-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DzrDtRs2Dq0/Ey7gcTt0FFeJVxVuCVcdbJPQaTMRtU0yzkLgDvo1eu/+8ux2P2G9 ECtWRDDXTNwshwGpFcIfbQ== 0000912057-01-002977.txt : 20010129 0000912057-01-002977.hdr.sgml : 20010129 ACCESSION NUMBER: 0000912057-01-002977 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20010126 EFFECTIVENESS DATE: 20010126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARRIS ASSOCIATES INVESTMENT TRUST CENTRAL INDEX KEY: 0000872323 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-38953 FILM NUMBER: 1516184 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-06279 FILM NUMBER: 1516185 BUSINESS ADDRESS: STREET 1: HARRIS ASSOCIATES LP STREET 2: TWO N LASALLE ST STE 500 CITY: CHICAGO STATE: IL ZIP: 60602-3790 BUSINESS PHONE: 8004769625 MAIL ADDRESS: STREET 1: HARRIS ASSOCIATES LP STREET 2: TWO NORTH LASALLE STREET STE 500 CITY: CHICAGO STATE: IL ZIP: 60602-3790 485BPOS 1 a2036007z485bpos.txt 485BPOS As filed with the Securities and Exchange Commission on January 26, 2001 Securities Act registration no. 33-38953 Investment Company Act file no. 811-06279 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A - -------------------------------------------------------------------------------- REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Post-Effective Amendment No. 25 [X] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 27 [X] - -------------------------------------------------------------------------------- HARRIS ASSOCIATES INVESTMENT TRUST (Registrant) Two North La Salle Street, Suite 500 Chicago, Illinois 60602-3790 Telephone number 312/621-0600 - -------------------------------------------------------------------------------- Robert M. Levy Cameron S. Avery Harris Associates L.P. Bell, Boyd & Lloyd LLC Two North La Salle Street, #500 70 West Madison Street, #3300 Chicago, Illinois 60602 Chicago, Illinois 60602 (Agents for service) - -------------------------------------------------------------------------------- Amending Parts A, B and C and filing Exhibits - -------------------------------------------------------------------------------- It is proposed that this filing will become effective: X immediately upon filing pursuant to rule 485(b) --- --- on _____________ pursuant to rule 485(b) --- 60 days after filing pursuant to rule 485(a)(1) --- on _____________ pursuant to rule 485(a)(1) --- 75 days after filing pursuant to rule 485(a)(2) --- on _____________ pursuant to rule 485(a)(2) - -------------------------------------------------------------------------------- [GRAPHIC OF TREE] 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 PROSPECTUS JANUARY 26, 2001 The Securities and Exchange Commission has not approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ADVISED BY HARRIS ASSOCIATES L.P. TABLE OF CONTENTS - --------------------------------------------------------------------------------- OVERVIEW OF THE OAKMARK FAMILY OF FUNDS 1 Investment Objectives 1 Principal Investment Strategies 1 - --------------------------------------------------------------------------------- THE OAKMARK FUND (OAKMX) 3 Investment Objective 3 Principal Investment Strategy 3 Principal Investment Risks 3 Is The Fund Right For Me? 3 Performance Information 4 Fees and Expenses 5 - --------------------------------------------------------------------------------- THE OAKMARK SELECT FUND (OAKLX) 6 Investment Objective 6 Principal Investment Strategy 6 Principal Investment Risks 6 Is The Fund Right For Me? 7 Performance Information 7 Fees and Expenses 8 - --------------------------------------------------------------------------------- THE OAKMARK SMALL CAP FUND (OAKSX) 9 Investment Objective 9 Principal Investment Strategy 9 Principal Investment Risks 9 Is The Fund Right For Me? 10 Performance Information 10 Fees and Expenses 11
- --------------------------------------------------------------------------------- THE OAKMARK EQUITY AND INCOME FUND (OAKBX) 13 Investment Objective 13 Principal Investment Strategy 13 Principal Investment Risks 13 Is The Fund Right For Me? 14 Performance Information 14 Fees and Expenses 16 - --------------------------------------------------------------------------------- THE OAKMARK GLOBAL FUND (OAKGX) 17 Investment Objective 17 Principal Investment Strategy 17 Principal Investment Risks 17 Is The Fund Right For Me? 18 Performance Information 18 Fees and Expenses 19 - --------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL FUND (OAKIX) 21 Investment Objective 21 Principal Investment Strategy 21 Principal Investment Risks 21 Is The Fund Right For Me? 22 Performance Information 22 Fees and Expenses 23 - --------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL SMALL CAP FUND (OAKEX) 24 Investment Objective 24 Principal Investment Strategy 24 Principal Investment Risks 24 Is The Fund Right For Me? 25 Performance Information 25 Fees and Expenses 26
- --------------------------------------------------------------------------------- HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES 28 Investment Techniques 28 Risk Factors 29 Change in Objective 32 - --------------------------------------------------------------------------------- MANAGEMENT OF THE FUNDS 33 - --------------------------------------------------------------------------------- INVESTING WITH THE OAKMARK FAMILY OF FUNDS 35 Eligibility To Buy Shares 35 Share Classes 35 Investment Minimums 35 Share Price 36 General Purchasing Policies 37 General Redemption Policies 37 90-Day Redemption Fee - Class I Shares 38 - --------------------------------------------------------------------------------- DISTRIBUTIONS AND TAXES 39 Distributions 39 Taxes 39 - --------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS 41 Oakmark Fund 42 Select Fund 43 Small Cap Fund 44 Equity and Income Fund 45 Global Fund 46 International Fund 47 International Small Cap Fund 48 - --------------------------------------------------------------------------------- HOW TO BUY CLASS I SHARES 49 By Check 49 By Wire Transfer 49 By Electronic Transfer 50 By Automatic Investment 50 By Payroll Deduction 51 By Exchange 52 By Internet 53 Purchase Price and Effective Date 53 - --------------------------------------------------------------------------------- HOW TO SELL CLASS I SHARES 54 In Writing 54 By Telephone 54 By Electronic Transfer 55 By Exchange 55 By Wire Transfer 56 By Automatic Redemption 56 By Internet 56 Signature Guarantee 57 Small Account Redemption 57 - --------------------------------------------------------------------------------- SHAREHOLDER SERVICES 58 Class I Shareholders 58 Class II Shareholders 59
OVERVIEW OF THE OAKMARK FAMILY OF FUNDS INVESTMENT OBJECTIVES THE OAKMARK FUND ("Oakmark Fund"), THE OAKMARK SELECT FUND ("Select Fund"), THE OAKMARK SMALL CAP FUND ("Small Cap Fund"), THE OAKMARK GLOBAL FUND ("Global Fund"), THE OAKMARK INTERNATIONAL FUND ("International Fund") and THE OAKMARK INTERNATIONAL SMALL CAP FUND ("International Small Cap Fund") seek long-term capital appreciation. THE OAKMARK EQUITY AND INCOME FUND ("Equity and Income Fund") seeks high current income and preservation and growth of capital. PRINCIPAL INVESTMENT STRATEGIES PHILOSOPHY The Oakmark Family of Funds uses a value investment philosophy in selecting equity securities. This investment philosophy is based upon the belief that, over time, a company's stock price converges with the company's true business value. By "true business value" the Funds mean an estimate of the price a knowledgeable buyer would pay to acquire the entire business. The Funds believe that investing in securities priced significantly below their true business value presents the best opportunity to achieve a Fund's investment objective. PROCESS The Fund's adviser, Harris Associates L.P. (called the "Adviser" in this prospectus), uses this value philosophy to identify companies that it believes have discounted stock prices compared to the companies' true business values. In assessing such companies, the Adviser looks for the following characteristics, although not all of the companies selected will have these attributes: - - free cash flows and intelligent investment of excess cash; - - earnings that are growing and are reasonably predictable; and - - high level of manager ownership. PROSPECTUS 1 The Adviser focuses on individual companies in making its investment decisions rather than on specific economic factors or specific industries. In order to select those that meet the criteria described above, the Adviser uses independent, in-house research to analyze each company. As part of this selection process, its analysts typically visit companies and talk to various industry sources. The chief consideration in the selection of stocks for the Funds is the size of the discount of a company's stock price compared to the company's true business value. Once the Adviser determines that a stock is selling at a significant discount (typically 60% of its estimated worth) and the company has the additional qualities mentioned above, the Adviser generally will consider buying that stock for a Fund. The Adviser usually sells a Fund's stock when the price approaches 90% of its estimated worth. This means the Adviser sets specific "buy" and "sell" targets for each stock held by a Fund. The Adviser also monitors each holding and adjusts those price targets as warranted to reflect changes in a company's fundamentals. MANAGING RISK Each Fund tries to manage some of the risks of investing in common stock by purchasing stocks whose prices the Adviser considers low relative to the stocks' true value. Each Fund seeks companies with solid finances and proven records and continuously monitors each portfolio holding. Equity and Income Fund attempts to manage the risks of investing in bonds by conducting independent evaluations of the creditworthiness of the bonds and the companies and by actively managing the average duration of the bonds in anticipation of interest rate changes. Furthermore, Global Fund, International Fund, and International Small Cap Fund attempt to manage some of the risks of investing in foreign securities by considering the relative political and economical stability of a company's home country, the ownership structure of the company, and the company's accounting practices. PORTFOLIO STRUCTURE The Adviser believes that holding a small number of stocks allows its "best ideas" to have a meaningful impact on fund performance; therefore, the portfolio of each Fund, except Select Fund, typically holds 30 to 60 stocks rather than hundreds. Select Fund generally holds 15 to 20 stocks in its portfolio. The Funds' value strategy also emphasizes investing for the long-term. The Adviser believes that the market will ultimately discover these undervalued companies, so, it gives them the time such recognition requires. The Adviser has found that generally it takes two to three years for the gap between stock price and true business value to close. Therefore, successful implementation of this value investment philosophy requires that the Funds and their shareholders have a long-term horizon. 2 THE OAKMARK FAMILY OF FUNDS THE OAKMARK FUND INVESTMENT OBJECTIVE Oakmark Fund seeks long-term capital appreciation. PRINCIPAL INVESTMENT STRATEGY Oakmark Fund invests primarily in common stocks of U.S. companies. PRINCIPAL INVESTMENT RISKS Although Oakmark Fund makes every effort to achieve its objective of long-term capital appreciation, it cannot guarantee it will attain that objective. Following are the principal risks of investing in the Fund: NOT A BANK DEPOSIT. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. COMMON STOCKS. The Fund invests mostly in common stocks, which are a type of equity security that represents an ownership interest in a corporation. One of the risks of investing in common stock is that a company's stock value may go up or down depending on the company's business success or other economic or market factors. This potential for fluctuation is called market risk and can affect the value of your shares of the Fund. When you sell your shares of the Fund, they may be worth more or less than you paid for them. VALUE STYLE. Investing in "value" stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods. FOR MORE INFORMATION ON RISKS, SEE "HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES--RISK FACTORS." IS THE FUND RIGHT FOR ME? You should consider an investment in Oakmark Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks. Although past performance of the Fund cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment. The Fund is not designed for investors whose primary objective is income. PROSPECTUS 3 PERFORMANCE INFORMATION The Fund offers two classes of shares: Class I Shares and Class II Shares. Class I Shares of the Fund are offered to the general public. Class II Shares of the Fund are offered to certain retirement and profit sharing plans. NEITHER THE BAR CHART NOR THE PERFORMANCE TABLE SHOWN BELOW IS INTENDED TO INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns. CLASS I SHARES Total Returns for Years Ended December 31 (%) [BAR CHART APPEARS HERE:] 1992 48.90 1993 30.50 1994 3.31 1995 34.42 1996 16.21 1997 32.59 1998 3.74 1999 -10.47 2000 11.78
Since 1992, the highest and lowest quarterly returns for the Fund's Class I Shares were: - - Highest quarterly return: 15.4%, during the quarter ended December 31, 1992 - - Lowest quarterly return: -13.8%, during the quarter ended September 30, 1998 The table below shows how the Fund's average annual total returns for one and five years and since inception compare with the S&P 500 Index, a widely quoted, unmanaged, market-weighted stock market index that includes 500 of the largest companies publicly traded in the United States. All returns reflect reinvested dividends.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 (%) - -------------------------------------------------------------------------------- 1 5 Since Inception Year Year August 5, 1991 - -------------------------------------------------------------------------------- Oakmark Fund - Class I 11.78% 9.84% 20.13% S&P 500 -9.10% 18.31% 16.41%
Information is not available for Class II Shares, since Class II Shares have not been sold to investors for a full calendar year. 4 THE OAKMARK FAMILY OF FUNDS FEES AND EXPENSES Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment) - -------------------------------------------------------------------------------- Expense Class I Class II - -------------------------------------------------------------------------------- Maximum sales charge (load) None None imposed on purchases Maximum deferred sales charge (load) None None Redemption fee (as a percentage None None of amount redeemed) Exchange fee None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - -------------------------------------------------------------------------------- Class I Class II - -------------------------------------------------------------------------------- Management fees 1.01% 1.01% Distribution (12b-1) fees None None Other expenses (including service fees) .20 .45 - -------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 1.21% 1.46%
EXAMPLE. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:
- -------------------------------------------------------------------------------- Class I Class II - -------------------------------------------------------------------------------- 1 Year $ 120 $ 150 3 Years 380 460 5 Years 660 790 10 Years 1,460 1,740
PROSPECTUS 5 THE OAKMARK SELECT FUND INVESTMENT OBJECTIVE Select Fund seeks long-term capital appreciation. PRINCIPAL INVESTMENT STRATEGY Select Fund invests primarily in common stocks of U.S. companies. The Fund is non-diversified, which means that it is not limited under the Investment Company Act of 1940 to a percentage of assets that it may invest in any one issuer. The Fund could own as few as 12 securities, but generally will have 15 to 20 securities in its portfolio. PRINCIPAL INVESTMENT RISKS Although Select Fund makes every effort to achieve its objective of long-term capital appreciation, it cannot guarantee it will attain that objective. Following are the principal risks of investing in the Fund: NOT A BANK DEPOSIT. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. COMMON STOCKS. The Fund invests mostly in common stocks, which are a type of equity security that represents an ownership interest in a corporation. One of the risks of investing in common stock is that a company's stock value may go up or down depending on the company's business success or other economic or market factors. This potential for fluctuation is called market risk and can affect the value of your shares of the Fund. When you sell your shares of the Fund, they may be worth more or less than you paid for them. NON-DIVERSIFICATION. Although the Fund's strategy of investing in a limited number of stocks has the potential to generate attractive returns over time, it may increase the volatility of the Fund's investment performance as compared to funds that invest in a larger number of stocks. If the stocks in which the Fund invests perform poorly, the Fund could incur greater losses than if it had invested in a larger number of stocks. VALUE STYLE. Investing in "value" stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods. FOR MORE INFORMATION ON RISKS, SEE "HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES--RISK FACTORS." 6 THE OAKMARK FAMILY OF FUNDS IS THE FUND RIGHT FOR ME? You should consider an investment in Select Fund if you are looking for long-term capital appreciation by investing in a non-diversified fund and are willing to accept the associated risks. Although past performance of the Fund cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment. The Fund is not designed for investors whose primary objective is income. PERFORMANCE INFORMATION The Fund offers two classes of shares: Class I Shares and Class II Shares. Class I Shares of the Fund are offered to the general public. Class II Shares of the Fund are offered to certain retirement and profit sharing plans. NEITHER THE BAR CHART NOR THE PERFORMANCE TABLE SHOWN BELOW IS INTENDED TO INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns. CLASS I SHARES Total Returns for Years Ended December 31 (%) [BAR CHART APPEARS HERE:] 1997 55.02 1998 16.22 1999 14.49 2000 25.81
Since 1997, the highest and lowest quarterly returns for the Fund's Class I Shares were: - - Highest quarterly return: 21.5%, during the quarter ended December 31, 1998 - - Lowest quarterly return: -17.2%, during the quarter ended September 30, 1998 PROSPECTUS 7 The table below shows how the Fund's average annual total returns for one year and since inception compare with the S&P 500 Index, a widely quoted, unmanaged, market-weighted stock market index that includes 500 of the largest companies publicly traded in the United States. All returns reflect reinvested dividends.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 (%) - -------------------------------------------------------------------------------- 1 Since Year Inception* - -------------------------------------------------------------------------------- Select Fund - Class I 25.81% 29.76% Select Fund - Class II 25.42% 25.42% S&P 500 -9.10% 17.93%
* Inception dates for Class I Shares and Class II Shares of the Fund are November 1, 1996 and December 31, 1999, respectively. FEES AND EXPENSES Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment) - ----------------------------------------------------------------------------------- Expense Class I Class II - ----------------------------------------------------------------------------------- Maximum sales charge (load) None None imposed on purchases Maximum deferred sales charge (load) None None Redemption fee (as a percentage 2% of redemption proceeds on None of amount redeemed) shares held for less than 90 days Exchange fee None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - -------------------------------------------------------------------------------- Class I Class II - -------------------------------------------------------------------------------- Management fees .97% .96% Distribution (12b-1) fees None None Other expenses (including service fees) .20 .45 - -------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 1.17% 1.41%
EXAMPLE. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:
- -------------------------------------------------------------------------------- Class I Class II - -------------------------------------------------------------------------------- 1 Year $ 120 $ 140 3 Years 370 440 5 Years 640 770 10 Years 1,420 1,690
8 THE OAKMARK FAMILY OF FUNDS THE OAKMARK SMALL CAP FUND INVESTMENT OBJECTIVE Small Cap Fund seeks long-term capital appreciation. PRINCIPAL INVESTMENT STRATEGY Small Cap Fund invests primarily in common stocks of U.S. companies. The Fund invests primarily in the stocks of "small cap companies." A small cap company is one whose market capitalization is no larger than the largest market capitalization of the companies included in the S&P Small Cap 600 Index ($3.337 billion as of December 31, 2000). The mean of the S&P Small Cap 600 Index was $583 million as of December 31, 2000. Over time, the largest market capitalization of the companies included in the S&P Small Cap 600 Index will change. As it does, the size of the companies in which the Fund invests may change. PRINCIPAL INVESTMENT RISKS Although Small Cap Fund makes every effort to achieve its objective of long-term capital appreciation, it cannot guarantee it will attain that objective. Following are the principal risks of investing in the Fund: NOT A BANK DEPOSIT. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. COMMON STOCKS. The Fund invests mostly in common stocks, which are a type of equity security that represents an ownership interest in a corporation. One of the risks of investing in common stock is that a company's stock value may go up or down depending on the company's business success or other economic or market factors. This potential for fluctuation is called market risk and can affect the value of your shares of the Fund. When you sell your shares of the Fund, they may be worth more or less than you paid for them. SMALL CAP STOCKS. Small cap stocks typically are more volatile and may be less liquid than large cap stocks. Small cap companies may have a shorter history of operations and a smaller market for their shares. VALUE STYLE. Investing in "value" stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods. FOR MORE INFORMATION ON RISKS, SEE "HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES--RISK FACTORS." PROSPECTUS 9 IS THE FUND RIGHT FOR ME? You should consider an investment in Small Cap Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks. Although past performance of the Fund cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment. The Fund is not designed for investors whose primary objective is income. PERFORMANCE INFORMATION The Fund offers two classes of shares: Class I Shares and Class II Shares. Class I Shares of the Fund are offered to the general public. Class II Shares of the Fund are offered to certain retirement and profit sharing plans. NEITHER THE BAR CHART NOR THE PERFORMANCE TABLE SHOWN BELOW IS INTENDED TO INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns. CLASS I SHARES Total Returns for Years Ended December 31 (%) [BAR CHART APPEARS HERE:] 1996 39.79 1997 40.51 1998 -13.16 1999 -7.92 2000 4.39
Since 1996, the highest and lowest quarterly returns for the Fund's Class I Shares were: - - Highest quarterly return: 17.7%, during the quarter ended December 31, 1998 - - Lowest quarterly return: -26.8%, during the quarter ended September 30, 1998 10 THE OAKMARK FAMILY OF FUNDS The table below shows how the Fund's average annual total returns for one and five years and since inception compare with the Russell 2000 Index, an unmanaged, market-weighted index of small companies that represents approximately 10% of the total value of publicly traded companies in the U.S. All returns reflect reinvested dividends.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 (%) - -------------------------------------------------------------------------------- 1 5 Since Inception Year Year November 1, 1995 - -------------------------------------------------------------------------------- Small Cap Fund - Class I 4.39%* 10.38% 10.72% Russell 2000 Index -3.02% 10.30% 11.39%
*During the year ended December 31, 2000, initial public offerings ("IPOs") contributed 0.59% to the performance of the Fund. As the IPO environment changes and the total assets of the Fund grow, the impact of IPOs on the Fund's performance is expected to diminish. Information is not available for Class II Shares, since Class II Shares have not been sold to investors for a full calendar year. FEES AND EXPENSES Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment) - -------------------------------------------------------------------------------- Expense Class I Class II - -------------------------------------------------------------------------------- Maximum sales charge (load) None None imposed on purchases Maximum deferred sales charge (load) None None Redemption fee (as a percentage None None of amount redeemed) 2% of redemption proceeds on shares held for less than 90 days Exchange fee None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - -------------------------------------------------------------------------------- Class I Class II - -------------------------------------------------------------------------------- Management fees 1.37% 1.37% Distribution (12b-1) fees None None Other expenses (including service fees) .22 .47 - -------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 1.59% 1.84% Expense reimbursement* .09 .09 - -------------------------------------------------------------------------------- Net expenses 1.50% 1.75%
*The Adviser has contractually agreed to reimburse Class I and Class II Shares of the Fund, respectively, to the extent that the annual ordinary operating expenses exceed 1.50% of the average net assets of Class I Shares, or 1.75% of the average net assets of Class II Shares. The agreement is effective through January 31, 2002. A reimbursement lowers the expense ratio and increases overall return to investors. PROSPECTUS 11 EXAMPLE. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:
- -------------------------------------------------------------------------------- Class I Class II - -------------------------------------------------------------------------------- 1 Year $ 150 $ 180 3 Years 470 550 5 Years 820 950 10 Years 1,790 2,070
12 THE OAKMARK FAMILY OF FUNDS THE OAKMARK EQUITY AND INCOME FUND INVESTMENT OBJECTIVE Equity and Income Fund seeks high current income and preservation and growth of capital. PRINCIPAL INVESTMENT STRATEGY Equity and Income Fund invests primarily in a diversified portfolio of U.S. equity and fixed-income securities (although the Fund may invest up to 10% of its total assets in securities of non-U.S. companies). The Fund is intended to present a balanced investment program between growth and income by investing approximately 50-75% of its total assets in common stock, including securities convertible into common stock, and 25-50% of its assets in U.S. government securities and debt securities rated at time of purchase within the two highest grades assigned by Moody's Investors Service, Inc. ("Moody's") or by Standard & Poor's Corporation ("S&P"). The Fund may also invest up to 20% of its assets in unrated or lower rated debt securities, sometimes called junk bonds. PRINCIPAL INVESTMENT RISKS Although Equity and Income Fund makes every effort to achieve its objectives of high current income and preservation and growth of capital, it cannot guarantee it will attain those objectives. Following are the principal risks of investing in the Fund: NOT A BANK DEPOSIT. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. COMMON STOCKS. The Fund invests in common stocks, which are a type of equity security that represents an ownership interest in a corporation. One of the risks of investing in common stock is that a company's stock value may go up or down depending on the company's business success or other economic or market factors. This potential for fluctuation is called market risk and can affect the value of your shares of the Fund. When you sell your shares of the Fund, they may be worth more or less than you paid for them. DEBT SECURITIES. The debt securities in which the Fund invests are subject to credit risk, interest rate risk and liquidity risk. Credit risk is the risk that the company that issued a debt security or bond may become unable to make payments of principal and interest when due and includes the risk of default. Interest rate risk is the risk that the Fund's investments in debt securities will decline in value as a result of changes in interest rates. Generally, the value of fixed income securities rises when prevailing interest rates fall and falls when interest rates rise. Liquidity risk is the risk that the Fund may not be able to sell the medium- and lower-grade debt securities because there are too few buyers for them. PROSPECTUS 13 Investment in medium- and lower-grade debt securities involves greater risk, including the possibility of issuer default or bankruptcy. Lower-grade debt securities (commonly called "junk bonds") are considered speculative and may be in poor standing or actually in default. Medium-grade debt securities also are considered to have speculative characteristics. An economic downturn could severely disrupt the market in medium- and lower-grade debt securities and adversely affect the value of outstanding bonds and the ability of the issuers to repay principal and interest. In addition, lower-quality bonds are less sensitive to interest rate changes than higher-quality instruments and generally are more sensitive to adverse economic changes or individual corporate developments. During a period of adverse economic changes, including a period of rising interest rates, issuers of such bonds may experience difficulty in meeting principal and interest payment obligations. VALUE STYLE. Investing in "value" stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods. FOR MORE INFORMATION ON RISKS, SEE "HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES--RISK FACTORS." IS THE FUND RIGHT FOR ME? You should consider an investment in Equity and Income Fund if you are seeking current income and preservation and growth of capital and are willing to accept the associated risks. The Fund is intended to present a balanced investment program between growth and income. If you invest in the Fund, you should be willing to accept short-term price fluctuations which will occur from time to time. You should not consider investing in the Fund if you cannot tolerate moderate short-term declines in share value or if you are seeking the higher returns historically achieved by funds that invest primarily in stocks. 14 THE OAKMARK FAMILY OF FUNDS PERFORMANCE INFORMATION The Fund offers two classes of shares: Class I Shares and Class II Shares. Class I Shares of the Fund are offered to the general public. Class II Shares of the Fund are offered to certain retirement and profit sharing plans. NEITHER THE BAR CHART NOR THE PERFORMANCE TABLE SHOWN BELOW IS INTENDED TO INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns.
CLASS I SHARES Total Returns for Years Ended December 31 (%) [BAR CHART APPEARS HERE:] 1996 15.29% 1997 26.56% 1998 12.39% 1999 7.90% 2000 19.89%
Since 1996, the highest and lowest quarterly returns for the Fund's Class I Shares were: - - Highest quarterly return: 10.5%, during the quarter ended December 31, 1998 - - Lowest quarterly return: -6.9%, during the quarter ended September 30, 1998 The table below shows how the Fund's average annual total returns for one and five years and since inception compare with the Lipper Balanced Fund Index, an index of 30 balanced funds. All returns reflect reinvested dividends.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 (%) - -------------------------------------------------------------------------------- 1 5 Since Inception Year Year November 1, 1995 - -------------------------------------------------------------------------------- Equity and Income Fund - Class I 19.89%* 16.21% 16.18% Lipper Balanced Fund Index Composite 2.39% 11.78% 12.38%
* During the year ended December 31, 2000, initial public offerings ("IPOs") contributed 1.14% to the performance of the Fund. As the IPO environment changes and the total assets of the Fund grow, the impact of IPOs on the Fund's performance is expected to diminish. Information is not available for Class II Shares, since Class II Shares have not been sold to investors for a full calendar year. PROSPECTUS 15 FEES AND EXPENSES Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment) - ----------------------------------------------------------------------------------- Expense Class I Class II - ----------------------------------------------------------------------------------- Maximum sales charge (load) None None imposed on purchases Maximum deferred sales charge (load) None None Redemption fee (as a percentage None None of amount redeemed) Exchange fee None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - ----------------------------------------------------------------------------------- Class I Class II - ----------------------------------------------------------------------------------- Management fees .75% .79% Distribution (12b-1) fees None None Other expenses (including service fees) .49 .53 - ----------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 1.24% 1.32%
*Until November 6, 2000, the Adviser agreed to reimburse Class I and Class II Shares of the Fund, respectively, to the extent that the annual ordinary operating expenses exceeded 1.50% of the average net assets of Class I Shares, or 1.75% of the average net assets of Class II Shares. Effective November 6, 2000 until January 31, 2002, the Adviser has contractually agreed to reimburse Class I Shares of the Fund and Class II Shares of the Fund, respectively, to the extent that the annual ordinary operating expenses exceed 1.00% of the average net assets of Class I Shares, or 1.25% of the average net assets of Class II Shares. A reimbursement lowers the expense ratio and increases overall return to investors. EXAMPLE. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:
- ----------------------------------------------------------------------------------- Class I Class II - ----------------------------------------------------------------------------------- 1 Year $ 130 $ 130 3 Years 400 410 5 Years 690 720 10 Years 1,510 1,590
16 THE OAKMARK FAMILY OF FUNDS THE OAKMARK GLOBAL FUND INVESTMENT OBJECTIVE Global Fund seeks long-term capital appreciation. PRINCIPAL INVESTMENT STRATEGY Global Fund invests primarily in common stocks of U.S. and non-U.S. companies. The Fund invests in the securities of companies located in at least three countries. Typically, the Fund invests between 20-60% of its total assets in securities of U.S. companies and between 40-80% of its total assets in securities of non-U.S. companies. The Fund's foreign investments include foreign government obligations and foreign common stock. There are no geographic limits on the Fund's foreign investments, but the Fund does not expect to invest more than 15% of its assets in securities of companies based in emerging markets. PRINCIPAL INVESTMENT RISKS Although Global Fund makes every effort to achieve its objective of long-term capital appreciation, it cannot guarantee it will attain that objective. Following are the principal risks of investing in the Fund: NOT A BANK DEPOSIT. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. COMMON STOCKS. The Fund invests mostly in common stocks, which are a type of equity security that represents an ownership interest in a corporation. One of the risks of investing in common stock is that a company's stock value may go up or down depending on the company's business success or other economic or market factors. This potential for fluctuation is called market risk and can affect the value of your shares of the Fund. When you sell your shares of the Fund, they may be worth more or less than you paid for them. FOREIGN SECURITIES. Investing in foreign securities presents risks that in some ways may be greater than the risks of investing in U.S. securities. These additional risks include currency exchange rate fluctuation, less available public information about companies, less stringent regulatory standards, lack of uniform accounting, auditing and financial reporting standards, and country risks including less market liquidity, high inflation rates, unfavorable market practices, and political instability. VALUE STYLE. Investing in "value" stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods. FOR MORE INFORMATION ON RISKS, SEE "HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES--RISK FACTORS." PROSPECTUS 17 IS THE FUND RIGHT FOR ME? You should consider an investment in Global Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks. Although past performance of the Fund cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment. The Fund is not designed for investors whose primary objective is income. PERFORMANCE INFORMATION The Fund offers two classes of shares: Class I Shares and Class II Shares. Class I Shares of the Fund are offered to the general public. Class II Shares of the Fund are offered to certain retirement and profit sharing plans. NEITHER THE BAR CHART NOR THE PERFORMANCE TABLE SHOWN BELOW IS INTENDED TO INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns.
CLASS I SHARES Total Returns for Years Ended December 31 (%) [BAR CHART APPEARS HERE:] 2000 15.84%
Since 2000, the highest and lowest quarterly returns for the Fund's Class I Shares were: - - Highest quarterly return: 5.86%, during the quarter ended December 31, 2000 - - Lowest quarterly return: 0.80%, during the quarter ended March 31, 2000 18 THE OAKMARK FAMILY OF FUNDS The table below shows how the Fund's average annual total returns for one year and since inception compare with the Morgan Stanley Capital International World Index, an unmanaged index which includes countries throughout the world, in proportion to world stock market capitalization. All returns reflect reinvested dividends.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 (%) - ------------------------------------------------------------------------- 1 Since Inception Year August 4, 1999 - ------------------------------------------------------------------------- Global Fund - Class I 15.84%* 10.75% M.S.C.I. World Index -13.18% 0.19%
*During the year ended December 31, 2000, initial public offerings ("IPOs") contributed 4.18% to the performance of the Fund. As the IPO environment changes and the total assets of the Fund grow, the impact of IPOs on the Fund's performance is expected to diminish. Information is not available for Class II Shares, since Class II Shares have not been sold to investors for a full calendar year. FEES AND EXPENSES Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment) - --------------------------------------------------------------------------------- Expense Class I Class II - --------------------------------------------------------------------------------- Maximum sales charge (load) None None imposed on purchases Maximum deferred sales charge (load) None None Redemption fee (as a percentage 2% of redemption proceeds on None of amount redeemed) shares held for less than 90 days Exchange fee None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - --------------------------------------------------------------------------------- Class I Class II - --------------------------------------------------------------------------------- Management fees 1.20% 1.20% Distribution (12b-1) fees None None Other expenses (including service fees) .76 1.01 - --------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 1.96% 2.21% Expense reimbursement* .21 .21 - --------------------------------------------------------------------------------- Net expenses 1.75% 2.00%
*The Adviser has contractually agreed to reimburse Class I and Class II Shares of the Fund, respectively, to the extent that the annual ordinary operating expenses exceed 1.75% of the average net assets of Class I Shares, or 2.00% of the average net assets of Class II Shares. The agreement is effective through January 31, 2002. A reimbursement lowers the expense ratio and increases overall return to investors. PROSPECTUS 19 EXAMPLE. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:
- ------------------------------------------------------------ Class I Class II - ------------------------------------------------------------ 1 Year $ 180 $ 200 3 Years 550 630 5 Years 950 1,080 10 Years 2,070 2,330
20 THE OAKMARK FAMILY OF FUNDS THE OAKMARK INTERNATIONAL FUND INVESTMENT OBJECTIVE International Fund seeks long-term capital appreciation. PRINCIPAL INVESTMENT STRATEGY International Fund invests primarily in common stocks of non-U.S. companies. The Funds may invest in mature markets (examples are Japan, Canada, and the United Kingdom) and in less developed markets (examples are Mexico, Brazil, and Korea). Ordinarily, the Funds will invest in the securities of at least five countries outside the U.S. There are no geographic limits on the Fund's foreign investments, but the Fund does not expect to invest more than 35% of its assets in securities of companies based in emerging markets. PRINCIPAL INVESTMENT RISKS Although International Fund makes every effort to achieve its objective of long-term capital appreciation, it cannot guarantee it will attain that objective. Following are the principal risks of investing in the Fund: NOT A BANK DEPOSIT. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. COMMON STOCKS. The Fund invests mostly in common stocks, which are a type of equity security that represents an ownership interest in a corporation. One of the risks of investing in common stock is that a company's stock value may go up or down depending on the company's business success or other economic or market factors. This potential for fluctuation is called market risk and can affect the value of your shares of the Fund. When you sell your shares of the Fund, they may be worth more or less than you paid for them. FOREIGN SECURITIES. Investing in foreign securities presents risks that in some ways may be greater than the risks of investing in U.S. securities. These additional risks include currency exchange rate fluctuation, less available public information about companies, less stringent regulatory standards, lack of uniform accounting, auditing and financial reporting standards, and country risks including less market liquidity, high inflation rates, unfavorable market practices, and political instability. VALUE STYLE. Investing in "value" stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods. FOR MORE INFORMATION ON RISKS, SEE "HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES--RISK FACTORS." PROSPECTUS 21 IS THE FUND RIGHT FOR ME? You should consider an investment in International Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks. Although past performance of the Fund cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment. The Fund is not designed for investors whose primary objective is income. PERFORMANCE INFORMATION The Fund offers two classes of shares: Class I Shares and Class II Shares. Class I Shares of the Fund are offered to the general public. Class II Shares of the Fund are offered to certain retirement and profit sharing plans. NEITHER THE BAR CHART NOR THE PERFORMANCE TABLE SHOWN BELOW IS INTENDED TO INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns. [BAR CHART]
CLASS I SHARES Total Returns for Years Ended December 31 (%) 1993 53.58% 1994 -9.06% 1995 8.32% 1996 28.02% 1997 3.33% 1998 -7.01% 1999 39.47% 2000 12.50%
Since 1993, the highest and lowest quarterly returns for the Fund's Class I Shares were: - - Highest quarterly return: 21.0%, during the quarter ended June 30, 1999 - - Lowest quarterly return: -19.4%, during the quarter ended September 30, 1998 22 THE OAKMARK FAMILY OF FUNDS The table below shows how the Fund's average annual total returns for one and five years and since inception compare with the Morgan Stanley Capital International World ex U.S. Index, an unmanaged index which includes countries throughout the world, excluding the U.S. and Canada, in proportion to world stock market capitalization. All returns reflect reinvested dividends.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 (%) - --------------------------------------------------------------------------------- 1 5 Since Year Years Inception* - --------------------------------------------------------------------------------- International Fund - Class I 12.50% 14.04% 13.91% International Fund - Class II 12.21% -- 15.95% M.S.C.I. World ex U.S. Index -13.37% 7.53% 9.96%
*Inception dates for Class I Shares and Class II Shares of the Fund are September 30, 1992 and November 4, 1999, respectively. FEES AND EXPENSES Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment) - --------------------------------------------------------------------------------- Expense Class I Class II - --------------------------------------------------------------------------------- Maximum sales charge (load) None None imposed on purchases Maximum deferred sales charge (load) None None Redemption fee (as a percentage 2% of redemption proceeds on None of amount redeemed) shares held for less than 90 days Exchange fee None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - -------------------------------------------------------------------------------- Class I Class II - -------------------------------------------------------------------------------- Management fees 1.00% .97% Distribution (12b-1) fees None None Other expenses (including service fees) .30 .53 - -------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 1.30% 1.50%
EXAMPLE. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:
- ----------------------------------------------------------- Class I Class II - ----------------------------------------------------------- 1 Year $ 130 $ 150 3 Years 410 470 5 Years 710 820 10 Years 1,560 1,790
PROSPECTUS 23 THE OAKMARK INTERNATIONAL SMALL CAP FUND INVESTMENT OBJECTIVE International Small Cap Fund seeks long-term capital appreciation. PRINCIPAL INVESTMENT STRATEGY International Small Cap Fund invests primarily in common stocks of non-U.S. small cap companies. A small cap company is one whose market capitalization is no larger than the largest market capitalization of the companies included in the S&P Small Cap 600 Index ($3.337 billion as of December 31, 2000). The mean of the S&P Small Cap 600 Index was $583 million as of December 31, 2000. Over time, the largest market capitalization of the companies included in the S&P Small Cap 600 Index will change. As it does, the size of the companies in which the Fund invests may change. The Fund may invest in mature markets (examples are Japan, Canada, and the United Kingdom) and in less developed markets (examples are Mexico, Brazil, and Korea). Ordinarily, the Fund will invest in the securities of at least five countries outside the U.S. There are no geographic limits on the Fund's foreign investments, but the Fund does not expect to invest more than 35% of its assets in securities of companies based in emerging markets. PRINCIPAL INVESTMENT RISKS Although International Small Cap Fund makes every effort to achieve its objective of long-term capital appreciation, it cannot guarantee it will attain that objective. Following are the principal risks of investing in the Fund: NOT A BANK DEPOSIT. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. COMMON STOCKS. The Fund invests mostly in common stocks, which are a type of equity security that represents an ownership interest in a corporation. One of the risks of investing in common stock is that a company's stock value may go up or down depending on the company's business success or other economic or market factors. This potential for fluctuation is called market risk and can affect the value of your shares of the Fund. When you sell your shares of the Fund, they may be worth more or less than you paid for them. FOREIGN SECURITIES. Investing in foreign securities presents risks that in some ways may be greater than the risks of investing in U.S. securities. These additional risks include currency exchange rate fluctuation, less available public information about companies, less stringent regulatory standards, lack of uniform accounting, auditing and financial reporting standards, and country risks including less market liquidity, high inflation rates, unfavorable market practices, and political instability. 24 THE OAKMARK FAMILY OF FUNDS SMALL CAP STOCKS. Small cap stocks typically are more volatile and may be less liquid than large cap stocks. Small cap companies may have a shorter history of operations and a smaller market for their shares. VALUE STYLE. Investing in "value" stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods. FOR MORE INFORMATION ON RISKS, SEE "HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES--RISK FACTORS." IS THE FUND RIGHT FOR ME? You should consider an investment in International Small Cap Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks. Although past performance of the Fund cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment. The Fund is not designed for investors whose primary objective is income. PERFORMANCE INFORMATION The Fund offers two classes of shares: Class I Shares and Class II Shares. Class I Shares of the Fund are offered to the general public. Class II Shares of the Fund are offered to certain retirement and profit sharing plans. NEITHER THE BAR CHART NOR THE PERFORMANCE TABLE SHOWN BELOW IS INTENDED TO INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns. [BAR CHART]
CLASS I SHARES Total Returns for Years Ended December 31 (%) 1996 25.01% 1997 -19.91% 1998 9.20% 1999 53.77% 2000 -8.85%
Since 1996, the highest and lowest quarterly returns for the Fund's Class I Shares were: - - Highest quarterly return: 28.2%, during the quarter ended December 31, 1998 - - Lowest quarterly return: -23.9%, during the quarter ended December 31, 1997 PROSPECTUS 25 The table below shows how the Fund's average annual total returns for one and five years and since inception compare with the Morgan Stanley Capital International World ex U.S. Index, an unmanaged index which includes countries throughout the world, excluding the U.S. and Canada, in proportion to world stock market capitalization. All returns reflect reinvested dividends.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 (%) - ---------------------------------------------------------------------------------- 1 5 Since Inception Year Year November 1, 1995 - ---------------------------------------------------------------------------------- International Small Cap Fund - Class I -8.85% 8.90% 7.81% M.S.C.I. World ex U.S. Index -13.37% 7.53% 8.66%
Information is not available for Class II Shares, since Class II Shares have not been sold to investors for a full calendar year. FEES AND EXPENSES Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment) - --------------------------------------------------------------------------------- Expense Class I Class II - --------------------------------------------------------------------------------- Maximum sales charge (load) None None imposed on purchases Maximum deferred sales charge (load) None None Redemption fee (as a percentage 2% of redemption proceeds on None of amount redeemed) shares held for less than 90 days Exchange fee None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - --------------------------------------------------------------------------------- Class I Class II - --------------------------------------------------------------------------------- Management fees 1.27% 1.27% Distribution (12b-1) fees None None Other expenses (including service fees) .49 .74 - --------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 1.76% 2.01%
26 THE OAKMARK FAMILY OF FUNDS EXAMPLE. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:
- ---------------------------------------------------------- Class I Class II - ---------------------------------------------------------- 1 Year $ 180 $ 200 3 Years 550 630 5 Years 950 1,080 10 Years 2,070 2,340
PROSPECTUS 27 HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES INVESTMENT TECHNIQUES In addition to the principal investment strategies described earlier in this prospectus, the Funds may employ the following techniques in pursuing their investment objectives. EQUITY SECURITIES (APPLICABLE TO ALL FUNDS). The types of equity securities in which each Fund may invest include common and preferred stocks and warrants or other similar rights and convertible securities. The chief consideration in selecting an equity security for a Fund is the size of the discount of the market price relative to the Adviser's determination of the true business value of the security. DEBT SECURITIES (APPLICABLE TO ALL FUNDS). Each Fund may invest in debt securities of both governmental and corporate issuers. Each of Oakmark Fund, Select Fund, Small Cap Fund and Global Fund may invest up to 25% of its assets, Equity and Income Fund may invest up to 20% of its assets, and each of International Fund and International Small Cap Fund may invest up to 10% of its assets (valued at the time of investment) in debt securities that are rated below investment grade (commonly called junk bonds), without a minimum rating requirement. A description of the ratings used by S&P and Moody's is included as an appendix to the Statement of Additional Information. CURRENCY EXCHANGE TRANSACTIONS (APPLICABLE TO ALL FUNDS). Each Fund may engage in currency exchange transactions either on a spot (i.e., cash) basis at the spot rate for purchasing or selling currency prevailing in the foreign exchange market or through a forward currency exchange contract ("forward contract"). A forward contract is an agreement to purchase or sell a specified currency at a specified future date (or within a specified time period) and price set at the time of the contract. Forward contracts are usually entered into with banks and broker-dealers, are not exchange-traded and are usually for less than one year, but may be renewed. Forward currency transactions may involve currencies of the different countries in which a Fund may invest, and serve as hedges against possible variations in the exchange rate between these currencies. The Funds' forward currency transactions are limited to transaction hedging and portfolio hedging involving either specific transactions or actual or anticipated portfolio positions. Transaction hedging is the purchase or sale of a forward contract with respect to a specific receivable or payable of a Fund accruing in connection with the purchase or sale of portfolio securities. Portfolio hedging is the use of a forward contract with respect to an actual or anticipated portfolio security position denominated or quoted in a particular currency. The Funds may engage in portfolio hedging with respect to the currency of a particular country in amounts approximating actual or anticipated positions in securities denominated in such currency. When a Fund owns or anticipates owning securities 28 THE OAKMARK FAMILY OF FUNDS in countries whose currencies are linked, the Fund may aggregate such positions as to the currency hedged. Although forward contracts may be used to protect a Fund from adverse currency movements, the use of such hedges may reduce or eliminate the potentially positive effect of currency revaluations on the Fund's total return. SHORT-TERM INVESTMENTS (APPLICABLE TO ALL FUNDS). In seeking to achieve its investment objective, a Fund ordinarily invests on a long-term basis, but on occasion may also invest on a short-term basis, for example, where short-term perceptions have created a significant gap between price and value. Occasionally, securities purchased on a long-term basis may be sold within twelve months after purchase in light of a change in the circumstances of a particular company or industry or in light of general market or economic conditions or if a security achieves its price target in an unexpected shorter period. To the extent that investments meeting a Fund's criteria for investment are not available, or when a Fund considers a temporary defensive posture advisable in response to adverse market, economic, political, or other conditions, the Fund may invest without limitation in high-quality corporate debt obligations of U.S. companies or U.S. government obligations, or may hold cash in domestic or foreign currencies or invest in domestic or foreign money market securities. During those periods, the Fund's assets may not be invested in accordance with its regular strategy, and the Fund may not achieve its investment objective. CASH RESERVES (APPLICABLE TO ALL FUNDS). Under ordinary circumstances, the Funds are substantially fully invested. At times, however, to meet liquidity needs or for temporary defensive purposes, each Fund may hold cash in domestic and foreign currencies and may invest in domestic and foreign money market securities. During those periods, a Fund's assets may not be invested in accordance with its regular strategy and the Fund may not achieve its investment objective. RISK FACTORS In addition to the principal risks described earlier in this prospectus, you may be subject to the following risks if you invest in the Funds. GENERAL RISKS (APPLICABLE TO ALL FUNDS). All investments, including those in mutual funds, have risks, and no one investment is suitable for all investors. Each Fund is intended for long-term investors. Only Equity and Income Fund is intended to present a balanced investment program between growth and income. MARKET RISK (APPLICABLE TO ALL FUNDS). Each Fund is subject to the market risk that always comes with investments in common stock. Stock prices may fluctuate widely over short or extended periods in response to company, market, or economic news. Stock markets also tend to move in cycles, with periods of rising stock prices and periods of falling stock prices. Although each Fund (other than Select Fund) is diversified, each Fund, except Select Fund, generally intends to limit its holdings to approximately 30 to 60 stocks. Select Fund is a non-diversified fund and usually holds between 15 to 20 stocks in its portfolio. The appreciation or depreciation of any one stock held by a Fund will have a greater impact on the Fund's net asset PROSPECTUS 29 value than it would if the Fund invested in a larger number of stocks. Although that strategy has the potential to generate attractive returns over time, it also increases a Fund's volatility. SMALL AND MID CAP COMPANIES (APPLICABLE TO ALL FUNDS, EXCEPT OAKMARK FUND AND EQUITY AND INCOME FUND). During some periods, the securities of small and mid cap companies, as a class, have performed better than the securities of large companies, and in some periods they have performed worse. Stocks of small and mid cap companies tend to be more volatile and less liquid than stocks of large companies. Small and mid cap companies, as compared to larger companies, may have a shorter history of operations, may not have as great an ability to raise additional capital, may have a less diversified product line making them susceptible to market pressure, and may have a smaller public market for their shares. INTERNATIONAL INVESTING (APPLICABLE TO GLOBAL FUND, INTERNATIONAL FUND AND INTERNATIONAL SMALL CAP FUND). International investing allows you to achieve greater diversification and to take advantage of changes in foreign economies and market conditions. Many foreign economies have, from time to time, grown faster than the U.S. economy, and the returns on investments in those countries have exceeded those of similar U.S. investments, although there can be no assurance that those conditions will continue. You should understand and consider carefully the greater risks involved in investing internationally. Investing in securities of non-U.S. companies, which are generally denominated in foreign currencies, and utilization of forward foreign currency exchange contracts involve both opportunities and risks not typically associated with investing in U.S. securities. These include: fluctuations in exchange rates of foreign currencies; possible imposition of exchange control regulation or currency restrictions that would prevent cash from being brought back to the United States; less public information with respect to companies; less governmental supervision of stock exchanges, securities brokers and companies; different accounting, auditing and financial reporting standards; different settlement periods and trading practices; less liquidity and frequently greater price volatility in foreign markets; imposition of foreign taxes; and sometimes less advantageous legal, operational and financial protections applicable to foreign subcustodial arrangements. Although the Funds try to invest in companies located in countries having stable political environments, there is the possibility of restriction of foreign investment, expropriation of assets, or confiscatory taxation, seizure or nationalization of foreign bank deposits or other assets, establishment of exchange controls, the adoption of foreign government restrictions, or other political, social or diplomatic developments that could adversely affect investment in these countries. Economies in individual emerging markets may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payments positions. Many emerging market countries have experienced high rates of inflation for many years, which has had and may continue to have very negative effects on the economies and securities markets of those countries. 30 THE OAKMARK FAMILY OF FUNDS The securities markets of emerging countries are substantially smaller, less developed, less liquid and more volatile than the securities markets of the United States and other more developed countries. Disclosure and regulatory standards in many respects are less stringent than in the U.S. and other major markets. There also may be a lower level of monitoring and regulation of emerging markets and the activities of investors in such markets, and enforcement of existing regulations has been extremely limited. The Funds may invest in ADRs, EDRs or GDRs that are not sponsored by the issuer of the underlying security. To the extent it does so, a Fund would probably bear its proportionate share of the expenses of the depository and might have greater difficulty in receiving copies of the issuer's shareholder communications than would be the case with a sponsored ADR, EDR or GDR. The cost of investing in securities of non-U.S. issuers typically is higher than the cost of investing in U.S. securities. International Fund, International Small Cap Fund and Global Fund provide an efficient way for an individual to participate in foreign markets, but their expenses, including advisory and custody fees, are higher than for a typical domestic equity fund. INTEREST RATE RISK (APPLICABLE TO ALL FUNDS). Each Fund may invest in debt securities of both governmental and corporate issuers. A decline in prevailing levels of interest rates generally increases the value of debt securities in a Fund's portfolio, while an increase in rates usually reduces the value of those securities. As a result, to the extent that a Fund invests in debt securities, interest rate fluctuations will affect its net asset value, but not the income it receives from debt securities it owns. In addition, if the debt securities contain call, prepayment, or redemption provisions, during a period of declining interest rates, those securities are likely to be redeemed, and the Fund would probably be unable to replace them with securities having as great a yield. CREDIT RISK (APPLICABLE TO ALL FUNDS). Neither International Fund nor International Small Cap Fund will invest more than 10% of its respective total assets in securities rated below investment grade or, if unrated, that are considered by the Adviser to be of comparable quality, Equity and Income Fund will not invest more than 20% of its total assets in such securities, and each of the other Funds will not invest more than 25% of its total assets in such securities. Investment in medium- and lower-grade debt securities involves greater risk, including the possibility of issuer default or bankruptcy. Lower-grade debt securities (commonly called "junk bonds") are obligations of companies rated BB or lower by S&P or Ba or lower by Moody's. Lower-grade debt securities are considered speculative and may be in poor standing or actually in default. Medium-grade debt securities are those rated BBB by S&P or Baa by Moody's. Securities so rated are considered to have speculative characteristics. An economic downturn could severely disrupt the market in medium and lower grade debt securities and adversely affect the value of outstanding bonds and the ability of the issuers to repay principal and interest. In addition, lower-quality bonds are less sensitive to interest rate changes than higher-quality instruments and generally are more sensitive to adverse economic changes or individual corporate developments. During a period of adverse economic changes, including a period of rising interest rates, issuers of such bonds may experience difficulty in servicing their principal and interest payment obligations. PROSPECTUS 31 LIQUIDITY RISK (APPLICABLE TO ALL FUNDS). The market for medium- and lower-grade debt securities tends to be less broad than the market for higher-quality debt securities. The market for unrated debt securities is even narrower. During periods of thin trading in these markets, the spread between bid and asked prices is likely to increase significantly, and a Fund may have greater difficulty selling its portfolio of these debt securities. The market value of these securities and their liquidity may be affected by adverse publicity and investor perceptions. NON-DIVERSIFICATION (APPLICABLE TO SELECT FUND). As a "non-diversified" fund, Select Fund is not limited under the Investment Company Act of 1940 in the percentage of its assets that it may invest in any one company. However, the Fund intends to comply with the diversification standards applicable to regulated investment companies under the Internal Revenue Code of 1986. In order to meet those standards, among other requirements, at the close of each quarter of its taxable year (a) at least 50% of the value of the Fund's total assets must be represented by one or more of the following: (i) cash and cash items, including receivables; (ii) U.S. government securities; (iii) securities of other regulated investment companies; and (iv) securities (other than those in items (ii) and (iii) above) of any one or more issuers as to which the Fund's investment in an issuer does not exceed 5% of the value of the Fund's total assets (valued at the time of investment); and (b) not more than 25% of its total assets (valued at the time of investment) may be invested in the securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies). Since Select Fund may invest more than 5% of its assets in a single portfolio security, the appreciation or depreciation of such a security will have a greater impact on the net asset value of the Fund than would a smaller investment in that security, and the net asset value per share of the Fund can be expected to fluctuate more than would the net asset value of a comparable "diversified" fund. CHANGE IN OBJECTIVE Each Fund's investment objective may be changed by the board of trustees without shareholder approval. Shareholders will receive at least 30 days' written notice of any change in a Fund's objective. If there is a change in investment objective, you should consider whether that Fund remains an appropriate investment in light of your then current financial position and needs. There can be no assurance that a Fund will achieve its investment objective. 32 THE OAKMARK FAMILY OF FUNDS MANAGEMENT OF THE FUNDS The Oakmark Family of Funds' investments and business affairs are managed by Harris Associates L.P. The Adviser also serves as investment adviser to individuals, trusts, retirement plans, endowments and foundations, and manages numerous private partnerships. Together with a predecessor, the Adviser has advised and managed mutual funds since 1970. The Adviser's address is Two North LaSalle Street, Chicago, Illinois 60602-3790. Subject to the overall authority of the board of trustees, the Adviser furnishes continuous investment supervision and management to the Funds and also furnishes office space, equipment, and management personnel. Each Fund pays a management fee to the Adviser for serving as investment adviser and for providing administrative services. The fee is determined as a percentage of average daily net assets. For the fiscal year ended September 30, 2000, the management fees paid by the Funds, as a percentage of average net assets, were:
FUND CLASS I CLASS II - -------------------------------------------------------------------------------- Oakmark Fund 1.01% n/a* Select Fund 0.97 1.00** Small Cap Fund 1.28 n/a* Equity and Income Fund 0.75 0.75** Global Fund 0.99 n/a* International Fund 1.00 1.00** International Small Cap Fund 1.27 n/a*
- ------------------- * No Class II Shares of Oakmark Fund, Small Cap Fund, Global Fund and International Small Cap Fund were outstanding as of September 30, 2000. ** The amount shown for Class II Shares of Select Fund, Equity and Income Fund and International Fund, which commenced operations on December 31, 1999, July 13, 2000 and November 4, 1999, respectively, is the actual annual management fee as a percentage of average net assets. For the period of December 31, 1999 through September 30, 2000, Select Fund paid the Adviser fees at the annual rate of 0.96% of average net assets. For the period of July 13, 2000 through September 30, 2000, Equity and Income Fund paid the Adviser fees at the annual rate of 0.79% of average net assets. For the period of November 4, 1999 to September 30, 2000, International Fund paid the Adviser fees at the annual rate of 0.97%. The Adviser has contractually agreed to reimburse each Fund to the extent that its annual ordinary operating expenses of a class exceed the following percentages of the average net assets of that class:
FUND CLASS I CLASS II - -------------------------------------------------------------------------------- Oakmark Fund 1.50% 1.75% Select Fund 1.50 1.75 Small Cap Fund 1.50 1.75 Equity and Income Fund 1.00 1.25 International Fund 2.00 2.25 International Small Cap Fund 2.00 2.25 Global Fund 1.75 2.00
Each such agreement is effective through January 31, 2002. PROSPECTUS 33 Oakmark Fund is managed by William C. Nygren, C.F.A., and Kevin G. Grant, C.F.A. Mr. Nygren joined the Adviser as an analyst in 1983, and was the Adviser's Director of Research from September 1990 to March 1998. Previously, he had been an analyst with Northwestern Mutual Life Insurance Company. He holds an M.S. in Finance from the University of Wisconsin (1981) and a B.S. in Accounting from the University of Minnesota (1980). Mr. Grant joined the Adviser as an analyst in 1988, and has been a senior investment analyst since 1994. He holds an M.B.A. in Finance from Loyola University (1991) and a B.S. in Computer Science from the University of Wisconsin-Madison (1987). Select Fund is managed by Mr. Nygren and Henry R. Berghoef, C.F.A. Mr. Berghoef joined the Adviser as an analyst in 1994 and has been a senior investment analyst since 1994. He holds an M.B.A. from George Washington University (1985), an M.A. in International Studies from Johns Hopkins University (1974), and a B.A. in History from Calvin College (1971). Small Cap Fund is managed by James P. Benson, C.F.A. and Clyde S. McGregor, C.F.A. Mr. Benson joined the Adviser as an investment analyst in 1997. Prior thereto, he had been an Executive Vice-President and Director of Equity Research for Ryan Beck & Co. Mr. Benson holds a M.M. in Finance from Northwestern University (1981) and a B.A. in Economics and Computer Science from Westminster College (1979). Mr. McGregor joined the Adviser as an analyst in 1981 and began managing portfolios in 1986. He holds an M.B.A. in Finance from the University of Wisconsin-Madison (1977) and a B.A. in Economics and Religion from Oberlin College (1974). Equity and Income Fund is managed by Mr. McGregor and Edward A. Studzinski, C.F.A. Mr. Studzinski joined the Adviser as an analyst in 1995. Prior to joining the Adviser, Mr. Studzinski was Vice President and Investment Officer at Mercantile National Bank of Indiana. He holds an M.M. in Marketing and Finance from Northwestern University (1985), a J.D. from Duke University (1974), and an A.B. in History from Boston College (1971). Global Fund is managed by Gregory L. Jackson and Michael J. Welsh, C.F.A. and C.P.A. Mr. Jackson is responsible for the day-to-day management of the Fund's domestic portfolio, and Mr. Welsh manages the day-to-day affairs of the Fund's foreign portfolio. Mr. Jackson joined the adviser in July of 1998. He holds a B.S. in Finance from the University of Utah, and an MBA in Finance from the University of Chicago. Previously he had been a portfolio manager/analyst with Yacktman Asset Management. Mr. Welsh joined the adviser as an international analyst in 1992. Previously, he had been a senior associate, valuation services, with Coopers & Lybrand. He holds an M.M. in Finance from Northwestern University (1993) and a B.S. in Accounting from the University of Kansas (1985). International Fund is managed by David G. Herro, C.F.A. and Mr. Welsh. Mr. Herro joined the Adviser in 1992 as a portfolio manager and analyst. Previously, he had been an international portfolio manager for the State of Wisconsin Investment Board and The Principal Financial Group. He holds an M.A. in Economics from the University of Wisconsin - Milwaukee (1985) and a B.S. in Business and Economics from the University of Wisconsin - Platteville (1983). International Small Cap Fund is managed by Mr. Herro and Mr. Welsh. 34 THE OAKMARK FAMILY OF FUNDS INVESTING WITH THE OAKMARK FAMILY OF FUNDS The Funds are "no-load" mutual funds, which means that they do not impose any commission or sales charge when shares are purchased or sold. However, each Fund except Oakmark Fund and Equity and Income Fund does impose a 2% redemption fee on redemptions of Class I Shares held for less than 90 days. SEE "INVESTING WITH THE OAKMARK FAMILY OF FUNDS--90-DAY REDEMPTION FEE--CLASS I SHARES." ELIGIBILITY TO BUY SHARES Each Fund is available for purchase only by residents of the United States, Puerto Rico, Guam, and the U.S. Virgin Islands. SHARE CLASSES The Funds offer two classes of shares: Class I Shares and Class II Shares. Each class is offered at net asset value per share of that class. Class I Shares of a Fund are offered to members of the general public. Class II Shares of a Fund are offered to certain retirement plans, such as a 401(k), and profit sharing plans. The purchase of Class II Shares is contingent upon an agreement with the Fund(s). Class II Shares of a Fund pay a service fee at the annual rate of .25% of the average net assets of Class II Shares of the Fund. This service fee is paid to an administrator for performing the services associated with the administration of such retirement plans. If you invest in Class II Shares, the procedures by which you can buy and sell shares are governed by the terms of your retirement plan. Please contact your plan sponsor or service provider for information on how to buy and sell your Class II Shares. INVESTMENT MINIMUMS (Applies to Class I Shares Only)
TYPE OF ACCOUNT INITIAL INVESTMENT SUBSEQUENT INVESTMENT - -------------------------------------------------------------------------------- Regular investing account $1,000 $100 Traditional or Roth IRA 1,000 100 SIMPLE IRA Determined on Determined on a case by case basis a case by case basis Education IRA 500 100 Automatic Investment Plan 500 100 or Payroll Deduction Plan
PROSPECTUS 35 SHARE PRICE NET ASSET VALUE. The share price is also called the net asset value ("NAV") of a share. The NAV of a Class I or Class II share is determined by the Fund's custodian, State Street Bank and Trust Company, as of the close of regular session trading (currently 4:00 p.m., Eastern time) on the New York Stock Exchange ("NYSE") on any day on which the NYSE is open for trading. A Fund's NAV will not be calculated on days when the NYSE is closed, such as on Saturdays and Sundays and on certain holidays, as more fully discussed in the Statement of Additional Information under "Purchasing and Redeeming Shares." The NAV of Class I Shares of each Fund is determined by dividing the value of the assets attributable to Class I Shares of the Fund, less liabilities attributable to that class, by the number of Class I Shares outstanding. Similarly, the NAV of Class II Shares of each Fund is determined by dividing the value of the assets attributable to Class II Shares of the Fund, less liabilities attributable to that class, by the number of Class II Shares outstanding. Trading in the securities of non-U.S. issuers held in each Fund's portfolio takes place in various markets on days and at times other than when the NYSE is open for trading. Therefore, the calculation of the NAV does not take place at the same time as the prices of many of those portfolio securities are determined and the value of the Funds' portfolios may change on days when the Funds are not open for business and their shares are not being bought or sold. PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Class I Shares of a Fund is made at the NAV of Class I Shares next determined as follows: - - A purchase by check, wire transfer, electronic transfer or over the Internet is made at the NAV next determined after receipt by the Funds' transfer agent of your check or wire transfer or your electronic transfer investment instruction. - - A purchase THROUGH AN INTERMEDIARY, such as a broker-dealer, bank, retirement plan service provider, or retirement plan sponsor (called an "Intermediary") that IS a Fund's authorized agent for the receipt of orders is made at the NAV next determined after receipt of the order by the Intermediary. - - A purchase THROUGH AN INTERMEDIARY that IS NOT a Fund's authorized agent for the receipt of orders is made at the NAV next determined after receipt of your order by the Fund's transfer agent. Each purchase of Class II Shares of a Fund through an Intermediary is made at the NAV of Class II Shares next determined after receipt of the order by the Intermediary. Price information may be obtained by accessing the Oakmark Funds' website at www.oakmark.com or calling the Funds' automated line at 1-800-GROWOAK (1-800-476-9625). 36 THE OAKMARK FAMILY OF FUNDS GENERAL PURCHASING POLICIES You may OPEN AN ACCOUNT and ADD TO AN ACCOUNT by purchasing directly from the Fund(s) or through an Intermediary. - - If you buy shares of a Fund through Intermediaries, those Intermediaries may charge a fee for their services. Any such charge could constitute a substantial portion of a smaller account and may not be in your best interest. You may purchase shares of a Fund directly from the Fund without the imposition of any charges other than those described in this prospectus. SEE "HOW TO BUY CLASS I SHARES." - - Once your purchase order has been accepted, you may not cancel or revoke it; however, you may redeem the shares. The Funds may withhold redemption proceeds until they are reasonably satisfied they have received your payment. This confirmation process may take up to fifteen days. - - The Funds reserve the right to reject any purchase order that they determine not to be in the best interest of the Funds or their shareholders. The Funds will not honor requests for purchases or exchanges by shareholders they have reason to believe are "market-timers." Although the Funds will attempt to give prior notice of a suspension or termination of an exchange privilege when they are reasonably able to do so, the suspension or termination may be effective immediately, thereby preventing any uncompleted exchange. - - The Funds reserve the right at any time without prior notice to suspend, limit, modify or terminate any privilege, including the telephone exchange privilege, or its use in any manner by any person or class. GENERAL REDEMPTION POLICIES You may SELL YOUR SHARES by contacting the Fund(s) directly or through an Intermediary. - - The price at which your redemption order will be processed is the NAV next determined after proper redemption instructions are received. SEE "INVESTING WITH THE OAKMARK FAMILY OF FUNDS--SHARE PRICE--NET ASSET VALUE." - - The Funds cannot accept a redemption request that specifies a particular redemption date or price. - - Once your redemption order has been accepted, you may not cancel or revoke it. - - The Funds generally will mail redemption proceeds within seven days after receipt of your redemption request. However, the Funds may withhold redemption proceeds until they are reasonably satisfied they have received your payment for recently purchased shares. This confirmation process may take up to fifteen days. - - The Funds reserve the right at any time without prior notice to suspend, limit, modify or terminate any privilege, including the telephone exchange privilege, or its use in any manner by any person or class. PROSPECTUS 37 REDEMPTION IN KIND. The Funds generally intend to pay all redemptions in cash. Each Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of the Fund during any 90-day period for any one shareholder. Redemptions in excess of those amounts will normally be paid in cash, but may be paid wholly or partly by a distribution in kind of marketable securities. Brokerage costs may be incurred by a shareholder who receives securities and desires to convert them to cash. 90-DAY REDEMPTION FEE - CLASS I SHARES Each Fund except Oakmark Fund and Equity and Income Fund imposes a short-term trading fee on redemptions of Class I Shares held less than 90 days to offset two types of costs to the Fund caused by short-term trading: portfolio transaction and market impact costs associated with erratic redemption activity and administrative costs associated with processing redemptions. The fee is paid to each Fund and is 2% of the redemption value and is deducted from the redemption proceeds. The "first-in, first-out" (FIFO) method is used to determine the holding period, which means that if you bought shares on different days, the shares purchased first will be redeemed first for purposes of determining whether the short-term trading fee applies. Each Fund does NOT impose a redemption fee on a redemption of: - - shares acquired by reinvestment of dividends or distributions of a Fund; or - - shares held in an account of certain retirement plans or profit sharing plans or purchased through certain Intermediaries. 38 THE OAKMARK FAMILY OF FUNDS DISTRIBUTIONS AND TAXES DISTRIBUTIONS Each Fund distributes to its shareholders at least annually substantially all net investment income as dividends and any net capital gains realized from sales of the Fund's portfolio securities. All of your income dividends and capital gain distributions will be reinvested in additional shares unless you elect to have distributions paid by check. If any check from a Fund mailed to you is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in additional Fund shares. TAXES The following discussion of U.S. and foreign taxation applies only to U.S. shareholders and is not intended to be a full discussion of income tax laws and their effect. You may wish to consult your own tax advisor. EXCHANGES. If you perform an exchange transaction, it is considered a sale and purchase of shares for federal income tax purposes and may result in a capital gain or loss. DISTRIBUTIONS. Distributions from investment income (dividends) and net short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held your Fund shares. Distributions will be taxable to you whether received in cash or reinvested in Fund shares. The Trust will send you an annual statement to advise you as to the source of your distributions for tax purposes. If you are not subject to income taxation, you will not be required to pay tax on amounts distributed to you. BUYING INTO A DISTRIBUTION. Purchasing a Fund's shares in a taxable account shortly before a distribution by the Fund is sometimes called "buying into a distribution." You pay income taxes on a distribution whether you reinvest the distribution in shares of the Fund or receive it in cash. In addition, you pay taxes on the distribution whether the value of your investment decreased, increased or remained the same after you bought shares of the Fund. A Fund may build up capital gains during the period covered by a distribution (over the course of the year, for example) when securities in the fund's portfolio are sold at a profit. After subtracting any capital losses, the Fund distributes those gains to you and other shareholders, even if you did not own the shares when the gains occurred (if you did not hold the fund earlier in the year, for example), and you incur the full tax liability on the distribution. PROSPECTUS 39 FOREIGN INCOME TAXES. Investment income received by a Fund from sources within foreign countries may be subject to foreign income taxes withheld at the source. If a Fund pays nonrefundable taxes to foreign governments during the year, the taxes will reduce the Fund's dividends but will still be included in your taxable income. However, you may be able to claim an offsetting credit or deduction on your tax return for your share of foreign taxes paid by a Fund. BACKUP WITHHOLDING. To avoid the Federal income tax withholding of 31% (called "backup withholding") on dividends, distributions and redemption proceeds, you must furnish to the Funds your properly certified social security or other tax identification number. If you do not do so or the Internal Revenue Service informs the Fund that your tax identification number is incorrect, the Fund may be required to withhold Federal income tax at a rate of 31% from these payments to you. Because each Fund must promptly pay to the IRS all amounts withheld, it is usually not possible for a Fund to reimburse you for amounts withheld. You may claim the amount withheld as a credit on your federal income tax return. 40 THE OAKMARK FAMILY OF FUNDS FINANCIAL HIGHLIGHTS The following tables are intended to help you understand each Fund's financial performance during the last five years (or since it began operations, if less than five years). Certain information reflects financial results for a single Fund share. Total returns represent the rate you would have earned (or lost) on an investment, assuming reinvestment of all dividends and distributions. This information has been audited by Arthur Andersen LLP, independent public accountants, whose report, along with each Fund's financial statements, is included in the annual report and the Statement of Additional Information, which are available on request. For each year shown, all information is for the fiscal year ended September 30, unless otherwise noted. As of September 30, 2000, no Class II Shares of Oakmark Fund, Small Cap Fund, Global Fund and International Small Cap Fund had been issued. PROSPECTUS 41
- ------------------------------------------------------------------------------------------------------------- OAKMARK FUND - ------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period Eleven Months Ended Year Ended Year Ended September 30, September 30, October 31, 2000 1999 1998 1997(a) 1996 - ------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $34.37 $33.54 $41.21 $32.39 $28.47 Income from investment operations: Net investment income (loss) 0.49 0.36 0.47 0.36 0.34 Net gains or losses on securities (both realized and unrealized) (2.91) 2.51 (1.73) 10.67 4.70 -------------------------------------------------------- Total from investment operations (2.42) 2.87 (1.26) 11.03 5.04 Less distributions: Dividends (from net investment income) (0.26) (0.44) (0.40) (0.34) (0.28) Distributions (from capital gains) (4.74) (1.60) (6.01) (1.87) (0.84) -------------------------------------------------------- Total distributions (5.00) (2.04) (6.41) (2.21) (1.12) -------------------------------------------------------- Net asset value, end of period $26.95 $34.37 $33.54 $41.21 $32.39 ======================================================== Total return (7.55)% 7.98% (4.06)% 39.24%* 18.07% Ratios/supplemental data: Net assets, end of period ($ million) $2,038.7 $4,772.8 $6,924.0 $6,614.9 $3,933.9 Ratio of expenses to average net assets 1.21% 1.11% 1.08% 1.08%* 1.18% Ratio of net income (loss) to average net assets 1.42% 1.02% 1.22% 1.19%* 1.13% Portfolio turnover rate 50% 13% 43% 17% 24% - -------------------------------------------------------------------------------------------------------------
* DATA HAS BEEN ANNUALIZED. (a) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. 42 THE OAKMARK FAMILY OF FUNDS
- --------------------------------------------------------------------------------------------------- SELECT FUND - --------------------------------------------------------------------------------------------------- For a share outstanding throughout each period CLASS II CLASS I ------------ ------------------------------------------ December 31, Eleven 1999 through Year Ended Months Ended September 30, September 30, September 30, 2000 (a) 2000 1999 1998 1997 (b) - --------------------------------------------------------------------------------------------------- Net asset value, beginning of period $18.42 $20.92 $16.76 $16.34 $10.00 Income from investment operations: Net investment income (loss) 0.10 0.13 0.19 0.03 (0.01) Net gains or losses on securities (both realized and unrealized) 2.88 4.32 4.73 0.56 6.35 -------------------------------------------------------- Total from investment operations 2.98 4.45 4.92 0.59 6.34 Less distributions: Dividends (from net investment income) 0.00 (0.20) (0.05) 0.00 0.00 Distributions (from capital gains) 0.00 (3.72) (0.71) (0.17) 0.00 -------------------------------------------------------- Total distributions 0.00 (3.92) (0.76) (0.17) 0.00 -------------------------------------------------------- Net asset value, end of period $21.40 $21.45 $20.92 $16.76 $16.34 ======================================================== Total return 21.57%* 24.53% 30.07% 3.64% 69.16%* Ratios/supplemental data: Net assets, end of period ($million) $6.8 $1,772.0 $1,638.9 $1,227.9 $514.2 Ratio of expenses to average net assets 1.41%* 1.17% 1.16% 1.22% 1.12%* Ratio of net income (loss) to average net assets 0.59%* 0.76% 0.98% 0.17% (0.11)%* Portfolio turnover rate 69% 69% 67% 56% 37% - ---------------------------------------------------------------------------------------------------
* DATA HAS BEEN ANNUALIZED. (a) The date which Class II Shares were first sold to the public was December 31, 1999. (b) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. PROSPECTUS 43
- ------------------------------------------------------------------------------------------------------------ SMALL CAP FUND - ------------------------------------------------------------------------------------------------------------ For a share outstanding throughout each period Eleven Months Ended Year Ended Year Ended September 30, September 30, October 31, 2000 1999 1998 1997(a) 1996 - ------------------------------------------------------------------------------------------------------------ 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 0.14 (0.12) (0.01) (0.02) Net gains or losses on securities (both realized and unrealized) 1.22 1.20 (4.73) 7.16 3.21 ---------------------------------------------------------- Total from investment operations 1.22 1.34 (4.85) 7.15 3.19 Less distributions: Dividends (from net investment income) 0.00 0.00 0.00 0.00 0.00 Distributions (from capital gains) 0.00 (0.09) (2.86) 0.00 0.00 ---------------------------------------------------------- Total distributions 0.00 (0.09) (2.86) 0.00 0.00 ---------------------------------------------------------- Net asset value, end of period $15.10 $13.88 $12.63 $20.34 $13.19 ========================================================== Total return 8.79% 10.56% (26.37)% 59.14%* 31.94% Ratios/supplemental data: Net assets, end of period ($million) $248.7 $437.1 $618.0 $1,513.4 $218.4 Ratio of expenses to average net assets 1.50%(b) 1.48% 1.45% 1.37%* 1.61% Ratio of net income (loss) to average net assets (0.41)%(b) (0.44)% (0.40)% (0.25)%* (0.29)% Portfolio turnover rate 28% 68% 34% 27% 23% -----------------------------------------------------------------------------------------------------------
* DATA HAS BEEN ANNUALIZED. (a) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. (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:
- ------------------------------------------------------------------------------------------------------------ Year Ended September 30, 2000 - ------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 1.59% Ratio of net income (loss) to average net assets (0.50)%
44 THE OAKMARK FAMILY OF FUNDS
- ---------------------------------------------------------------------------------------------------------------- EQUITY AND INCOME FUND - ---------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period CLASS II CLASS I ------------ -------------------------------------------------- July 13, 2000 Eleven Year through Year Ended Months Ended Ended September 30, September 30, September 30, October 31, 2000(a) 2000 1999 1998 1997(b) 1996 - ---------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $15.51 $15.68 $13.99 $14.49 $11.29 $10.00 Income from investment operations: Net investment income (loss) 0.30 0.35 0.39 0.29 0.21 0.10 Net gains or losses on securities (both realized and unrealized) 0.68 2.28 1.72 0.04 3.24 1.19 --------------------------------------------------------------------- Total from investment operations 0.98 2.63 2.11 0.33 3.45 1.29 Less distributions: Dividends (from net investment income) 0.00 (0.45) (0.21) (0.24) (0.12) 0.00 Distributions (from capital gains) 0.00 (1.36) (0.21) (0.59) (0.13) 0.00 --------------------------------------------------------------------- Total distributions 0.00 (1.81) (0.42) (0.83) (0.25) 0.00 --------------------------------------------------------------------- Net asset value, end of period $16.49 $16.50 $15.68 $13.99 $14.49 $11.29 ===================================================================== Total return 30.34%* 18.51% 15.32% 2.57% 34.01%* 12.91% Ratios/supplemental data: Net assets, end of period ($million) $0.4 $54.5 $60.3 $57.7 $33.5 $13.8 Ratio of expenses to average net assets 1.32%* 1.24% 1.18% 1.31% 1.50%*(c) 2.50%(c) Ratio of net income (loss) to average net assets 2.59%* 3.04% 2.65% 2.39% 2.38%*(c) 1.21%(c) Portfolio turnover rate 87% 87% 81% 46% 53% 66% - ----------------------------------------------------------------------------------------------------------------
* DATA HAS BEEN ANNUALIZED. (a) The date which Class II Shares were first sold to the public was July 13, 2000. (b) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. (c) If the Fund had paid all of its expenses and there had been no expense reimbursement by the Adviser, the ratios would have been as follows:
- ---------------------------------------------------------------------------------------------------------------- Eleven Months Ended Year Ended September 30, 1997 October 31, 1996 - ---------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 1.70% 2.64% Ratio of net income (loss) to average net assets 2.18 1.08
PROSPECTUS 45 GLOBAL FUND For a share outstanding throughout each period
Year Ended Period Ended September 30, September 30, 2000 1999(a) - -------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.18 $10.00 Income from investment operations: Net investment income (loss) 0.11 0.01 Net gains or losses on securities (both realized and unrealized) 1.63 (0.83) --------------------------------------------------- Total from investment operations 1.74 (0.82) Less distributions: Dividends (from net investment income) (0.01) 0.00 Distributions (from capital gains) 0.00 0.00 --------------------------------------------------- Total distributions (0.01) 0.00 --------------------------------------------------- Net asset value, end of period $10.91 $ 9.18 =================================================== Total return 18.97% (51.60)%* Ratios/supplemental data: Net assets, end of period ($million) $27.2 $24.0 Ratio of expenses to average net assets 1.75%(b) 1.75%*(b) Ratio of net income (loss) to average net assets 0.54%(b) 0.98%*(b) Portfolio turnover rate 147% 7% - ---------------------------------------------------------------------------------------------
* 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, the ratios would have been as follows:
- --------------------------------------------------------------------------------------------- Year Ended Period Ended September 30, 2000 September 30, 1999 - --------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 1.96% 2.22% Ratio of net income (loss) to average net assets 0.34% 0.51%
46 THE OAKMARK FAMILY OF FUNDS INTERNATIONAL FUND For a share outstanding throughout each period
CLASS II CLASS I -------------- -------------------------------------------------- November 4, Eleven 1999 through Year Ended Months Ended Year Ended September 30, September 30, September 30, October 31, 2000(a) 2000 1999 1998 1997(b) 1996 - ------------------------------------------------------------------------------------------------ Net asset value, beginning of period $14.36 $13.95 $10.42 $18.77 $14.92 $12.97 Income from investment operations: Net investment income (loss) 0.96 1.02 (0.34) 0.41 0.27 0.09 Net gains or losses on securities (both realized and unrealized) 0.54 0.92 4.89 (5.32) 3.74 2.90 --------------------------------------------------------------- Total from investment operations 1.50 1.94 4.55 (4.91) 4.01 2.99 Less distributions: Dividends (from net investment income) (0.49) (0.49) (0.24) (0.58) (0.16) 0.00 Distributions (from capital gains) 0.00 0.00 (0.78) (2.86) 0.00 (1.04) --------------------------------------------------------------- Total distributions (0.49) (0.49) (1.02) (3.44) (0.16) (1.04) --------------------------------------------------------------- Net asset value, end of period $15.37 $15.40 $13.95 $10.42 $18.77 $14.92 =============================================================== Total return 11.77% 14.27% 46.41% (29.90)% 29.63%* 24.90% Ratios/supplemental data: Net assets, end of period ($ million) $0.1 $782.4 $811. 1 $756.1 $1,647.3 $1,172.8 Ratio of expenses to average net assets 1.50%* 1.30% 1.29% 1.32% 1.26%* 1.32% Ratio of net income (loss) to average net assets 1.98%* 1.87% 1.94% 1.95% 2.09%* 1.45% Portfolio turnover rate 64% 64% 54% 43% 61% 42% - -----------------------------------------------------------------------------------------------
* DATA HAS BEEN ANNUALIZED. (a) The date which Class II Shares were first sold to the public was November 4, 1999. (b) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. PROSPECTUS 47 INTERNATIONAL SMALL CAP FUND For a share outstanding throughout each period
Eleven Year Months Ended Ended Year Ended September 30, September 30, October 31, 2000 1999 1998 1997(a) 1996 - ---------------------------------------------------------------------------------------------------- Net asset value, beginning of period $12.64 $ 6.89 $12.20 $11.41 $10.00 Income from investment operations: Net investment income (loss) 0.23 0.24 0.18 0.13 0.04 Net gains or losses on securities (both realized and unrealized) (0.66) 5.71 (4.09) 1.10 1.37 ----------------------------------------------------------- Total from investment operations (0.43) 5.95 (3.91) 1.23 1.41 Less distributions: Dividends (from net investment income) (0.11) (0.20) (0.06) (0.08) 0.00 Distributions (from capital gains) (0.59) 0.00 (1.34) (0.36) 0.00 ----------------------------------------------------------- Total distributions (0.70) (0.20) (1.40) (0.44) 0.00 ----------------------------------------------------------- Net asset value, end of period $11.51 $ 12.64 $ 6.89 $12.20 $11.41 =========================================================== Total return (3.44)% 88.02% (35.20)% 12.07%* 14.15% Ratios/supplemental data: Net assets, end of period ($million) $90.3 $155.4 $51.8 $66.0 $39.8 Ratio of expenses to average net assets 1.76% 1.79% 1.96% 1.93%* 2.50%(b) Ratio of net income (loss) to average net assets 1.98% 2.31% 2.17% 1.23%* 0.65%(b) Portfolio turnover rate 40% 126% 69% 63% 27% - ----------------------------------------------------------------------------------------------------
* DATA HAS BEEN ANNUALIZED. (a) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. (b) If the Fund had paid all of its expenses and there had been no expense reimbursement by the Adviser, the ratios would have been as follows:
- ------------------------------------------------------------------------------- Year Ended October 31, 1996 - ------------------------------------------------------------------------------- Ratio of expenses to average net assets 2.65% Ratio of net income (loss) to average net assets .50
48 THE OAKMARK FAMILY OF FUNDS HOW TO BUY CLASS I SHARES FOR INVESTORS WHO PURCHASE DIRECTLY FROM THE FUND(S) AND NOT THROUGH AN INTERMEDIARY BY CHECK - --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT - - Complete and sign the New Account - Mail your check made payable to State Registration Form, enclose a check Street Bank and Trust Company with made payable to State Street Bank and either the additional investment form Trust Company and mail the Form attached to your confirmation state- and your check to the address indicat- ment or a note with the amount of ed to the right. the purchase, your account number, and the name in which your account - - Your initial investment must be is registered to: at least $1,000. - - PLEASE NOTE: The Funds do not accept OAKMARK FAMILY OF FUNDS cash, drafts, starter checks, third party P.O. Box 8510 checks, or checks drawn on banks out- Boston, MA 02266-8510 side of the United States or purchase orders specifying a particular purchase - Your subsequent investments must be date or price per share. at least $100.
BY WIRE TRANSFER - -------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT - - Call an investor services representative - Instruct your bank to transfer funds to at 1-800-OAKMARK and choose menu State Street Bank & Trust Company, option 2 to request an account num- ABA# 011000028, DDA# 9904-632-8. ber and wire transfer instructions. Specify the Fund name, your account number and the registered account - - Your initial investment must be at name(s) in the instructions. least $1,000. - Your subsequent investments must be at least $100.
PROSPECTUS 49 BY ELECTRONIC TRANSFER - --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT - - You may NOT open a new account by - If you established the electronic trans- electronic transfer. fer privilege on your New Account Registration Form, call the Funds' Voice Response System, OAKLINK, at 1-800-OAKMARK and choose menu options 1, then 3, and follow the instructions, or call an investor ser- vice representative at 1-800-OAKMARK and choose menu option 2. - Your subsequent investments must be at least $100. - If you did not establish the electronic transfer privilege on your New Account Registration Form, you may add the privilege by obtaining a Shareholder Services Form by visiting the Oakmark Funds' website at www.oakmark.com or by calling an investor service representative at 1-800-OAKMARK. Confirm with your bank or credit union that it is a member of the Automated Clearing House (ACH) system.
BY AUTOMATIC INVESTMENT - -------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT - - Choose the Automatic Investment - If you chose the Automatic Investment Plan on your New Account Plan when you opened your account, Registration Form. subsequent purchases of shares will be made automatically, either monthly or - - Your initial investment must be at quarterly, by electronic transfer from least $500 and be made by check your bank account in the dollar payable to State Street Bank and Trust amount you specified. Company. - - In addition to your investment check, - Your subsequent investments must be send a check marked "Void" or a at least $100. deposit slip from your bank account along with your New Account - If you did not establish the electronic Registration Form. transfer privilege on your New Account Registration Form, you may add the privilege by obtaining a Shareholder Services Form by visiting the Oakmark Funds' website at www.oakmark.com or by calling an investor service representative at 1-800-OAKMARK.
50 THE OAKMARK FAMILY OF FUNDS BY PAYROLL DEDUCTION - --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT - - Complete and sign the New Account - If you completed the Payroll Registration Form and the Payroll Deduction Plan Application, subse- Deduction Plan Application, enclose a quent purchases of shares will be made check made payable to State Street automatically, either monthly, bi- Bank and Trust Company and return monthly or quarterly, by deducting both forms and the check for at least the dollar amount you specified from $500 to: your pay. OAKMARK FAMILY OF FUNDS - Your subsequent investments must be P.O. Box 8510 at least $100. Boston, MA 02266-8510 - If you want to establish the Payroll - - Your initial investment must be at Deduction Plan, obtain a Payroll least $500 and be made by check. Deduction Plan Application by visit- ing the Oakmark Funds' website at - - The Payroll Deduction Plan www.oakmark.com or by calling an Application allows you to purchase investor service representative at shares of the Fund on a monthly, bi- 1-800-OAKMARK. monthly, or quarterly basis by instruct- ing your employer to deduct from your paycheck a specified dollar amount.
PROSPECTUS 51 By Exchange - ------------------------------------------------------------------------------- You may purchase shares of a Fund by exchange of shares of another Fund or by exchange of Oakmark Units. Oakmark Units are ILA Service Units of Government Portfolio (a money market fund that is a portfolio of Goldman Sachs Institutional Liquid Assets Portfolios of Goldman Sachs Trust).
OPENING AN ACCOUNT ADDING TO AN ACCOUNT - - Call 1-800-OAKMARK and choose - Call the Funds' Voice Response menu option 2. The new account into System, OAKLINK, at 1-800-OAKMARK which you are making the exchange and choose menu options 1, then 3, will have exactly the same registration and follow the instructions, or call an as the account from which you are investor service representative at exchanging shares. 1-800-OAKMARK and choose menu option 2. - - Your initial investment into your new account must be at least $1,000. - Send a letter of instruction, indicating your name, the name of the Fund, and the Fund account number from which you wish to redeem shares, and the name of the Fund and the Fund account number into which you wish to buy shares, to: OAKMARK FAMILY OF FUNDS P.O. Box 8510 Boston, MA 02266-8510 - Your subsequent investments must be at least $100. - Except for automatic exchanges from Oakmark Units, you may not make more than four exchanges from a Fund in any calendar year. The Trust may, however, refuse at any time any exchange request it considers detri- mental to a Fund. - An exchange transaction is a sale and purchase of shares for federal income tax purposes and may result in a capi- tal gain or loss. - Obtain a current prospectus for the Fund into which you are exchanging by visiting the Oakmark Funds' web- site at www.oakmark.com or calling an investor service representative at 1-800-OAKMARK and choose menu option 2.
52 THE OAKMARK FAMILY OF FUNDS BY INTERNET - -------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT - - Login to the Oarkmark Funds' website - Login to the Oarkmark Funds' website at WWW.OAKMARK.COM, choose the at www.oakmark.com, choose the "My Account" tab and then follow the "My Account" tab and then follow the instructions. instructions. - - Your initial investment into your new - Your subsequent investments must be account must be at least $1000. at least $100.
PURCHASE PRICE AND EFFECTIVE DATE A purchase by CHECK, WIRE TRANSFER, ELECTRONIC TRANSFER or over the INTERNET is made at the net asset value next determined after receipt by the Funds' transfer agent of your check, wire transfer or your electronic transfer investment instruction. PROSPECTUS 53 HOW TO SELL CLASS I SHARES FOR INVESTORS WHO REDEEM DIRECTLY FROM THE FUND(S) AND NOT THROUGH AN INTERMEDIARY
IN WRITING - -------------------------------------------------------------------------------- WRITE TO THE FUNDS AT: YOUR REDEMPTION REQUEST MUST: OAKMARK FAMILY OF FUNDS - identify the Fund and give your P.O. Box 8510 account number; Boston, MA 02266-8510 - specify the number of shares or dollar amount to be redeemed; and - be signed in ink by ALL account owners exactly as their names appear on the account registration. BY TELEPHONE - ----------------------------------------------------------------------------------------------- - - You may redeem shares from your - A redemption request received by tele- account by calling the Funds' Voice phone after the close of regular session Response System, OAKLINK, at trading on the New York 1-800-OAKMARK and choosing menu Stock Exchange (usually 4 p.m. Eastern time) options 1, then 3, and following the is deemed received on the next busi- instructions, or by calling an investor ness day. service representative at 1-800-OAKMARK and choosing menu option 2. - You may not redeem by telephone shares held in an account for which - - A check for the proceeds will be sent you have changed the address within to your address of record, generally the preceding 30 days. within 7 days of receiving your proper request, or within 15 days of your pur- chase if you purchased the shares by check. SEE "INVESTING WITH THE OAKMARK FAMILY OF FUNDS--GENERAL REDEMPTION POLICIES."
54 THE OAKMARK FAMILY OF FUNDS
BY ELECTRONIC TRANSFER - ---------------------------------------------------------------------------------------------- - - To redeem shares from your account - Payment of the proceeds will normally by electronic transfer, call the Funds' be sent on the next business day after Voice Response System, OAKLINK, at receipt of your request or within 15 1-800-OAKMARK and choose menu days of your purchase if you purchased options 1 then 3 and follow the the shares by electronic transfer. instructions, or call an investor ser- vice representative at 1-800-OAKMARK - A redemption request received by tele- and choose menu option 2. phone after the close of regular session trading on the New York Stock - - Payment of the proceeds will be made Exchange (usually 4 p.m. Eastern time) by electronic transfer only to a check- is deemed received on the next busi- ing account previously designated by ness day. you at a bank that is a member of the Automated Clearing House (ACH) sys- - If the proceeds of your redemption are tem. Confirm with your bank or cred- sent by electronic transfer, your bank it union that it is a member of ACH. will be notified of the transfer on the day the proceeds are sent, but your bank account may not receive "good funds" for at least one week thereafter. BY EXCHANGE - ---------------------------------------------------------------------------------------------- - - You may sell some or all of your shares - An exchange request received by tele- of a Fund and use the proceeds to buy phone after the close of regular session shares of another Oakmark fund or trading on the New York Stock Oakmark Units either in writing or by Exchange (usually 4 p.m. Eastern time) calling the Funds' Voice Response is deemed received on the next busi- System, OAKLINK, at 1-800-OAKMARK ness day. and choosing menu options 1 then 3 and following the instructions, or by SEE ALSO THE SECTION ENTITLED "HOW TO BUY calling an investor service representa- CLASS I SHARES--BY EXCHANGE." tive at 1-800-OAKMARK and choosing menu option 2. - - Obtain a current prospectus for a Fund into which you are exchanging by vis- iting the Oakmark Funds' website at www.oakmark.com or by calling an investor service representative at 1-800-OAKMARK.
PROSPECTUS 55
BY WIRE TRANSFER - ----------------------------------------------------------------------------------------------- - - To redeem shares from your account - Payment of the proceeds will normally by wire transfer, call an investor ser- be wired on the next business day after vice representative at 1-800-OAKMARK receipt of your request. and choose menu option 2. - A redemption request received by tele- - - The proceeds will be paid by wire phone after the close of regular session transfer to your bank account, provid- trading on the New York Stock ed the redemption proceeds are at least Exchange (usually 4 p.m. Eastern $250. time) is deemed received on the next busi- ness day. - - The cost of the wire transfer (currently $5) will be deducted from your - A wire transfer will normally result in account, or from the redemption pro- your bank receiving "good funds" on ceeds if you redeem your entire the business day following the date of account. redemption of your shares. - - Some transactions require a signature guarantee. SEE "HOW TO SELL CLASS I SHARES--SIGNATURE GUARANTEE." BY AUTOMATIC REDEMPTION - ------------------------------------------------------------------------------------------- - - You may automatically redeem a fixed - Because withdrawal payments may dollar amount of shares each month have tax consequences, you should or quarter and have the proceeds sent consult your tax advisor before estab- by check to you or deposited by elec- lishing such a plan. tronic transfer into your bank account by so electing on your New Account Registration Form. BY INTERNET - -------------------------------------------------------------------------------- - - Login to the Oakmark Funds' web site at www.oakmark.com, choose the "My Account" tab and then follow the instructions.
56 THE OAKMARK FAMILY OF FUNDS SIGNATURE GUARANTEE. Your request to sell your Fund shares must include a signature guarantee if: - - your account registration has been changed within the last 30 days; - - the redemption check is to be mailed to an address different from the one on your account; - - the redemption check is to be made payable to someone other than the registered account owner; or - - you are instructing a Fund to transmit the proceeds to a bank account that you have not previously designated as the recipient of such proceeds. You should be able to obtain a signature guarantee from a bank, securities broker-dealer, credit union (if authorized under state law), securities exchange or association, clearing agency or savings association. YOU CANNOT OBTAIN A SIGNATURE GUARANTEE FROM A NOTARY PUBLIC. SMALL ACCOUNT REDEMPTION. The Trust and the Funds also reserve the right to redeem shares in any account and send the proceeds to the owner if the account value has been reduced below $1,000 as a result of redemptions. A Fund or its agent will notify you if your account falls below the minimum and give you 30 days to bring the account value up to the minimum. PROSPECTUS 57 SHAREHOLDER SERVICES CLASS I SHAREHOLDERS - -------------------------------------------------------------------------------- If you are a holder of Class I Shares of a Fund, the following services are available to you. REPORTING TO SHAREHOLDERS. You will receive a confirmation statement reflecting each of your purchases and sales of shares of the Funds, as well as periodic statements detailing distributions made by the Funds. Shares purchased by reinvestment of dividends or pursuant to an automatic investment plan will be confirmed to you quarterly. In addition, the Funds will send you periodic reports showing Fund portfolio holdings and will provide you annually with tax information. The Funds reduce the number of duplicate prospectuses, annual and semi- annual reports you receive by sending only one copy of each to those addresses shared by two or more accounts. Call the Oakmark Funds at 1-800-OAKMARK to request individual copies of these documents. The Funds will begin sending individual copies thirty days after receiving your request. IRA PLANS. The Trust has a master individual retirement account (IRA) plan that allows you to invest in a Traditional IRA, Roth IRA, Education IRA or SIMPLE IRA on a tax-sheltered basis in the Funds or Oakmark Units of the Government Portfolio of Goldman, Sachs Money Market Trust. The plan also permits you to "roll over" or transfer to your Traditional IRA a lump sum distribution from a qualified pension or profit-sharing plan, thereby postponing federal income tax on the distribution. If your employer has a Simplified Employee Pension Plan (SEP), you may establish a Traditional IRA with a Fund to which your employer may contribute, subject to special rules designed to avoid discrimination. Information on IRAs may be obtained by visiting the Oakmark Funds' website at www.oakmark.com or calling an investor service representative at 1-800-OAKMARK (choose menu option 2). ESTABLISHING PRIVILEGES. You may establish any of the shareholder privileges when you complete an application to purchase shares of a Fund. If you have already established an account and want to add or change a privilege, visit the Oakmark Funds' website at www.oakmark.com to obtain a Shareholder Services Form and return the completed form to the Oakmark Funds, or call an investor service representative at 1-800-OAKMARK (choose menu option 2) to request the appropriate form. VOICE RESPONSE SYSTEM ("OAKLINK"). To obtain information about your account, such as account balance, last transaction and distribution information, to purchase, redeem or exchange shares of a Fund or Oakmark Units, or to order duplicate statements, call the Funds' Voice Response System, OAKLINK, at 1-800-OAKMARK (choose menu option 1). Please note: you must have a personal identification number ("PIN") to access account information through OAKLINK. Call 1-800-OAKMARK (choose menu option 2) and speak with an investor service representative to obtain your PIN. 58 THE OAKMARK FAMILY OF FUNDS WEBSITE. To learn more about The Oakmark Family of Funds, or to obtain prospectuses, account applications, shareholder reports, or each Fund's daily NAV, or to hear portfolio manager commentaries access the Oakmark Funds' website at www.oakmark.com. To perform transactions, change your address, order duplicate statements or obtain information about your account, such as your account balance, your last transaction and account history, click on "My Account" and follow the instructions. TELEPHONE AND INTERNET TRANSACTIONS. You may perform many transactions - including exchanges, purchases and redemptions - by telephone and over the Internet. To prevent unauthorized transactions in your account, the Funds will take precautions designed to confirm that instructions communicated through the telephone or Internet are genuine. For example, the Funds or their agents may record a telephone call, request a personal identification number or password, request more information and send written confirmations of telephone and Internet transactions. The Funds request that shareholders review these written confirmations and notify the Funds immediately if there is a problem. A Fund will not be responsible for any loss, liability, cost or expense resulting from an unauthorized transaction initiated by telephone or the Internet if it or its transfer agent follows reasonable procedures designed to verify the identity of the caller or Internet user. ACCOUNT ADDRESS CHANGE. You may change the address of record for your Fund account by sending written instructions to the Funds at Oakmark Family of Funds, P.O. Box 8510, Boston, MA 02266-8510 or by telephoning an investor service representative at 1-800-OAKMARK (choose menu option 2). You may also change your address by accessing the Oakmark Funds' website at www.oakmark.com and clicking on "My Account" and following the instructions. If you change your address of record by telephone or in writing without a signature guarantee, the Funds will not honor a redemption request by telephone or the Internet for the following 30 days. During that period, the Funds will require written redemption requests with signature guarantees. ACCOUNT REGISTRATION CHANGE. You may change your account registration only by sending your written instructions with a signature guarantee to the transfer agent at its address shown on the inside back cover of this prospectus. SEE "HOW TO SELL CLASS I SHARES--SIGNATURE GUARANTEE." CLASS II SHAREHOLDERS - -------------------------------------------------------------------------------- If you are a holder of Class II Shares of a Fund, your 401(k) or other retirement plan will provide shareholder services to you as required in accordance with your plan agreement. You should contact your plan sponsor or service provider for information about the services available to you under the terms of your plan. PROSPECTUS 59 You can obtain more information about The Oakmark Family of Funds' investments in its semiannual and annual reports to shareowners. These reports contain information on the market conditions and investment strategies that significantly affected The Oakmark Family of Funds' performance during the last fiscal year. You may wish to read the Statement of Additional Information (SAI) for more information about The Oakmark Family of Funds. The SAI is incorporated by reference into this prospectus, which means that it is considered to be part of this prospectus. You can obtain free copies of The Oakmark Family of Funds' semiannual and annual reports and the SAI, request other information, and discuss your questions about The Oakmark Family of Funds by writing or calling: OAKMARK FAMILY OF FUNDS P.O. BOX 8510 BOSTON, MA 02266-8510 1-800-OAKMARK (1-800-625-6275) The requested documents will be sent within three business days of your request. Other information about each Fund may also be obtained by accessing The Oakmark Family of Funds' website at www.oakmark.com. Text-only versions of all Fund documents can be viewed online or downloaded from the EDGAR Database on the SEC's internet web site at www.sec.gov. You may also review and copy those documents by visiting the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-942-8090. In addition, copies of the Fund documents may be obtained, after mailing the appropriate duplicating fee, by writing to the SEC's Public Reference Section, 450 5th Street, N.W., Washington, DC 20549-0102 or by e-mail request at publicinfo@sec.gov. HARRIS ASSOCIATES INVESTMENT TRUST 811-06279 60 THE OAKMARK FAMILY OF FUNDS STATEMENT OF ADDITIONAL INFORMATION JANUARY 26, 2001 THE OAKMARK FAMILY OF FUNDS No-Load Funds Two North LaSalle Street Chicago, Illinois 60602-3790 Telephone 1-800-OAKMARK (1-800-625-6275) www.oakmark.com This Statement of Additional Information relates to The Oakmark Fund ("Oakmark Fund"), The Oakmark Select Fund ("Select Fund"), The Oakmark Small Cap Fund ("Small Cap Fund"), The Oakmark Equity and Income Fund, ("Equity and Income Fund"), The Oakmark Global Fund ("Global Fund"), The Oakmark International Fund ("International Fund") and The Oakmark International Small Cap Fund ("International Small Cap Fund"), each a series of Harris Associates Investment Trust (the "Trust"). This Statement of Additional Information is not a prospectus but provides information that should be read in conjunction with the Funds' prospectus dated the same date as this Statement of Additional Information and any supplement thereto. You may obtain a prospectus or semi-annual or annual report from the Funds at no charge by writing, telephoning or accessing the Funds at their address, telephone number or website shown above. TABLE OF CONTENTS THE FUNDS................................................................2 INVESTMENT RESTRICTIONS..................................................2 HOW THE FUNDS INVEST.....................................................5 PERFORMANCE INFORMATION.................................................13 INVESTMENT ADVISER......................................................16 CODE OF ETHICS..........................................................18 TRUSTEES AND OFFICERS...................................................18 PRINCIPAL SHAREHOLDERS..................................................22 PURCHASING AND REDEEMING SHARES.........................................24 ADDITIONAL TAX INFORMATION..............................................26 DISTRIBUTOR.............................................................26 PORTFOLIO TRANSACTIONS..................................................27 DECLARATION OF TRUST....................................................29 CUSTODIAN AND TRANSFER AGENT............................................30 INDEPENDENT PUBLIC ACCOUNTANTS..........................................30 APPENDIX A -- BOND RATINGS.............................................A-1 APPENDIX B -- FINANCIAL STATEMENTS.....................................B-1 THE FUNDS Oakmark Fund, Select Fund, Small Cap Fund, Global Fund, International Fund and International Small Cap Fund seek long-term capital appreciation. Equity and Income Fund seeks high current income and preservation and growth of capital. The Funds are series of the Trust, an open-end management investment company, and each Fund other than Select Fund is diversified. The Trust is a Massachusetts business trust organized under an Agreement and Declaration of Trust dated February 1, 1991. Each Fund's shares are divided into two share classes: Class I Shares and Class II Shares. Class I Shares of each Fund are offered to members of the general public. As described more fully in the prospectus, Class II Shares of each Fund are offered to certain retirement and profit sharing plans. Class II Shares of a Fund pay a service fee at the annual rate of .25% of the average net assets of Class II Shares of the Fund. This service fee is paid to an administrator for performing the services associated with the administration of such retirement plans. The shares of each class of a Fund represent an interest in the same portfolio of investments of the Fund. All shares of a Fund have equal voting rights (except as to matters affecting the interests of only one class). INVESTMENT RESTRICTIONS In pursuing their respective investment objectives no Fund will: 1. [THIS RESTRICTION DOES NOT APPLY TO SELECT FUND] In regard to 75% of its assets, invest more than 5% of its assets (valued at the time of investment) in securities of any one issuer, except in U.S. government obligations; 2. Acquire securities of any one issuer which at the time of investment (a) represent more than 10% of the voting securities of the issuer or (b) have a value greater than 10% of the value of the outstanding securities of the issuer; 3. Invest more than 25% of its assets (valued at the time of investment) in securities of companies in any one industry, except that this restriction does not apply to investments in U.S. government obligations; 4. Borrow money except from banks for temporary or emergency purposes in amounts not exceeding 10% of the value of the Fund's assets at the time of borrowing [the Fund will not purchase additional securities when its borrowings, less receivables from portfolio securities sold, exceed 5% of the value of the Fund's total assets]; 5. Issue any senior security except in connection with permitted borrowings; 6. Underwrite the distribution of securities of other issuers; however the Fund may acquire "restricted" securities which, in the event of a resale, might be required to be registered under the Securities Act of 1933 on the ground that the Fund could be regarded as an underwriter as defined by that act with respect to such resale; 7. Make loans, but this restriction shall not prevent the Fund from (a) investing in debt obligations, (b) investing in repurchase agreements,/(1)/ or (c) [FUNDS OTHER THAN OAKMARK FUND] lending its portfolio securities - ------------------------ /(1)/ A repurchase agreement involves a sale of securities to a Fund with the concurrent agreement of the seller (bank or securities dealer) to repurchase the securities at the same price plus an amount equal to an agreed-upon interest rate within a specified time. In the event of a bankruptcy or other default of a seller of a repurchase agreement, the Fund could experience both delays in liquidating the underlying securities and 2 [the Fund will not lend securities having a value in excess of 33% of its assets, including collateral received for loaned securities (valued at the time of any loan)]; 8. Purchase and sell real estate or interests in real estate, although it may invest in marketable securities of enterprises which invest in real estate or interests in real estate; 9. Purchase and sell commodities or commodity contracts, except that it may enter into forward foreign currency contracts; 10. Acquire securities of other investment companies except (a) by purchase in the open market, where no commission or profit to a sponsor or dealer results from such purchase other than the customary broker's commission or (b) where the acquisition results from a dividend or a merger, consolidation or other reorganization;/(2)/ 11. Make margin purchases or participate in a joint or on a joint or several basis in any trading account in securities; 12. Invest in companies for the purpose of management or the exercise of control; 13. Invest more than 15% of its net assets (valued at the time of investment) in illiquid securities, including repurchase agreements maturing in more than seven days; 14. [OAKMARK FUND, SELECT FUND, SMALL CAP FUND AND EQUITY AND INCOME FUND ONLY] Invest more than 2% of its net assets (valued at the time of investment) in warrants not listed on the New York or American stock exchanges, valued at cost, nor more than 5% of its net assets in all warrants, provided that warrants acquired in units or attached to other securities shall be deemed to be without value for purposes of this restriction; [INTERNATIONAL FUND AND INTERNATIONAL SMALL CAP FUND ONLY] Invest more than 10% of its net assets (valued at the time of investment) in warrants valued at the lower of cost or market, provided that warrants acquired in units or attached to securities shall be deemed to be without value for purposes of this restriction; 15. [OAKMARK FUND, SELECT FUND AND SMALL CAP FUND ONLY] Invest more than 25% of its total assets (valued at the time of investment) in securities of non-U.S. issuers (other than securities represented by American Depositary Receipts) [EQUITY AND INCOME FUND ONLY] Invest more than 10% of its total assets (valued at the time of investment) in securities of non-U.S. issuers (other than securities represented by American Depositary Receipts);/(3)/ 16. Make short sales of securities unless (i) the Fund owns at least an equal amount of such securities, or of securities that are convertible or exchangeable, or anticipated to be convertible or exchangeable, into at least an equal amount of such securities with no restriction other than the payment of additional consideration or (ii) immediately after such a short sale, the aggregate value of all securities that the - -------------------------------------------------------------------------------- losses. No Fund may invest more than 15% of its net assets in repurchase agreements maturing in more than seven days and other illiquid securities. /(2)/ In addition to this investment restriction, the Investment Company Act of 1940 provides that a Fund may neither purchase more than 3% of the voting securities of any one investment company nor invest more than 10% of the Fund's assets (valued at the time of investment) in all investment company securities purchased by the Fund. Investment in the shares of another investment company would require the Fund to bear a portion of the management and advisory fees paid by that investment company, which might duplicate the fees paid by the Fund. /(3)/ Although securities represented by American Depositary Receipts ("ADRs") are not subject to restriction 15, none of these Funds has any present intention to invest more than the indicated percentage of its total assets in ADRs and securities of foreign issuers. 3 Fund is short (excluding short sales against-the-box/(4)/) does not exceed 5% of the value of the Fund's net assets, and the Fund covers such a short sale as required by the current rules and positions of the Securities and Exchange Commission or its staff; 17. Purchase a call option or a put option if, immediately thereafter, the aggregate market value of all call and put options then held would exceed 10% of its net assets; 18. Write any call option or put option if, immediately thereafter, the aggregate market value of all portfolio securities or currencies covering such options would exceed 15% of its net assets; 19. Invest in futures or options on futures, except that it may invest in forward foreign currency contracts. The first 10 restrictions listed above, except the bracketed portions and the footnotes related to the restrictions, are fundamental policies and may be changed only with the approval of the holders of a "majority of the outstanding voting securities" of the respective Fund, which is defined in the Investment Company Act of 1940 (the "1940 Act") as the lesser of (i) 67% of the shares of the Fund present at a meeting if more than 50% of the outstanding shares of the Fund are present in person or represented by proxy or (ii) more than 50% of the outstanding shares of the Fund. Those restrictions not designated as "fundamental," and a Fund's investment objective, may be changed by the board of trustees without shareholder approval. A Fund's investment objective will not be changed without at least 30 days' notice to shareholders. Notwithstanding the foregoing investment restrictions, a Fund may purchase securities pursuant to the exercise of subscription rights, provided, in the case of each Fund other than Select Fund, that such purchase will not result in the Fund's ceasing to be a diversified investment company. Japanese and European corporations frequently issue additional capital stock by means of subscription rights offerings to existing shareholders at a price substantially below the market price of the shares. The failure to exercise such rights would result in a Fund's interest in the issuing company being diluted. The market for such rights is not well developed in all cases and, accordingly, a Fund may not always realize full value on the sale of rights. The exception applies in cases where the limits set forth in the investment restrictions would otherwise be exceeded by exercising rights or would have already been exceeded as a result of fluctuations in the market value of a Fund's portfolio securities with the result that the Fund would be forced either to sell securities at a time when it might not otherwise have done so, or to forego exercising the rights. HOW THE FUNDS INVEST BOTTOM-UP INVESTMENT PROCESS All portfolio managers at Harris Associates L.P., investment adviser to The Oakmark Family of Funds (the "Adviser"), strive to abide by a consistent philosophy and process. This process involves a collective, unified effort at identifying what the managers believe are the best values in the marketplace. - -------------------------- /(4)/ A short sale "against the box" involves the sale of a security with respect to which the Fund already owns or has the right to acquire an equivalent amount of such security in kind or amount, or securities that are convertible or exchangeable, or anticipated to be convertible or exchangeable, into at least an equal amount of such securities with no restriction other than the payment of additional consideration. 4 Each manager typically constructs a focused portfolio from a list of approved stocks, built on a stock by stock basis from the bottom up. The following chart illustrates this bottom-up investment process: BOTTOM-UP INVESTMENT PROCESS --------------------------------------------------- INVEST MANAGERS SELECT STOCKS FROM THE APPROVED LIST FOR THEIR SPECIFIC FUNDS. --------------------------------------------------- / / --------------------------------------------------- APPROVED LIST (APPROXIMATELY 80-100 SECURITIES.) --------------------------------------------------- / / --------------------------------------------------- QUANTITATIVE AND QUALITATIVE RESEARCH (RIGOROUS ANALYSIS IS PERFORMED TO ENSURE THAT THE STOCK MEETS CERTAIN "VALUE" STANDARDS.) --------------------------------------------------- / / --------------------------------------------------- CRITERIA SCREENS (MANAGERS AND RESEARCH TEAM SCREEN FOR STOCKS THAT THEY BELIEVE ARE WORTH FURTHER CONSIDERATION.) --------------------------------------------------- / / --------------------------------------------------- UNIVERSE OF THOUSANDS OF EQUITY SECURITIES (ALL STOCKS AVAILABLE FOR INVESTMENT.) --------------------------------------------------- SECURITIES OF NON-U.S. ISSUERS International Fund and International Small Cap Fund invest primarily in securities of non-U.S. issuers, Global Fund typically invests between 40-80% of its total assets in securities of non-U.S. issuers and the other Funds each may invest a minor portion of their assets (up to 25% for Oakmark Fund, Select Fund and Small Cap Fund and up to 10% for Equity and Income Fund) in securities of non-U.S. issuers. International investing permits an investor to take advantage of the growth in markets outside the United States. Investing in securities of non-U.S. issuers may entail a greater degree of risk (including risks relating to exchange rate fluctuations, tax provisions, or expropriation of assets) than does investment in securities of domestic issuers. The Funds may invest in securities of non-U.S. issuers directly or in the form of American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), or other securities representing underlying shares of foreign issuers. Positions in these securities are not necessarily denominated in the same currency as the common stocks into which they may be converted. ADRs are receipts typically issued by an American bank or trust company and trading in U.S. markets evidencing ownership of the underlying securities. EDRs are European receipts evidencing a similar arrangement. Generally ADRs, in registered form, are designed for use in the U.S. securities markets and EDRs, in bearer form, are designed for use in European securities markets. GDRs are receipts that may trade in U.S. or non-U.S. markets. The Funds may invest in both "sponsored" and "unsponsored" ADRs, EDRs or GDRs. In a sponsored depositary receipt, the issuer typically pays some or all of the expenses of the depository and agrees to provide its regular shareholder communications to depositary receipt holders. An unsponsored depositary receipt is created independently of the issuer of the underlying security. The depositary receipt holders generally pay the expenses of the depository and do not have an undertaking from the issuer of the underlying security to furnish shareholder communications. 5 With respect to portfolio securities of non-U.S. issuers or denominated in foreign currencies, a Fund's investment performance is affected by the strength or weakness of the U.S. dollar against these currencies. For example, if the dollar falls in value relative to the Japanese yen, the dollar value of a yen-denominated stock held in the portfolio will rise even though the price of the stock remains unchanged. Conversely, if the dollar rises in value relative to the yen, the dollar value of the yen-denominated stock will fall. See discussion of transaction hedging and portfolio hedging under "Currency Exchange Transactions." You should understand and consider carefully the risks involved in international investing. Investing in securities of non-U.S. issuers, which are generally denominated in foreign currencies, and utilization of forward foreign currency exchange contracts involve certain considerations comprising both risks and opportunities not typically associated with investing in U.S. securities. These considerations include: fluctuations in exchange rates of foreign currencies; possible imposition of exchange control regulation or currency restrictions that would prevent cash from being brought back to the United States; less public information with respect to issuers of securities; less governmental supervision of stock exchanges, securities brokers, and issuers of securities; different accounting, auditing and financial reporting standards; different settlement periods and trading practices; less liquidity and frequently greater price volatility; imposition of foreign taxes; and sometimes less advantageous legal, operational and financial protections applicable to foreign subcustodial arrangements. Although the Funds try to invest in companies located in countries having stable political environments, there is the possibility of expropriation of assets, confiscatory taxation, seizure or nationalization of foreign bank deposits or other assets, establishment of exchange controls, the adoption of foreign government restrictions, or other political, social or diplomatic developments that could adversely affect investment in these countries. PRIVATIZATIONS. Some governments have been engaged in programs of selling part or all of their stakes in government owned or controlled enterprises ("privatizations"). The Adviser believes that privatizations may offer opportunities for significant capital appreciation, and intends to invest assets of International Fund, International Small Cap Fund and Global Fund in privatizations in appropriate circumstances. In certain of those markets, the ability of foreign entities such as International Fund, International Small Cap Fund and Global Fund to participate in privatizations may be limited by local law, and/or the terms on which such Funds may be permitted to participate may be less advantageous than those afforded local investors. There can be no assurance that governments will continue to sell companies currently owned or controlled by them or that privatization programs will be successful. EMERGING MARKETS. Investments in emerging markets securities include special risks in addition to those generally associated with foreign investing. Many investments in emerging markets can be considered speculative, and the value of those investments can be more volatile than in more developed foreign markets. This difference reflects the greater uncertainties of investing in less established markets and economies. Emerging markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have not kept pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in settlement could result in temporary periods when a portion of the assets is uninvested and no return is earned thereon. The inability to make intended security purchases due to settlement problems could cause a Fund to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result either in losses to a Fund due to subsequent declines in the value of those securities or, if a Fund has entered into a contract to sell a security, in possible liability to the purchaser. Costs associated with transactions in emerging markets securities are typically higher than costs associated with transactions in U.S. securities. Such transactions also involve additional costs for the purchase or sale of foreign currency. Certain foreign markets (including emerging markets) may require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if a deterioration occurs in an emerging market's balance of payments or for other reasons, a country could impose temporary restrictions on foreign capital remittances. A Fund could be adversely affected by delays in, or a refusal to grant, required governmental approval for repatriation of capital, as well as by the application to the Fund of any restrictions on investments. 6 The risk also exists that an emergency situation may arise in one or more emerging markets. As a result, trading of securities may cease or may be substantially curtailed and prices for a Fund's securities in such markets may not be readily available. A Fund may suspend redemption of its shares for any period during which an emergency exists, as determined by the Securities and Exchange Commission (the "SEC"). Accordingly, if a Fund believes that appropriate circumstances exist, it will promptly apply to the SEC for a determination that such an emergency is present. During the period commencing from a Fund's identification of such condition until the date of the SEC action, that Fund's securities in the affected markets will be valued at fair value determined in good faith by or under the direction of the Trust's board of trustees. Income from securities held by a Fund could be reduced by taxes withheld from that income, or other taxes that may be imposed by the emerging market countries in which the Fund invests. Net asset value of a Fund may also be affected by changes in the rates or methods of taxation applicable to the Fund or to entities in which the Fund has invested. Many emerging markets have experienced substantial rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the economies and securities markets of certain emerging market countries. In an attempt to control inflation, certain emerging market countries have imposed wage and price controls. Of these countries, some, in recent years, have begun to control inflation through prudent economic policies. Emerging market governmental issuers are among the largest debtors to commercial banks, foreign governments, international financial organizations and other financial institutions. Certain emerging market governmental issuers have not been able to make payments of interest or principal on debt obligations as those payments have come due. Obligations arising from past restructuring agreements may affect the economic performance and political and social stability of those issuers. Governments of many emerging market countries have exercised and continue to exercise substantial influence over many aspects of the private sector through ownership or control of many companies. The future actions of those governments could have a significant effect on economic conditions in emerging markets, which in turn, may adversely affect companies in the private sector, general market conditions and prices and yields of certain of the securities in a Fund's portfolio. Expropriation, confiscatory taxation, nationalization, political, economic and social instability have occurred throughout the history of certain emerging market countries and could adversely affect Fund assets should any of those conditions recur. CURRENCY EXCHANGE TRANSACTIONS. Each Fund may enter into currency exchange transactions either on a spot (i.e., cash) basis at the spot rate for purchasing or selling currency prevailing in the foreign exchange market or through a forward currency exchange contract ("forward contract"). A forward contract is an agreement to purchase or sell a specified currency at a specified future date (or within a specified time period) and price set at the time of the contract. Forward contracts are usually entered into with banks, foreign exchange dealers or broker-dealers, are not exchange-traded and are usually for less than one year, but may be renewed. Forward currency transactions may involve currencies of the different countries in which a Fund may invest, and serve as hedges against possible variations in the exchange rate between these currencies. A Fund's currency transactions are limited to transaction hedging and portfolio hedging involving either specific transactions or actual or anticipated portfolio positions. Transaction hedging is the purchase or sale of a forward contract with respect to specific receivables or payables of a Fund accruing in connection with the purchase or sale of portfolio securities. Portfolio hedging is the use of a forward contract with respect to an actual or anticipated portfolio security position denominated or quoted in a particular currency. When a Fund owns or anticipates owning securities in countries whose currencies are linked, the Fund may aggregate such positions as to the currency hedged. If a Fund enters into a forward contract hedging an anticipated or actual holding of portfolio securities, liquid assets of the Fund, having a value at least as great as the amount of the excess, if any, of the Fund's commitment under the forward contract over the value of the portfolio position being hedged, will be segregated on the books of the Fund and held by the Fund's custodian and marked to market daily, while the contract is outstanding. 7 At the maturity of a forward contract to deliver a particular currency, a Fund may sell the portfolio security related to such contract and make delivery of the currency received from the sale, or it may retain the security and either purchase the currency on the spot market or terminate its contractual obligation to deliver the currency by entering into an offsetting contract with the same currency trader for the purchase on the same maturity date of the same amount of the currency. It is impossible to forecast precisely the market value of a portfolio security being hedged with a forward currency contract. Accordingly, at the maturity of a contract it may be necessary for a Fund to purchase additional currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of currency the Fund is obligated to deliver under the forward contract and if a decision is made to sell the security and make delivery of the currency. Conversely, it may be necessary to sell on the spot market some of the currency received upon the sale of the portfolio security if the sale proceeds exceed the amount of currency the Fund is obligated to deliver. If the Fund retains the portfolio security and engages in an offsetting transaction, the Fund will incur a gain or a loss to the extent that there has been movement in forward contract prices. If the Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the currency. Should forward prices decline during the period between the Fund's entering into a forward contract for the sale of a currency and the date it enters into an offsetting contract for the purchase of the currency, the Fund will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the Fund will suffer a loss to the extent the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell. A default on the contract would deprive the Fund of unrealized profits or force the Fund to cover its commitments for purchase or sale of currency, if any, at the current market price. Hedging against a decline in the value of a currency does not eliminate fluctuations in the prices of portfolio securities or prevent losses if the prices of such securities decline. Such transactions also preclude the opportunity for gain if the value of the hedged currency should rise. Moreover, it may not be possible for the Fund to hedge against a devaluation that is so generally anticipated that the Fund is not able to contract to sell the currency at a price above the devaluation level it anticipates. The cost to the Fund of engaging in currency exchange transactions varies with such factors as the currency involved, the length of the contract period, and prevailing market conditions. Since currency exchange transactions are usually conducted on a principal basis, no fees or commissions are involved. EUROPEAN CURRENCY UNIFICATION. Eleven of the fifteen member countries of the European Union adopted a single European currency, the euro, effective January 1, 1999. The countries participating in the Economic and Monetary Union ("EMU") are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The notable countries not currently participating in the EMU are Great Britain, Denmark, Sweden and Greece. A new European Central Bank ("ECB") manages the monetary policy of the new unified region, and the exchange rates among the EMU member countries are permanently fixed. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002. This change is likely to impact significantly the European capital markets in which the Funds, and in particular, International Fund, International Small Cap Fund and Global Fund, may invest their assets. As the ECB and European market participants search for a common understanding of policy targets and instruments, interest rates and exchange rates could become more volatile and may increase a Fund's share price volatility. DEBT SECURITIES Each Fund may invest in debt securities, including lower-rated securities (i.e., securities rated BB or lower by Standard & Poor's ("S&P") or Ba or lower by Moody's Investor Services, Inc. ("Moody's"), commonly called "junk bonds") and securities that are not rated. There are no restrictions as to the ratings of debt securities acquired by a Fund or the portion of a Fund's assets that may be invested in debt securities in a particular ratings category, except that each of International Fund and International Small Cap Fund will not invest more than 10% of its respective total assets in securities rated below investment grade, Equity and Income Fund will 8 not invest more than 20% of its total assets in such securities, and each of the other Funds will not invest more than 25% of its total assets in such securities. Securities rated BBB or Baa are considered to be medium grade and to have speculative characteristics. Lower-rated debt securities are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. Investment in medium- and lower-quality debt securities involves greater investment risk, including the possibility of issuer default or bankruptcy. An economic downturn could severely disrupt the market for such securities and adversely affect the value of such securities. In addition, lower-quality bonds are less sensitive to interest rate changes than higher-quality instruments and generally are more sensitive to adverse economic changes or individual corporate developments. During a period of adverse economic changes, including a period of rising interest rates, issuers of such bonds may experience difficulty in making their principal and interest payments. Medium- and lower-quality debt securities may be less marketable than higher-quality debt securities because the market for them is less broad. The market for unrated debt securities is even narrower. During periods of thin trading in these markets, the spread between bid and asked prices is likely to increase significantly, and a Fund may have greater difficulty selling its portfolio securities. See "Investing with The Oakmark Family of Funds - Share Price" in the prospectus. The market value of those securities and their liquidity may be affected by adverse publicity and investor perceptions. A description of the characteristics of bonds in each ratings category is included in Appendix A to this statement of additional information. WHEN-ISSUED, DELAYED-DELIVERY AND OTHER SECURITIES Each Fund may purchase securities on a when-issued or delayed-delivery basis. Although the payment and interest terms of these securities are established at the time a Fund enters into the commitment, the securities may be delivered and paid for a month or more after the date of purchase, when their value may have changed. A Fund makes such commitments only with the intention of actually acquiring the securities, but may sell the securities before settlement date if the Adviser deems it advisable for investment reasons. A Fund may utilize spot and forward foreign currency exchange transactions to reduce the risk inherent in fluctuations in the exchange rate between one currency and another when securities are purchased or sold on a when-issued or delayed-delivery basis. At the time a Fund enters into a binding obligation to purchase securities on a when-issued basis, liquid assets of the Fund having a value at least as great as the purchase price of the securities to be purchased will be segregated on the books of the Fund and held by the custodian throughout the period of the obligation. The use of these investment strategies, as well as any borrowing by a Fund, may increase net asset value fluctuation. A Fund may also enter into a contract with a third party that provides for the sale of securities held by the Fund at a set price, with a contingent right for the Fund to receive additional proceeds from the purchaser upon the occurrence of designated future events, such as a tender offer for the securities of the subject company by the purchaser, and satisfaction of any applicable conditions. Under such an arrangement, the amount of contingent proceeds that the Fund will receive from the purchaser, if any, will generally not be determinable at the time such securities are sold. The Fund's rights under such an arrangement will not be secured and the Fund may not receive the contingent payment if the purchaser does not have the resources to make the payment. The Fund's rights under such an arrangement also generally will be illiquid and subject to the limitations on ownership of illiquid securities. ILLIQUID SECURITIES No Fund may invest in illiquid securities if, as a result, such securities would comprise more than 15% of the value of the Fund's assets. 9 If, through the appreciation of illiquid securities or the depreciation of liquid securities, the Fund should be in a position where more than 15% of the value of its net assets are invested in illiquid assets, including restricted securities, the Fund will take appropriate steps to protect liquidity. Illiquid securities may include restricted securities, which may be sold only in privately negotiated transactions or in a public offering with respect to which a registration statement is in effect under the Securities Act of 1933 (the "1933 Act"). Where a Fund holds restricted securities and registration is required, the Fund may be obligated to pay all or part of the registration expenses and a considerable period may elapse between the time of the decision to sell and the time the Fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than prevailed when it decided to sell. Restricted securities will be priced at fair value as determined in good faith by or under the direction of the board of trustees. Notwithstanding the above, each Fund may purchase securities that, although privately placed, are eligible for purchase and sale under Rule 144A under the 1933 Act. This rule permits certain qualified institutional buyers, such as the Funds, to trade in privately placed securities even though such securities are not registered under the 1933 Act. The Adviser, under the supervision of the board of trustees, may consider whether securities purchased under Rule 144A are liquid and thus not subject to the Fund's restriction of investing no more than 15% of its assets in illiquid securities. (See restriction 13 under "Investment Restrictions.") A determination of whether a Rule 144A security is liquid or not is a question of fact. In making this determination the Adviser will consider the trading markets for the specific security, taking into account the unregistered nature of a Rule 144A security. In addition, the Adviser could consider the (1) frequency of trades and quotes, (2) number of dealers and potential purchasers, (3) dealer undertakings to make a market, (4) and the nature of the security and of market place trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). The liquidity of Rule 144A securities would be monitored and, if as a result of changed conditions, it is determined that a Rule 144A security is no longer liquid, the Fund's holdings of illiquid securities would be reviewed to determine what, if any, steps are required to assure that the Fund does not invest more than 15% of its assets in illiquid securities. Investing in Rule 144A securities could have the effect of increasing the amount of a Fund's assets invested in illiquid securities if qualified institutional buyers are unwilling to purchase such securities. PRIVATE PLACEMENTS Each Fund may acquire securities in private placements. Because an active trading market may not exist for such securities, the sale of such securities may be subject to delay and additional costs. No Fund will purchase such a security if more than 15% of the value of such Fund's net assets would be invested in illiquid securities. SHORT SALES Each Fund may make short sales of securities if (a) the Fund owns at least an equal amount of such securities, or of securities that are convertible or exchangeable, or anticipated to be convertible or exchangeable, into at least an equal amount of such securities with no restriction other than the payment of additional consideration or (b) immediately after such a short sale, the aggregate value of all securities that the Fund is short (excluding the value of securities sold short against-the-box, as defined below) does not exceed 5% of the value of the Fund's net assets, and the Fund covers such short sales as described in the following paragraph. A short sale against-the-box involves the sale of a security with respect to which the Fund already owns or has the right to acquire an equivalent security in kind and amount, or securities that are convertible or exchangeable, or anticipated to be convertible or exchangeble, into such securities with no restriction other than the payment of additional consideration. In a short sale, a Fund does not deliver from its portfolio the securities sold and does not receive immediately the proceeds from the short sale. Instead, the Fund borrows the securities sold short from a broker-dealer through which the short sale is executed, and the broker-dealer delivers such securities, on behalf of the Fund, to the purchaser of such securities. Such broker-dealer is entitled to retain the proceeds from the short sale until the Fund delivers to such broker-dealer the securities sold short. In addition, the Fund is required to 10 pay to the broker-dealer the amount of any dividends paid on shares sold short. Finally, in order to cover its short positions, the Fund must deposit and continuously maintain in a separate account with the Fund's custodian either (1) an equivalent amount of the securities sold short or securities convertible into or exchangeable for such securities without the payment of additional consideration or (2) cash, U.S. government securities or other liquid securities having a value equal to the excess of (a) the market value of the securities sold short over (b) the value of any cash, U.S. government securities or other liquid securities deposited as collateral with the broker in connection with the short sale. A Fund is said to have a short position in the securities sold until it delivers to the broker-dealer the securities sold, at which time the Fund receives the proceeds of the sale. A Fund may close out a short position by purchasing on the open market and delivering to the broker-dealer an equal amount of the securities sold short, rather than by delivering portfolio securities. Short sales may protect a Fund against the risk of losses in the value of its portfolio securities because any unrealized losses with respect to such portfolio securities should be wholly or partially offset by a corresponding gain in the short position. However, any potential gains in such portfolio securities should be wholly or partially offset by a corresponding loss in the short position. The extent to which such gains or losses are offset will depend upon the amount of securities sold short relative to the amount the Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium. Short sale transactions involve certain risks. If the price of the security sold short increases between the time of the short sale and the time a Fund replaces the borrowed security, the Fund will incur a loss and if the price declines during this period, the Fund will realize a short-term capital gain. Any realized short-term capital gain will be decreased, and any incurred loss increased, by the amount of transaction costs and any premium, dividend or interest which the Fund may have to pay in connection with such short sale. Certain provisions of the Internal Revenue Code may limit the degree to which a Fund is able to enter into short sales. There is no limitation on the amount of each Fund's assets that, in the aggregate, may be deposited as collateral for the obligation to replace securities borrowed to effect short sales and allocated to segregated accounts in connection with short sales. LENDING OF PORTFOLIO SECURITIES Each Fund except Oakmark Fund may lend its portfolio securities to broker-dealers and banks to the extent indicated in restriction 7 under "Investment Restrictions." Any such loan must be continuously secured by collateral in cash or cash equivalents maintained on a current basis in an amount at least equal to the market value of the securities loaned by a Fund. The Fund would continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned, and would also receive an additional return that may be in the form of a fixed fee or a percentage of the earnings on the collateral. The Fund would have the right to call the loan and obtain the securities loaned at any time on notice of not more than five business days. In the event of bankruptcy or other default of the borrower, the Fund could experience delays in liquidating the loan collateral or recovering the loaned securities and incur expenses related to enforcing its rights. In addition, there could be a decline in the value of the collateral or in the value of the securities loaned while the Fund seeks to enforce its rights thereto and the Fund could experience subnormal levels of income and lack of access to income during this period. FOREIGN INVESTMENT COMPANIES Certain markets are closed in whole or in part to direct equity investments by foreigners. A Fund may be able to invest in such markets solely or primarily through foreign government-approved or authorized investment vehicles, which may include other investment companies. A Fund may also invest in other investment companies that invest in foreign securities. As a shareholder in an investment company, a Fund would bear its ratable share of that investment company's expenses, including its advisory and administration fees. At the same time the Fund would continue to pay its own management fees and other expenses. In addition, investing through such vehicles may be subject to limitation under the 1940 Act. Under the 1940 Act, a Fund may invest up to 10% of its assets in shares of investment companies and up to 5% of its assets in any one investment company, as long as the Fund does not own more than 3% of the voting stock of any one investment company. 11 The Funds do not intend to invest in such vehicles or funds unless, in the judgment of the Adviser, the potential benefits of the investment justify the payment of any applicable fee, premium or sales charge. OPTIONS Each Fund may purchase and sell both call options and put options on securities. An option on a security is a contract that gives the purchaser (holder) of the option, in return for a premium, the right to buy from (call) or sell to (put) the seller (writer) of the option the security underlying the option at a specified exercise price at any time during the term of the option. The writer of an option on an individual security has the obligation upon exercise of a call option to deliver the underlying security upon payment of the exercise price or upon exercise of a put option to pay the exercise price upon delivery of the underlying security. Each Fund will write call options and put options only if they are "covered." For example, in the case of a call option, the option is "covered" if the Fund owns the security underlying the option or has an absolute and immediate right to acquire that security without additional consideration (or, if additional consideration is required, assets having a value at least equal to that amount are segregated on the books of a fund) upon conversion or exchange of other securities held in its portfolio. If an option written by a Fund expires, the Fund realizes a capital gain equal to the premium received at the time the option was written. If an option purchased by a Fund expires, the Fund realizes a capital loss equal to the premium paid. Prior to the earlier of exercise or expiration, the writer may close out the option by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security or index, exercise price and expiration). There can be no assurance, however, that a closing purchase or sale transaction can be effected when a Fund desires. If a Fund closes out an option it has written, it will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the option, or, if it is more, the Fund will realize a capital loss. If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less, the Fund will realize a capital loss. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security in relation to the exercise price of the option, the volatility of the underlying security or index, and the time remaining until the expiration date. A put or call option purchased by a Fund is an asset of the Fund, valued initially at the premium paid for the option. The premium received for an option written by a Fund is recorded as a deferred credit. The value of an option purchased or written is marked-to-market daily and is valued at the closing price on the exchange on which it is traded, or, if not traded on an exchange or no closing price is available, at the mean between the last bid and asked prices. There are several risks associated with transactions in options. For example, there are significant differences between the securities markets and the options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A decision as to whether, when, and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events. There can be no assurance that a liquid market will exist when a Fund seeks to close out an option position. If a Fund was unable to close out an option that it had purchased on a security, it would have to exercise the option in order to realize any profit or the option would expire and become worthless. If a Fund was unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security until the option expired. As the writer of a covered call option on a security, a Fund foregoes, during the option's life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the exercise price of the call. If trading were suspended in an option purchased or written by a Fund, that Fund would not able to close out the option. If restrictions on exercise were imposed, the Fund might be unable to exercise an option it has purchased. 12 TEMPORARY STRATEGIES Each Fund has the flexibility to respond promptly to changes in market and economic conditions. In the interest of preserving shareholders' capital, the Adviser may employ a temporary defensive investment strategy if it determines such a strategy to be warranted. Pursuant to such a defensive strategy, a Fund temporarily may hold cash (U.S. dollars, foreign currencies, or multinational currency units) and/or invest up to 100% of its assets in high quality debt securities or money market instruments of U.S. or foreign issuers, and most or all of the investments of International Fund, International Small Cap Fund and Global Fund may be made in the United States and denominated in U.S. dollars. It is impossible to predict whether, when or for how long a Fund will employ defensive strategies. In addition, pending investment of proceeds from new sales of Fund shares or to meet ordinary daily cash needs, each Fund temporarily may hold cash (U.S. dollars, foreign currencies or multinational currency units) and may invest any portion of its assets in money market instruments. PERFORMANCE INFORMATION From time to time the Funds may quote total return figures in sales material. "Total Return" for a period is the percentage change in value during the period of an investment in Fund shares, including the value of shares acquired through reinvestment of all dividends and capital gains distributions. Total return figures quoted by the Funds will assume reinvestment of all dividends and distributions, but will not take into account income taxes payable by shareholders. Total return is not intended to indicate future performance. "Average Annual Total Return" is the average annual compounded rate of change in value represented by the Total Return for the period. Average Annual Total Return will be computed as follows: n ERV = P(1+T) Where: P = the amount of an assumed initial investment in Fund shares T = average annual total return n = number of years from initial investment to the end of the period ERV = ending redeemable value of shares held at the end of the period For example, Total Return and Average Annual Total Return on a $1,000 investment in shares of each class of each Fund for various periods ended December 31, 2000 were as follows:
Total Average Annual Return Total Return ------ ------------ Oakmark Fund Class I One year..................................... 11.78% -- Five years................................... 59.96 9.84% Life of the Class*........................... 462.01 20.13 Select Fund Class I One year..................................... 25.81 -- Life of the Class*........................... 196.37 29.76 Select Fund Class II One year..................................... 25.42 -- Life of the Class**.......................... 25.42 25.42 Small Cap Fund Class I One year..................................... 4.39 -- Five year.................................... 63.96 10.38 Life of the Class*........................... 69.37 10.72 13 Equity and Income Fund Class I One year..................................... 19.89 -- Five year.................................... 112.14 16.21 Life of the Class*........................... 117.23 16.18 Equity and Income Fund Class II Life of the Class**.......................... 11.17 -- Global Fund Class I One year..................................... 15.84 -- Life of the Class*........................... 15.62 10.75 International Fund Class I One year..................................... 12.50 -- Five years................................... 93.01 14.04 Life of the Class*........................... 193.24 13.91 International Fund Class II One year..................................... 12.21 -- Life of the Class**.......................... 18.90 15.95 International Small Cap Fund Class I One year..................................... (8.85) -- Five years................................... 53.23 8.90 Life of the Class*........................... 47.56 7.81
------------------ * Life of Class I Shares commenced with the public offering of Class I Shares as follows: Oakmark, 8/5/91; Select, 11/1/96; International, 9/30/92; Small Cap, Equity and Income and International Small Cap, 11/1/95; and Global, 8/4/99. ** Life of Class II Shares commenced with the public offering of Class II Shares as follows: International, 11/4/99; Select, 12/31/99; and Equity and Income, 7/13/00. No information is provided for Class II Shares of Oakmark Fund, Small Cap Fund, Global Fund and International Small Cap Fund, because no Class II Shares had been issued as of December 31, 2000. The Funds also may, from time to time, quote their yield. Yield is based on historical earnings and is not intended to indicate future performance. The yield of a Fund refers to the income generated by an investment in that Fund over a one-month period (which period will be stated in the sales material). This income is then "annualized." That is, the amount of income generated by the investment during the month is assumed to be generated each month over a 12 month period and is shown as a percentage of the investment. Yield quotations are based on a 30-day (or one month) period, and are computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period, according to the following formula: a-b 6 Yield = 2 [( --- +1) - 1] cd Where: a = dividends and interest earned during the period b = expenses accrued for the period (net of reimbursements) c = the average daily number of shares outstanding during the period that were entitled to receive dividends d = the maximum offering price per share on the last day of the period Although they may do so in the future, each Fund typically does not calculate or advertise its yield. The Funds impose no sales charge and pay no distribution ("12b-1") expenses. Each Fund's performance is a function of conditions in the securities markets, portfolio management, and operating 14 expenses. Although information such as yield and total return is useful in reviewing a Fund's performance and in providing some basis for comparison with other investment alternatives, it should not be used for comparison with other investments using different reinvestment assumptions or time periods. In advertising and sales literature, the performance of a Fund may be compared with that of other mutual funds, indexes or averages of other mutual funds, indexes of related financial assets or data, and other competing investment and deposit products available from or through other financial institutions. The composition of these indexes or averages differs from that of the Funds. Comparison of a Fund to an alternative investment should consider differences in features and expected performance. All of the indexes and averages noted below will be obtained from the indicated sources or reporting services, which the Funds generally believe to be accurate. The Funds may also refer to publicity (including performance rankings) in newspapers, magazines, or other media from time to time. However, the Funds assume no responsibility for the accuracy of such data. Newspapers and magazines that might mention the Funds include, but are not limited to, the following: Barron's Global Finance Personal Investor Business Week Investor's Business Daily Smart Money Changing Times Kiplinger's Personal Finance Stanger Reports Chicago Tribune Los Angeles Times Time Chicago Sun-Times Money USA Today Crain's Chicago Business Mutual Fund Letter U.S. News and World Report Consumer Reports Mutual Funds Magazine The Wall Street Journal Consumer Digest Morningstar Worth Financial World Newsweek Forbes The New York Times Fortune Pensions and Investments
A Fund may compare its performance to the Consumer Price Index (All Urban), a widely recognized measure of inflation. The performance of a Fund may also be compared to the following indexes or averages: Dow-Jones Industrial Average* Standard & Poor's 500 Stock Index* Standard & Poor's 400 Industrials Standard & Poor's Small Cap 600* Standard & Poor's Mid Cap 400* Russell 2000 Wilshire 5000 New York Stock Exchange Composite Index American Stock Exchange Composite Index NASDAQ Composite NASDAQ Industrials - -------- * With dividends reinvested. 15 In addition, each of Oakmark Fund, Select Fund, Small Cap Fund and Equity and Income Fund may compare its performance to the following indexes and averages: Value Line Index; Lipper Balanced Fund Index; Lipper Capital Appreciation Fund Average; Lipper Growth Funds Average; Lipper Small Company Growth Funds Average; Lipper General Equity Funds Average; Lipper Equity Funds Average; Lipper Small-Cap Growth Index; Lipper Small-Cap Value Index; Lipper Small-Cap Core Index; Lipper Small Cap Fund Index; and Lehman Brothers Government/Corporate Bond Index. Each of International Fund, International Small Cap Fund and Global Fund may compare its performance to the following indexes and averages: Lipper International & Global Funds Average; Lipper Global Fund Index; Lipper International Fund Index; Lipper International Equity Funds Average; Micropal International Small Company Fund Index; Morgan Stanley Capital International World ex U.S. Index; Morgan Stanley Capital International EAFE (Europe, Australia and Far East Index); Morningstar Growth Average; Morningstar Small-Cap Funds Average; Morningstar U.S. Diversified Average; Morningstar Equity Fund Average; Morningstar Hybrid Fund Average; Morningstar All Equity Funds Average; Morningstar General Equity Average; and Morningstar International Stock Average. Lipper Indexes and Averages are calculated and published by Lipper, Inc. ("Lipper"), an independent service that monitors the performance of more than 1,000 funds. The Funds may also use comparative performance as computed in a ranking by Lipper or category averages and rankings provided by another independent service. Should Lipper or another service reclassify a Fund to a different category or develop (and place a Fund into) a new category, that Fund may compare its performance or ranking against other funds in the newly assigned category, as published by the service. Each Fund may also compare its performance or ranking against all funds tracked by Lipper or another independent service, including Morningstar, Inc. The Funds may cite their ratings, recognition, or other mention by Morningstar or any other entity. For each Fund with at least a three-year history, Morningstar calculates a Morningstar Rating(TM) metric each month by subtracting the return on a 90-day U.S. Treasury Bill from the Fund's load-adjusted return for the same period, and then adjusting this excess return for risk. The top 10% of funds in each broad asset class receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The Overall Morningstar Rating is derived from a weighted average of the performance figures associated with the Fund's three-, five- and ten-year (if applicable) Morningstar Rating metrics. To illustrate the historical returns on various types of financial assets, the Funds may use historical data provided by Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains) very long-term (since 1926) total return data (including, for example, total return indexes, total return percentages, average annual total returns and standard deviations of such returns) for the following asset types: common stocks; small company stocks; long-term corporate bonds; long-term government bonds; intermediate-term government bonds; U.S. Treasury bills; and Consumer Price Index. INVESTMENT ADVISER The Funds' investment adviser, Harris Associates L.P., furnishes continuing investment supervision to the Funds and is responsible for overall management of the Funds' business affairs pursuant to investment advisory agreements relating to the respective Funds (the "Agreements"). The Adviser furnishes office space, equipment and personnel to the Funds, and assumes the expenses of printing and distributing the Funds' prospectus, profiles and reports to prospective investors. Each Fund pays the cost of its custodial, stock transfer, dividend disbursing, bookkeeping, audit and legal services. Each Fund also pays other expenses such as the cost of proxy solicitations, printing and distributing notices and copies of the prospectus and shareholder reports furnished to existing shareholders, taxes, insurance premiums, the expenses of maintaining the registration of that Fund's shares under federal and state securities laws and the fees of trustees not affiliated with the Adviser. The Adviser has contractually agreed to reimburse Class I Shares of each Fund to the extent that the annual ordinary operating expenses of that class exceed the following percentages of the average net assets of Class I Shares: 1.50% in the case of Oakmark Fund, Select Fund or Small Cap Fund; 1.00% in the case of Equity and Income Fund; 1.75% in the case of Global Fund; and 2.00% in the case of International Fund and International Small Cap Fund. The Adviser has also contractually agreed to reimburse Class II Shares of each 16 Fund to the extent that the annual ordinary operating expenses of that class exceed the following percentages of the average net assets of Class II Shares: Oakmark Fund, Select Fund or Small Cap Fund, 1.75% (1.50% + .25%); Equity and Income Fund, 1.25% (1.00% + .25%); Global Fund, 2.00% (1.75% + .25%); and International Fund and International Small Cap Fund, 2.25% (2.00% + .25%). Each such agreement is effective through January 31, 2002. For the purpose of determining whether a share class of a Fund is entitled to any reduction in advisory fee or expense reimbursement, the pro rata portion of the Fund's expenses attributable to a share class of that Fund is calculated daily and any reduction in fee or reimbursement is made monthly. For its services as investment adviser, the Adviser receives from each Fund a monthly fee based on that Fund's net assets at the end of the preceding month. Basing the fee on net assets at the end of the preceding month has the effect of (i) delaying the impact of changes in assets on the amount of the fee and (ii) in the first year of a fund's operation, reducing the amount of the aggregate fee by providing for no fee in the first month of operation. The annual rates of fees as a percentage of each Fund's net assets are as follows: FUND FEE - --------------- ---------------------------------------------------- Oakmark 1.00% up to $2.0 billion; .90% on the next $1.0 billion; .80% on the next $2.0 billion; and .75% on net assets in excess of $5.0 billion Select 1.00% up to $1.0 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 billion; and .75% on net assets in excess of $5.0 billion Small Cap 1.00% Equity and Income .75% Global 1.00% International 1.00% up to $2.0 billion; .95% on the next $1.0 billion; and .85% on net assets in excess of $3 billion International Small Cap 1.25% up to $500 million; and 1.10% on net assets in excess of $500 million The table below shows gross advisory fees paid by the Funds and any expense reimbursements by the Adviser to them, which are described in the prospectus.
TYPE OF YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED FUND PAYMENT SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 ------------------------------------------------------------------------------------------------- Oakmark Advisory fee $28,116,035 $59,957,947 $72,196,251 Select Advisory fee 15,325,113 15,358,029 11,525,158 Small Cap Advisory fee 3,683,621 7,251,751 15,863,707 Reimbursement 252,000 -- -- Equity and Income Advisory fee 410,864 464,454 359,708 Global Advisory fee 267,710 18,520 -- Reimbursement 55,500 15,474 -- International Advisory fee 7,849,938 8,068,806 12,623,371 International Small Cap Advisory fee 1,451,394 1,330,000 827,611
The Agreement for each Fund is for an initial term expiring October 31, 2001. Each Agreement continues from year to year thereafter so long as such continuation is approved at least annually by (1) the 17 board of trustees or the vote of a majority of the outstanding voting securities of the Fund, and (2) a majority of the trustees who are not interested persons of any party to the Agreement, cast in person at a meeting called for the purpose of voting on such approval. Each Agreement may be terminated at any time, without penalty, by either the Trust or the Adviser upon 60 days' written notice, and is automatically terminated in the event of its assignment as defined in the 1940 Act. The Adviser is a limited partnership managed by its general partner, Harris Associates, Inc. ("HAI"), whose directors are David G. Herro, Robert M. Levy, Roxanne M. Martino, Anita M. Nagler, William C. Nygren, G. Neal Ryland, and Peter S. Voss. Mr. Levy is the president and chief executive officer of HAI. HAI is a wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest"). Nvest owns all of the limited partnership interests in the Adviser and, through its wholly-owned subsidiary, Nvest Holdings, Inc., all of the outstanding shares of HAI. Nvest is a limited partnership that owns investment management and related firms and is an affiliate of Nvest Services Co., the Funds' transfer agent. As of February 14, 2001, Nvest Services Co. intends to change its name to CDC IXIS Services Company. Nvest is an indirect wholly-owned subsidiary of CDC IXIS Asset Management S.A. ("CDC AM"), which in turn is 60% owned by CDC IXIS, a wholly-owned subsidiary of Caisse des Depots et Consignations ("CDC"). Founded in 1816, CDC is a major diversified financial institution with a strong global presence in the banking, insurance, investment banking, asset management and global custody industries. In addition to its 60% ownership of CDC AM through CDC IXIS, CDC owns 40% of CNP Assurances, a leading French insurance company, which itself owns 20% of CDC AM. CDC also owns 35% of Caisse National des Caisses d'Epargne, which also owns 20% of CDC AM. CDC is 100% owned by the French government. The main place of business of CDC AM is 7, place des Cinq Martyrs du Lycee Buffon, 75015 Paris, France. The registered address of CDC IXIS is 56, rue de Lille, 75007 Paris, France. The registered address of CNP Assurances is 4, place Raoul Dautry, 75015 Paris, France. The registered address of Caisse National des Caisses d'Epargne is 5, rue Masseran, 75007 Paris, France. CODE OF ETHICS The 1940 Act and rules thereunder require that the Trust, the Adviser and the Funds' distributor, Harris Associates Securities L.P. ("HASLP"), establish standards and procedures for the detection and prevention of certain conflicts of interest, including activities by which persons having knowledge of the investments and investment intentions of the Trust might take advantage of that knowledge for their own benefit. The Trust, the Adviser and HASLP have adopted codes of ethics to meet those concerns and legal requirements. Although the codes do not prohibit employees who have knowledge of the investments and investment intentions of any of the Funds from engaging in personal securities investing, it does regulate such personal securities investing by these employees as a part of the effort by the Trust, the Adviser and HASLP to detect and prevent conflicts of interest. TRUSTEES AND OFFICERS The trustees and officers of the Trust and their principal business activities during the past five years are:
NAME, ADDRESS,+ POSITION(S) WITH TRUST AND AGE AT SEPTEMBER 30, 2000 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS# ----------------------------- ---------------------------------------------- VICTOR A. MORGENSTERN* Chairman of the Board, HAI, 1996 - 2000 and President Trustee and Chairman of the Board, 57 prior thereto; Chairman, Harris Partners, L.L.C., 1995 - 2000; Director of Nvest Corporation, 1996-2000. MICHAEL J. FRIDUSS Principal, MJ Friduss & Associates, Inc. Trustee, 58 (telecommunications consultants)
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NAME, ADDRESS,+ POSITION(S) WITH TRUST AND AGE AT SEPTEMBER 30, 2000 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS# ----------------------------- ---------------------------------------------- THOMAS H. HAYDEN Executive Vice President and Director, Bozell Group Trustee, 49 (advertising and public relations) c/o Bozell Group 676 N. St. Clair Chicago, Illinois 60611 CHRISTINE M. MAKI Vice President--Tax, Hyatt Corporation (hotel management) Trustee, 39 c/o Hyatt Corporation 200 West Madison Street Chicago, Illinois 60606 ALLAN J. REICH Managing Member and Chair of Corporate/Securities Trustee, 52 Practice Group, D'Ancona & Pflaum LLC (attorneys) c/o D'Ancona & Pflaum LLC 111 E. Wacker Drive, Suite 2800 Chicago, Illinois 60601 MARV R. ROTTER President -- Central Region, AXA Advisors, LLC (formerly Trustee, 54 named Rotter & Associates), since 1999, and General c/o AXA Advisors, LLC Manager prior thereto (financial services) 5 Revere Dr., Suite 400 Northbrook, IL 60062 BURTON W. RUDER President, The Academy Group (venture capital Trustee, 56 investments and transaction financing) c/o The Academy Group 707 Skokie Boulevard, Suite 410 Northbrook, Illinois 60062 PETER S. VOSS* President and Chief Executive Officer, CDC AM North Trustee, 53 America Corporation and CDC AM North America LLC, and c/o CDC AM North America Corporation Member of the Supervisory Board, CDC IXIS Asset 399 Boylston Street Management S.A. (investment management), since 2000; Boston, Massachusetts 02116 Chairman,President and Chief Executive Officer, Nvest Corporation, Nvest Companies, L.P. and Nvest L.P. (investment management), prior thereto GARY N. WILNER, M.D. Senior Attending Physician, Evanston Hospital, and Trustee, 60 Medical Director - CardioPulmonary Wellness Program, c/o Evanston Hospital Evanston Hospital Corporation 2650 Ridge Avenue Evanston, Illinois 60201 ROBERT LEVY President and Chief Executive Officer, HAI, since 1997; President, 50 Chief Executive Officer, HASLP, since 1995; Portfolio Manager, HALP
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NAME, ADDRESS,+ POSITION(S) WITH TRUST AND AGE AT SEPTEMBER 30, 2000 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS# ----------------------------- ---------------------------------------------- JAMES P. BENSON Portfolio Manager and Analyst, HALP, since 1997; Vice President and Portfolio Manager (The Executive Vice President and Director of Equity Oakmark Small Cap Fund), 43 Research, Ryan Beck & Co. (broker/dealer and investment banking), prior thereto HENRY R. BERGHOEF Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (The Oakmark Select Fund), 51 KEVIN G. GRANT Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (The Oakmark Fund), 36 DAVID G. HERRO Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (The Oakmark International Fund and The Oakmark International Small Cap Fund), 39 GREGORY L. JACKSON Portfolio Manager and Analyst, HALP, since July 1998; Vice President and Portfolio Manager (The Portfolio Manager and Analyst, Yacktman Asset Oakmark Global Fund), 34 Management, prior thereto JOHN J. KANE Manager - Fund Accounting, HALP Assistant Treasurer, 29 CLYDE S. MCGREGOR Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (The Oakmark Small Cap Fund and The Oakmark Equity and Income Fund), 47 ANITA M. NAGLER Chief Operating Officer, HAI, and Chief Operating Executive Vice President and Secretary, 44 Officer and General Counsel, HASLP, since 2000; Vice President, HAI; General Counsel, HALP; Chief Legal Officer, HASLP, 1995-2000. WILLIAM C. NYGREN Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (The Oakmark Fund and The Oakmark Select Fund), 42 ANN W. REGAN Director of Mutual Fund Operations, HALP Vice President--Shareholder Operations and Assistant Secretary, 52 Kristi L. Rowsell Chief Financial Officer, HAI and HASLP, since 1999; Treasurer, 34 Treasurer, HALP
20
NAME, ADDRESS,+ POSITION(S) WITH TRUST AND AGE AT SEPTEMBER 30, 2000 PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS# ----------------------------- ---------------------------------------------- EDWARD A. STUDZINSKI Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (The Oakmark Equity and Income Fund), 51 MICHAEL J. WELSH Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (The Oakmark Global Fund, The Oakmark International Fund and The Oakmark International Small Cap Fund), 37
- ------------------------------------ + Unless otherwise noted, the business address of each officer and trustee listed in the table is Two North LaSalle Street, Suite 500, Chicago, Illinois 60602-3790. # As used in this table, "HALP," "HAI" and "HASLP" refer to the Adviser, the general partner of the Adviser, and the Fund's distributor, respectively. * Mr. Voss is a trustee who is an "interested person" of the Trust as defined in the 1940 Act. ** Mr. Morgenstern ceased to be an "interested person" of the Trust as of January 1, 2001. Messrs. Voss and Morgenstern and Dr. Wilner are members of the executive committee, which has authority during intervals between meetings of the board of trustees to exercise the powers of the board, with certain exceptions. At December 31, 2000, the trustees and officers as a group owned beneficially less than 1% of Oakmark Fund and the following percentages of the outstanding shares of each of the other Funds: Select, 1.43%; Small Cap, 1.07%; Equity and Income, 6.07%; Global, 32.67%; International, 6.79%; and International Small Cap, 12.34%. 21 The following table shows the compensation paid by the Trust for the year ended September 30, 2000 to each trustee who was not an "interested person" of the Trust: AGGREGATE COMPENSATION NAME OF TRUSTEE FROM THE TRUST* - ---------------------------------------------------------------- Victor A. Morgenstern $0** Michael J. Friduss 59,750 Thomas H. Hayden 53,750 Christine M. Maki 55,750 Allan J. Reich 54,250 Marv R. Rotter 51,750 Burton W. Ruder 53,750 Gary N. Wilner, M.D. 56,000 - ------------------------------------------------------------------------------- * The Trust is not part of a fund complex. ** Mr. Morgenstern received no compensation paid by the Trust for the year ended September 30, 2000 because, until January 1, 2001, he was an "interested person" of the Trust. Other trustees who are "interested persons" of the Trust, as well as the officers of the Trust, are compensated by the Adviser and not by the Trust. The Trust does not provide any pension or retirement benefits to its trustees. The Trust has a deferred compensation plan (the "Plan") that permits any trustee who is not an "interested person" of the Trust to elect to defer receipt of all or a portion of his or her compensation as a trustee for two or more years. The deferred compensation of a participating trustee is credited to a book reserve account of the Trust when the compensation would otherwise have been paid to the trustee. The value of the trustee's deferral account at any time is equal to the value that the account would have had if contributions to the account had been invested and reinvested in shares of one or more of the Oakmark Funds or the Goldman Sachs Institutional Liquid Assets Government Portfolio as designated by the trustee. At the time for commencing distributions from a trustee's deferral account, which is no later than when the trustee ceases to be a member of the board of trustees, the trustee may elect to receive distributions in a lump sum or over a period of five years. Each Fund's obligation to make distributions under the Plan is a general obligation of that Fund. No Fund will be liable for any other Fund's obligations to make distributions under the Plan. PRINCIPAL SHAREHOLDERS The only persons known by the Trust to own of record or "beneficially" (within the meaning of that term as defined in rule 13d-3 under the Securities Exchange Act of 1934) 5% or more of the outstanding shares of any Fund as of December 31, 2000 were:
PERCENTAGE OF OUTSTANDING NAME AND ADDRESS FUND AND CLASS SHARES HELD ---------------- -------------- ----------- Banc of America Securities LLC (1) International Small Cap, Class I 6.90% 600 Montgomery Street Global, Class I 15.49% San Francisco, CA 94111-2702
22
PERCENTAGE OF OUTSTANDING NAME AND ADDRESS FUND AND CLASS SHARES HELD ---------------- -------------- ----------- Charles Schwab & Co. Inc. (1) Oakmark, Class I 26.62% 101 Montgomery Street Select, Class I 36.03% San Francisco, CA 94104-4122 Small Cap, Class I 26.20% Equity and Income, Class I 26.02% International, Class I 32.21% International Small Cap, Class I 28.11% Global, Class I 6.59% National Financial Services Corp. (1) Oakmark, Class I 6.99% P.O. Box 3908 Select, Class I 19.62% Church Street Station Small Cap, Class I 9.24% New York, NY 10008-3908 Equity and Income, Class I 11.84% International, Class I 5.59% International Small Cap, Class I 6.80% Merrill Lynch Pierce Fenner & Smith Inc. (1) Select, Class II 75.89% 4800 Deer Lake Drive E., 3rd Floor Jacksonville, FL 32246-6486 Reliance Trust (1) Select, Class II 16.82% FBO MetLife Defined Contribution Group Equity and Income, Class II 100.00% 3384 Peachtree Road NE, 9th Floor Atlanta, GA 30326-1181 John Hancock (1) Select, Class II 6.23% FBO Cross & Peters 101 Huntington Avenue, Fl. 5 Boston, MA 02199-7603 John Hancock (1) International, Class II 31.13% FBO Apple Rio Management 101 Huntington Avenue, Fl. 5 Boston, MA 02199-7603 John Hancock (1) International, Class II 27.53% FBO Wakefield Management 101 Huntington Avenue, Fl. 8 Boston, MA 02199-7603 John Hancock (1) International, Class II 41.34% FBO FGM 101 Huntington Avenue, Fl. 5 Boston, MA 02199-7603
- ----------------------------- (1) Shares are held for accounts of customers. PURCHASING AND REDEEMING SHARES Purchases and redemptions are discussed in the Funds' prospectus under the headings "Investing with The Oakmark Family of Funds," "How to Buy Class I Shares," "How to Sell Class I Shares" and "Shareholder Services." 23 NET ASSET VALUE The net asset value per Class I Share or per Class II Share of each Fund is determined by the Trust's custodian, State Street Bank and Trust Company. The net asset value of Class I Shares of a Fund is determined by dividing the value of the assets attributable to Class I Shares of the Fund, less liabilities attributable to that class, by the number of Class I Shares outstanding. Similarly, the net asset value of Class II Shares of a Fund is determined by dividing the value of the assets attributable to Class II Shares of the Fund, less liabilities attributable to that class, by the number of Class II Shares outstanding. Securities traded on securities exchanges, or in the over-the-counter market in which transaction prices are reported on the NASDAQ National Market System, are valued at the last sales prices at the time of valuation or, lacking any reported sales on that day, at the most recent bid quotations. Other securities traded over-the-counter are also valued at the most recent bid quotations. Money market instruments having a maturity of 60 days or less from the valuation date are valued on an amortized cost basis. The values of securities of foreign issuers are generally based upon market quotations which, depending upon local convention or regulation, may be last sale price, last bid or asked price, or the mean between last bid and asked prices as of, in each case, the close of the appropriate exchange or other designated time. Securities for which quotations are not available and any other assets are valued at a fair value as determined in good faith by or under the direction of the board of trustees. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at the mean of the bid and offer prices of such currencies against U.S. dollars quoted by any major bank or dealer. If such quotations are not available, the rate of exchange will be determined in accordance with policies established in good faith by or under the direction of the board of trustees. The Funds' net asset values are determined only on days on which the New York Stock Exchange (the "NYSE") is open for trading. The NYSE is regularly closed on Saturdays and Sundays and on New Year's Day, the third Monday in January and February, Good Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving and Christmas. If one of these holidays falls on a Saturday or Sunday, the NYSE will be closed on the preceding Friday or the following Monday, respectively. Trading in the portfolio securities of International Fund, International Small Cap Fund or Global Fund (and of any other Fund, to the extent it invests in securities of non-U.S. issuers) takes place in various foreign markets on certain days (such as Saturday) when the Fund is not open for business and does not calculate its net asset value. In addition, trading in the Fund's portfolio securities may not occur on days when the Fund is open. Therefore, the calculation of net asset value does not take place contemporaneously with the determinations of the prices of many of the Fund's portfolio securities and the value of the Fund's portfolio may be significantly affected on days when shares of the Fund may not be purchased or redeemed. Computation of net asset value (and the sale and redemption of a Fund's shares) may be suspended or postponed during any period when (a) trading on the NYSE is restricted, as determined by the SEC, or that exchange is closed for other than customary weekend and holiday closings, (b) the SEC has by order permitted such suspension, or (c) an emergency, as determined by the SEC, exists making disposal of portfolio securities or valuation of the net assets of a Fund not reasonably practicable. SHARES PURCHASED THROUGH INTERMEDIARIES Class I Shares of any of the Funds may be purchased through certain financial service companies, who are agents of the Funds for the limited purpose of completing purchases and sales. For services provided by such a company with respect to Fund shares held by that company for its customers, the company may charge a fee of up to 0.35% of the annual average value of those accounts. Each Fund may pay a portion of those fees, not to exceed the estimated fees that the Fund would pay to its own transfer agent if the shares of the Fund held by such customers of the company were registered directly in their names on the books of the Fund's transfer agent. The balance of those fees are paid by the Adviser. To buy and sell Class II Shares, you must do so through an intermediary, such as a broker-dealer, bank, retirement plan service provider or retirement plan sponsor ("Intermediary"). The Intermediary accepts purchase and sale orders for Class II Shares as an authorized agent of the Trust pursuant to a written agreement. The Intermediary is required to segregate any orders received on a business day after the close of regular session 24 trading on the NYSE and transmit those orders separately for execution at the net asset value next determined after that business day. Purchases through Intermediaries that are authorized agents of the Trust are made at the net asset value next determined after receipt of the orders by such Intermediaries. A purchase through an Intermediary that is not an authorized agent of the Trust for the receipt of orders is made at the net asset value next determined after receipt of your order by the Trust's transfer agent. REDEMPTION IN KIND Each Fund elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which it is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of a Fund during any 90-day period for any one shareholder. Redemptions in excess of those amounts will normally be paid in cash, but may be paid wholly or partly by a distribution in kind of marketable securities. Brokerage costs may be incurred by a shareholder who receives securities and desires to convert them to cash. REDEMPTION OF SMALL ACCOUNTS Due to the relatively high cost of maintaining small accounts, each Fund reserves the right to redeem at net asset value the shares of any shareholder whose account in the Fund has a value as a result of redemptions of less than the minimum amount specified by the board of trustees, which currently is $1,000. Before such a redemption, the shareholder will be notified that the account value is less than the minimum and will be allowed at least 30 days to bring the value of the account up to the minimum. The agreement and declaration of trust also authorizes the Trust to redeem shares under certain other circumstances as may be specified by the board of trustees. 90-DAY REDEMPTION FEE - CLASS I SHARES Each Fund except Oakmark Fund and Equity and Income Fund imposes a short-term trading fee on redemptions of Class I Shares held less than 90 days to offset two types of costs to the Fund caused by short-term trading: portfolio transaction and market impact costs associated with erratic redemption activity and administrative costs associated with processing redemptions. The fee is 2% of the redemption value and is deducted from the redemption proceeds. The "first-in, first-out" (FIFO) method is used to determine the holding period, which means that if you bought shares on different days, the shares purchased first will be redeemed first for purposes of determining whether the short-term trading fee applies. No Fund imposes a redemption fee on a redemption of: - shares acquired by reinvestment of dividends or distributions of a Fund; or - shares held in an account of certain retirement plans or profit sharing plans or purchased through certain Intermediaries. MONEY MARKET EXCHANGE FUND The Adviser acts as a Service Organization for the Institutional Liquid Assets Service Units ("Units") of the Government Portfolio of Goldman Sachs Trust, which Units may be purchased directly or by exchanging shares of a Fund. For its services, the Adviser receives fees at a rate of .50% of the average annual net assets of the portfolio, pursuant to a 12b-1 plan adopted by the Goldman Sachs Trust. ADDITIONAL TAX INFORMATION GENERAL Each Fund intends to continue to qualify to be taxed as a regulated investment company under the Internal Revenue Code of 1986, as amended, so as to be relieved of federal income tax on its capital gains and net investment income currently distributed to its shareholders. At the time of your purchase, a Fund's net asset 25 value may reflect undistributed income, capital gains or net unrealized appreciation of securities held by that Fund. A subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable either as dividends or capital gain distributions. INTERNATIONAL FUND AND INTERNATIONAL SMALL CAP FUND Dividends and distributions paid by International Fund and International Small Cap Fund are not eligible for the dividends-received deduction for corporate shareholders, if as expected, none of such Funds' income consists of dividends paid by United States corporations. Capital gain distributions paid by the Funds are never eligible for this deduction. Certain foreign currency gains and losses, including the portion of gain or loss on the sale of debt securities attributable to foreign exchange rate fluctuations are taxable as ordinary income. If the net effect of these transactions is a gain, the dividend paid by any of these Funds will be increased; if the result is a loss, the income dividend paid by any of these Funds will be decreased. Income received by a Fund from sources within various foreign countries will be subject to foreign income taxes withheld at the source. Under the Code, if more than 50% of the value of the Fund's total assets at the close of its taxable year comprise securities issued by foreign corporations, the Fund may file an election with the Internal Revenue Service to "pass through" to the Fund's shareholders the amount of foreign income taxes paid by the Fund. Pursuant to this election, shareholders will be required to: (i) include in gross income, even though not actually received, their respective pro rata share of foreign taxes paid by the Fund; (ii) treat their pro rata share of foreign taxes as paid by them; and (iii) either deduct their pro rata share of foreign taxes in computing their taxable income, or use it as a foreign tax credit against U.S. income taxes (but not both). No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions. International Fund, International Small Cap Fund and Global Fund intend to meet the requirements of the Code to "pass through" to their shareholders foreign income taxes paid, but there can be no assurance that they will be able to do so. Each shareholder will be notified within 60 days after the close of each taxable year of a Fund, if the foreign taxes paid by the Fund will "pass through" for that year, and, if so, the amount of each shareholder's pro rata share (by country) of (i) the foreign taxes paid, and (ii) the Fund's gross income from foreign sources. Of course, shareholders who are not liable for federal income taxes, such as retirement plans qualified under Section 401 of the Code, will not be affected by any such "pass through" of foreign tax credits. DISTRIBUTOR Shares of the Funds are offered for sale by Harris Associates Securities L.P. without any sales commissions, 12b-1 fees, or other charges to the Funds or their shareholders. HASLP is an affiliate of the Adviser. All distribution expenses relating to the Funds are paid by the Adviser, including the payment or reimbursement of any expenses incurred by HASLP. The Distribution Agreement is for an initial term expiring January 1, 2002 and will continue in effect from year to year provided such continuance is approved annually (i) by a majority of the trustees or by a majority of the outstanding voting securities of the Funds and (ii) by a majority of the trustees who are not parties to the Distribution Agreement or interested persons of any such party. The Trust has agreed to pay all expenses in connection with registration of its shares with the SEC and any auditing and filing fees required in compliance with various state securities laws. The Adviser bears all sales and promotional expenses, including the cost of prospectuses and other materials used for sales and promotional purposes by HASLP. HASLP offers the Funds' shares only on a best efforts basis. HASLP is located at Two North LaSalle Street, Chicago, Illinois 60602-3790. PORTFOLIO TRANSACTIONS Portfolio transactions for each Fund are placed with those securities brokers and dealers that the Adviser believes will provide the best value in transaction and research services for that Fund, either in a 26 particular transaction or over a period of time. Subject to that standard, portfolio transactions for each Fund may be executed through HASLP, a registered broker-dealer and an affiliate of the Adviser. In valuing brokerage services, the Adviser makes a judgment as to which brokers are capable of providing the most favorable net price (not necessarily the lowest commission) and the best execution in a particular transaction. Best execution connotes not only general competence and reliability of a broker, but specific expertise and effort of a broker in overcoming the anticipated difficulties in fulfilling the requirements of particular transactions, because the problems of execution and the required skills and effort vary greatly among transactions. Although some transactions involve only brokerage services, many involve research services as well. In valuing research services, the Adviser makes a judgment of the usefulness of research and other information provided by a broker to the Adviser in managing a Fund's investment portfolio. In some cases, the information, e.g., data or recommendations concerning particular securities, relates to the specific transaction placed with the broker, but for the greater part the research consists of a wide variety of information concerning companies, industries, investment strategy and economic, financial and political conditions and prospects, useful to the Adviser in advising the Funds. The Adviser is the principal source of information and advice to the Funds, and is responsible for making and initiating the execution of the investment decisions for each Fund. However, the board of trustees recognizes that it is important for the Adviser, in performing its responsibilities to the Funds, to continue to receive and evaluate the broad spectrum of economic and financial information that many securities brokers have customarily furnished in connection with brokerage transactions, and that in compensating brokers for their services, it is in the interest of the Funds to take into account the value of the information received for use in advising the Funds. Consequently, the commission paid to brokers (other than HASLP) providing research services may be greater than the amount of commission another broker would charge for the same transaction. The extent, if any, to which the obtaining of such information may reduce the expenses of the Adviser in providing management services to the Funds is not determinable. In addition, it is understood by the board of trustees that other clients of the Adviser might also benefit from the information obtained for the Funds, in the same manner that the Funds might also benefit from information obtained by the Adviser in performing services to others. HASLP may act as broker for a Fund in connection with the purchase or sale of securities by or to the Fund if and to the extent permitted by procedures adopted from time to time by the board of trustees of the Trust. The board of trustees, including a majority of the trustees who are not "interested" trustees, has determined that portfolio transactions for a Fund may be executed through HASLP if, in the judgment of the Adviser, the use of HASLP is likely to result in prices and execution at least as favorable to the Fund as those available from other qualified brokers and if, in such transactions, HASLP charges the Fund commission rates at least as favorable to the Fund as those charged by HASLP to comparable unaffiliated customers in similar transactions. The board of trustees also has adopted procedures that are reasonably designed to provide that any commission, fee or other remuneration paid to HASLP is consistent with the foregoing standard. The Funds will not effect principal transactions with HASLP. In executing transactions through HASLP, the Funds will be subject to, and intend to comply with, section 17(e) of the 1940 Act and rules thereunder. The reasonableness of brokerage commissions paid by the Funds in relation to transaction and research services received is evaluated by the staff of the Adviser on an ongoing basis. The general level of brokerage charges and other aspects of the Funds' portfolio transactions are reviewed periodically by the board of trustees. The following table shows the aggregate brokerage commissions (excluding the gross underwriting spread on securities purchased in initial public offerings) paid by each Fund during the periods indicated, as well as the aggregate commissions paid to affiliated persons of the Trust. 27
Year Ended Year Ended Year Ended September 30, 2000 September 30, 1999 September 30, 1998 ------------------ ------------------ ------------------ Oakmark Fund Aggregate commissions............ $7,645,100 $5,015,100 $7,578,511 Commissions paid to affiliates... 2,765,022 1,944,758 2,068,690 Percentage of aggregate commissions paid to affiliates*.... 36.2% 38.8% 27.3% Select Fund Aggregate commissions............ 4,102,031 2,890,228 2,408,373 Commissions paid to affiliates... 1,112,365 725,722 589,564 Percentage of aggregate commissions paid to affiliates*.. 27.1% 25.1% 24.5% Small Cap Fund Aggregate commissions............ 646,845 1,681,150 1,956,668 Commissions paid to affiliates... 233,479 213,191 193,708 Percentage of aggregate commissions paid to affiliates*.. 36.1% 12.7% 9.9% Equity and Income Fund Aggregate commission............. 173,265 100,156 66,195 Commissions paid to affiliates... 100,258 56,545 41,979 Percentage of aggregate commissions paid to affiliates*.. 57.9% 56.5% 63.4% Global Fund Aggregate commissions............ 211,245 89,492 -- Commissions paid to affiliates... 87,377 29,127 -- Percentage of aggregate commissions paid to affiliates*.. 41.4% 32.6% -- International Fund Aggregate commissions............ 2,853,134 2,994,368 4,287,619 Commissions paid to affiliates... -- -- -- Percentage of aggregate commissions paid to affiliates*.. -- -- -- International Small Cap Fund Aggregate commissions............ 404,559 1,153,858 387,461 Commissions paid to affiliates... -- -- -- Percentage of aggregate commissions paid to affiliates*.. -- -- --
-------------------------- * The percent of the dollar amount of each Fund's aggregate transactions involving the Fund's payment of brokerage commissions that were executed through affiliates for each of the periods is shown below.
Year Ended Year Ended Eleven Months Ended Fund September 30, 2000 September 30, 1999 September 30, 1998 ---- ------------------ ------------------ ------------------ Oakmark 67.4% 44.1% 29.5% Select 56.3 31.0 33.01 Small Cap 36.9 19.1 14.5 Equity and Income 51.4 69.6 63.5 28 Global 56.3 43.2 - International - - - International Small Cap - - -
Of the aggregate brokerage transactions during the year ended September 30, 2000, the Funds paid the following commissions on transactions directed to brokers because of research services they provided: Oakmark, $1,457,883; Select, $872,694; Small Cap, $93,970; Equity and Income, $23,211; Global, $47,287; International, $1,504,700; and International Small Cap, $240,757; and the aggregate dollar amounts involved in those transactions for the respective Funds were $780,427,547, $442,687,926, $31,661,174, $5,707,855, $20,331,448, $740,576,326 and $74,482,662, respectively. Transactions of the Funds in the over-the-counter market and the third market are executed with primary market makers acting as principal except where it is believed that better prices and execution may be obtained otherwise. Although the Adviser makes investment decisions for the Funds independently from those for other investment advisory clients of the Adviser, it may occur that the same investment decision is made for both a Fund and one or more other advisory clients. If both a Fund and another client purchase or sell the same class of securities on the same day, the transactions will be allocated as to amount and price in a manner considered equitable to each over time. The Funds do not purchase securities with a view to rapid turnover. However, there are no limitations on the length of time that portfolio securities must be held. Portfolio turnover can occur for a number of reasons, including general conditions in the securities market, more favorable investment opportunities in other securities, or other factors relating to the desirability of holding or changing a portfolio investment. A high rate of portfolio turnover would result in increased transaction expense, which must be borne by the Fund. High portfolio turnover may also result in the realization of capital gains or losses and, to the extent net short-term capital gains are realized, any distributions resulting from such gains will be considered ordinary income for federal income tax purposes. The portfolio turnover rates for the Funds are set forth in the prospectus under "Financial Highlights." DECLARATION OF TRUST The Agreement and Declaration of Trust under which the Trust has been organized ("Declaration of Trust") disclaims liability of the shareholders, trustees and officers of the Trust for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation, or contract entered into or executed by the Trust or the board of trustees. The Declaration of Trust provides for indemnification out of the Trust's assets for all losses and expenses of any shareholder held personally liable for obligations of the Trust. Thus, although shareholders of a business trust may, under certain circumstances, be held personally liable under Massachusetts law for the obligations of the Trust, the risk of a shareholder incurring financial loss on account of shareholder liability is believed to be remote because it is limited to circumstances in which the disclaimer is inoperative and the Trust itself is unable to meet its obligations. The Trust and the Adviser believe that the risk to any one series of sustaining a loss on account of liabilities incurred by another series is remote. CUSTODIAN AND TRANSFER AGENT State Street Bank and Trust Company, P.O. Box 8510, Boston Massachusetts 02266-8510 is the custodian for the Trust. It is responsible for holding all securities and cash of each Fund, receiving and paying for securities purchased, delivering against payment securities sold, receiving and collecting income from investments, making all payments covering expenses of the Funds, and performing other administrative duties, all as directed by authorized persons of the Trust. The custodian also performs certain portfolio accounting services for the Funds, for which each Fund pays the custodian a monthly fee. The fee paid by each of Oakmark Global Fund, Oakmark International Fund and Oakmark International Small Cap Fund is $3,000 per month. The fee paid by each of Oakmark Fund, Select Fund, Small Cap Fund and Equity and Income Fund is $2,500 per month. The custodian does not exercise any supervisory function in such matters as the purchase 29 and sale of portfolio securities, payment of dividends, or payment of expenses of a Fund. The Trust has authorized the custodian to deposit certain portfolio securities of each Fund in central depository systems as permitted under federal law. The Funds may invest in obligations of the custodian and may purchase or sell securities from or to the custodian. Nvest Services Company, Inc. ("NSC"), an affiliate of the Adviser, 399 Boylston Street, 5th Floor, Boston, Massachusetts 02116, performs transfer agency services for the Funds. As of February 14, 2001, NSC intends to change its name to CDC IXIS Services Company. NSC maintains shareholder accounts and prepares and mails shareholder account statements, processes shareholder transactions, mails shareholders reports, prepares and mails distribution payments, maintains records of Fund transactions and provides blue sky reporting services. The Trust pays NSC for its services based on the number of open accounts and transactions it performs on behalf of the Trust. INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603, audits and reports on each Fund's annual financial statements, reviews certain regulatory reports and the Funds' federal income tax returns, and performs other professional accounting, auditing, tax and advisory services when engaged to do so by the Trust. 30 APPENDIX A -- BOND RATINGS A rating by a rating service represents the service's opinion as to the credit quality of the security being rated. However, the ratings are general and are not absolute standards of quality or guarantees as to the credit-worthiness of an issuer. Consequently, the Adviser believes that the quality of debt securities in which the Fund invests should be continuously reviewed and that individual analysts give different weightings to the various factors involved in credit analysis. A rating is not a recommendation to purchase, sell, or hold a security, because it does not take into account market value or suitability for a particular investor. When a security has received a rating from more than one service, each rating should be evaluated independently. Ratings are based on current information furnished by the issuer or obtained by the rating services from other sources which they consider reliable. Ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information, or for other reasons. The following is a description of the characteristics of ratings used by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's ("S&P"). RATINGS BY MOODY'S: Aaa. Bonds rated Aaa are judged to be the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge". Interest payments are protected by a large or an exceptionally stable margin and principal is secure. Although the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such bonds. Aa. Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in the Aaa bonds, fluctuation of protective elements may be of greater amplitude, or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa bonds. A. Bonds rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa. Bonds rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba. Bonds rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during other good and bad times over the future. Uncertainty of position characterizes bonds in this class. B. Bonds rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa. Bonds rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca. Bonds rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C. Bonds rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. A-1 Ratings By Standard & Poor's: AAA. Debt rated AAA has the highest rating. Capacity to pay interest and repay principal is extremely strong. AA. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. A. Debt rated A has a very strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions, or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than for debt in higher rated categories. BB-B-CCC-CC. Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C. This rating is reserved for income bonds on which no interest is being paid. D. Debt rated D is in default, and payment of interest and/or repayment of principal is in arrears. NOTE: The ratings from AA to B may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. A-2 APPENDIX B -- FINANCIAL STATEMENTS B-1 - -------------------------------------------------------------------------------- THE OAKMARK FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 ................................................................................
Shares Held Market Value - ------------------------------------------------------------------------------------------------------ COMMON STOCKS--92.2% FOOD & BEVERAGE--2.0% H.J. Heinz Company 1,125,000 $ 41,695,313 APPAREL--3.0% Jones Apparel Group, Inc. (a) 1,257,000 $ 33,310,500 NIKE, Inc., Class B 681,400 27,298,588 -------------- 60,609,088 RETAIL--9.6% The Kroger Co. (a) 2,200,000 $ 49,637,500 Toys `R' Us, Inc. (a) 3,000,000 48,750,000 Tricon Global Restaurants, Inc. (a) 1,350,000 41,343,750 CVS Corporation 700,000 32,418,750 J.C. Penney Company, Inc. 1,950,000 23,034,375 -------------- 195,184,375 HOUSEHOLD PRODUCTS--7.0% Fort James Corporation 1,400,000 $ 42,787,500 Newell Rubbermaid Inc. 1,700,000 38,781,250 Energizer Holdings, Inc. (a) 1,500,000 36,750,000 The Dial Corporation 2,052,900 23,864,962 -------------- 142,183,712 HOUSEHOLD APPLIANCES--1.8% Maytag Corporation 1,160,400 $ 36,044,925 OFFICE EQUIPMENT--1.6% Xerox Corporation 2,150,000 $ 32,384,375 HARDWARE--3.9% The Black & Decker Corporation 1,522,200 $ 52,040,213 The Stanley Works 1,224,900 28,249,256 -------------- 80,289,469 OTHER CONSUMER GOODS & SERVICES--16.0% Fortune Brands, Inc. 2,605,200 $ 69,037,800 Mattel, Inc. 5,864,400 65,607,975 Brunswick Corporation 2,971,800 54,235,350 H&R Block, Inc. 1,275,300 47,265,806 Cendant Corporation (a) 3,300,100 35,888,588 Ralston Purina Group 1,400,000 33,162,500 Galileo International, Inc. 1,396,200 21,641,100 -------------- 326,839,119 BANKS & THRIFTS--5.1% Washington Mutual, Inc. 1,730,000 $ 68,875,625 Bank One Corporation 900,548 34,783,666 -------------- 103,659,291
B-2 - -------------------------------------------------------------------------------- THE OAKMARK FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. ................................................................................
Shares Held Market Value - ------------------------------------------------------------------------------------------------------ COMMON STOCKS--92.2% (CONT.) INSURANCE--1.4% MGIC Investment Corporation 475,000 $ 29,034,375 OTHER FINANCIAL--2.3% USA Education Inc. 1,000,000 $ 48,187,500 INFORMATION SERVICES--7.8% Dun & Bradstreet Corporation 1,907,500 $ 65,689,531 ACNielsen Corporation (a) 2,664,000 63,436,500 Equifax Inc. 1,300,000 35,018,750 Moody's Corporation, When Issued (a) (200,000) (5,262,500) -------------- 158,882,281 COMPUTER SERVICES--5.7% First Data Corporation 1,040,000 $ 40,625,000 Electronic Data Systems Corporation 940,000 39,010,000 SunGard Data Systems Inc. (a) 840,800 35,996,750 -------------- 115,631,750 TELECOMMUNICATIONS--3.6% AT&T Corp. 1,425,000 $ 41,859,375 Citizens Communications Company (a) 2,350,000 31,578,125 -------------- 73,437,500 PUBLISHING--1.7% Knight Ridder, Inc. (a) 692,000 $ 35,162,250 PHARMACEUTICALS--0.5% Chiron Corporation (a) 235,000 $ 10,575,000 MEDICAL PRODUCTS--2.0% Sybron International Corporation (a) 1,673,600 $ 40,166,400 AUTOMOBILES--1.9% Ford Motor Company 800,000 $ 20,250,000 DaimlerChrysler AG (b) 400,000 17,756,000 -------------- 38,006,000 AEROSPACE & DEFENSE--3.1% Lockheed Martin Corporation 1,000,000 $ 32,960,000 The B.F. Goodrich Company 770,000 30,174,375 -------------- 63,134,375 INSTRUMENTS--1.6% Rockwell International Corporation 1,067,300 $ 32,285,825 MACHINERY & INDUSTRIAL PROCESSING--4.5% Cooper Industries, Inc. 1,698,400 $ 59,868,600 Eaton Corporation 511,700 31,533,512 -------------- 91,402,112
B-3 - -------------------------------------------------------------------------------- THE OAKMARK FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. ................................................................................
Shares Held/ Par Value Market Value - ------------------------------------------------------------------------------------------------------ COMMON STOCKS--92.2% (CONT.) BUILDING MATERIALS & CONSTRUCTION--1.8% Masco Corporation 1,933,000 $ 36,002,125 CHEMICALS--0.6% PolyOne Corporation 1,613,200 $ 11,796,525 UTILITIES--2.1% TXU Corp. 1,080,000 $ 42,795,000 RECREATION & ENTERTAINMENT--1.6% Carnival Corporation 1,350,000 $ 33,243,750 TOTAL COMMON STOCKS (COST: $1,847,268,947) 1,878,632,435 SHORT TERM INVESTMENTS--6.5% U.S. GOVERNMENT BILLS--1.2% United States Treasury Bills, 6.10% due 11/24/2000 $25,000,000 $ 24,771,250 TOTAL U.S. GOVERNMENT BILLS (COST: $24,771,250) 24,771,250 COMMERCIAL PAPER--3.4% American Express Credit Corporation, 6.55% due 10/4/2000 $10,000,000 $ 10,000,000 Ford Motor Credit Corp., 6.56% due 10/4/2000 10,000,000 10,000,000 General Electric Capital Corporation, 6.69% due 10/2/2000 50,000,000 50,000,000 -------------- TOTAL COMMERCIAL PAPER (COST: $70,000,000) 70,000,000 REPURCHASE AGREEMENTS--1.9% State Street Repurchase Agreement, 6.42% due 10/2/2000 $37,913,000 $ 37,913,000 TOTAL REPURCHASE AGREEMENTS (COST: $37,913,000) 37,913,000 TOTAL SHORT TERM INVESTMENTS (COST: $132,684,250) 132,684,250 Total Investments (Cost $1,979,953,197)--98.7% (c) $2,011,316,685 Other Assets In Excess Of Other Liabilities--1.3% 27,412,122 TOTAL NET ASSETS--100% $2,038,728,807 ==============
(a) Non-income producing security. (b) Represents foreign domiciled corporation. (c) At September 30, 2000, net unrealized appreciation of $31,363,487, for federal income tax purposes, consisted of gross unrealized appreciation of $281,525,537 and gross unrealized depreciation of $250,162,050. B-4
- ------------------------------------------------------------------------------------------ THE OAKMARK SELECT FUND - ------------------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 - ------------------------------------------------------------------------------------------ Shares Held Market Value - ------------------------------------------------------------------------------------------ COMMON STOCKS--92.4% APPAREL--3.6% Liz Claiborne, Inc. 1,648,600 $ 63,471,100 RETAIL--16.7% Toys `R' Us, Inc. (a) 9,048,500 $147,038,125 Tricon Global Restaurants, Inc. (a) 2,615,400 80,096,625 Office Depot, Inc. (a) 9,046,000 70,671,875 ------------ 297,806,625 HOUSEHOLD PRODUCTS--4.2% Energizer Holdings, Inc. (a) 3,089,200 $ 75,685,400 OTHER CONSUMER GOODS & SERVICES--7.6% H&R Block, Inc. 1,956,000 $ 72,494,250 Mattel, Inc. 5,600,000 62,650,000 ------------ 135,144,250 BANKS & THRIFTS--14.9% Washington Mutual, Inc. 6,679,800 $265,939,537 OTHER FINANCIAL--1.9% MBIA, Inc. 465,800 $ 33,130,025 INFORMATION SERVICES--11.8% Dun & Bradstreet Corporation 3,143,600 $108,257,725 Ceridian Corporation 3,284,500 92,171,281 Dun & Bradstreet Corporation, When Issued (a) 536,400 9,118,800 ------------ 209,547,806 COMPUTER SERVICES--7.6% First Data Corporation 1,810,200 $ 70,710,938 Electronic Data Systems Corporation 1,545,000 64,117,500 ------------ 134,828,438 COMPUTER SOFTWARE--6.7% The Reynolds and Reynolds Company, Class A (b) 5,979,700 $118,846,538 PHARMACEUTICALS--1.7% Chiron Corporation (a) 668,900 $ 30,100,500 AUTOMOTIVE--3.5% Visteon Corporation 4,128,900 $ 62,449,613
B-5
- ----------------------------------------------------------------------------------------------- THE OAKMARK SELECT FUND - ----------------------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - ----------------------------------------------------------------------------------------------- Shares Held/ Par Value Market Value - ----------------------------------------------------------------------------------------------- COMMON STOCKS--92.4% (CONT.) MACHINERY & INDUSTRIAL PROCESSING--4.9% Thermo Electron Corporation (a) 3,369,000 $ 87,594,000 BUILDING MATERIALS & CONSTRUCTION--4.9% USG Corporation (b) 3,474,900 $ 87,089,681 DIVERSIFIED CONGLOMERATES--2.4% U.S. Industries, Inc. (b) 4,286,800 $ 42,600,075 TOTAL COMMON STOCKS (COST: $1,457,018,607) 1,644,233,588 SHORT TERM INVESTMENTS--7.4% U.S. GOVERNMENT BILLS--1.1% United States Treasury Bills, 6.10% due 11/24/2000 $ 20,000,000 $ 19,817,000 TOTAL U.S. GOVERNMENT BILLS (COST: $19,817,000) 19,817,000 COMMERCIAL PAPER--3.4% American Express Credit Corporation, 6.51% due 10/2/2000 $ 20,000,000 $ 20,000,000 Ford Motor Credit Corp., 6.56% due 10/4/2000 10,000,000 10,000,000 General Electric Capital Corporation, 6.69% due 10/2/2000 30,000,000 30,000,000 -------------- TOTAL COMMERCIAL PAPER (COST: $60,000,000) 60,000,000 REPURCHASE AGREEMENTS--2.9% State Street Repurchase Agreement, 6.42% due 10/2/2000 $ 51,597,000 $ 51,597,000 TOTAL REPURCHASE AGREEMENTS (COST: $51,597,000) 51,597,000 TOTAL SHORT TERM INVESTMENTS (COST: $131,414,000) 131,414,000 Total Investments (Cost $1,588,432,607)--99.8% (c) $1,775,647,588 Other Assets In Excess Of Other Liabilities--0.2% 3,088,886 TOTAL NET ASSETS--100% $1,778,736,474 ==============
(a) Non-income producing security. (b) See footnote number five in the Notes to Financial Statements regarding transactions in affiliated issuers. (c) At September 30, 2000, net unrealized appreciation of $187,214,980, for federal income tax purposes, consisted of gross unrealized appreciation of $302,941,071 and gross unrealized depreciation of $115,726,091. B-6 - ------------------------------------------------------------------------------- THE OAKMARK SMALL CAP FUND - ------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 - -------------------------------------------------------------------------------
Shares Held Market Value - ----------------------------------------------------------------------------------------------- COMMON STOCKS-- 94.5% FOOD & BEVERAGE--6.2% Ralcorp Holdings, Inc. 465,000 $ 6,568,125 Del Monte Foods Company (a) 850,000 5,259,375 International Multifoods Corporation 127,500 2,215,312 M&F Worldwide Corp. (a) 225,000 1,307,813 ------------- 15,350,625 APPAREL--1.0% R.G. Barry Corporation (a)(c) 855,000 $ 2,565,000 RETAIL--6.2% Ugly Duckling Corporation (a)(c) 1,750,000 $ 10,171,875 ShopKo Stores, Inc. (a) 500,000 5,187,500 ------------- 15,359,375 OTHER CONSUMER GOODS & SERVICES--3.7% Department 56, Inc. (a) 525,000 $ 6,923,437 American Greetings Corporation, Class A 135,000 2,362,500 ------------- 9,285,937 BANKS & THRIFTS--8.6% People's Bank of Bridgeport, Connecticut 360,000 $ 7,582,500 Golden State Bancorp Inc. (a) 200,000 4,725,000 BankAtlantic Bancorp, Inc., Class A 1,020,000 4,271,250 PennFed Financial Services, Inc. 250,000 3,843,750 Finger Lakes Financial Corp. 160,000 1,080,000 ------------- 21,502,500 INSURANCE--6.5% The PMI Group, Inc. 190,000 $ 12,872,500 The MONY Group Inc. (a) 80,000 3,190,000 ------------- 16,062,500 OTHER FINANCIAL--0.5% NCO Group, Inc. (a) 100,000 $ 1,187,500 EDUCATIONAL SERVICES--8.2% ITT Educational Services, Inc. (a) 750,000 $ 20,343,750 INFORMATION SERVICES--5.7% National Data Corporation 435,000 $ 14,273,437 DATA STORAGE--0.9% Imation Corp. (a) 125,000 $ 2,328,125 COMPUTER SERVICES--0.7% CIBER, Inc. (a) 200,000 $ 1,650,000
B-7 - ------------------------------------------------------------------------------- THE OAKMARK SMALL CAP FUND - ------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - -------------------------------------------------------------------------------
Shares Held Market Value - ----------------------------------------------------------------------------------------------- COMMON STOCKS--94.5% (CONT.) COMPUTER SOFTWARE--4.1% Mentor Graphics Corporation (a) 280,000 $ 6,597,500 MSC.Software Corp. (a) 225,000 2,385,000 Symantec Corporation (a) 30,000 1,320,000 ------------- 10,302,500 COMPUTER SYSTEMS--3.0% Micron Electronics, Inc. (a) 825,000 $ 7,425,000 SECURITY SYSTEMS--1.7% Checkpoint Systems, Inc. (a) 550,000 $ 4,159,375 PHARMACEUTICALS--7.0% Dura Pharmaceuticals, Inc. (a) 490,000 $ 17,333,750 MEDICAL RESEARCH--0.7% Covance Inc. (a) 200,000 $ 1,637,500 MEDICAL PRODUCTS--2.9% Hanger Orthopedic Group, Inc. (a)(c) 1,150,000 $ 4,312,500 CONMED Corporation (a) 215,000 2,942,813 ------------- 7,255,313 AUTOMOTIVE--1.4% Stoneridge, Inc. (a) 177,800 $ 1,711,325 Standard Motor Products, Inc. 210,000 1,680,000 ------------- 3,391,325 AUTOMOBILE RENTALS--1.4% Dollar Thrifty Automotive Group, Inc. (a) 175,000 $ 3,456,250 TRANSPORTATION SERVICES--3.8% Teekay Shipping Corporation (b) 200,000 $ 9,387,500 MACHINERY & INDUSTRIAL PROCESSING--4.0% Columbus McKinnon Corporation 495,000 $ 6,713,437 Sames Corporation (a)(c) 235,000 3,201,875 ------------- 9,915,312 CHEMICALS--2.4% Ferro Corporation 155,000 $ 2,954,688 H.B. Fuller Company 70,000 2,012,500 Georgia Gulf Corporation 100,000 1,143,750 ------------- 6,110,938
B-8 - ------------------------------------------------------------------------------- THE OAKMARK SMALL CAP FUND - ------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - -------------------------------------------------------------------------------
Shares Held/ Par Value Market Value - ----------------------------------------------------------------------------------------------- COMMON STOCKS--94.5% (CONT.) OTHER INDUSTRIAL GOODS & SERVICES--0.8% Gardner Denver Inc. (a) 64,000 $ 1,040,000 Scott Technologies, Inc. (a) 45,000 797,344 Intergrated Electrical Services, Inc. (a) 37,500 257,812 ------------- 2,095,156 REAL ESTATE--12.0% Catellus Development Corporation (a) 900,000 $15,750,000 Prime Hospitality Corp. (a) 800,000 8,100,000 Trammell Crow Company (a) 400,000 6,000,000 ------------- 29,850,000 DIVERSIFIED CONGLOMERATES--1.1% U.S. Industries, Inc. 275,000 $ 2,732,813 TOTAL COMMON STOCKS (COST: $231,477,177) 234,961,481 SHORT TERM INVESTMENTS--5.8% COMMERCIAL PAPER--2.8% General Electric Capital Corporation, 6.69% due 10/2/2000 $ 7,000,000 $ 7,000,000 TOTAL COMMERCIAL PAPER (COST: $7,000,000) 7,000,000 REPURCHASE AGREEMENTS--3.0% State Street Repurchase Agreement, 6.42% due 10/2/2000 $ 7,598,000 $ 7,598,000 TOTAL REPURCHASE AGREEMENTS (COST: $7,598,000) 7,598,000 TOTAL SHORT TERM INVESTMENTS (COST: $14,598,000) 14,598,000 TOTAL INVESTMENTS (COST $246,075,178)--100.3% (D) $249,559,481 CALL OPTIONS WRITTEN--0.0% EQUITY OPTIONS--0.0% INSURANCE--0.0% The MONY Group Inc., November 40 Calls (21,000) $ (42,000) TOTAL CALL OPTION WRITTEN (COST: $(64,578)) (42,000) Other Liabilities In Excess Of Other Assets--(0.3)% (813,869) TOTAL NET ASSETS--100% $248,703,612 =============
(a) Non-income producing security. (b) Represents foreign domiciled corporation. (c) See footnote number five in the Notes to Financial Statements regarding transactions in affiliated issuers. (d) At September 30, 2000, net unrealized appreciation of $3,506,881, for federal income tax purposes, consisted of gross unrealized appreciation of $50,635,465 and gross unrealized depreciation of $47,128,584. B-9 - -------------------------------------------------------------------------------- THE OAKMARK EQUITY AND INCOME FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 - --------------------------------------------------------------------------------
Shares Held Market Value - ------------------------------------------------------------------------------------------ EQUITY AND EQUIVALENTS--62.2% FOOD & BEVERAGE--2.9% UST Inc. 68,900 $ 1,576,088 RETAIL--4.3% Office Depot, Inc. (a) 200,000 $ 1,562,500 J.C. Penney Company, Inc. 67,500 797,344 ---------------- 2,359,844 HOUSEHOLD PRODUCTS--3.6% Energizer Holdings, Inc. (a) 80,000 $ 1,960,000 OTHER CONSUMER GOODS & SERVICES--2.3% H&R Block, Inc. 34,500 $ 1,278,656 BANKS & THRIFTS--3.4% Washington Mutual, Inc. 47,000 $ 1,871,187 OTHER FINANCIAL--2.6% Heller Financial, Inc. 50,000 $ 1,428,125 EDUCATIONAL SERVICES--1.2% ITT Educational Services, Inc. (a) 25,000 $ 678,125 INFORMATION SERVICES--8.0% Ceridian Corporation (a) 80,000 $ 2,245,000 NOVA Corporation (a) 125,000 2,140,625 ---------------- 4,385,625 COMPUTER SERVICES--3.4% Electronic Data Systems Corporation 30,000 $ 1,245,000 SunGard Data Systems Inc. (a) 15,000 642,187 ---------------- 1,887,187 COMPUTER SOFTWARE--4.2% The Reynolds and Reynolds Company, Class A 117,500 $ 2,335,312 TELECOMMUNICATIONS--2.6% Citizens Communications Company (a) 105,000 $ 1,410,938 MEDICAL PRODUCTS--5.4% Sybron International Corporation (a) 70,000 $ 1,680,000 Edwards Lifesciences Corporation (a) 60,000 1,308,750 ---------------- 2,988,750
B-10 - -------------------------------------------------------------------------------- THE OAKMARK EQUITY AND INCOME FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - --------------------------------------------------------------------------------
Shares Held/ Par Value Market Value - ------------------------------------------------------------------------------------------ EQUITY AND EQUIVALENTS--62.2% (CONT.) AUTOMOTIVE--1.7% Borg-Warner, Inc. 27,900 $ 924,188 TRANSPORTATION SERVICES--3.9% GATX Corporation 38,000 $ 1,591,250 Nordic American Tanker Shipping Limited 25,000 540,625 ---------------- 2,131,875 AGRICULTURAL EQUIPMENT--3.7% Alamo Group Inc. 159,150 $ 2,019,216 INSTRUMENTS--1.1% Rockwell International Corporation 20,000 $ 605,000 MACHINERY & INDUSTRIAL PROCESSING--0.5% Gardner Denver Inc. (a) 16,000 $ 260,000 REAL ESTATE--6.2% Catellus Development Corporation (a) 116,728 $ 2,042,740 The St. Joe Company 50,000 1,387,500 ---------------- 3,430,240 TOTAL EQUITY (COST: $26,552,422) 33,530,356 CONVERTIBLE PREFERRED STOCK--1.2% TELECOMMUNICATIONS--1.2% Metromedia International Group, Inc., Convertible Preferred, 7.25% 28,600 $ 650,650 TOTAL CONVERTIBLE PREFERRED STOCK (COST: $808,041) 650,650 TOTAL EQUITY AND EQUIVALENTS (COST: $27,360,463) 34,181,006 FIXED INCOME--35.2% PREFERRED STOCK--3.1% BANKS & THRIFTS--2.0% Pennfed Capital Trust, Preferred, 8.90% 27,500 $ 598,125 Fidelity Capital Trust I, Preferred, 8.375% 43,500 372,469 BBC Capital Trust I, Preferred, 9.50% 6,000 114,000 ---------------- 1,084,594 TELECOMMUNICATIONS--0.9% MediaOne Finance Trust III, Preferred, 9.04% 20,000 $ 503,750
B-11 - -------------------------------------------------------------------------------- THE OAKMARK EQUITY AND INCOME FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - --------------------------------------------------------------------------------
Shares Held/ Par Value Market Value - ------------------------------------------------------------------------------------------ FIXED INCOME--35.2% (CONT.) REAL ESTATE--0.2% Host Marriott Corporation, Preferred Class B, 10.00% 6,000 $ 141,750 TOTAL PREFERRED STOCK (COST: $1,847,110) 1,730,094 CORPORATE BONDS--3.5% RETAIL--1.1% Ugly Duckling Corporation, 12.00% due 10/15/2003, Subordinated Debenture $ 650,000 $ 585,000 BUILDING MATERIALS & CONSTRUCTION--1.4% Juno Lighting, Inc., 11.875% due 7/1/2009, Senior Subordinated Note $ 750,000 $ 630,000 USG Corporation, 9.25% due 9/15/2001, Senior Notes Series B 150,000 152,062 ---------------- 782,062 UTILITIES--1.0% Midland Funding Corporation, 11.75% due 7/23/2005 $ 500,000 $ 556,875 TOTAL CORPORATE BONDS (COST: $1,931,691) 1,923,937 GOVERNMENT AND AGENCY SECURITIES--28.6% U.S. GOVERNMENT NOTES--24.9% United States Treasury Notes, 6.50% due 10/15/2006 $ 3,000,000 $ 3,082,500 United States Treasury Notes, 5.25% due 8/15/2003 2,500,000 2,453,125 United States Treasury Notes, 6.50% due 2/15/2010 2,000,000 2,082,500 United States Treasury Notes, 6.50% due 2/28/2002 2,000,000 2,009,376 United States Treasury Notes, 5.25% due 5/15/2004 2,000,000 1,956,876 United States Treasury Notes, 9.125% due 5/15/2009 1,000,000 1,095,625 United States Treasury Notes, 7.875% due 8/15/2001 1,000,000 1,013,438 ---------------- 13,693,440 U.S. GOVERNMENT AGENCIES--3.7% Federal Home Loan Bank, 6.75% due 5/1/2002 $ 2,000,000 $ 2,007,832 TOTAL GOVERNMENT AND AGENCY SECURITIES (COST: $15,489,609) 15,701,272 TOTAL FIXED INCOME (COST: $19,268,410) 19,355,303
B-12 - -------------------------------------------------------------------------------- THE OAKMARK EQUITY AND INCOME FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - --------------------------------------------------------------------------------
Par Value Market Value - ----------------------------------------------------------------------------------------------- SHORT TERM INVESTMENTS--3.8% COMMERCIAL PAPER--1.8% General Electric Capital Corporation, 6.69% due 10/2/2000 $1,000,000 $ 1,000,000 TOTAL COMMERCIAL PAPER (COST: $1,000,000) 1,000,000 REPURCHASE AGREEMENTS--2.0% State Street Repurchase Agreement, 6.42% due 10/2/2000 $1,058,000 $ 1,058,000 TOTAL REPURCHASE AGREEMENTS (COST: $1,058,000) 1,058,000 TOTAL SHORT TERM INVESTMENTS (COST: $2,058,000) 2,058,000 Total Investments (Cost $48,686,873)--101.2% (b) 55,594,309 Other Liabilities In Excess Of Other Assets--(1.2)% (658,472) -------------- TOTAL NET ASSETS--100% $ 54,935,837 ==============
(a) Non-income producing security. (b) At September 30, 2000, net unrealized appreciation of $6,907,435, for federal income tax purposes, consisted of gross unrealized appreciation of $7,676,838 and gross unrealized depreciation of $769,403. B-13 - -------------------------------------------------------------------------------- THE OAKMARK GLOBAL FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 - --------------------------------------------------------------------------------
Description Shares Held Market Value - --------------------------------------------------------------------------------------------------- COMMON STOCKS--94.5% FOOD & BEVERAGE--8.2% Diageo plc Beverages, Wines, & Spirits (Great Britain) Manufacturer 130,000 $ 1,161,233 Hite Brewery Co., Ltd. Brewer (Korea) 27,000 1,088,329 ----------- 2,249,562 APPAREL--2.9% Fila Holding S.p.A. Athletic Footwear & Apparel (Italy), (a)(b) 87,900 $ 802,087 RETAIL--13.5% Somerfield plc Food Retailer (Great Britain) 1,198,000 $ 1,408,520 House of Fraser Plc Department Store (Great Britain) 1,601,000 1,166,102 Toys `R' Us, Inc. Toy Retailer (United States), (a) 50,000 812,500 Ugly Duckling Automobile Retailer & Financier Corporation (United States), (a) 50,000 290,625 ----------- 3,677,747 OTHER CONSUMER GOODS & SERVICES--8.4% Royal Doulton plc Tableware & Giftware (Great Britain), (a) 700,000 $ 843,713 Department 56, Inc. Collectibles & Giftware Products (United States), (a) 60,000 791,250 H&R Block, Inc. Financial Services Provider (United States) 18,000 667,125 ----------- 2,302,088 BANKS & THRIFTS--4.1% Banco Latinoamericano Latin American Trade Bank de Exportaciones, S.A., Class E (Panama), (b) 26,300 $ 729,825 Washington Mutual, Inc. Thrift (United States) 10,000 398,125 ----------- 1,127,950 HOTELS & MOTELS--0.1% Mandarin Oriental Hotel Management International Limited (Singapore) 30,000 $ 19,500 HUMAN RESOURCES--1.3% Spherion Corporation Workforce Management Services (United States), (a) 30,000 $ 358,125
B-14 - -------------------------------------------------------------------------------- THE OAKMARK GLOBAL FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - --------------------------------------------------------------------------------
Description Shares Held Market Value - --------------------------------------------------------------------------------------------------- COMMON STOCKS--94.5% (CONT.) EDUCATIONAL SERVICES--6.0% ITT Educational Services, Postsecondary Degree Programs Inc. (United States), (a) 60,000 $ 1,627,500 INFORMATION SERVICES--15.8% NOVA Corporation Transaction Processing Services (United States), (a) 110,000 $ 1,883,750 Ceridian Corporation Data Management Services (United States), (a) 50,000 1,403,125 Equifax Inc. Consumer Credit Information (United States) 37,000 996,687 Dun & Bradstreet Decision Support Services Corporation, When Issued (United States), (a) 1,500 25,500 ----------- 4,309,062 COMPUTER SERVICES--3.9% First Data Corporation Electronic Commerce Services (United States) 27,000 $ 1,054,687 COMPUTER SOFTWARE--5.5% The Reynolds and Information Management Systems Reynolds Company, Class A (United States) 75,000 $ 1,490,625 PRINTING--4.1% Valassis Communications, Product Promotions Printer Inc. (United States), (a) 50,000 $ 1,112,500 TELECOMMUNICATIONS--1.1% Telemig Celular Mobile Telecommunications Participacoes S.A. (Brazil), (a) 111,345,000 $ 290,597 MEDICAL PRODUCTS--1.4% Hanger Orthopedic Group, Orthotics & Prosthetics Inc. (United States), (a) Manufacturer 100,000 $ 375,000 MACHINERY & METAL PROCESSING--2.6% Metso Oyj (Finland) Paper & Pulp Machinery 69,500 $ 706,337 MINING & BUILDING MATERIALS--4.1% Fletcher Challenge Building Materials Manufacturer Building (New Zealand) 1,107,186 $ 1,110,307
B-15 - -------------------------------------------------------------------------------- THE OAKMARK GLOBAL FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - --------------------------------------------------------------------------------
Description Shares Held/ Par Value Market Value - --------------------------------------------------------------------------------------------------- COMMON STOCKS--94.5% (CONT.) OTHER INDUSTRIAL GOODS & SERVICES--4.8% Chargeurs SA (France) Wool, Textile Production & Trading 9,900 $ 599,315 GFI Industries SA (France) Industrial Fastener Manufacturer 26,600 564,656 Tomkins plc (Great Britain) Diversified Engineering 57,432 140,569 ----------- 1,304,540 PRODUCTION EQUIPMENT--3.4% Krones AG (Germany) Production Machinery Manufacturer 33,400 $ 929,793 DIVERSIFIED CONGLOMERATES--3.3% First Pacific Company Diversified Operations Limited (Hong Kong) 1,540,000 $ 459,245 Enodis plc (Great Britain) Food Processing Equipment 150,000 431,469 ----------- 890,714 TOTAL COMMON STOCKS (COST: $23,392,410) 25,738,721 FIXED INCOME--1.6% RETAIL--1.6% Ugly Duckling Corporation, Subordinated Debenture, 11.00% due 4/15/2007 $ 605,000 $ 423,500 TOTAL FIXED INCOME (COST: $436,404) 423,500 SHORT TERM INVESTMENTS--3.6% COMMERCIAL PAPER--1.8% General Electric Capital Corporation, 6.69% due 10/2/2000 $ 500,000 $ 500,000 TOTAL COMMERCIAL PAPER (COST: $500,000) 500,000 REPURCHASE AGREEMENTS--1.8% State Street Repurchase Agreement, 6.42% due 10/2/2000 $ 473,000 $ 473,000 TOTAL REPURCHASE AGREEMENTS (COST: $473,000) 473,000 TOTAL SHORT TERM INVESTMENTS (COST: $973,000) 973,000 Total Investments (Cost $24,801,814)--99.7% (c) $27,135,222 Foreign Currencies (Proceeds $28)--0.0% 28 Other Assets In Excess Of Other Liabilities--0.3% (d) 91,989 TOTAL NET ASSETS--100% $27,227,239 ===========
(a) Non-income producing security. (b) Represents an American Depository Receipt. (c) At September 30, 2000, net unrealized appreciation of $2,333,407, for federal income tax purposes, consisted of gross unrealized appreciation of $3,679,374 and gross unrealized depreciation of $1,345,967. (d) Includes portfolio and transaction hedges. B-16 - ------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL FUND - ------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 - -------------------------------------------------------------------------------
Description Shares Held Market Value - --------------------------------------------------------------------------------------------------- COMMON STOCKS--95.7% FOOD & BEVERAGE--8.4% Diageo plc (Great Britain) Beverages, Wines, & Spirits Manufacturer 3,520,000 $ 31,442,608 Quilmes Industrial Brewer S.A. (Argentina), (b) 2,032,000 21,336,000 Lotte Chilsung Beverage Soft Drinks, Juices, & Sport Company (Korea) (d) Drinks Manufacturer 88,080 9,399,202 Lotte Confectionery Co., Confection Manufacturer Ltd. (Korea) 37,270 3,275,308 ------------ 65,453,118 APPAREL--6.4% Fila Holding S.p.A. Athletic Footwear & Apparel (Italy), (a)(b)(d) 2,577,800 $ 23,522,425 Adidas-Salomon AG Worldwide Manufacturer/Marketer (Germany) of Sportswear 335,100 18,399,461 Giordano International Pacific Rim Clothing Retailer & Limited (Hong Kong) Manufacturer 14,286,000 8,291,432 ------------ 50,213,318 RETAIL--5.8% Somerfield plc Food Retailer (Great Britain) (d) 38,321,000 $ 45,054,993 HOUSEHOLD PRODUCTS--6.1% Hunter Douglas N.V. Window Coverings Manufacturer (Netherlands) 1,106,184 $ 30,012,009 Reckitt Benckiser plc Household Cleaners & Air (Great Britain) Fresheners 1,443,000 17,755,325 ------------ 47,767,334 OTHER CONSUMER GOODS & SERVICES--0.9% Shimano Inc. (Japan) Bicycle Components Manufacturer 345,000 $ 6,669,989 BANKS & THRIFTS--18.4% Banco Latinoamericano Latin American Trade Bank de Exportaciones, S.A., Class E (Panama), (b) 898,500 $ 24,933,375 Danske Bank Group Commercial Banking (Denmark), (a) 177,700 22,597,004 Uniao de Bancos Commercial Banking Brasileiros S.A. (Brazil), (c) 623,300 20,568,900 Nordic Baltic Holding Commercial Banking (NBH) AB (Denmark) 2,520,728 17,758,329 Bank of Ireland (Ireland) Commercial Banking 2,030,000 16,217,869 Canadian Imperial Bank of Commercial Banking Commerce (Canada) 335,000 11,001,460
B-17 - ------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL FUND - ------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - -------------------------------------------------------------------------------
Description Shares Held Market Value - --------------------------------------------------------------------------------------------------- COMMON STOCKS--95.7% (CONT.) BANKS & THRIFTS--18.4% (CONTINUED) BNP Paribas SA (France) Commercial Banking 108,500 $ 9,579,096 Svenska Handelsbanken AB Commercial Banking (Sweden) 502,500 8,100,624 Kookmin Bank (Korea) Commercial Banking 430,000 5,128,458 United Overseas Bank Commercial Banking Limited, Foreign Shares (Singapore) 583,968 4,197,223 National Australia Bank Commercial Banking Limited (Australia) 295,000 4,076,433 ------------ 144,158,771 INSURANCE--1.9% Swiss Re (Switzerland) Reinsurance Provider 7,700 $ 14,724,886 HOTELS & MOTELS--2.7% Mandarin Oriental Hotel Management International Limited (Singapore) 33,134,400 $ 21,537,360 PUBLISHING--1.4% Wolters Kluwer NV Reference Material Publisher (Netherlands) 535,000 $ 10,874,541 TELECOMMUNICATIONS--2.7% SK Telecom Co., Ltd. Mobile Telecommunications (Korea) 44,130 $ 10,763,897 Telemig Celular Mobile Telecommunications Participacoes S.A. (Brazil), (a) 2,297,800,000 5,996,971 Brasil Telecom Mobile Telecommunications Participacoes S.A. (Brazil), (a) 469,200,000 4,088,634 ------------ 20,849,502 PHARMACEUTICALS--2.5% Aventis S.A. (France) Pharmaceuticals 152,000 $ 11,418,047 Glaxo Wellcome plc Pharmaceuticals (Great Britain) 265,000 8,010,613 ------------ 19,428,660 AUTOMOTIVE--5.1% Autoliv, Inc (Sweden) Automotive Safety Systems Manufacturer 950,000 $ 18,723,349 Compagnie Generale des Tire Manufacturer Establissements Michelin (France) 644,000 17,927,748
B-18 - ------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL FUND - ------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - -------------------------------------------------------------------------------
Description Shares Held Market Value - --------------------------------------------------------------------------------------------------- COMMON STOCKS--95.7% (CONT.) AUTOMOTIVE--5.1% (CONTINUED) Dongah Tire Industry Innertube Manufacturer Company (Korea) (d) 166,290 $ 3,459,560 ------------ 40,110,657 AEROSPACE--2.1% Rolls-Royce plc Aviation & Marine Power (Great Britain) 6,638,702 $ 16,666,021 AIRPORT MAINTENANCE--1.1% Flughafen Wien AG Airport Management & Operations (Austria) 170,825 $ 6,189,629 Grupo Aeroportuario del Airport Operator Sureste S.A. de C.V. (Mexico), (a) (b) 170,000 2,581,875 ------------ 8,771,504 COMPONENTS--4.2% Morgan Crucible Crucible & Components Company plc Manufacturer (Great Britain) 4,396,424 $ 16,807,344 IMI plc (Great Britain) Components Manufacturer 5,140,000 15,982,256 ------------ 32,789,600 CHEMICALS--2.2% Nufarm Limited Agricultural & Industrial (Australia) (d) Chemical Producer 10,381,415 $ 17,097,359 OIL & NATURAL GAS--1.8% ISIS (France) Oil Services 200,950 $ 14,082,849 MACHINERY & METAL PROCESSING--3.8% Metso Oyj (Finland) Paper & Pulp Machinery 2,937,987 $ 29,859,122 MINING & BUILDING MATERIALS--2.4% Kumkang Korea Building Materials Chemical Co., Ltd. (Korea) 419,260 $ 18,798,367 OTHER INDUSTRIAL GOODS & SERVICES--9.1% Chargeurs SA (France) (d) Wool, Textile Production & Trading 418,930 $ 25,360,707 Tomkins plc (Great Britain) Diversified Engineering 8,698,685 21,290,731 Kone Corporation, Class B Elevators (Finland) 313,110 19,093,052 Buderus AG (Germany) Industrial Manufacturing 327,820 5,455,255 ------------ 71,199,745
B-19 - ------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL FUND - ------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - -------------------------------------------------------------------------------
Shares Held/ Description Par Value Market Value - --------------------------------------------------------------------------------------------------- COMMON STOCKS--95.7% (CONT.) STEEL--1.5% SSAB Svenskt Stal AB, Steel Producer Series A (Sweden) 1,451,920 $ 11,551,938 DIVERSIFIED CONGLOMERATES--5.2% Enodis plc (Great Britain) Food Processing Equipment 6,240,000 $ 17,949,120 Canadian Pacific Limited Diversified Operations (Canada) 517,000 13,411,199 First Pacific Company Diversified Operations Limited (Hong Kong) 31,760,868 9,471,431 ------------ 40,831,750 TOTAL COMMON STOCKS (COST: $792,892,042) 748,491,384 SHORT TERM INVESTMENTS--3.0% COMMERCIAL PAPER--1.3% General Electric Capital Corporation, 6.69% due 10/2/2000 $10,000,000 $ 10,000,000 TOTAL COMMERCIAL PAPER (COST: $10,000,000) 10,000,000 REPURCHASE AGREEMENTS--1.7% State Street Repurchase Agreement, 6.42% due 10/2/2000 $13,828,000 $ 13,828,000 TOTAL REPURCHASE AGREEMENTS (COST: $13,828,000) 13,828,000 TOTAL SHORT TERM INVESTMENTS (COST: $23,828,000) 23,828,000 Total Investments (Cost $816,720,042)--98.7% (e) $772,319,384 Foreign Currencies (Proceeds $76)--0.0% 76 Other Assets In Excess Of Other Liabilities--1.3% (f) 10,194,506 TOTAL NET ASSETS--100% $782,513,966 ============
(a) Non-income producing security. (b) Represents an American Depository Receipt. (c) Represents a Global Depository Receipt. (d) See footnote number five in the Notes to Financial Statements regarding transactions in affiliated issuers. (e) At September 30, 2000, net unrealized depreciation of $44,400,657, for federal income tax purposes, consisted of gross unrealized appreciation of $88,414,759 and gross unrealized depreciation of $132,815,412. (f) Includes portfolio and transaction hedges. B-20 - -------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL SMALL CAP FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 - --------------------------------------------------------------------------------
Description Shares Held Market Value - ----------------------------------------------------------------------------------------------------- COMMON STOCKS--94.7% FOOD & BEVERAGE--9.4% Hite Brewery Co., Ltd. Brewer (Korea) 95,531 $ 3,850,709 Alaska Milk Corporation Milk Producer (Philippines) 44,874,000 2,233,987 Grupo Continental, S.A. Soft Drink Manufacturer (Mexico) 1,213,000 1,477,389 Mikuni Coca-Cola Soft Drink Manufacturer Bottling Co., Ltd. (Japan) 87,000 968,056 ----------- 8,530,141 APPAREL--2.1% Kingmaker Footwear Athletic Footwear Manufacturer Holdings Limited (Hong Kong) 12,300,000 $ 1,861,605 RETAIL--11.0% House of Fraser Plc Department Store (Great Britain) 4,195,000 $ 3,055,464 Carpetright plc Carpet Retailer (Great Britain) 346,000 2,522,679 Denny's Japan Co., Restaurant Chain Ltd. (Japan) 110,000 2,111,364 York-Benimaru Co., Supermarket Chain Ltd. (Japan) 41,300 1,056,961 Jusco Stores Department Stores (Hong Kong) Co., Limited (Hong Kong) 6,996,000 807,593 Harvey Nichols plc High Fashion Clothing Retailer (Great Britain) 142,000 364,357 ----------- 9,918,418 OTHER CONSUMER GOODS & SERVICES--10.1% Royal Doulton plc Tableware & Giftware (Great Britain), (a) 4,129,219 $ 4,976,964 Il Shin Spinning Fabric & Yarn Manufacturer Company (Korea) 65,220 2,397,902 Dickson Concepts Jewlery Wholesaler & Retailer (International) Limited (Hong Kong) 1,315,000 877,060 Sanford Limited Fisheries (New Zealand) 358,334 642,729 Designer Textiles (NZ) Knit Fabrics Limited (New Zealand) (c) 1,960,000 191,758 ----------- 9,086,413
B-21 - -------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL SMALL CAP FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - --------------------------------------------------------------------------------
Description Shares Held Market Value - ----------------------------------------------------------------------------------------------------- COMMON STOCKS--94.7% (CONT.) INSURANCE--2.6% IPC Holdings, Ltd. Reinsurance Provider (Bermuda) 87,700 $ 1,622,450 Hannover Rueckversicherungs- Reinsurance Provider AG (Germany) 8,000 685,790 ----------- 2,308,240 OTHER FINANCIAL--5.6% JCG Holdings Ltd. Investment Holding Company (Hong Kong) 5,604,000 $ 3,162,650 Ichiyoshi Securities Co., Stock Broker Ltd. (Japan) 345,000 1,919,421 ----------- 5,082,071 HOTELS & MOTELS--4.1% Jarvis Hotels plc Hotel Operator (Great Britain) 2,537,000 $ 3,658,171 PUBLISHING--3.5% Matichon Public Newspaper Publisher Company Limited, Foreign Shares (Thailand) (c) 2,039,500 $2,105,571 VLT AB, Class B (Sweden) Newspaper Publisher 125,950 1,087,244 ----------- 3,192,815 PRINTING--2.3% Hung Hing Printing Printing Company Group Limited (Hong Kong) 5,498,000 $ 2,080,305 TELECOMMUNICATIONS--2.2% Telemig Celular Mobile Telecommunications Participacoes S.A. (Brazil), (a) 475,000,000 $ 1,239,691 SK Telecom Co., Mobile Telecommunications Ltd. (Korea) 2,960 721,983 ----------- 1,961,674 AUTOMOTIVE--0.8% Dongah Tire Industry Innertube Manufacturer Company (Korea) 34,400 $ 715,670 AUTOMOBILES--3.3% Ducati Motor Holding Motorcycle Manufacturer S.p.A. (Italy), (a) 1,287,000 $ 2,974,264
B-22 - -------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL SMALL CAP FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - --------------------------------------------------------------------------------
Description Shares Held Market Value - ----------------------------------------------------------------------------------------------------- COMMON STOCKS--94.7% (CONT.) TRANSPORTATION SERVICES--4.2% Mainfreight Limited Logistics Services (New Zealand) (c) 4,373,551 $ 2,317,741 DelGro Corporation Bus, Taxi, & Car Leasing Limited (Singapore) 572,000 1,466,878 ----------- 3,784,619 AIRPORT MAINTENANCE--4.6% Flughafen Wien AG Airport Management & Operations (Austria) 73,500 $ 2,663,180 Grupo Aeroportuario Airport Operator del Sureste S.A. de C.V. (Mexico), (a) (b) 100,000 1,518,750 ----------- 4,181,930 CHEMICALS--0.6% Kemira Oyj (Finland) Chemicals 111,000 $ 580,730 OIL & NATURAL GAS--3.8% ISIS (France) Oil Services 32,477 $ 2,276,032 Cairn Energy plc Oil & Natural Gas Producer (Great Britain), (a) 419,000 1,180,451 ----------- 3,456,483 INSTRUMENTS--0.1% Rotork plc Industrial Controls & (Great Britain) Instruments Supplier 32,000 $ 113,580 MINING & BUILDING MATERIALS--5.3% Fletcher Challenge Building Materials Manufacturer Building (New Zealand) 3,753,251 $ 3,763,831 Anglian Group plc Window & Door Manufacturer (Great Britain) 459,000 1,001,253 ----------- 4,765,084 OTHER INDUSTRIAL GOODS & SERVICES--6.4% GFI Industries SA Industrial Fastener Manufacturer (France) 208,400 $ 4,423,847 Vaisala Oyj, Class A Atmospheric Observation (Finland) Equipment 72,100 1,382,688 ----------- 5,806,535 PRODUCTION EQUIPMENT--6.2% Krones AG (Germany) Production Machinery Manufacturer 115,700 $ 3,220,870 NSC Groupe (France) Textile Equipment Manufacturer 23,630 2,340,985 ----------- 5,561,855
B-23 - -------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL SMALL CAP FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2000 CONT. - --------------------------------------------------------------------------------
Shares Held/ Description Par Value Market Value - ----------------------------------------------------------------------------------------------------- COMMON STOCKS--94.7% (CONT.) DIVERSIFIED CONGLOMERATES--6.5% Haw Par Corporation Healthcare & Leisure Products Ltd. (Singapore) 1,972,000 $ 3,288,273 Jardine Strategic Holdings Limited Diversified Operations (Bermuda) 340,700 994,844 Tae Young Corporation Heavy Construction (Korea) 64[cad 229],000 1,601,220 ----------- 5,884,337 TOTAL COMMON STOCKS (COST: $92,815,393) 85,504,940 SHORT TERM INVESTMENTS--3.7% COMMERCIAL PAPER--1.6% General Electric Capital Corporation, 6.69% due 10/2/2000 $1,500,000 $ 1,500,000 TOTAL COMMERCIAL PAPER (COST: $1,500,000) 1,500,000 REPURCHASE AGREEMENTS--2.1% State Street Repurchase Agreement, 6.42% due 10/2/2000 $1,867,000 $ 1,867,000 TOTAL REPURCHASE AGREEMENTS (COST: $1,867,000) 1,867,000 TOTAL SHORT TERM INVESTMENTS (COST: $3,367,000) 3,367,000 Total Investments (Cost $96,182,393)--98.4% (d) $88,871,940 Foreign Currencies (Proceeds $75)--(0.0)% 70 Other Assets In Excess Of Other Liabilities--1.6% (e) 1,473,772 ----------- TOTAL NET ASSETS--100% $90,345,782 ===========
(a) Non-income producing security. (b) Represents an American Depository Receipt. (c) See footnote number five in the Notes to Financial Statements regarding transactions in affiliated issuers. (d) At September 30, 2000, net unrealized depreciation of $7,310,458, for federal income tax purposes, consisted of gross unrealized appreciation of $8,729,481 and gross unrealized depreciation of $16,039,939. (e) Includes portfolio and transaction hedges. B-24 THE OAKMARK FAMILY OF FUNDS STATEMENT OF ASSETS AND LIABILITIES--SEPTEMBER 30, 2000 - -------------------------------------------------------------------------------
THE OAKMARK THE OAKMARK THE OAKMARK FUND SELECT SMALL CAP FUND FUND - --------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments, at value $ 2,011,316,685 $ 1,775,647,588 $ 249,559,481 (cost: 1,979,953,197) (cost: 1,588,432,607) (cost: 246,075,178) Cash 199 626 942 Foreign currency, at value 0 0 0 Receivable for: Forward foreign currency contracts 0 0 0 Securities sold 28,311,454 24,325,561 559,320 Fund shares sold 5,751,925 2,225,652 48,707 Dividends and interest 4,017,332 1,264,708 96,313 --------------- --------------- -------------- Total receivables 38,080,711 27,815,921 704,340 Other assets 158,764 30,591 19,752 --------------- --------------- -------------- Total assets $ 2,049,556,359 $ 1,803,494,726 $ 250,284,515 --------------- --------------- -------------- - --------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND NET ASSETS Options sold, at fair value $ 0 $ 0 $ 42,000 (premiums received: 64,578) Payable for: Securities purchased 6,097,075 23,506,634 578,950 Fund shares redeemed 3,378,486 604,856 704,562 Forward foreign currency contracts 0 0 0 Other 1,351,991 646,762 255,391 --------------- --------------- -------------- Total liabilities 10,827,552 24,758,252 1,580,903 --------------- --------------- -------------- Net assets applicable to fund shares outstanding $ 2,038,728,807 $ 1,778,736,474 $ 248,703,612 =============== =============== ============== Fund shares outstanding 75,659,245 82,931,572 16,467,408 =============== =============== ============== - --------------------------------------------------------------------------------------------------------------------------------- ANALYSIS OF NET ASSETS Paid in capital $ 2,327,702,018 $ 1,443,945,477 $ 234,310,878 Accumulated undistributed net realized gain (loss) on sale of investments, forward contracts and foreign currency exchange transactions (358,898,002) 138,991,711 10,885,853 Net unrealized appreciation (depreciation) of investments 31,363,487 187,214,980 3,506,881 Net unrealized appreciation (depreciation) of foreign currency portfolio hedges 0 0 0 Net unrealized appreciation (depreciation)--other 0 0 0 Accumulated undistributed net investment income (loss) 38,561,304 8,584,306 0 --------------- --------------- -------------- Net assets applicable to Fund shares outstanding $ 2,038,728,807 $ 1,778,736,474 $ 248,703,612 =============== =============== ============== - --------------------------------------------------------------------------------------------------------------------------------- PRICE OF SHARES Net asset value per share: Class I $ 26.95 $ 21.45 $ 15.10 Class I--Net assets $ 2,038,728,807 $ 1,771,965,140 $ 248,703,612 Class I--Shares outstanding 75,659,245 82,615,135 16,467,408 Net asset value per share: Class II $ 21.40 Class II--Net assets $ 6,771,334 Class II--Shares outstanding 316,437 B-25 - ----------------------------------------------------------------------------------------------------------------------------------- THE OAKMARK THE OAKMARK THE OAKMARK THE OAKMARK EQUITY AND GLOBAL INTERNATIONAL INTERNATIONAL INCOME FUND FUND FUND SMALL CAP FUND - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments, at value $ 55,594,309 $ 27,135,222 $ 772,319,384 $ 88,871,940 (cost: 48,686,873)(cost: 24,801,814) (cost: 816,720,042) (cost: 96,182,393) Cash 692 751 341 425 Foreign currency, at value 0 28 76 70 Receivable for: Forward foreign currency contracts 0 76,462 2,048,003 289,441 Securities sold 552,777 211,224 12,558,641 2,966,110 Fund shares sold 127,518 3,217 898,742 3,922 Dividends and interest 381,529 95,357 4,349,544 392,597 ------------ ------------ ------------- ------------ Total receivables 1,061,824 386,260 19,854,930 3,652,070 Other assets 1,370 10,706 29,368 7,147 ------------ ------------ ------------- ------------ Total assets $ 56,658,195 $ 27,532,967 $ 792,204,099 $ 92,531,652 ------------ ------------ ------------- ------------ - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND NET ASSETS Options sold, at fair value $ 0 $ 0 $ 0 $ 0 Payable for: Securities purchased 1,463,121 215,752 8,428,894 1,819,092 Fund shares redeemed 158,960 0 350,885 170,404 Forward foreign currency contracts 0 0 38,795 7,014 Other 100,277 89,976 871,559 189,360 ------------ ------------ ------------- ------------ Total liabilities 1,722,358 305,728 9,690,133 2,185,870 ------------ ------------ ------------- ------------ Net assets applicable to fund shares outstanding $ 54,935,837 $ 27,227,239 $ 782,513,966 $ 90,345,782 ============ ============ ============= ============ Fund shares outstanding 3,329,607 2,495,109 50,813,807 7,852,136 ============ ============ ============= ============ - ----------------------------------------------------------------------------------------------------------------------------------- ANALYSIS OF NET ASSETS Paid in capital $ 42,415,052 $ 24,526,429 $ 773,453,511 $ 89,764,601 Accumulated undistributed net realized gain (loss) on sale of investments, forward contracts and foreign currency exchange transactions 4,605,687 11,546 27,284,016 4,660,607 Net unrealized appreciation (depreciation) of investments 6,907,435 2,333,407 (44,400,657) (7,310,458) Net unrealized appreciation (depreciation) of foreign currency portfolio hedges 0 76,462 2,048,003 289,441 Net unrealized appreciation (depreciation)--other 0 (1,515) (180,240) (25,686) Accumulated undistributed net investment income (loss) 1,007,663 280,910 24,309,333 2,967,277 ------------ ------------ ------------- ------------ Net assets applicable to Fund shares outstanding $ 54,935,837 $ 27,227,239 $ 782,513,966 $ 90,345,782 ============ ============ ============= ============ - ----------------------------------------------------------------------------------------------------------------------------------- PRICE OF SHARES Net asset value per share: Class I $ 16.50 $ 10.91 $ 15.40 $ 11.51 Class I--Net assets $ 54,494,455 $ 27,227,239 $ 782,416,127 $ 90,345,782 Class I--Shares outstanding 3,302,834 2,495,109 50,807,440 7,852,136 Net asset value per share: Class II $ 16.49 $ 15.37 Class II--Net assets $ 441,382 $ 97,839 Class II--Shares outstanding 26,773 6,367
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. B-26 THE OAKMARK FAMILY OF FUNDS STATEMENT OF OPERATIONS--SEPTEMBER 30, 2000 - --------------------------------------------------------------------------------
THE OAKMARK THE OAKMARK THE OAKMARK FUND SELECT SMALL CAP FUND FUND - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 62,217,821 $ 24,190,270 $ 2,270,400 Interest Income 11,152,574 6,316,298 868,545 Other Income 189,274 8,202 109 Foreign taxes withheld (153,721) 0 0 --------------- --------------- -------------- Total investment income 73,405,948 30,514,770 3,139,054 - -------------------------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fee 28,116,035 15,325,113 3,683,621 Transfer and dividend disbursing agent fees 2,144,292 959,533 282,517 Other shareholder servicing fees 1,407,173 1,058,557 144,292 Service Fee--Class II 0 10,765 0 Reports to shareholders 1,390,953 569,655 164,908 Custody and accounting fees 303,434 209,167 77,569 Registration and blue sky expenses 15,171 80,450 29,896 Trustee fees 117,583 67,881 36,760 Legal fees 37,929 25,327 10,729 Audit fees 24,116 23,005 22,105 Other 240,627 136,950 113,185 --------------- --------------- -------------- Total expenses 33,797,313 18,466,403 4,565,582 Expense reimbursement 0 0 (252,000) Expense offset arrangements (9,433) (6,506) (832) --------------- --------------- -------------- Net expenses 33,787,880 18,459,897 4,312,750 - -------------------------------------------------------------------------------------------------------------------------------- Net Investment Income (loss): 39,618,068 12,054,873 (1,173,696) - -------------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) on investments (358,898,002) 161,052,611 25,233,378 Net realized gain (loss) on foreign currency transactions 0 0 0 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (135,635,885) 159,978,754 (12,748,906) Net change in appreciation (depreciation) of forward currency exchange contracts 0 0 0 Net change in appreciation (depreciation)--other 0 0 0 - -------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions: (494,533,887) 321,031,365 12,484,472 --------------- --------------- -------------- - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (454,915,819) $ 333,086,238 $ 11,310,776 =============== =============== ==============
B-27
- ----------------------------------------------------------------------------------------------------------------------------------- THE OAKMARK THE OAKMARK THE OAKMARK THE OAKMARK EQUITY AND GLOBAL INTERNATIONAL INTERNATIONAL INCOME FUND FUND FUND SMALL CAP FUND - ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 1,149,410 $ 615,292 $ 25,208,892 $ 4,628,168 Interest Income 1,219,738 60,281 2,284,194 234,290 Other Income 911 0 0 0 Foreign taxes withheld (22,837) (56,319) (2,623,737) (579,417) ------------ ------------ ------------- ------------ Total investment income 2,347,222 619,254 24,869,349 4,283,041 - ----------------------------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fee 410,864 267,710 7,849,938 1,451,394 Transfer and dividend disbursing agent fees 57,692 46,375 596,790 112,558 Other shareholder servicing fees 13,549 4,638 358,338 65,130 Service Fee--Class II 165 0 251 0 Reports to shareholders 28,049 44,681 305,840 59,570 Custody and accounting fees 50,428 51,259 868,495 201,396 Registration and blue sky expenses 40,366 41,928 53,092 32,622 Trustee fees 27,682 26,900 50,812 29,502 Legal fees 8,381 10,047 16,642 9,028 Audit fees 20,005 21,057 27,222 24,116 Other 24,440 14,772 80,226 32,150 ------------ ------------ ------------- ------------ Total expenses 681,621 529,367 10,207,646 2,017,466 Expense reimbursement 0 (55,500) 0 0 Expense offset arrangements (1,017) (1,355) (2,912) (3,039) ------------ ------------ ------------- ------------ Net expenses 680,604 472,512 10,204,734 2,014,427 - ----------------------------------------------------------------------------------------------------------------------------------- Net Investment Income (loss): 1,666,618 146,742 14,664,615 2,268,614 - ----------------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) on investments 4,310,645 96,088 60,562,992 4,863,798 Net realized gain (loss) on foreign currency transactions (645) 132,840 10,609,055 991,046 Net change in unrealized appreciation (depreciation) of investments and foreign currencies 3,084,969 4,122,450 13,902,115 (13,182,275) Net change in appreciation (depreciation) of forward currency exchange contracts 0 81,181 2,556,178 281,817 Net change in appreciation (depreciation)--other 159 (1,568) (111,145) (28,709) - ----------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions: 7,395,128 4,430,991 87,519,195 (7,074,323) ------------ ------------ ------------- ------------ - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 9,061,746 $ 4,577,733 $ 102,183,810 $ (4,805,709) ============ ============ ============= ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. B-28 THE OAKMARK FAMILY OF FUNDS STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 2000 - -------------------------------------------------------------------------------
---------------------------------------------- THE OAKMARK FUND - ---------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 - ---------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: Net investment income $ 39,618,068 $ 63,903,129 Net realized gain (loss) on sale of investments (358,898,002) 748,595,189 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (135,635,885) (147,719,773) --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (454,915,819) 664,778,545 - ---------------------------------------------------------------------------------------------------------------------- DISTRIBUTION TO SHAREHOLDERS FROM (1): Net investment income (32,700,105) (89,026,890) Net realized short-term gain (100,782,239) (128,028,090) Net realized long-term gain (487,248,675) (195,972,927) --------------- --------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (620,731,019) (413,027,907) - ---------------------------------------------------------------------------------------------------------------------- FROM FUND SHARE TRANSACTIONS: Proceeds from shares sold 290,642,873 832,343,635 Reinvestment of dividends and capital gain distributions 603,462,527 391,307,098 Payments for shares redeemed, net of fees (2,552,562,124) (3,626,526,884) --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS (1,658,456,724) (2,402,876,151) --------------- --------------- - ---------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (2,734,103,562) (2,151,125,513) NET ASSETS: Beginning of period 4,772,832,369 6,923,957,882 --------------- --------------- End of period $ 2,038,728,807 $ 4,772,832,369 =============== =============== Undistributed net investment income $ 38,561,304 $ 40,937,014 =============== =============== (1) DISTRIBUTIONS PER SHARE: Net investment income $ 0.2632 $ 0.4401 Net realized short-term gain 0.8111 0.6329 Net realized long-term gain 3.9217 0.9686 --------------- --------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 4.9960 $ 2.0416 =============== ===============
B-29 - -------------------------------------------------------------------------------
---------------------------------------------- THE OAKMARK SELECT FUND - ---------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 - ---------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: Net investment income $ 12,054,873 $ 15,427,356 Net realized gain (loss) on sale of investments 161,052,611 301,413,442 Net change in unrealized appreciation (depreciation) of investments and foreign currencies 159,978,754 18,463,317 --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 333,086,238 335,304,115 - ---------------------------------------------------------------------------------------------------------------------- DISTRIBUTION TO SHAREHOLDERS FROM (1): Net investment income--Class I (14,709,648) (3,491,747) Net investment income--Class II 0 0 Net realized short-term gain (8,341,169) (497,653) Net realized long-term gain (268,872,301) (50,206,634) --------------- --------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (291,923,118) (54,196,034) - ---------------------------------------------------------------------------------------------------------------------- FROM FUND SHARE TRANSACTIONS: Proceeds from shares sold--Class I 628,490,960 688,865,887 Proceeds from shares sold--Class II 7,021,801 0 Reinvestment of dividends and capital gain distributions 287,179,516 51,676,128 Payments for shares redeemed, net of fees--Class I (823,014,435) (610,635,670) Payments for shares redeemed, net of fees--Class II (1,013,300) 0 --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS 98,664,542 129,906,345 --------------- --------------- - ---------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 139,827,662 411,014,426 NET ASSETS: Beginning of period 1,638,908,812 1,227,894,386 --------------- --------------- End of period $ 1,778,736,474 $ 1,638,908,812 =============== =============== Undistributed net investment income $ 8,584,306 $ 13,170,342 =============== =============== (1) DISTRIBUTIONS PER SHARE: Net investment income $ 0.1972 $ 0.0491 Net realized short-term gain 0.1118 0.0070 Net realized long-term gain 3.6040 0.7058 --------------- --------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 3.9130 $ 0.7619 =============== ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. B-30 THE OAKMARK FAMILY OF FUNDS STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 2000 CONT. - -------------------------------------------------------------------------------
---------------------------------------------- THE OAKMARK SMALL CAP FUND - ---------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 - ---------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: Net investment income (loss) $ (1,173,696) $ (2,516,832) Net realized gain (loss) on sale of investments 25,233,378 (11,002,740) Net change in unrealized appreciation (depreciation) of investments and foreign currencies (12,748,906) 82,350,204 --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 11,310,776 68,830,632 - ---------------------------------------------------------------------------------------------------------------------- DISTRIBUTION TO SHAREHOLDERS FROM (1): Net investment income 0 0 Net realized short-term gain 0 0 Net realized long-term gain 0 (4,508,112) --------------- --------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS 0 (4,508,112) - ---------------------------------------------------------------------------------------------------------------------- FROM FUND SHARE TRANSACTIONS: Proceeds from shares sold 51,615,294 262,182,135 Reinvestment of dividends and capital gain distributions 0 4,278,943 Payments for shares redeemed, net of fees (251,361,737) (511,639,081) --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS (199,746,443) (245,178,003) --------------- --------------- - ---------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (188,435,667) (180,855,483) NET ASSETS: Beginning of period 437,139,279 617,994,762 --------------- --------------- End of period $ 248,703,612 $ 437,139,279 =============== =============== Undistributed net investment income $ 0 $ 0 =============== =============== (1) DISTRIBUTIONS PER SHARE: Net investment income $ 0 $ 0 Net realized short-term gain 0 0 Net realized long-term gain 0 0.0874 --------------- --------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0 $ 0.0874 =============== ===============
B-31 - --------------------------------------------------------------------------------
---------------------------------------------- THE OAKMARK EQUITY AND INCOME FUND ---------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 - ---------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: Net investment income $ 1,666,618 $ 1,640,639 Net realized gain (loss) on sale of investments 4,310,645 6,246,386 Net realized gain (loss) on foreign currency transactions (645) (1,597) Net change in unrealized appreciation (depreciation) of investments and foreign currencies 3,084,969 690,123 Net change in unrealized appreciation (depreciation)--other 159 (159) --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 9,061,746 8,575,392 - ---------------------------------------------------------------------------------------------------------------------- DISTRIBUTION TO SHAREHOLDERS FROM (1): Net investment income--Class I (1,718,499) (855,395) Net investment income--Class II 0 0 Net realized short-term gain 0 0 Net realized long-term gain (5,192,802) (829,557) --------------- --------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (6,911,301) (1,684,952) - ---------------------------------------------------------------------------------------------------------------------- FROM FUND SHARE TRANSACTIONS: Proceeds from shares sold--Class I 11,520,117 21,877,864 Proceeds from shares sold--Class II 418,255 0 Reinvestment of dividends and capital gain distributions 6,650,712 1,610,146 Payments for shares redeemed, net of fees--Class I (26,121,233) (27,806,714) Payments for shares redeemed, net of fees--Class II (50) 0 --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS (7,532,199) (4,318,704) --------------- --------------- - ---------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (5,381,754) 2,571,736 NET ASSETS: Beginning of period 60,317,591 57,745,855 --------------- --------------- End of period $ 54,935,837 $ 60,317,591 =============== =============== Undistributed net investment income $ 1,007,663 $ 1,631,244 =============== =============== (1) DISTRIBUTIONS PER SHARE: Net investment income $ 0.4509 $ 0.2118 Net realized short-term gain 0 0 Net realized long-term gain 1.3625 0.2053 --------------- --------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 1.8134 $ 0.4171 =============== ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. B-32 THE OAKMARK FAMILY OF FUNDS STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 2000 CONT. - -------------------------------------------------------------------------------
------------------------------------------------- THE OAKMARK GLOBAL FUND - ----------------------------------------------------------------------------------------------------------------- YEAR ENDED PERIOD ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999(a) - ----------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: Net investment income $ 146,742 $ 32,032 Net realized gain (loss) on sale of investments 96,088 (84,542) Net realized gain (loss) on foreign currency transactions 132,840 (871) Net change in unrealized appreciation (depreciation) of investments and foreign currencies 4,122,450 (1,789,042) Net change in unrealized appreciation (depreciation) of forward currency exchange contracts 81,181 (4,719) Net change in unrealized appreciation (depreciation)--other (1,568) 53 ------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 4,577,733 (1,847,089) - ----------------------------------------------------------------------------------------------------------------- DISTRIBUTION TO SHAREHOLDERS FROM (1): Net investment income (29,834) 0 Net realized short-term gain 0 0 Net realized long-term gain 0 0 ------------- -------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (29,834) 0 - ----------------------------------------------------------------------------------------------------------------- FROM FUND SHARE TRANSACTIONS: Proceeds from shares sold 12,896,002 25,938,577 Reinvestment of dividends and capital gain distributions 28,883 0 Payments for shares redeemed, net of fees (14,198,899) (138,134) ------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS (1,274,014) 25,800,443 ------------- -------------- - ----------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 3,273,885 23,953,354 NET ASSETS: Beginning of period 23,953,354 0 ------------- -------------- End of period $ 27,227,239 $ 23,953,354 ============= ============== Undistributed net investment income $ 280,910 $ 31,161 ============= ============== (1) DISTRIBUTIONS PER SHARE: Net investment income $ 0.0098 $ 0 Net realized short-term gain 0 0 Net realized long-term gain 0 0 ------------- -------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0.0098 $ 0 ============= ==============
(a) The date which Fund shares were first offered to the public was August 4,1999. B-33 - --------------------------------------------------------------------------------
------------------------------------------------- THE OAKMARK INTERNATIONAL FUND - ----------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 - ----------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: Net investment income $ 14,664,615 $ 15,632,479 Net realized gain (loss) on sale of investments 60,562,992 (28,187,781) Net realized gain (loss) on foreign currency transactions 10,609,055 11,558,024 Net change in unrealized appreciation (depreciation) of investments and foreign currencies 13,902,115 290,561,381 Net change in unrealized appreciation (depreciation) of forward currency exchange contracts 2,556,178 1,014,015 Net change in unrealized appreciation (depreciation)--other (111,145) (274,516) ------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 102,183,810 290,303,602 - ----------------------------------------------------------------------------------------------------------------- DISTRIBUTION TO SHAREHOLDERS FROM (1): Net investment income--Class I (27,231,383) (16,590,763) Net investment income--Class II (1,053) 0 Net realized short-term gain 0 (32,678,201) Net realized long-term gain 0 (20,071,535) ------------- -------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (27,232,436) (69,340,499) - ----------------------------------------------------------------------------------------------------------------- FROM FUND SHARE TRANSACTIONS: Proceeds from shares sold--Class I 172,133,473 370,563,788 Proceeds from shares sold--Class II 143,284 0 Reinvestment of dividends and capital gain distributions 26,258,587 65,432,760 Payments for shares redeemed, net of fees--Class I (302,066,042) (601,921,972) Payments for shares redeemed, net of fees--Class II (48,697) 0 ------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS (103,579,395) (165,925,424) ------------- -------------- - ----------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (28,628,021) 55,037,679 NET ASSETS: Beginning of period 811,141,987 756,104,308 ------------- -------------- End of period $ 782,513,966 $ 811,141,987 ============= ============== Undistributed net investment income $ 24,309,333 $ (3,080,259) ============= ============== (1) DISTRIBUTIONS PER SHARE: Net investment income $ 0.4861 $ 0.2440 Net realized short-term gain 0 0.4807 Net realized long-term gain 0 0.2953 ------------- -------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0.4861 $ 1.0200 ============= ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. B-34 THE OAKMARK FAMILY OF FUNDS STATEMENT OF CHANGES IN NET ASSETS--SEPTEMBER 30, 2000 CONT. - -------------------------------------------------------------------------------
------------------------------------------------- THE OAKMARK INTERNATIONAL SMALL CAP FUND - ----------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 - ----------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: Net investment income $ 2,268,614 $ 2,541,981 Net realized gain (loss) on sale of investments 4,863,798 12,338,825 Net realized gain (loss) on foreign currency transactions 991,046 968,518 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (13,182,275) 34,768,296 Net change in unrealized appreciation (depreciation) of forward currency exchange contracts 281,817 186,436 Net change in unrealized appreciation (depreciation)--other (28,709) (2,615) ------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (4,805,709) 50,801,441 - ----------------------------------------------------------------------------------------------------------------- DISTRIBUTION TO SHAREHOLDERS FROM (1): Net investment income (1,252,257) (1,558,450) Net realized short-term gain (3,278,736) 0 Net realized long-term gain (3,226,904) 0 ------------- -------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (7,757,897) (1,558,450) - ----------------------------------------------------------------------------------------------------------------- FROM FUND SHARE TRANSACTIONS: Proceeds from shares sold 39,669,014 253,467,836 Reinvestment of dividends and capital gain distributions 7,637,609 1,470,554 Payments for shares redeemed, net of fees (99,763,438) (200,585,753) ------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS (52,456,815) 54,352,637 ------------- -------------- - ----------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (65,020,421) 103,595,628 NET ASSETS: Beginning of period 155,366,203 51,770,575 ------------- -------------- End of period $ 90,345,782 $ 155,366,203 ============= ============== Undistributed net investment income $ 2,967,277 $ 3,165,289 ============= ============== (1) DISTRIBUTIONS PER SHARE: Net investment income $ 0.1135 $ 0.2049 Net realized short-term gain 0.2972 0 Net realized long-term gain 0.2923 0 ------------- -------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ 0.7030 $ 0.2049 ============= ==============
B-35 - ------------------------------------------------------------------------------ THE OAKMARK FAMILY OF FUNDS - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------ 1. SIGNIFICANT ACCOUNTING POLICIES The following are the significant accounting policies of The Oakmark Fund ("Oakmark"), The Oakmark Select Fund ("Select"), The Oakmark Small Cap Fund ("Small Cap"), The Oakmark Equity and Income Fund ("Equity and Income"), The Oakmark Global Fund ("Global"), The Oakmark International Fund ("International"), and The Oakmark International Small Cap Fund ("Int'l Small Cap") collectively referred to as "the Funds", each a series of the Harris Associates Investment Trust (a Massachusetts business trust). These policies are in conformity with accounting principles generally accepted in the United States ("GAAP"). The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. CLASS DISCLOSURE-- Each Fund offers two classes of shares: Class I Shares and Class II Shares. Class I Shares are offered to the general public. Class II Shares are offered to certain retirement plans such as 401(k) and profit sharing plans. Class II Shares pay a service fee at the annual rate of .25% of average net assets of Class II Shares of the Fund. This service fee is paid to an administrator for performing the services associated with the administration of such retirement plans. Expenses of the Funds that are not directly attributable to a specific class of shares are prorated among the classes based on the relative net assets of each class. Expenses directly attributable to a class of shares are recorded to the specific class. At this time, expenses directly attributable to each class are transfer agent fees, service fees and other shareholder servicing fees. SECURITY VALUATION-- Investments are stated at market value. Securities traded on securities exchanges and securities traded on the NASDAQ National Market are valued at the last sales price on the day of valuation, or if lacking any reported sales that day, at the most recent bid quotation. Over-the-counter securities not so traded are valued at the most recent bid quotation. Money market instruments having a maturity of 60 days or less from the date of valuation are valued on an amortized cost basis which approximates market value. Securities for which quotations are not readily available are valued at a fair value as determined by the Pricing Committee appointed by the Board of Trustees. FOREIGN CURRENCY TRANSLATIONS-- Values of investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the mean of the bid and offer prices of such currencies at the time of valuation. Purchases and sales of investments and dividend and interest income are converted at the prevailing rate of exchange on the respective dates of such transactions. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized gain or loss from investments. Net realized gains on foreign currency transactions arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds' books, and the U.S. dollar equivalent of the amounts actually received or paid, and the realized gains or losses resulting from the portfolio and transaction hedges. At September 30 2000, only the Global, International and Int'l Small Cap Funds had foreign currency transactions. Net unrealized appreciation (depreciation)-other includes the following components:
INT'L GLOBAL INTERNATIONAL SMALL CAP - ----------------------------------------------------------------------------- Unrealized appreciation (depreciation) on dividends and dividend reclaims receivable $(1,594) $(191,459) $(25,844) Unrealized appreciation (depreciation) on open securities purchases and sales 0 22,322 1,041 Unrealized appreciation (depreciation) on transaction hedge purchases and sales 0 (29,882) (1,454) Unrealized appreciation (depreciation) on tax expense payable 79 18,779 571 ------- --------- -------- Net Unrealized Appreciation (Depreciation) - Other $(1,515) $(180,240) $(25,686) ======= ========= ========
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 B-36 - ------------------------------------------------------------------------------ THE OAKMARK FAMILY OF FUNDS - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS (CONT.) - ------------------------------------------------------------------------------ Exchange is open for trading by dividing the total value of the Fund's investments and other assets, less liabilities, by the number of Fund shares outstanding. FORWARD FOREIGN CURRENCY CONTRACTS-- At September 30, 2000, Global, International and Int'l Small Cap had entered into forward foreign currency contracts under which they are obligated to exchange currencies at specified future dates. The Funds' currency transactions are limited to transaction hedging and portfolio hedging involving either specific transactions or portfolio positions. The contractual amounts of forward foreign exchange contracts do not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered. Risks arise from the possible inability of counter parties to meet the terms of their contracts and from movements in currency values. The Global Fund had the following outstanding contracts at September 30, 2000: PORTFOLIO HEDGES--
UNREALIZED APPRECIATION (DEPRECIATION) AT US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000 -------------------------------------------------------------------------------------------------- $1,185,825 750,000 Pound Sterling October 2000 $76,462 ------- $76,462 =======
The International Fund had the following outstanding contracts at September 30, 2000: PORTFOLIO HEDGES--
UNREALIZED APPRECIATION (DEPRECIATION) AT US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000 -------------------------------------------------------------------------------------------------- $15,811,000 10,000,000 Pound Sterling October 2000 $1,019,496 27,659,700 18,000,000 Pound Sterling November 2000 1,021,282 3,811,339 400,000,000 Japanese Yen February 2001 7,225 ---------- $2,048,003 ==========
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES--
UNREALIZED APPRECIATION (DEPRECIATION) AT US DOLLAR SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE SEPTEMBER 30, 2000 -------------------------------------------------------------------------------------------------- $1,352,619 1,533,755 Euro Currency October 2000 $2,837 133,806 151,553 Euro Currency October 2000 129 1,153,383 1,306,357 Euro Currency October 2000 1,110 362,329 410,902 Euro Currency October 2000 805 2,020,755 2,289,808 Euro Currency October 2000 2,862 825,839 935,795 Euro Currency October 2000 1,170 ------ $8,913 ======
B-37 - ------------------------------------------------------------------------------ THE OAKMARK FAMILY OF FUNDS - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS (CONT.) - ------------------------------------------------------------------------------ TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
UNREALIZED APPRECIATION (DEPRECIATION) AT US DOLLAR PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000 -------------------------------------------------------------------------------------------------- $1,474,421 1,669,975 Euro Currency October 2000 $ (1,419) 3,043,854 3,448,735 Euro Currency October 2000 (3,965) 2,023,098 1,385,304 Pound Sterling October 2000 (25,629) 41,124 28,119 Pound Sterling October 2000 (461) 2,570,357 1,742,969 Pound Sterling October 2000 (7,321) -------- $(38,795) ========
The Int'l Small Cap Fund had the following outstanding contracts at September 30, 2000: PORTFOLIO HEDGES--
UNREALIZED APPRECIATION (DEPRECIATION) AT US DOLLAR PROCEEDS FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000 -------------------------------------------------------------------------------------------------- $4,189,915 2,650,000 Pound Sterling October 2000 $270,166 2,882,398 300,000,000 Japanese Yen October 2000 19,275 -------- $289,441 ========
TRANSACTION HEDGES: FOREIGN CURRENCY PURCHASES--
UNREALIZED APPRECIATION (DEPRECIATION) AT US DOLLARS SOLD FOREIGN CURRENCY PURCHASED SETTLEMENT DATE SEPTEMBER 30, 2000 -------------------------------------------------------------------------------------------------- $302,964 207,311 Pound Sterling October 2000 $3,628 ------ $3,628 ======
TRANSACTION HEDGES: FOREIGN CURRENCY SALES--
UNREALIZED APPRECIATION (DEPRECIATION) AT US DOLLARS PURCHASED FOREIGN CURRENCY SOLD SETTLEMENT DATE SEPTEMBER 30, 2000 -------------------------------------------------------------------------------------------------- $1,348,240 2,029,291 Canadian Dollar October 2000 $ 1,932 25,616 29,013 Euro Currency October 2000 (25) 32,537 36,852 Euro Currency October 2000 (31) 1,002,315 1,137,057 Euro Currency October 2000 (2,558) 20,704 23,460 Euro Currency October 2000 (29) 154,457 175,023 Euro Currency October 2000 (219) 200,724 138,323 Pound Sterling October 2000 (3,841) 42,854 74,695 Singapore Dollar October 2000 (95) 32,896 57,420 Singapore Dollar October 2000 (120) 100,684 175,270 Singapore Dollar October 2000 (96) ------- $(5,082) =======
B-38 - ------------------------------------------------------------------------------ THE OAKMARK FAMILY OF FUNDS - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS (CONT.) - ---------------------------------------------------------------------------- At September 30, 2000, Global, International and Int'l Small Cap Funds each had sufficient cash and/or securities to cover any commitments under these contracts. FEDERAL INCOME TAXES, DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS-- No provision is made for Federal income taxes. The Funds elect to be taxed as "regulated investment companies" and make such distributions to their shareholders as to be relieved of all Federal income taxes under provisions of current Federal tax law. The Funds hereby designate the approximate long term capital gains for purposes of the dividends paid deduction (in thousands):
SMALL EQUITY & INT'L SMALL OAKMARK SELECT CAP INCOME GLOBAL INT'L CAP ------------------------------------------------------------------------ $0 $127,158 $10,886 $4,590 $0 $9,190 $4,864
Income dividends and capital gains distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these tax and book differences are permanent in nature, such amounts are reclassified among paid in capital, undistributed net investment income and undistributed net realized gain (loss) on investments. These differences are primarily related to foreign currency transactions, deferral of losses on wash sales, and character of capital loss carryforwards. The Funds also utilize earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. BANK LOANS-- The Funds have an unsecured line of credit with a syndication of banks. It is a committed line of $300 million. Borrowings under this arrangement bear interest at .45% above the Federal Funds Effective Rate. As of September 30, 2000, there were no outstanding borrowings. ACCOUNTING FOR OPTIONS-- When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from writing options, which expire unexercised, are recorded by the Fund on the expiration date as realized gains from option transactions. The difference between the premium and the amount paid on effecting a closing purchase transaction including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or a loss. If a put option is exercised, the premium reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value. During the year ended September 30, 2000, Small Cap wrote option contracts. Portfolio securities valued at $837,375 were held in escrow by the custodian as cover for call options written by the Small Cap. 2. TRANSACTIONS WITH AFFILIATES Each fund has an investment advisory agreement with Harris Associates L.P. (Adviser). For management services and facilities furnished, the Funds pay the Adviser monthly fees at annual rates as follows. Oakmark pays 1% on the first $2.5 billion of net assets, .95% on the next $1.25 billion of net assets, .90% on the next $1.25 billion of net assets, .85% on the next $5 billion of net assets, and .80% on the excess of $10 billion of net assets. Select pays 1% on the first $1 billion of net assets, .95% on the next $500 million of net assets, .90% on the next $500 million of net assets, .85% on the next $500 million of net assets, .80% on the next $2.5 million of net assets, and .75% on the excess of $5 billion of net assets. Small Cap pays 1.25% on the first $1 billion of net assets, 1.15% on the next $500 million of net assets, 1.10% on the next $500 million of net assets, 1.05% on the next $500 million of net assets, and 1% on the excess of $2.5 billion of net assets. Equity and Income pays .75% of net assets. Global pays 1.00% of net assets. International pays 1% on the first $2.5 billion of net assets, .95% on the next $2.5 billion of net assets, and .90% on the excess of $5 billion of net assets. Int'l Small Cap pays 1.25% of net assets. Each fee is calculated on the total net assets as determined at the end of each preceding calendar month. The Adviser has voluntarily agreed to reimburse the Funds to the extent that annual expenses, excluding certain expenses, exceed 1.5% for domestic funds, 2.0% for international funds, and 1.75% for the Global Fund. In connection with the organization of the Funds, expenses of approximately $7,283 were advanced each to Small Cap, Equity and Income and Int'l Small Cap, and $3,500 to Select by the Adviser. These expenses are being amortized on a straight line basis through October, 2000 for Small Cap, Equity and Income and Int'l Small Cap, and October, 2001 for Select. During the twelve months ended September 30, 2000, the Funds incurred brokerage commissions of $7,645,100, $4,102,031, $680,633, $200,588, $256,580, $2,905,834, and $469,454 of which $2,765,022, $1,112,365, $226,659, $100,258, $87,377, $0, and $0 were paid by Oakmark, Select, Small Cap, Equity and Income, Global, International and Int'l Small Cap, respectively, to an affiliate of the Adviser. The Funds' Trustees may participate in a Deferred Compensation Plan which may be terminated at any time. The obligations of the Plan are paid solely out of the assets of the Funds. B-39 - ------------------------------------------------------------------------------ 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):
TWELVE MONTHS ENDED SEPTEMBER 30, 2000 -------------------------------------------------------------------------------------- EQUITY & INT'L SMALL OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL CAP -------------------------------------------------------------------------------------------------------------------- Shares sold 11,007 32,899 3,743 784 1,361 11,609 3,311 Shares issued in reinvestment of dividends 21,629 15,744 0 463 3 1,899 656 Less shares redeemed (95,833) (44,043) (18,761) (1,763) (1,477) (20,847) (8,406) ------- ------- ------- ------ ------ ------- ------ Net increase (decrease) in shares outstanding (63,197) 4,600 (15,018) (516) (113) (7,339) (4,439) ======= ======= ======= ====== ====== ======= ====== TWELVE MONTHS ENDED SEPTEMBER 30, 1999 -------------------------------------------------------------------------------------- EQUITY & INT'L SMALL OAKMARK SELECT SMALL CAP INCOME GLOBAL(a) INTERNATIONAL CAP -------------------------------------------------------------------------------------------------------------------- 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 ======= ======= ======= ====== ====== ======= ======
(a) The date which Fund shares were first offered for sale to the public was August 4, 1999. 4. INVESTMENT TRANSACTIONS Transactions in investment securities (excluding short term securities) were as follows (in thousands):
EQUITY & INT'L SMALL OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL CAP ------------------------------------------------------------------------------------------------------------------ Purchases $1,287,017 $1,007,676 $ 77,253 $45,616 $38,215 $473,207 $43,098 Proceeds from sales $3,249,901 $1,233,828 $285,248 $56,873 $39,785 $570,706 $95,650
Transactions in options written by Small Cap during the year ended September 30, 2000 were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED --------------------------------------------------------------------------------- Options outstanding at September 30, 1999 $ 0 $ 0 Options written 2,360 678,033 Options terminated in closing purchase transactions (200) (50,794) Options expired (1,750) (538,261) Options exercised (200) (24,400) ------- --------- Options outstanding at September 30, 2000 $ 210 $ 64,578 ======= =========
B-40 - ---------------------------------------------------------------------------- THE OAKMARK FAMILY OF FUNDS - ---------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONT.) - ---------------------------------------------------------------------------- 5. TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS Affiliated issuers, as defined under the Investment Company Act of 1940, are those in which the Fund's holdings of an issuer represent 5% or more of the outstanding voting securities of the issuer. A summary of the Fund's transactions in the securities of these issuers during the year ended September 30, 2000 is set forth below: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES THE OAKMARK SELECT FUND
PURCHASE SALES DIVIDEND MARKET VALUE AFFILIATES (COST) PROCEEDS INCOME SEPTEMBER 30, 2000 ------------------------------------------------------------------------------------------------------- The Reynolds and Reynolds Company, Class A $71,680,613 $17,864,227 $2,363,801 $118,846,538 U.S. Industries, Inc. 2,912,258 55,191,225 1,248,195 42,600,075 USG Corporation 17,059,825 16,769,233 2,147,190 87,089,681 ----------- ----------- ---------- ------------ TOTALS $91,652,696 $89,824,685 $5,759,186 $248,536,294
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES THE OAKMARK SMALL CAP FUND
PURCHASE SALES DIVIDEND MARKET VALUE AFFILIATES (COST) PROCEEDS INCOME SEPTEMBER 30, 2000 ------------------------------------------------------------------------------------------------------- Hanger Orthopedic Group, Inc. $ 7,335,666 $ 61,472 $ 0 $ 4,312,500 R.G. Barry Corporation 49,200 192,456 0 2,565,000 Sames Corporation 0 242,030 0 3,201,875 Ugly Duckling Corporation 0 0 0 10,171,875 ----------- ----------- ---------- ------------ TOTALS $ 7,384,866 $ 495,958 $ 0 $ 20,251,250
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES THE OAKMARK INTERNATIONAL FUND
PURCHASE SALES DIVIDEND MARKET VALUE AFFILIATES (COST) PROCEEDS INCOME SEPTEMBER 30, 2000 ------------------------------------------------------------------------------------------------------- Chargeurs SA $ 0 $12,532,174 $1,336,880 $ 25,360,707 Dongah Tire Industry Company 0 0 222,263 3,459,560 Fila Holding S.p.A. 1,824,332 1,710,130 0 23,522,425 Lotte Chilsung Beverage Company 1,542,010 0 32,524 9,399,202 Nufarm Limited 32,936,973 0 0 17,097,359 Somerfield plc 42,112,018 12,444,936 813,479 45,054,993 ----------- ----------- ---------- ------------ TOTALS $78,415,333 $26,687,240 $2,405,146 $123,894,246
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES THE OAKMARK INTERNATIONAL SMALL CAP FUND
PURCHASE SALES DIVIDEND MARKET VALUE AFFILIATES (COST) PROCEEDS INCOME SEPTEMBER 30, 2000 ------------------------------------------------------------------------------------------------------- Designer Textiles (NZ) Limited $ 0 $ 0 $ 20,634 $ 191,758 Mainfreight Limited 115,895 15,170 167,324 2,317,741 Matichon Public Company Limited, Foreign Shares 0 0 215,963 2,105,571 ----------- ----------- ---------- ------------ TOTALS $ 115,895 $ 15,170 $ 403,921 $ 4,615,070
B-41 - ------------------------------------------------------------------------------ THE OAKMARK FUND - ------------------------------------------------------------------------------ FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------ FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
ELEVEN MONTHS YEAR ENDED YEAR ENDED YEAR ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2000 1999 1998 1997(d) ------------------------------------------------------------- Net Asset Value, Beginning of Period $ 34.37 $ 33.54 $ 41.21 $ 32.39 Income From Investment Operations: Net Investment Income (Loss) 0.49 0.36 0.47 0.36 Net Gains or Losses on Securities (both realized and unrealized) (2.91) 2.51 (1.73) 10.67 ------------- ------------- ------------- ------------- Total From Investment Operations: (2.42) 2.87 (1.26) 11.03 Less Distributions: Dividends (from net investment income) (0.26) (0.44) (0.40) (0.34) Distributions (from capital gains) (4.74) (1.60) (6.01) (1.87) ------------- ------------- ------------- ------------- Total Distributions (5.00) (2.04) (6.41) (2.21) ------------- ------------- ------------- ------------- Net Asset Value, End of Period $ 26.95 $ 34.37 $ 33.54 $ 41.21 ============= ============= ============= ============= Total Return (7.55%) 7.98% (4.06%) 39.24%* Ratios/Supplemental Data: Net Assets, End of Period ($million) $ 2,038.7 $ 4,772.8 $ 6,924.0 $ 6,614.9 Ratio of Expenses to Average Net Assets 1.21% 1.11% 1.08% 1.08%* Ratio of Net Investment Income (Loss) to Average Net Assets 1.42% 1.02% 1.22% 1.19%* Portfolio Turnover Rate 50% 13% 43% 17% YEAR ENDED OCTOBER 31, PERIOD ENDED ------------------------------------------------------------------------ OCTOBER 31, 1996 1995 1994 1993 1992 1991(a) ----------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 28.47 $ 25.21 $ 24.18 $ 17.11 $ 12.10 $ 10.00 Income From Investment Operations: Net Investment Income (Loss) 0.34 0.30 0.27 0.17 (0.03) (0.01) Net Gains or Losses on Securities (both realized and unrealized) 4.70 4.66 1.76 7.15 5.04 2.11 ------------ ------------- ------------- ------------- ------------- --------- Total From Investment Operations: 5.04 4.96 2.03 7.32 5.01 2.10 Less Distributions: Dividends (from net investment income) (0.28) (0.23) (0.23) (0.04) 0 0 Distributions (from capital gains) (0.84) (1.47) (0.77) (0.21) 0 0 ------------ ------------- ------------- ------------- ------------- --------- Total Distributions (1.12) (1.70) (1.00) (0.25) 0 0 ------------ ------------- ------------- ------------- ------------- --------- Net Asset Value, End of Period $ 32.39 $ 28.47 $ 25.21 $ 24.18 $ 17.11 $ 12.10 ============ ============= ============= ============= ============= ========= Total Return 18.07% 21.55% 8.77% 43.21% 41.40% 87.10%* Ratios/Supplemental Data: Net Assets, End of Period ($million) $ 3,933.9 $ 2,827.1 $ 1,677.3 $ 1,107.0 $ 114.7 $ 4.8 Ratio of Expenses to Average Net Assets 1.18% 1.17% 1.22% 1.32% 1.70% 2.50%(b)* Ratio of Net Investment Income (Loss) to Average Net Assets 1.13% 1.27% 1.19% 0.94% (0.24)% (0.66)%(c)* Portfolio Turnover Rate 24% 18% 29% 18% 34% 0%
* Data has been annualized. (a) From August 5, 1991, the date on which Fund shares were first offered for sale to the public. (b) If the Fund had paid all of its expenses and there had been no reimbursement by the Adviser, this annualized ratio would have been 4.92% for the period. (c) Computed giving effect to the Adviser's expense limitation undertaking. (d) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. B-42 - -------------------------------------------------------------------------------- THE OAKMARK SELECT FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
DECEMBER 31, 1999 YEAR ENDED THROUGH SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 YEAR ENDED YEAR ENDED CLASS I CLASS II(a) SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 - ----------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 20.92 $ 18.42 $ 16.76 $ 16.34 Income From Investment Operations: Net Investment Income (Loss) 0.13 0.10 0.19 0.03 Net Gains or Losses on Securities (both realized and unrealized) 4.32 2.88 4.73 0.56 ------------ ------------ ------------ ------------ Total From Investment Operations: 4.45 2.98 4.92 0.59 Less Distributions: Dividends (from net investment income) (0.20) 0.00 (0.05) 0 Distributions (from capital gains) (3.72) 0.00 (0.71) (0.17) ------------ ------------ ------------ ------------ Total Distributions (3.92) 0.00 (0.76) (0.17) ------------ ------------ ------------ ------------ Net Asset Value, End of Period $ 21.45 $ 21.40 $ 20.92 $ 16.76 ============ ============ ============ ============ Total Return 24.53% 21.57%* 30.07% 3.64% Ratios/Supplemental Data: Net Assets, End of Period ($million) $ 1,772.0 $ 6.8 $ 1,638.9 $ 1,227.9 Ratio of Expenses to Average Net Assets 1.17% 1.41%* 1.16% 1.22% Ratio of Net Investment Income (Loss) to Average Net Assets 0.76% 0.59%* 0.98% .17% Portfolio Turnover Rate 69% 69% 67% 56% ELEVEN MONTHS ENDED SEPTEMBER 30, 1997(b) - -------------------------------------------------------- Net Asset Value, Beginning of Period $ 10.00 Income From Investment Operations: Net Investment Income (Loss) (0.01) Net Gains or Losses on Securities (both realized and unrealized) 6.35 ------------ Total From Investment Operations: 6.34 Less Distributions: Dividends (from net investment income) 0 Distributions (from capital gains) 0 ------------ Total Distributions 0 ------------ Net Asset Value, End of Period $ 16.34 ============ Total Return 69.16%* Ratios/Supplemental Data: Net Assets, End of Period ($million) $ 514.2 Ratio of Expenses to Average Net Assets 1.12%* Ratio of Net Investment Income (Loss) to Average Net Assets (0.11)%* Portfolio Turnover Rate 37%
* Data has been annualized. (a) The date which Class II shares were first sold to the public was December 31, 1999. (b) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. B-43 - ------------------------------------------------------------------------------ THE OAKMARK SMALL CAP FUND - ------------------------------------------------------------------------------ FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------ FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 - -------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 13.88 $ 12.63 $ 20.34 Income From Investment Operations: Net Investment Income (Loss) 0.00 0.14 (0.12) Net Gains or Losses on Securities (both realized and unrealized) 1.22 1.20 (4.73) --------- --------- --------- Total From Investment Operations: 1.22 1.34 (4.85) Less Distributions: Dividends (from net investment income) 0.00 0.00 0 Distributions (from capital gains) 0.00 (0.09) (2.86) --------- --------- --------- Total Distributions 0.00 (0.09) (2.86) --------- --------- --------- Net Asset Value, End of Period $ 15.10 $ 13.88 $ 12.63 ========= ========= ========= Total Return 8.79% 10.56% (26.37%) Ratios/Supplemental Data: Net Assets, End of Period ($million) $248.7 $437.1 $618.0 Ratio of Expenses to Average Net Assets 1.50%(a) 1.48% 1.45% Ratio of Net Investment Income (Loss) to Average Net Assets (0.41)%(a) (0.44)% (0.40)% Portfolio Turnover Rate 28% 68% 34% ELEVEN MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1997(b) OCTOBER 31, 1996 - ------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $ 13.19 $ 10.00 Income From Investment Operations: Net Investment Income (Loss) (0.01) (0.02) Net Gains or Losses on Securities (both realized and unrealized) 7.16 3.21 ------------ ----------- Total From Investment Operations: 7.15 3.19 Less Distributions: Dividends (from net investment income) 0 0 Distributions (from capital gains) 0 0 ------------ ----------- Total Distributions 0 0 ------------ ----------- Net Asset Value, End of Period $ 20.34 $ 13.19 ============ =========== Total Return 59.14%* 31.94% Ratios/Supplemental Data: Net Assets, End of Period ($million) $ 1,513.4 $ 218.4 Ratio of Expenses to Average Net Assets 1.37%* 1.61% Ratio of Net Investment Income (Loss) to Average Net Assets (0.25)%* (0.29)% Portfolio Turnover Rate 27% 23%
* 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:
September 30, 2000 - -------------------------------------------------------------------------------- Ratio of Expenses to Average Net Assets 1.59% Ratio of Net Income (Loss) to Average Net Assets (0.50)%
(b) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. B-44 - -------------------------------------------------------------------------------- THE OAKMARK EQUITY AND INCOME FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
JULY 13, 2000 YEAR ENDED THROUGH ELEVEN MONTHS SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED YEAR ENDED ENDED YEAR ENDED 2000 2000 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, OCTOBER 31, CLASS I CLASS II (a) 1999 1998 1997(c) 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $ 15.68 $ 15.51 $ 13.99 $ 14.49 $ 11.29 $ 10.00 Income From Investment Operations: Net Investment Income (Loss) 0.35 0.30 0.39 0.29 0.21 0.10 Net Gains or Losses on Securities (both realized and unrealized) 2.28 0.68 1.72 0.04 3.24 1.19 -------- -------- -------- --------- --------- --------- Total From Investment Operations: 2.63 0.98 2.11 0.33 3.45 1.29 Less Distributions: Dividends (from net investment income) (0.45) 0.00 (0.21) (0.24) (0.12) 0 Distributions (from capital gains) (1.36) 0.00 (0.21) (0.59) (0.13) 0 -------- -------- -------- --------- --------- --------- Total Distributions (1.81) 0.00 (0.42) (0.83) (0.25) 0 -------- -------- -------- --------- --------- --------- Net Asset Value, End of Period $ 16.50 $ 16.49 $ 15.68 $ 13.99 $ 14.49 $ 11.29 ======== ======== ======== ========= ========= ========= Total Return 18.51% 30.34%* 15.32% 2.57% 34.01%* 12.91% Ratios/Supplemental Data: Net Assets, End of Period ($million) $ 54.5 $ 0.4 $ 60.3 $ 57.7 $ 33.5 $ 13.8 Ratio of Expenses to Average Net Assets 1.24% 1.32%* 1.18% 1.31% 1.50%*(b) 2.50%(b) Ratio of Net Investment Income (Loss) to Average Net Assets 3.04% 2.59%* 2.65% 2.39% 2.38%*(b) 1.21%(b) Portfolio Turnover Rate 87% 87% 81% 46% 53% 66%
*Data has been annualized. (a) The date which Class II shares were first sold to the public was July 13, 2000. (b) If the Fund had paid all of its expenses and there had been no expense reimbursement by the Adviser, ratios would have been as follows:
September 30, October 31, 1997 1996 - --------------------------------------------------------------------------------------------------------------------------- Ratio of Expenses to Average Net Assets 1.70% 2.64% Ratio of Net Income (Loss) to Average Net Assets 2.18% 1.08%
(c) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. B-44 - -------------------------------------------------------------------------------- THE OAKMARK GLOBAL FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED PERIOD ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999(a) - --------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 9.18 $10.00 Income From Investment Operations: Net Investment Income (Loss) 0.11 0.01 Net Gains or Losses on Securities (both realized and unrealized) 1.63 (0.83) ------- ------ Total From Investment Operations: 1.74 (0.82) Less Distributions: Dividends (from net investment income) (0.01) 0.00 Distributions (from capital gains) 0.00 0.00 ------- ------ Total Distributions (0.01) 0.00 ------- ------ Net Asset Value, End of Period $10.91 $ 9.18 ======= ====== Total Return 18.97% (51.60%)* Ratios/Supplemental Data: Net Assets, End of Period ($million) $ 27.2 $ 24.0 Ratio of Expenses to Average Net Assets 1.75%(b) 1.75%*(b) Ratio of Net Investment Income (Loss) to Average Net Assets 0.54%(b) 0.98%*(b) Portfolio Turnover Rate 147% 7%
*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:
September 30, September 30, 2000 1999 - --------------------------------------------------------------------------------------------------------------------- Ratio of Expenses to Average Net Assets 1.96% 2.22% Ratio of Net Income (Loss) to Average Net Assets 0.34% 0.51%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. B-45 - -------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED NOVEMBER 4, ELEVEN MONTHS SEPTEMBER 30, 1999, THROUGH YEAR ENDED YEAR ENDED ENDED 2000 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, CLASS I 2000 CLASS II(a) 1999 1998 1997(c) - -------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning Of Period $ 13.95 $ 14.36 $ 10.42 $ 18.77 $ 14.92 Income From Investment Operations: Net Investment Income (Loss) 1.02 0.96 (0.34) 0.41 0.27 Net Gains or Losses on Securities (both realized and unrealized) 0.92 0.54 4.89 (5.32) 3.74 -------- -------- -------- -------- ------- Total From Investment Operations: 1.94 1.50 4.55 (4.91) 4.01 Less Distributions: Dividends (from net investment income) (0.49) (0.49) (0.24) (0.58) (0.16) Distributions (from capital gains) 0.00 0.00 (0.78) (2.86) 0 -------- -------- -------- -------- ------- Total Distributions (0.49) (0.49) (1.02) (3.44) (0.16) -------- -------- -------- -------- ------- Net Asset Value, End of Period $ 15.40 $ 15.37 $ 13.95 $ 10.42 $ 18.77 ======== ======== ======== ======== ======= Total Return 14.27% 11.77%* 46.41% (29.90)% 29.63%* Ratios/Supplemental Data: Net Assets, End of Period ($million) $ 782.4 $ 0.1 $ 811.1 $ 756.1 $1,647.3 Ratio of Expenses to Average Net Assets 1.30% 1.50%* 1.29% 1.32% 1.26%* Ratio of Net Investment Income (Loss) to Average Net Assets 1.87% 1.98%* 1.94% 1.95% 2.09%* Portfolio Turnover Rate 64% 64% 54% 43% 61% YEAR ENDED OCTOBER 31, PERIOD ENDED ----------------------------------------- OCTOBER 31, 1996 1995 1994 1993 1992(b) - ------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning Of Period $ 12.97 $ 14.50 $ 14.09 $ 9.80 $ 10.00 Income From Investment Operations: Net Investment Income (Loss) 0.09 0.30 0.21 0.06 0.26 Net Gains or Losses on Securities (both realized and unrealized) 2.90 (0.77) 0.43 4.48 (0.46) -------- --------- --------- -------- --------- Total From Investment Operations: 2.99 (0.47) 0.64 4.54 (0.2) Less Distributions: Dividends (from net investment income) 0 0 (0.08) (0.25) 0 Distributions (from capital gains) (1.04) (1.06) (0.15) 0 0 -------- --------- --------- -------- --------- Total Distributions (1.04) (1.06) (0.23) (0.25) 0 -------- --------- --------- -------- --------- Net Asset Value, End of Period $ 14.92 $ 12.97 $ 14.50 $ 14.09 $ 9.80 ======== ========= ========= ======== ========= Total Return 24.90% (3.06)% 4.62% 47.49% (22.81)%* Ratios/Supplemental Data: Net Assets, End of Period ($million) $1,172.8 $ 819.7 $ 1,286.0 $ 815.4 $ 23.5 Ratio of Expenses to Average Net Assets 1.32% 1.40% 1.37% 1.26% 2.04%* Ratio of Net Investment Income (Loss) to Average Net Assets 1.45% 1.40% 1.44% 1.55% 37.02%* Portfolio Turnover Rate 42% 26% 55% 21% 0%
*Data has been annualized. (a) The date which Class II shares were first sold to the public was November 4, 1999. (b) The date which Fund shares were first offered for sale to the public was September 30, 1992. (c) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. B-46 - -------------------------------------------------------------------------------- THE OAKMARK INTERNATIONAL SMALL CAP FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
ELEVEN MONTHS YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997(b) OCTOBER 31, 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $ 12.64 $ 6.89 $ 12.20 $ 11.41 $ 10.00 Income From Investment Operations: Net Investment Income (Loss) 0.23 0.24 0.18 0.13 0.04 Net Gains or Losses on Securities (both realized and unrealized) (0.66) 5.71 (4.09) 1.10 1.37 ---------- -------- --------- ---------- --------- Total From Investment Operations: (0.43) 5.95 (3.91) 1.23 1.41 Less Distributions: Dividends (from net investment income) (0.11) (0.20) (0.06) (0.08) 0 Distributions (from capital gains) (0.59) 0.00 (1.34) (0.36) 0 ---------- -------- --------- ---------- --------- Total Distributions (0.70) (0.20) (1.40) (0.44) 0 ---------- -------- --------- ---------- --------- Net Asset Value, End of Period $ 11.51 $ 12.64 $ 6.89 $ 12.20 $ 11.41 ========== ======== ========= ========== ========= Total Return (3.44)% 88.02% (35.20)% 12.07%* 14.15% Ratios/Supplemental Data: Net Assets, End of Period ($million) $ 90.3 $ 155.4 $51.8 $66.0 $39.8 Ratio of Expenses to Average Net Assets 1.76% 1.79% 1.96% 1.93%* 2.50%(a) Ratio of Net Investment Income (Loss) to Average Net Assets 1.98% 2.31% 2.17% 1.23%* 0.65%(a) Portfolio Turnover Rate 40% 126% 69% 63% 27%
*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:
October 31, 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of Expenses to Average Net Assets 2.65% Ratio of Net Income (Loss) to Average Net Assets 0.50%
(b) A move to a September 30th fiscal year end from an October 31st fiscal year end resulted in an eleven-month fiscal year in 1997. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. B-47 THE OAKMARK FAMILY OF FUNDS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF HARRIS ASSOCIATES INVESTMENT TRUST: WE HAVE AUDITED THE ACCOMPANYING STATEMENTS OF ASSETS AND LIABILITIES OF THE OAKMARK FUND, THE OAKMARK SELECT FUND, THE OAKMARK SMALL CAP FUND, THE OAKMARK EQUITY AND INCOME FUND, THE OAKMARK GLOBAL FUND, THE OAKMARK INTERNATIONAL FUND, AND THE OAKMARK INTERNATIONAL SMALL CAP FUND (EACH A SERIES OF HARRIS ASSOCIATES INVESTMENT TRUST), INCLUDING THE SCHEDULES OF INVESTMENTS ON PAGES 5-7, 11-12, 16-18, 22-25, 30-32, 37-40 AND 45-48, AS OF SEPTEMBER 30, 2000, AND THE RELATED STATEMENTS OF OPERATIONS, STATEMENTS OF CHANGES IN NET ASSETS AND THE FINANCIAL HIGHLIGHTS FOR THE PERIODS INDICATED THEREON. THESE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS ARE THE RESPONSIBILITY OF THE TRUST'S MANAGEMENT. OUR RESPONSIBILITY IS TO EXPRESS AN OPINION ON THESE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS BASED ON OUR AUDITS. WE CONDUCTED OUR AUDITS IN ACCORDANCE WITH AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES. THOSE STANDARDS REQUIRE THAT WE PLAN AND PERFORM THE AUDITS TO OBTAIN REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS ARE FREE OF MATERIAL MISSTATEMENT. AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING THE AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENTS. OUR PROCEDURES INCLUDED CONFIRMATION OF SECURITIES OWNED AS OF SEPTEMBER 30, 2000, BY CORRESPONDENCE WITH THE CUSTODIAN AND BROKERS. AS TO SECURITIES PURCHASED BUT NOT RECEIVED, WE REQUESTED CONFIRMATION FROM BROKERS, AND WHEN REPLIES WERE NOT RECEIVED, WE CARRIED OUT ALTERNATIVE AUDITING PROCEDURES. AN AUDIT ALSO INCLUDES ASSESSING THE ACCOUNTING PRINCIPLES USED AND SIGNIFICANT ESTIMATES MADE BY MANAGEMENT, AS WELL AS EVALUATING THE OVERALL FINANCIAL STATEMENT PRESENTATION. WE BELIEVE THAT OUR AUDITS PROVIDE A REASONABLE BASIS FOR OUR OPINION. IN OUR OPINION, THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS REFERRED TO ABOVE PRESENT FAIRLY, IN ALL MATERIAL RESPECTS, THE FINANCIAL POSITIONS OF THE OAKMARK FUND, THE OAKMARK SELECT FUND, THE OAKMARK SMALL CAP FUND, THE OAKMARK EQUITY AND INCOME FUND, THE OAKMARK GLOBAL FUND, THE OAKMARK INTERNATIONAL FUND, AND THE OAKMARK INTERNATIONAL SMALL CAP FUND OF THE HARRIS ASSOCIATES INVESTMENT TRUST AS OF SEPTEMBER 30, 2000, THE RESULTS OF THEIR OPERATIONS, THE CHANGES IN THEIR NET ASSETS, AND THEIR FINANCIAL HIGHLIGHTS FOR THE PERIODS INDICATED THEREON IN CONFORMITY WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES. ARTHUR ANDERSEN LLP Chicago, Illinois October 26, 2000 B-48 PART C OTHER INFORMATION ITEM 23. EXHIBITS Note: As used herein, "Registration Statement" refers to this registration statement under the Securities Act of 1933, no. 33-38953. "Pre- effective Amendment" refers to a pre-effective amendment to the Registration Statement, and "Post-effective Amendment" refers to a post-effective amendment to the Registration Statement. (a) Agreement and declaration of trust (exhibit 1 to Post-effective Amendment no. 18*) (b) Bylaws as amended and restated through January 17, 2001 (c) The registrant does not issue share certificates (d)(1) Investment advisory agreement for The Oakmark Fund dated October 30, 2000 (d)(2) Investment advisory agreement for The Oakmark Select Fund dated October 30, 2000 (d)(3) Investment advisory agreement for The Oakmark Small Cap Fund dated October 30, 2000 (d)(4) Investment advisory agreement for The Oakmark Equity and Income Fund dated October 30, 2000 (d)(5) Investment advisory agreement for The Oakmark Global Fund dated October 30, 2000 (d)(6) Investment advisory agreement for The Oakmark International Fund dated October 30, 2000 (d)(7) Investment advisory agreement for The Oakmark International Small Cap Fund dated October 30, 2000 (e) Distribution agreement dated January 26, 2001 (f) None (g)(1) Custody agreement with State Street Bank and Trust Company dated July 10, 1991 (exhibit 8.1 to Post-effective Amendment no. 18*) (g)(2) Special custody account agreement (short sales) dated September 24, 1991 (exhibit 8.2 to Post-effective Amendment no. 18*) (g)(3) Form of letter agreement dated September 8, 1992 applying custody agreement (exhibit (g)(1)) to The Oakmark International Fund (exhibit 8.3 to Post-effective Amendment no. 18*) (g)(4) Form of letter agreement dated September 15, 1995 applying custody agreement (exhibit (g)(1)) and transfer agency agreement to The Oakmark Small Cap Fund, The Oakmark Equity and Income C-1 Fund and The Oakmark International Small Cap Fund (exhibit 8.4 to Post-effective Amendment no. 18*) (g)(5) Form of letter agreement dated September 30, 1996 applying custody agreement (exhibit (g)(1)) to The Oakmark Select Fund (exhibit 8.5 to Post-effective Amendment no. 17*) (g)(6) Form of special custody account agreement (short sales) dated May 21, 1996 for each of The Oakmark Fund, The Oakmark Select Fund, The Oakmark Small Cap Fund, The Oakmark Equity and Income Fund, The Oakmark International Fund and The Oakmark International Small Cap Fund (exhibit 8.6 to Post-effective Amendment No. 20*) (g)(7) Form of letter agreement dated August, 1999 applying custody agreement (exhibit (g)(1)) to The Oakmark Global Fund (exhibit (g)(7) to Post-effective Amendment no. 22*) (g)(8) Amendment to custodian contract dated April 18, 2000 (h) Transfer agent agreement with Nvest Services Company, Inc. dated September 1, 1999 (exhibit (h) to Post-effective Amendment no. 23*) (i)(1) Opinion of Bell, Boyd & Lloyd dated November 1, 1998 - The Oakmark Fund (exhibit 10.1 to Post-effective Amendment no. 21*) (i)(2) Opinion of Bell, Boyd & Lloyd dated July 23, 1992 - The Oakmark International Fund (exhibit 10.2 to Post-effective Amendment no. 18*) (i)(3) Opinion of Bell, Boyd & Lloyd dated September 20, 1995 - The Oakmark Small Cap Fund, The Oakmark Equity and Income Fund and The Oakmark International Small Cap Fund (exhibit 10.4 to Post-Effective Amendment no. 18*) (i)(4) Opinion of Bell, Boyd & Lloyd dated October 22, 1996 - The Oakmark Select Fund (exhibit 10.5 to Post-effective Amendment no. 17*) (i)(5) Opinion of Bell, Boyd & Lloyd dated May 21, 1999 - The Oakmark Global Fund (exhibit (i)(6) to Post-effective Amendment no. 22*) (i)(6) Consent of Bell, Boyd & Lloyd LLC dated January 26, 2001 (j) Consent of independent public accountants dated January 26, 2001 (k) None (l)(1) Organizational expense agreement for The Oakmark Fund dated July 31, 1991 (exhibit 13.1 to Post-effective Amendment no. 18*) (l)(2) Organizational expense agreement for The Oakmark International Fund dated September 15, 1992 (exhibit 13.2 to Post-effective Amendment no. 18*) C-2 (l)(3) Organizational expense agreement for The Oakmark Small Cap Fund, The Oakmark Equity and Income Fund and The Oakmark International Small Cap Fund dated July 6, 1995 (exhibit 13.3 to Post-effective Amendment no. 18*) (l)(4) Organizational expense agreement for The Oakmark Select Fund dated October 22, 1996 (exhibit 13.4 to Post-effective Amendment no. 17*) (l)(5) Form of subscription agreement (exhibit 13.5 to Post-effective Amendment no. 18*) (m) None (n) Rule 18f-3 plan (exhibit 18 to Post-effective Amendment No. 21*) (p)(1) Code of ethics of Harris Associates L.P., Harris Associates Securities L.P. and Harris Associates Investment Trust dated April 18, 2000 (p)(2) Code of ethics for non-interested trustees of Harris Associates Investment Trust dated April 18, 2000 - -------------------- * Incorporated by reference ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT The registrant does not consider that there are any persons directly or indirectly controlling, controlled by, or under common control with, the registrant within the meaning of this item. The information in the prospectus under the caption "Management of the Funds" and in the Statement of Additional Information under the caption "Investment Adviser" and "Trustees and Officers" is incorporated by reference. ITEM 25. INDEMNIFICATION Article VIII of the agreement and declaration of trust of registrant (exhibit 1 to this registration statement, which is incorporated herein by reference) provides that registrant shall provide certain indemnification of its trustees and officers. In accordance with Section 17(h) of the Investment Company Act, that provision shall not protect any person against any liability to the registrant or its shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, negligence or reckless disregard of the duties involved in the conduct of his office. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a trustee, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such C-3 indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The registrant, its trustees and officers, Harris Associates L.P. ("HALP") (the investment adviser to registrant) and certain affiliated persons of HALP and affiliated persons of such persons are insured under a policy of insurance maintained by registrant and HALP, within the limits and subject to the limitations of the policy, against certain expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been such trustees, directors or officers. The policy expressly excludes coverage for any trustee or officer whose personal dishonesty, fraudulent breach of trust, lack of good faith, or intention to deceive or defraud has been finally adjudicated or may be established or who willfully fails to act prudently. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER The information in the prospectus under the caption "Management of the Funds" is incorporated by reference. Neither the Adviser nor its general partner has at any time during the past two years been engaged in any other business, profession, vocation or employment of a substantial nature either for its own account or in the capacity of director, officer, employee, partner or trustee, except that the Adviser is a registered commodity trading adviser and commodity pool operator and its general partner is also the general partner of a securities broker-dealer firm. ITEM 27. PRINCIPAL UNDERWRITERS (a) Harris Associates Securities L.P. acts as principal underwriter for the registrant. (b) Set forth below is information with respect to each officer of Harris Associates Securities L.P.:
POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH NAME UNDERWRITER REGISTRANT Robert Levy President and Chief President Executive Officer Anita M. Nagler Chief Operating Officer Secretary Kristi L. Rowsell Treasurer Treasurer
The principal business address of each officer of Harris Associates Securities L.P. is Two North La Salle Street, Suite 500, Chicago, Illinois 60602. (c) There are no commissions or other compensation received from the registrant directly or indirectly, by any principal underwriter who is not an affiliated person of the registrant or an affiliated person of an affiliated person. C-4 ITEM 28. LOCATION OF ACCOUNTS AND RECORDS (1) State Street Bank & Trust Company 66 Brooks Drive Braintree, MA 02184 Rule 31a-1(a); Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8) (2) Harris Associates L.P. Two North La Salle Street, Suite 500 Chicago, IL 60602 Rule 31a-1(a); Rule 31a-1(b)(4), (9), (10), (11); Rule 31a-1(d); Rule 31a-1(f); Rule 31a-2(a); Rule 31a-2(c); Rule 31a-2(e) ITEM 29. MANAGEMENT SERVICES None ITEM 30. UNDERTAKINGS Not applicable C-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this post-effective amendment pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Chicago, Illinois on January 26, 2001. HARRIS ASSOCIATES INVESTMENT TRUST By /s/ Robert M. Levy -------------------------------- Robert M. Levy, President Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed below by the following persons in the capacities and on the dates indicated.
NAME TITLE DATE /s/ Michael J. Friduss Trustee ) - ----------------------------- ) Michael J. Friduss ) ) /s/ Thomas H. Hayden Trustee ) - ----------------------------- ) Thomas H. Hayden ) ) /s/ Christine M. Maki Trustee ) - ----------------------------- ) Christine M. Maki ) ) /s/ Victor A. Morgenstern Trustee ) - ----------------------------- ) Victor A. Morgenstern ) ) /s/ Allan J. Reich Trustee ) - ----------------------------- ) Allan J. Reich ) ) January 26, 2001 /s/ Marv R. Rotter Trustee ) - ----------------------------- ) Marv R. Rotter ) ) /s/ Burton W. Ruder Trustee ) - ----------------------------- ) Burton W. Ruder ) ) /s/ Peter S. Voss Trustee ) - ----------------------------- ) Peter S. Voss ) ) /s/ Gary N. Wilner Trustee ) - ----------------------------- ) Gary N. Wilner ) ) /s/ Robert M. Levy President (chief ) - ----------------------------- executive officer) ) Robert M. Levy /s/ Kristi L. Rowsell Treasurer (principal ) - ----------------------------- accounting officer) ) Kristi L. Rowsell
Exhibits Being Filed with This Amendment EXHIBIT (b) Bylaws as amended and restated through January 17, 2001 (d)(1) Investment advisory agreement for The Oakmark Fund dated October 30, 2000 (d)(2) Investment advisory agreement for The Oakmark Select Fund dated October 30, 2000 (d)(3) Investment advisory agreement for The Oakmark Small Cap Fund dated October 30, 2000 (d)(4) Investment advisory agreement for The Oakmark Equity and Income Fund dated October 30, 2000 (d)(5) Investment advisory agreement for The Oakmark Global Fund dated October 30, 2000 (d)(6) Investment advisory agreement for The Oakmark International Fund dated October 30, 2000 (d)(7) Investment advisory agreement for The Oakmark International Small Cap Fund dated October 30, 2000 (e) Distribution agreement dated January 26, 2001 (g)(8) Amendment to custodian contract dated April 18, 2000 (i)(6) Consent of Bell, Boyd & Lloyd (j) Consent of independent public accountants (p)(1) Code of ethics of Harris Associates L.P., Harris Associates Securities L.P. and Harris Associates Investment Trust dated April 18, 2000 (p)(2) Code of ethics for non-interested trustees of Harris Associates Investment Trust dated April 18, 2000 EX-99.(B) 2 a2036007zex-99_b.txt EXHIBIT 99. (B) HARRIS ASSOCIATES INVESTMENT TRUST BYLAWS [as amended through January 17, 2001] SECTION 1 AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE 1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall be subject to the Agreement and Declaration of Trust, as from time to time in effect (the "Declaration of Trust"), of Harris Associates Investment Trust, a Massachusetts business trust established by the Declaration of Trust (the "Trust"). 1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust shall be located in Chicago, Illinois. SECTION 2 SHAREHOLDERS 2.1 SHAREHOLDER MEETINGS. A meeting of the shareholders of the Trust or of any one or more series or classes of shares may be called at any time by the Trustees, by the chairman of the board, by the president or, if the Trustees, the chairman of the board and the president shall fail to call any meeting of shareholders for a period of 30 days after written application of one or more shareholders who hold at least 10% of all outstanding shares of the Trust, if shareholders of all series are required under the Declaration of Trust to vote in the aggregate and not by individual series at such meeting, or of any series or class, if shareholders of such series or class are entitled under the Declaration of Trust to vote by individual series or class at such meeting, then such shareholders may call such meeting. If the meeting is a meeting of the shareholders of one or more series or classes of shares, but not a meeting of all shareholders of the Trust, then only the shareholders of such one or more series or classes shall be entitled to notice of and to vote at the meeting. Each call of a meeting shall state the place, date, hour and purposes of the meeting. [amended 9/9/97 and 1/17/01] 2.2 PLACE OF MEETINGS. All meetings of the shareholders shall be held at the principal office of the Trust, or, to the extent permitted by the Declaration of Trust, at such other place within the United States as shall be designated by the Trustees or the president of the Trust. [amended 9/9/97 and 1/17/01] 2.3 NOTICE OF MEETINGS. A written notice of each meeting of shareholders, stating the place, date and hour and the purposes of the meeting, shall be given at least seven days before the meeting to each shareholder entitled to vote thereat by leaving such notice with him or her or at his or her residence or usual place of business or by mailing it, postage prepaid, and addressed to such shareholder at his or her address as it appears in the records of the Trust. Such notice shall be given by the secretary or an assistant secretary or by an officer designated by the Trustees. No notice of any meeting of shareholders need be given to a shareholder if a written waiver of notice, executed before or after the meeting by such shareholder or his or her attorney thereunto duly authorized, is filed with the records of the meeting. 2.4 BALLOTS. No ballot shall be required for any election unless requested by a shareholder present or represented at the meeting and entitled to vote in the election. 2.5 PROXIES. Shareholders entitled to vote may vote either in person or by proxy in writing dated not more than six months before the meeting named therein, which proxies shall be filed with the secretary or other person responsible to record the proceedings of the meeting before being voted. The placing of a shareholder's name on a proxy pursuant to telephone or electronically transmitted instructions obtained pursuant to procedures reasonably designed to verify that such instructions have been authorized by such shareholder shall constitute execution of such proxy by or on behalf of such shareholder. Unless otherwise specifically limited by their terms, such proxies shall entitle the holders thereof to vote at any adjournment of such meeting but shall not be valid after the final adjournment of such meeting. [amended 7/18/00] SECTION 3 TRUSTEES 3.1 COMMITTEES AND ADVISORY BOARD. The Trustees may appoint from their number an executive committee and other committees. Except as the Trustees may otherwise determine, any such committee may make rules for conduct of its business. The Trustees may appoint an advisory board to consist of not less than two nor more than five members. The members of the advisory board shall be compensated in such manner as the Trustees may determine and shall confer with and advise the Trustees regarding the investments and other affairs of the Trust. Each member of the advisory board shall hold office until the first meeting of the Trustees following the next meeting of the shareholders and until his or her successor is elected and qualified, or until he or she sooner dies, resigns, is removed or becomes disqualified, or until the advisory board is sooner abolished by the Trustees. 3.2 REGULAR MEETINGS. Regular meetings of the Trustees may be held without call or notice at such places and at such times as the Trustees may from time to time determine, provided that notice of the first regular meeting following any such determination shall be given to absent Trustees. 3.3 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any time and at any place designated in the call of the meeting, when called by the chairman of the board or the president or by two or more Trustees, sufficient notice thereof being given to each Trustee by the secretary or an assistant secretary or by the officer or one of the Trustees calling the meeting. [amended 9/9/97 and 1/17/01] 3.4 NOTICE. It shall be sufficient notice to a Trustee to send notice by mail at least forty-eight hours or by telegram at least twenty-four hours before the meeting addressed to the Trustee at his or her usual or last known business or residence address or to give notice to him or her in person or by telephone at least twenty-four hours before the meeting. Notice of a meeting need not be given to any Trustee if a written waiver of notice, executed by him or her before or after the meeting, is filed with the records of the meeting, or to any Trustee who attends the meeting without protesting prior thereto or at its commencement the lack of notice to 2 him or her. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting. 3.5 QUORUM. At any meeting of the Trustees a majority of the Trustees then in office shall constitute a quorum; provided, however, a quorum shall not be less that two. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice. [amended 9/21/93] 3.6 ELIGIBILITY TO SERVE. No person shall be appointed or elected to serve as a Trustee after attaining the age of 65 years. Any Trustee shall retire as a Trustee as of the end of the calendar year in which the Trustee attains the age of 70 years. [adopted 6/15/93; amended 1/17/01] 3.7 NOMINATION OF NON-INTERESTED TRUSTEES. No Trustee who is an "interested person" of the Trust within the meaning of the Investment Company Act of 1940 shall vote for the nomination of any person for election as a Trustee. [adopted 1/17/01] SECTION 4 OFFICERS AND AGENTS 4.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a president, an executive vice president, a treasurer, a secretary and such other officers, if any, as the Trustees from time to time may in their discretion elect or appoint. The Trust may also have such agents, if any, as the Trustees from time to time may in their discretion appoint. Any officer may be but none need be a Trustee or shareholder. Any two or more offices may be held by the same person. [amended 9/21/93, 9/9/97 and 1/17/01] 4.2 POWERS. Subject to the other provisions of these Bylaws, each officer shall have, in addition to the duties and powers herein and in the Declaration of Trust set forth, such duties and powers as are commonly incident to his or her office as if the Trust were organized as a Massachusetts business corporation and such other duties and powers as the Trustees may from time to time designate, including without limitation the power to make purchases and sales of portfolio securities of the Trust pursuant to recommendations of the Trust's investment adviser in accordance with the policies and objectives of the Trust set forth in its prospectus and with such general or specific instructions as the Trustees may from time to time have issued. 4.3 ELECTION. The president, the executive vice president, the treasurer and the secretary shall be elected annually by the Trustees. Other officers, if any, may be elected or appointed by the Trustees at any time. [amended 9/21/93, 9/9/97 and 1/17/01] 4.4 TENURE. The president, the executive vice president, the treasurer and the secretary shall hold office until their respective successors are chosen and qualified, or in each case until he or she sooner dies, resigns, is removed or becomes disqualified. Each other officer shall hold office at the pleasure of the Trustee. Each agent shall retain his or her authority at the pleasure of the Trustees. [amended 9/21/93, 9/9/97 and 1/17/01] 4.5 PRESIDENT. The president (a) shall be the chief executive and chief operating officer of the Trust; (b) except as may otherwise be provided by the Board of Trustees, in the 3 absence of the chairman of the board, shall preside at all meetings of the Board of Trustees and shareholders; and (c) shall have general and active management of the business of the Trust and shall see that all orders and resolutions of the Board of Trustees are carried into effect. The president shall also have such other duties and powers as shall be designated from time to time by the Trustees. [amended 9/9/97 and 1/17/01] 4.6 VICE PRESIDENTS. In the absence of the president, or in the event of the president's inability or refusal to act, the executive vice president, or in the absence of the president, or in the event of the executive vice president's inability or refusal to act, the vice president (or if there be more than one vice president, the vice presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of the president. Any vice president shall also have such other duties and powers as shall be designated from time to time by the Trustees or the president. [amended 9/21/93, 9/9/97 and 1/17/01] 4.7 TREASURER AND ASSISTANT TREASURER. The treasurer shall be the chief financial and accounting officer of the Trust, shall be responsible for preparation of financial statements of the Trust and, subject to any arrangement made by the Trustees with a bank or trust company or other organization as custodian or transfer or shareholder services agent, shall be in charge of its valuable papers and its books of account and accounting records. The treasurer shall also have such other duties and powers as shall be designated from time to time by the Trustees, the president or the vice president-finance. In the absence of the treasurer, if there is an assistant treasurer the assistant treasurer shall perform the duties of the treasurer and when so acting shall have the powers of the treasurer. The assistant treasurer shall also have such other duties and powers as shall be designated from time to time by the Trustees, the president, the vice president-finance or the treasurer. [amended 9/21/93, 9/9/97 and 1/17/01] 4.8 SECRETARY AND ASSISTANT SECRETARY. The secretary shall record all proceedings of the shareholders and the Trustees in books to be kept therefor, which books shall be kept at the principal office of the Trust. In the absence of the secretary from any meeting of shareholders or Trustees, an assistant secretary, or if there be none or he or she is absent, a temporary clerk chosen at the meeting, shall record the proceedings thereof in the aforesaid books. [amended 9/9/97] SECTION 5 RESIGNATIONS AND REMOVALS Any Trustee, officer or advisory board member may resign at any time by delivering his or her resignation in writing to the chairman of the board, the president, the executive vice president, the treasurer or the secretary or to a meeting of the Trustees. The Trustees may remove any officer elected by them with or without cause by the vote of a majority of the Trustees then in office. Except to the extent expressly provided in a written agreement with the Trust, no Trustee, officer, or advisory board member resigning, and no officer or advisory board member removed, shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages on account of such removal. [amended 9/9/97 and 1/17/01] 4 SECTION 6 VACANCIES A vacancy in any office may be filled at any time. Each successor shall hold office for the unexpired term, and in the case of the president, the treasurer and the secretary, until his or her successor is chosen and qualified, or in each case until he or she sooner dies, resigns, is removed or becomes disqualified. [amended 9/9/97 and 1/17/01] SECTION 7 SHARES OF BENEFICIAL INTEREST 7.1 SHARE CERTIFICATES. No certificates certifying the ownership of shares shall be issued except as the Trustees may otherwise authorize. In the event that the Trustees authorize the issuance of share certificates, subject to the provisions of Section 7.3, each shareholder shall be entitled to a certificate stating the number of shares owned by him or her, in such form as shall be prescribed from time to time by the Trustees. Such certificate shall be signed by the president or a vice president and by the secretary, treasurer or an assistant secretary or treasurer. Such signatures may be facsimiles if the certificate is signed by a transfer agent or by a registrar, other than a Trustee, officer or employee of the Trust. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Trust with the same effect as if he or she were such officer at the time of its issue. [amended 9/21/93, 9/9/97 and 1/17/01] In lieu of issuing certificates for shares, the Trustees or the transfer agent may either issue receipts therefor or keep accounts upon the books of the Trust for the record holders of such shares, who shall in either case be deemed, for all purposes hereunder, to be the holders of certificates for such shares as if they had accepted such certificates and shall be held to have expressly assented and agreed to the terms hereof. 7.2 LOSS OF CERTIFICATES. In the case of the alleged loss or destruction or the mutilation of a share certificate, a duplicate certificate may be issued in place thereof, upon such terms as the Trustees may prescribe. 7.3 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any time discontinue the issuance of share certificates and may, by written notice to each shareholder, require the surrender of share certificates to the Trust for cancellation. Such surrender and cancellation shall not affect the ownership or shares in the Trust. SECTION 8 RECORD DATE AND CLOSING TRANSFER BOOKS The Trustees may fix in advance a time, which shall not be more than 60 days before the date of any meeting of shareholders or the date for the payment of any dividend or making of any other distribution to shareholders, as the record date for determining the shareholders having the right to notice and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution, and in such case only shareholders of record on such record date shall have such right, notwithstanding any transfer of shares on the books of the 5 Trust after the record date; or without fixing such record date the Trustees may for any of such purposes close the transfer books for all or any part of such period. SECTION 9 SEAL The seal of the Trust shall, subject to alteration by the Trustees, consist of a flat-faced circular die with the word "Massachusetts," together with the name of the Trust and the year of its organization, cut or engraved thereon; but, unless otherwise required by the Trustees, the seal shall not be necessary to be placed on, and its absence shall not impair the validity of, any document, instrument or other paper executed and delivered by or on behalf of the Trust. SECTION 10 EXECUTION OF PAPERS Except as the Trustees may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other obligations made, accepted or endorsed by the Trust shall be signed, and all transfer of securities standing in the name of the Trust shall be executed, by the president, one of the vice presidents or the treasurer or by whomsoever else shall be designated for that purpose by the vote of the Trustees and need not bear the seal of the Trust. [amended 9/9/97 and 1/17/01] SECTION 11 FISCAL YEAR Except as from time to time otherwise provided by the Trustees, the fiscal year of the Trust shall end on September 30. [amended 6/10/97] SECTION 12 AMENDMENTS These Bylaws may be amended or repealed, in whole or in part, by a majority of the Trustees then in office at any meeting of the Trustees, or by one or more writings signed by such a majority. 6 EX-99.(D)(1) 3 a2036007zex-99_d1.txt EXHIBIT 99. (D)(1) INVESTMENT ADVISORY AGREEMENT FOR THE OAKMARK FUND OCTOBER 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end diversified management investment company (the "Trust"), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the "Adviser"), agree as follows: 1. APPOINTMENT OF ADVISER. The Trust appoints the Adviser to act as manager and investment adviser to The Oakmark Fund (the "Fund"), a series of the Trust, for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. SERVICES OF ADVISER. (a) The Adviser shall manage the investment and reinvestment of the assets of the Fund, subject to the supervision of the board of trustees of the Trust, for the period and on the terms set forth in this agreement. The Adviser shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's Agreement and Declaration of Trust, bylaws and registration statements under the 1940 Act and the Securities Act of 1933 (the "1933 Act"), and to the provisions of the Internal Revenue Code applicable to the Trust as a regulated investment company. The Adviser shall be deemed for all purposes to be an independent contractor and not an agent of the Trust or the Fund, and unless otherwise expressly provided or authorized, shall have no authority to act or represent the Trust or the Fund in any way. (b) The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of the Fund with brokers or dealers selected by the Adviser, although the Fund will pay the actual brokerage commissions on portfolio transactions in accordance with Paragraph 4. In executing portfolio transactions and selecting brokers or dealers, the Adviser will use its best efforts to seek on behalf of the Fund the best overall terms available for any transaction. The Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any (for the specific transaction and on a continuing basis). (c) To the extent contemplated by the Trust's registration statement under the 1933 Act, in evaluating the best overall terms available, and in selecting the broker or dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable combination of net price and execution available, the Adviser may consider sales of shares of the Fund as a factor in the selection of broker-dealers to execute portfolio transactions for the Fund. The Adviser is authorized to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. SERVICES OTHER THAN AS ADVISER. The Adviser (or an affiliate of the Adviser) may act as broker for the Trust in connection with the purchase or sale of securities by or to the Trust if and to the extent permitted by procedures adopted from time to time by the board of trustees of the Trust. Such brokerage services are not within the scope of the duties of the Adviser under this agreement, and, within the limits permitted by law and the trustees, the Adviser (or an affiliate of the Adviser) may receive brokerage commissions, fees or other remuneration from the Trust for such services in addition to its fee for services as Adviser. Within the limits permitted by law, the Adviser may receive compensation from the Trust for other services performed by or for the Trust which are not within the scope of the duties of the Adviser under this agreement. 4. EXPENSES TO BE PAID BY ADVISER. The Adviser shall furnish to the Trust, at its own expense, such office space and all office facilities, equipment and personnel necessary to render the services set forth in paragraph 2 above. The Adviser shall also assume and pay all expenses incurred by it related to the placement of securities orders, and all expenses of marketing shares of the Trust. 5. EXPENSES TO BE PAID BY THE TRUST. The Trust shall pay all expenses not expressly assumed by the Adviser, including but not limited to: all charges of depositories, custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents, fund accounting agents, registrars and its dividend disbursing and redemption agents, if any; all charges of legal counsel and of independent auditors; all compensation of trustees other than those affiliated with the Adviser and all expenses incurred in connection with their services to the Trust; all costs of borrowing money; all expenses of publication of notices and reports to its shareholders and to governmental bodies or regulatory agencies; all expenses of proxy solicitations of the Trust or its board of trustees with respect to the Fund; all expenses of shareholder meetings; all expenses of typesetting of the Fund's prospectus and of printing and mailing copies of the prospectus furnished to each then-existing shareholder or beneficial owner; all taxes and fees payable to federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of printing and mailing certificates for shares of the Trust; all expenses of bond and insurance coverage required by law or deemed advisable by the Trust's board of trustees; all expenses of maintaining the registration of shares of the Trust under the 1933 Act and of qualifying and maintaining qualification of shares of the Trust under the securities laws of such United States jurisdictions as the Trust may from time to time reasonably designate and all expenses of maintaining the registration of the Trust under the 1940 Act; and all fees, dues and other expenses related to membership of the Trust in any trade association or other investment company organization. In addition to the payment of expenses, the Trust shall also pay all brokers' commissions and other charges relating to the purchase and sale of portfolio securities. 6. COMPENSATION OF ADVISER. For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund's net assets as of the last business day of the preceding month, at the annual rate of 1.00% on the first $2 billion of net assets, .90% on the next $1 billion of net assets, .80% on the next $2 billion of net assets and .75% on net assets in excess of $5 billion. The fee for a month shall be paid as soon as practicable after the last day of that month. The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month. 2 7. LIMITATION OF EXPENSES OF THE FUND. The total expenses of the Fund, exclusive of taxes, interest and extraordinary litigation expenses, but including fees paid to the Adviser, shall not in any fiscal year of the Trust exceed the most restrictive limits prescribed by any state in which Fund shares are then being offered for sale, and the Adviser agrees to reimburse the Fund for any sums expended for such expenses in excess of that amount. Brokers' commissions and other charges relating to the purchase and sale of portfolio securities shall not be regarded as expenses. 8. SERVICES OF ADVISER NOT EXCLUSIVE. The services of the Adviser to the Trust hereunder are not exclusive, and the Adviser shall be free to render similar services to others so long as its services under this agreement are not impaired by such other activities. 9. LIABILITY OF ADVISER. The Adviser shall not be liable to the Trust or its shareholders for any loss suffered by the Trust or its shareholders from or as a consequence of any act or omission of the Adviser, or of any of the partners, employees or agents of the Adviser, in connection with or pursuant to this agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties or by reason of reckless disregard by the Adviser of its obligations and duties under this agreement. 10. LIABILITY OF TRUST. The obligations of the Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but shall bind only the assets and property of the Trust as provided in the Agreement and Declaration of Trust of the Trust. 11. USE OF ADVISER'S NAME. The Trust may use the name "Harris Associates Investment Trust," or any other name derived from the name "Harris Associates," and the name "Oakmark" only for so long as this agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which shall have succeeded to the business of the Adviser as investment adviser. At such time as this agreement or any extension, renewal or amendment hereof, or such other similar agreement shall no longer be in effect, the Trust will (by amendment of its Agreement and Declaration of Trust, if necessary) cease to use any name derived from the name "Harris Associates," any name similar thereto or any other name indicating that it is advised by or otherwise connected with the Adviser, or with any organization which shall have succeeded to the Adviser's business as investment adviser, and shall cease to use the name "Oakmark" or any name derived from the name "Oakmark." The consent of the Adviser to the use of such names by the Trust shall not prevent the Adviser's permitting any other enterprise, including another investment company, to use such name or names. 12. DURATION AND RENEWAL. (a) Unless terminated as provided in section 13, this agreement shall continue in effect until October 31, 2001, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those trustees who are not interested persons of the Trust or of the Adviser, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of trustees of the Trust or a vote of the holders of a majority of the outstanding shares of the Fund (which term as used throughout this agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act). (b) Any approval of this agreement by the holders of a majority of the outstanding shares of the Fund shall be effective to continue this agreement notwithstanding that it has not been approved by the vote of a majority of the outstanding shares of the Trust, unless such approval shall be required by any other applicable law or otherwise. 3 13. TERMINATION. This agreement may be terminated at any time, without payment of any penalty, by the board of trustees of the Trust, or by a vote of the holders of a majority of the outstanding shares of the Fund, upon 60 days' written notice to the Adviser. This agreement may be terminated by the Adviser at any time upon 60 days' written notice to the Trust. This agreement shall terminate automatically in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act). 14. AMENDMENT. This agreement may not be amended without the affirmative vote (a) of a majority of those trustees who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Trust and (b) of the holders of a majority of the outstanding shares of the Fund. Dated: October 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Victor A. Morgenstern ------------------------------- HARRIS ASSOCIATES L.P. by Harris Associates, Inc. its General Partner By: /s/ Robert Levy ------------------------------- 4 EX-99.(D)(2) 4 a2036007zex-99_d2.txt EXHIBIT 99. (D)(2) INVESTMENT ADVISORY AGREEMENT FOR THE OAKMARK SELECT FUND OCTOBER 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end diversified management investment company (the "Trust"), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the "Adviser"), agree as follows: 1. APPOINTMENT OF ADVISER. The Trust appoints the Adviser to act as manager and investment adviser to The Oakmark Select Fund (the "Fund"), a series of the Trust, for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. SERVICES OF ADVISER. (a) The Adviser shall manage the investment and reinvestment of the assets of the Fund, subject to the supervision of the board of trustees of the Trust, for the period and on the terms set forth in this agreement. The Adviser shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's Agreement and Declaration of Trust, bylaws and registration statements under the 1940 Act and the Securities Act of 1933 (the "1933 Act"), and to the provisions of the Internal Revenue Code applicable to the Trust as a regulated investment company. The Adviser shall be deemed for all purposes to be an independent contractor and not an agent of the Trust or the Fund, and unless otherwise expressly provided or authorized, shall have no authority to act or represent the Trust or the Fund in any way. (b) The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of the Fund with brokers or dealers selected by the Adviser, although the Fund will pay the actual brokerage commissions on portfolio transactions in accordance with Paragraph 4. In executing portfolio transactions and selecting brokers or dealers, the Adviser will use its best efforts to seek on behalf of the Fund the best overall terms available for any transaction. The Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any (for the specific transaction and on a continuing basis). (c) To the extent contemplated by the Trust's registration statement under the 1933 Act, in evaluating the best overall terms available, and in selecting the broker or dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable combination of net price and execution available, the Adviser may consider sales of shares of the Fund as a factor in the selection of broker-dealers to execute portfolio transactions for the Fund. The Adviser is authorized to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. SERVICES OTHER THAN AS ADVISER. The Adviser (or an affiliate of the Adviser) may act as broker for the Trust in connection with the purchase or sale of securities by or to the Trust if and to the extent permitted by procedures adopted from time to time by the board of trustees of the Trust. Such brokerage services are not within the scope of the duties of the Adviser under this agreement, and, within the limits permitted by law and the trustees, the Adviser (or an affiliate of the Adviser) may receive brokerage commissions, fees or other remuneration from the Trust for such services in addition to its fee for services as Adviser. Within the limits permitted by law, the Adviser may receive compensation from the Trust for other services performed by or for the Trust which are not within the scope of the duties of the Adviser under this agreement. 4. EXPENSES TO BE PAID BY ADVISER. The Adviser shall furnish to the Trust, at its own expense, such office space and all office facilities, equipment and personnel necessary to render the services set forth in paragraph 2 above. The Adviser shall also assume and pay all expenses incurred by it related to the placement of securities orders, and all expenses of marketing shares of the Trust. 5. EXPENSES TO BE PAID BY THE TRUST. The Trust shall pay all expenses not expressly assumed by the Adviser, including but not limited to: all charges of depositories, custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents, fund accounting agents, registrars and its dividend disbursing and redemption agents, if any; all charges of legal counsel and of independent auditors; all compensation of trustees other than those affiliated with the Adviser and all expenses incurred in connection with their services to the Trust; all costs of borrowing money; all expenses of publication of notices and reports to its shareholders and to governmental bodies or regulatory agencies; all expenses of proxy solicitations of the Trust or its board of trustees with respect to the Fund; all expenses of shareholder meetings; all expenses of typesetting of the Fund's prospectus and of printing and mailing copies of the prospectus furnished to each then-existing shareholder or beneficial owner; all taxes and fees payable to federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of printing and mailing certificates for shares of the Trust; all expenses of bond and insurance coverage required by law or deemed advisable by the Trust's board of trustees; all expenses of maintaining the registration of shares of the Trust under the 1933 Act and of qualifying and maintaining qualification of shares of the Trust under the securities laws of such United States jurisdictions as the Trust may from time to time reasonably designate and all expenses of maintaining the registration of the Trust under the 1940 Act; and all fees, dues and other expenses related to membership of the Trust in any trade association or other investment company organization. In addition to the payment of expenses, the Trust shall also pay all brokers' commissions and other charges relating to the purchase and sale of portfolio securities. 6. COMPENSATION OF ADVISER. For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund's net assets as of the last business day of the preceding month, at the annual rate of 1.00% on the first $1 billion of net assets, .95% on the next $500 million of net assets, .90% on the next $500 million of net assets, .85% on the next $500 million of net assets, .80% on the next $2.5 billion of net assets and .75% on net assets in excess of $5 billion. The fee for a month shall be paid as soon as practicable after the last day of that month. The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month. 2 7. LIMITATION OF EXPENSES OF THE FUND. The total expenses of the Fund, exclusive of taxes, interest and extraordinary litigation expenses, but including fees paid to the Adviser, shall not in any fiscal year of the Trust exceed the most restrictive limits prescribed by any state in which Fund shares are then being offered for sale, and the Adviser agrees to reimburse the Fund for any sums expended for such expenses in excess of that amount. Brokers' commissions and other charges relating to the purchase and sale of portfolio securities shall not be regarded as expenses. 8. SERVICES OF ADVISER NOT EXCLUSIVE. The services of the Adviser to the Trust hereunder are not exclusive, and the Adviser shall be free to render similar services to others so long as its services under this agreement are not impaired by such other activities. 9. LIABILITY OF ADVISER. The Adviser shall not be liable to the Trust or its shareholders for any loss suffered by the Trust or its shareholders from or as a consequence of any act or omission of the Adviser, or of any of the partners, employees or agents of the Adviser, in connection with or pursuant to this agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties or by reason of reckless disregard by the Adviser of its obligations and duties under this agreement. 10. LIABILITY OF TRUST. The obligations of the Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but shall bind only the assets and property of the Trust as provided in the Agreement and Declaration of Trust of the Trust. 11. USE OF ADVISER'S NAME. The Trust may use the name "Harris Associates Investment Trust," or any other name derived from the name "Harris Associates," and the name "Oakmark" only for so long as this agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which shall have succeeded to the business of the Adviser as investment adviser. At such time as this agreement or any extension, renewal or amendment hereof, or such other similar agreement shall no longer be in effect, the Trust will (by amendment of its Agreement and Declaration of Trust, if necessary) cease to use any name derived from the name "Harris Associates," any name similar thereto or any other name indicating that it is advised by or otherwise connected with the Adviser, or with any organization which shall have succeeded to the Adviser's business as investment adviser, and shall cease to use the name "Oakmark" or any name derived from the name "Oakmark." The consent of the Adviser to the use of such names by the Trust shall not prevent the Adviser's permitting any other enterprise, including another investment company, to use such name or names. 12. DURATION AND RENEWAL. (a) Unless terminated as provided in section 13, this agreement shall continue in effect until October 31, 2001, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those trustees who are not interested persons of the Trust or of the Adviser, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of trustees of the Trust or a vote of the holders of a majority of the outstanding shares of the Fund (which term as used throughout this agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act). (b) Any approval of this agreement by the holders of a majority of the outstanding shares of the Fund shall be effective to continue this agreement notwithstanding that it has not been approved by the vote of a majority of the outstanding shares of the Trust, unless such approval shall be required by any other applicable law or otherwise. 3 13. TERMINATION. This agreement may be terminated at any time, without payment of any penalty, by the board of trustees of the Trust, or by a vote of the holders of a majority of the outstanding shares of the Fund, upon 60 days' written notice to the Adviser. This agreement may be terminated by the Adviser at any time upon 60 days' written notice to the Trust. This agreement shall terminate automatically in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act). 14. AMENDMENT. This agreement may not be amended without the affirmative vote (a) of a majority of those trustees who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Trust and (b) of the holders of a majority of the outstanding shares of the Fund. Dated: October 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Victor A. Morgenstern ------------------------------- HARRIS ASSOCIATES L.P. by Harris Associates, Inc. its General Partner By: /s/ Robert Levy ------------------------------- 4 EX-99.(D)(3) 5 a2036007zex-99_d3.txt EXHIBIT 99. (D)(3) INVESTMENT ADVISORY AGREEMENT FOR THE OAKMARK SMALL CAP FUND OCTOBER 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end diversified management investment company (the "Trust"), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the "Adviser"), agree as follows: 1. APPOINTMENT OF ADVISER. The Trust appoints the Adviser to act as manager and investment adviser to The Oakmark Small Cap Fund (the "Fund"), a series of the Trust, for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. SERVICES OF ADVISER. (a) The Adviser shall manage the investment and reinvestment of the assets of the Fund, subject to the supervision of the board of trustees of the Trust, for the period and on the terms set forth in this agreement. The Adviser shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's Agreement and Declaration of Trust, bylaws and registration statements under the 1940 Act and the Securities Act of 1933 (the "1933 Act"), and to the provisions of the Internal Revenue Code applicable to the Trust as a regulated investment company. The Adviser shall be deemed for all purposes to be an independent contractor and not an agent of the Trust or the Fund, and unless otherwise expressly provided or authorized, shall have no authority to act or represent the Trust or the Fund in any way. (b) The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of the Fund with brokers or dealers selected by the Adviser, although the Fund will pay the actual brokerage commissions on portfolio transactions in accordance with Paragraph 4. In executing portfolio transactions and selecting brokers or dealers, the Adviser will use its best efforts to seek on behalf of the Fund the best overall terms available for any transaction. The Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any (for the specific transaction and on a continuing basis). (c) To the extent contemplated by the Trust's registration statement under the 1933 Act, in evaluating the best overall terms available, and in selecting the broker or dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable combination of net price and execution available, the Adviser may consider sales of shares of the Fund as a factor in the selection of broker-dealers to execute portfolio transactions for the Fund. The Adviser is authorized to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. SERVICES OTHER THAN AS ADVISER. The Adviser (or an affiliate of the Adviser) may act as broker for the Trust in connection with the purchase or sale of securities by or to the Trust if and to the extent permitted by procedures adopted from time to time by the board of trustees of the Trust. Such brokerage services are not within the scope of the duties of the Adviser under this agreement, and, within the limits permitted by law and the trustees, the Adviser (or an affiliate of the Adviser) may receive brokerage commissions, fees or other remuneration from the Trust for such services in addition to its fee for services as Adviser. Within the limits permitted by law, the Adviser may receive compensation from the Trust for other services performed by or for the Trust which are not within the scope of the duties of the Adviser under this agreement. 4. EXPENSES TO BE PAID BY ADVISER. The Adviser shall furnish to the Trust, at its own expense, such office space and all office facilities, equipment and personnel necessary to render the services set forth in paragraph 2 above. The Adviser shall also assume and pay all expenses incurred by it related to the placement of securities orders, and all expenses of marketing shares of the Trust. 5. EXPENSES TO BE PAID BY THE TRUST. The Trust shall pay all expenses not expressly assumed by the Adviser, including but not limited to: all charges of depositories, custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents, fund accounting agents, registrars and its dividend disbursing and redemption agents, if any; all charges of legal counsel and of independent auditors; all compensation of trustees other than those affiliated with the Adviser and all expenses incurred in connection with their services to the Trust; all costs of borrowing money; all expenses of publication of notices and reports to its shareholders and to governmental bodies or regulatory agencies; all expenses of proxy solicitations of the Trust or its board of trustees with respect to the Fund; all expenses of shareholder meetings; all expenses of typesetting of the Fund's prospectus and of printing and mailing copies of the prospectus furnished to each then-existing shareholder or beneficial owner; all taxes and fees payable to federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of printing and mailing certificates for shares of the Trust; all expenses of bond and insurance coverage required by law or deemed advisable by the Trust's board of trustees; all expenses of maintaining the registration of shares of the Trust under the 1933 Act and of qualifying and maintaining qualification of shares of the Trust under the securities laws of such United States jurisdictions as the Trust may from time to time reasonably designate and all expenses of maintaining the registration of the Trust under the 1940 Act; and all fees, dues and other expenses related to membership of the Trust in any trade association or other investment company organization. In addition to the payment of expenses, the Trust shall also pay all brokers' commissions and other charges relating to the purchase and sale of portfolio securities. 6. COMPENSATION OF ADVISER. For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund's net assets as of the last business day of the preceding month, at the annual rate of 1.00% of net assets. The fee for a month shall be paid as soon as practicable after the last day of that month. The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month. 7. LIMITATION OF EXPENSES OF THE FUND. The total expenses of the Fund, exclusive of taxes, interest and extraordinary litigation expenses, but including fees paid to the Adviser, shall not in any fiscal year of the Trust exceed the most restrictive limits prescribed by any state in which Fund shares 2 are then being offered for sale, and the Adviser agrees to reimburse the Fund for any sums expended for such expenses in excess of that amount. Brokers' commissions and other charges relating to the purchase and sale of portfolio securities shall not be regarded as expenses. 8. SERVICES OF ADVISER NOT EXCLUSIVE. The services of the Adviser to the Trust hereunder are not exclusive, and the Adviser shall be free to render similar services to others so long as its services under this agreement are not impaired by such other activities. 9. LIABILITY OF ADVISER. The Adviser shall not be liable to the Trust or its shareholders for any loss suffered by the Trust or its shareholders from or as a consequence of any act or omission of the Adviser, or of any of the partners, employees or agents of the Adviser, in connection with or pursuant to this agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties or by reason of reckless disregard by the Adviser of its obligations and duties under this agreement. 10. LIABILITY OF TRUST. The obligations of the Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but shall bind only the assets and property of the Trust as provided in the Agreement and Declaration of Trust of the Trust. 11. USE OF ADVISER'S NAME. The Trust may use the name "Harris Associates Investment Trust," or any other name derived from the name "Harris Associates," and the name "Oakmark" only for so long as this agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which shall have succeeded to the business of the Adviser as investment adviser. At such time as this agreement or any extension, renewal or amendment hereof, or such other similar agreement shall no longer be in effect, the Trust will (by amendment of its Agreement and Declaration of Trust, if necessary) cease to use any name derived from the name "Harris Associates," any name similar thereto or any other name indicating that it is advised by or otherwise connected with the Adviser, or with any organization which shall have succeeded to the Adviser's business as investment adviser, and shall cease to use the name "Oakmark" or any name derived from the name "Oakmark." The consent of the Adviser to the use of such names by the Trust shall not prevent the Adviser's permitting any other enterprise, including another investment company, to use such name or names. 12. DURATION AND RENEWAL. (a) Unless terminated as provided in section 13, this agreement shall continue in effect until October 31, 2001, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those trustees who are not interested persons of the Trust or of the Adviser, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of trustees of the Trust or a vote of the holders of a majority of the outstanding shares of the Fund (which term as used throughout this agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act). (b) Any approval of this agreement by the holders of a majority of the outstanding shares of the Fund shall be effective to continue this agreement notwithstanding that it has not been approved by the vote of a majority of the outstanding shares of the Trust, unless such approval shall be required by any other applicable law or otherwise. 13. TERMINATION. This agreement may be terminated at any time, without payment of any penalty, by the board of trustees of the Trust, or by a vote of the holders of a majority of the outstanding 3 shares of the Fund, upon 60 days' written notice to the Adviser. This agreement may be terminated by the Adviser at any time upon 60 days' written notice to the Trust. This agreement shall terminate automatically in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act). 14. AMENDMENT. This agreement may not be amended without the affirmative vote (a) of a majority of those trustees who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Trust and (b) of the holders of a majority of the outstanding shares of the Fund. Dated: October 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Victor A. Morgenstern ------------------------------- HARRIS ASSOCIATES L.P. by Harris Associates, Inc. its General Partner By: /s/ Robert Levy ------------------------------- 4 EX-99.(D)(4) 6 a2036007zex-99_d4.txt EXHIBIT 99. (D)(4) INVESTMENT ADVISORY AGREEMENT FOR THE OAKMARK EQUITY AND INCOME FUND OCTOBER 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end diversified management investment company (the "Trust"), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the "Adviser"), agree as follows: 1. APPOINTMENT OF ADVISER. The Trust appoints the Adviser to act as manager and investment adviser to The Oakmark Equity and Income Fund (the "Fund"), a series of the Trust, for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. SERVICES OF ADVISER. (a) The Adviser shall manage the investment and reinvestment of the assets of the Fund, subject to the supervision of the board of trustees of the Trust, for the period and on the terms set forth in this agreement. The Adviser shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's Agreement and Declaration of Trust, bylaws and registration statements under the 1940 Act and the Securities Act of 1933 (the "1933 Act"), and to the provisions of the Internal Revenue Code applicable to the Trust as a regulated investment company. The Adviser shall be deemed for all purposes to be an independent contractor and not an agent of the Trust or the Fund, and unless otherwise expressly provided or authorized, shall have no authority to act or represent the Trust or the Fund in any way. (b) The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of the Fund with brokers or dealers selected by the Adviser, although the Fund will pay the actual brokerage commissions on portfolio transactions in accordance with Paragraph 4. In executing portfolio transactions and selecting brokers or dealers, the Adviser will use its best efforts to seek on behalf of the Fund the best overall terms available for any transaction. The Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any (for the specific transaction and on a continuing basis). (c) To the extent contemplated by the Trust's registration statement under the 1933 Act, in evaluating the best overall terms available, and in selecting the broker or dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable combination of net price and execution available, the Adviser may consider sales of shares of the Fund as a factor in the selection of broker-dealers to execute portfolio transactions for the Fund. The Adviser is authorized to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. SERVICES OTHER THAN AS ADVISER. The Adviser (or an affiliate of the Adviser) may act as broker for the Trust in connection with the purchase or sale of securities by or to the Trust if and to the extent permitted by procedures adopted from time to time by the board of trustees of the Trust. Such brokerage services are not within the scope of the duties of the Adviser under this agreement, and, within the limits permitted by law and the trustees, the Adviser (or an affiliate of the Adviser) may receive brokerage commissions, fees or other remuneration from the Trust for such services in addition to its fee for services as Adviser. Within the limits permitted by law, the Adviser may receive compensation from the Trust for other services performed by or for the Trust which are not within the scope of the duties of the Adviser under this agreement. 4. EXPENSES TO BE PAID BY ADVISER. The Adviser shall furnish to the Trust, at its own expense, such office space and all office facilities, equipment and personnel necessary to render the services set forth in paragraph 2 above. The Adviser shall also assume and pay all expenses incurred by it related to the placement of securities orders, and all expenses of marketing shares of the Trust. 5. EXPENSES TO BE PAID BY THE TRUST. The Trust shall pay all expenses not expressly assumed by the Adviser, including but not limited to: all charges of depositories, custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents, fund accounting agents, registrars and its dividend disbursing and redemption agents, if any; all charges of legal counsel and of independent auditors; all compensation of trustees other than those affiliated with the Adviser and all expenses incurred in connection with their services to the Trust; all costs of borrowing money; all expenses of publication of notices and reports to its shareholders and to governmental bodies or regulatory agencies; all expenses of proxy solicitations of the Trust or its board of trustees with respect to the Fund; all expenses of shareholder meetings; all expenses of typesetting of the Fund's prospectus and of printing and mailing copies of the prospectus furnished to each then-existing shareholder or beneficial owner; all taxes and fees payable to federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of printing and mailing certificates for shares of the Trust; all expenses of bond and insurance coverage required by law or deemed advisable by the Trust's board of trustees; all expenses of maintaining the registration of shares of the Trust under the 1933 Act and of qualifying and maintaining qualification of shares of the Trust under the securities laws of such United States jurisdictions as the Trust may from time to time reasonably designate and all expenses of maintaining the registration of the Trust under the 1940 Act; and all fees, dues and other expenses related to membership of the Trust in any trade association or other investment company organization. In addition to the payment of expenses, the Trust shall also pay all brokers' commissions and other charges relating to the purchase and sale of portfolio securities. 6. COMPENSATION OF ADVISER. For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund's net assets as of the last business day of the preceding month, at the annual rate of 0.75% of net assets. The fee for a month shall be paid as soon as practicable after the last day of that month. The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month. 7. LIMITATION OF EXPENSES OF THE FUND. The total expenses of the Fund, exclusive of taxes, interest and extraordinary litigation expenses, but including fees paid to the Adviser, shall not in any fiscal year of the Trust exceed the most restrictive limits prescribed by any state in which Fund shares 2 are then being offered for sale, and the Adviser agrees to reimburse the Fund for any sums expended for such expenses in excess of that amount. Brokers' commissions and other charges relating to the purchase and sale of portfolio securities shall not be regarded as expenses. 8. SERVICES OF ADVISER NOT EXCLUSIVE. The services of the Adviser to the Trust hereunder are not exclusive, and the Adviser shall be free to render similar services to others so long as its services under this agreement are not impaired by such other activities. 9. LIABILITY OF ADVISER. The Adviser shall not be liable to the Trust or its shareholders for any loss suffered by the Trust or its shareholders from or as a consequence of any act or omission of the Adviser, or of any of the partners, employees or agents of the Adviser, in connection with or pursuant to this agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties or by reason of reckless disregard by the Adviser of its obligations and duties under this agreement. 10. LIABILITY OF TRUST. The obligations of the Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but shall bind only the assets and property of the Trust as provided in the Agreement and Declaration of Trust of the Trust. 11. USE OF ADVISER'S NAME. The Trust may use the name "Harris Associates Investment Trust," or any other name derived from the name "Harris Associates," and the name "Oakmark" only for so long as this agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which shall have succeeded to the business of the Adviser as investment adviser. At such time as this agreement or any extension, renewal or amendment hereof, or such other similar agreement shall no longer be in effect, the Trust will (by amendment of its Agreement and Declaration of Trust, if necessary) cease to use any name derived from the name "Harris Associates," any name similar thereto or any other name indicating that it is advised by or otherwise connected with the Adviser, or with any organization which shall have succeeded to the Adviser's business as investment adviser, and shall cease to use the name "Oakmark" or any name derived from the name "Oakmark." The consent of the Adviser to the use of such names by the Trust shall not prevent the Adviser's permitting any other enterprise, including another investment company, to use such name or names. 12. DURATION AND RENEWAL. (a) Unless terminated as provided in section 13, this agreement shall continue in effect until October 31, 2001, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those trustees who are not interested persons of the Trust or of the Adviser, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of trustees of the Trust or a vote of the holders of a majority of the outstanding shares of the Fund (which term as used throughout this agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act). (b) Any approval of this agreement by the holders of a majority of the outstanding shares of the Fund shall be effective to continue this agreement notwithstanding that it has not been approved by the vote of a majority of the outstanding shares of the Trust, unless such approval shall be required by any other applicable law or otherwise. 13. TERMINATION. This agreement may be terminated at any time, without payment of any penalty, by the board of trustees of the Trust, or by a vote of the holders of a majority of the outstanding 3 shares of the Fund, upon 60 days' written notice to the Adviser. This agreement may be terminated by the Adviser at any time upon 60 days' written notice to the Trust. This agreement shall terminate automatically in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act). 14. AMENDMENT. This agreement may not be amended without the affirmative vote (a) of a majority of those trustees who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Trust and (b) of the holders of a majority of the outstanding shares of the Fund. Dated: October 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Victor A. Morgenstern ------------------------------- HARRIS ASSOCIATES L.P. by Harris Associates, Inc. its General Partner By: /s/ Robert Levy ------------------------------- 4 EX-99.(D)(5) 7 a2036007zex-99_d5.txt EXHIBIT 99. (D)(5) INVESTMENT ADVISORY AGREEMENT FOR THE OAKMARK GLOBAL FUND OCTOBER 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end diversified management investment company (the "Trust"), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the "Adviser"), agree as follows: 1. APPOINTMENT OF ADVISER. The Trust appoints the Adviser to act as manager and investment adviser to The Oakmark Global Fund (the "Fund"), a series of the Trust, for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. SERVICES OF ADVISER. (a) The Adviser shall manage the investment and reinvestment of the assets of the Fund, subject to the supervision of the board of trustees of the Trust, for the period and on the terms set forth in this agreement. The Adviser shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's Agreement and Declaration of Trust, bylaws and registration statements under the 1940 Act and the Securities Act of 1933 (the "1933 Act"), and to the provisions of the Internal Revenue Code applicable to the Trust as a regulated investment company. The Adviser shall be deemed for all purposes to be an independent contractor and not an agent of the Trust or the Fund, and unless otherwise expressly provided or authorized, shall have no authority to act or represent the Trust or the Fund in any way. (b) The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of the Fund with brokers or dealers selected by the Adviser, although the Fund will pay the actual brokerage commissions on portfolio transactions in accordance with Paragraph 4. In executing portfolio transactions and selecting brokers or dealers, the Adviser will use its best efforts to seek on behalf of the Fund the best overall terms available for any transaction. The Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any (for the specific transaction and on a continuing basis). (c) To the extent contemplated by the Trust's registration statement under the 1933 Act, in evaluating the best overall terms available, and in selecting the broker or dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable combination of net price and execution available, the Adviser may consider sales of shares of the Fund as a factor in the selection of broker-dealers to execute portfolio transactions for the Fund. The Adviser is authorized to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. SERVICES OTHER THAN AS ADVISER. The Adviser (or an affiliate of the Adviser) may act as broker for the Trust in connection with the purchase or sale of securities by or to the Trust if and to the extent permitted by procedures adopted from time to time by the board of trustees of the Trust. Such brokerage services are not within the scope of the duties of the Adviser under this agreement, and, within the limits permitted by law and the trustees, the Adviser (or an affiliate of the Adviser) may receive brokerage commissions, fees or other remuneration from the Trust for such services in addition to its fee for services as Adviser. Within the limits permitted by law, the Adviser may receive compensation from the Trust for other services performed by or for the Trust which are not within the scope of the duties of the Adviser under this agreement. 4. EXPENSES TO BE PAID BY ADVISER. The Adviser shall furnish to the Trust, at its own expense, such office space and all office facilities, equipment and personnel necessary to render the services set forth in paragraph 2 above. The Adviser shall also assume and pay all expenses incurred by it related to the placement of securities orders, and all expenses of marketing shares of the Trust. 5. EXPENSES TO BE PAID BY THE TRUST. The Trust shall pay all expenses not expressly assumed by the Adviser, including but not limited to: all charges of depositories, custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents, fund accounting agents, registrars and its dividend disbursing and redemption agents, if any; all charges of legal counsel and of independent auditors; all compensation of trustees other than those affiliated with the Adviser and all expenses incurred in connection with their services to the Trust; all costs of borrowing money; all expenses of publication of notices and reports to its shareholders and to governmental bodies or regulatory agencies; all expenses of proxy solicitations of the Trust or its board of trustees with respect to the Fund; all expenses of shareholder meetings; all expenses of typesetting of the Fund's prospectus and of printing and mailing copies of the prospectus furnished to each then-existing shareholder or beneficial owner; all taxes and fees payable to federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of printing and mailing certificates for shares of the Trust; all expenses of bond and insurance coverage required by law or deemed advisable by the Trust's board of trustees; all expenses of maintaining the registration of shares of the Trust under the 1933 Act and of qualifying and maintaining qualification of shares of the Trust under the securities laws of such United States jurisdictions as the Trust may from time to time reasonably designate and all expenses of maintaining the registration of the Trust under the 1940 Act; and all fees, dues and other expenses related to membership of the Trust in any trade association or other investment company organization. In addition to the payment of expenses, the Trust shall also pay all brokers' commissions and other charges relating to the purchase and sale of portfolio securities. 6. COMPENSATION OF ADVISER. For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund's net assets as of the last business day of the preceding month, at the annual rate of 1.00% of net assets. The fee for a month shall be paid as soon as practicable after the last day of that month. The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month. 7. LIMITATION OF EXPENSES OF THE FUND. The total expenses of the Fund, exclusive of taxes, interest and extraordinary litigation expenses, but including fees paid to the Adviser, shall not in any fiscal year of the Trust exceed the most restrictive limits prescribed by any state in which Fund shares 2 are then being offered for sale, and the Adviser agrees to reimburse the Fund for any sums expended for such expenses in excess of that amount. Brokers' commissions and other charges relating to the purchase and sale of portfolio securities shall not be regarded as expenses. 8. SERVICES OF ADVISER NOT EXCLUSIVE. The services of the Adviser to the Trust hereunder are not exclusive, and the Adviser shall be free to render similar services to others so long as its services under this agreement are not impaired by such other activities. 9. LIABILITY OF ADVISER. The Adviser shall not be liable to the Trust or its shareholders for any loss suffered by the Trust or its shareholders from or as a consequence of any act or omission of the Adviser, or of any of the partners, employees or agents of the Adviser, in connection with or pursuant to this agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties or by reason of reckless disregard by the Adviser of its obligations and duties under this agreement. 10. LIABILITY OF TRUST. The obligations of the Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but shall bind only the assets and property of the Trust as provided in the Agreement and Declaration of Trust of the Trust. 11. USE OF ADVISER'S NAME. The Trust may use the name "Harris Associates Investment Trust," or any other name derived from the name "Harris Associates," and the name "Oakmark" only for so long as this agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which shall have succeeded to the business of the Adviser as investment adviser. At such time as this agreement or any extension, renewal or amendment hereof, or such other similar agreement shall no longer be in effect, the Trust will (by amendment of its Agreement and Declaration of Trust, if necessary) cease to use any name derived from the name "Harris Associates," any name similar thereto or any other name indicating that it is advised by or otherwise connected with the Adviser, or with any organization which shall have succeeded to the Adviser's business as investment adviser, and shall cease to use the name "Oakmark" or any name derived from the name "Oakmark." The consent of the Adviser to the use of such names by the Trust shall not prevent the Adviser's permitting any other enterprise, including another investment company, to use such name or names. 12. DURATION AND RENEWAL. (a) Unless terminated as provided in section 13, this agreement shall continue in effect until October 31, 2001, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those trustees who are not interested persons of the Trust or of the Adviser, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of trustees of the Trust or a vote of the holders of a majority of the outstanding shares of the Fund (which term as used throughout this agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act). (b) Any approval of this agreement by the holders of a majority of the outstanding shares of the Fund shall be effective to continue this agreement notwithstanding that it has not been approved by the vote of a majority of the outstanding shares of the Trust, unless such approval shall be required by any other applicable law or otherwise. 13. TERMINATION. This agreement may be terminated at any time, without payment of any penalty, by the board of trustees of the Trust, or by a vote of the holders of a majority of the outstanding 3 shares of the Fund, upon 60 days' written notice to the Adviser. This agreement may be terminated by the Adviser at any time upon 60 days' written notice to the Trust. This agreement shall terminate automatically in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act). 14. AMENDMENT. This agreement may not be amended without the affirmative vote (a) of a majority of those trustees who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Trust and (b) of the holders of a majority of the outstanding shares of the Fund. Dated: October 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Victor A. Morgenstern ------------------------------- HARRIS ASSOCIATES L.P. by Harris Associates, Inc. its General Partner By: /s/ Robert Levy ------------------------------- 4 EX-99.(D)(6) 8 a2036007zex-99_d6.txt EXHIBIT 99. (D)(6) INVESTMENT ADVISORY AGREEMENT FOR THE OAKMARK INTERNATIONAL FUND OCTOBER 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end diversified management investment company (the "Trust"), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the "Adviser"), agree as follows: 1. APPOINTMENT OF ADVISER. The Trust appoints the Adviser to act as manager and investment adviser to The Oakmark International Fund (the "Fund"), a series of the Trust, for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. SERVICES OF ADVISER. (a) The Adviser shall manage the investment and reinvestment of the assets of the Fund, subject to the supervision of the board of trustees of the Trust, for the period and on the terms set forth in this agreement. The Adviser shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's Agreement and Declaration of Trust, bylaws and registration statements under the 1940 Act and the Securities Act of 1933 (the "1933 Act"), and to the provisions of the Internal Revenue Code applicable to the Trust as a regulated investment company. The Adviser shall be deemed for all purposes to be an independent contractor and not an agent of the Trust or the Fund, and unless otherwise expressly provided or authorized, shall have no authority to act or represent the Trust or the Fund in any way. (b) The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of the Fund with brokers or dealers selected by the Adviser, although the Fund will pay the actual brokerage commissions on portfolio transactions in accordance with Paragraph 4. In executing portfolio transactions and selecting brokers or dealers, the Adviser will use its best efforts to seek on behalf of the Fund the best overall terms available for any transaction. The Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any (for the specific transaction and on a continuing basis). (c) To the extent contemplated by the Trust's registration statement under the 1933 Act, in evaluating the best overall terms available, and in selecting the broker or dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable combination of net price and execution available, the Adviser may consider sales of shares of the Fund as a factor in the selection of broker-dealers to execute portfolio transactions for the Fund. The Adviser is authorized to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. SERVICES OTHER THAN AS ADVISER. The Adviser (or an affiliate of the Adviser) may act as broker for the Trust in connection with the purchase or sale of securities by or to the Trust if and to the extent permitted by procedures adopted from time to time by the board of trustees of the Trust. Such brokerage services are not within the scope of the duties of the Adviser under this agreement, and, within the limits permitted by law and the trustees, the Adviser (or an affiliate of the Adviser) may receive brokerage commissions, fees or other remuneration from the Trust for such services in addition to its fee for services as Adviser. Within the limits permitted by law, the Adviser may receive compensation from the Trust for other services performed by or for the Trust which are not within the scope of the duties of the Adviser under this agreement. 4. EXPENSES TO BE PAID BY ADVISER. The Adviser shall furnish to the Trust, at its own expense, such office space and all office facilities, equipment and personnel necessary to render the services set forth in paragraph 2 above. The Adviser shall also assume and pay all expenses incurred by it related to the placement of securities orders, and all expenses of marketing shares of the Trust. 5. EXPENSES TO BE PAID BY THE TRUST. The Trust shall pay all expenses not expressly assumed by the Adviser, including but not limited to: all charges of depositories, custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents, fund accounting agents, registrars and its dividend disbursing and redemption agents, if any; all charges of legal counsel and of independent auditors; all compensation of trustees other than those affiliated with the Adviser and all expenses incurred in connection with their services to the Trust; all costs of borrowing money; all expenses of publication of notices and reports to its shareholders and to governmental bodies or regulatory agencies; all expenses of proxy solicitations of the Trust or its board of trustees with respect to the Fund; all expenses of shareholder meetings; all expenses of typesetting of the Fund's prospectus and of printing and mailing copies of the prospectus furnished to each then-existing shareholder or beneficial owner; all taxes and fees payable to federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of printing and mailing certificates for shares of the Trust; all expenses of bond and insurance coverage required by law or deemed advisable by the Trust's board of trustees; all expenses of maintaining the registration of shares of the Trust under the 1933 Act and of qualifying and maintaining qualification of shares of the Trust under the securities laws of such United States jurisdictions as the Trust may from time to time reasonably designate and all expenses of maintaining the registration of the Trust under the 1940 Act; and all fees, dues and other expenses related to membership of the Trust in any trade association or other investment company organization. In addition to the payment of expenses, the Trust shall also pay all brokers' commissions and other charges relating to the purchase and sale of portfolio securities. 6. COMPENSATION OF ADVISER. For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund's net assets as of the last business day of the preceding month, at the annual rate of 1.00% on the first $2 billion of net assets, .95% on the next $1 billion of net assets and .85% on net assets in excess of $3 billion. The fee for a month shall be paid as soon as practicable after the last day of that month. The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month. 7. LIMITATION OF EXPENSES OF THE FUND. The total expenses of the Fund, exclusive of taxes, interest and extraordinary litigation expenses, but including fees paid to the Adviser, shall not in 2 any fiscal year of the Trust exceed the most restrictive limits prescribed by any state in which Fund shares are then being offered for sale, and the Adviser agrees to reimburse the Fund for any sums expended for such expenses in excess of that amount. Brokers' commissions and other charges relating to the purchase and sale of portfolio securities shall not be regarded as expenses. 8. SERVICES OF ADVISER NOT EXCLUSIVE. The services of the Adviser to the Trust hereunder are not exclusive, and the Adviser shall be free to render similar services to others so long as its services under this agreement are not impaired by such other activities. 9. LIABILITY OF ADVISER. The Adviser shall not be liable to the Trust or its shareholders for any loss suffered by the Trust or its shareholders from or as a consequence of any act or omission of the Adviser, or of any of the partners, employees or agents of the Adviser, in connection with or pursuant to this agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties or by reason of reckless disregard by the Adviser of its obligations and duties under this agreement. 10. LIABILITY OF TRUST. The obligations of the Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but shall bind only the assets and property of the Trust as provided in the Agreement and Declaration of Trust of the Trust. 11. USE OF ADVISER'S NAME. The Trust may use the name "Harris Associates Investment Trust," or any other name derived from the name "Harris Associates," and the name "Oakmark" only for so long as this agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which shall have succeeded to the business of the Adviser as investment adviser. At such time as this agreement or any extension, renewal or amendment hereof, or such other similar agreement shall no longer be in effect, the Trust will (by amendment of its Agreement and Declaration of Trust, if necessary) cease to use any name derived from the name "Harris Associates," any name similar thereto or any other name indicating that it is advised by or otherwise connected with the Adviser, or with any organization which shall have succeeded to the Adviser's business as investment adviser, and shall cease to use the name "Oakmark" or any name derived from the name "Oakmark." The consent of the Adviser to the use of such names by the Trust shall not prevent the Adviser's permitting any other enterprise, including another investment company, to use such name or names. 12. DURATION AND RENEWAL. (a) Unless terminated as provided in section 13, this agreement shall continue in effect until October 31, 2001, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those trustees who are not interested persons of the Trust or of the Adviser, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of trustees of the Trust or a vote of the holders of a majority of the outstanding shares of the Fund (which term as used throughout this agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act). (b) Any approval of this agreement by the holders of a majority of the outstanding shares of the Fund shall be effective to continue this agreement notwithstanding that it has not been approved by the vote of a majority of the outstanding shares of the Trust, unless such approval shall be required by any other applicable law or otherwise. 3 13. TERMINATION. This agreement may be terminated at any time, without payment of any penalty, by the board of trustees of the Trust, or by a vote of the holders of a majority of the outstanding shares of the Fund, upon 60 days' written notice to the Adviser. This agreement may be terminated by the Adviser at any time upon 60 days' written notice to the Trust. This agreement shall terminate automatically in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act). 14. AMENDMENT. This agreement may not be amended without the affirmative vote (a) of a majority of those trustees who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Trust and (b) of the holders of a majority of the outstanding shares of the Fund. Dated: October 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Victor A. Morgenstern ------------------------------- HARRIS ASSOCIATES L.P. by Harris Associates, Inc. its General Partner By: /s/ Robert Levy ------------------------------- 4 EX-99.(D)(7) 9 a2036007zex-99_d7.txt EXHIBIT 99. (D)(7) INVESTMENT ADVISORY AGREEMENT FOR THE OAKMARK INTERNATIONAL SMALL CAP FUND OCTOBER 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end diversified management investment company (the "Trust"), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the "Adviser"), agree as follows: 1. APPOINTMENT OF ADVISER. The Trust appoints the Adviser to act as manager and investment adviser to The Oakmark International Small Cap Fund (the "Fund"), a series of the Trust, for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. SERVICES OF ADVISER. (a) The Adviser shall manage the investment and reinvestment of the assets of the Fund, subject to the supervision of the board of trustees of the Trust, for the period and on the terms set forth in this agreement. The Adviser shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's Agreement and Declaration of Trust, bylaws and registration statements under the 1940 Act and the Securities Act of 1933 (the "1933 Act"), and to the provisions of the Internal Revenue Code applicable to the Trust as a regulated investment company. The Adviser shall be deemed for all purposes to be an independent contractor and not an agent of the Trust or the Fund, and unless otherwise expressly provided or authorized, shall have no authority to act or represent the Trust or the Fund in any way. (b) The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of the Fund with brokers or dealers selected by the Adviser, although the Fund will pay the actual brokerage commissions on portfolio transactions in accordance with Paragraph 4. In executing portfolio transactions and selecting brokers or dealers, the Adviser will use its best efforts to seek on behalf of the Fund the best overall terms available for any transaction. The Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any (for the specific transaction and on a continuing basis). (c) To the extent contemplated by the Trust's registration statement under the 1933 Act, in evaluating the best overall terms available, and in selecting the broker or dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable combination of net price and execution available, the Adviser may consider sales of shares of the Fund as a factor in the selection of broker-dealers to execute portfolio transactions for the Fund. The Adviser is authorized to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. SERVICES OTHER THAN AS ADVISER. The Adviser (or an affiliate of the Adviser) may act as broker for the Trust in connection with the purchase or sale of securities by or to the Trust if and to the extent permitted by procedures adopted from time to time by the board of trustees of the Trust. Such brokerage services are not within the scope of the duties of the Adviser under this agreement, and, within the limits permitted by law and the trustees, the Adviser (or an affiliate of the Adviser) may receive brokerage commissions, fees or other remuneration from the Trust for such services in addition to its fee for services as Adviser. Within the limits permitted by law, the Adviser may receive compensation from the Trust for other services performed by or for the Trust which are not within the scope of the duties of the Adviser under this agreement. 4. EXPENSES TO BE PAID BY ADVISER. The Adviser shall furnish to the Trust, at its own expense, such office space and all office facilities, equipment and personnel necessary to render the services set forth in paragraph 2 above. The Adviser shall also assume and pay all expenses incurred by it related to the placement of securities orders, and all expenses of marketing shares of the Trust. 5. EXPENSES TO BE PAID BY THE TRUST. The Trust shall pay all expenses not expressly assumed by the Adviser, including but not limited to: all charges of depositories, custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents, fund accounting agents, registrars and its dividend disbursing and redemption agents, if any; all charges of legal counsel and of independent auditors; all compensation of trustees other than those affiliated with the Adviser and all expenses incurred in connection with their services to the Trust; all costs of borrowing money; all expenses of publication of notices and reports to its shareholders and to governmental bodies or regulatory agencies; all expenses of proxy solicitations of the Trust or its board of trustees with respect to the Fund; all expenses of shareholder meetings; all expenses of typesetting of the Fund's prospectus and of printing and mailing copies of the prospectus furnished to each then-existing shareholder or beneficial owner; all taxes and fees payable to federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of printing and mailing certificates for shares of the Trust; all expenses of bond and insurance coverage required by law or deemed advisable by the Trust's board of trustees; all expenses of maintaining the registration of shares of the Trust under the 1933 Act and of qualifying and maintaining qualification of shares of the Trust under the securities laws of such United States jurisdictions as the Trust may from time to time reasonably designate and all expenses of maintaining the registration of the Trust under the 1940 Act; and all fees, dues and other expenses related to membership of the Trust in any trade association or other investment company organization. In addition to the payment of expenses, the Trust shall also pay all brokers' commissions and other charges relating to the purchase and sale of portfolio securities. 6. COMPENSATION OF ADVISER. For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund's net assets as of the last business day of the preceding month, at the annual rate of 1.25% on the first $500 million of net assets and 1.10% on net assets in excess of $500 million. The fee for a month shall be paid as soon as practicable after the last day of that month. The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month. 7. LIMITATION OF EXPENSES OF THE FUND. The total expenses of the Fund, exclusive of taxes, interest and extraordinary litigation expenses, but including fees paid to the Adviser, shall not in 2 any fiscal year of the Trust exceed the most restrictive limits prescribed by any state in which Fund shares are then being offered for sale, and the Adviser agrees to reimburse the Fund for any sums expended for such expenses in excess of that amount. Brokers' commissions and other charges relating to the purchase and sale of portfolio securities shall not be regarded as expenses. 8. SERVICES OF ADVISER NOT EXCLUSIVE. The services of the Adviser to the Trust hereunder are not exclusive, and the Adviser shall be free to render similar services to others so long as its services under this agreement are not impaired by such other activities. 9. LIABILITY OF ADVISER. The Adviser shall not be liable to the Trust or its shareholders for any loss suffered by the Trust or its shareholders from or as a consequence of any act or omission of the Adviser, or of any of the partners, employees or agents of the Adviser, in connection with or pursuant to this agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties or by reason of reckless disregard by the Adviser of its obligations and duties under this agreement. 10. LIABILITY OF TRUST. The obligations of the Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but shall bind only the assets and property of the Trust as provided in the Agreement and Declaration of Trust of the Trust. 11. USE OF ADVISER'S NAME. The Trust may use the name "Harris Associates Investment Trust," or any other name derived from the name "Harris Associates," and the name "Oakmark" only for so long as this agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which shall have succeeded to the business of the Adviser as investment adviser. At such time as this agreement or any extension, renewal or amendment hereof, or such other similar agreement shall no longer be in effect, the Trust will (by amendment of its Agreement and Declaration of Trust, if necessary) cease to use any name derived from the name "Harris Associates," any name similar thereto or any other name indicating that it is advised by or otherwise connected with the Adviser, or with any organization which shall have succeeded to the Adviser's business as investment adviser, and shall cease to use the name "Oakmark" or any name derived from the name "Oakmark." The consent of the Adviser to the use of such names by the Trust shall not prevent the Adviser's permitting any other enterprise, including another investment company, to use such name or names. 12. DURATION AND RENEWAL. (a) Unless terminated as provided in section 13, this agreement shall continue in effect until October 31, 2001, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those trustees who are not interested persons of the Trust or of the Adviser, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of trustees of the Trust or a vote of the holders of a majority of the outstanding shares of the Fund (which term as used throughout this agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act). (b) Any approval of this agreement by the holders of a majority of the outstanding shares of the Fund shall be effective to continue this agreement notwithstanding that it has not been approved by the vote of a majority of the outstanding shares of the Trust, unless such approval shall be required by any other applicable law or otherwise. 3 13. TERMINATION. This agreement may be terminated at any time, without payment of any penalty, by the board of trustees of the Trust, or by a vote of the holders of a majority of the outstanding shares of the Fund, upon 60 days' written notice to the Adviser. This agreement may be terminated by the Adviser at any time upon 60 days' written notice to the Trust. This agreement shall terminate automatically in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act). 14. AMENDMENT. This agreement may not be amended without the affirmative vote (a) of a majority of those trustees who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Trust and (b) of the holders of a majority of the outstanding shares of the Fund. Dated: October 30, 2000 HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Victor A. Morgenstern ------------------------------- HARRIS ASSOCIATES L.P. by Harris Associates, Inc. its General Partner By: /s/ Robert Levy ------------------------------- 4 EX-99.(E) 10 a2036007zex-99_e.txt EXHIBIT 99. (E) DISTRIBUTION AGREEMENT BETWEEN HARRIS ASSOCIATES INVESTMENT TRUST AND HARRIS ASSOCIATES SECURITIES L.P. THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of this 26th day of January 2001 by and between HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust ("HAIT"), and HARRIS ASSOCIATES SECURITIES L.P., a Delaware limited partnership ("Distributor"). RECITALS: WHEREAS, HAIT is engaged in business as an open-end management investment company registered under the Investment Company Act of 1940, as amended ("1940 Act"); WHEREAS, Distributor is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended ("1934 Act"), and the laws of each state (including the District of Columbia and Puerto Rico) in which it engages in business to the extent such law requires, and is a member of the National Association of Securities Dealers, Inc. ("NASD") (such registrations and membership are referred to collectively as the "Registrations"); WHEREAS, HAIT desires Distributor to act as the distributor in the public offering of its shares of common stock (hereinafter called "Shares") which currently are divided into seven series designated The Oakmark Fund, The Oakmark Select Fund, The Oakmark Small Cap Fund, The Oakmark Equity and Income Fund, The Oakmark Global Fund, The Oakmark International Fund and The Oakmark International Small Cap Fund, and including shares of any additional series which may from time to time be offered for sale to the public (hereinafter called, collectively, the "Funds" and, individually, the "Fund"); WHEREAS, HAIT has entered into an investment advisory agreement with Harris Associates L.P. ("HALP"), an affiliate of Distributor, pursuant to which HALP has agreed to pay all expenses incurred in the sale and promotion of shares of HAIT; NOW, THEREFORE, the parties hereto agree as follows: 1. APPOINTMENT. HAIT appoints Distributor to act as principal underwriter (as such term is defined in Section 2(a)(29) of the 1940 Act) of its Shares. 2. DELIVERY OF HAIT DOCUMENTS. HAIT has furnished Distributor with properly certified or authenticated copies of each of the following in effect on the date hereof and shall furnish Distributor from time to time properly certified or authenticated copies of all amendments or supplements thereto: (a) Agreement and Declaration of Trust; (b) Bylaws; (c) Resolutions of its Board of Trustees (hereinafter referred to as the "Board") selecting Distributor as distributor and approving this form of agreement and authorizing its execution. HAIT shall furnish Distributor promptly with copies of any registration statements filed by it with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933 (the "1933 Act") or the 1940 Act, together with any financial statements and exhibits included therein, and all amendments or supplements thereto hereafter filed. HAIT also shall furnish Distributor such other certificates or documents which Distributor may from time to time, in its discretion, reasonably deem necessary or appropriate in the proper performance of its duties. 3. SOLICITATION OF ORDERS FOR PURCHASE OF SHARES. (a) Subject to the provisions of Paragraphs 5, 6 and 8 hereof, and to such minimum purchase requirements as may from time to time be indicated in the prospectus of each Fund, Distributor is authorized to solicit, as agent on behalf of HAIT, unconditional orders for purchases of Shares authorized for issuance and registered under the 1933 Act, provided that: (1) Distributor shall act solely as a disclosed agent on behalf of and for the account of HAIT; (2) HAIT's transfer agent shall receive directly from investors all payments for the purchase of Shares and also shall pay directly to shareholders amounts due to them for the redemption or repurchase of all Shares, with Distributor having no rights or duties to accept such payment or to effect such redemptions or repurchases; if a payment for the purchase of Shares is delivered to Distributor, such payment shall not be negotiated by Distributor but shall be delivered as soon as reasonably practicable to HAIT's transfer agent; and (3) Distributor shall have no liability for payment for purchases of Shares it sells as agent. The purchase price to the public of Shares shall be the public offering price as defined in Paragraph 7 hereof. (b) In consideration of the rights granted to Distributor under this Agreement, Distributor will use its best efforts (but only in states in which Distributor may lawfully do so) to solicit from investors unconditional orders to purchase Shares. HAIT shall make available to Distributor, at no cost to Distributor, such number of copies of the currently effective prospectus and Statement of Additional Information of each Fund and copies of all information, financial statements and other papers which Distributor may reasonably request for use in connection with the distribution of Shares. 4. SELLING AGREEMENTS. Distributor is authorized, as agent on behalf of HAIT, to enter into agreements with other broker-dealers providing for the solicitation of unconditional orders for purchases of Shares authorized for issuance and registered under the 1933 Act. All such agreements shall be in a form as may be approved by the officers of HAIT ("Selling Agreement"). All solicitations made by other broker-dealers pursuant to a Selling Agreement shall be subject to the same terms as are applied by this Agreement to solicitations made by Distributor. 5. SOLICITATION OF ORDERS TO PURCHASE SHARES BY HAIT. The rights granted to Distributor shall be non-exclusive in that HAIT reserves the right to solicit purchases from, and sell its Shares to, investors. Further, HAIT reserves the right to issue Shares in connection with the merger or consolidation of any other investment company, trust or personal holding company with HAIT, or HAIT's acquisition, by the purchase or otherwise, of all or substantially all of the assets of an investment company, trust or personal holding company, or substantially all of the outstanding shares or interests of any such entity. Any right granted to Distributor to solicit purchases of Shares will not apply to Shares that may be offered by HAIT to shareholders by virtue of their being shareholders of HAIT. 6. SHARES COVERED BY THIS AGREEMENT. This Agreement relates to the solicitation of orders to purchase Shares that are duly authorized and registered and available for sale by HAIT, including redeemed or repurchased Shares if and to the extent that they may be legally sold and if, but only if, HAIT authorizes Distributor to sell them. If HAIT establishes one or more series in addition to The Oakmark Fund, The Oakmark Select Fund, The Oakmark Small Cap Fund, The Oakmark Equity and Income Fund, The Oakmark Global Fund, The Oakmark International Fund and The Oakmark International Small Cap Fund and wishes to appoint Distributor as principal underwriter of the shares of beneficial interest of such series, HAIT shall so notify Distributor in writing, and if Distributor agrees in writing to provide such services and HALP acknowledges that agreement by Distributor, the shares of common stock of such series shall become Shares under the Agreement. 7. PUBLIC OFFERING PRICE. All solicitations by Distributor pursuant to this Agreement shall be for orders to purchase Shares through HAIT's transfer agent at the public offering price. The public offering price for each accepted subscription for Shares will be the net asset value per share of the particular Fund subscribed for calculated by HAIT at the next close of regular session trading on the New York Stock Exchange after such subscription is accepted by HAIT or by a person authorized by HAIT to accept such subscriptions. The net asset value per share shall be determined in the manner provided in HAIT's Agreement and Declaration of Trust as now in effect or as it may be amended, and as reflected in the then current prospectus and Statement of Additional Information of each Fund. 8. SUSPENSION OF SALES. If and whenever the determination of a Fund's net asset value is suspended and until such suspension is terminated, no further orders for Shares of such Fund shall be accepted by HAIT except such unconditional orders placed with HAIT and accepted by it before the suspension. In addition, HAIT reserves the right to suspend sales of Shares if, in the judgment of the Board of HAIT, it is in the best interest of HAIT to do so, such suspension to continue for such period as may be determined by HAIT's Board; and in that event, (i) at the direction of HAIT, Distributor shall suspend its solicitation of orders to purchase Shares until otherwise instructed by HAIT and (ii) no orders to purchase Shares shall be accepted by HAIT while such suspension remains in effect unless otherwise directed by its Board. 9. AUTHORIZED REPRESENTATIONS. Distributor is not authorized by HAIT to give on behalf of HAIT or any Fund any information or to make any representations in connection with the sale of Shares other than information and representations which are consistent with HAIT's registration statement filed with the SEC under the 1933 Act and/or the 1940 Act, covering Shares, as such registration statement or HAIT's prospectus may be amended or supplemented from time to time, or contained in shareholder reports or other material that may be prepared by or on behalf of HAIT or approved by HAIT for Distributor's use. No person other than Distributor is authorized to act as principal underwriter (as such term is defined in the 1940 Act, as amended) for HAIT. 10. REGISTRATION OF ADDITIONAL SHARES. HAIT hereby agrees to register an indefinite number of Shares pursuant to Rule 24f-2 under the 1940 Act, as amended. HAIT will, in cooperation with Distributor, take such action as may be necessary from time to time to permit such Shares (so registered or otherwise qualified for sale under the 1933 Act) to be sold in any state mutually agreeable to Distributor and HAIT, and to maintain such qualification; provided, however, that nothing herein shall be deemed to prevent HAIT from taking action, without approval of Distributor, to permit its Shares to be sold in any state it deems appropriate. 11. CONFORMITY WITH LAW. Distributor agrees that in soliciting orders to purchase Shares it shall duly conform in all respects with applicable federal and state laws and the rules and regulations of the NASD. Distributor will use its best efforts to maintain its Registrations in good standing during the term of this Agreement and will promptly notify HAIT and HALP in the event of the suspension or termination of any of the Registrations. 12. INDEPENDENT CONTRACTOR. Distributor shall be an independent contractor and neither Distributor, nor any of its members, managers, officers, directors, employees or representatives is or shall be an employee of HAIT in the performance of Distributor's duties hereunder. Distributor shall be responsible for its own conduct and the employment, control and conduct of its agents and employees and for injury to such agents or employees or to others through its agents and employees and agrees to pay all employee taxes thereunder. 13. INDEMNIFICATION. (a) Distributor agrees to indemnify and hold harmless HAIT and each of the members of its Board and its officers, employees and representatives and each person, if any, who controls HAIT within the meaning of Section 15 of the 1933 Act against any and all losses, liabilities, damages, claims and expenses (including the reasonable costs of investigating or defending any alleged loss, liability, damage, claim or expense and reasonable legal counsel fees incurred in connection therewith) to which HAIT or such of the members of its Board and of its officers, employees, representatives, or controlling person or persons may become subject under the 1933 Act, under any other statute, at common law, or otherwise, arising out of the acquisition or sale of any Shares by any person which (i) may be based upon any wrongful act by Distributor or any of Distributor's members, managers, directors, officers, employees or representatives, or (ii) may be based upon any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, Statement of Additional Information, shareholder report or other information covering Shares filed, published or otherwise made public by HAIT or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon information furnished to HAIT by Distributor in writing. In no case (i) is Distributor's indemnity in favor of HAIT, or any person indemnified, to be deemed to protect HAIT or such indemnified person against any liability to which HAIT or such person would otherwise be subject by reason of willful misfeasance, bad faith or negligence in the performance of its or his duties or by reason of its or his reckless disregard of its or his obligations and duties under this Agreement, or (ii) is Distributor to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against HAIT or any person indemnified unless HAIT or such person, as the case may be, shall have notified Distributor in writing of the claim within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim served upon HAIT or upon such person (or after HAIT or such person shall have received notice of such service on any designated agent). However, failure to notify Distributor of any such claim shall not relieve Distributor from any liability unless (and then only to the extent that) the failure to give such notice prejudices the defense of any such claim or from any liability which Distributor may have to HAIT or any person against whom such action is brought otherwise than on account of Distributor's indemnity agreement contained in this paragraph. Distributor shall be entitled to participate, at its own expense, in the defense, or, if Distributor so elects, to assume the defense of any suit brought to enforce any such claim but, if Distributor elects to assume that defense, such defense shall be conducted by legal counsel chosen by Distributor and acceptable to the persons indemnified who are defendants in the suit. In the event that Distributor elects to assume the defense of any such suit and retain such legal counsel, persons indemnified who are defendants in the suit shall bear the fees and expenses of any additional legal counsel retained by them. If Distributor does not elect to assume the defense of any such suit, Distributor will reimburse persons indemnified who are defendants in such suit for the reasonable fees of any legal counsel retained by them in such litigation. (b) HAIT agrees to indemnify and hold harmless Distributor and each of its members, managers, directors, officers, employees, and representatives and each person, if any, who controls Distributor within the meaning of Section 15 of the 1933 Act against any and all losses, liabilities, damages, claims or expenses (including the damage, claim or expense and reasonable legal counsel fees incurred in connection therewith) to which Distributor or such of its members, managers, directors, officers, employees, representatives or controlling person or persons may otherwise become subject under the 1933 Act, under any other statute, at common law, or otherwise arising out of the acquisition of any Shares by any person which (i) may be based upon any wrongful act by HAIT or any of the members of HAIT's Board, or HAIT's officers, employees or representatives other than Distributor, or (ii) may be based upon any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, Statement of Additional Information, shareholder report or other information covering Shares filed, published or otherwise made public by HAIT or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading unless such statement or omission was made in reliance upon information furnished in writing by Distributor to HAIT. In no case (i) is HAIT's indemnity in favor of Distributor or any person indemnified to be deemed to protect Distributor or such indemnified person against any liability to which Distributor or such indemnified person would otherwise be subject by reason of willful misfeasance, bad faith, or negligence in the performance of its or his duties or by reason of its or his reckless disregard of its or his obligations and duties under this Agreement, or (ii) is HAIT to be liable under its indemnity agreement contained in this Paragraph with respect to any claim made against Distributor or any person indemnified unless Distributor, or such person, as the case may be, shall have notified HAIT in writing of the claim within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim served upon Distributor or upon such person (or after Distributor or such person shall have received notice of such service on any designated agent). However, failure to notify HAIT of any such claim shall not relieve HAIT from any liability unless (and then only to the extent that) the failure to give such notice prejudices the defense of any such claim or from any liability which HAIT may have to Distributor or any person against whom such action is brought otherwise than on account of HAIT's indemnity agreement contained in this paragraph. HAIT shall be entitled to participate, at its own expense, in the defense or, if HAIT so elects, to assume the defense of any suit brought to enforce such claim but, if HAIT elects to assume the defense, such defense shall be conducted by legal counsel chosen by HAIT and satisfactory to the persons indemnified who are defendants in the suit. In the event that HAIT elects to assume the defense of any such suit and retain such legal counsel, the persons indemnified who are defendants in the suit shall bear the fees and expenses of any additional legal counsel retained by them. If HAIT does not elect to assume the defense of any such suit, HAIT will reimburse the persons indemnified who are defendants in such suit for the reasonable fees and expenses of any legal counsel retained by them in such litigation. 14. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become effective the later of January 1, 2001 or the approval by the NASD of the activities contemplated by Distributed hereunder ("Effective Date") and unless terminated as provided herein, shall remain in effect through January 1, 2002, and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by (a) a vote of majority of the members of the Board of HAIT who are not interested persons of Distributor or HAIT, voting in person at a meeting called for the purpose of voting on such approval, and (b) the vote of either the Board of HAIT or a majority of the outstanding Shares of HAIT. This Agreement may be terminated at any time, without the payment of any penalty (a) on 60 days' written notice, by the Board of HAIT or by a vote of a majority of the outstanding Shares of HAIT, or by Distributor, or (b) immediately, on written notice by the Board of HAIT, in the event of termination or suspension of any of the Registrations. This Agreement will automatically terminate in the event of its assignment. In interpreting the provisions of this Paragraph 14, the definitions contained in Section 2(a) of the 1940 Act (particularly the definitions of "interested person," "assignment" and "majority of the outstanding shares") shall be applied. 15. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by each party against which enforcement of the change, waiver, discharge or termination is sought. If HAIT should at any time deem it necessary or advisable in the best interests of HAIT that any amendment of this Agreement be made in order to comply with the recommendations or requirements of the SEC or any other governmental authority or to obtain any advantage under state or federal tax laws and notifies Distributor of the form of such amendment and the reasons therefore, and if Distributor should decline to assent to such amendment, HAIT may terminate this Agreement forthwith. If Distributor should at any time request that a change be made in HAIT's Agreement and Declaration of Trust, Bylaws or its methods of doing business, in order to comply with any requirements of federal law or regulations of the SEC, or of a national securities association of which Distributor is or may be a member, relating to the sale of Shares, and HAIT should not make such necessary changes within a reasonable time, Distributor may terminate this Agreement forthwith. 16. LIABILITY. A copy of the Declaration of Trust of the Trust is on file with the Secretary of the Commonwealth of the Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trust by officers of the Trust as officers and not individually and that the obligations of or arising out of this instrument are not binding upon any of the trustees, officers or shareholders individually but are binding only upon the assets of and property of the Trust. 17. MISCELLANEOUS. The captions in this Agreement are included for convenience or reference only, and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 18. NOTICE. Any notice required or permitted to be given by a party to this Agreement or to any other party hereunder shall be deemed sufficient if delivered in person or sent by registered or certified mail, postage prepaid, addressed by the party giving notice to each such other party at the address provided below or to the last address furnished by each such other party to the party giving notice. If to HAIT: Two North LaSalle Street Chicago, Illinois 60602 Attn: Anita M. Nagler -------------------- If to Distributor: Two North LaSalle Street Chicago, Illinois 60602 Attn: Anita M. Nagler -------------------- If to HALP: Two North LaSalle Street Chicago, Illinois 60602 Attn: Anita M. Nagler -------------------- HARRIS ASSOCIATES SECURITIES L.P. By: /s/ Anita M. Nagler ----------------------------- Anita M. Nagler HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Robert M. Levy ------------------------------ Robert M. Levy ACKNOWLEDGED: HARRIS ASSOCIATES L.P. By: /s/ Robert M. Levy -------------------------- EX-99.(G)(8) 11 a2036007zex-99_g8.txt EXHIBIT 99. (G)(8) AMENDMENT TO CUSTODIAN CONTRACT This Amendment to the Custodian Contract is made as of April 18, 2000 by and between Harris Associates Investment Trust (the "Trust") and State Street Bank and Trust Company (the "Custodian"). Capitalized terms used in this Amendment without definition shall have the respective meanings given to such terms in the Custodian Contract referred to below. WHEREAS, the Trust and the Custodian entered into a Custodian Contract dated as of July 10, 1991 (as amended and in effect from time to time, the "Contract"); and WHEREAS, the Trust is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets, and the Trust has made The Oakmark Fund, The Oakmark International Fund, The Oakmark Small Cap Fund, The Oakmark Balanced Fund, The Oakmark Select Fund, The Oakmark International Small Cap Fund and The Oakmark Global Fund subject to the Contract (each such series, together with all other series subsequently established by the Trust and made subject to the Contract in accordance with the terms thereof, shall be referred to as a "Fund", and, collectively, the "Funds"); and WHEREAS, the Trust and the Custodian desire to amend certain provisions of the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Trust and the Custodian desire to amend and restate certain other provisions of the Contract relating to the custody of assets of each of the Funds held outside of the United States. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Contract, pursuant to the terms thereof, as follows: I. Article 3 of the Contract is hereby deleted, and Articles 4 through 20 of the Contract are hereby renumbered, as of the effective date of this Amendment, as Articles 5 through 21, respectively. II. New Articles 3 and 4 of the Contract are hereby added, as of the effective date of this Amendment, as set forth below. 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. 3.1. DEFINITIONS. Capitalized terms in this Article 3 shall have the following meanings: "Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment; economic and financial infrastructure (including any Mandatory Securities Depositories, as defined below, operating in the country); prevailing or developing custody and settlement practices; and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country. "Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act, except that the term does not include Mandatory Securities Depositories. "Foreign Assets" means any of the Funds' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Funds' transactions in such investments. "Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule 17f-5. "Mandatory Securities Depository" means a foreign securities depository or clearing agency that, either as a legal or practical matter, must be used if the Trust, on a Fund's behalf, determines to place Foreign Assets in a country outside the United States (i) because required by law or regulation; (ii) because securities cannot be withdrawn from such foreign securities depository or clearing agency; or (iii) because maintaining or effecting trades in securities outside the foreign securities depository or clearing agency is not consistent with prevailing or developing custodial or market practices. 3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Trust, by resolution adopted by its Board of Trustees (the "Board"), hereby delegates to the Custodian, with respect to the Funds, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Article 3 with respect to Foreign Assets of the Funds held outside the United States, and the Custodian hereby accepts such delegation, as Foreign Custody Manager with respect to the Funds. 3.3. COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Contract, which list of countries may be amended from time to time by the Trust with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Funds which list of 2 Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. Mandatory Securities Depositories are listed on Schedule B to this Contract, which Schedule B may be amended from time to time by the Foreign Custody Manager with such notice to the Fund as is reasonably practicable. The Foreign Custody Manager will provide amended versions of Schedules A and B in accordance with Section 3.7 of this Article 3. Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account, or to place or maintain Foreign Assets, in a country listed on Schedule A, and the fulfillment by the Trust on behalf of the Funds of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by the Board on behalf of the Funds responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Amendment by the Trust shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A in which the Custodian has previously placed or currently maintains Foreign Assets pursuant to the terms of the Contract. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Fund with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of the Funds to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager of the Funds with respect to that country. The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Trust. Sixty (60) days (or such longer period as to which the parties agree in writing) after receipt of any such notice by the Trust, the Custodian shall have no further responsibility as Foreign Custody Manager to the Trust with respect to the country as to which the Custodian's acceptance of delegation is withdrawn. 3.4. SCOPE OF DELEGATED RESPONSIBILITIES. 3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this Article 3, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such 3 assets, including, without limitation the factors specified in Rule 17f-5(c)(1), as amended from time to time. 3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager shall determine that the contract (or the rules or established practices or procedures in the case of an Eligible Foreign Custodian that is a foreign securities depository or clearing agency) governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2), as amended from time to time. 3.4.3. MONITORING. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules or established practices and procedures in the case of an Eligible Foreign Custodian selected by the Foreign Custody Manager which is a foreign securities depository or clearing agency that is not a Mandatory Securities Depository). In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.7 hereunder. 3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this Article 3, the Board or its delegate (which shall not include the Foreign Custody Manager) shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Funds. The Trust, on behalf of the Funds, and the Board or its delegate (which shall not include the Foreign Custody Manager) shall be deemed to be monitoring on a continuing basis such Country Risk to the extent that the Board or its delegate (which shall not include the Foreign Custody Manager) considers necessary or appropriate. The Trust and the Custodian each expressly acknowledge that the Foreign Custody Manager shall not be delegated any responsibilities under this Article 3 with respect to Mandatory Securities Depositories. 3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A FUND. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise. 4 3.7. REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board amended Schedules A or B at the end of the calendar quarter in which an amendment to either Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Funds described in this Article 3 after the occurrence of the material change. The Foreign Custody Manager shall deliver the written reports required by this Article 3 to the following address, or such other address as the Trust shall from time to time reasonably request: Board of Trustees Harris Associates Investment Trust c/o Harris Associates Two North LaSalle Street, #500 Chicago, Illinois 60602-3790 Attention: Kristi L. Rowsell 3.8. REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign Custody Manager represents to the Trust that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. The Trust represents to the Custodian that the Board has determined that it is reasonable for the Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Contract to the Custodian as the Foreign Custody Manager of the Funds. 3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody Manager of the Funds shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.3 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Funds with respect to designated countries. 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUNDS HELD OUTSIDE THE UNITED STATES. 4.1 DEFINITIONS. 5 Capitalized terms in this Article 4 shall have the following meanings: "Foreign Securities System" means either a clearing agency or a securities depository listed on Schedule A hereto or a Mandatory Securities Depository listed on Schedule B hereto. "Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian. 4.2. HOLDING SECURITIES. The Custodian shall identify on its books as belonging to each Fund the respective foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Funds, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, PROVIDED HOWEVER, that (i) the records of the Custodian with respect to foreign securities of each Fund which are maintained in such account shall identify those securities as belonging to such Fund and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian. 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country only through arrangements implemented by the Foreign Sub-Custodian in such country pursuant to the terms of this Contract. 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. 4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Funds held by such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: (i) upon the sale of such foreign securities for the Fund in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System; (ii) in connection with any repurchase agreement related to foreign securities; 6 (iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Funds; (iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable; (v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub- Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; (vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; PROVIDED that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub- Custodian's own negligence or willful misconduct; (vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; (viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; (ix) for delivery as security in connection with any borrowing by a Fund requiring a pledge of assets by such Fund; (x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (xi) in connection with the lending of foreign securities; and (xii) for any other proper purpose, BUT ONLY upon receipt of Proper Instructions specifying the foreign securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper trust purpose, and naming the person or persons to whom delivery of such securities shall be made. 7 4.4.2. PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Fund in the following cases only: (i) upon the purchase of foreign securities for the Fund, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System; (ii) in connection with the conversion, exchange or surrender of foreign securities of the Fund; (iii) for the payment of any expense or liability of the Fund, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Contract, legal fees, accounting fees, and other operating expenses; (iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Fund, including transactions executed with or through the Custodian or its Foreign Sub-Custodians; (v) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (vi) for payment of part or all of the dividends received in respect of securities (vii) in connection with the borrowing or lending of foreign securities; and (viii) for any other proper purpose, BUT ONLY upon receipt of Proper Instructions specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper trust purpose, and naming the person or persons to whom such payment is to be made. 4.4.3. MARKET CONDITIONS; MARKET INFORMATION. 8 Notwithstanding any provision of this Contract to the contrary, settlement and payment for Foreign Assets received for the account of the Funds and delivery of Foreign Assets maintained for the account of the Funds may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer. The Custodian shall provide to the Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian, including without limitation information relating to Foreign Securities Systems, described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Board being provided with substantively less information than had been previously provided hereunder. In the event the Custodian, in its capacity as Foreign Custody Manager, determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate as provided in Section 3.4.3 hereof, upon receipt of Proper Instructions the Custodian will assist the Funds in withdrawing their assets from such Eligible Foreign Custodian as soon as reasonably practicable. 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the Trust applicable Fund or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the Trust on behalf of such Fund agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities except as such liability may arise from such nominee's own negligence, misfeasance, bad faith or willful misconduct. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Fund under the terms of this Contract unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice. 4.6. BANK ACCOUNTS. The Custodian shall identify on its books as belonging to each Fund cash (including cash denominated in foreign currencies) deposited with the Custodian for such Fund. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts opened and maintained outside the United States on behalf of a Fund with a Foreign Sub-Custodian shall be subject only to draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant to the terms of this Contract to hold cash received by or from or for the account of the Fund. 9 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Funds shall be entitled and shall credit such income, as collected, to the applicable Fund. In the event that extraordinary measures are required to collect such income, the Trust and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. 4.8. SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant this Article 4, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Trust acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Trust to exercise shareholder rights. 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the Trust written information (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith) received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Funds. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Trust written information so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. Absent the Custodian's failure to observe the standard of care set forth in Section 14, the Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Funds at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties and, to the extent possible, to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At the Trust's election, the Trust and the Funds shall be entitled to be subrogated to the rights of the 10 Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Funds have not been made whole for any such loss, damage, cost, expense, liability or claim. 4.11. TAX LAW. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Trust, the Funds or the Custodian as custodian of the Funds by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Trust to notify the Custodian of the obligations imposed on the Trust with respect to the Funds or the Custodian as custodian of the Funds by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Trust with respect to any claim for exemption or refund under the tax law of countries for which the Trust has provided such information. 4.12. LIABILITY OF CUSTODIAN. Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a Foreign Sub-Custodian, the Custodian shall be without liability to the Trust for any loss, liability, claim or expense resulting from or caused by anything which is part of Country Risk. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in the Contract and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities Depository, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care. III. Except as specifically superseded or modified herein, the terms and provisions of the Contract shall continue to apply with full force and effect. In the event of any conflict between the terms of the Contract prior to this Amendment and this Amendment, the terms of this Amendment shall prevail. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of Article 3 hereof, in the event of any conflict between the provisions of Articles 3 and 4 hereof, the provisions of Article 3 shall prevail. 11 IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first above written. STATE STREET BANK AND TRUST WITNESSED BY: COMPANY By: /s/ Nelson H. Graves By: /s/ Ronald E. Logue --------------------------------------- ------------------------------ Nelson H. Graves, Vice President Ronald E. Logue, Vice Chairman HARRIS ASSOCIATES INVESTMENT WITNESSED BY: TRUST By: /s/ Anita Nagler By: /s/ Kristi L. Roswell --------------------------------------- ------------------------------ Name: Anita Nagler Name: Kristi L. Roswell ------------------------------------- ---------------------------- Title: Secretary Title: Treasurer ----------------------------------- --------------------------- EX-99.(I)(6) 12 a2036007zex-99_i6.txt EXHIBIT 99. (I)(6) January 26, 2001 As counsel for Harris Associates Investment Trust (the "Registrant"), we consent to the incorporation by reference of our opinion for each of the Registrant's series, filed with the Registrant's registration statement on Form N-1A, Securities Act File No. 33-38953 on each of the dates listed below:
SERIES DATE OF OPINION DATE OF FILING The Oakmark International Fund July 23, 1992 February 28, 1997 The Oakmark Small Cap Fund September 20, 1995 February 28, 1997 The Oakmark Equity and Income Fund September 20, 1995 February 28, 1997 The Oakmark International Small Cap Fund September 20, 1995 February 28, 1997 The Oakmark Select Fund October 22, 1996 October 23, 1996 The Oakmark Fund November 1, 1998 November 5, 1998 The Oakmark Global Fund May 21, 1999 May 21, 1999
In giving this consent we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933. /s/ Bell, Boyd & Lloyd LLC EX-99.(J) 13 a2036007zex-99_j.txt EXHIBIT 99. (J) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated October 26, 2000, and to all references to our Firm included in or made part of this Registration Statement on Form N-1A of the Harris Associates Investment Trust (comprising The Oakmark Fund, The Oakmark Select Fund, The Oakmark Small Cap Fund, The Oakmark Equity and Income Fund, The Oakmark Global Fund, The Oakmark International Fund and The Oakmark International Small Cap Fund). /s/ Arthur Andersen LLP Chicago, Illinois January 26, 2001 EX-99.(P)(1) 14 a2036007zex-99_p1.txt EXHIBIT 99. (P)(1) HARRIS ASSOCIATES L.P., HARRIS ASSOCIATES SECURITIES L.P. AND HARRIS ASSOCIATES INVESTMENT TRUST CODE OF ETHICS AND STATEMENT ON INSIDER TRADING (EFFECTIVE APRIL 18, 2000) I. DEFINITIONS A. FIRM OR HARRIS. The term "Firm" or "Harris" shall include Harris Associates L.P. ("HALP") and Harris Associates Securities L.P. ("HASLP"). B. TRUST. The term "Trust" shall mean Harris Associates Investment Trust, including any series of shares of beneficial interest of the Trust (each, a "Fund"). C. EMPLOYEE. The term "Employee" shall include any person employed by the Firm, whether on a full or part-time basis and all partners, officers, shareholders and directors of the Firm. D. ACCESS PERSON. The term "Access Person" shall have the meaning set forth in Section 17j-1(a)(1) of the Investment Company Act of 1940 and rules thereunder (the "Act"). Accordingly, Access Person means any director, officer, general partner, or Advisory Person (as defined below) of the Fund or HALP, but shall not include any trustee of the Trust who is not an "interested person" of the Trust. E. ADVISORY PERSON. The term "Advisory Person" shall have the meaning set forth in Section 17j-1(a)(2) of the Act. Accordingly, Advisory Person means any Employee of the Firm, who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities (as defined below) by a Client (as defined below), or whose functions relate to the making of any recommendations with respect to purchases and sales. For the purpose of this Code, each Employee of the Firm with an office at the Firm's principal place of business shall be deemed to be an Advisory Person. F. PERSONS SUBJECT TO THIS CODE. Each Employee is subject to this Code. G. COVERED SECURITY. The term "Covered Security" shall have the meaning set forth in Section 2(a)(36) of the Act, (1) including any right to acquire such security, except that it shall not include - ------------------ 1 SEC. 2(a)(36) "Security" means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a "security," or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. 1 securities which are direct obligations of the Government of the United States, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debit instruments (including repurchase agreements), and shares issued by open-end investment companies. H. BENEFICIAL INTEREST OR OWNERSHIP. The term "beneficial interest or ownership" shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and rules thereunder, which includes any interest in which a person, directly or indirectly, has or shares a direct or indirect pecuniary interest. A pecuniary interest is the opportunity, directly or indirectly, to profit or share in any profit derived from any transaction. Each person will be assumed to have a pecuniary interest, and therefore, beneficial interest or ownership, in all securities held by that person, that person's spouse, all members of that person's immediate family and adults sharing the same household with that person (other than mere roommates) and all minor children of that person and in all accounts subject to their direct or indirect influence or control and/or through which they obtain the substantial equivalent of ownership, such as trusts in which they are a trustee or beneficiary, partnerships in which they are the general partner, corporations in which they are a controlling shareholder or any other similar arrangement. Any questions an Employee may have about whether an interest in a security or an account constitutes beneficial interest or ownership should be directed to the Firm's General Counsel or Compliance Department. Examples of beneficial interest or ownership are attached as Appendix A. I. CLIENT. The term "Client" shall mean any client of HALP, including any Fund. II. CODE OF ETHICS A. GENERAL STATEMENT Harris seeks to foster a reputation for integrity and professionalism. That reputation is a vital business asset. The confidence and trust placed in us by investors in mutual funds and clients with accounts advised by the Firm is something that is highly valued and must be protected. As a result, any activity which creates even the suspicion of misuse of material non-public information by the Firm or any of its Employees, which gives rise to or appears to give rise to any breach of fiduciary duty owed to any Client, or which creates any actual or potential conflict of interest between any Client and the Firm or any of its Employees or even the appearance of any conflict of interest must be avoided and is prohibited. The Investment Company Act and rules make it illegal for any person covered by the Code, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by the Trust to: a. employ any device, scheme, or artifice to defraud the Trust; 2 b. make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of circumstances under which they are made, not misleading or in any way mislead the Trust regarding a material fact; c. engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Trust; or d. engage in any manipulative practice with respect to the Trust. The restrictions on personal securities transactions contained in this Code are intended to help the Firm monitor for compliance with these prohibitions. Additionally, the federal securities laws require that an investment adviser maintain a record of every transaction in any Covered Security in which an Access Person acquires any direct or indirect beneficial interest or ownership, except any transaction in an account in which the Access Person has no direct or indirect control or influence. To attempt to ensure that each Person Subject to this Code satisfies this Code and these record keeping obligations, the Firm has developed the following rules relating to personal securities trading, outside employment, personal investments with external investment managers and confidentiality. The General Counsel, Chief Executive Officer, and Compliance Officer, acting in concert, has the authority to grant written waivers of the provisions of this Code in appropriate instances. However, the Firm expects that waivers will be granted only in rare instances, and some provisions of the Code that are mandated by the Act cannot be waived. B. RESTRICTIONS ON EMPLOYEE TRADING No trading activity by an Employee in any security in which an Employee has any beneficial interest or ownership which is also the subject of a Client portfolio purchase or sale shall disadvantage or appear to disadvantage such Client transaction. Further, the following specific restrictions apply to all trading activity for Advisory Persons: i) Any transaction in a security in anticipation of client orders ("frontrunning") is prohibited, ii) Any transaction in a security which is the subject of a Firm recommendation is prohibited until the tenth business day following the dissemination of the recommendation, or any longer period specified in this Code, iii) Any transaction in a security which the Advisory Person knows or has reason to believe is being purchased or sold or considered for purchase or sale(2) by any investment company - ------------------ 2 A security is "being considered for purchase or sale", the earlier of, when a 3 advised by the Firm is prohibited until the transaction by such investment company has been completed or consideration of such transaction has been abandoned,(3) iv) Any same day transaction in a security in which any investment company advised by the Firm has a pending or actual transaction is prohibited. If an Advisory Person places a same day trade for such security prior to the investment company placing an order the Employee's order will be canceled, v) Any transaction in a security within two business days after any investment company advised by the Firm has traded in that security is prohibited, vi) Any transaction involving options relating to any security on the Firm's approved list or which are held by any investment company advised by the Firm is prohibited, and vii) Any acquisition of an equity security in an initial public offering is prohibited. Additionally, no Employee of the Firm shall knowingly sell to or purchase from the Funds or HAIT any security or other property except, in the case of the Funds, securities issued by the Funds. C. PERSONAL INVESTMENTS WITH EXTERNAL MONEY MANAGERS. All investments in which an Advisory Person has any beneficial interest or ownership placed with external investment managers (including interests in limited partnerships or trust vehicles, managed accounts, variable annuities or foreign entities) or in any account in which an Advisory Person has discretion must be approved in writing by the Compliance Department and the Chief Executive Officer prior to the commitment of initial capital. Additionally, "Investment Personnel" must obtain approval prior to investing or acquiring a beneficial ownership interest in a Limited Offering, whether directly or indirectly. "Investment Personnel" is defined in Section 17j-1(a)(7) of the Act and shall be deemed to include any officer of HAI with an office in the Firm's principal place of business; any officer of HAI who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities; any Harris portfolio manager; any member of the Harris stock selection group; any Harris financial analyst; or any Harris fund manager. A "Limited Offering" is generally - -------------------------------------------------------------------------------- recommendation to purchase or sell has been made and communicated or the security is placed on the research project list and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation. 3 Among the clients of the Firm are private investment partnerships (partnerships) in which various Employees of the Firm have equity interests. This trading prohibition shall not restrict purchases or sales for the accounts of such partnerships provided that the Trust and such accounts are treated fairly and equitably in connection with such purchases and sales. 4 defined as a private placement and can include interests in real estate or oil and gas limited partnership interests and other privately placed securities and funds. The Investment Personnel must (i) provide notice in writing to the Chief Executive Officer and the Compliance Department prior to acquiring ownership, and (ii) obtain the written approval of the Chief Executive Officer and the Compliance Department prior to acquiring ownership. The Compliance Department shall maintain a copy of such approval and reasons supporting the approval as provided under Section IV of this Code. The Compliance Department will maintain a list of investment managers used by Partnerships managed internally and a list of investment managers used by Advisory Persons. If an Advisory Person has been notified that an investment manager is used by the Partnerships' managed internally, an Advisory Person must notify the Compliance Department and the Head of the Multi-Manager Area of any material withdrawal of their investment with such investment manager at least two working days prior to an Advisory Person submitting any notice of such withdrawal. To avoid a conflict of interest or the appearance of any conflict, an Advisory Person should also note the reason for the withdrawal if it relates to the investment manager's performance, organization or perceived ability to execute their trading strategy. D. ADDITIONAL RESTRICTION ON FUND MANAGERS OF INVESTMENT COMPANY ACCOUNTS. Any Access Person who is a fund manager of any investment company that is advised by the Firm is prohibited from buying or selling a security within fifteen calendar days before and after the investment company that he/she manages trades in that security. Any profits realized on trades within the proscribed periods shall be required to be disgorged.(4) E. PROCEDURES TO IMPLEMENT TRADING RESTRICTIONS AND REPORTING OBLIGATIONS. 1) TRADING THROUGH HARRIS' TRADING DESK. All transactions in Covered Securities in which an Advisory Person has any beneficial interest or ownership or in any accounts in which an Advisory Person has discretion, other than fee paying accounts ("Advisory Person account"), must be processed through the Firm's trading desk. Transactions at other brokers or banks are not permitted except in unusual circumstances and then only after the Advisory Person has: (i) provided notice in writing to his/her Supervisor and the Compliance Department prior to opening or placing an initial order in an account with such other broker or bank, (ii) obtained the written approval of his/her Supervisor and the Compliance Department prior to opening or placing an initial order in such account, (iii) provided such other broker or bank with a - ------------------ 4 Any profits disgorged shall be given to a tax exempt charitable organization of Harris' choosing. 5 written notice of the Advisory Person's affiliation with Harris and request that copies of confirmations and statements be sent to the Firm's Compliance Department, and provide a report to the Firm that includes the name of the broker or bank with whom the account was established, the date the account was established, and the date the report is submitted. A copy of such written notice and request should also be provided to his/her Supervisor and the Compliance Department. Even after an Advisory Person has obtained approval to execute transactions through another broker or bank, the Advisory Person must still present the Firm's trading desk with an order ticket for an order to be executed at the other broker or bank. In those exceptional situations in which it is inappropriate for the Firm's trading desk to place the order, the Advisory Person must promptly present the trading desk with a completed order ticket reflecting the details of the transaction and clearly indicating that the transaction has been completed. 2) MONITORING OF TRADES. Transactions for an account of an Advisory Person that are executed through the Firm's trading desk are to be monitored by the Trading Department and reviewed and approved by the Chief Executive Officer (or such party to whom he delegates). These transactions are unsolicited brokerage transactions, should be so marked on the original order ticket and may not be executed if they are in conflict with discretionary orders. Should a conflict arise, sharing of executions may be approved by the Head of the Investment Advisory Department, or in his/her absence, the Manager of the Trading Department. Employee accounts must be opened in the 40000 office range. The Firm will provide to the Compliance Department information (including the title of each Covered Security involved, the date of the transaction, the interest rate and maturity rate (if applicable), the number of shares and principal amount of each Covered Security involved, the nature of the transaction (i.e. buy/sell), the price at which the transaction was effected, the name of the broker or bank through which the transaction was effected, and the date on which the report is submitted) about transactions in the accounts of Advisory Persons who have accounts with the Firm. Transactions at other brokers or banks, in addition to being placed through the trading desk, are to be monitored by the Compliance Department. To accomplish this, an Access Person shall submit to the Compliance Department within ten days after any transaction a report which includes the title of the Covered Security, the date of the transaction, the interest rate and maturity rate (if applicable), the number of shares and principal amount of each Covered Security involved, the nature of the transaction (i.e. buy/sell), the price at which the transaction was effected, the name of the broker or bank through which the transaction was effected and the date on which the report is submitted. This requirement may be satisfied by having the broker or bank send the Firm duplicate copies of confirmations and statements, provided that such confirmations and statements contain all of the information otherwise required to be provided in the report. The Compliance Department will maintain copies of all such transaction reports. 6 3) CANCELLATION OF TRADES. Any transaction for an account of an Access Person is subject to cancellation or reversal if it is determined by either the Chief Executive Officer (or such party to whom he delegates), the Manager of the Trading Department or the Compliance Department that the transaction is or was in conflict with or appeared to be in conflict with any Client transaction or any of the trading restrictions of this Code. Cancellations or reversals of transactions may be required after an extended period past the settlement date. The Manager of the Trading Department may also prevent the execution of orders for an Advisory Person's account if it appears that the trade may have to be canceled or reversed. Client transactions include transactions for any investment company managed by the Firm, any other discretionary advisory clients or any other accounts managed or advised by Employees of the Firm for a fee. The determination that a transaction of an Access Person may conflict with a Client transaction will be subjective and individualized and may include questions about timely and adequate dissemination of information, availability of bids and offers, as well as many other factors deemed pertinent for that transaction or series of transactions. It is possible that a cancellation or reversal of a transaction could be costly to an Access Person or his/her family. Therefore, great care is required to adhere to the Firm's trading restrictions and avoid conflicts or the appearance of conflicts. 4) PARTICIPATION IN DIVIDEND REINVESTMENT PLANS AND SYSTEMATIC PURCHASE PLANS. Advisory Persons may purchase securities through dividend reinvestment plans or systematic purchase plans without processing such transactions through the Firm's trading desk. Purchases are permitted only after the Employee has: (i) provided notice in writing to his/her Supervisor and the Compliance Department prior to opening an account or placing an initial purchase, and (ii) obtained the written approval of his/her Supervisor and the Compliance Department prior to opening an account or placing an initial purchase. Even after the Advisory Person has obtained approval to invest in such a plan, the Advisory Person must provide the Compliance Department with duplicate copies of statements within ten days after the end of each quarter. Such report or statements must contain all of the information required to be reported with respect to transactions in Covered Securities under II(F)(2) above. The Compliance Department will maintain copies of all such transaction reports. 5) REPORTING ALL OTHER SECURITIES TRANSACTIONS. 7 Because the obligations of an investment adviser to maintain records of Employee's personal securities transactions is broader than the type of transactions discussed above in this Section, all Employees have the following ADDITIONAL reporting obligations. Any transaction in a Covered Security not required to be placed through the Firm's trading desk in which an Employee has any beneficial interest or ownership (such as, real estate or oil and gas limited partnership interests and other privately placed securities and funds) must be reported to the Compliance Department. This report must be submitted within ten days after the end of each quarter and include: the title, price, number of shares and principal amount of each Covered Security involved, the date and nature of the transaction (i.e. buy/sell), the name of the broker or bank used, if any, interest rate and maturity, if applicable, and the date on which the report is submitted. This report may be in any form, including a copy of a confirmation or monthly statement. However, no report is necessary for any transaction in an account in which the Employee has no control or influence. 6) INITIAL AND ANNUAL REPORTING REQUIREMENTS. Each Access Person shall initially disclose in writing to the Compliance Department within 10 business days of becoming an Access Person, and annually thereafter within 30 business days after each calendar year-end, the title, number of shares and principal amount of all Covered Securities beneficially owned by such Access Person as of the date of becoming a Access Person, or as of the preceding December 31 for annual reporting and the name of the broker or bank with whom the Access Person maintains an account in which he or she has beneficial ownership of any security. The first such annual report under this amended Code of Ethics shall be made by January 30, 2001. An Access Person need not make an Initial or Annual Report for Covered Securities held in any account over which the Employee has no direct or indirect influence or control. F. CONFIDENTIALITY & OBLIGATIONS OF EMPLOYEES During the period of employment with the Firm an Employee will have access to certain "confidential information" concerning the Firm and its clients. This information is a valuable asset and the sole property of the Firm and may not be misappropriated and used outside of the Firm by an Employee or former Employee. "Confidential Information", defined as all information not publicly available about the business of the Firm, may include, but is not limited to, Client and prospect names and records, research, trading and portfolio information and systems, information concerning externally managed entities or accounts which have been considered or made on behalf of fee paying clients, and the financial records of the Firm and/or its Employees. In order to protect the interests of the Firm, an Employee or ex-Employee shall not, without the express written consent of the Firm's Chief Executive Officer, disclose directly or indirectly confidential information to anyone outside of the Firm. An Employee should be extremely careful to avoid inadvertent disclosures and to exercise maximum effort to keep confidential information confidential. Any questions concerning the confidentiality of information should be directed to the Chief Executive Officer or the General Counsel. An abuse of the Firm's policy of confidentiality could subject an Employee to immediate disciplinary action that may include dismissal from the Firm. 8 G. OUTSIDE EMPLOYMENT, ASSOCIATIONS AND BUSINESS ACTIVITIES 1) OUTSIDE EMPLOYMENT AND ASSOCIATIONS. It is Harris's policy not to permit Advisory Persons to hold outside positions of authority, including that of being an officer, partner, director or employee of another business entity (except in the case of entities managed by the Firm). Also, Harris requires that all Advisory Persons make their positions with the Firm a full-time job. The approval of Harris, and in some cases the approval of the NASD, is required before any Advisory Person may hold any outside position for any business organization, regardless of whether such position is compensated or not. Any exception to this policy must be approved in writing by the Firm's Chief Executive Officer (or other person as he may delegate) and the Access Person's Supervisor, and a copy of such approval shall be provided by the Advisory Person to the Compliance Department. Any change in the status of such approved position immediately must be reported in writing to the Compliance Department and the Advisory Person's Supervisor. Any income or compensation received by an Advisory Person for serving in such position must be paid in full to the Firm. Under no circumstance may an Advisory Person represent or suggest that Harris has approved or recommended the business activities of the outside organization or any person associated with it. 2) OUTSIDE BUSINESS ACTIVITIES. To further avoid actual or potential conflicts of interest and to maintain impartial investment advice, and equally important, the appearance of impartial investment advice, each Advisory Person must disclose in writing to the Compliance Department any special relationships and/or investments or business activities that they or their families have which could influence the investment activities of the Firm. If an Employee has any questions about any activities and the need for disclosure, the Employee should be cautious and direct any questions to the Firm's General Counsel or Compliance Department. H. CERTIFICATION OF COMPLIANCE BY ACCESS PERSONS. Each Access Person is required to certify annually that (i) he or she has read and understands the Code, (ii) recognizes that he or she is subject to the Code, and (iii) he or she has disclosed or reported all Personal Securities Transactions required to be disclosed or reported under the Code. The Firm shall annually distribute a copy of the Code and request certification by all Persons Subject to this Code and shall be responsible for ensuring that all personnel comply with the certification requirement. Each Access Person who has not engaged in any personal securities transactions during the preceding year for which a report was required to be filed pursuant to the Code shall include a certification to that effect in his or her annual certification. I. ANNUAL REPORT TO THE TRUST'S BOARD OF TRUSTEES. 9 The officers of the Trust shall prepare an annual report to the board of trustees of the Trust that: 1. summarizes existing procedures concerning personal investing and any changes in those procedures during the past year; 2. describes issues that arose during the previous year under the Code or procedures concerning personal investing, including but not limited to information about material violations of the Code and sanctions imposed; 3. certifies to the board that the Trust has adopted procedures reasonably necessary to prevent its Investment Personnel and Access Persons from violating the Code; and 4. identifies any recommended changes in existing restrictions or procedures based upon experience under the Code, evolving industry practices, or developments in applicable laws or regulations. III. POLICY STATEMENT ON INSIDER TRADING A. BACKGROUND Trading securities while in possession of material, nonpublic information or improperly communicating that information to others may expose you to stringent penalties. Criminal sanctions may include a fine of up to $1,000,000 and/or ten years imprisonment. The Securities and Exchange Commission (SEC) can recover the profits gained or losses avoided through the violative trading, obtain a penalty of up to three times the illicit windfall and issue an order permanently barring you from the securities industry. Finally, you may be sued by investors seeking to recover damages for insider trading violations. Regardless of whether a government inquiry occurs, Harris views seriously any violation of this Policy Statement. Such violations constitute grounds for disciplinary sanctions, including dismissal. The law of insider trading is unsettled; an individual legitimately may be uncertain about the application of the Policy Statement in a particular circumstance. Often, a single question can forestall disciplinary action or complex legal problems. You should direct any questions relating to the Policy Statement to the General Counsel, or, in her absence, a member of the Stock Selection Group, or the Compliance Department. You also must notify the General Counsel, or, in her absence, a member of the Stock Selection Group or the Compliance Department immediately if you have any reason to believe that a violation of the Policy Statement has occurred or is about to occur. B. POLICY STATEMENT ON INSIDER TRADING No person to whom this Policy Statement applies may TRADE, either personally or on behalf of 10 others (such as Clients), while in possession of material, nonpublic information; nor may such persons COMMUNICATE material, nonpublic information to others in violation of the law. This Policy Statement is drafted broadly; it will be applied and interpreted in a similar manner. This Policy Statement applies to securities trading and information handling by all Access Persons (including their spouses, minor children and adult members of their households). The section below reviews principles important to this Policy Statement. 1. WHAT IS MATERIAL INFORMATION? Information is "material" when there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions. Generally, this is information whose disclosure will have a substantial effect on the price of a company's securities. No simple "bright line" test exists to determine when information is material; assessments of materiality involve a highly fact-specific inquiry. For this reason, you should direct any questions about whether information is material to the General Counsel, or, in her absence, a member of the Stock Selection Group, or Compliance Department. Material information often relates to a company's results and operations including, for example, dividend changes, earnings results, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments. Material information also may relate to the MARKET for a company's securities. Information about a significant order to purchase or sell securities may, in some contexts, be deemed material. Similarly, prepublication information regarding reports in the financial press also may be deemed material. 2. WHAT IS NONPUBLIC INFORMATION? Information is "nonpublic" until it has been disseminated broadly to investors in the marketplace. Tangible evidence of such dissemination is the best indication that the information is public. For example, information is public after it has become available to the general public through a public filing with the SEC or some other governmental agency, the Dow Jones "tape" or the WALL STREET JOURNAL or some other publication of general circulation, and after sufficient time has passed so that the information has been disseminated widely. 3. IDENTIFYING INSIDE INFORMATION Before executing any trade for yourself or others, including Clients, you must determine whether you have access to material, nonpublic information. If you think that you might have access to material, nonpublic information, you should take the following steps: i. Immediately alert the Trading Department to restrict trading in the security by placing the 11 security on the restricted list maintained in the trading room. No reason or explanation should be given to the Trading Department for the restriction. ii. Report the information and proposed trade immediately to the General Counsel, or in her absence, a member of the Stock Selection Group. iii. Do not purchase or sell the securities on behalf of yourself or others, including Clients. iv. Do not communicate the information inside or outside Harris other than to the above individuals. v. After the above individuals have reviewed the issue, the Firm will determine whether the information is material and nonpublic and, if so, what action the Firm should take. 4. CONTACTS WITH PUBLIC COMPANIES For Harris, contacts with public companies represent an important part of our research efforts. Harris may make investment decisions on the basis of the Firm's conclusions formed through such contacts and analysis of publicly-available information. Difficult legal issues arise, however, when, in the course of these contacts, an Access Person becomes aware of MATERIAL, nonpublic information. This could happen, for example, if a company's Chief Financial Officer prematurely discloses quarterly results to an analyst or an investor relations representative makes a selective disclosure of adverse news to a handful of investors. In such situations, Harris must make a judgment as to its further conduct. To protect yourself, Clients and the Firm, you should contact the General Counsel, or in her absence, a member of the Stock Selection Group, or Compliance Department immediately if you believe that you may have received material, nonpublic information. 5. TENDER OFFERS Tender offers represent a particular concern in the law of insider trading for two reasons. First, tender offer activity often produces extraordinary gyrations in the price of the target company's securities. Trading during this time period is more likely to attract regulatory attention (and produces a disproportionate percentage of insider trading cases). Second, the SEC has adopted a rule which expressly forbids trading and "tipping" while in possession of material, nonpublic information regarding a tender offer received from the tender offeror, the target company or anyone acting on behalf of either. Employees should exercise particular caution any time they become aware of nonpublic information relating to a tender offer. C. PROCEDURES TO IMPLEMENT THE POLICY STATEMENTON INSIDER TRADING 12 1. PERSONAL SECURITIES TRADING The restrictions on Employee trading and procedures to implement those restrictions and the Firm's reporting obligations, which are set forth in Section II above, constitute the same procedures to implement this Policy Statement. Review those procedures carefully and direct any questions about their scope or applicability to the General Counsel or the Compliance Department. 2. RESTRICTIONS ON DISCLOSURES Harris Employees shall not disclose any nonpublic information (whether or not it is material) relating to Harris or its securities transactions to any person outside Harris (unless such disclosure has been authorized by Harris). Material, nonpublic information may not be communicated to anyone, including persons within Harris, except as provided in Section III(B)(3) above. Such information must be secured. For example, access to files containing material, nonpublic information and computer files containing such information should be restricted, and conversations containing such information, if appropriate at all, should be conducted in private. IV. RETENTION OF RECORDS The Compliance Department or the Secretary of the Trust will maintain the records listed below for a period of five years. Such records shall be maintained at the Firm's principal place of business in an easily accessible place: (i) a list of all persons subject to the Code during that period; (ii) receipts signed by all persons subject to the Code acknowledging receipt of copies of the Code and acknowledging that they are subject to it; (iii) a copy of each Code of Ethics that has been in effect at any time during the period; (iv) a copy of each report filed pursuant to the Code and a record of any known violations and actions taken as a result thereof during the period as well as a record of all persons responsible for reviewing these reports; and (v) a copy of any decision and the reasons supporting the decision, to approve the acquisition by Investment Personnel of Limited Offerings. 13 ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS AND STATEMENT ON INSIDER TRADING FOR ACCESS PERSONS CODE OF ETHICS. Harris Associates L.P. ("HALP"), Harris Associates Securities L.P. ("HASLP") and Harris Associates Investment Trust (the "Trust") have adopted a written Code of Ethics and Statement on Insider Trading (the "Code") to avoid potential conflicts of interest by HALP and HASLP personnel and to govern the use and handling of material non-public information. A copy of the Code is attached to this acknowledgement. As a condition of your continued employment with HALP and HASLP, and/or the retention of your position, if any, as an officer of the Trust, you are required to read, understand and abide by the Code. COMPLIANCE PROGRAM. The Code requires that all personnel furnish to the Compliance Department information regarding any investment account in which you have a "beneficial interest." You are also required to furnish to the Compliance Department copies of your monthly or quarterly account statements, or other documents, showing all purchases or sales of securities in any such account, or which are effected by you or for your benefit, or the benefit of any member of your household. Additionally, you are required to furnish a report of your personal securities holdings within ten days of commencement of your employment with HALP or HASLP and annually thereafter. These requirements apply to any investment account, such as an account at a brokerage house, trust account at a bank, custodial account or similar types of accounts. This compliance program also requires that you report any contact with any securities issuer, government or its personnel, or others, that, in the usual course of business, might involve material non-public financial information. The Code requires that you bring to the attention of the General Counsel any information you receive from any source which might be material non-public information. Any questions concerning the Code should be directed to the General Counsel or the Compliance Department. I affirm that I have read and understand the Code. I agree to the terms and conditions set forth in the Code. - -------------------------------- ---------------- Signature Date 1 ANNUAL AFFIRMATION OF COMPLIANCE FOR ACCESS PERSONS I affirm that: 1. I have again read and, during the past year to the best of my knowledge, have complied with the Code of Ethics and Statement of Insider Trading (the "Code"). 2. I have provided to the Compliance Department the names and addresses of each investment account that I have with any firm, including, but not limited to, broker-dealers, banks and others. (List of known accounts attached.) 3. I have provided to the Compliance Department copies of account statements or other reports showing each and every transaction in any security in which I have a beneficial interest, as defined in the Code, during the most recently ended calendar year or During the most recent calendar year there were no transactions in any security in which I had a beneficial interest required to be reported pursuant to the Code. 4. I have provided to the Compliance Department a report of my personal securities holdings as of the end of the most recent calendar year, including all required information for each security in which I have any direct or indirect beneficial ownership. - -------------------------------- ----------------- Signature Date APPENDIX A EXAMPLES OF BENEFICIAL INTEREST For purposes of the Code, you will be deemed to have a beneficial interest in a security if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security. Examples of beneficial ownership under this definition include: - securities you own, no matter how they are registered, and including securities held for you by others (for example, by a custodian or broker, or by a relative, executor or administrator) or that you have pledged to another (as security for a loan, for example); - securities held by a trust of which you are a beneficiary (except that, if your interest is a remainder interest and you do not have or participate in investment control of trust assets, you will not be deemed to have a beneficial interest in securities held by the trust); - securities held by you as trustee or co-trustee, where either you or any member of your immediate family (i.e., spouse, children or descendants, stepchildren, parents and their ancestors, and stepparents, in each case treating a legal adoption as blood relationship) has a beneficial interest (using these rules) in the trust. - securities held by a trust of which you are the settlor, if you have the power to revoke the trust without obtaining the consent of all the beneficiaries and have or participate in investment control; - securities held by any partnership in which you are a general partner, to the extent of your interest in partnership capital or profits; - securities held by a personal holding company controlled by you alone or jointly with others; - securities held by (i) your spouse, unless legally separated, or you and your spouse jointly, or (ii) your minor children or any immediate family member of you or your spouse (including an adult relative), directly or through a trust, who is sharing your home, even if the securities were not received from you and the income from the securities is not actually used for the maintenance of your household; or - securities you have the right to acquire (for example, through the exercise of a derivative security), even if the right is not presently exercisable, or securities as to which, through any other type of arrangement, you obtain benefits substantially equivalent to those of ownership. You will NOT be deemed to have beneficial ownership of securities in the following situations: APPENDIX A - securities held by a limited partnership in which you do not have a controlling interest and do not have or share investment control over the partnership's portfolio; and - securities held by a foundation of which you are a trustee and donor, provided that the beneficiaries are exclusively charitable and you have no right to revoke the gift. These examples are not exclusive. There are other circumstances in which you may be deemed to have a beneficial interest in a security. Any questions about whether you have a beneficial interest should be directed to the General Counsel or Compliance Department. EX-99.(P)(2) 15 a2036007zex-99_p2.txt EXHIBIT 99. (P)(2) HARRIS ASSOCIATES INVESTMENT TRUST Code of Ethics for Non-Interested Trustees (as amended April 18, 2000) The following Code of Ethics has been adopted in accordance with Rule l7j-1 under the 1940/(1)/ Act by the board of trustees of Harris Associates Investment Trust on March 8, 1994, and has been amended by the board of trustees of Harris Associates Investment Trust on April 18, 2000. The Investment Company Act and rules make it illegal for any person covered by the Code, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by the Trust to: a. employ any device, scheme, or artifice to defraud the Trust; b. make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of circumstances under which they are made, not misleading or in any way mislead the Trust regarding a material fact; c. engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Trust; or d. engage in any manipulative practice with respect to the Trust. The restrictions on personal securities transactions contained in this Code are intended to help the Firm monitor for compliance with these prohibitions. 1. DEFINITIONS OF TERMS USED. (a) TRUST: Harris Associates Investment Trust (b) FUND: The Oakmark Fund, The Oakmark Select Fund, The Oakmark Small Cap Fund, The Oakmark Equity and Income Fund, The Oakmark Global Fund, The Oakmark International Fund and The Oakmark International Small Cap Fund, and any other series of shares of beneficial interest of the Trust. (c) ADVISER: Harris Associates L.P., the investment adviser to the Trust. (d) CODE: This Code of Ethics. (e) PERSON SUBJECT TO THE CODE: Each non-interested trustee of the Trust. - ----------------- /(1)/ 1940 Act: The Investment Company Act of 1940. 1 (f) NON-INTERESTED TRUSTEE: A trustee of the Trust who is not affiliated with the Adviser, is not an officer of the Trust or five percent shareholder of any Fund, and is not otherwise an "interested person" of the Trust as defined in the 1940 Act. (g) SECURITY: Security shall have the meaning set forth in section 2(a)(36) of the 1940 Act, including any right to acquire such security, except that it shall not include securities issued by the Government of the United States, short-term debt securities which are "government securities" within the meaning of Section 2(a)(16) of the 1940 Act, bankers acceptances, bank certificates of deposit, commercial paper and securities issued by a registered open-end investment company. (h) BENEFICIAL INTEREST OR OWNERSHIP: Beneficial interest or ownership shall be interpreted in the same manner as it would be in determining whether a person is subject to the provisions of Section 16 of the 1934 Act(2) and the rules and regulations thereunder, but applied to all securities owned or acquired and not only those within the scope of Section 16. Examples of beneficial interest or ownership are attached as Appendix A. 2. CONSIDERATION OF TRANSACTION FOR A FUND. The Adviser shall be deemed to be considering a transaction in a security for a Fund, the earlier of, when a recommendation to purchase or sell a security has been made and communicated to the Trust or the security is placed on the research project list, and with respect to the person making the recommendations, when such person seriously considers making such recommendation. 3. PROHIBITED SECURITIES TRANSACTIONS. No Person Subject to the Code shall purchase or sell, directly or indirectly, any security in which he or she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership or interest and when the person knows or has reason to believe that securities of the same class are being purchased or sold or considered for purchase or sale by a Fund, until the Fund's transactions have been completed or consideration of such transaction is abandoned. This prohibition does not apply to any transaction in an investment advisory account of any Person Subject to the Code (either alone or with others) over which the investment adviser for the account exercises investment discretion if the Person Subject to the Code did not have knowledge of the transaction until after the transaction has been executed; provided that the Person Subject to the Code has previously identified the account to the Secretary of the Trust. Among the advisory clients of the Adviser are private investment partnerships in which various Persons Subject to the Code may have equity interests. This section shall not - ------------------ (2) 1934 Act: The Securities Exchange Act of 1934. 2 restrict purchases or sales for the accounts of such partnerships provided that a Fund and such accounts are treated fairly and equitably in connection with such purchases and sales. 4. EXEMPTED TRANSACTIONS. The provisions of this Code are not intended to restrict unnecessarily the personal investment activities of Persons Subject to the Code. Therefore, the provisions of Section 3 of this Code shall not apply to: (a) Purchases or sales effected in any account over which the Persons Subject to the Code has no direct or indirect influence or control; (b) Purchases or sales of securities which are not eligible for purchase or sale by a Fund; (c) Purchases or sales which are non-volitional on the part of either the Person Subject to the Code or a Fund; (d) Purchases which are part of an automatic dividend reinvestment plan; (e) Purchases effected upon the exercise of rights issued by an issuer PRO RATA to all holders of a class of its securities to the extent such rights were acquired from such issuer, and sales of such rights so acquired; and (f) Purchases or sales which receive the prior approval of Robert Levy or Victor A. Morgenstern on the ground that they are not inconsistent with this Code or the provisions of Rule 17-j-l(a). 5. REPORTING SECURITIES TRANSACTIONS. (a) DUTY TO REPORT. If any Person Subject to the Code has a beneficial interest in a transaction in a security and at the time of the transaction knew, or in the ordinary course of fulfilling his or her official duties as a trustee of the Trust should have known, that on the day of the transaction or within 15 days before or after that day a purchase or sale of that class of security was made or considered for a Fund, he or she shall report the transaction to the Compliance Department of the Adviser within 10 days after the end of the calendar quarter in which the transaction occurred. (b) FORM OF REPORT. A report pursuant to Section 5(a) may be in any form (including a copy of a confirmation or monthly brokerage statement) but must include: (i) the date of the transaction; (ii) the title, interest rate and maturity date (if applicable), number of shares, and the principal amount of the security; 3 (ii) the nature of the transaction (i.e., purchase, sale, gift, or other type of acquisition or disposition); (iii) the price at which the transaction was effected; (iv) the name of the broker, dealer or bank with or through whom the transaction was effected; (v) the name of the reporting person; and (vi) the date on which the report is submitted. 6. TRANSACTIONS WITH A FUND OR THE TRUST. No Person Subject to the Code will knowingly sell to or purchase from a Fund or the Trust any security or other property except, in the case of a Fund, securities issued by that Fund. 7. ENFORCEMENT. (a) CONFIDENTIALITY; ADDITIONAL INFORMATION. Reports filed pursuant to Section 5 of the Code will be maintained in strictest confidence but will be reviewed by the Trust or the Adviser to verify compliance with the Code. Additional information may be required to clarify the nature of particular transactions. (b) SANCTIONS FOR NON-COMPLIANCE. Conduct which is not in accordance herewith shall constitute grounds for appropriate sanctions by the Trust, including letters of sanction, suspension, or removal from office. (c) RETENTION OF RECORDS. The Secretary of the Trust will maintain the records listed below for a period of five years. Such records shall be maintained at the Trust's principal place of business in an easily accessible place: (i) a list of all Persons Subject to the Code during the period; (ii) receipts signed by al1 persons subject to the Code acknowledging receipt of copies of the Code and acknowledging that they are subject to it; (iii) a copy of each Code of Ethics that has been in effect at any time during the period; and (iv) a copy of each report filed pursuant to the Code and a record of any known violations and actions taken as a result thereof during the period as well as a record of all persons responsible for reviewing these reports. * * * * * 4 ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS AND STATEMENT ON INSIDER TRADING FOR NON-INTERESTED TRUSTEES Harris Associates Investment Trust (the "Trust") has adopted a written Code of Ethics for Non-Interested Trustees (the "Code") to avoid potential conflicts of interest. A copy of the Code is attached to this acknowledgement. As a condition of the retention of your position as a trustee, you are required to read, understand and abide by the Code. Any questions concerning the Code should be directed to the General Counsel. - -------------------------------------------------------------------------------- I affirm that I have read and understand the Code. I agree to the terms and conditions set forth in the Code. ___________________________ _______________________ Signature Date 1 APPENDIX A EXAMPLES OF BENEFICIAL INTEREST For purposes of the Code, you will be deemed to have a beneficial interest in a security if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security. Examples of beneficial ownership under this definition include: - securities you own, no matter how they are registered, and including securities held for you by others (for example, by a custodian or broker, or by a relative, executor or administrator) or that you have pledged to another (as security for a loan, for example); - securities held by a trust of which you are a beneficiary (except that, if your interest is a remainder interest and you do not have or participate in investment control of trust assets, you will not be deemed to have a beneficial interest in securities held by the trust); - securities held by you as trustee or co-trustee, where either you or any member of your immediate family (i.e., spouse, children or descendants, stepchildren, parents and their ancestors, and stepparents, in each case treating a legal adoption as blood relationship) has a beneficial interest (using these rules) in the trust. - securities held by a trust of which you are the settlor, if you have the power to revoke the trust without obtaining the consent of all the beneficiaries and have or participate in investment control; - securities held by any partnership in which you are a general partner, to the extent of your interest in partnership capital or profits; - securities held by a personal holding company controlled by you alone or jointly with others; - securities held by (i) your spouse, unless legally separated, or you and your spouse jointly, or (ii) your minor children or any immediate family member of you or your spouse (including an adult relative), directly or through a trust, who is sharing your home, even if the securities were not received from you and the income from the securities is not actually used for the maintenance of your household; or - securities you have the right to acquire (for example, through the exercise of a derivative security), even if the right is not presently exercisable, or securities as to which, through any other type of arrangement, you obtain benefits substantially equivalent to those of ownership. 2 You will NOT be deemed to have beneficial ownership of securities in the following situations: - securities held by a limited partnership in which you do not have a controlling interest and do not have or share investment control over the partnership's portfolio; and - securities held by a foundation of which you are a trustee and donor, provided that the beneficiaries are exclusively charitable and you have no right to revoke the gift. These examples are not exclusive. There are other circumstances in which you may be deemed to have a beneficial interest in a security. Any questions about whether you have a beneficial interest should be directed to the General Counsel. 3 -----END PRIVACY-ENHANCED MESSAGE-----