changes
and the total assets of the Funds grow, the impact of IPOs on performance
will diminish.
THE OAKMARK FAMILY OF FUNDS 3
<PAGE>
THE OAKMARK FUND
REPORT FROM BILL NYGREN AND KEVIN GRANT, PORTFOLIO MANAGERS
----------------------------------------------------------------------
[PHOTO] [PHOTO]
- --------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM
ITS INCEPTION (8/5/91) TO PRESENT (3/31/00) AS COMPARED TO THE
STANDARD & POOR'S 500 INDEX
[GRAPH]
<TABLE>
<CAPTION>
THE OAKMARK
FUND S & P 500
<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 $53,882 $40,023
12/99 $50,277 $45,977
3/00 $45,767 $47,032
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
3/31/00 NAV $24.76 THROUGH 3/31/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 8/5/91
- ----------------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK FUND -9.0% 19.2%
Standard & Poor's 500 Stock
Index w/inc** 2.3% 19.6%
Dow Jones Industrial Average w/inc** -4.7% 18.7%
Value Line Composite Index** -0.6% 6.8%
</TABLE>
*Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
**Each of the three indexes or averages is an unmanaged group of stocks 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.
This is a very exciting time at The Oakmark Fund. Your new portfolio managers
have been on the job for two weeks. We have completed the portfolio
restructuring we felt was appropriate and are very confident about how the fund
is positioned. The focus of this report will be on our management approach and
our very attractive portfolio. But first, we'd like to comment that under Robert
Sanborn's leadership, The Oakmark Fund's return placed it in the top 10% of
value mutual funds for the period from inception (8/91) to the end of this March
according to Lipper. We look forward to extending that exceptional track record.
It is important to us that our investors understand that we will continue to
employ the same value philosophy that has been responsible for these results. We
will only buy a stock when it is selling below 60% of what we believe the
business is worth today. We will sell it when it is priced at more than 90% of
estimated value, or when we believe we have made a mistake analyzing the
company. In addition, we will seek to identify companies where value grows as
time passes and where managements have economic interests that are well aligned
with their shareholders. When we identify these stocks, we will buy them in
meaningful size. While most mutual funds own over 100 different stocks, we
expect to usually have only 40-50 stocks. We are confident that this approach
will continue to deliver excellent long-term returns, and we have both made
substantial personal investments in The Oakmark Fund since being named the new
managers.
We are well aware that recent results have been disappointing, and the quarter
just ended was no exception. But in our search for light at the end of the
tunnel, it is interesting to note that the fund has already increased 15% from
its March 8 low. We are seeing an increased level of acquisition activity
4 THE OAKMARK FUND
<PAGE>
- --------------------------------------------------------------------------------
that we believe will benefit the Fund. Additionally, our companies continue to
repurchase large quantities of their own stocks, which we believe adds
significant value to the remaining shares. Our portfolio is extremely
undervalued based on our forecasts for the stocks we own. The price-to-earnings
ratio of The Oakmark Fund stands at 11.5 (using estimated 2000 eps) compared to
26 for the S&P 500. That means that each share of The Oakmark Fund that you
purchase for $24.76 represents $2.16 of current earnings. If you invested enough
money in the S&P 500 to create that same $2.16 of earnings, it would cost $57 or
130% more than in The Oakmark Fund. And what's even more exciting is that when
you look at the stocks we own, you don't find structurally disadvantaged
companies. Instead, you find industry leaders whose businesses should be worth
more as each year passes.
Hopefully, the excitement we feel about the portfolio can be captured in a few
words about our top five positions:
FORTUNE BRANDS (FO--$25)
The Fund's largest position was highlighted in the last quarterly report.
Fortune is a diversified consumer products company selling brands such as Jim
Beam, Titleist, and Moen faucets. After adding back goodwill amortization,
Fortune sells at less than 9 times this year's earnings estimate.
WASHINGTON MUTUAL
(WM--$27)
The largest savings and loan in the country, Washington Mutual, is expected to
grow earnings at a double-digit rate due to both growth in customers and share
repurchase. In addition, Washington Mutual has a dividend yield of over 4% and
has raised that dividend every quarter for the last four years. Washington
Mutual sells at a P/E of just over 7 times estimated 2000 earnings.
DUN AND BRADSTREET
(DNB--$29)
Dun & Bradstreet sells at a high P/E for us, 17 times, but we believe a higher
multiple is warranted for this terrific franchise. The company is in the process
of splitting into two pieces, separating its highly regarded Moody's bond rating
business (17% compounded earnings growth for the last decade) from the more
stagnant Dun & Bradstreet credit report business. We believe new management on
the credit side will improve profitability and restore growth to that business.
We are also pleased that Warren Buffett has recently purchased 15% of Dun &
Bradstreet's shares.
BRUNSWICK (BC--$19)
Brunswick sells at 7 times estimated earnings. With its Sea Ray line of luxury
boats, Brunswick continues to be the industry leader. Brunswick also gets nearly
a third of its income from less cyclical consumer recreation products (Life
Fitness exercise equipment, Igloo coolers, Mongoose bicycles, Brunswick bowling
and billiards), so earnings should be less sensitive to an economic downturn
than one would expect for a boat company.
ACNIELSEN (ART--$23)
Nielsen is the global leader in market research for consumer product companies.
Outside the US, Nielsen is also a leader in measuring television audiences. In
mid-1999, Nielsen bought 6% of NetRatings, a business that measures Internet
site usage in North America, and also started eratings.com that will measure
Internet audiences and advertising outside North America. Were these investments
valued similarly to pure-play Internet stocks, it is conceivable they would sell
for more than the entire market value of Nielsen. Adding back the Internet
startup losses as well as expenses to restructure operations (especially in
Europe), Nielsen sells at 10 times our estimate of next year's earnings, and
that assigns zero value to the Internet investments.
In addition to having a portfolio full of great values, we inherit a very
favorable tax position. It is unlikely that we will have to make any capital
gains distributions for at least a couple of years. We will only pay capital
gains taxes after the portfolio appreciates substantially from current levels
and that will be welcomed by all of us!
In closing, we'd like to thank you, our shareholders, for your patience. We are
not satisfied with recent performance and are energized by the challenge of
restoring The Oakmark Fund to the position of the premier diversified value
fund. We believe the road ahead will be an exciting and profitable one. We
encourage you to join us for that journey.
Thank you for your support.
/s/ Bill Nygren
BILL NYGREN
Portfolio Manager
[email protected]
/s/ Kevin Grant
KEVIN GRANT
Portfolio Manager
[email protected]
April 3, 2000
THE OAKMARK FUND 5
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--90.7%
FOOD & BEVERAGE--7.6%
Nabisco Holdings Corporation, Class A 2,072,100 $ 66,695,719
Philip Morris Companies Inc. 2,610,700 55,151,037
H.J. Heinz Company 1,325,000 46,209,375
-------------
168,056,131
APPAREL--3.0%
Nike, Inc., Class B 1,539,300 $ 60,994,763
Jones Apparel Group, Inc. (a) 157,000 5,004,375
-------------
65,999,138
RETAIL--5.4%
The Kroger Company 2,200,000 $ 38,637,500
Tricon Global Restaurants, Inc. (a) 1,200,000 37,275,000
Toys "R" Us, Inc. (a) 2,263,400 33,526,612
GC Companies, Inc. (a) 266,200 9,250,450
-------------
118,689,562
HOUSEHOLD PRODUCTS--2.9%
Fort James Corporation 1,400,000 $ 30,800,000
The Dial Corporation 2,052,900 28,227,375
The Clorox Company 192,300 6,249,750
-------------
65,277,125
HOUSEHOLD APPLIANCES--1.9%
Maytag Corporation 1,260,400 $ 41,750,750
HARDWARE--5.2%
The Black & Decker Corporation 1,872,200 $ 70,324,512
The Stanley Works 1,724,900 45,494,238
-------------
115,818,750
OTHER CONSUMER GOODS & SERVICES--19.5%
Fortune Brands, Inc. 4,261,100 $ 106,527,500
Brunswick Corporation 4,475,800 84,760,462
Mattel, Inc. 6,964,400 72,690,925
H&R Block, Inc. 1,330,500 59,539,875
Galileo International, Inc. 2,358,600 56,753,813
Ralston Purina Group 1,011,000 27,676,125
American Greetings Corporation, Class A 1,308,300 23,876,475
-------------
431,825,175
BANKS & THRIFTS--7.0%
Washington Mutual, Inc. 3,430,000 $ 90,895,000
Bank One Corporation 1,850,548 63,612,587
-------------
154,507,587
6 THE OAKMARK FUND
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--90.7% (CONT.)
INSURANCE--3.4%
Old Republic International Corporation 3,896,330 $ 53,574,538
MGIC Investment Corporation 475,000 20,721,875
-------------
74,296,413
OTHER FINANCIAL--1.2%
SLM Holding Corporation 800,000 $ 26,650,000
INFORMATION SERVICES--8.1%
The Dun & Bradstreet Corporation 2,957,500 $ 84,658,437
ACNielsen Corporation (a) (c) 3,714,000 83,565,000
Equifax Inc. 443,500 11,198,375
-------------
179,421,812
COMPUTER SERVICES--2.2%
First Data Corporation 1,100,000 $ 48,675,000
PUBLISHING--3.0%
Knight Ridder, Inc. 1,315,300 $ 66,998,094
Medical Products3.0%
Sybron International Corporation (a) 2,295,600 $ 66,572,400
AUTOMOBILES--2.1%
DaimlerChrysler AG (b) 700,000 $ 45,806,250
AEROSPACE & DEFENSE--3.7%
Lockheed Martin Corporation 3,150,000 $ 64,378,125
The Boeing Company 474,400 17,997,550
-------------
82,375,675
Machinery & Industrial Processing--6.5%
Cooper Industries, Inc. 2,123,400 $ 74,319,000
Eaton Corporation 743,600 58,000,800
Crane Co. 500,000 11,781,250
-------------
144,101,050
BUILDING MATERIALS & CONSTRUCTION--1.1%
Masco Corporation 1,183,000 $ 24,251,500
CHEMICALS--0.9%
The Geon Company 956,600 $ 20,566,900
THE OAKMARK FUND 7
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Shares Held/
Par Value Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--90.7% (CONT.)
UTILITIES--2.2%
Texas Utilities Company 900,000 $ 26,718,750
Citizens Utilities Company, Class B 1,393,700 22,821,838
-------------
49,540,588
OIL & NATURAL GAS--0.8%
Union Pacific Resources Group Inc. 1,299,000 $ 18,835,500
TOTAL COMMON STOCKS (COST: $2,097,226,948) 2,010,015,400
SHORT TERM INVESTMENTS--8.9%
U.S. GOVERNMENT BILLS--2.3%
United States Treasury Bills, 4.91%-5.31%
due 4/6/2000-5/25/2000 50,000,000 $ 49,783,826
TOTAL U.S. GOVERNMENT BILLS (COST: $49,783,827) 49,783,826
COMMERCIAL PAPER--3.8%
Ford Motor Credit Corp., 5.90%-6.07% due
4/3/2000-4/5/2000 55,000,000 $ 55,000,000
General Electric Capital Corporation, 6.18%
due 4/3/2000 30,000,000 30,000,000
-------------
TOTAL COMMERCIAL PAPER (COST: $85,000,000) 85,000,000
REPURCHASE AGREEMENTS--2.8%
State Street Repurchase Agreement, 6.03% due 4/3/2000 61,914,000 $ 61,914,000
TOTAL REPURCHASE AGREEMENTS (COST: $61,914,000) 61,914,000
TOTAL SHORT TERM INVESTMENTS (COST: $196,697,827) 196,697,826
Total Investments (Cost $2,293,924,775)--99.6% (c) $2,206,713,226
Other Assets In Excess Of Other Liabilities--0.4% 9,149,227
TOTAL NET ASSETS--100% $2,215,862,453
==============
</TABLE>
(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(c) At March 31, 2000, net unrealized depreciation of $87,211,548, for federal
income tax purposes, consisted of gross unrealized appreciation of
$240,278,410 and gross unrealized depreciation of $327,489,958.
8 THE OAKMARK FUND
<PAGE>
THE OAKMARK SELECT FUND
REPORT FROM BILL NYGREN AND HENRY BERGHOEF, PORTFOLIO MANAGERS
----------------------------------------------------------------------
[PHOTO] [PHOTO]
- --------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK Select FUND FROM ITS INCEPTION
(11/1/96) TO PRESENT (3/31/00) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX
<TABLE>
<CAPTION>
THE OAKMARK
SELECT FUND S & P 500
<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
12/99 $23,557 $21,882
3/00 $25,667 $22,384
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
3/31/00 NAV $20.07 THROUGH 3/31/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 11/1/96
- ------------------------------------------------------------------------------
<S> <C> <C>
The Oakmark Select Fund 9.0% 31.8%
Standard & Poor's 500 Stock
Index w/inc** 2.3% 26.6%
Standard & Poor's MidCap 400
Index w/inc** 12.7% 25.2%
Value Line Composite Index** -0.6% 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. TheS&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.
As of today, every investor in The Oakmark Select Fund has made a profit. The
fund hit an all-time high, adjusted for distributions, on March 31. I can't
imagine a statistic I'd be more pleased to report! This quarter's 9.0% return
exceeded the S&P 500, but trailed the S&P Midcap Index. The Midcap Index has
become less useful as a day-to-day predictor of our Fund because it has become
dominated by large cap technology stocks (the companies are still small, but
their capitalizations are not). Our portfolio today is priced at 10.6 times
estimated 2000 earnings, which compares to 26 times for the S&P 500 and 23 times
for the S&P Midcap. I believe our portfolio is extremely attractive relative to
both the S&P 500 and the S&P Midcap and expect it to perform well as the P/E gap
closes.
During the quarter, two stocks in our portfolio--Sterling Commerce and Times
Mirror--accepted acquisition offers. On February 22, Sterling Commerce agreed to
be acquired by SBC Communications for $44 per share. That price was a 30%
premium to Sterling's stock price at the end of 1999, and a 144% premium to its
October, 1999 low of $18. Congratulations to CEO Warner Blow for delivering this
value to his shareholders. On March 13, Times Mirror stock jumped 79% after it
agreed to be acquired by the Tribune Company for $95 per share. In journalism
circles, Times Mirror CEO Mark Willes has been a controversial figure because of
changes he spearheaded at the LA Times. Among shareholders there was no such
controversy. Times Mirror stock was trading at $23 in June of 1995 when Mark was
named CEO. In less than five years, Times Mirror shareholders received a return
in excess of 300%. We will definitely investigate the next company Mark joins!
(As an aside, our portfolio now includes a short position in Tribune Company.
This short sale is simply a
THE OAKMARK SELECT FUND 9
<PAGE>
pre-sale of some of the shares we anticipate receiving in the Times Mirror
tender offer.)
"When will stock market investors start caring about value again?" Our answer
has been that we know it will happen, but we don't know when. Examples like
Sterling, Times Mirror and the many other acquisitions we now see occurring show
that if investors don't correct these mispricings, corporations will. We expect
merger activity to continue accelerating and think we are well positioned to
benefit from that trend.
TOYS `R' US
Because over 7% of our portfolio is now invested in a new stock, Toys `R' Us
(TOY $15), I'd like to explain what we find so attractive about this company.
First, a bit of history. Through the 1980's and early 1990's TOY was a favorite
of growth stock investors. TOY reached its highest stock price in 1993 when it
traded for $43 per share. At that time, TOY had a P/E ratio of 26 (when the
market multiple was much lower than it is today) because it had compounded
earnings per share growth at 18% for the prior decade. But the later 1990's were
tough on TOY. The quality of the stores went downhill as capital expenditures
were focused on expansion instead of modernizing the existing store base, and
service levels became close to non-existent. Mass merchants like Wal-Mart and
Target took advantage of TOY's problems and increased their commitment to the
toy category. In 1999, Wal-Mart passed TOY as the country's largest toy retailer
and Wall Street analysts became uniformly negative on TOY.
With that background, what could possibly have attracted us to TOY? Well, nearly
seven years after TOY hit its $43 high, the stock hit a low of $10. Despite all
the negatives, TOY had a $16 book value (how long has it been since you've heard
that term on CNBC?) and had per share earnings of $1.36 before deducting losses
from their Internet startup, toysrus.com. Furthermore, TOY owns a very
successful Babies `R' Us chain, 80% of Toys `R' Us Japan, and much of the real
estate its stores occupy. It is our belief that the value of these assets alone
could be as much as the current stock price. And management is taking steps
toward having these values recognized by bringing Toys `R' Us - Japan public and
partnering with Softbank on the Internet site. But what really caught our
attention was TOY's announcement on January 10 that John Eyler had been named
CEO. Most recently, John engineered a turnaround of the wonderful toy retailer
FAO Schwartz. We believe John has a perfect skill set for increasing
profitability and at the same time, making the Toys `R' Us shopping experience
fun. When we met with John at their New Jersey headquarters, he outlined his
plan for changing the in-store merchandise presentation, which should create a
shopper-friendly environment. These changes should start appearing in stores by
Fall, 2000. In addition to these positives, John took a compensation package,
which includes a large stock option plan and also personally purchased TOY stock
in the open market. We like managements with a large economic interest in an
improved share price. If, as we expect, he succeeds in turning around the toy
stores, TOY is likely to be a great stock.
Finally, I'd like to welcome Henry Berghoef to The Oakmark Select team. One of
my best moves as Director of Research was the decision to hire Henry in 1994.
Over the past six years, we have worked together on many stocks, the most recent
example being our successful effort persuading the Dun & Bradstreet board to
make changes to maximize the value of their company. Henry is also the analyst
responsible for Times Mirror being in our portfolio. You should be reassured to
know that it is now part of Henry's formal responsibilities to prod me when he
thinks we should be making changes in the portfolio. Over the last three years,
our portfolio has benefited from Henry's strong analytic skill. I'm delighted
that he's now getting the recognition he deserves.
Thank you for your continued support.
/s/ Bill Nygren
BILL NYGREN
Portfolio Manager
[email protected]
/s/ Henry Berghoef
HENRY BERGHOEF
Portfolio Manager
[email protected]
April 3, 2000
10 THE OAKMARK SELECT FUND
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK SELECT FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--92.7%
APPAREL--4.9%
Liz Claiborne, Inc. 1,591,600 $ 72,915,175
RETAIL--9.8%
Toys "R" Us, Inc. (a) 8,338,300 $ 123,511,069
Tricon Global Restaurants, Inc. (a) 756,500 23,498,781
-------------
147,009,850
OTHER CONSUMER GOODS & SERVICES--3.3%
Ralston Purina Group 1,780,200 $ 48,732,975
BANKS & THRIFTS--15.7%
Washington Mutual, Inc. 7,674,800 $ 203,382,200
People's Bank of Bridgeport, Connecticut 1,572,900 32,932,594
-------------
236,314,794
INSURANCE--4.5%
PartnerRe Ltd. (b) 1,837,300 $ 67,635,606
OTHER FINANCIAL--1.5%
MBIA, Inc. 440,800 $ 22,949,150
INFORMATION SERVICES--11.2%
The Dun & Bradstreet Corporation 3,643,600 $ 104,298,050
Ceridian Corporation 3,284,500 63,021,344
-------------
167,319,394
COMPUTER SERVICES--7.0%
First Data Corporation 1,277,200 $ 56,516,100
Electronic Data Systems Corporation 750,000 48,140,625
-------------
104,656,725
COMPUTER SOFTWARE--8.3%
The Reynolds and Reynolds Company, Class A 4,633,600 $ 125,107,200
PUBLISHING--4.3%
The Times Mirror Company, Class A 700,300 $ 65,084,131
PHARMACEUTICALS--2.2%
Chiron Corporation (a) 668,900 $ 33,361,388
MACHINERY & INDUSTRIAL PROCESSING--5.5%
Thermo Electron Corporation (a) 3,369,000 $ 68,643,375
Illinois Tool Works Inc. 255,592 14,121,458
-------------
82,764,833
BUILDING MATERIALS & CONSTRUCTION--9.7%
USG Corporation (c) 3,483,000 $ 146,068,312
THE OAKMARK SELECT FUND 11
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK SELECT FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- -----------------------------------------------------------------------------------------------------
Shares Held/
Par Value Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--92.7% (CONT.)
DIVERSIFIED CONGLOMERATES--4.8%
U.S. Industries, Inc. (c) 6,531,600 $ 72,255,825
Total Common Stocks (Cost: $1,333,690,841) 1,392,175,358
COMMON STOCKS SOLD SHORT--(0.4%)
PUBLISHING--(0.4%)
Tribune Company (185,000) $ (6,764,062)
Total Common Stocks Sold Short (Proceeds: $(7,069,753)) (6,764,062)
SHORT TERM INVESTMENTS--7.4%
U.S. GOVERNMENT BILLS--0.6%
United States Treasury Bills, 5.31% due 5/25/2000 10,000,000 $ 9,920,350
TOTAL U.S. GOVERNMENT BILLS (COST: $9,920,350) 9,920,350
COMMERCIAL PAPER--4.0%
Ford Motor Credit Corp., 5.90%-6.07%
due 4/3/2000-4/4/2000 20,000,000 $ 20,000,000
General Electric Capital Corporation, 6.18%
due 4/3/2000 40,000,000 40,000,000
--------------
TOTAL COMMERCIAL PAPER (COST: $60,000,000) 60,000,000
REPURCHASE AGREEMENTS--2.8%
State Street Repurchase Agreement, 6.03% due 4/3/2000 41,932,000 $ 41,932,000
TOTAL REPURCHASE AGREEMENTS (COST: $41,932,000) 41,932,000
TOTAL SHORT TERM INVESTMENTS (COST: $111,852,350) 111,852,350
Total Investments (Cost $1,438,473,438)--99.7% (d) $1,497,263,646
Other Assets In Excess Of Other Liabilities--0.3% 5,071,403
TOTAL NET ASSETS--100% $1,502,335,049
==============
</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 March 31, 2000, net unrealized appreciation of $58,790,207, for federal
income tax purposes, consisted of gross unrealized appreciation of $198,341,495
and gross unrealized depreciation of $139,551,288.
12 THE OAKMARK SELECT FUND
<PAGE>
THE OAKMARK SMALL CAP FUND
REPORT FROM JAMES P. BENSON AND STEVEN J. REID, PORTFOLIO MANAGERS
[PHOTO] [PHOTO]
(on leave of absence)
- -------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK SMALL CAP FUND FROM ITS
INCEPTION (11/1/95) TO PRESENT (3/31/00) AS COMPARED TO THE RUSSELL 2000 INDEX
[GRAPH]
The Oakmark
Small Cap Fund Russell 2000
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
12/99 $16,224 $18,015
3/00 $15,974 $19,292
AVERAGE ANNUAL TOTAL RETURN*
3/31/00 NAV $13.39 THROUGH 3/31/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 11/1/95
- -------------------------------------------------------------------------------
THE OAKMARK SMALL CAP FUND -1.5% 11.2%
Lipper Small Cap Fund Index** 3.6% 11.1%
Russell 2000 w/inc** 7.1% 16.0%
S&P Small Cap 600 w/inc.** 5.8% 15.5%
*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 first calendar quarter of 2000 began poorly as the Fund declined 5.44% in
January. February was somewhat better as the Fund slipped 1.32%, while March saw
a modest return to value investing and the Fund responded with a monthly gain of
5.52%. The March rebound trimmed the Fund's quarterly loss to 1.54%. The recent
progress relative to our benchmark, the Russell 2000, has also been encouraging.
At the Russell's peak on March 9th we were 25.08% behind this index on a
year-to-date basis, but we closed the quarter trailing the index by only 8.34%
as we made up 16.74% during the last 16 trading days of the quarter! The
question is can we sustain the positive momentum that developed in March or will
the stock market revert to a "growth at any price" mentality. While our focus
remains on investing in undervalued companies with positive business and cash
flow characteristics, we are shifting our strategy slightly to position the fund
in stocks that we believe have not only the value characteristics that we
desire, but also have a catalyst that will reveal that value. We have been and
will continue to pursue the upgrading of the portfolio.
IS VALUE COMING BACK INTO STYLE?
Over the last few weeks investors have rotated out of some of the highflying
growth stocks and into equities that actually represent long-term value. Yahoo!,
the company that we used as an example in last quarter's letter, had a market
value in early January of approximately $135 billion, but as of early April this
value had declined to around $101 billion or a drop of 25%. Yet despite this
decline Yahoo! still trades at approximately 375 times expected year 2000
earnings. Interestingly, most analyst estimates project Yahoo's earnings growth
rate in 2001
THE OAKMARK SMALL CAP FUND 13
<PAGE>
- --------------------------------------------------------------------------------
versus 2000 at only 30% that would imply that Yahoo! is currently trading at
12.5 times its growth rate (375 divided by 30). By contrast the stocks in our
portfolio are trading near 12 times earnings with an expected earnings growth
rate of approximately 20%. Thus, our portfolio is trading at approximately 0.6
times its growth rate. We believe that over time stocks that can be purchased at
substantial discounts to their growth rates represent excellent values and are
likely to outperform stocks that trade at very high and probably unsustainable
multiples of earnings.
PORTFOLIO UPDATE
The continued malaise in small cap companies, especially value-oriented
equities, has created a number of new investment opportunities for the Fund.
Fortunately, a few of our investments such as NovaMed (sold for a gain of over
140%), Superior Consultants (sold for a gain in excess of 35%) and Duff & Phelps
Credit Rating Co. (agreed to be bought out at $100 per share) have performed
very well. Funds from these sold stocks have been utilized to buy stocks that
have higher expected returns.
New companies to the portfolio include: Checkpoint Systems, a provider of
security and anti-theft products for retailers; Dollar Thrifty Automotive Group,
a car rental company with strong positions in leisure markets; Dura
Pharmaceuticals, a firm specializing in respiratory drugs and drug delivery
systems; Mentor Graphics, a software provider to the semiconductor industry; and
MSC.Software, the leading supplier of simulation software. We believe these five
companies are attractive additions to the portfolio based upon very attractive
multiples to earnings and cash flows.
TAXES AND TIDBITS
Since we are half way through the current tax year we want to update everyone on
the Fund's tax status. As disclosed elsewhere in this report your Fund has a
moderate realized gain for the first six months of this tax year. We would point
out two items with respect to the realized gain. First, the gains are
principally long-term and secondly we currently have unrealized losses in the
portfolio that exceed the current realized gain, thus we have a good opportunity
to manage down the tax liability over the next six months. While taxes alone do
not drive our investment decisions, we do focus on our shareholders' tax status
and we strive to maximize after-tax returns.
One other item worth mentioning is that we have begun to make use of call
options. Given the recent volatility in the stock market, call option premiums
have reached very high levels. We have taken advantage of these attractive
premiums by writing some calls on portions of two of our positions. The goal of
these sales is to enhance our returns while simultaneously reducing risk. While
the writing of call options is unlikely to be a principle driver of our
investment returns, we expect the returns from these sales will have a positive
impact on our overall return.
Once again we would like to thank our shareholders for supporting The Oakmark
Small Cap Fund.
/s/ James P. Benson, CFA
JAMES P. BENSON, CFA
Portfolio Manager
[email protected]
STEVEN J. REID
Portfolio Manager
(on leave of absense)
April 6, 2000
14 THE OAKMARK SMALL CAP FUND
<PAGE>
THE OAKMARK SMALL CAP FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
COMMON STOCKS--91.0%
<S> <C> <C> <C>
FOOD & BEVERAGE--7.4%
Del Monte Foods Company (a) 800,000 $ 8,550,000
Ralcorp Holdings, Inc. (a) 465,000 6,742,500
International Multifoods Corporation 180,000 2,407,500
M & F Worldwide Corp. (a) 300,000 1,312,500
------------
19,012,500
RETAIL--6.8%
Ugly Duckling Corporation (a) (c) 1,750,000 $ 13,453,125
The Great Atlantic & Pacific Tea Company, Inc. 200,000 3,900,000
------------
17,353,125
HARDWARE--1.1%
Jore Corporation (a) 417,500 $ 2,818,125
OTHER CONSUMER GOODS & SERVICES--5.4%
Department 56, Inc. (a) 572,300 $ 8,477,194
Barry (R.G.) Corporation (a) (c) 880,000 2,970,000
Harman International Industries, Incorporated 40,000 2,400,000
------------
13,847,194
BANKS & THRIFTS--10.2%
People's Bank of Bridgeport, Connecticut 480,000 $ 10,050,000
Golden State Bancorp Inc. (a) 450,000 6,721,875
BankAtlantic Bancorp, Inc., Class A 1,100,000 4,331,250
PennFed Financial Services, Inc. 260,000 3,672,500
Finger Lakes Financial Corp. (c) 178,500 1,260,656
------------
26,036,281
INSURANCE--7.5%
The MONY Group Inc. (a) 300,000 $ 9,693,750
The PMI Group, Inc. 200,000 9,487,500
------------
19,181,250
EDUCATIONAL SERVICES--4.7%
ITT Educational Services, Inc. (a) 750,000 $ 12,000,000
INFORMATION SERVICES--4.4%
National Data Corporation 435,000 $ 11,310,000
COMPUTER SOFTWARE--4.1%
Symantec Corporation (a) 62,500 $ 4,695,312
Mentor Graphics Corporation 300,000 4,537,500
MSC.Software Corp. 100,000 1,181,250
------------
10,414,062
COMPUTER SYSTEMS--3.8%
Micron Electronics, Inc. (a) 700,000 $ 9,800,000
THE OAKMARK SMALL CAP FUND 15
<PAGE>
- -----------------------------------------------------------------------------------------------------
THE OAKMARK SMALL CAP FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- -----------------------------------------------------------------------------------------------------
Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
COMMON STOCKS--91.0% (CONT.)
SECURITY SYSTEMS--0.8%
Checkpoint Systems, Inc. (a) 256,000 $ 2,144,000
PHARMACEUTICALS--1.4%
Dura Pharmaceuticals, Inc. (a) 300,000 $ 3,693,750
MEDICAL CENTERS--1.1%
Veterinary Centers of America, Inc. (a) 200,000 $ 2,750,000
MANAGED CARE SERVICES--2.3%
First Health Group Corp. (a) 190,000 $ 6,008,750
MEDICAL PRODUCTS--1.8%
Hanger Orthopedic Group, Inc. (a) 850,000 $ 4,515,625
AUTOMOTIVE--2.8%
Standard Motor Products, Inc. 280,000 $ 4,165,000
Stoneridge, Inc. (a) 250,000 2,875,000
------------
7,040,000
AUTOMOBILE RENTALS--1.0%
Dollar Thrifty Automotive Group, Inc. (a) 151,500 $ 2,603,906
TRANSPORTATION SERVICES--3.5%
Teekay Shipping Corporation (b) 325,000 $ 8,957,813
MACHINERY & INDUSTRIAL PROCESSING--5.0%
Columbus McKinnon Corporation 500,000 $ 6,562,500
Sames Corporation (c) 240,000 3,390,000
MagneTek, Inc. (a) 300,000 2,737,500
------------
12,690,000
CHEMICALS--2.8%
Ferro Corporation 250,000 $ 4,453,125
H.B. Fuller Company 70,000 2,795,625
------------
7,248,750
REAL ESTATE--11.0%
Catellus Development Corporation (a) 1,250,000 $ 17,343,750
Prime Hospitality Corp. (a) 800,000 5,800,000
Trammell Crow Company (a) 450,000 4,978,125
------------
28,121,875
DIVERSIFIED CONGLOMERATES--2.1%
U.S. Industries, Inc. 480,000 $ 5,310,000
TOTAL COMMON STOCKS (COST: $268,430,034) 232,857,006
16 THE OAKMARK SMALL CAP FUND
<PAGE>
- -----------------------------------------------------------------------------------------------------
THE OAKMARK SMALL CAP FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- -----------------------------------------------------------------------------------------------------
Shares Held/
Par Value Market Value
- -----------------------------------------------------------------------------------------------------
CALL OPTIONS WRITTEN--(0.1%)
EQUITY OPTIONS--(0.1%)
COMPUTER SOFTWARE--(0.1%)
Symantec Corporation, April 75 Calls (25,000) $ (100,000)
COMPUTER SYSTEMS--(0.0%)
Micron Electronics, Inc., April 20 Calls (20,000) $ (1,250)
Micron Electronics, Inc., July 15 Calls (27,500) (68,750)
-------------
(70,000)
TOTAL CALL OPTIONS WRITTEN (COST: $(227,886)) (170,000)
SHORT TERM INVESTMENTS--8.2%
COMMERCIAL PAPER--4.9%
Ford Motor Credit Corp., 6.07% due 4/4/2000 5,000,000 $ 5,000,000
General Electric Capital Corporation, 6.18%
due 4/3/2000 7,500,000 7,500,000
------------
TOTAL COMMERCIAL PAPER (COST: $12,500,000) 12,500,000
REPURCHASE AGREEMENTS--3.3%
State Street Repurchase Agreement, 6.03%
due 4/3/2000 8,318,000 $ 8,318,000
TOTAL REPURCHASE AGREEMENTS (COST: $8,318,000) 8,318,000
TOTAL SHORT TERM INVESTMENTS (COST: $20,818,000) 20,818,000
Total Investments (Cost $289,020,148)--99.1% (d) $ 253,505,006
Other Assets In Excess Of Other Liabilities--0.9% 2,334,784
TOTAL NET ASSETS--100% $ 255,839,790
=============
</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 March 31, 2000, net unrealized depreciation of $35,515,142, for federal
income tax purposes, consisted of gross unrealized appreciation of
$22,736,208 and gross unrealized depreciation of $58,251,350.
THE OAKMARK SMALL CAP FUND 17
<PAGE>
[PHOTO] [PHOTO]
THE OAKMARK EQUITY AND INCOME FUND
REPORT FROM CLYDE S. MCGREGOR AND EDWARD A. STUDZINSKI, PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK EQUITY AND INCOME FUND FROM ITS
INCEPTION (11/1/95) TO PRESENT (3/31/00) AS COMPARED TO THE LIPPER BALANCED FUND
INDEX
[GRAPH]
THE OAKMARK LIPPER BALANCED
EQUITY & INCOME FUND FUND INDEX
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
12/99 $18,119 $17,863
3/00 $18,924 $18,396
AVERAGE ANNUAL TOTAL RETURN*
3/31/00 NAV $15.04 THROUGH 3/31/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 11/1/95
- -------------------------------------------------------------------------------
THE OAKMARK EQUITY & INCOME FUND 4.4% 15.5%
Lipper Balanced Fund Index** 3.0% 14.8%
Lehman Govt./Corp. Bond** 2.7% 5.8%
S&P 500 w/inc.** 2.3% 26.0%
* Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
** Each of the three indexes or averages is an unmanaged group of stocks or
funds whose composition is different from the Fund. The Lipper Balanced
Fund Index Composite is comprised of 30 balanced funds. The Lehman
Govt./Corp. Bond Index includes the Lehman Government and Lehman Corporate
indices. The S&P 500 is a broad market-weighted average dominated by
blue-chip stocks. Past performance is no guarantee of future results.
QUARTER REVIEW
Frankly, it is impossible to give a thorough review of the recent quarter within
the confines of this report. The March quarter was my 91st in this business, and
it stands out as one of the most unusual. The emotional state of investors
cycled between elation and despair frequently. The NASDAQ marketplace
experienced both robust gains and the fastest correction in history not
associated with a crash. The Equity and Income Fund was not immune to this
turbulence but did succeed in dampening the volatility. At the nadir in returns
for the quarter (January 28) the Fund had declined 3%. Over the next two months
the Fund rebounded, closing March 31 at an all-time high and producing a total
return of 4.4%.
While the recovery in fund returns in March is pleasing, it does not yet
reflect a definitive change in the investing environment. Flows to and from
mutual funds dominate investing activity today in a manner never previously
observed, and to date these flows continue to favor funds employing a
momentum style, especially those concentrating on issues in the technology
sector. Over the last decade technology has grown in importance within the
stock market at an incredible pace--by one measure from 7% of market value to
about 40% today. The contribution to gross domestic product, however, has not
grown commensurately.
As I noted in my June, 1999, report, the Equity and Income Fund has not ignored
this development--currently 40% of the fund's equities are in the technology
"space" and this is true even after losing Sterling Commerce in March to a
takeover offer. As you would expect from an Oakmark Group offering, our thrust
in this sector has been to identify issues with strong business franchises and
attractive valuations. It has been frustrating, however, to
18 THE OAKMARK EQUITY AND INCOME FUND
<PAGE>
- -------------------------------------------------------------------------------
observe the market favoring concerns with little more than an idea.
Imagine that in 1980 two knowledgeable investors (I'll call them Rip van Winkle
1 and 2) had gone to sleep and were awakened today. If we now give Rip 1
information about the prevailing market environment except for the 250 or so
most expensive stocks and Rip 2 information only concerning those 250 issues,
imagine how their analysis would differ. The first Rip would no doubt wax
eloquent about the improved conditions in the overall picturereduced world
tensions, low inflation and interest rates, no federal deficit, etc. He would
also note that valuations of the stocks he had reviewed were not too much in
excess of 1980 levels. He would probably conclude that this is a wonderful time
to be an investor. In contrast, Rip 2 would no doubt come back in shock. The
high valuation periods within his previous experience would seem tame in
comparison to present conditions. He would also admit that the world seems like
a far safer and more prosperous place, but he would counsel fleeing the stock
market.
I cannot predict when the current trend will change. I am convinced, however,
that it sows the seeds of its own destruction. The vast amounts of money both
public and private flowing into so-called "new economy" ventures will eventually
ensure that profitability in this sector melts away. In the meantime, our focus
is on issues which benefit from these trends and managements which fully
understand how to propel their companies' evolution.
FIXED INCOME MANAGEMENT IN A TIME OF FEDERAL RESERVE TIGHTENING
One of the best known and most successful rules for investors is "don't fight
the Fed." In the March quarter investors in both stocks and long term Treasury
notes chose to ignore this axiom. In the Treasury market the promise of
shrinking supply induced a buying panic in issues with the longest maturities.
This has resulted in an "inversion" in the Treasury yield curve where short term
issues yield more than long. The corporate debt market does not have a similar
future scarcity issue, and longer term issues continue to yield more than short.
Our strategy for the fixed income segment of the Equity and Income Fund has not
changed with the peculiar conditions in the fixed income market. We continue to
seek corporate debt and preferred issues which offer the possibility of
equity-like returns while managing the riskiness of the entire portfolio with a
significant commitment to short and intermediate term Treasury and Agency notes.
HELLER VS. GE SCORECARD
Last quarter I wrote at length concerning the amazing divergence in valuation
statistics between Heller Financial and General Electric. Each company
experienced wide swings in stock price in the March quarter, but by March 31 the
score was Heller +14.6%, GE +0.4%. Of course, this barely begins to bridge the
valuation gap, but it is noteworthy that rising interest rates did not prove to
be a problem to either stock in the quarter.
NEW TO THE FUND
In March, Edward Studzinski joined me as portfolio manager of the Equity and
Income Fund. Ed has been invaluable to me in the management of The Fund since
his arrival here nearly four years ago, and I have regularly mentioned his
efforts in these pages. Ed has a wide range of experience and his incisive
insights have often helped me to see flaws in my logic. Because his appointment
as portfolio manager was so recent, I did not think it fair to ask Ed to
contribute his thoughts to this report. Future editions will bear his
unmistakable imprint.
Both Ed and I welcome e-mailed questions or comments.
/s/ Clyde S. McGregor
CLYDE S. MCGREGOR
Portfolio Manager
[email protected]
/s/ Edward A. Studzinski
EDWARD A. STUDZINSKI
Portfolio Manager
[email protected]
April 5, 2000
THE OAKMARK EQUITY AND INCOME FUND 19
<PAGE>
- -------------------------------------------------------------------------------
THE OAKMARK EQUITY AND INCOME FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY AND EQUIVALENTS--61.6%
BANKS & THRIFTS--2.9%
Washington Mutual, Inc. 57,000 $ 1,510,500
OTHER FINANCIAL--3.3%
Heller Financial, Inc. 75,000 $ 1,734,375
INFORMATION SERVICES--4.4%
Ceridian Corporation 120,000 $ 2,302,500
DATA STORAGE--3.1%
Imation Corp. (a) 61,500 $ 1,641,281
COMPUTER SERVICES--5.7%
First Data Corporation 35,000 $ 1,548,750
Electronic Data Systems Corporation 22,000 1,412,125
------------
2,960,875
COMPUTER SOFTWARE--6.1%
The Reynolds and Reynolds Company 117,500 $ 3,172,500
PUBLISHING--2.2%
Lee Enterprises, Incorporated 43,900 $ 1,146,888
MEDICAL PRODUCTS--3.2%
Sybron International Corporation (a) 58,500 $ 1,696,500
AUTOMOTIVE--3.2%
Lear Corporation (a) 60,000 $ 1,687,500
AGRICULTURAL EQUIPMENT--4.4%
Alamo Group Inc. 196,350 $ 2,282,569
BUILDING MATERIALS & CONSTRUCTION--3.1%
Vulcan Materials Company 35,000 $ 1,603,437
CHEMICALS--1.0%
The Geon Company 25,000 $ 537,500
UTILITIES--3.1%
Citizens Utilities Company 100,000 $ 1,637,500
20 THE OAKMARK EQUITY AND INCOME FUND
<PAGE>
- -----------------------------------------------------------------------------------------------------
THE OAKMARK EQUITY AND INCOME FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- -----------------------------------------------------------------------------------------------------
Shares Held/
Par Value Market Value
- -----------------------------------------------------------------------------------------------------
EQUITY AND EQUIVALENTS--61.6% (CONT.)
REAL ESTATE--12.8%
Legacy Hotels Real Estate Investment Trust (b) 350,000 $ 1,999,312
Catellus Development Corporation (a) 136,728 1,897,101
Amli Residential Properties Trust 80,000 1,640,000
The St. Joe Company 40,000 1,157,500
------------
6,693,913
TOTAL EQUITY (COST: $25,237,495) 30,607,838
CONVERTIBLE PREFERRED STOCK--3.1%
TELECOMMUNICATIONS--3.1%
Metromedia International Group, Inc., Convertible
Preferred, 7.25% 50,000 $ 1,600,000
TOTAL CONVERTIBLE PREFERRED STOCK (COST: $1,543,788) 1,600,000
TOTAL EQUITY AND EQUIVALENTS (COST: $26,781,283) 32,207,838
FIXED INCOME--34.3%
PREFERRED STOCK--5.4%
BANKS & THRIFTS--4.2%
Pennfed Capital Trust, Preferred, 8.90% 27,500 $ 605,000
BBC Capital Trust I, Preferred, 9.50% 28,000 507,500
PennFirst Capital Trust I, Preferred, 8.625% 70,000 507,500
Fidelity Capital Trust I, Preferred, 8.375% 43,500 326,250
RBI Capital Trust I, Preferred, 9.10% 35,700 272,212
------------
2,218,462
TELECOMMUNICATIONS--1.0%
MediaOne Finance Trust III, Preferred, 9.04% 20,000 $ 500,000
REAL ESTATE--0.2%
Host Marriott Corporation, Preferred Class B, 10.00% 6,000 $ 120,750
Total Preferred Stock (Cost: $3,518,598) 2,839,212
CORPORATE BONDS--3.9%
RETAIL--1.1%
Ugly Duckling Corporation, 12.00% due 10/15/2003,
Subordinated Debenture 650,000 $ 573,625
AEROSPACE & AUTOMOTIVE--0.3%
Coltec Industries, Inc., 9.75% due 4/1/2000 150,000 $ 150,000
THE OAKMARK EQUITY AND INCOME FUND 21
<PAGE>
- -----------------------------------------------------------------------------------------------------
THE OAKMARK EQUITY AND INCOME FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- -----------------------------------------------------------------------------------------------------
Par Value Market Value
- -----------------------------------------------------------------------------------------------------
FIXED INCOME--34.3% (CONT.)
BUILDING MATERIALS & CONSTRUCTION--1.5%
Juno Lighting, Inc., 11.875% due 7/1/2009, Senior
Subordinated Note 750,000 $ 631,875
USG Corporation, 9.25% due 9/15/2001, Senior
Notes Series B 150,000 152,625
------------
784,500
UTILITIES--1.0%
Midland Funding Corporation, 11.75% due 7/23/2005 500,000 $ 534,375
Total Corporate Bonds (Cost: $2,084,983) 2,042,500
GOVERNMENT AND AGENCY SECURITIES--25.0%
U.S. GOVERNMENT BONDS--24.4%
United States Treasury Notes, 6.25% due 6/30/2002 4,000,000 $ 3,980,589
United States Treasury Notes, 4.75% due 2/15/2004 4,000,000 3,781,919
United States Treasury Notes, 6.50% due 10/15/2006 3,000,000 3,026,556
United States Treasury Notes, 6.00% due 8/15/2009 2,000,000 1,974,644
------------
12,763,708
U.S. GOVERNMENT AGENCIES--0.6%
Federal Home Loan Bank, 6.405% due 4/10/2001,
Consolidated Bond 300,000 $ 299,009
TOTAL GOVERNMENT AND AGENCY SECURITIES (COST: $13,219,341) 13,062,717
TOTAL FIXED INCOME (COST: $18,822,922) 17,944,429
SHORT TERM INVESTMENTS--3.0%
REPURCHASE AGREEMENTS--3.0%
State Street Repurchase Agreement, 6.03% due 4/3/2000 1,575,000 $ 1,575,000
TOTAL REPURCHASE AGREEMENTS (COST: $1,575,000) 1,575,000
TOTAL SHORT TERM INVESTMENTS (COST: $1,575,000) 1,575,000
Total Investments (Cost $47,179,205)--98.9% (c) $ 51,727,267
Other Assets In Excess Of Other Liabilities--1.1% 588,612
TOTAL NET ASSETS--100% $ 52,315,879
============
</TABLE>
(a) Non-income producing security.
(b) Represents foreign domiciled corporation.
(c) At March 31, 2000, net unrealized appreciation of $4,548,062, for federal
income tax purposes, consisted of gross unrealized appreciation of
$5,810,766 and gross unrealized depreciation of $1,262,704.
22 THE OAKMARK EQUITY AND INCOME FUND
<PAGE>
THE OAKMARK GLOBAL FUND
REPORT FROM MICHAEL J. WELSH AND GREGORY L. JACKSON, PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
[PHOTO] [PHOTO]
- --------------------------------------------------------------------------------
RESULTS FROM FUND INCEPTION 8/4/99 THROUGH 3/31/00
<TABLE>
<CAPTION>
TOTAL RETURN*
3/31/00 NAV $10.05 FROM FUND
TOTAL RETURN INCEPTION
LAST 3 MOS. 8/4/99
- --------------------------------------------------------------------------------
<S> <C> <C>
The Oakmark Global Fund 0.8% 0.6%
MSCI World Index w/inc.** 1.0% 16.7%
Lipper Global Fund Index** 4.6% 27.6%
</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 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,
The Oakmark Global Fund was up .8% for the three-month period ending March 31,
2000. This compares to a gain of 1.0% for the MSCI World index and 4.6% for the
Lipper Global Fund Index.
The performance of share prices around the world in the first quarter of the new
millennium continued roughly the same trend as the fourth quarter of
1999--technology and telecommunications issues soared, and everything else was
ignored. Consequently, this trend did little to close the large valuation gap we
spoke about in our last letter between the intrinsic value of our current
portfolio of companies and the market. As we said before, and it bears
repeating, while the timing may be uncertain we are as confident as ever in the
attractive values and future outlooks of our companies.
COMPOSITION OF CURRENT PORTFOLIO
The composition of the current portfolio geographically consists of 44% United
States, 37% Europe (with the United Kingdom representing 20% of the Fund), 8%
Asia, and 4% Latin America. As you already know, this allocation is not the
reflection of some grand, top-down macroeconomic forecast but of the best
opportunities we can find around the globe. In other words, geographic weighting
is simply a fall-out of stock selection. Macroeconomic forecasts certainly play
a part of our valuation of each individual company, but will never drive the
decision of where to invest your money.
Consumer product oriented companies make up the largest weighting in the Fund,
at over 19% of assets. We have found this industry group to be particularly
fertile ground around the world, providing a number of businesses with good
growth prospects, high financial returns, quality management, and,
THE OAKMARK GLOBAL FUND 23
<PAGE>
- --------------------------------------------------------------------------------
most importantly, bargain share prices. The multinational colossus Diageo and
Korean brewer Hite Brewery are the most recent additions to the portfolio from
this area. Diageo, you may remember, is the result of the merger between
Guinness plc and Grand Metropolitan. Pillsbury, Burger King, and Haagen Dazs are
three of their best known businesses but the real jewel is their unparalleled
portfolio of distilled spirits brands. You can own all of these highly cash
generative businesses at the bargain price of less than 12x earnings.
Three US-based service companies make up over 13% of the portfolio: Nova,
Ceridian, and Equifax. All are benefiting greatly from the boom in technology,
resulting in "New Economy" growth rates in profit, but selling in the market at
attractive "Old Economy" share prices. Regarding the Internet, each to a certain
extent is employing the strategy Levi Straus used during the Gold Rush days:
don't try to become a successful miner--make money selling supplies to the
multitudes of people who believe they will be successful miners. This strategy
allows your business to thrive without having to figure out precisely where the
gold is in the ground. Nova, for example, has an attractive position in credit
card transaction processing, an area which will continue to grow regardless of
which "e-tailer" wins the battle of the Internet.
Companies broadly defined as capital goods manufacturers make up 13% of the
Fund. The four companies--Krones, Tomkins, Metso, and GFI Industries--are all
European-based and all extremely out of favor. However the most important trait
they all share is the large discount to intrinsic value they currently trade at
in the market. Krones, as mentioned in the Oakmark International Small Cap
letter, is the world-leading manufacturer of bottling equipment. An investment
in Krones at four times cash flow nets you a globally dominant technological
leader with attractive growth prospects, net cash on its balance sheet and a
management that is eagerly buying in shares at current prices.
Financials represent just under 13% of the Fund, composed of companies with
variety of specialties located on three continents. Banco Latinoamericano de
Exportaciones, or Bladex as it is known, is a good example of the value we are
finding in the area. The Bank is the largest trade finance institution in Latin
America, and has successfully negotiated a multitude of regional and global
shocks with a minimum of credit quality problems. Overcapitalized and extremely
conservatively provisioned, the market is currently pricing this business at
less than 5 times earnings and less than 70% of a growing and understated (given
their tendency to over-provision for potential risks) book value. This is far
too cheap a price for a business of this quality.
LOOKING FORWARD
At Harris Associates our primary concern as analysts and portfolio managers is
to fully understand the underlying value of a business, not to predict
short-term, sentiment-driven price movements in the market. If we properly
ascertain the intrinsic value of a business with a reasonable level of
confidence, and can purchase that business at a significant discount, we are
confident we will do well over time.
Once again, we would like to thank you for your continued confidence in the
newest Fund in the Oakmark Family.
/s/ Michael Welsh
MICHAEL WELSH
Portfolio Manager
[email protected]
/s/ Greg Jackson
GREG JACKSON
Portfolio Manager
[email protected]
April 6
24 THE OAKMARK GLOBAL FUND
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------------------------
GLOBAL DIVERSIFICATION--MARCH 31, 2000
- --------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<S> <C>
United States 44.2%
Europe 37.4%
Pacific Rim 7.5%
Latin America 4.0%
Other 2.2%
</TABLE>
<TABLE>
<CAPTION>
% OF FUND
NET ASSETS
- ------------------------------------------
<S> <C>
UNITED STATES 44.2%
EUROPE 37.4%
Great Britain 20.2%
*France 4.4%
*Germany 4.2%
Denmark 3.0%
*Finland 3.0%
*Italy 2.6%
PACIFIC RIM 7.5%
New Zealand 4.7%
Korea 1.7%
Japan 1.1%
LATIN AMERICA 4.0%
Panama 2.6%
Brazil 1.4%
OTHER 2.2%
Bermuda 2.2%
</TABLE>
* Euro currency countries comprise 14.2% of the Fund.
THE OAKMARK GLOBAL FUND 25
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.3%
FOOD & BEVERAGE--5.4%
Diageo plc (Great Britain) Beverages, Wines, & Spirits
Manufacturer 130,000 $ 976,395
Hite Brewery Company Brewer
(Korea) 20,500 458,132
-----------
1,434,527
APPAREL--4.7%
Fila Holding S.p.A. Athletic Footwear & Apparel
(Italy), (b) 94,700 $ 704,331
Jones Apparel Group, Inc. Apparel Manufacturer
(United States), (a) 17,000 541,875
-----------
1,246,206
RETAIL--18.1%
Somerfield plc (Great Food Retailer
Britain) 1,421,500 $ 1,256,060
House Of Fraser Plc (Great Department Store
Britain) 1,201,300 1,071,051
Ugly Duckling Automobile Retailer & Financier
Corporation (United
States), (a) 125,000 960,937
Toys "R" Us, Inc. (United Toy Retailer
States), (a) 50,000 740,625
Tricon Global Restaurants, Restaurant Owner and Franchisor
Inc. (United States), (a) 17,000 528,062
Denny's Japan Co., Ltd. Restaurant Chain
(Japan) 17,000 298,057
-----------
4,854,792
OTHER CONSUMER GOODS & SERVICES--9.4%
Department 56, Inc. Collectibles & Giftware Products
(United States), (a) 95,000 $ 1,407,188
Royal Doulton plc (Great Tableware & Giftware
Britain) 703,700 1,120,361
-----------
2,527,549
BANKS & THRIFTS--9.1%
Washington Mutual, Inc. Thrift
(United States) 35,000 $ 927,500
Banco Latinoamericano Latin American Trade Bank
de Exportaciones, S.A.,
Class E (Panama), (b) 26,300 696,950
Unidanmark A/S, Class A Commercial Banking
(Denmark) 6,600 423,431
Den Danske Bank Group Commercial Banking
(Denmark) 3,700 387,701
-----------
2,435,582
26 THE OAKMARK GLOBAL FUND
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- --------------------------------------------------------------------------------
<CAPTION>
Description Shares Held Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.3% (CONT.)
INSURANCE--2.2%
PartnerRe Ltd. (Bermuda) Reinsurance Company 16,000 $ 589,000
EDUCATIONAL SERVICES--4.5%
ITT Educational Services, Postsecondary Degree Programs
Inc. (United States), (a) 75,000 $ 1,200,000
INFORMATION SERVICES--13.6%
Ceridian Corporation Data Management Services
(United States) 71,500 $ 1,371,906
NOVA Corporation Transaction Processing Services
(United States) 46,000 1,339,750
Equifax Inc. (United Consumer Credit Information
States) 37,000 934,250
-----------
3,645,906
COMPUTER SOFTWARE--5.0%
The Reynolds and Information Management
Reynolds Company,
Class A (United States) 50,000 $ 1,350,000
TELECOMMUNICATIONS--1.3%
Telemig Celular Telecommunications
Participacoes S.A.
(Brazil), (a) 111,345,000 $ 361,240
MEDICAL PRODUCTS--2.0%
Hanger Orthopedic Orthotics and Prosthetics
Group, Inc. (United Manufacturer
States), (a) 100,000 $ 531,250
MACHINERY & METAL PROCESSING--3.0%
Metso Oyj (Finland), (a) Paper and Pulp Machinery 59,600 $ 804,687
MINING & BUILDING MATERIALS--4.7%
Fletcher Challenge Building Materials Manufacturer
Building (New Zealand) 1,172,186 $ 1,267,717
THE OAKMARK GLOBAL FUND 27
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- --------------------------------------------------------------------------------
<CAPTION>
Description Shares Held Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.3% (CONT.)
OTHER INDUSTRIAL GOODS & SERVICES--8.1%
Tomkins plc (Great Diversified Engineering
Britain) 308,000 $ 988,090
GFI Industries SA (France) Industrial Fastener Manufacturer 26,600 598,564
Chargeurs SA (France) Wool, Textile Production & Trading 9,900 578,264
-----------
2,164,918
PRODUCTION EQUIPMENT--4.2%
Krones AG (Germany) Production Machinery Manufacturer 38,700 $ 1,111,715
TOTAL COMMON STOCKS (COST: $27,050,697) 25,525,089
Total Investments (Cost $27,050,697)--95.3% (c) $25,525,089
Foreign Currencies (Proceeds $11,511)--0.0% $ 11,427
Other Assets In Excess Of Other Liabilities--4.7% (d) 1,258,261
TOTAL NET ASSETS--100% $26,794,777
===========
</TABLE>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) At March 31, 2000, net unrealized depreciation of $1,525,692, for federal
income tax purposes, consisted of gross unrealized appreciation of
$1,649,547 and gross unrealized depreciation of $3,175,239.
(d) Includes portfolio and transaction hedges.
28 THE OAKMARK GLOBAL FUND
<PAGE>
THE OAKMARK INTERNATIONAL FUND
REPORT FROM DAVID G. HERRO AND MICHAEL J. WELSH, PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
[PHOTO] [PHOTO]
- --------------------------------------------------------------------------------
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL FUND FROM ITS
INCEPTION (9/30/92) TO PRESENT (3/31/00) COMPARED TO THE MSCI WORLD EX U.S.
INDEX
[GRAPH]
<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
12/99 $26,065 $25,277
3/00 $26,012 $25,416
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
3/31/00 NAV $14.67 THROUGH 3/31/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 9/30/92
- -------------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK INTERNATIONAL FUND -0.2% 13.6%
MSCI World ex U.S. Index w/inc.** 0.6% 13.2%
MSCI EAFE Index w/inc.** -0.1% 13.0%
Lipper International Fund Index** 0.6% 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 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.
For the first quarter of the year, your fund has achieved a return of -.2%. This
compares to the MSCI World ex-U.S. Index which was up .6%. The Lipper
International Fund Index also was up .6%.
TRAVELER'S LOG:
JAPAN AND KOREA
Perceiving change in the Japanese economy is difficult for anyone using a time
horizon shorter than a year. While there are numerous examples of specific
companies which have started to restructure and focus more on shareholder
returns (something we have found more common in smaller companies), in general,
the changes have been masked by continued economic paralysis.
The quality of our company visits has certainly improved over the years.
Management personnel dispatched to meet with investors are now higher up the
ladder than they used to be and seem to better understand concepts like return
and capital. However, many sociological impediments to enhancing shareholder
returns still remain. For example, many companies are still tied to the
tradition of using seniority as the primary criterion for advancement.
Thankfully, there are some respected industry leaders such as Canon, Sony and
Nomura which have started making promotion and compensation more dependent on
performance. We are hopeful this trend will continue.
One very positive aspect of the rise of "new economy" companies in Japan
(setting aside the absurd valuations the market is assigning many of them) is
the freeing up of options for young people entering the labor market. The
relaxation of listing requirements and the formation of alternative exchanges
have opened the door to capital for many young firms. With the possibility of
founding new startups or joining fast-growing service firms, many are no
THE OAKMARK INTERNATIONAL FUND 29
<PAGE>
- --------------------------------------------------------------------------------
longer are forced into a life of mind-numbing conformity as "salary men".
It has been sad to watch the treatment of the Japanese taxpayer over the past
decade. To say they have been poorly served by their government is too kind. The
delays and half-actions of the 1990s have transformed the country's formerly
rock-solid finances into an enormous pile of government debt (most estimate
total government obligations at well over 100% of GDP). The government's
favorite tool, fiscal stimulus primarily in construction, has been a recurring
failure. Japanese earners continue to be exceptional savers and will continue to
be so as long as they have little confidence in an economic turnaround.
In stark contrast the Koreans have made more progress in reforming their banking
sector in the last six months than the Japanese have in the past decade. It
helped, ironically, that their short-term problems were much more severe, i.e.,
the wolf was at the door and they had no choice. Because of the rapidity of
reform the outlook for Korea has gone from bleak to bright in two years.
The burst of change and energy happening right now in Korea was jolting, framed
as it was by our Japanese visit. Anecdotally, the immigration area designated
for foreigners was packed by Americans, French, Germans and Indians (not ALL
fund managers!); on previous visits there were usually only a handful of non-GI
foreigners going through Kimpo Airport. On this trip you couldn't throw a rock
in Seoul without hitting a foreigner trying to make a deal.
This has shown up in dramatic fashion in the foreign direct investment ("FDI")
numbers. Before the crisis Korea used to be the outcast of Asian FDI, with
regulations and nationalistic attitudes that were nearly xenophobic. Since the
crisis the country has attracted more FDI capital than in the previous six years
combined. President DJ Kim returned from Europe recently with a fist full of
fresh investment commitments he received from French and German companies.
The dramatic adoption of change by the Korean people is most obvious in
technology and telecoms. Cellular telephone penetration is now 50% (remember
this country has 1/3 the GDP per capita of the US!), a rate that has DOUBLED
since the crisis. The internet is also sweeping the country, from the share
price mania of the KOSDAQ (Korea's equally high-octane version of our NASDAQ),
to the embrace of on-line trading. "Cyber-trading", as its known, now accounts
for nearly 50% of total share turnover, up from 5% at the beginning of last
year, and currently the highest rate in the world.
Of course the dark side of this rush to embrace the future is that a financial
bubble has developed in public companies identified with the internet. The
KOSDAQ appears wildly overvalued (50% more expensive than the NASDAQ on a
price/sales ratio) and share turnover on this market has increased an astounding
100-fold in the last 12 months. The terms "New economy" and "Cyber" routinely
set-off desperate floods of money. THE ASIAN WALL STREET JOURNAL recently
related the story of a young entrepreneur, Jeong Seung Mo, who watched nearly
US$7 million gush into his bank account in the first five minutes after he
posted a notice for new investors in his software company. "I advertised on the
Internet because I contacted friends, banks, and institutional investors in
person, and no one would give me money, " Jeong said.
Our company meetings, most with "old economy" companies, were punctuated by
management's disbelief in the under-valuation of their share prices, a sentiment
that is all too familiar to value investors around the globe. Profitability for
many of these "old" companies has been tremendous. Because many of these
companies were over-levered as the crisis hit, they responded with deep and
massive restructuring. With slimmed down cost structures and many weaker
competitors bankrupt, margins exploded when the economy boomed last year. For
instance, one of our investments, Keumkang, doubled their operating profit in
1999 on a 20% pick up in revenue.
The future looks very bright for Korea as long as it stays on the path of
reform. They have jettisoned their former economic role model, Japan, and
replaced it with a more open Anglo-American style of free market capitalism. The
short-term could still be volatile and progress could very well be interrupted
by a number of potential negatives, including: another Daewoo-sized bankruptcy
damaging the recovering financial sector; a popping of the KOSDAQ bubble; an
unfavorable outcome in the upcoming legislative elections; a strongly
appreciating Korean currency; trouble with North Korea; or a resurgence in the
country's formerly strong labor unions.
We appreciate your support and confidence.
/s/ David G. Herro
DAVID G. HERRO
Portfolio Manager
[email protected]
/s/ Michael J. Welsh
MICHAEL J. WELSH
Portfolio Manager
[email protected]
April 5, 2000
30 THE OAKMARK INTERNATIONAL FUND
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------------------------
INTERNATIONAL DIVERSIFICATION--MARCH 31, 2000
- --------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<S> <C>
Europe 58.8%
Latin America 13.5%
Pacific Rim 18.5%
Other 4.1%
</TABLE>
<TABLE>
<CAPTION>
% OF FUND
NET ASSETS
<S> <C>
EUROPE 58.8%
Great Britain 28.6%
*France 7.6%
*Finland 7.4%
Denmark 5.1%
*Netherlands 3.8%
*Italy 2.7%
Switzerland 1.8%
*Germany 1.6%
*Austria 0.2%
LATIN AMERICA 13.5%
Brazil 6.4%
Panama 4.1%
Argentina 3.0%
PACIFIC RIM 18.5%
Korea 5.4%
Japan 4.3%
Australia 3.4%
Singapore 2.8%
Hong Kong 2.6%
OTHER 4.1%
Canada 3.5%
Bermuda 0.6%
</TABLE>
* Euro currency countires comprise 23.3% of the Fund.
THE OAKMARK INTERNATIONAL FUND 31
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.9%
FOOD & BEVERAGE--8.9%
Diageo plc (Great Britain) Beverages, Wines, & Spirits
Manufacturer 4,757,000 $ 35,728,565
Quilmes Industrial SA Brewer
(Argentina), (b) 2,121,000 22,270,500
Lotte Confectionery Confection Manufacturer
Company (Korea) 37,270 4,602,900
Lotte Chilsung Beverage Soft Drinks, Juices, & Sport
Company (Korea) (d) Drinks Manufacturer 73,000 4,405,429
------------
67,007,394
APPAREL--2.7%
Fila Holding S.p.A. Athletic Footwear & Apparel
(Italy), (b) (d) 2,752,800 $ 20,473,950
RETAIL--6.0%
Somerfield plc (Great Food Retailer
Britain) (d) 36,474,995 $ 32,229,884
Giordano International Pacific Rim Clothing Retailer &
Limited (Hong Kong) Manufacturer 10,218,000 12,400,883
------------
44,630,767
HOUSEHOLD PRODUCTS--8.4%
Hunter Douglas N.V. Window Coverings Manufacturer
(Netherlands) 1,107,700 $ 28,320,103
Reckitt Benckiser plc Household Cleaners & Air
(Great Britain) Fresheners 2,530,000 23,906,267
Unilever plc (Great Detergents & Personal Care
Britain) Products 1,685,000 10,757,585
------------
62,983,955
ELECTRONICS--1.2%
Canon, Inc. (Japan) Office & Video Equipment 213,000 $ 9,232,455
OTHER CONSUMER GOODS & SERVICES--5.4%
Citizen Watch Co. Watch and Component
(Japan) Manufacturer 2,480,000 $ 20,895,144
Mandarin Oriental Hotel Management
International Limited
(Singapore) 33,134,400 17,561,232
Shimano Inc. (Japan) Bicycle Parts Manufacturer 120,000 2,276,920
------------
40,733,296
32 THE OAKMARK INTERNATIONAL FUND
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- --------------------------------------------------------------------------------
<CAPTION>
Description Shares Held Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.9% (CONT.)
BANKS & THRIFTS--16.7%
Banco Latinoamericano Latin American Trade Bank
de Exportaciones, S.A.,
Class E (Panama), (b) (d) 1,157,800 $ 30,681,700
Uniao de Bancos Major Brazilian Bank
Brasileiros S.A.
(Brazil), (c) 701,100 22,259,925
Den Danske Bank Group Commercial Banking
(Denmark) 201,500 21,113,990
Canadian Imperial Bank Commercial Banking
of Commerce (Canada) 625,000 17,829,491
Unidanmark A/S, Commercial Banking
Class A (Denmark) 269,500 17,290,078
Banque Nationale de Commercial Banking
Paris (France) 108,500 8,571,268
National Australia Bank Commercial Banking
Limited (Australia) 295,000 3,789,784
United Overseas Bank Commercial Banking
Ltd., Foreign Shares
(Singapore) 583,968 3,581,998
------------
125,118,234
INSURANCE--2.4%
Swiss Re (Switzerland) Reinsurance Provider 7,825 $ 13,561,419
IPC Holdings, Ltd. Reinsurance Provider
(Bermuda) 370,500 4,446,000
------------
18,007,419
TELECOMMUNICATIONS--5.2%
SK Telecom Co. Ltd. Telecommunications
(Korea) 3,962 $ 12,904,954
Telesp Participacoes Telecommunications
(Brazil) S.A. 444,100,000 7,752,306
Telemig Celular Telecommunications
Participacoes S.A.
(Brazil), (a) 2,297,800,000 7,454,821
Tele Sudeste Celular Telecommunications
Participacoes S.A.
(Brazil) 1,151,100,000 5,691,058
Tele Centro Sul Telecommunications
Participacoes S.A.
(Brazil), (a) 469,200,000 5,119,035
------------
38,922,174
PHARMACEUTICALS--1.7%
Glaxo Wellcome plc Pharmaceuticals
(Great Britain) 455,000 $ 12,988,596
THE OAKMARK INTERNATIONAL FUND 33
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- --------------------------------------------------------------------------------
<CAPTION>
Description Shares Held Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.9% (CONT.)
MEDICAL PRODUCTS--0.0%
Getinge Industrier AB, Medical Instruments Manufacturer
Class B (Sweden) 200 $ 2,086
Aerospace2.6%
Rolls-Royce plc (Great Aviation & Marine Power
Britain) 5,988,702 $ 19,355,271
AIRPORT MAINTENANCE--0.2%
Flughafen Wien AG Airport Management &
(Austria) Operations 36,700 $ 1,363,513
COMPONENTS--4.1%
Morgan Crucible Crucible & Components
Company plc (Great Manufacturer
Britain) 4,058,424 $ 15,862,785
IMI plc (Great Britain) Components Manufacturer 4,120,000 15,152,340
------------
31,015,125
CHEMICALS--2.9%
Nufarm Limited Agricultural & Industrial
(Australia) (d) Chemical Producer 10,557,554 $ 21,439,531
OIL & NATURAL GAS--1.8%
ISIS (France) Oil Services 208,250 $ 13,180,986
MACHINERY & METAL PROCESSING--4.8%
Metso Oyj (Finland), (a) Paper and Pulp Machinery 2,634,577 $ 35,570,619
MINING & BUILDING MATERIALS--1.8%
Keumkang Ltd. (Korea) (d) Building Materials 312,460 $ 13,711,206
OTHER INDUSTRIAL GOODS & SERVICES--14.3%
Tomkins plc (Great Diversified Engineering
Britain) 11,211,565 $ 35,967,629
Chargeurs SA (France) (d) Wool, Textile Production &
Trading 494,243 28,869,002
Kone Corporation, Elevators
Class B (Finland) 338,790 19,626,704
Buderus AG (Germany) Industrial Manufacturing 710,120 11,967,566
Compagnie Generale des Tire Manufacturer
Establissements
Michelin (France) 205,000 6,583,826
Dongah Tire Industry Tire Manufacturer
Company (Korea) (d) 166,290 4,513,639
------------
107,528,366
</TABLE>
34 THE OAKMARK INTERNATIONAL FUND
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Held/
Description Par Value Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.9% (CONT.)
DIVERSIFIED CONGLOMERATES--3.8%
Berisford plc (Great Diversified Operations
Britain) 2,645,700 $ 12,699,845
Canadian Pacific Limited Diversified Operations
(Canada) 367,000 8,183,620
First Pacific Company Ltd. Diversified Operations
(Hong Kong) 14,716,000 7,181,717
-------------
28,065,182
TOTAL COMMON STOCKS (COST: $798,638,163) 711,330,125
SHORT TERM INVESTMENTS--4.3%
COMMERCIAL PAPER--2.0%
General Electric Capital Corporation, 6.18% due 4/3/2000 15,000,000 $ 15,000,000
Total Commercial Paper (Cost: $15,000,000) 15,000,000
REPURCHASE AGREEMENTS--2.3%
State Street Repurchase Agreement, 6.03% due 4/3/2000 17,401,000 $ 17,401,000
TOTAL REPURCHASE AGREEMENTS (COST: $17,401,000) 17,401,000
TOTAL SHORT TERM INVESTMENTS (COST: $32,401,000) 32,401,000
Total Investments (Cost $831,039,163)--99.1% (e) $ 743,731,125
Foreign Currencies (Proceeds $1,953,699)--0.3% $ 1,959,114
Other Assets In Excess Of Other Liabilities--0.6% (f) 4,358,328
TOTAL NET ASSETS--100% $ 750,048,567
=============
</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) March 31, 2000, net unrealized depreciation of $87,302,622, for federal
income tax purposes, consisted of gross unrealized appreciation of
$93,318,929 and gross unrealized depreciation of $180,621,551.
(f) Includes portfolio and transaction hedges.
THE OAKMARK INTERNATIONAL FUND 35
<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 (3/31/00) AS COMPARED TO THE MSCI WORLD
EX U.S. INDEX
[GRAPH]
<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
12/99 $16,190 $17,741
3/00 $15,387 $17,839
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
3/31/00 NAV $11.88 THROUGH 3/31/00
TOTAL RETURN FROM FUND INCEPTION
LAST 3 MOS. 11/1/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
THE OAKMARK INTERNATIONAL SMALL
CAP FUND -5.0% 10.2%
MSCI World ex U.S. Index w/inc.** 0.6% 14.0%
Lipper International Small Cap Fund
Average** 13.1% 23.7%
Micropal Equity International Small
Cap Index** 13.8% 25.3%
</TABLE>
*Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
**Each of the three indexes or averages is an unmanaged group of indexes or
funds whose composition is different from the Fund. The MSCI World ex U.S. Index
includes 21 country sub-indexes. The Lipper International Small Cap Fund Average
includes 76 mutual funds that invest in securities whose primary markets are
outside the United States. The Micropal Equity International Small Cap Index is
an unweighted index comprised of all funds within the international small
company fund sector. Past performance is no guarantee of future results.
FELLOW SHAREHOLDERS,
For the first calendar quarter of the year, your fund achieved a return of
- -5.0%. This compares to the MCSI World ex-U.S. Index which returned .6% and a
13.1% return for the Lipper International Small Cap average.
Though your Fund has achieved a negative return, please keep in mind that your
fund was up over 53% last year so some pull back is natural. The current market
prices of our portfolio of companies is EXTREMELY attractive, several examples
of which we will describe below.
ON MANIAS...
A lot has been said and written on the technology stock mania that has swept the
globe. As managers who feel a tremendous sense of responsibility and duty to our
shareholders we feel we must continue to warn you on the dangers of
participating in this absurdity. Again, we are not saying that technology should
be ignored or that the Internet in not a potent force to be reckoned with. We
have experienced in our travels and in the normal course of business how
technology and telecommunications have shrunk the world and changed the way the
way it operates. As mentioned last quarter, we have owned certain technology and
software stocks over the life of the Fund that have greatly contributed to
returns. These truths, however, do not mean that companies involved in
technology or telecommunications are always good investments. Price always must
be considered. This is no different from buying a house, car, insurance policy
or even a pound of hamburger. Rarely does any rational person buy something
regardless of price.
36 THE OAKMARK
<PAGE>
- --------------------------------------------------------------------------------
Today, at time of writing, this is not true in the global equity markets. A wall
of money has piled into a small group of technology and telecom stocks no matter
what the price. This buying hysteria has made for a two-headed market: one
priced highly and the rest of the investment universe on sale. FOR LONG-TERM
INVESTORS LIKE US, THESE TIMES ARE GLORIOUS. THE MISPRICING OF ASSETS IN THE
SHORT-TERM MAKES OUR JOB EASIER AS LONG-TERM INVESTORS. The availability of
sound, well-managed companies with great GROWTH prospects selling at LOW prices
is huge. In fact, this highlights that the choice an investor faces is not
between growth stocks and value stocks, for they are now one in the same, but
between growth and momentum. And as we have always stated, buying something
because of anticipated price movement is not investing, but, speculating.
Yes, these times often cause one to second-guess common sense. But, in the end,
fundamentals always assert themselves. Always remember Nobel Prize winning
economist Milton Friedman's famous quote: "there is no such thing as a free
lunch."
...AND REAL OPPORTUNITY
Two years ago, we raved about values available to us in the Pacific Rim
specifically and in the emerging markets in general. In a disciplined fashion we
took advantage of these opportunities and performed very well. Today, the
situation is more expansive as the enormous gap between "old economy" and "new
economy" has created great opportunity in the developed markets as well. Why are
these stocks so undervalued? For one reason and one reason only: they are not
directly related to technology. Consider your fund's largest holding, a German
company called KRONES. Krones is the world-leading manufacturer of bottling
equipment. The company has great growth prospects as global soft drink and beer
consumption increases, it is a technological leader, has net cash on its balance
sheet and sells for about 4x's its cashflow. Management has made great strides
to improve transparency and treatment of minority shareholders. And, the company
itself thinks it's so undervalued that it is buying back its own stock!
Another large position in your Fund is FLETCHER BUILDING in New Zealand. It
sells at depressed valuation levels, is the dominant force in New Zealand
construction materials including cement and concrete and operates in a market
that is coming out of a lengthy recession in building activity. On top of all of
this, they have divested themselves of underperforming assets and are about to
be spun-out of a larger group thereby making themselves a focused, independent
entity (and, perhaps, a takeover target). This stock yields close to 10% and
trades at 7x's expanding earnings. Fletcher and Krones are just two examples of
why we are so excited about the portfolio going forward.
STICK WITH COMMON SENSE
In closing this letter, we as managers of your Fund urge you to think carefully
about your investment choices. Never before in recent memory has there been two
distinct choices in the field of common stock investment. We are quite confident
of our approach and remain extremely enthusiastic about this Fund's prospects.
We hope you share our enthusiasm.
/s/ David G. Herro
DAVID G. HERRO
Portfolio Manager
[email protected]
/s/ Michael J. Welsh
MICHAEL J. WELSH
Portfolio Manager
[email protected]
April 5 , 2000
THE OAKMARK INTERNATIONAL SMALL CAP FUND 37
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------------------------
INTERNATIONAL DIVERSIFICATION--MARCH 31, 2000
- --------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<S> <C>
Europe 47.2%
Pacific Rim 43.2%
Latin America 1.4%
Other 2.4%
</TABLE>
<TABLE>
<CAPTION>
% OF FUND
NET ASSETS
- ---------------------------------------
<S> <C>
EUROPE 47.2%
Great Britain 17.9%
*France 14.7%
*Germany 7.4%
*Portugal 2.3%
*Italy 2.2%
*Finland 1.5%
Sweden 1.2%
LATIN AMERICA 1.4%
Brazil 1.4%
PACIFIC RIM 43.2%
New Zealand 12.8%
Hong Kong 8.8%
Japan 6.4%
Korea 5.7%
Singapore 4.1%
Thailand 3.3%
Philippines 2.1%
OTHER 2.4%
Canada 1.5%
Bermuda 0.9%
</TABLE>
* Euro currency countries comprise 28.1% of the Fund.
38 THE OAKMARK INTERNATIONAL SMALL CAP FUND
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.2%
FOOD & BEVERAGE--4.0%
Alaska Milk Corporation Milk Producer
(Philippines), (a) 42,544,000 $ 2,274,528
Hite Brewery Company Brewer
(Korea) 90,861 2,030,551
------------------
4,305,079
APPAREL--1.2%
Kingmaker Footwear Athletic Footwear Manufacturer
Holdings Limited
(Hong Kong) 7,640,000 $ 1,314,780
RETAIL1--1.8%
House Of Fraser Plc (Great Department Store
Britain) 5,885,000 $ 5,246,927
Carpetright plc (Great Carpet Retailer
Britain) 424,000 3,307,748
Denny's Japan Co., Ltd. Restaurant Chain
(Japan) 116,000 2,033,799
Dairy Farm International Supermarket Chain
Holdings Limited
(Singapore) 1,405,800 899,712
Jusco Stores (Hong Kong) Department Stores
Co., Limited (Hong
Kong) 6,888,000 574,992
York-Benimaru Co., Ltd. Supermarket Chain
(Japan) 21,000 572,737
------------------
12,635,915
OTHER CONSUMER GOODS & SERVICES--8.2%
Royal Doulton plc Tableware & Giftware
(Great Britain) 3,285,000 $ 5,230,051
Il Shin Spinning Fabric & Yarn Manufacturer
Company (Korea) 53,320 2,170,912
Sanford Limited (New Fisheries
Zealand) 458,334 1,114,159
Designer Textiles (NZ) Knit Fabrics
Limited (New
Zealand) (b) 1,960,000 281,983
------------------
8,797,105
INSURANCE--1.0%
Hannover
Rueckversicherungs-AG Reinsurance Provider
(Germany) 16,500 $ 1,066,471
THE OAKMARK INTERNATIONAL SMALL CAP FUND 39
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- --------------------------------------------------------------------------------
<CAPTION>
Description Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.2% (CONT.)
OTHER FINANCIAL--8.2%
JCG Holdings Ltd. (Hong Investment Holding Company
Kong) 9,914,000 $ 4,488,104
Ichiyoshi Securities Co., Stock Broker
Ltd. (Japan) 328,000 4,277,914
------------------
8,766,018
HOTELS & MOTELS--4.1%
Jarvis Hotels plc (Great Hotel Operator
Britain) 2,735,000 $ 4,354,395
BROADCASTING & CABLE TV--1.5%
Regional Cablesystems
Inc. (Canada), (a) Cable Operator 137,000 $ 1,650,034
PUBLISHING--4.5%
Matichon Public Newspaper Publisher
Company Limited,
Foreign Shares
(Thailand) (b) 2,039,500 $ 3,532,185
VLT AB, Class B (Sweden) Newspaper Publisher 125,950 1,313,804
------------------
4,845,989
PRINTING--2.0%
Hung Hing Printing Printing Company
Group Limited (Hong
Kong) 5,498,000 $ 2,118,268
TELECOMMUNICATIONS--2.3%
Telemig Celular Telecommunications
Participacoes S.A.
(Brazil), (a) 475,000,000 $ 1,541,056
SK Telecom Co. Ltd. Telecommunications
(Korea) 296 964,126
------------------
2,505,182
PHARMACEUTICALS--2.2%
Recordati (Italy) Pharmaceuticals 479,000 $ 2,302,505
TRANSPORTATION SERVICES--3.6%
Mainfreight Limited Logistics Services
(New Zealand) (b) 4,373,551 $ 3,905,493
40 THE OAKMARK INTERNATIONAL SMALL CAP FUND
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- --------------------------------------------------------------------------------
<CAPTION>
Description Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.2% (CONT.)
OIL & NATURAL GAS-4.2%
ISIS (France) Oil Services 54,177 $ 3,429,082
Cairn Energy plc (Great Oil & Natural Gas Producer
Britain), (a) 545,000 1,110,649
------------------
4,539,731
MINING & BUILDING MATERIALS--8.1%
Fletcher Challenge Building Materials Manufacturer
Building (New Zealand) 5,710,951 $ 6,176,381
Semapa-Sociedade de Cement Manufacturer
Investimento e Gestao,
SGPS, SA (Portugal) 146,012 2,494,278
------------------
8,670,659
OTHER INDUSTRIAL GOODS & SERVICES--8.6%
GFI Industries SA Industrial Fastener Manufacturer
(France) 257,974 $ 5,805,040
Vaisala Oyj (Finland) Atmospheric Observation
Equipment 61,400 1,587,426
Yip's Hang Cheung Paint & Solvent Manufacturer
(Holdings) Ltd. (Hong
Kong) 14,654,000 940,982
Dongah Tire Industry Tire Manufacturer
Company (Korea) 34,400 933,725
------------------
9,267,173
PRODUCTION EQUIPMENT--12.4%
Krones AG (Germany) Production Machinery
Manufacturer 239,100 $ 6,868,505
NSC Groupe (France) (b) Textile Equipment Manufacturer 44,398 4,251,330
De Dietrich et Production Machinery
Compagnie SA (France) Manufacturer 41,500 2,227,333
------------------
13,347,168
STEEL--2.1%
Steel & Tube Holdings Produces and Distributes Steel
Limited (New Zealand) 3,261,470 $ 2,249,041
DIVERSIFIED CONGLOMERATES--4.2%
Haw Par Corporation Healthcare and Leisure Products
Ltd. (Singapore) 2,177,000 $ 3,459,189
Jardine Strategic Holdings Diversified Operations
Limited (Bermuda) 490,000 999,600
------------------
4,458,789
TOTAL COMMON STOCKS (COST: $103,324,195) 101,099,795
THE OAKMARK INTERNATIONAL SMALL CAP FUND 41
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--MARCH 31, 2000 (UNAUDITED) CONT.
- --------------------------------------------------------------------------------
<CAPTION>
Description Shares Held Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS--4.2%
COMMERCIAL PAPER--1.9%
General Electric Capital Corporation, 6.18% due
4/3/2000 2,000,000 $ 2,000,000
TOTAL COMMERCIAL PAPER (COST: $2,000,000) 2,000,000
REPURCHASE AGREEMENTS--2.3%
State Street Repurchase Agreement, 6.03% due
4/3/2000 2,534,000 $ 2,534,000
TOTAL REPURCHASE AGREEMENTS (COST: $2,534,000) 2,534,000
TOTAL SHORT TERM INVESTMENTS (COST: $4,534,000) 4,534,000
Total Investments (Cost $107,858,195)--98.4% (c) $ 105,633,795
Foreign Currencies (Proceeds $81,485)--0.1% $ 81,319
Other Assets In Excess Of Other Liabilities--1.5% (d) 1,604,663
TOTAL NET ASSETS--100% $ 107,319,777
==================
</TABLE>
(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements regarding
transactions in affiliated issuers.
(c) At March 31, 2000, net unrealized depreciation of $2,224,566, for federal
income tax purposes, consisted of gross unrealized appreciation of
$10,878,312 and gross unrealized depreciation of $13,102,878.
(d) Includes portfolio and transaction hedges.
42 THE OAKMARK INTERNATIONAL SMALL CAP FUND
<PAGE>
[LOGO]
(This page has been intentionally left blank.)
THE OAKMARK FAMILY OF FUNDS 43
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF ASSETS AND LIABILITIES--MARCH 31, 2000
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK
THE OAKMARK SELECT SMALL CAP
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at value $ 2,206,713,226 $ 1,497,263,646 $ 253,675,006
(cost: 2,293,924,775) (cost: 1,438,473,438) (cost: 289,248,034)
Cash 298 422 926
Foreign currency, at value 0 0 0
Receivable for:
Forward foreign currency contracts 0 0 0
Securities sold 42,700,243 8,470,527 5,364,945
Fund shares sold 4,916,456 7,765,648 122,016
Dividends and interest 7,630,388 1,006,773 142,133
-------------------- -------------------- -------------------
Total receivables 55,247,087 17,242,948 5,629,094
Other assets 156,740 29,457 20,269
-------------------- -------------------- -------------------
Total assets $ 2,262,117,351 $ 1,514,536,473 $ 259,325,295
==================== ==================== ===================
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
Options sold, at fair value $ 0 $ 0 $ 170,000
(premiums received:) 0 0 227,886
Payable for:
Securities purchased 28,673,299 9,899,563 2,322,050
Fund shares redeemed 15,957,012 1,657,274 751,085
Forward foreign currency contracts 0 0 0
Other 1,624,587 644,587 242,370
-------------------- -------------------- -------------------
Total liabilities 46,254,898 12,201,424 3,485,505
-------------------- -------------------- -------------------
Net assets applicable to fund shares outstanding $ 2,215,862,453 $ 1,502,335,049 $ 255,839,790
==================== ==================== ===================
Fund shares outstanding 89,480,824 74,863,519 19,103,170
==================== ==================== ===================
- ------------------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
Paid in capital $ 2,689,287,987 $ 1,279,139,658 $ 270,855,132
Accumulated undistributed net realized gain (loss)
on sale of investments, forward contracts and
foreign currency exchange transactions (411,801,705) 162,429,490 20,499,800
Net unrealized appreciation (depreciation) of investments (87,211,548) 58,790,207 (35,515,142)
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) 25,587,719 1,975,694 0
-------------------- -------------------- -------------------
Net assets applicable to Fund shares outstanding $ 2,215,862,453 $ 1,502,335,049 $ 255,839,790
==================== ==================== ===================
PRICE OF SHARES
Net asset value per share: Class I $ 24.76 $ 20.07 $ 13.39
Class I--Net assets $ 2,215,862,453 $ 1,497,713,941 $ 255,839,790
Class I--Shares outstanding 89,480,824 74,633,059 19,103,170
Net asset value per share: Class II $ 20.05
Class II--Net assets $ 4,621,108
Class II--Shares outstanding 230,460
44 THE OAKMARK FAMILY OF FUNDS
<PAGE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
EQUITY AND GLOBAL INTERNATIONAL
INCOME FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at value $ 51,727,267 $ 25,536,516 $ 743,731,125
(cost: 47,179,205) (cost: 27,050,697) (cost: 831,039,163)
Cash 904 (361,613) 383
Foreign currency, at value 0 0 1,959,114
Receivable for:
Forward foreign currency contracts 0 50,555 1,607,161
Securities sold 808,948 1,609,028 8,135,843
Fund shares sold 3,460 1,500 433,394
Dividends and interest 358,855 165,603 7,585,450
------------------ ------------------ --------------------
Total receivables 1,171,263 1,834,686 17,761,848
Other assets 2,051 10,680 19,661
------------------ ------------------ --------------------
Total assets $ 52,901,485 $ 27,020,269 $ 763,472,131
================== ================== ====================
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
Options sold, at fair value $ 0 $ 0 $ 0
(premiums received:) 0 0 0
Payable for:
Securities purchased 115,300 115,300 9,625,153
Fund shares redeemed 378,007 10,776 577,297
Forward foreign currency contracts 0 28,299 1,871,278
Other 92,299 71,117 1,349,836
------------------ ------------------ --------------------
Total liabilities 585,606 225,492 13,423,564
------------------ ------------------ --------------------
Net assets applicable to fund shares outstanding $ 52,315,879 $ 26,794,777 $ 750,048,567
------------------ ------------------ --------------------
Fund shares outstanding 3,479,175 2,665,668 51,122,007
================== ================== ====================
- ------------------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
Paid in capital $ 44,705,203 $ 26,287,235 $ 776,055,252
Accumulated undistributed net realized gain (loss)
on sale of investments, forward contracts and
foreign currency exchange transactions 2,496,638 1,870,172 83,685,784
Net unrealized appreciation (depreciation) of investments 4,548,062 (1,525,692) (87,302,622)
Net unrealized appreciation (depreciation) of foreign
currency portfolio hedges 0 36,112 (207,417)
Net unrealized appreciation (depreciation)--other 75 1,787 (109,263)
Accumulated undistributed net investment income (loss) 565,901 125,163 (22,073,167)
------------------ ------------------ --------------------
Net assets applicable to Fund shares outstanding $ 52,315,879 $ 26,794,777 $ 750,048,567
================== ================== ====================
PRICE OF SHARES
Net asset value per share: Class I $ 15.04 $ 10.05 $ 14.67
Class I--Net assets $ 52,315,879 $ 26,794,777 $ 749,992,422
Class I--Shares outstanding 3,479,175 2,665,668 51,118,176
Net asset value per share: Class II $ 14.66
Class II--Net assets $ 56,145
Class II--Shares outstanding 3,831
<CAPTION>
THE OAKMARK
INTERNATIONAL
SMALL CAP FUND
- -------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value $ 105,633,796
(cost: 107,858,195)
Cash
Foreign currency, at value 81,319
Receivable for:
Forward foreign currency contracts 544,254
Securities sold 1,138,651
Fund shares sold 71,597
Dividends and interest 1,153,906
------------------
Total receivables 2,908,408
Other assets 2,219
------------------
Total assets $ 108,626,133
==================
- -------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
Options sold, at fair value $ 0
(premiums received:) 0
Payable for:
Securities purchased 659,217
Fund shares redeemed 247,728
Forward foreign currency contracts 144,057
Other 255,354
------------------
Total liabilities 1,306,356
------------------
Net assets applicable to fund shares outstanding $ 107,319,777
==================
Fund shares outstanding 9,032,169
==================
- -------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
Paid in capital $ 103,392,566
Accumulated undistributed net realized gain (loss)
on sale of investments, forward contracts and
foreign currency exchange transactions 4,384,393
Net unrealized appreciation (depreciation) of investments (2,224,566)
Net unrealized appreciation (depreciation) of foreign
currency portfolio hedges 409,652
Net unrealized appreciation (depreciation)--other (654)
Accumulated undistributed net investment income (loss) 1,358,386
------------------
Net assets applicable to Fund shares outstanding $ 107,319,777
==================
- -------------------------------------------------------------------------------------
PRICE OF SHARES
Net asset value per share: Class I $ 11.88
Class I--Net assets $ 107,319,777
Class I--Shares outstanding 9,032,169
Net asset value per share: Class II
Class II--Net assets
Class II--Shares outstanding
</TABLE>
THE OAKMARK FAMILY OF FUNDS 45
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF OPERATIONS--MARCH 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE OAKMARK THE OAKMARK
THE OAKMARK SELECT SMALL CAP
FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 40,256,457 $ 12,056,916 $ 1,372,017
Interest Income 6,215,066 2,430,662 366,228
Securities lending income 0 0 0
Other Income 189,274 0 0
Foreign taxes withheld 0 0 0
--------------- --------------- ---------------
Total investment income 46,660,797 14,487,578 1,738,245
- --------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 17,361,382 7,560,785 2,206,456
Transfer and dividend disbursing agent fees 1,015,631 395,189 116,894
Other shareholder servicing fees 870,695 549,720 102,134
Reports to shareholders 719,858 254,909 85,998
Custody and accounting fees 188,043 101,691 41,603
Registration and blue sky expenses (8,396) 35,102 9,607
Trustee fees 58,509 28,371 17,575
Legal fees 23,710 14,106 6,295
Audit fees 12,829 12,273 12,273
Other 179,993 88,464 34,244
--------------- --------------- ---------------
Total expenses 20,422,254 9,040,610 2,633,079
Expense reimbursement 0 0 (112,500)
Expense offset arrangements (6,499) (1,216) (332)
--------------- --------------- ---------------
Net expenses 20,415,755 9,039,394 2,520,247
- --------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS): 26,245,042 5,448,184 (782,002)
- --------------------------------------------------------------------------------------------------------------------------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments (411,390,237) 184,486,213 36,103,517
Net realized gain (loss) on foreign currency transactions 0 0 0
Net change in unrealized appreciation (depreciation)
of investments and foreign currencies (254,210,921) 31,553,980 (51,770,930)
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: (665,601,158) 216,040,193 (15,667,413)
--------------- --------------- ---------------
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (639,356,116) $ 221,488,377 $ (16,449,415)
=============== =============== ===============
46 THE OAKMARK FAMILY OF FUNDS
<PAGE>
<CAPTION>
THE OAKMARK THE OAKMARK THE OAKMARK
EQUITY AND GLOBAL INTERNATIONAL
INCOME FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 663,899 $ 323,047 $ 12,106,499
Interest Income 604,341 16,699 1,039,528
Securities lending income 0 0 0
Other Income 0 0 0
Foreign taxes withheld (16,519) (30,087) (1,333,627)
--------------- --------------- ---------------
Total investment income 1,251,721 309,659 11,812,400
- --------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 215,368 136,171 3,981,177
Transfer and dividend disbursing agent fees 24,194 17,526 229,650
Other shareholder servicing fees 7,517 1,782 187,488
Reports to shareholders 14,216 30,792 152,516
Custody and accounting fees 25,114 14,085 451,147
Registration and blue sky expenses 8,057 15,087 28,804
Trustee fees 12,754 12,383 22,137
Legal fees 4,893 7,728 8,875
Audit fees 10,773 9,027 14,883
Other 18,507 10,785 53,780
--------------- --------------- ---------------
Total expenses 341,393 255,366 5,130,457
Expense reimbursement 0 (16,500) 0
Expense offset arrangements (410) (231) (1,404)
--------------- --------------- ---------------
Net expenses 340,983 238,635 5,129,053
- --------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS): 910,738 71,024 6,683,347
- --------------------------------------------------------------------------------------------------------------------------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments 2,515,982 1,954,715 86,862,642
Net realized gain (loss) on foreign currency transactions 0 52,812 1,616,580
Net change in unrealized appreciation (depreciation)
of investments and foreign currencies 725,595 263,350 (28,999,849)
Net change in appreciation (depreciation) of forward
currency exchange contracts 0 34,975 244,057
Net change in appreciation (depreciation)--other 234 7,590 16,532
- --------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS: 3,241,811 2,313,442 59,739,962
--------------- --------------- ---------------
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 4,152,549 $ 2,384,466 $ 66,423,309
=============== =============== ===============
<CAPTION>
THE OAKMARK
INTERNATIONAL
SMALL CAP FUND
- -------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends $ 2,099,822
Interest Income 125,643
Securities lending income 0
Other Income 0
Foreign taxes withheld (243,351)
---------------
Total investment income 1,982,114
- -----------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 831,013
Transfer and dividend disbursing agent fees 52,277
Other shareholder servicing fees 38,248
Reports to shareholders 29,792
Custody and accounting fees 98,302
Registration and blue sky expenses 13,204
Trustee fees 13,580
Legal fees 5,308
Audit fees 12,829
Other 24,681
---------------
Total expenses 1,119,234
Expense reimbursement 0
Expense offset arrangements (1,829)
---------------
Net expenses 1,117,405
- -----------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS): 864,709
- -----------------------------------------------------------------------------------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments 5,599,958
Net realized gain (loss) on foreign currency transactions (222,842)
Net change in unrealized appreciation (depreciation)
of investments and foreign currencies (8,096,383)
Net change in appreciation (depreciation) of forward
currency exchange contracts 392,574
Net change in appreciation (depreciation)--other 5,776
- -----------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS: (2,320,917)
---------------
- -----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (1,456,208)
===============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 47
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--MARCH 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------
THE OAKMARK FUND
-------------------------------------
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 26,245,042 $ 63,903,129
Net realized gain (loss) on sale of investments (411,390,237) 748,595,189
Net realized gain (loss) on foreign currency transactions 0 0
Net change in unrealized appreciation (depreciation)
of investments and foreign currencies (254,210,921) (147,719,773)
Net change in unrealized appreciation (depreciation)
of forward currency exchange contracts 0 0
Net change in unrealized appreciation (depreciation)--
other 0 0
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (639,356,116) 664,778,545
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income (32,700,105) (89,026,890)
Net realized short-term gain (100,782,239) (128,028,090)
Net realized long-term gain (487,251,797) (195,972,927)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (620,734,141) (413,027,907)
- --------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 170,987,093 832,343,635
Reinvestment of dividends and capital gain distributions 603,455,859 391,307,098
Payments for shares redeemed (2,071,322,609) (3,626,526,884)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (1,296,879,657) (2,402,876,151)
--------------- ---------------
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (2,556,969,915) (2,151,125,513)
NET ASSETS:
Beginning of period 4,772,832,369 6,923,957,882
--------------- ---------------
End of period $ 2,215,862,453 $ 4,772,832,369
=============== ===============
Undistributed net investment income $ 25,587,719 $ 52,730,692
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.2632 $ 0.4401
Net realized short-term gain 0.8111 0.6329
Net realized long-term gain 3.9217 0.9686
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 4.9960 $ 2.0416
=============== ===============
</TABLE>
48 THE OAKMARK FAMILY OF FUNDS
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------
THE OAKMARK
SELECT FUND
-------------------------------------
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 5,448,184 $ 15,427,356
Net realized gain (loss) on sale of investments 184,486,213 301,413,442
Net realized gain (loss) on foreign currency transactions 0 0
Net change in unrealized appreciation (depreciation) 31,553,980 18,463,317
of investments and foreign currencies
Net change in unrealized appreciation (depreciation)
of forward currency exchange contracts 0 0
Net change in unrealized appreciation (depreciation)--
other 0 0
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 221,488,377 335,304,115
- --------------------------------------------------------------------------------------------------------------
*DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income (14,709,648) (3,491,747)
Net realized short-term gain (8,341,169) (497,653)
Net realized long-term gain (268,868,124) (50,206,634)
--------------- ---------------
Total distributions to shareholders (291,918,941) (54,196,034)
- --------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 330,084,276 688,865,887
Reinvestment of dividends and capital gain distributions 287,174,874 51,676,128
Payments for shares redeemed, net of fees (683,402,349) (610,635,670)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (66,143,199) 129,906,345
--------------- ---------------
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (136,573,763) 411,014,426
NET ASSETS:
Beginning of period 1,638,908,812 1,227,894,386
--------------- ---------------
End of period $ 1,502,335,049 $ 1,638,908,812
=============== ===============
Undistributed net investment income $ 1,975,694 $ 13,637,247
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.1972 $ 0.0491
Net realized short-term gain 0.1118 0.0070
Net realized long-term gain 3.6040 0.7058
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 3.9130 $ 0.7619
=============== ===============
</TABLE>
*Class II shares were first sold December 31, 1999, after the distribution date.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 49
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--MARCH 31, 2000 (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------
THE OAKMARK
SMALL CAP FUND
-------------------------------------
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ (782,002) $ (2,516,832)
Net realized gain (loss) on sale of investments 36,103,517 (11,002,740)
Net realized gain (loss) on foreign currency transactions 0 0
Net change in unrealized appreciation (depreciation) (51,770,930) 82,350,204
of investments and foreign currencies
Net change in unrealized appreciation (depreciation)
of forward currency exchange contracts 0 0
Net change in unrealized appreciation (depreciation)--
other 0 0
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (16,449,415) 68,830,632
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income 0 0
Net realized short-term gain 0 0
Net realized long-term gain 0 (4,508,112)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS 0 (4,508,112)
- --------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 24,431,744 262,182,135
Reinvestment of dividends and capital gain distributions 0 4,278,943
Payments for shares redeemed, net of fees (189,281,818) (511,639,081)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (164,850,074) (245,178,003)
--------------- ---------------
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (181,299,489) (180,855,483)
NET ASSETS:
Beginning of period 437,139,279 617,994,762
--------------- ---------------
End of period $ 255,839,790 $ 437,139,279
=============== ===============
Undistributed net investment income $ 0 $ (9,437,333)
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0 $ 0
Net realized short-term gain 0 0
Net realized long-term gain 0 0.0874
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0 $ 0.0874
=============== ===============
</TABLE>
50 THE OAKMARK FAMILY OF FUNDS
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------
THE OAKMARK
EQUITY AND INCOME FUND
-------------------------------------
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 910,738 $ 1,640,639
Net realized gain (loss) on sale of investments 2,515,982 6,246,386
Net realized gain (loss) on foreign currency transactions 0 (1,597)
Net change in unrealized appreciation (depreciation) 725,595 690,123
of investments and foreign currencies
Net change in unrealized appreciation (depreciation)
of forward currency exchange contracts 0 0
Net change in unrealized appreciation (depreciation)--
other 234 (159)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 4,152,549 8,575,392
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income (1,718,499) (855,395)
Net realized short-term gain 0 0
Net realized long-term gain (5,192,802) (829,557)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (6,911,301) (1,684,952)
- --------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 5,590,181 21,877,864
Reinvestment of dividends and capital gain distributions 6,650,712 1,610,146
Payments for shares redeemed, net of fees (17,483,853) (27,806,714)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (5,242,960) (4,318,704)
--------------- ---------------
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (8,001,712) 2,571,736
NET ASSETS:
Beginning of period 60,317,591 57,745,855
--------------- ---------------
End of period $ 52,315,879 $ 60,317,591
=============== ===============
Undistributed net investment income $ 565,901 $ 1,806,607
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.4509 $ 0.2118
Net realized short-term gain 0 0
Net realized long-term gain 1.3625 0.2053
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 1.8134 $ 0.4171
=============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 51
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--MARCH 31, 2000 (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------
THE OAKMARK
GLOBAL FUND
-------------------------------------
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 71,024 $ 32,032
Net realized gain (loss) on sale of investments 1,954,715 (84,542)
Net realized gain (loss) on foreign currency transactions 52,812 (871)
Net change in unrealized appreciation (depreciation) 263,350 (1,789,042)
of investments and foreign currencies
Net change in unrealized appreciation (depreciation)
of forward currency exchange contracts 34,975 (4,719)
Net change in unrealized appreciation (depreciation)--
other 7,590 53
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 2,384,466 (1,847,089)
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income (29,834) 0
Net realized short-term gain 0 0
Net realized long-term gain 0 0
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (29,834) 0
- --------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 10,783,756 25,938,577
Reinvestment of dividends and capital gain distributions 28,824 0
Payments for shares redeemed, net of fees (10,325,789) (138,134)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 486,791 25,800,443
--------------- ---------------
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,841,423 23,953,354
NET ASSETS:
Beginning of period 23,953,354 0
--------------- ---------------
End of period $ 26,794,777 $ 23,953,354
=============== ===============
Undistributed net investment income $ 125,163 $ 32,032
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.0098 $ 0
Net realized short-term gain 0 0
Net realized long-term gain 0 0
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0.0098 $ 0
=============== ===============
</TABLE>
(a) From August 4, 1999, to date on which Fund shares were first offered for
sale to the public.
52 THE OAKMARK FAMILY OF FUNDS
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------
THE OAKMARK
INTERNATIONAL FUND
-------------------------------------
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 6,683,347 $ 15,632,479
Net realized gain (loss) on sale of investments 86,862,642 (28,187,781)
Net realized gain (loss) on foreign currency transactions 1,616,580 11,558,024
Net change in unrealized appreciation (depreciation) (28,999,849) 290,561,381
of investments and foreign currencies
Net change in unrealized appreciation (depreciation)
of forward currency exchange contracts 244,057 1,014,015
Net change in unrealized appreciation (depreciation)--
other 16,532 (274,516)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 66,423,309 290,303,602
- --------------------------------------------------------------------------------------------------------------
*DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income--Class I (27,291,783) (16,590,763)
Net investment income--Class II (1,053) 0
Net realized short-term gain 0 (32,678,201)
Net realized long-term gain 0 (20,071,535)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (27,292,836) (69,340,499)
- --------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 73,526,909 370,563,788
Reinvestment of dividends and capital gain distributions 26,255,741 65,432,760
Payments for shares redeemed, net of fees (200,006,543) (601,921,972)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (100,223,893) (165,925,424)
--------------- ---------------
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (61,093,420) 55,037,679
NET ASSETS:
Beginning of period 811,141,987 756,104,308
--------------- ---------------
End of period $ 750,048,567 $ 811,141,987
=============== ===============
Undistributed net investment income $ (22,073,167) $ 37,780,575
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.4861 $ 0.2440
Net realized short-term gain 0 0.4807
Net realized long-term gain 0 0.2953
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0.4861 $ 1.0200
=============== ===============
</TABLE>
* Class II Shares were first sold November 4, 1999.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. THE OAKMARK FAMILY OF FUNDS 53
<PAGE>
THE OAKMARK FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS--MARCH 31, 2000 (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------
THE OAKMARK INTERNATIONAL
SMALL CAP FUND
-------------------------------------
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 864,709 $ 2,541,981
Net realized gain (loss) on sale of investments 5,599,958 12,338,825
Net realized gain (loss) on foreign currency transactions (222,842) 968,518
Net change in unrealized appreciation (depreciation) (8,096,383) 34,768,296
of investments and foreign currencies
Net change in unrealized appreciation (depreciation)
of forward currency exchange contracts 392,574 186,436
Net change in unrealized appreciation (depreciation)--
other 5,776 (2,615)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (1,456,208) 50,801,441
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (1):
Net investment income (1,252,257) (1,558,450)
Net realized short-term gain (3,278,736) 0
Net realized long-term gain (3,226,904) 0
--------------- ---------------
Total distributions to shareholders (7,757,898) (1,558,450)
- --------------------------------------------------------------------------------------------------------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 29,202,382 253,467,836
Reinvestment of dividends and capital gain distributions 7,637,609 1,470,554
Payments for shares redeemed, net of fees (75,672,311) (200,585,753)
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions (38,832,320) 54,352,637
--------------- ---------------
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (48,046,426) 103,595,628
NET ASSETS:
Beginning of period 155,366,203 51,770,575
--------------- ---------------
End of period $ 107,319,777 $ 155,366,203
=============== ===============
Undistributed net investment income $ 1,358,386 $ 2,612,604
=============== ===============
(1) DISTRIBUTIONS PER SHARE:
Net investment income $ 0.1135 $ 0.2049
Net realized short-term gain 0.2972 0
Net realized long-term gain 0.2923 0
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0.7030 $ 0.2049
=============== ===============
</TABLE>
54 THE OAKMARK FAMILY OF FUNDS
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
................................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of The Oakmark Fund
("Oakmark"), The Oakmark Select Fund ("Select"), The Oakmark Small Cap Fund
("Small Cap"), The Oakmark Equity and Income Fund ("Equity and Income"), The
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 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 March 31, 2000, 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 $ 88 $ 1,787 $ (82,393) $ 1,182
Unrealized appreciation
(depreciation) on open
securities purchases and
sales 0 6,133 24,677 9,944
Unrealized appreciation
(depreciation) on
transaction hedge
purchases and sales 0 (5,857) (56,701) (9,453)
Unrealized appreciation
(depreciation) on tax
expense payable (13) (276) 5,154 (2,327)
--------- --------- --------- ---------
Net unrealized
appreciation
(depreciation) - other $ 75 $ 1,787 $(109,263) $ (654)
========= ========= ========= =========
</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 March 31, 2000,Global, International and Int'l Small Cap had entered into
forward foreign currency contracts under which they are obligated to exchange
currencies at specified future dates. The Funds' currency transactions are
limited to transaction hedging and portfolio hedging involving either specific
transactions or portfolio positions.
THE OAKMARK FAMILY OF FUNDS 55
<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 March 31, 2000:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE MARCH 31, 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 905,551 Pound Sterling April 2000 $ 58,196
302,821 32,523,000 Japanese Yen April 2000 (22,084)
---------
$ 36,112
=========
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE MARCH 31, 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 83,595 647,400 Danish Krone April 2000 $ 359
221,294 23,353,200 Japanese Yen April 2000 (6,176)
---------
$ (5,817)
=========
</TABLE>
The International Fund had the following outstanding contracts at March 31,
2000:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE MARCH 31, 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$24,629,460 2,645,204,000 Japanese Yen August 2000 $(1,796,138)
30,000,000 18,111,021 Pound Sterling April 2000 1,163,917
29,088,000 18,000,000 Pound Sterling May 2000 424,804
-----------
$ (207,417)
===========
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE MARCH 31, 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,546,581 2,240,903 Canadian Dollar April 2000 $ (4,322)
995,939 1,027,271 Euro Currency April 2000 (12,276)
988,396 623,122 Pound Sterling April 2000 3,677
2,092,386 1,318,163 Pound Sterling April 2000 6,262
2,043,880 1,287,443 Pound Sterling April 2000 5,859
---------
$ (800)
=========
</TABLE>
56 THE OAKMARK FAMILY OF FUNDS
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
................................................................................
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE MARCH 31, 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 136,135 142,252 Euro Currency April 2000 $ (78)
484,385 506,149 Euro Currency April 2000 (278)
2,362,240 248,554,894 Japanese Yen April 2000 (58,788)
209,651 21,461,990 Japanese Yen April 2000 602
1,375,324 862,272 Pound Sterling April 2000 2,500
2,265,110 1,422,629 Pound Sterling April 2000 141
--------
$(55,901)
========
</TABLE>
The Int'l Small Cap Fund had the following outstanding contracts at March 31,
2000:
PORTFOLIO HEDGES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE MARCH 31, 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$4,959,938 507,600,000 Japanese Yen September 2000 $(133,510)
14,000,000 8,451,810 Pound Sterling April 2000 543,162
---------
$ 409,652
=========
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE MARCH 31, 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 281,764 177,484 Euro Currency April 2000 $ 808
95,508 60,168 Pound Sterling April 2000 286
-------
$ 1,094
=======
</TABLE>
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AT
US DOLLAR SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE MARCH 31, 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 33,916 35,493 Euro Currency April 2000 $ (70)
4,467 34,777 Hong Kong Dollar April 2000 0
9,571 74,523 Hong Kong Dollar April 2000 0
186,965 19,730,460 Japanese Yen April 2000 (5,218)
105,301 11,079,796 Japanese Yen April 2000 (2,621)
39,959 80,595 New Zealand Dollar April 2000 (24)
702,864 443,112 Pound Sterling April 2000 (2,614)
--------
$(10,547)
========
</TABLE>
At March 31, 2000, 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 57
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
................................................................................
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.
Income dividends and capital gains distributions are determined in accordance
with federal income tax regulations, which may differ from GAAP. To the
extent these tax and book differences are permanent in nature, such amounts
are reclassified among paid in capital, undistributed net investment income
and undistributed net realized gain (loss) on investments. These differences
are primarily related to foreign currency transactions, deferral of losses on
wash sales, and character of capital loss carryforwards. The funds also
utilize earnings and profits distributed to shareholders on redemption of
shares as a part of the dividends paid deduction for income tax purposes.
BANK LOANS--
The Funds have an unsecured line of credit with a syndication of banks. It is a
committed line of $300 million. Borrowings under this arrangement bear interest
at .45% above the Federal Funds Effective Rate. As of March 31, 2000, 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 The Global Fund.
In connection with the organization of the Funds, expenses of approximately
$146,500 and $47,000 were advanced to Oakmark and International, approximately
$7,283 each to Small Cap, Equity and Income and Int'l Small Cap, and $3,500 to
Select by the Adviser. These expenses are being amortized on a straight line
basis through October, 2000 for Small Cap, Equity and Income and Int'l Small
Cap, and October, 2001 for Select. Oakmark and International have fully
amortized all organization expenses.
During the twelve months ended March 31, 2000, the Funds incurred brokerage
commissions of $4,765,046, $1,970,164, $430,363, $91,585, $177,124, $1,876,722,
amd $262,991 of which $1,600,477, $601,043, $106,188, $41,177, $57,179, $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.
58 THE OAKMARK FAMILY OF FUNDS
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
................................................................................
3. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund shares as shown in the Statement of Changes in Net
Assets are in respect of the following number of shares (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 2000
-------------------------------------------------------------------------------------------
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL CAP
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 6,430 17,874 1,832 380 1,156 5,118 2,412
Shares issued in
reinvestment of
dividends 21,629 15,744 0 463 3 1,898 656
Less shares redeemed (77,434) (37,087) (14,214) (1,209) (1,102) (14,047) (6,328)
-------- ------- ------- ------ ------ ------- ------
Net increase (decrease) in
shares outstanding (49,375) (3,469) (12,382) (366) 57 (7,031) (3,260)
======== ======= ======= ====== ====== ======= ======
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------------------
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL CAP
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 22,559 32,332 18,587 1,449 2,623 27,499 21,542
Shares issued in
reinvestment of dividends 10,299 2,853 298 112 0 6,003 178
Less shares redeemed (100,457) (30,105) (36,338) (1,842) (15) (47,902) (16,944)
-------- ------- ------- ------ ------ ------- ------
Net increase
(decrease) in
shares outstanding (67,599) 5,080 (17,453) (281) 2,608 (14,400) 4,776
======== ======= ======= ====== ====== ======= ======
4. INVESTMENT TRANSACTIONS
Transactions in investment securities (excluding short term securities) were as
follows (in thousands):
<CAPTION>
EQUITY & INT'L SMALL
OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL CAP
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases $649,635 $392,575 $ 40,917 $15,944 $25,272 $262,741 $19,964
Proceeds from sales $2,310,069 $772,559 $222,938 $26,482 $25,479 $380,793 $62,744
</TABLE>
THE OAKMARK FAMILY OF FUNDS 59
<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 six months ended
March 31, 2000 is set forth below:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET VALUE
AFFILIATES (COST) PROCEEDS INCOME MARCH 31, 2000
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AC Nielsen Corporation $ 0 $21,436,839 $ 0 $83,565,000
--- ----------- --- -----------
TOTALS $ 0 $21,436,839 $ 0 $83,565,000
Summary of Transactions with Affiliated Companies
The Oakmark Select Fund
<CAPTION>
PURCHASE SALES DIVIDEND MARKET VALUE
AFFILIATES (COST) PROCEEDS INCOME MARCH 31, 2000
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US Industries, Inc. $ 2,912,258 $27,182,892 $ 760,745 $ 72,255,825
USG Corporation 11,264,597 12,477,289 1,056,720 146,068,312
---------- ---------- --------- -----------
TOTALS $14,176,855 $39,660,181 $1,817,465 $218,324,137
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK SMALL CAP FUND
<CAPTION>
PURCHASE SALES DIVIDEND MARKET VALUE
AFFILIATES (COST) PROCEEDS INCOME MARCH 31, 2000
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Barry (R.G.) Corporation $ 0 $ 59,398 $ 0 $ 2,970,000
Finger Lakes Financial Corp. 0 56,248 22,140 1,260,656
Sames Corporation 0 157,333 0 3,390,000
Ugly Duckling Corporation 0 0 0 13,453,125
------- -------- ------- ----------
TOTALS $ 0 $272,979 $22,140 $21,073,781
</TABLE>
60 THE OAKMARK FAMILY OF FUNDS
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
................................................................................
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL FUND
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND MARKET VALUE
AFFILIATES (COST) PROCEEDS INCOME MARCH 31, 2000
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Banco Latinoamericano de Exportaciones, S.A.
Class E $ 443,700 $ 3,045,448 $1,591,000 $ 30,681,700
Chargeurs SA 0 8,287,042 0 28,869,002
Dongah Tire Industry Company 0 0 222,263 4,513,639
Fila Holding S.p.A. 1,824,332 0 0 20,473,950
Keumkang Ltd. 0 1,467,014 348,029 13,711,206
Lotte Chilsung Beverage Company 0 0 32,524 4,405,429
Nufarm Limited 1,403,176 0 0 21,439,531
Somerfield plc 29,313,238 0 813,479 32,229,884
---------- ------------ ------- ----------
TOTALS $32,984,446 $12,799,504 $3,007,295 $156,324,341
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
THE OAKMARK INTERNATIONAL SMALL CAP FUND
<CAPTION>
PURCHASE SALES DIVIDEND MARKET VALUE
AFFILIATES (COST) PROCEEDS INCOME MARCH 31, 2000
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Designer Textiles (NZ) Limited $ 0 $ 0 $ 11,154 $ 281,983
Mainfreight Limited 115,895 15,170 167,324 3,905,493
Matichon Public Company Limited,
Foreign Shares 0 0 0 3,532,185
NSC Groupe 0 1,118,301 0 4,251,330
----------- ----------- ----------- -----------
TOTALS $ 115,895 $ 1,133,471 $ 178,478 $11,970,991
</TABLE>
THE OAKMARK FAMILY OF FUNDS 61
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ELEVEN
SIX MONTHS YEAR YEAR MONTHS
ENDED ENDED ENDED ENDED
MARCH 31, SEPTEMBER SEPTEMBER SEPTEMBER
2000 30, 1999 30, 1998 30, 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 34.37 $ 33.54 $ 41.21 $ 32.39
Income From Investment Operations:
Net Investment Income (Loss) 0.25 0.44 0.47 0.36
Net Gains or Losses on Securities
(both realized and unrealized) (4.86) 2.43 (1.73) 10.67
--------- --------- --------- ---------
Total From Investment Operations: (4.61) 2.87 (1.26) 11.03
Less Distributions:
Dividends (from net investment
income) (0.26) (0.44) (0.40) (0.34)
Distributions (from capital gains) (4.74) (1.60) (6.01) (1.87)
--------- --------- --------- ---------
Total Distributions (5.00) (2.04) (6.41) (2.21)
--------- --------- --------- ---------
Net Asset Value, End of Period $ 24.76 $ 34.37 $ 33.54 $ 41.21
========= ========= ========= =========
Total Return (15.06)% 7.98% (4.06)% 39.24%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $2,215.9 $4,772.8 $6,924.0 $6,614.9
Ratio of Expenses to Average
Net Assets 1.22%* 1.11% 1.08% 1.08%*
Ratio of Net Income (Loss) to
Average Net Assets 1.56%* 1.02% 1.22% 1.19%*
Portfolio Turnover Rate 21% 13% 43% 17%
<CAPTION>
PERIOD
YEAR ENDED OCTOBER 31, ENDED
------------------------------------------------------ OCTOBER 31,
1996 1995 1994 1993 1992 1991(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 28.47 $ 25.21 $ 24.18 $ 17.11 $ 12.10 $10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.34 0.30 0.27 0.17 (0.03) (0.01)
Net Gains or Losses on Securities
--------- --------- --------- --------- ------- ------
(both realized and unrealized) 4.70 4.66 1.76 7.15 5.04 2.11
Total From Investment Operations: 5.04 4.96 2.03 7.32 5.01 2.10
Less Distributions:
Dividends (from net investment
income) (0.28) (0.23) (0.23) (0.04) 0 0
Distributions (from capital gains) (0.84) (1.47) (0.77) (0.21) 0 0
--------- --------- --------- --------- ------- ------
Total Distributions (1.12) (1.70) (1.00) (0.25) 0 0
--------- --------- --------- --------- ------- ------
Net Asset Value, End of Period $ 32.39 $ 28.47 $ 25.21 $ 24.18 $ 17.11 $12.10
========= ========= ========= ========= ======= ======
Total Return 18.07% 21.55% 8.77% 43.21% 41.40% 87.10%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $3,933.9 $2,827.1 $1,677.3 $1,107.0 $114.7 $ 4.8
Ratio of Expenses to Average
Net Assets 1.18% 1.17% 1.22% 1.32% 1.70% 2.50%(b)*
Ratio of Net Income (Loss) to
Average Net Assets 1.13% 1.27% 1.19% 0.94% (0.24)% (0.66)%(c)*
Portfolio Turnover Rate 24% 18% 29% 18% 34% 0%
</TABLE>
*Data has been annualized.
(a) The date which Fund shares were first offered for sale to the public was
August 5, 1991.
(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.
62 THE OAKMARK FAMILY OF FUNDS
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK SELECT FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 31, ELEVEN
SIX MONTHS 1999 MONTHS
ENDED THROUGH YEAR ENDED YEAR ENDED ENDED
MARCH 31, 2000 MARCH 31, 2000 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
CLASS I CLASS II (a) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.92 $18.42 $ 16.76 $ 16.34 $ 10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.06 0.03 0.20 0.03 (0.01)
Net Gains or Losses on Securities (both
realized and unrealized) 3.01 1.60 4.72 0.56 6.35
--------- ------ --------- --------- -------
Total From Investment Operations: 3.07 1.63 4.92 0.59 6.34
Less Distributions:
Dividends (from net investment income) (0.20) 0.00 (0.05) 0 0
Distributions (from capital gains) (3.72) 0.00 (0.71) (0.17) 0
--------- ------ --------- --------- -------
Total Distributions (3.92) 0.00 (0.76) (0.17) 0
Net Asset Value, End of Period $ 20.07 $20.05 $ 20.92 $ 16.76 $ 16.34
========= ====== ========= ========= =======
Total Return 16.52% 8.85% 30.07% 3.64% 69.16%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $1,497.7 $ 4.6 $1,638.9 $1,227.9 $514.2
Ratio of Expenses to Average Net Assets 1.18%* 1.36%* 1.16% 1.22% 1.12%*
Ratio of Net Income (Loss) to Average Net Assets 0.71%* .33%* 0.98% 17.00% (0.11)%*
Portfolio Turnover Rate 27% 27% 67% 56% 37%
</TABLE>
* Data has been annualized.
(a) The date which Class II shares were first sold to the public was December
31, 1999.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
THE OAKMARK FAMILY OF FUNDS 63
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK SMALL-CAP FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS ELEVEN MONTHS YEAR
ENDED YEAR ENDED YEAR ENDED ENDED ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, OCTOBER 31,
2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.88 $ 12.63 $ 20.34 $ 13.19 $ 10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.00 (0.16) (0.12) (0.01) (0.02)
Net Gains or Losses on Securities (both
realized and unrealized) (0.49) 1.50 (4.73) 7.16 3.21
------- ------- ------- --------- -------
Total From Investment Operations: (0.49) 1.34 (4.85) 7.15 3.19
Less Distributions:
Dividends (from net investment income) 0.00 0.00 0 0 0
Distributions (from capital gains) 0.00 (0.09) (2.86) 0 0
------- ------- ------- --------- -------
Total Distributions 0.00 (0.09) (2.86) 0 0
------- ------- ------- --------- -------
Net Asset Value, End of Period $ 13.39 $ 13.88 $ 12.63 $ 20.34 $ 13.19
======= ======= ======= ========= =======
Total Return (3.53)% 10.56% (26.37)% 59.14% 31.94%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $255.8 $437.1 $618.0 $1,513.4 $218.4
Ratio of Expenses to Average Net Assets 1.50%*(a) 1.48% 1.45% 1.37%* 1.61%
Ratio of Net Income (Loss) to Average Net Assets (0.46)%*(a) (0.44)% (0.40)% (0.25)%* (0.29)%
Portfolio Turnover Rate 13% 68% 34% 27% 23%
</TABLE>
*Data has been annualized.
(a) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
MARCH 31,
2000
- --------------------------------------------------------------------------------
<S> <C>
Ratio of Expenses to Average Net Assets 1.57%
Ratio of Net Income (Loss) to Average Net Assets (0.53)%
</TABLE>
64 THE OAKMARK FAMILY OF FUNDS
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK EQUITY AND INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS ELEVEN MONTHS YEAR
ENDED YEAR ENDED YEAR ENDED ENDED ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, OCTOBER 31,
2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.68 $13.99 $14.49 $11.29 $10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.22 0.43 0.29 0.21 0.10
Net Gains or Losses on Securities (both
realized and unrealized) 0.95 1.68 0.04 3.24 1.19
------ ------ ------ ------ ------
Total From Investment Operations: 1.17 2.11 0.33 3.45 1.29
Less Distributions:
Dividends (from net investment income) (0.45) (0.21) (0.24) (0.12) 0
Distributions (from capital gains) (1.36) (0.21) (0.59) (0.13) 0
------ ------ ------ ------ ------
Total Distributions (1.81) (0.42) (0.83) (0.25) 0
Net Asset Value, End of Period $15.04 $15.68 $13.99 $14.49 $11.29
====== ====== ====== ====== ======
Total Return 8.02% 15.32% 2.57% 34.01%* 12.91%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $52.3 $60.3 $57.7 $33.5 $13.8
Ratio of Expenses to Average Net Assets 1.21%* 1.18% 1.31% 1.50%*(a) 2.50%(a)
Ratio of Net Income (Loss) to Average Net Assets 3.21%* 2.65% 2.39% 2.38%*(a) 1.21%(a)
Portfolio Turnover Rate 29% 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 Adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 31,
1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Ratio of Expenses to Average Net Assets 1.70% 2.64%
Ratio of Net Income (Loss) to Average Net Assets 2.18% 1.08%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
THE OAKMARK FAMILY OF FUNDS 65
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK GLOBAL FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
2000 1999(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 9.18 $10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.05 0.01
Net Gains or Losses on Securities (both
realized and unrealized) 0.83 (0.83)
------ ------
Total From Investment Operations: 0.88 (0.82)
Less Distributions:
Dividends (from net investment income) (0.01) 0.00
Distributions (from capital gains) 0.00 0.00
------ ------
Total Distributions (0.01) 0.00
Net Asset Value, End of Period $10.05 $ 9.18
====== ======
Total Return 9.59% (8.18)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $26.8 $24.0*
Ratio of Expenses to Average Net Assets 1.75%*(b) 1.75%*(b)
Ratio of Net Income (Loss) to Average Net Assets 0.52%*(b) 0.98%*(b)
Portfolio Turnover Rate 96% 7%
</TABLE>
*Data has been annualized
(a) The date which Fund shares were first offered for sale to the public was
August 4, 1999.
(b) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 1999
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Ratio of Expenses to Average Net Assets 1.87% 2.22%
Ratio of Net Income (Loss) to Average Net Assets 0.40% 0.51%
</TABLE>
66 THE OAKMARK FAMILY OF FUNDS
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NOVEMBER 4,
1999 ELEVEN
SIX MONTHS THROUGH MONTHS
ENDED MARCH 31, YEAR ENDED YEAR ENDED ENDED
MARCH 31, 2000 2000 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
CLASS I CLASS II(b) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.95 $14.36 $ 10.42 $18.77 $ 14.92
Income From Investment Operations:
Net Investment Income (Loss) 0.11 0.19 0.36 0.41 0.27
Net Gains or Losses on Securities
(both realized and unrealized) 1.10 0.60 4.19 (5.32) 3.74
------- ------ ------- ------ ---------
Total From Investment Operations: 1.21 0.79 4.55 (4.91) 4.01
Less Distributions:
Dividends (from net
investment income) (0.49) (0.49) (0.24) (0.58) (0.16)
Distributions (from capital gains) 0.00 0.00 (0.78) (2.86) 0
------- ------ ------- ------ ---------
Total Distributions (0.49) 0.00 (1.02) (3.44) (0.16)
------- ------ ------- ------ ---------
Net Asset Value, End of Period $ 14.67 $14.66 $ 13.95 $ 10.42 $ 18.77
======= ====== ======= ======= =========
Total Return 8.85% 5.67% 46.41% (29.90)% 29.63%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $750.0 $ 0.1 $811.1 $756.1 $1,647.3
Ratio of Expenses to Average
Net Assets 1.30%* 1.69%* 1.29% 1.32% 1.26%*
Ratio of Net Income (Loss) to
Average Net Assets 1.68%* 1.87%* 1.94% 1.95% 2.09%*
Portfolio Turnover Rate 35% 35% 54% 43% 61%
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------- PERIOD ENDED
OCTOBER 31,
1996 1995 1994 1993 1992(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.97 $ 14.50 $ 14.09 $ 9.80 $10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.09 0.30 0.21 0.06 0.26
Net Gains or Losses on Securities
(both realized and unrealized) 2.90 (0.77) 0.43 4.48 (0.46)
--------- ------- --------- ------ ------
Total From Investment Operations: 2.99 (0.47) 0.64 4.54 (0.2)
Less Distributions:
Dividends (from net
investment income) 0 0 (0.08) (0.25) 0
Distributions (from capital gains) (1.04) (1.06) (0.15) 0 0
--------- ------- --------- ------ ------
Total Distributions (1.04) (1.06) (0.23) (0.25) 0
--------- ------- --------- ------ ------
Net Asset Value, End of Period $ 14.92 $ 12.97 $ 14.50 $ 14.09 $ 9.80
========= ======= ========= ======= ======
Total Return 24.90% (3.06)% 4.62% 47.49% (22.81)%*
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $1,172.8 $819.7 $1,286.0 $815.4 $ 23.5
Ratio of Expenses to Average
Net Assets 1.32% 1.40% 1.37% 1.26% 2.04%*
Ratio of Net Income (Loss) to
Average Net Assets 1.45% 1.40% 1.44% 1.55% 37.02%*
Portfolio Turnover Rate 42% 26% 55% 21% 0%
</TABLE>
*Data has been annualized.
(a) The date which Fund shares were first offered for sale to the public was
September 30, 1992.
(b) The date which Class II shares were first sold to the public was November
4, 1999.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
THE OAKMARK FAMILY OF FUNDS 67
<PAGE>
- --------------------------------------------------------------------------------
THE OAKMARK INTERNATIONAL SMALL CAP FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS ELEVEN MONTHS YEAR
ENDED YEAR ENDED YEAR ENDED ENDED ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, OCTOBER 31,
2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.64 $ 6.89 $12.20 $11.41 $10.00
Income From Investment Operations:
Net Investment Income (Loss) 0.01 0.20 0.18 0.13 0.04
Net Gains or Losses on Securities (both
realized and unrealized) (0.07) 5.75 (4.09) 1.10 1.37
------- ------- ------ ------ ------
Total From Investment Operations: (0.06) 5.95 (3.91) 1.23 1.41
Less Distributions:
Dividends (from net investment income) (0.11) (0.20) (0.06) (0.08) 0
Distributions (from capital gains) (0.59) 0.00 (1.34) (0.36) 0
------- ------- ------ ------ ------
Total Distributions (0.70) (0.20) (1.40) (0.44) 0
Net Asset Value, End of Period $ 11.88 $ 12.64 $ 6.89 $12.20 $11.41
======= ======= ====== ====== ======
Total Return (0.34)% 88.02% (35.20)% 12.07% *14.15%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $107.3 $155.4 $51.8 $66.0 $39.8
Ratio of Expenses to Average Net Assets 1.73%* 1.79% 1.96% 1.93%* 2.50%(a)
Ratio of Net Income (Loss) to Average Net Assets 1.33%* 2.31% 2.17% 1.23%* 0.65%(a)
Portfolio Turnover Rate 16% 126% 69% 63% 27%
</TABLE>
*Data has been annualized.
(a) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, ratios would have been as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1996
- -------------------------------------------------------------------------------------------------------
<S> <C>
Ratio of Expenses to Average Net Assets 2.65%
Ratio of Net Income (Loss) to Average Net Assets 0.50%
</TABLE>
68 THE OAKMARK FAMILY OF FUNDS
<PAGE>
THE OAKMARK FAMILY OF FUNDS
TRUSTEES AND OFFICERS
--------------------------------------------------------------------------
TRUSTEES
Michael J. Friduss
Thomas H. Hayden
Christine M. Maki
Victor A. Morgenstern
Allan J. Reich
Marv Rotter
Burton W. Ruder
Peter S. Voss
Gary Wilner, M.D.
OFFICERS
Victor A. Morgenstern--CHAIRMAN
Robert M. Levy--PRESIDENT
James P. Benson--VICE PRESIDENT
Henry R. Berghoef--VICE PRESIDENT
Kevin G. Grant--VICE PRESIDENT
David G. Herro--VICE PRESIDENT
Gregory L. Jackson--VICE PRESIDENT
Clyde S. McGregor--VICE PRESIDENT
William C. Nygren--VICE PRESIDENT
Steven J. Reid--VICE PRESIDENT
Edward A. Studzinski--VICE PRESIDENT
Michael J. Welsh--VICE PRESIDENT
Anita M. Nagler--SECRETARY
Ann W. Regan--VICE PRESIDENT
SHAREHOLDER OPERATIONS AND ASSISTANT SECRETARY
Kristi L. Rowsell--TREASURER
John J. Kane--ASSISTANT TREASURER
OTHER INFORMATION
INVESTMENT ADVISER
Harris Associates L.P.
Two North LaSalle Street
Chicago, Illinois 60602-3790
TRANSFER AGENT
Nvest Services Company, Inc.
Attention: The Oakmark Family of Funds
P.O. Box 8510
Boston, Massachusetts 02266-8510
LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
FOR MORE INFORMATION:
Please call 1-800-OAKMARK
(1-800-625-6275)
or 617-578-1329
WEBSITE
www.oakmark.com
24-HOUR NAV HOTLINE
1-800-GROWOAK (1-800-476-9625)
E-MAIL ADDRESS
[email protected]
This report, including the unaudited financial statements contained herein, is
submitted for the general information of the shareholders of the Funds. The
report is not authorized for distribution to prospective investors in the Funds
unless it is accompanied or preceded by a currently effective prospectus of the
Funds. No sales charge to the shareholder or to the new investor is made in
offering the shares of the Funds.
<PAGE>
- --------------------------------------------------------------------------------
P.O. Box 8510
Boston, MA 02266-8510
- --------------------------------------------------------------------------------
[LOGO]
OAKMARK
FAMILY OF FUNDS
1-800-OAKMARK
www.oakmark.com
