-----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, D47osFjOWq8aF2nzXBp5kSWzFvEqkQTxFOpV6ZyxgAeIkevvc+1RaU8kqcE1+xuL q8g2uHANBj2IkI1VF30esg== 0000950131-97-001412.txt : 19970303 0000950131-97-001412.hdr.sgml : 19970303 ACCESSION NUMBER: 0000950131-97-001412 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 25 FILED AS OF DATE: 19970228 EFFECTIVENESS DATE: 19970228 SROS: NONE 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: 1933 Act SEC FILE NUMBER: 033-38953 FILM NUMBER: 97546546 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06279 FILM NUMBER: 97546547 BUSINESS ADDRESS: STREET 1: HARRIS ASSOCIATES LP STREET 2: TWO NORTH LASALLE STREET SUITE 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 HARRIS ASSOCIATES INVESTMENT TRUST As filed with the Securities and Exchange Commission on February 28, 1997 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. 18 [X] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 20 [X] - -------------------------------------------------------------------------------- HARRIS ASSOCIATES INVESTMENT TRUST (Registrant) Two North La Salle Street, Suite 500 Chicago, Illinois 60602-3790 Telephone number 312/621-0600 - -------------------------------------------------------------------------------- Victor A. Morgenstern Cameron S. Avery Harris Associates L.P. Bell, Boyd & Lloyd 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: immediately upon filing pursuant to rule 485(b) ----- X on March 1, 1997 pursuant to rule 485(b) ----- 60 days after filing pursuant to rule 485(a)(1) ----- on May 1, 1996 pursuant to rule 485(a)(1) by acceleration ----- 75 days after filing pursuant to rule 485(a)(2) ----- on _______________ pursuant to rule 485(a)(2) ----- Registrant has elected to register an indefinite number of its shares of beneficial interest, without par value, of the series designated The Oakmark Fund, The Oakmark Select Fund, The Oakmark Small Cap Fund, The Oakmark Balanced Fund, The Oakmark International Fund and The Oakmark International Emerging Value Fund (which is to be named The Oakmark International Small Cap Fund commencing on the effective date of this amendment), pursuant to Rule 24f-2 under the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the fiscal period ended October 31, 1996 was filed on or about December 23, 1996. - -------------------------------------------------------------------------------- HARRIS ASSOCIATES INVESTMENT TRUST Cross-reference sheet pursuant to rule 495(a) of Regulation C
Item Location or caption* - ---- ---------------------------- Part A (Prospectus) ---------------------------- 1 (a) & (b) Front Cover 2 (a) Expenses (b) & (c) Summary 3 (a) Financial Highlights (b) Not Applicable (c) Performance Information (d) Financial Highlights 4 (a)(i) The Funds; Other Information (a)(ii)&(b) How the Funds Invest (c) Risk Factors 5 (a) Management of the Funds (b) Management of the Funds; Inside Back Cover; Expenses (c) Management of the Funds (d) Not applicable (e) Inside Back Cover (f) Expenses (g) Management of the Funds 5 (a) Not applicable (the specified information is included in registrant's annual reports to shareholders) 6 (a) Other Information (b) Not Applicable (c)-(e) Other Information (f) Distributions (g) Taxes 7 How to Purchase Shares; Shareholder Services (a) Not Applicable (b) How to Purchase Shares; Net Asset Value (c) Not Applicable (d) Front cover; How to Purchase Shares (e) & (f) Not Applicable 8 (a)-(d) How to Redeem Shares 9 Not Applicable
- ----------------- * References are to captions within the part of the registration statement to which the particular item relates except as otherwise indicated.
Item Location or caption* ---- -------------------------------------------- Part B (Statement of Additional Information) -------------------------------------------- 10 (a) & (b) Front Cover 11 Table of Contents 12 Not Applicable 13 (a) The Funds; How the Funds Invest (c) Investment Restrictions (d) Not applicable 14 (a) & (b) Part A - Management of the Funds; Trustees and Officers (c) Not Applicable 15 (a) Not Applicable (b) Principal Shareholders (c) Trustees and Officers 16 (a) & (b) Part A - Management of the Funds; Part B - Investment Adviser; Trustees and Officers (c) Not Applicable (d) Custodian (e)-(g) Not Applicable (h) Custodian; Independent Public Accountants (i) Not Applicable 17 (a)-(d) Portfolio Transactions (e) Not Applicable 18 (a) & (b) Not Applicable 19 (a)-(c) Purchasing and Redeeming Shares 20 Additional Tax Information; Taxation of Foreign Shareholders 21 (a)-(c) Not Applicable 22 (a) Not Applicable (b) Performance Information 23 Financial Statements
- ----------------- *References are to captions within the part of the registration statement to which the particular item relates except as otherwise indicated. ii Item Location or caption* ---- ------------------------------------- Part C (Other Information) -------------------------- 24 Financial statements and exhibits 25 Persons controlled by or under common control with registrant 26 Number of holders of securities 27 Indemnification 28 Business and other connections of investment adviser 29 Principal underwriters 30 Location of accounts and records 31 Management services 32 Undertakings - ---------------- *References are to captions within the part of the registration statement to which the particular item relates except as otherwise indicated. iii PROSPECTUS March 1, 1997 The Oakmark Fund The Oakmark Select Fund The Oakmark Small Cap Fund The Oakmark Balanced Fund The Oakmark International Fund The Oakmark International Small Cap Fund Formerly The Oakmark International Emerging Value Fund MEMBER OF ----------------- 100% NO-LOAD MUTUAL FUND COUNCIL ----------------- Managed by HARRIS ASSOCIATES L.P. OAKMARK The Oakmark Family of Funds 1997 Prospectus Highlights........................................... 2 Shareholder Transaction Expenses..................... 3 Annual Fund Operating Expenses....................... 4 Financial Highlights................................. 6 The Funds............................................10 How the Funds Invest.................................10 Investment Techniques................................14 Risk Factors.........................................17 Restrictions on the Funds' Investments...............20 How to Purchase Shares...............................21 How to Redeem Shares.................................23 Shareholder Services.................................26 Net Asset Value......................................27 Distributions........................................28 Taxes................................................28 Management of the Funds..............................29 Trustees and Officers................................32 Performance Information..............................34 Other Information....................................35 [INSERT LOGO HERE] For More Information: Please call 1-800-OAKMARK (1-800-625-6275). 24-Hour Net Asset Value Hotline: To obtain the current net asset value per share of a Fund, please call 1-800-GROWOAK (1-800-476-9625). Oakmark family of funds March 1, 1997 Fund Investment Objective - -------------------------------------------------------------------------- THE OAKMARK FUND Long-Term Capital Appreciation OAKMX The Fund invests primarily in equity securities. - -------------------------------------------------------------------------- THE OAKMARK Long-Term Capital Appreciation SELECT FUND The Fund invests primarily in a OAKLX non-diversified portfolio of equity securities. - -------------------------------------------------------------------------- THE OAKMARK Long-Term Capital Appreciation SMALL CAP FUND The Fund invests primarily OAKSX in equity securities of companies with small market capitalizations. - -------------------------------------------------------------------------- THE OAKMARK High Current Income and Preservation BALANCED FUND and Growth of Capital The Fund invests OAKBX in a diversified portfolio of equity and fixed-income securities. - -------------------------------------------------------------------------- THE OAKMARK Long-Term Capital Appreciation INTERNATIONAL FUND The Fund invests primarily in equity OAKIX securities of non-U.S. issuers. - -------------------------------------------------------------------------- THE OAKMARK Long-Term Capital Appreciation INTERNATIONAL The Fund invests primarily in equity SMALL CAP FUND securities of non-U.S. issuers with small OAKEX market capitalizations. - -------------------------------------------------------------------------- NO LOAD-NO SALES CHARGE, NO 12b-1 FEES Minimum Investment Initial purchase--$1,000 Subsequent investments--$100 (see "How to Purchase Shares") Each "Fund" is a series of Harris Associates Investment Trust. The Funds may invest to a limited extent in high-yield, high-risk bonds and in other securities that entail certain risks. See "Risk Factors." This prospectus contains information you should know before investing. Please retain it for future reference. A Statement of Additional Information regarding the Funds dated the date of this prospectus has been filed with the Securities and Exchange Commission and (together with any supplement to it) is incorporated by reference. The Statement of Additional Information may be obtained at no charge by writing or telephoning the Trust at its address or telephone number shown inside the back cover. These securities have not been approved or disapproved by the securities and exchange commission or any state securities commission, nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Prospectus 1 HIGHLIGHTS Harris Associates Investment Trust (the "Trust") provides investors an opportunity to pool their money to achieve economies of scale and diversification, and to take advantage of the professional investment expertise of Harris Associates L.P. (the "Adviser"). The Trust currently issues shares in six series (collectively, the "Funds" and generally, a "Fund"). Each series has distinct investment objectives and policies, and a shareholder's interest is limited to the series in which he or she owns shares. The six series are: The Oakmark Fund ("Oakmark Fund"), The Oakmark Select Fund ("Select Fund"), The Oakmark Small Cap Fund ("Small Cap Fund"), The Oakmark Balanced Fund ("Balanced Fund"), The Oakmark International Fund ("International Fund") and The Oakmark International Small Cap Fund, formerly named The Oakmark International Emerging Value Fund ("International Small Cap Fund"). Each is a "no-load" fund, and there are no sales or 12b-1 charges. The Trust is designed for long-term investors, including those who wish to use shares of one or more series as a funding vehicle for tax-deferred retirement plans (including tax-qualified retirement plans and Individual Retirement Account (IRA) plans), and not for investors who intend to liquidate their investments after a short period of time. Only Balanced Fund is intended to present a balanced investment program between growth and income. The chief consideration in selecting equity securities for each Fund's portfolio is the size of the discount of market price relative to the economic value of the security as determined by the Adviser. The Trust's investment philosophy is predicated on the belief that over time market price and value converge and that investment in securities priced significantly below long-term value presents the best opportunity to achieve long-term capital appreciation. Oakmark Fund seeks long-term capital appreciation by investing primarily in equity securities. Select Fund seeks long-term capital appreciation by investing primarily in a non-diversified portfolio of equity securities. Small Cap Fund seeks long-term capital appreciation by investing primarily in equity securities of companies with small market capitalizations. Balanced Fund seeks high current income and preservation and growth of capital by investing in a diversified portfolio of equity and fixed-income securities. International Fund seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers. International Small Cap Fund (formerly named The Oakmark International Emerging Value Fund) seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers with small market capitalizations. 2 Oakmark family of funds Risks The Funds are intended for long-term investors who can accept fluctuations in value and other risks associated with seeking the investment objectives of the respective Funds through investments in the types of securities in which the Funds may invest. You should understand and consider carefully the risks involved in a Fund before investing in that Fund. See "Risk Factors" for a more detailed discussion. Purchases The minimum initial investment for each Fund is $1,000; each additional investment must be at least $100. Shares may be purchased by check, by wire transfer, by electronic transfer or by exchange. See "How to Purchase Shares." Redemptions For information on redeeming Fund shares, see "How to Redeem Shares." Net Asset Value The purchase and redemption price of a Fund's shares is the net asset value per share. The net asset value is determined as of the close of regular session trading on the New York Stock Exchange. See "Net Asset Value." Adviser Harris Associates L.P. (the "Adviser") provides management and investment advisory services to the Funds. See "Management of the Funds." SHAREHOLDER TRANSACTION EXPENSES
All Funds - -------------------------------------------------------------------------------- Commission to purchase shares (sales load) None - -------------------------------------------------------------------------------- Commission to reinvest dividends None - -------------------------------------------------------------------------------- Deferred sales load None - -------------------------------------------------------------------------------- Redemption fee None - -------------------------------------------------------------------------------- Fee to exchange shares None
* If you request payment of redemption proceeds by wire transfer, you must pay the cost of the wire transfer (currently $5). Prospectus 3 ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets) The following table is intended to help you understand the costs and expenses that an investor in the Funds may bear directly or indirectly. For a more complete explanation of the fees and expenses borne by the Funds, see the discussions under the prospectus headings "How to Purchase Shares" and "Management of the Funds", as well as the Statement of Additional Information incorporated by reference into this prospectus.
Small Int'l Oakmark Select Cap Balanced Int'l Small Cap Fund Fund(a) Fund Fund Fund Fund - -------------------------------------------------------------------------------------------------------------- Investment management fees 1.00% 1.00% 1.25% .75% 1.00% 1.25% 12b-1 fees None None None None None None Other expenses (after reimbursement of certain expenses)(b) .18 .41 .25 .75 .32 .75 - -------------------------------------------------------------------------------------------------------------- Total Fund operating expenses (after reimbursement of certain expenses)(b) 1.18% 1.41% 1.50% 1.50% 1.32% 2.00%
(a) Select Fund pays the Adviser an investment management fee at the annual rate of 1% of its average net assets. Because it has no operating history, its other expenses reflected in the table have been estimated. (b) In the case of Small Cap, Balanced and International Small Cap Funds, the percentages shown have been computed giving effect to the Adviser's agreement to limit the Fund's ordinary operating expenses. See "Management of the Funds." Absent that limitation, the "Other Expenses" and "Total Fund Operating Expenses" of Small Cap Fund, Balanced Fund and International Small Cap Fund would be .36% and 1.61%, 1.89% and 2.64% and 1.40% and 2.65%, respectively. 4 Oakmark family of funds The following example illustrates the expenses that you would pay on a $1,000 investment in each Fund over various time periods assuming (1) a 5% annual rate of return, (2) the operating expense percentages listed in the table above remain the same through each of the periods, (3) reinvestment of all dividends and capital gain distributions, and (4) redemption at the end of each time period.
1 year 3 years 5 years 10 years Oakmark Fund $12 $37 $ 65 $143 Select Fund 14 45 77 169 Small Cap Fund 15 47 82 179 Balanced Fund 15 47 82 179 International Fund 13 42 72 159 International Small Cap Fund 20 63 108 233
This example should not be considered a representation of past or future expenses or performance. Actual expenses may be greater or less than those shown. Prospectus 5 FINANCIAL HIGHLIGHTS The tables below for Oakmark Fund, Small Cap Fund, Balanced Fund, International Fund and International Small Cap Fund reflect the results of the operations for a share outstanding throughout the periods shown and have been audited by Arthur Andersen LLP, independent public accountants. As of October 31, 1996 Select Fund had not commenced operations. These tables should be read in conjunction with the Funds' financial statements and notes thereto, which may be obtained from the Trust upon request without charge.
Oakmark Fund Year 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) .34 .30 .27 .17 (.03) (.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) (.28) (.23) ( .23) (.04) -- -- Distributions (from capital gains) (.84) (1.47) ( .77) (.21) -- -- Total distributions (1.12) (1.70) (1.00) (.25) -- -- Net asset value, end of period $32.39 $28.47 $25.21 $24.18 $17.11 $12.10 Total return 18.07% 21.55% 8.77% 43.21% 41.40% 87.10%
6 Oakmark family of funds Oakmark Fund cont'd
Year Ended October 31, ------------------------------------------------------------------------ 1996 1995 1994 1993 1992 1991 (a) - ------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period ($ million) $3,933.9 $2,827.1 $1,677.3 $1,107.0 $114.7 $4.8 - ------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 1.18%* 1.17% 1.22% 1.32% 1.70% 2.50%(b)* - ------------------------------------------------------------------------------------------------------- Ratio of net income (loss) to average net assets 1.13%* 1.27% 1.19% .94% (.24)% (.66%)(c)* - ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 23.7% 18% 29% 18% 34% 0% - ------------------------------------------------------------------------------------------------------- Average commission paid(d) $ .0530 - -------------------------------------------------------------------------------------------------------
- ------------------------------ *Ratios for the period have been determined on an annualized basis. (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) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund depending on the mix of trades executed in various markets where trading practices and commission rate structures may differ. Prospectus 7 7
International Fund Year Ended October 31, ---------------------------------------------------- 1996 1995 1994 1993 1992(a) - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.97 $ 14.50 $ 14.09 $ 9.80 $ 10.00 - --------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .09 .30 .21 .06 .26 - --------------------------------------------------------------------------------------------------------------------------- Net gains or losses on securities (both realized and unrealized) 2.90 (.77) .43 4.48 (.46) - --------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.99 (.47) .64 4.54 (.20) - --------------------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------------------- Dividends (from net investment income) .00 -- (.08) (.25) -- - --------------------------------------------------------------------------------------------------------------------------- Distributions (from capital gains) (1.04) (1.06) (.15) -- -- -------- ------- ------- ------ ------- Total distributions (1.04) (1.06) (.23) (.25) -- -------- ------- ------- ------ ------- 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 1.32% 1.40% 1.37% 1.26% 2.04%* - --------------------------------------------------------------------------------------------------------------------------- Ratio of net income (loss) to average net assets 1.45% 1.40% 1.44% 1.55% 37.02%* - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 42% 26% 55% 21% 0% - --------------------------------------------------------------------------------------------------------------------------- Average commission rate paid(b) $ .0158 - ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------- *Ratios for the period have been determined on an annualized basis. (a) From September 30, 1992, the date on which Fund shares were first offered for sale to the public. (b) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund depending on the mix of trades executed in various markets where trading practices and commission rate structures may differ. 8 Oakmark family of funds Small Cap Fund, Balanced Fund and International Small Cap Fund
Year Ended October 31, ------------------------------------------------------- Small International Cap Balanced Small Cap Fund Fund Fund - -------------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 $10.00 $10.00 Income from investment operations: Net investment income (.02) .10 .04 Net gains or losses on securities (both realized and unrealized) 3.21 1.19 1.37 ------- ------ ------ Total from investment operations 3.19 1.29 1.41 Less distributions: Dividends (from net investment income) .00 .00 .00 Distributions (from capital gains) .00 .00 .00 Total distributions .00 .00 .00 Net asset value, end of period $13.19 $11.29 $11.41 Total return 31.94% 12.91% 14.15% Ratios/supplemental data: Net assets, end of period ($ million) $218.4 $ 13.8 $ 39.8 Ratio of expenses to average net assets 1.61% 2.50%(a) 2.50%(a) Ratio of net income (loss) to average net assets (.29)% 1.21%(a) .65%(a) Portfolio turnover rate 23.15% 66.35% 27.44% Average brokerage commission paid per share $.0520 $.0581 $.0036
(a) If Balanced Fund and International Small Cap Fund had paid all of their expenses and there had been no reimbursement by the investment adviser, their ratios of expenses to average net assets would have been 2.64% and 2.65%, respectively, and their ratios of net income to average net assets would have been 1.08% and .50%, respectively. Commencing March 1, 1997 the Adviser has voluntarily agreed to reimburse each Fund to the extent that the Fund's annual ordinary operating expenses exceed 1.50% in the case of Small Cap Fund and Balanced Fund, and 2.0% in the case of International Small Cap Fund, of the Fund's average net assets through October 31, 1998, subject to earlier termination by the Adviser on 30 days notice to the Fund. (b) Formerly named Oakmark International Emerging Value Fund. Prospectus 9 THE FUNDS The mutual funds offered by this prospectus are Oakmark Fund, Select Fund, Small Cap Fund, Balanced Fund, International Fund and International Small Cap Fund. Each of the Funds is a no-load "mutual fund" and, except for Select Fund, is a diversified Fund. No Fund imposes any commission or charge when shares are purchased, nor bears any 12b-1 charges. The Funds are series of Harris Associates Investment Trust (the "Trust"), which is authorized to issue shares in separate series. Each series is a separate portfolio of securities and other assets, with its own investment objective and policies. Harris Associates L.P. (the "Adviser") provides investment advisory and administrative services to the Funds. How the Funds Invest The chief consideration in the selection of equity securities for each Fund is the size of the discount of market price relative to the economic value, or underlying value, of the security as determined by the Adviser. The economic or underlying value of a security generally represents the per share net present value of the issuer's estimated long-term cash flows. The Funds may also employ the techniques described below under "Investment Techniques." Oakmark Fund seeks long-term capital appreciation by investing primarily in equity securities. Although income is considered in the selection of securities, the Fund is not designed for investors whose primary investment objective is income. The Fund invests principally in securities of U.S. issuers. However, it may invest up to 25% of its total assets (valued at the time of investment) in securities of non-U.S. issuers, including foreign government obligations and foreign equity and debt securities that are traded over-the-counter or on foreign exchanges. There are no geographic limits on the Fund's foreign investments, but the Fund does not expect to invest more than 5% of its assets in securities of issuers based in emerging markets. See "Risk Factors-- International Investing" below. Select Fund seeks long-term capital appreciation by investing primarily in a non-diversified portfolio of equity securities. The Fund invests principally in securities of U.S. issuers. However, it may invest up to 25% of its total assets (valued at the time of investment) in securities of non-U.S. issuers, including foreign government obligations and foreign equity and debt securities that are traded over-the-counter or on foreign exchanges. There are no geographic limits on the Fund's foreign investments, but the Fund does not expect to invest more than 5% of its assets in securities of issuers based in emerging markets. See "Risk Factors-- International Investing" below. As a "non-diversified" fund, the Fund is not limited under the Investment Company Act of 1940 in the percentage of its assets that it may invest in any one issuer. See "Risk Factors--Non-diversification of Select Fund." 10 Oakmark family of funds Small Cap Fund seeks long-term capital appreciation by investing primarily in equity securities. Under normal market conditions, the Fund invests at least 65% of its total assets, valued at the time of investment, in "small cap companies," as defined below under "How the Funds Invest-Small Cap Companies." Although income is considered in the selection of securities, the Fund is not designed for investors whose primary investment objective is income. The Fund invests principally in securities of U.S. issuers. However, it may invest up to 25% of its total assets (valued at the time of investment) in securities of non-U.S. issuers, including foreign government obligations and foreign equity and debt securities that are traded over-the-counter or on foreign exchanges. There are no geographic limits on the Fund's foreign investments, but the Fund does not expect to invest more than 5% of its assets in securities of issuers based in emerging markets. See "Risk Factors-- International Investing" below. At January 31, 1997 the median market capitalization of the Fund's portfolio was $405 million. See "How the Funds Invest-Median Market Capitalization" below. Balanced Fund seeks high current income and preservation and growth of capital by investing in a diversified portfolio of equity and fixed-income securities. The Fund is intended to present a balanced investment program between growth and income. It generally invests approximately 50--65% of its total assets in equity securities, including securities convertible into equity securities, 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") (Aaa or Aa) or by Standard & Poor's Corporation ("S&P") (AAA or AA), and up to 20% in unrated or lower rated debt securities (measured at market value at the time of investment). The Fund invests principally in securities of U.S. issuers. However, it may invest up to 10% of its total assets (valued at the time of investment) in securities of non-U.S. issuers, including foreign government obligations and foreign equity and debt securities that are traded over-the-counter or on foreign exchanges. The Fund has no geographic limits on its foreign investments, but the Fund does not expect to invest more than 5% of its assets in securities of issuers based in emerging markets. See "Risk Factors-International Investing" below. International Fund seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers. Although income is considered in the selection of securities, the Fund is not designed for investors whose primary investment objective is income. The Adviser considers the relative political and economic stability of the issuer's home country, the ownership structure of the company, and the company's accounting practices in evaluating the potential rewards and risks of an Prospectus 11 investment opportunity. The Fund may invest in securities traded in mature markets (for example, Japan, Canada and the United Kingdom), in less developed markets (for example, Mexico and Thailand), and in selected emerging markets (such as Peru and India). Investments in securities of non-U.S. issuers, especially those traded in less developed or emerging markets, present additional risk. There are no limits on the Fund's geographic asset distribution, but, to provide adequate diversification, the Fund ordinarily invests in the securities markets of at least five countries outside the United States. See "Risk Factors-International Investing" below. Some foreign 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 the Fund in privatizations in appropriate circumstances. In certain of those markets, the ability of foreign entities such as the Fund to participate in privatizations may be limited by local law and/or the terms on which the Fund 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. The equity securities in which the Fund may invest include common and preferred stocks and warrants or other similar rights and convertible securities. The Fund may purchase 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 non-U.S. issuers. Under normal market conditions, the Fund invests at least 65% of its total assets, valued at the time of investment, in securities of non- U.S. issuers. International Small Cap Fund (formerly named The Oakmark International Emerging Value Fund) seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers with small market capitalizations. Under normal market conditions, the Fund invests at least 65% of its total assets, valued at the time of investment, in "small cap companies," as defined below under "How the Funds Invest-Small Cap Companies." Although income is considered in the selection of securities, the Fund is not designed for investors whose primary investment objective is income. The Adviser considers the relative political and economic stability of the issuer's home country, the ownership structure of the company, and the company's accounting practices in evaluating the potential rewards and risks of an investment opportunity. The Fund invests in securities traded in both developed and emerging markets. Investments in securities of non-U.S. issuers, especially those traded in less developed or emerging markets, present additional risks. There are no limits on the Fund's geographic asset distribution, but, to 12 Oakmark family of funds provide adequate diversification, the Fund ordinarily invests in the securities markets of at least five countries outside the United States. See "Risk Factors- International Investing" below. Some foreign 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 the Fund in privatizations in appropriate circumstances. In certain of those markets, the ability of foreign entities such as the Fund to participate in privatizations may be limited by local law and/or the terms on which the Fund 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. The equity securities in which the Fund may invest include common and preferred stocks and warrants or other similar rights and convertible securities. The Fund may purchase securities of non-U.S. issuers directly or in the form of ADRs, EDRs, GDRs, or other securities representing underlying shares of non-U.S. issuers. At January 31, 1997 the median market capitalization of the Fund's portfolio was $227 million. See "How the Funds Invest-Median Market Capitalization" below. Under normal market conditions, each Fund expects to be substantially fully invested in the types of securities described in the preceding paragraphs. Within the limitations described in this prospectus, the percentages of Fund assets invested in various types of securities will vary in accordance with the judgment of the Adviser. To the extent that investments meeting a Fund's criteria for investment are not available, or when the Adviser considers a temporary defensive posture advisable, 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. In seeking to achieve its investment objective, each 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 12 months after purchase in light of a change in the circumstances of a particular company or industry or in general market or economic conditions. Small Cap Companies. As used in this prospectus 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 (the "S&P Index") as most recently reported. The market capitalization of a company is the total market value of its outstanding Prospectus 13 common stock. The S&P Index is a broad index of 600 small capitalization companies. As of January 31, 1997 the largest market capitalization of companies included in the S&P Index was $2.68 billion. Median Market Capitalization. The "median market capitalization" of the portfolio of Small Cap Fund or of International Small Cap Fund stated above is a measure of the size of the companies in which the Fund invests. One-half of the Fund's equity investments as of the stated date were in securities of companies with market capitalizations at or above the stated median market capitalization of the Fund's portfolio. Investment Techniques Equity Securities. The 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 the selection of equity securities for each Fund is the size of the discount of market price relative to the economic value of the security as determined by the Adviser. The Adviser's investment philosophy for those investments is predicated on the belief that over time market price and value converge and that investment in securities priced significantly below long-term value presents the best opportunity to achieve long-term capital appreciation. The Adviser uses several qualitative and quantitative methods in analyzing economic value, but considers the primary determinant of value to be the enterprise's long-run ability to generate cash for its owners. Once the Adviser has determined that a security is undervalued, the Adviser will consider it for purchase by a Fund, taking into account the quality and motivation of the management, the firm's market position within its industry and its degree of pricing power. The Adviser believes that the risks of equity investing are often reduced if management's interests are strongly aligned with the interests of its stockholders. Debt Securities. Each Fund may invest in debt securities of both governmental and corporate issuers. Each of Oakmark Fund, Select Fund and Small Cap Fund may invest up to 25% of its assets, Balanced Fund may invest up to 20% of its assets, and 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, without a minimum rating requirement. Lower- grade debt securities (commonly called "junk bonds") are obligations of issuers 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. See "Risk Factors." A description of the ratings used by S&P and Moody's is included as an appendix to the Statement of Additional Information. 14 Oakmark family of funds Short Sales against the Box. Each Fund may sell short securities the Fund owns or has the right to acquire without further consideration, a technique called selling short "against the box." Short sales against the box may protect the Fund against the risk of losses in the value of its portfolio securities because any unrealized losses with respect to such securities should be wholly or partially offset by a corresponding gain in the short position. However, any potential gains in such securities should be wholly or partially offset by a corresponding loss in the short position. Short sales against the box may be used to lock in a profit on a security when, for tax reasons or otherwise, the Adviser does not want to sell the security. The Trust does not currently expect that more than 20% of any Fund's total assets would be involved in short sales against the box. For a more complete explanation, please refer to the Statement of Additional Information. Currency Exchange Transactions. 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. Each Fund 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 in countries whose currencies are linked, the Adviser 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. Other Investment Companies. Certain markets are closed in whole or in part to equity investments by foreigners. A Fund may be able to invest in such markets solely or primarily through governmentally authorized Investment vehicles or companies. Each Prospectus 15 Fund generally may invest up to 10% of its assets in the aggregate in shares of other investment companies and up to 5% of its assets in any one investment company, as long as no investment represents more than 3% of the outstanding voting stock of the acquired investment company at the time of investment. Investment in another investment company may involve the payment of a premium above the value of such issuers' portfolio securities, and is subject to market availability. The Trust does not intend to invest in such vehicles or funds unless, in the judgment of the Adviser, the potential benefits of the investment justify the payment of any applicable premium or sales charge. As a shareholder in an investment company, a Fund would bear its ratable share of that investment company's expenses, including its advisory and administration fees. At the same time the Fund would continue to pay its own management fees and other expenses. When-Issued and Forward Commitment Securities. Each Fund may purchase securities on a "when-issued" basis and may purchase or sell securities on a "forward commitment" basis in order to hedge against anticipated changes in interest rates and prices. There is a risk that the securities may not be delivered or that they may decline in value before the settlement date. Private Placements. Each Fund may acquire securities in private placements. Because an active trading market may not exist for such securities, the sale of such securities may be subject to delay and additional costs. No Fund will purchase such a security if more than 15% of the value of such Fund's net assets would be invested in illiquid securities. Lending of Portfolio Securities. Each Fund except Oakmark Fund may lend its portfolio securities to broker-dealers and banks to the extent indicated in restriction 5 under "Restrictions on the Funds' Investment." 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 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 both delays in liquidating the loan collateral or recovering the loaned securities and losses including (a) possible decline in the value of the collateral or in the value of the securities loaned during the period while the Fund seeks to enforce its rights thereto, (b) possible subnormal levels of income and lack of access to income during this period, and (c) expenses of enforcing its rights. Options. Each Fund may purchase both call options and put options on securities. A call or put option is a con- 16 Oakmark Family of Funds tract that gives the Fund, in return for a premium paid on purchase of the option, the right to buy from, or to sell to, the seller of the option the security underlying the option at a specified exercise price during the term of the option. Cash Reserves. 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. Risk Factors General. All investments, including those in mutual funds, have risks, and no investment is suitable for all investors. Each Fund is intended for long-term investors. Only Balanced Fund is intended to present a balanced investment program between growth and income. Small Cap Companies. During some periods, the securities of small 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 cap companies tend to be more volatile and less liquid than stocks of large companies. Small 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. International Fund and International Small Cap Fund provide long-term investors with an opportunity to invest a portion of their assets in a diversified portfolio of securities of non-U.S. issuers. Each of the other Funds may invest up to 25% (or 10% in the case of Balanced Fund) of its assets in securities of non-U.S. issuers. 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 these countries have exceeded those of similar U.S. investments, although there can be no assurance that these conditions will continue. You should understand and consider carefully the greater risks involved in investing internationally. Investing in securities of non-U.S. issuers, positions in 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 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 in foreign Prospectus 17 markets than in the United States; imposition of foreign taxes; and sometimes less advantageous legal, operational and financial protections applicable to foreign subcustodial arrangements. Although the Funds try to invest in companies and governments of countries having stable political environments, there is the possibility of 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 adverse political, social or diplomatic developments that could affect investment in these nations. 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. 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. Any Fund may invest in ADRs, EDRs or GDRs that are not sponsored by the issuer of the underlying security. To the extent it does so, the 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 is higher than the cost of investing in U.S. securities. International Fund and International Small Cap 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. Debt Securities. As noted above, each Fund may invest to a limited extent in debt securities that are rated below investment grade or, if unrated, are considered by the Fund's investment adviser to be of comparable quality. 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 its debt securi 18 Oakmark Family of Funds ties. 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. Investment in medium- or lower-grade debt securities involves greater investment risk, including the possibility of issuer default or bankruptcy. An economic downturn could severely disrupt this market 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. Furthermore, medium- and lower-grade debt securities tend to 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 the Fund may have greater difficulty selling its portfolio securities. The market value of these securities and their liquidity may be affected by adverse publicity and investor perceptions. Non-diversification of 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 issuer. 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, 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. See Investment Restriction number 1, below. Prospectus 19 Change in Objective. Each Fund's investment objective may be changed by the board of trustees without shareholder approval. Shareholders would 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 the Fund remains an appropriate investment in light of your then current financial position and needs. There can be no assurance that any Fund will achieve its investment objective. Restrictions on the Funds' Investments 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. 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 total assets]; 4. Issue any senior security except in connection with permitted borrowings; or 5. Make loans, except that each Fund may invest in debt obligations and repurchase agreements*, and each Fund other than Oakmark Fund may lend its portfolio securities [a Fund will not lend securities having a value in excess of 33% of its assets (valued at the time of any loan)]. These restrictions, except the bracketed portions and the footnote, are "fundamental" and cannot be changed as to a Fund without the approval of a "majority of the outstanding voting securities" of that Fund as defined in the Investment Company Act of 1940. All of the Funds' investment restrictions, including additional fundamental restrictions, are set forth in the Statement of Additional Information. *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 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. Oakmark Family of Funds 20 HOW TO PURCHASE SHARES You may purchase shares of any of the Funds by check, by wire transfer, by electronic transfer or by exchange. There are no sales commissions or underwriting discounts. The minimum initial investment for each Fund is $1,000. Minimum subsequent investments are $100, except for reinvestments of dividends and capital gain distributions. By Check. To make an initial purchase of shares, complete and sign the Share Purchase Application and mail it to the Trust's transfer agent, State Street Bank and Trust Company, Attention: Oakmark Funds, P.O. Box 8510, Boston, Massachusetts 02266-8510, together with a check for the total purchase amount payable to State Street Bank and Trust Company. To make subsequent purchases of shares, submit a check along with either the stub from your Fund account confirmation statement or a note indicating the amount of the purchase, your account number, and the name in which your account is registered. The Trust will not accept cash, drafts, third party checks, or checks drawn on banks outside of the United States. If your order to purchase shares of a Fund is canceled because your check does not clear, you will be responsible for any resulting loss incurred by the Fund. By Wire Transfer. You may also purchase shares by instructing your bank to wire transfer money to the Trust's custodian bank. Your bank may charge you a fee for sending the wire transfer. If you are opening a new account by wire transfer, you must first telephone the transfer agent at 1-800-OAKMARK (choose menu option 2) to request an account number and furnish your social security or other tax identication number. Neither the Funds nor the Trust will be responsible for the consequences of delays, including delays in the banking or Federal Reserve wire transfer systems. By Telephone Call and Electronic Transfer. If you have an established Fund account with an established electronic transfer privilege, you may make subsequent purchases of shares by an electronic transfer of funds from your bank account by calling 1-800-OAKMARK (choose menu option 2). You may not open a new account through electronic transfer. If your order to purchase shares of a Fund is canceled because your electronic transfer does not clear, you will be responsible for any resulting loss incurred by the Fund. By Automatic Investment. You may authorize the monthly or quarterly purchase of shares of a Fund for a specified dollar amount to be transferred electronically from your bank account each month or quarter by so electing on your new account purchase application. By Exchange. You may purchase shares of a Fund by exchange of shares from another Fund or by exchange of Service Units of GS Short Duration Tax-Free Fund, a portfolio of Goldman Sachs Trust, or of ILA Service Units of Government Portfolio or Tax-Exempt Portfolio, each a portfolio of Goldman Sachs Institutional Liquid Assets (such Prospectus 21 Service Units and ILA Service Units are referred to as "Oakmark Units"). You may initiate a purchase by exchange either by phone (if the telephone exchange privilege has been established on the account from which the exchange is being made) or by mail, or you may authorize a monthly or quarterly redemption of a specified dollar amount of Oakmark Units to be used to purchase shares of a Fund. An exchange transaction is a sale and purchase of shares for federal income tax purposes and may result in capital gain or loss. Except for automatic exchanges from Oakmark Units, you may not make more than six exchanges from any Fund in any calendar year, and the Trust may refuse requests for more frequent exchanges. Restrictions apply; please review the information under "How to Redeem Shares--By Exchange." Purchases through Intermediaries. You may purchase or redeem shares of the Funds through certain investment dealers, banks or other institutions. Any such purchase or redemption generally will not be effective until the order or request is received by the Trust's transfer agent; it is the responsibility of the dealer to transmit your order or request promptly. These institutions may impose charges for their services. Any such charges could constitute a substantial portion of a smaller account, and may not be in your best interest. You may purchase or redeem shares of the Funds directly from or with the Trust without imposition of any charges other than those described in this prospectus. Purchase Price and Effective Date. Each purchase of a Fund's shares is made at that Fund's net asset value (see "Net Asset Value") next determined as follows: A purchase by check, wire transfer or electronic transfer is made at the net asset value next determined after receipt by the Trust's transfer agent of your check or wire transfer or your electronic transfer investment instruction. A purchase through a dealer or finnancial institution that is an 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 dealer or financial institution. General. The Trust cannot accept a purchase order specifying a particular purchase date or price per share. Each purchase order for a Fund must be accepted by an authorized officer of the Trust or its transfer agent and is not binding until accepted and entered on the books of that Fund. Once your purchase order has been accepted, you may not cancel or revoke it; however, you may redeem the shares. The Trust reserves the right not to accept any purchase order that it determines not to be in the best interest of the Trust or of a Fund's shareholders. The Trust will not be responsible for any losses resulting from unauthorized transactions initiated by telephone if it or its transfer agent follows reasonable procedures designed to verify the identity of the caller. Those procedures may include recording the call, requesting additional information and sending written confir- 22 Oakmark Family of Funds mation of telephone transactions. You should verify the accuracy of telephone transactions immediately upon receipt of your confirmation statement. How to Redeem Shares By Mail. You may redeem all or any part of your shares of a Fund upon your written request delivered to the Trust's transfer agent, State Street Bank and Trust Company, Attention: Oakmark Funds, P.O. Box 8510, Boston, Massachusetts 02266-8510. Your redemption request must: (1) identify the Fund and give your account number; (2) specify the number of shares or dollar amount to be redeemed; and (3) be signed in ink by all account owners exactly as their names appear on the account. Your request must also include a signature guarantee if any of the following situations applies: . 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 (record address); . the redemption check is to be made payable to someone other than the registered account owner; or . you are instructing us 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, but not a notary public. The signature guarantee must include an ink-stamped guarantee for each signature on the redemption request and must include the name of the guarantor bank or firm and an authorized signature. Special rules apply to redemptions by corporations, trusts and partnerships. In the case of a corporation, the request must be signed in the name of the corporation by an officer whose title must be stated, and must be accompanied by a bylaw provision or resolution of the board of directors, certified within 60 days, authorizing the officer to so act. A redemption request from a partnership or a trust must be signed in the name of the partnership or trust by a general partner or a trustee and include a signature guarantee. If the trustee is not named in the account registration, a redemption request by a trust must also include evidence of the trustee's appointment as such (e.g., a certified copy of the relevant portions of the trust instrument). Under certain circumstances, before the shares can be redeemed, additional documents may be required in order to verify the authority of the person seeking to redeem. By Telephone. You may redeem shares from your account by calling 1-800-OAKMARK (choose menu option 2). The proceeds may be sent by check to your registered address or you may request payment by wire transfer, or by Prospectus 23 electronic transfer, to a checking account previously designated by you at a bank that is a member of the Automated Clearing House. Redemption proceeds payable by wire transfer or by electronic transfer will normally be sent on the next business day after receipt of the redemption request. A redemption request received by telephone after 4 p.m. eastern time (or after the close of regular session trading on the New York Stock Exchange if the Exchange closes before 4 p.m.) is deemed received on the next business day. You may not redeem by telephone shares held in an IRA account or an account for which you have changed the address within the preceding 30 days. By Exchange. You may redeem all or any portion of your shares of a Fund or of Oakmark Units and use the proceeds to purchase shares of any of the other Funds or Oakmark Units if your signed, properly completed Application is on file. An exchange transaction is a sale and purchase of shares for federal income tax purposes and may result in capital gain or loss. Except for automatic exchanges from Oakmark Units, you may not make more than six exchanges from any Fund in any calendar year, and the Trust may refuse requests for more frequent exchanges. Before exchanging into Oakmark Units, you should obtain the prospectus relating to the Oakmark Units from the Adviser and read it carefully. The exchange privilege is not an offering or recommendation of Oakmark Units. The registration of the account to which you are making an exchange must be exactly the same as that of the account from which the exchange is made and the amount you exchange must meet any applicable minimum investment of the fund being purchased. An exchange may be made by following the redemption procedure described above under "By Mail" and indicating the fund to be purchased, except that a signature guarantee normally is not required. You may exchange among shares of the Funds and Oakmark Units by calling 1-800-OAKMARK (choose menu option 2). An exchange request received by telephone after 4 p.m. eastern time (or after the close of regular session trading on the New York Stock Exchange if the Exchange closes before 4 p.m.) is deemed received on the next business day. The Trust's general redemption policies apply to redemptions by Telephone Exchange. See "General Redemption Policies." The Trust reserves the right at any time without prior notice to suspend or terminate the use of the telephone exchange privilege by any person or class of persons. The Trust believes that use of the telephone exchange privilege by investors utilizing market-timing strategies adversely affects the Funds. Therefore, the Trust generally will not honor requests for telephone exchanges by shareholders identified by the Trust as "market-timers." Except for automatic exchanges from Oakmark Units, you may not make more than six exchanges from any Fund in any calendar year. Although the Trust will attempt to give prior notice of a suspension or termination of 24 Oakmark family of funds an exchange privilege when it is reasonably able to do so, the suspension or termination may be effective immediately, thereby preventing any uncompleted exchange. See "How to Redeem Shares-By Exchange." During periods of volatile economic and market conditions, you may have difficulty placing your exchange by telephone; you may wish to consider placing your exchange by mail during such periods. By Automatic Redemption. You may automatically redeem a fixed dollar amount of shares each month or quarter and have the proceeds sent by check to you or deposited by electronic transfer into your bank account by so electing on your new account purchase application. General Redemption Policies. You may not cancel or revoke your redemption order once your instructions have been received and accepted. The Trust cannot accept a redemption request that specifies a particular date or price for redemption or any special conditions. Please telephone the transfer agent if you have any questions about requirements for a redemption before submitting your request. The Trust reserves the right to require a properly completed Application before making payment for shares redeemed. The price at which your redemption order will be executed is the net asset value next determined after proper redemption instructions are received. See "Net Asset Value." Because the redemption price you receive depends upon that Fund's net asset value per share at the time of redemption, it may be more or less than the price you originally paid for the shares and may result in a realized capital gain or loss. The Trust will generally mail redemption proceeds that are payable by check within seven days after proper instructions are received. If you attempt to redeem shares within 15 days after they have been purchased by check or electronic transfer, the Trust may delay payment of the redemption proceeds to you until it can verify that payment for the purchase of those shares has been (or will be) collected. To reduce such delays, the Trust recommends that your purchase be made by wire transfer through your bank. If you so request, the proceeds of your redemption may be paid by wire transfer to your bank account, provided the redemption proceeds are at least $250, but the cost of the wire transfer (currently $5) will be deducted from the redemption proceeds. A wire transfer will normally result in your bank account receiving "good funds" on the business day following the date of redemption of your shares. If the proceeds of your redemption are sent by electronic transfer, your bank will be notified of the transfer, but your bank account will not receive "good funds" for at least one week. Neither the Trust, its transfer agent, nor their respective officers, trustees, directors, employees, or agents will be responsible for the authenticity of Prospectus 25 instructions provided by telephone, nor for any loss, liability, cost or expense for acting upon instructions furnished thereunder if they reasonably believe that such instructions are genuine. The Funds employ procedures reasonably designed to confirm that instructions communicated by telephone are genuine. Use of any telephone redemption or exchange privilege authorizes the Funds and their transfer agent to tape-record all instructions to redeem. In addition, callers are asked to identify the account number and registration, and may be required to provide other forms of identification. Written confirmations of transactions are mailed promptly to the registered address; a legend on the confirmation requests the shareholder to review the transactions and inform the Fund immediately if there is a problem. If a Fund does not follow reasonable procedures for protecting shareholders against loss on telephone transactions, it may be liable for any losses due to unauthorized or fraudulent instructions. The Trust reserves the right at any time without prior notice to suspend, limit, modify or terminate any privilege or its use in any manner by any person or class. The Trust also reserves the right to redeem shares in any account and send the proceeds to the owner if the shares in the account do not have a value of at least $1,000. A shareholder would be notified that the account is below the minimum and allowed 30 days to bring the account value up to the minimum. Shares in any account you maintain with a Fund may be redeemed to the extent necessary to reimburse a Fund for any loss it sustains that is caused by you (such as losses from uncollected checks and electronic transfers or any Fund liability under the Internal Revenue Code provisions on backup withholding relating to your account). Shareholder Services Reporting to Shareholders. You will receive a confirmation statement reflecting each of your purchases and redemptions of shares of a Fund, as well as periodic statements detailing distributions made by that Fund. Shares purchased by reinvestment of dividends or pursuant to an automatic plan will be confirmed to you quarterly. In addition, the Trust will send you quarterly and annual reports showing Fund portfolio holdings and will provide you annually with tax information. IRA Plan. The Trust has a master individual retirement account (IRA) plan that allows you to invest 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 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 an IRA with the Fund to which your employer may contribute, subject to special rules designed to avoid discrimination. Establishing Privileges. You may establish any of the shareholder privileges when you complete an application 26 Oakmark family of funds to purchase shares of a Fund. If you have already established an account and want to add or change a privilege, please call the transfer agent at 1-800- OAKMARK (choose menu option 2) to request the appropriate form. Your call will be recorded. Audio Response System. You may obtain information about your account, such as account balance and last transaction and distribution information, or you may order duplicate statements, by calling the Funds' Audio Response System at 1-800-OAKMARK (choose menu option 1). Please note: you must have a personal identification ("PIN") number to access the Audio Response System. Call 1-800- OAKMARK (choose menu option 2) and speak with a customer service representative to obtain your PIN number. Your call will be recorded. Account Address Change. You may change your address of record for a Fund account by sending written instructions to the transfer agent at its address shown on the inside back cover of this prospectus or by telephoning the transfer agent at 1-800-OAKMARK (choose menu option 2). Your call will be recorded. 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 Redeem Shares-By Mail" regarding signature guarantees. Questions about Your Account. If you have a question about your account, you may telephone the transfer agent at 1-800-OAKMARK (choose menu option 2). Net Asset Value The net asset value of a share of each Fund is determined by the Fund's custodian, State Street Bank and Trust Company, as of the close of regular session trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time) on any day on which that exchange is open for trading by dividing the market value of that Fund's assets, less its liabilities, by the number of shares outstanding. Trading in the portfolio securities of International Fund or International Small Cap Fund (and in any securities of non-U.S. issuers held by any other Fund) takes place in various markets on days and at times other than when the New York Stock Exchange is open for trading. Therefore, the calculation of net asset value 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 may not be purchased or redeemed. Price information can be obtained by calling the 24-Hour Net Asset Value Hotline, 1-800-GROWOAK (1-800-476-9625). Prospectus 27 Distributions Each Fund distributes to shareholders at least annually substantially all net investment income 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 Dividends from investment income 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. You will be advised annually 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. If you purchase shares shortly before a record date for a distribution you will, in effect, receive a return of a portion of your investment, but the distribution will be taxable to you even if the net asset value of your shares is reduced below your cost. However, for federal income tax purposes your original cost would continue as your tax basis. If you redeem shares within six months, any loss on the sale of those shares would be long-term capital loss to the extent of any distributions of long-term capital gain that you have received on those shares. 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 that 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 the Fund. If (a) you fail to (i) furnish your properly certified social security or other tax identification number or (ii) certify that your tax identification number is correct or that you are not subject to backup withholding due to the underreporting of certain income, or (b) the Internal Revenue Service informs the Trust that your tax identification number is incorrect, the Trust may be required to withhold Federal income tax at a rate of 31% ("backup withholding") from certain payments (including redemption proceeds) to you. These certifications are contained in the New Account Purchase Application that you should complete and return when you open an account. The Fund must promptly pay to the IRS all amounts withheld. Therefore, it is usually not possible for the Fund to reimburse you for amounts withheld. You may claim the amount 28 Oakmark family of funds withheld as a credit on your Federal income tax return. This 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 adviser. Management of the Funds The board of trustees of the Trust has overall responsibility for the conduct of the affairs of the Funds and the Trust. The trustees serve indefinite terms of unlimited duration. The trustees appoint their own successors, provided that at least two-thirds of the trustees, after such appointment, have been elected by shareholders. Shareholders may remove a trustee, with or without cause, upon the declaration in writing or vote of two-thirds of the Trust's outstanding shares. A trustee may be removed with or without cause upon the written declaration of a majority of the trustees. The Funds' investments and business affairs are managed by the Adviser, Harris Associates L.P. The Adviser also serves as investment adviser to individuals, trusts, retirement plans, endowments and foundations, and manages numerous private partnerships. The Adviser was organized in 1995 to succeed to the business of a previous limited partnership, also named Harris Associates L.P. (the "Former Adviser"), that, together with its predecessor, had advised and managed mutual funds since 1970. The Adviser, a limited partnership, is managed by its general partner, Harris Associates, Inc. ("HAI"), a wholly-owned subsidiary of New England Investment Companies, L.P. ("NEIC"). NEIC owns all of the limited partnership interests in the Adviser. NEIC is a publicly traded limited partnership that owns investment management firms and that is a subsidiary of Metropolitan Life Insurance Company. 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. The Adviser has voluntarily agreed to reimburse each Fund to the extent that the Fund's annual ordinary operating expenses exceed the following percent of the Fund's average net assets through October 31, 1998, subject to earlier termination by the Adviser on 30 days' notice to the Fund: 1.5% in the case of Oakmark Fund, Select Fund, Small Cap Fund or Balanced Fund and 2% in the case of International Fund and International Small Cap Fund. The Trust uses "Harris Associates" in its name and "Oakmark" in the names of the Funds by license from the Adviser and would be required to stop using those names if Harris Associates ceased to be the Adviser. The Adviser has the right to use the names for another enterprise, including another investment company. Prospectus 29 The investment objective and policies of Oakmark Fund were developed by the Adviser and by Robert J. Sanborn, C.F.A., the Fund's portfolio manager. Mr. Sanborn joined the Adviser as a portfolio manager and analyst in 1988. Prior thereto, he had been a portfolio manager/analyst with The State Teachers Retirement System of Ohio. Mr. Sanborn holds an M.B.A. in Finance from the University of Chicago (1983) and a B.A. in Economics from Dartmouth College (1980). The investment objective and policies of Select Fund were developed by the Adviser and by William C. Nygren, C.F.A., the Fund's portfolio manager. Mr. Nygren joined the Adviser as an analyst in 1983, and has been the Adviser's Director of Research since 1990. Prior thereto, he had been an analyst with Northwestern Mutual Life Insurance Company. Mr. Nygren holds an M.S. in Finance from the University of Wisconsin (1981) and a B.S. in Accounting from the University of Minnesota (1980). The investment objective and policies of Small Cap Fund were developed by the Adviser and by Steven J. Reid, C.F.A., the Fund's portfolio manager. Mr. Reid joined the Adviser as an accountant in 1980 and has been an investment analyst since 1985. He holds a B.A. in Business from Roosevelt University (1979). The investment objective and policies of Balanced Fund were developed by the Adviser and by Clyde S. McGregor, C.F.A., the Fund's portfolio manager. 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). 30 Oakmark family of funds The investment objective and policies of International Fund were developed by the Adviser and by David G. Herro, C.F.A., the Fund's portfolio manager. The Fund is co-managed by Michael J. Welsh, C.F.A. and C.P.A. 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. Mr. Herro holds an M.A. in Economics from the University of Wisconsin--Milwaukee (1986) and a B.S. in Business and Economics from the University of Wisconsin--Platteville (1985). Mr. Welsh joined the adviser as an international analyst in 1992. Previously he had been a senior associate, valuation services, with Coopers & Lybrand. Mr. Welsh holds an M.M. in Finance from Northwestern University (1993) and a B.S. in Accounting from the University of Kansas (1985). The investment objective and policies of International Small Cap Fund were developed by the Adviser and by David G. Herro, the Fund's portfolio manager. The Fund is co-managed by Adam Schor, C.F.A. Mr. Schor joined the Adviser as an international analyst in 1993. Previously he had been an analyst with American Family Insurance Group and the State of Wisconsin Investment Board. Mr. Schor holds an M.S. in Finance from the University of Wisconsin--Madison (1993) and a B.S. in Journalism and Economics from Northwestern University (1986). Brokerage transactions for the Funds may be executed through Harris Associates Securities L.P., a registered broker-dealer and an affiliate of the Adviser. Prospectus 31 TRUSTEES AND OFFICERS The trustees and officers of the Trust and their principal business activities during the past five years are:
Name, Position(s) with Trust and Age at January 31, 1997 Principal Occupation(s) during Past Five Years# - -------------------------------------------------------------------------------- Victor A. Morgenstern* Chief executive officer (Chairman of the Board since Trustee and President, 54 1996; President prior thereto), HAI; Chairman, Harris Partners, L.L.C. since September 1995 Michael J. Friduss Principal, MJ Friduss & Associates (telecommunica- Trustee, 54 tions consultants), since 1993; Vice President-- Customer Service and Information Technology, Ameritech Corporation (telecommunications) Thomas H. Hayden Executive Vice President and director, Bozell Trustee, 45 Worldwide, Inc. (advertising and public relations) Christine M. Maki Vice President--Tax, Hyatt Corporation (hotel Trustee, 36 management) since 1995; Tax Manager, Coopers & Lybrand (independent accountants), prior thereto Allan J. Reich Senior Partner and Chair of Corporate/Securities Trustee, 48 Practice Group, D'Ancona & Pflaum (attorneys), since 1993; Senior Partner, McDermott, Will & Emery (attorneys), prior thereto Marv R. Rotter General Manager, Rotter & Associates Trustee, 50 (financial services) Burton W. Ruder President, The Academy Group (venture capital Trustee, 53 investments and transaction financing) Peter S. Voss* Chairman and Chief Executive Officer, New England Trustee, 50 Investment Companies, Inc. and New England Investment Companies, L.P. Gary N. Wilner, M.D. Senior Attending Physician, Evanston Hospital, and Trustee, 56 Medical Director--CardioPulmonary Wellness Program, Evanston Hospital Corporation Robert J. Sanborn Portfolio Manager and Analyst, HALP Executive Vice President and Portfolio Manager (Oakmark Fund), 38
32 OAKMARK FAMILY OF FUNDS Name, Position(s) with Trust and Age at January 31, 1997 Principal Occupation(s) during Past Five Years - -------------------------------------------------------------------------------- DAVID G. HERRO Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (International Fund and International Small Cap Fund), 36 CLYDE S. McGREGOR Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (Balanced Fund), 44 WILLIAM C. NYGREN Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (Select Fund), 38 STEVEN J. REID Portfolio Manager and Analyst, HALP Vice President and Portfolio Manager (Small Cap Fund), 40 ADAM SCHOR Portfolio Manager and Analyst, HALP, since 1993; Assistant Vice President Analyst, American Family Insurance Group, and Co-Portfolio Manager prior thereto (International Small Cap Fund), 32 MICHAEL J. WELSH Portfolio Manager and Analyst, HALP Assistant Vice President and Co-portfolio Manager (International Fund), 33 ANN W. REGAN Director of Mutual Fund Operations, HALP, Vice President--Shareholder since 1996; Special Projects Assistant to the Operations and Assistant General Counsel, HALP, 1995--1996; Deputy Secretary, 48 Corporation Counsel, City of Chicago, 1993--1994; Partner, Wildman, Harrold, Allen & Dixon (attorneys), prior thereto Prospectus 33 Name, Position(s) with Trust and Age at January 31, 1997 Principal Occupation(s) during Past Five Years - -------------------------------------------------------------------------------- Anita M. Nagler Vice President, HAI, since 1994; General Secretary, 40 Counsel, HALP, since 1993; Associate Regional Administrator--Enforcement, Securities and Exchange Commission, prior thereto Donald Terao Secretary, Treasurer, and Chief Financial Treasurer, 47 Officer HAI, since 1995; Controller, HALP, prior thereto Kristi L. Rowsell Assistant Treasurer, HALP, since 1996; Tax and Assistant Treasurer, 30 Accounting Manager, HALP, 1995-1996; Vice President and Treasurer, Calamos Asset Management, Inc., prior thereto # As used in this table, from and after September 29, 1995 "HALP" and "HAI" refer to the Adviser and the general partner of the Adviser, respectively, and prior to that date those terms refer to the Former Adviser and the general partner of the Former Adviser, respectively. * Messrs. Morgenstern and Voss are trustees who are "interested persons" (as defined in the Investment Company Act) of the Trust by virtue of their relationships with HAI. 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. "Average Annual Total Return" is the average annual compound rate of change in value represented by the Total Return for the period. All of these calculations assume the reinvestment of dividends and distributions in additional shares of the Fund. Income taxes are not taken into account. In advertising and sales literature, a Fund's performance may be compared to market indexes and to the performance of other mutual funds. A Fund may also publicize its comparative performance as computed in rankings or ratings determined by independent services or publications including Lipper Analytical Services, Inc., Morningstar, Inc. and others. The performance of a Fund is a function of conditions in the securities markets, porffolio management and operating expenses, and past results are not necessarily indicative of future results. See "Investment Objectives" and "Investment Restrictions." Performance information supplied by a Fund may not provide a basis for comparison with other investments using different reinvestment assumptions or time periods. 34 Oakmark Family of Funds Other Information The Funds are series of Harris Associates Investment Trust (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 ("Declaration of Trust") dated February 1, 1991, which provides that each shareholder shall be deemed to have agreed to be bound by the terms thereof. The Declaration of Trust may be amended by a vote of either the Trust's shareholders or its trustees. The Trust may issue an unlimited number of shares, in one or more series, each with its own investment objective, policies and restrictions, as the board of trustees may authorize. Any such series of shares may be further divided, without shareholder approval, into two or more classes of shares having such preferences or special or relative rights or privileges as the trustees may determine. The Funds' shares are not currently divided into classes. The Funds are the only series of the Trust currently being offered. All shares issued will be fully paid and non-assessable and will have no preemptive or conversion rights. Each share of a series is entitled to participate pro rata in any dividends and other distributions declared by the board of trustees with respect to that series, and all shares of a series have equal rights in the event of liquidation of that series. Each share is entitled to one vote on each matter presented to shareholders. As a business trust, the Trust is not required to hold annual shareholder meetings. However, special meetings may be called for purposes such as electing or removing trustees, changing fundamental policies, or approving an investment advisory contract. On any matter submitted to a vote of shareholders, shares are voted in the aggregate and not by individual series except when required by the Investment Company Act of 1940 or other applicable law, or when the board of trustees determines that the matter affects only the interests of one or more series, in which case shareholders of the unaffected series are not entitled to vote on such matters. All shares of the Trust are voted together in the election of trustees. Inquiries regarding the Funds should be directed to the Trust at its address or telephone number shown on the inside back cover. Prospectus 35 The Oakmark Family of Funds 1997 Prospectus ------------------------------------------------------------------------- Investment Adviser Harris Associates L.P. Two North LaSalle Street Chicago, Illinois 60602-3790 Transfer Agent, Dividend Disbursing Agent & Custodian State Street Bank and Trust Company Attention: Oakmark Funds P.O. Box 8510 Boston, Massachusetts 02266-8510 Auditors Arthur Andersen LLP Chicago, Illinois Legal Counsel Bell, Boyd & Lloyd Chicago, Illinois [LOGO OAKMARK Family of Funds] For More Information: Please call 1-800-OAKMARK (1-800-625-6275). 24-Hour Net Asset Value Hotline: To obtain the current net asset value per share of a Fund, please call 1-800-GROWOAK (1-800-476-9625). 36 Oakmark family of funds [OAKMARK LOGO] HARRIS ASSOCIATES L.P. 2 NORTH LASALLE STREET CHICAGO, IL 60602 1-800-OAKMARK STATEMENT OF ADDITIONAL INFORMATION ---------------------- March 1, 1997 THE OAKMARK FAMILY OF FUNDS No-Load Funds Two North La Salle Street Chicago, Illinois 60602-3790 Telephone 1-800-OAKMARK (1-800-625-6275) 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 Balanced Fund ("Balanced Fund"), The Oakmark International Fund ("International Fund") and The Oakmark International Small Cap Fund, formerly named The Oakmark International Emerging Value Fund ("International Small Cap Fund"), each a series of Harris Associates Investment Trust (the "Trust"). It 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. The prospectus may be obtained from the Funds at no charge by writing or telephoning the Funds at their address or telephone number shown above.
Table of Contents The Funds......................................................... 2 Investment Restrictions........................................... 2 How the Funds Invest.............................................. 5 Performance Information........................................... 10 Investment Adviser................................................ 12 Trustees and Officers............................................. 14 Principal Shareholders............................................ 16 Purchasing and Redeeming Shares................................... 16 Additional Tax Information........................................ 17 Taxation of Foreign Shareholders.................................. 18 Portfolio Transactions............................................ 18 Declaration of Trust.............................................. 21 Custodian......................................................... 21 Independent Public Accountants.................................... 21 Financial Statements.............................................. 21 Appendix -- Bond Ratings.......................................... 22
THE FUNDS Oakmark Fund seeks long-term capital appreciation by investing primarily in equity securities. Select Fund seeks long-term capital appreciation by investing primarily in a non-diversified portfolio of equity securities. Small Cap Fund seeks long-term capital appreciation by investing primarily in equity securities of companies with small market capitalizations. Balanced Fund seeks high current income with regard for both preservation and growth of capital by investing in a diversified portfolio of equity and fixed-income securities. International Fund seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers. International Small Cap Fund seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers with small market capitalizations. 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 - ------------------ /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 2 Fund] lending its portfolio securities [the Fund will not lend securities having a value in excess of 33-1/3% of its assets (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. Invest more than (a) 5% of its total assets (valued at the time of investment) in securities of issuers (other than issuers of federal agency obligations or securities issued or guaranteed by any foreign country or asset- backed securities) that, together with any predecessors or unconditional guarantors, have been in continuous operation for less than three years ("unseasoned issuers") or (b) more than 15% of its total assets (valued at time of investment) in restricted securities and securities of unseasoned issuers; 12. Pledge, mortgage or hypothecate its assets, except for temporary or emergency purposes and then to an extent not greater than 15% of its assets at cost; 13. Make margin purchases or participate in a joint or on a joint or several basis in any trading account in securities; 14. Invest in companies for the purpose of management or the exercise of control; 15. Purchase or retain securities of a company if all of the directors and officers of the Fund and of its investment adviser who individually own beneficially more than 1/2% of the securities of the company collectively own beneficially more than 5% of such securities; 16. 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; 17. Invest in oil, gas or other mineral leases or exploration or development programs, although it may invest in marketable securities of enterprises engaged in oil, gas or mineral exploration; 18. [Oakmark Fund, Select Fund, Small Cap Fund and Balanced 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 - -------------------------------------------------------------------------------- experience both delays in liquidating the underlying securities and losses. No Fund may invest more than 15% of its net assets in repurchase agreements maturing in more than seven days and other illiquid securities. /2/ In addition to this investment restriction, the Investment Company Act of 1940 provides that a Fund may neither purchase more than 3% of the voting securities of any one investment company nor invest more than 10% of the Fund's assets (valued at the time of investment) in all investment company securities purchased by the Fund. Investment in the shares of another investment company would require the Fund to bear a portion of the management and advisory fees paid by that investment company, which might duplicate the fees paid by the Fund. 3 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; 19. [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) [Balanced 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/ 20. Make short sales of securities unless the Fund owns at least an equal amount of such securities, or owns securities that are convertible or exchangeable, without payment of further consideration, into at least an equal amount of such securities; 21. Purchase a call option or a put option if the aggregate premium paid for all call and put options then held exceed 20% of its net assets (less the amount by which any such positions are in-the-money); 22. Invest in futures or options on futures, except that it may invest in forward foreign currency contracts. The first 10 restrictions listed above, except the bracketed portions, are fundamental policies and may be changed only with the approval of the holders of a "majority of the outstanding voting securities" of the respective Fund, which is defined in the Investment Company Act of 1940 (the "1940 Act") as the lesser of (i) 67% of the shares of the Fund present at a meeting if more than 50% of the outstanding shares of the Fund are present in person or represented by proxy or (ii) more than 50% of the outstanding shares of the Fund. Those restrictions not designated as "fundamental," and a Fund's investment objective, may be changed by the board of trustees without shareholder approval. A Fund's investment objective will not be changed without at least 30 days' notice to shareholders. Notwithstanding the foregoing investment restrictions, a Fund may purchase securities pursuant to the exercise of subscription rights, provided, in the case of each Fund other than Select Fund, that such purchase will not result in the Fund's ceasing to be a diversified investment company. Japanese and European corporations frequently issue additional capital stock by means of subscription rights offerings to existing shareholders at a price substantially below the market price of the shares. The failure to exercise such rights would result in a Fund's interest in the issuing company being diluted. The market for such rights is not well developed in all cases and, accordingly, a Fund may not always realize full value on the sale of rights. The exception applies in cases where the limits set forth in the investment restrictions would otherwise be exceeded by exercising rights or would have already been exceeded as a result of fluctuations in the market value of a Fund's portfolio securities with the result that the Fund would be forced either to sell securities at a time when it might not otherwise have done so, or to forego exercising the rights. - ------------------ /3/ Although securities represented by American Depositary Receipts ("ADRs") are not subject to restriction 19, 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. 4 HOW THE FUNDS INVEST Securities of Non-U.S. Issuers International Fund and International Small Cap Fund invest primarily in securities of non-U.S. issuers, and the other Funds each may invest a minor portion of their assets (up to 25% for Oakmark Fund and Small Cap Fund and up to 10% for Balanced 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. 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, positions in 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 in foreign markets than in the United States; imposition of foreign taxes; and sometimes less advantageous legal, operational and financial protections applicable to foreign subcustodial arrangements. Although the Funds try to invest in companies and governments of countries having stable political environments, there is the possibility of expropriation of assets, confiscatory taxation, seizure or nationalization of foreign bank deposits or other assets, establishment of exchange controls, the adoption of foreign government restrictions, or other adverse, political, social or diplomatic developments that could affect investment in these nations. 5 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 and International Small Cap Fund in privatizations in appropriate circumstances. In certain of those markets, the ability of foreign entities such as International Fund and International Small Cap 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. 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 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. 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 the Fund owns or anticipates owning securities in countries whose currencies are linked, the Adviser may aggregate such positions as to the currency hedged. If a Fund enters into a forward contract hedging an anticipated purchase of portfolio securities, liquid assets of the Fund, which may include equities, debt obligations, U.S. government securities or cash, having a value at least as great as the commitment under the forward contract will be segregated on the books of the Fund, marked to market daily, and held by the Fund's custodian while the contract is outstanding. At the maturity of a forward contract to deliver a particular currency, a Fund may either sell the portfolio security related to such contract and make delivery of the currency, or it may retain the security and either acquire the currency on the spot market or terminate its contractual obligation to deliver the currency by purchasing an offsetting contract with the same currency trader obligating it to purchase on the same maturity date the same amount of the currency. It is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of a forward contract. Accordingly, 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 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 its market value exceeds 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 6 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. Debt Securities Each Fund may invest in debt securities, including lower-rated securities (i.e., securities rated BB or lower by Standard & Poor's Corporation ("S&P") or Ba or lower by Moody's Investor Services, Inc. ("Moody's"), commonly called "junk bonds") and securities that are not rated. There are no restrictions as to the ratings of debt securities acquired by a Fund or the portion of a Fund's assets that may be invested in debt securities in a particular ratings category, except that International Fund and International Small Cap Fund will not invest more than 10% of their respective total assets in securities rated below investment grade, Balanced Fund will not invest more than 20% of its total assets in such securities, and each of the other Funds will not invest more than 25% of its total assets in such securities. Securities rated BBB or Baa are considered to be medium grade and to have speculative characteristics. Lower-rated debt securities are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. Investment in medium- or lower-quality debt securities involves greater investment risk, including the possibility of issuer default or bankruptcy. An economic downturn could severely disrupt the market for such securities and adversely affect the value of such securities. In addition, lower-quality bonds are less sensitive to interest rate changes than higher- quality instruments and generally are more sensitive to adverse economic changes or individual corporate developments. During a period of adverse economic changes, including a period of rising interest rates, issuers of such bonds may experience difficulty in servicing their principal and interest payment obligations. 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 "Net Asset Value." The market value of these securities and their liquidity may be affected by adverse publicity and investor perceptions. A description of the characteristics of bonds in each ratings category is included in the appendix to this statement of additional information. When-Issued and Delayed-Delivery 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 7 settlement date if the adviser deems it advisable for investment reasons. A Fund may utilize spot and forward foreign currency exchange transactions to reduce the risk inherent in fluctuations in the exchange rate between one currency and another when securities are purchased or sold on a when-issued or delayed-delivered basis. At the time a Fund enters into a binding obligation to purchase securities on a when-issued basis, liquid assets of the Fund having a value at least as great as the purchase price of the securities to be purchased will be segregated on the books of the Fund and held by the custodian throughout the period of the obligation. The use of these investment strategies, as well as any borrowing by a Fund, may increase net asset value fluctuation. Illiquid Securities No Fund may invest in illiquid securities, if as a result such securities would comprise more than 15% of the value of the Fund's assets. If through the appreciation of illiquid securities or the depreciation of liquid securities, the Fund should be in a position where more than 15% of the value of its net assets are invested in illiquid assets, including restricted securities, the Fund will take appropriate steps to protect liquidity. Illiquid securities may include restricted securities, which may be sold only in privately negotiated transactions or in a public offering with respect to which a registration statement is in effect under the Securities Act of 1933 (the "1933 Act"). Where a Fund holds restricted securities and registration is required, the Fund may be obligated to pay all or part of the registration expenses and a considerable period may elapse between the time of the decision to sell and the time the Fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than prevailed when it decided to sell. Restricted securities will be priced at fair value as determined in good faith by the board of trustees. 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 11 under "Investment Restrictions.") A determination of whether a Rule 144A security is liquid or not is a question of fact. In making this determination the adviser will consider the trading markets for the specific security taking into account the unregistered nature of a Rule 144A security. In addition, the adviser could consider the (1) frequency of trades and quotes, (2) number of dealers and potential purchasers, (3) dealer undertakings to make a market, (4) and the nature of the security and of market place trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). The liquidity of Rule 144A securities would be monitored and, if as a result of changed conditions, it is determined that a Rule 144A security is no longer liquid, the Fund's holdings of illiquid securities would be reviewed to determine what, if any, steps are required to assure that the Fund does not invest more than 15% of its assets in illiquid securities. Investing in Rule 144A securities could have the effect of increasing the amount of a Fund's assets invested in illiquid securities if qualified institutional buyers are unwilling to purchase such securities. Short Sales Each Fund may sell securities short against the box, that is: (1) enter into short sales of securities that it currently owns or has the right to acquire through the conversion or exchange of other securities that it owns without additional consideration; and (2) enter into arrangements with 8 the broker-dealers through which such securities are sold short to receive income with respect to the proceeds of short sales during the period the Fund's short positions remain open. A Fund may make short sales of securities only if at all times when a short position is open the Fund owns at least an equal amount of such securities or securities convertible into or exchangeable for, without payment of any further consideration, securities of the same issue as, and equal in amount to, the securities sold short. In a short sale against the box, a Fund does not deliver from its portfolio the securities sold and does not receive immediately the proceeds from the short sale. Instead, the Fund borrows the securities sold short from a broker-dealer through which the short sale is executed, and the broker-dealer delivers such securities, on behalf of the Fund, to the purchaser of such securities. Such broker-dealer is entitled to retain the proceeds from the short sale until the Fund delivers to such broker-dealer the securities sold short. In addition, the Fund is required to pay to the broker-dealer the amount of any dividends paid on shares sold short. Finally, to secure its obligation to deliver to such broker- dealer the securities sold short, the Fund must deposit and continuously maintain in a separate account with the Fund's custodian an equivalent amount of the securities sold short or securities convertible into or exchangeable for such securities without the payment of additional consideration. 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. No Fund currently expects that more than 20% of its total assets would be involved in short sales against the box. Options Each Fund may purchase both call options and put options on securities. A call or put option is a contract that gives the Fund, in return for a premium paid upon purchase of the option, the right during the term of the option to buy from, or to sell to, the seller of the option the security underlying the option at a specified exercise price. The option is valued initially at the premium paid for the option. Thereafter, the value of the option is marked-to-market daily. It is expected that a Fund will not purchase a call option or a put option if the aggregate value of all call and put options held by the Fund would exceed 5% of the Fund's net assets. 9 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 International Fund's investments and International Small Cap Fund's investments 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. "Average Annual Total Return" is the average annual compounded rate of change in value represented by the Total Return for the period. Average Annual Total Return will be computed as follows: ERV = P(1+T)/n/ Where: P = the amount of an assumed initial investment in Fund shares T = average annual total return n = number of years from initial investment to the end of the period ERV = ending redeemable value of shares held at the end of the period For example, Total Return and Average Annual Total Return on a $1,000 investment in each Fund other than Select Fund for the following periods ended October 31, 1996 were: 10
Total Average Annual Return Total Return ------ ------------ Oakmark Fund One year................................ 18.1% 18.1% Five years.............................. 216.1 25.8 Life of Fund*........................... 282.5 29.2 Small Cap Fund One year and life of Fund*.............. 31.9 31.9 Balanced Fund One year and life of Fund*.............. 12.9 12.9 International Fund One year................................ 24.9 24.9 Life of Fund*........................... 83.1 16.0 International Small Cap Fund One year and life of Fund*.............. 14.1 14.1
-------------- *Life of Fund commenced with the public offering of its shares as follows: Oakmark, 8/5/91; International, 9/30/92; Small Cap, Balanced and International Small Cap, 11/1/95. Performance figures quoted by the Funds will assume reinvestment of all dividends and distributions, but will not take into account income taxes payable by shareholders. The Funds impose no sales charge and pay no distribution ("12b-1") expenses. Each Fund's performance is a function of conditions in the securities markets, portfolio management, and operating expenses. Although information such as yield and total return is useful in reviewing a Fund's performance and in providing some basis for comparison with other investment alternatives, it should not be used for comparison with other investments using different reinvestment assumptions or time periods. In advertising and sales literature, the performance of a Fund may be compared with that of other mutual funds, indexes or averages of other mutual funds, indexes of related financial assets or data, and other competing investment and deposit products available from or through other financial institutions. The composition of these indexes or averages differs from that of the Funds. Comparison of a Fund to an alternative investment should consider differences in features and expected performance. All of the indexes and averages noted below will be obtained from the indicated sources or reporting services, which the Funds generally believe to be accurate. The Funds may also refer to publicity (including performance rankings) in newspapers, magazines, or other media from time to time. However, the Funds assume no responsibility for the accuracy of such data. Newspapers and magazines that might mention the Funds include, but are not limited to, the following:
Barron's Fortune The New York Times Business Week Global Finance Pensions and Investments Changing Times Investor's Daily Personal Investor Chicago Tribune Kiplinger's Personal Finance Smart Money Chicago Sun-Times Los Angeles Times Stanger Reports Crain's Chicago Business Money Time Consumer Reports Mutual Fund Letter USA Today Consumer Digest Mutual Funds Magazine U.S. News and World Report Financial World Morningstar The Wall Street Journal Forbes Newsweek Worth
11 A Fund may compare its performance to the Consumer Price Index (All Urban), a widely recognized measure of inflation. The performance of a Fund may also be compared to the Morgan Stanley EAFE (Europe, Australia and Far East) Index, a generally accepted benchmark for performance of major overseas markets, and to the following indexes or averages: Dow-Jones Industrial Average Wilshire 5000 Standard & Poor's 500 Stock Index New York Stock Exchange Composite Index Standard & Poor's 400 Industrials American Stock Exchange Composite Index Standard & Poor's Small Cap 600 NASDAQ Composite Standard & Poor's Mid Cap 400 NASDAQ Industrials Russell 2000 In addition, each of Oakmark Fund, Select Fund, Small Cap Fund and Balanced Fund may compare its performance to the following indexes and averages: Value Line Index; Lipper Capital Appreciation Fund Average; Lipper Growth Funds Average; Lipper Small Company Growth Funds Average; Lipper General Equity Funds Average; Lipper Equity Funds Average; Lipper Small Company Growth Fund Index; and Lehman Brothers Government/Corporate Bond Index. Each of International Fund and International Small Cap Fund may compare its performance to the following indexes and averages: Lipper International & Global Funds Average; Lipper International Fund Index; Lipper International Equity Funds Average; Morgan Stanley Capital International World ex the U.S. Index; Morningstar International Stock Average. Lipper Indexes and Averages are calculated and published by Lipper Analytical Services, Inc. ("Lipper"), an independent service that monitors the performance of more than 1,000 funds. The Funds may also use comparative performance as computed in a ranking by Lipper or category averages and rankings provided by another independent service. Should Lipper or another service reclassify a Fund to a different category or develop (and place a Fund into) a new category, that Fund may compare its performance or ranking against other funds in the newly assigned category, as published by the service. Each Fund may also compare its performance or ranking against all funds tracked by Lipper or another independent service, including Morningstar, Inc. The Funds may cite their ratings, recognition, or other mention by Morningstar or any other entity. Morningstar's rating system is based on risk- adjusted total return performance and is expressed in a star-rating format. The risk-adjusted number is computed by subtracting a fund's risk score (which is a function of the fund's monthly returns less the 3-month T-bill return) from the fund's load-adjusted total return score. This numerical score is then translated into rating categories, with the top 10% labeled five star, the next 22.5% labeled four star, the next 35% labeled three star, the next 22.5% labeled two star, and the bottom 10% one star. A high rating reflects either above- average returns or below-average risk or both. To illustrate the historical returns on various types of financial assets, the Funds may use historical data provided by Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains) very long-term (since 1926) total return data (including, for example, total return indexes, total return percentages, average annual total returns and standard deviations of such returns) for the following asset types: common stocks; small company stocks; long-term corporate bonds; long-term government bonds; intermediate-term government bonds; U.S. Treasury bills; and Consumer Price Index. INVESTMENT ADVISER The Funds' investment adviser, Harris Associates L.P. (the "Adviser"), furnishes continuing investment supervision to the Funds and is responsible for overall management of the 12 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 and reports to prospective investors. Each Fund pays the cost of its custodial, stock transfer, dividend disbursing, bookkeeping, audit and legal services. Each Fund also pays other expenses such as the cost of proxy solicitations, printing and distributing notices and copies of the prospectus and shareholder reports furnished to existing shareholders, taxes, insurance premiums, the expenses of maintaining the registration of that Fund's shares under federal and state securities laws and the fees of trustees not affiliated with the Adviser. The Adviser has voluntarily agreed to reimburse each Fund to the extent that its annual ordinary operating expenses exceed the following percent of the Fund's average net assets through October 31, 1998, subject to earlier termination by the Adviser on 30 days' notice to the Fund: 1.5% in the case of Oakmark Fund, Select Fund, Small Cap Fund or Balanced Fund and 2% in the case of International Fund and International Small Cap Fund. For the purpose of determining whether a Fund is entitled to any reduction in advisory fee or expense reimbursement, that Fund's expenses are 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. The annual rates of fees as a percentage of each Fund's net assets are as follows:
Fund Fee - ---------------- ----------------------------------------------------- Balanced .75% Oakmark 1% up to $2.5 billion; .95% on the next $1.25 billion; .90% on the next $1.25 billion; and .85% on net assets in excess of $5 billion International 1% up to $2.5 billion; .95% on the next $2.5 billion; and .90% on net assets in excess of $5 billion Select 1.00% Small Cap and 1.25% International Small Cap
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. Select Fund did not commence operations until November 1, 1996. 13
Year Ended October 31, Type of ------------------------------ Fund Payment 1996 1995 1994 ---- ------- ---- ---- ---- Oakmark Advisory fee $36,082,925 $21,215,738 $13,431,816 Small Cap Advisory fee 956,809 - - Balanced Advisory fee 69,005 - - Reimbursement 14,245 International Advisory fee 10,113,272 9,916,904 13,080,028 International Advisory fee 258,427 - - Small Cap Reimbursement 35,441 - -
The Agreement for each Fund is for an initial term expiring September 30, 1997. Each Agreement will continue from year to year thereafter so long as such continuation is approved at least annually by (1) the board of trustees or the vote of a majority of the outstanding voting securities of the Fund, and (2) a majority of the trustees who are not interested persons of any party to the Agreement, cast in person at a meeting called for the purpose of voting on such approval. Each Agreement may be terminated at any time, without penalty, by either the Trust or the Adviser upon sixty 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., whose directors are David G. Herro, Robert M. Levy, Roxanne M. Martino, Victor A. Morgenstern, Anita M. Nagler, William C. Nygren, Neal Ryland, Robert J. Sanborn and Peter S. Voss. Mr. Morgenstern is the chairman of the board and chief executive officer of Harris Associates, Inc. TRUSTEES AND OFFICERS Information on the trustees and officers of the Trust is included in the Funds' prospectus under "Trustees and Officers." All of that information is incorporated herein by reference. The addresses of the trustees are as follows: Michael J. Friduss c/o MJ Friduss & Associates 1555 Museum Drive Highland Park, Illinois 60035 Thomas H. Hayden c/o Bozell Worldwide, Inc. 625 North Michigan Avenue Chicago, Illinois 60611-3110 Christine M. Maki c/o Hyatt Corporation 200 West Madison Street Chicago, Illinois 60606 Victor A. Morgenstern c/o Harris Associates L.P. Two North La Salle Street, Suite 500 Chicago, Illinois 60602 14 Allan J. Reich c/o D'Ancona & Pflaum 30 North La Salle Street, Suite 2900 Chicago, Illinois 60602 Marv R. Rotter c/o Rotter & Associates 5 Revere Drive, Suite 400 Northbrook, Illinois 60062-1571 Burton W. Ruder c/o The Academy Group 707 Skokie Boulevard, Suite 410 Northbrook, Illinois 60062 Peter S. Voss c/o New England Investment Companies, L.P. 399 Boylston Street Boston, Massachusetts 02116 Gary N. Wilner, M.D. c/o Evanston Hospital 2650 Ridge Avenue Evanston, Illinois 60201 Messrs. Morgenstern and Voss are trustees who are "interested persons" of the Trust as defined in the 1940 Act. They and Dr. Wilner are members of the executive committee, which has authority during intervals between meetings of the board of trustees to exercise the powers of the board, with certain exceptions. At January 31, 1997, the trustees and officers as a group owned beneficially the following percentages of the outstanding shares of the Funds: Select, 10.2%; Small Cap, 2.0%; Balanced, 22.5%; International Small Cap, 9.6%; Oakmark and International, less than 1%. The following table shows the compensation paid by the Trust in the fiscal year ended October 31, 1996 to each trustee who was not an "interested person" of the Trust:
Aggregate Compensation Name of Trustee from the Trust* - -------------------------------------------------------------------------------- Christine M. Maki $18,500 Michael J. Friduss 18,500 Thomas H. Hayden 17,000 Allan J. Reich 17,500 Marv R. Rotter 16,000 Burton W. Ruder 17,000 Gary N. Wilner, M.D. 19,000
- -------------------------------------------------------------------------------- * The Trust is not part of a fund complex. Other trustees who are "interested persons" of The Trust, as well as the officers of the Trust, are compensated by the Adviser and not by The Trust. The Trust does not provide any pension or retirement benefits to its trustees. 15 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 January 31, 1997 were William C. Nygren, who owned beneficially 6.5% of the shares of Select Fund, and Clyde and Joan McGregor, who collectively owned beneficially 14.8% of the shares of Balanced Fund. The address of those shareholders is Suite 500, Two North La Salle Street, Chicago, Illinois 60602. PURCHASING AND REDEEMING SHARES Purchases and redemptions are discussed in the Funds' prospectus under the headings "How to Purchase Shares," "How to Redeem Shares," and "Shareholder Services." All of that information is incorporated herein by reference. The net asset value per share of each Fund is determined by the Trust's custodian, State Street Bank and Trust Company. 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 the board of trustees. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at the mean of the bid and offer prices of such currencies against U.S. dollars quoted by any major bank or dealer. If such quotations are not available, the rate of exchange will be determined in accordance with policies established in good faith by the Board. The Funds' net asset values are determined only on days on which the New York Stock Exchange is open for trading. The Exchange is regularly closed on Saturdays and Sundays and on New Year's Day, the third Monday in 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 Exchange will be closed on the preceding Friday or the following Monday, respectively. Trading in the portfolio securities of International Fund or International Small Cap Fund (and of any other Fund, to the extent it invests in securities of non-U.S. issuers) takes place in various foreign markets on certain days (such as Saturday) when the Fund is not open for business and does not calculate its net asset value. In addition, trading in the Fund's portfolio securities may not occur on days when the Fund is open. Therefore, the calculation of net asset value does not take place contemporaneously with the determinations of the prices of many of the Fund's portfolio securities and the value of the Fund's portfolio may be significantly affected on days when shares of the Fund may not be purchased or redeemed. Computation of net asset value (and the sale and redemption of a Fund's shares) may be suspended or postponed during any period when (a) trading on the New York Stock Exchange is restricted, as determined by the Securities and Exchange Commission, or that exchange is closed for other than customary weekend and holiday closings, (b) the Commission has by order permitted such suspension, or (c) an emergency, as determined by the Commission, exists 16 making disposal of portfolio securities or valuation of the net assets of a Fund not reasonably practicable. Shares of any of the Funds may be purchased through certain financial service companies, without incurring any transaction fee. 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 0.30% 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. The Trust has 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 the above amounts will normally be paid in cash, but may be paid wholly or partly by a distribution in kind of marketable securities. Due to the relatively high cost of maintaining small accounts, the Trust reserves the right to redeem at net asset value the shares of any shareholder whose account in any Fund has a value 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. In connection with the Exchange Plan, the Adviser acts as a Service Organization for the Government Portfolio and the Tax-Exempt Diversified Portfolio of Goldman Sachs Money Market Trust and the GS Short Duration Fund Portfolio of Goldman Sachs Trust. For its services it receives fees at rates of up to .50% of the average annual net assets of each account in those portfolios established through the Exchange Plan, pursuant to 12b-1 plans adopted by those investment companies. 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 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 either of these Funds will be 17 increased; if the result is a loss, the income dividend paid by either of these Funds will be decreased. Income received by International Fund or International Small Cap 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. Both International Fund and International Small Cap Fund intend to meet the requirements of the Code to "pass through" to its shareholders foreign income taxes paid, but there can be no assurance that a Fund 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. TAXATION OF FOREIGN SHAREHOLDERS The Code provides that dividends from net income (which are deemed to include for this purpose each shareholder's pro rata share of foreign taxes paid by International Fund and International Small Cap Fund (see discussion of "pass through" of the foreign tax credit to U.S. shareholders), will be subject to U.S. tax. For shareholders who are not engaged in a business in the U.S., this tax would be imposed at the rate of 30% upon the gross amount of the dividend in the absence of a Tax Treaty providing for a reduced rate or exemption from U.S. taxation. Distributions of net long-term capital gains realized by these Funds are not subject to tax unless the foreign shareholder is a nonresident alien individual who was physically present in the U.S. during the tax year for more than 182 days. PORTFOLIO TRANSACTIONS Portfolio transactions for each Fund are placed with those securities brokers and dealers that the Adviser believes will provide the best value in transaction and research services for that Fund, either in a particular transaction or over a period of time. Subject to that standard, portfolio transactions for each Fund may be executed through Harris Associates Securities L.P. ("HASLP"), a registered broker-dealer and an affiliate of the Adviser. In valuing brokerage services, the Adviser makes a judgment as to which brokers are capable of providing the most favorable net price (not necessarily the lowest commission) and the best execution in a particular transaction. Best execution connotes not only general competence and reliability of a broker, but specific expertise and effort of a broker in overcoming the anticipated difficulties in fulfilling the requirements of particular transactions, because the problems of execution and the required skills and effort vary greatly among transactions. 18 Although some transactions involve only brokerage services, many involve research services as well. In valuing research services, the Adviser makes a judgment of the usefulness of research and other information provided by a broker to the Adviser in managing a Fund's investment portfolio. In some cases, the information, e.g., data or recommendations concerning particular securities, relates to the specific transaction placed with the broker, but for the greater part the research consists of a wide variety of information concerning companies, industries, investment strategy and economic, financial and political conditions and prospects, useful to the Adviser in advising the Funds. The Adviser is the principal source of information and advice to the Funds, and is responsible for making and initiating the execution of the investment decisions for each Fund. However, the board of trustees recognizes that it is important for the Adviser, in performing its responsibilities to the Funds, to continue to receive and evaluate the broad spectrum of economic and financial information that many securities brokers have customarily furnished in connection with brokerage transactions, and that in compensating brokers for their services, it is in the interest of the Funds to take into account the value of the information received for use in advising the Funds. Consequently, the commission paid to brokers (other than HASLP) providing research services may be greater than the amount of commission another broker would charge for the same transaction. The extent, if any, to which the obtaining of such information may reduce the expenses of the Adviser in providing management services to the Funds is not determinable. In addition, it is understood by the board of trustees that other clients of the Adviser might also benefit from the information obtained for the Funds, in the same manner that the Funds might also benefit from information obtained by the Adviser in performing services to others. HASLP may act as broker for a Fund in connection with the purchase or sale of securities by or to the Fund if and to the extent permitted by procedures adopted from time to time by the board of trustees of the Trust. The board of trustees, including a majority of the trustees who are not "interested" trustees, has determined that portfolio transactions for a Fund may be executed through HASLP if, in the judgment of the Adviser, the use of HASLP is likely to result in prices and execution at least as favorable to the Fund as those available from other qualified brokers and if, in such transactions, HASLP charges the Fund commission rates at least as favorable to the Fund as those charged by HASLP to comparable unaffiliated customers in similar transactions. The board of trustees has also adopted procedures that are reasonably designed to provide that any commissions, fees or other remuneration paid to HASLP are consistent with the foregoing standard. The Funds will not effect principal transactions with HASLP. In executing transactions through HASLP, the Funds will be subject to, and intend to comply with, section 17(e) of the 1940 Act and rules thereunder. The reasonableness of brokerage commissions paid by the Funds in relation to transaction and research services received is evaluated by the staff of the Adviser on an ongoing basis. The general level of brokerage charges and other aspects of the Funds' portfolio transactions are reviewed periodically by the board of trustees. Transactions of the Funds in the over-the-counter market and the third market are executed with primary market makers acting as principal except where it is believed that better prices and execution may be obtained otherwise. Although investment decisions for the Funds are made independently from those for other investment advisory clients of the Adviser, it may develop that the same investment decision is made for both a Fund and one or more other advisory clients. If both a Fund and other clients purchase or sell the same class of securities on the same day, the transactions will be allocated as to amount and price in a manner considered equitable to each. 19 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 Oakmark Fund and International Fund are set forth in the prospectus under "Financial Highlights." The portfolio turnover rate of each of Select Fund, Small Cap Fund, Balanced Fund and International Small Cap Fund is not expected to exceed 100%. The following table shows the aggregate brokerage commissions (excluding the gross underwriting spread on securities purchased in initial public offerings) paid by each Fund other than Select Fund during the periods indicated, as well as the aggregate commissions paid to affiliated persons of the Trust. Select Fund had not commenced operations as of October 31, 1996.
Year Ended October 31, ------------------------------------------------------------ 1996 1995 1994 ---- ---- ---- Oakmark Fund Aggregate commissions............ $2,863,961 (100%) $2,100,849 (100%) $1,594,102 (100%) Commissions paid to affiliates*.. 1,192,641 (41.6%) 389,339 (18.5%) 244,055 (15%) Small Cap Fund Aggregate commissions............ 404,602 (100%) -- -- Commissions paid to affiliates*.. 132,729 (32.8%) -- -- Balanced Fund Aggregate commission............. 19,797 (100%) -- -- Commissions paid to affiliates*.. 14,487 (73.2%) -- -- International Fund Aggregate commissions............ 2,804,611 (100%) 2,609,780 (100%) 5,170,141 (100%) Commissions paid to affiliates*.. 82,872 (3.0%) 71,600 (2.7%) 6,980 (0.1%) International Small Cap Fund Aggregate commissions............ 198,847 (100%) -- -- Commissions paid to affiliates*.. 6,128 (3.1%) -- -- - --------------------------
* 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 years is shown below.
Year Ended October 31, --------------------------------- Fund 1996 1995 1994 ---- ---- ---- ---- Oakmark 47.0% 7.5% 17.0% Small Cap 40.0 - - Balanced 78.0 - - International 5.0 1.6 0.3 International Small Cap 0.4 - -
20 Of the aggregate brokerage commissions paid during the 1996 fiscal year, the Funds paid the following commissions to brokers who furnished research services: Oakmark, $77,639; Small Cap, $8,902; Balanced, $312; International, $28; International Small Cap, $0. 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 risk to any one series of sustaining a loss on account of liabilities incurred by another series is also believed to be remote. CUSTODIAN 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 Oakmark Fund is $2,500 per month. The fee paid by Oakmark International is $3,000 per month. The fee paid by each of Select Fund, Small Cap Fund and Balanced Fund is $2,500 per month and the fee paid by International Small Cap Fund is $3,000 per month, which fees have been waived during the first six months of operations of each of the Funds. The custodian does not exercise any supervisory function in such matters as the purchase and sale of portfolio securities, payment of dividends, or payment of expenses of a Fund. The Trust has authorized the custodian to deposit certain portfolio securities of each Fund in central depository systems as permitted under federal law. The Funds may invest in obligations of the custodian and may purchase or sell securities from or to the custodian. 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. FINANCIAL STATEMENTS Copies of the annual reports for each Fund other than Select Fund for the fiscal year ended October 31, 1996 accompany this Statement of Additional Information. Those reports contain financial statements, notes thereto, supplementary information entitled "Condensed Financial Information" and reports of independent auditors, all of which (but no other part of the 21 reports), as well as the unaudited financial statements of Select Fund and the notes thereto that also accompany this Statement of Additional Information, are incorporated herein by reference. A copy of the Funds' Prospectus and additional copies of the reports to shareholders may be obtained from the Trust at no charge by writing to the Trust at the address shown on the cover page of this statement of additional information, or by telephoning the number shown on the cover page. APPENDIX -- 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 Corporation ("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 22 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. 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. 23 The Oakmark Select Fund January 31, 1996
The Oakmark Select Fund Schedule of Investments -- January 31, 1997 (Unaudited) Market Shares Held Value - -------------------------------------------------------------------------- COMMON STOCKS - 98.6% OTHER CONSUMER GOODS & SERVICES - 8.2% 160,900 Brunswick Corporation 4,042,612 86,000 Polaroid 3,784,000 --------- 7,826,612 BANKS - 3.8% 109,000 Peoples Bank of Bridgeport Connecticut 3,624,250 INSURANCE - 4.4% 117,000 PartnerRe Ltd. 4,153,500 OTHER FINANCIAL - 16.9% 317,000 First USA, Inc. 16,048,125 BROADCASTING & CABLE TV - 11.4% 219,000 U.S. West Media Group 4,078,875 447,000 TCI Satellite Entertainment, Inc. Class A (a) 3,631,875 101,000 Cablevision Systems Corporation (a) 3,168,875 --------- 10,879,625 TV PROGRAMMING - 15.5% 774,500 TCI Communications, Inc. (a) 14,715,500 PUBLISHING - 8.5% 177,000 Dun & Bradstreet Corporation 4,248,000 235,700 ACNielson Corporation 3,859,588 --------- 8,107,588 DATA STORAGE - 2.9% 94,500 Imation Corporation (a) 2,752,313 AEROSPACE & DEFENSE - 7.9% 112,000 McDonnell Douglas Corporation 7,532,000
The Oakmark Select Fund January 31, 1996
The Oakmark Select Fund Schedule of Investments -- January 31, 1997 (Unaudited) Market Shares Held Value - ------------------------------------------------------------------------------ BUILDING MATERIALS & CONSTRUCTION - 3.4% 91,000 USG Corporation (a) 3,241,875 OIL & NATURAL GAS - 3.7% 275,000 Titan Exploration, Inc. 3,471,875 OTHER INDUSTRIAL GOODS & SERVICES - 5.7% 165,000 Premark International, Inc. 3,795,000 40,000 SPX Corporation 1,625,000 --------- 5,420,000 DIVERSIFIED CONGLOMERATES - 6.3% 176,000 U.S. Industries, Inc. (a) 5,962,000 TOTAL COMMON STOCKS 93,735,263 SHORT-TERM INVESTMENTS - 8.0% COMMERCIAL PAPER - 6.3% Face Amount Commercial Paper - ------------------------------------------------------------------------------ 2,000,000 American Express Credit Corporation, 5.38% due 2/3/97 2,000,000 2,000,000 Ford Motor Credit Corp., 5.35% due 2/4/97 2,000,000 2,000,000 General Electric Capital Corporation, 5.48% due 2/3/97 2,000,000 TOTAL COMMERCIAL PAPER 6,000,000 REPURCHASE AGREEMENTS - 1.7% Face Amount Repurchase Agreements - ------------------------------------------------------------------------------ 1,560,000 State Street Repurchase Agreement, 5.47% due 2/3/97 1,560,000 Collateralized by US Treasury Securities TOTAL REPURCHASE AGREEMENTS 1,560,000 TOTAL SHORT-TERM INVESTMENTS 7,560,000
2 The Oakmark Select Fund January 31, 1996
The Oakmark Select Fund Schedule of Investments -- January 31, 1997 (Unaudited) Market Shares Held Value - --------------------------------------------------------------------------- Total Investments - 106.6% 101,295,263 Other liabilites, less other assets - (6.6%) (6,267,192) ---------- TOTAL NET ASSETS - 100% $95,028,071 ===========
- ------------- Notes: (a) Non-income producing security. 3 The Oakmark Select Fund Statement of Assets and Liabilities January 31, 1997 (Unaudited)
Assets - ------ Investments, at value (cost: $90,540,910) $101,295,263 Cash 426 Receivable for: Securities Sold 0 Fund Shares Sold 1,643,595 Dividends and Interest 44,735 --------- Total Receivables 1,688,330 Miscellaneous Assets 54,742 ------------ 103,038,760 Liabilities and Net Assets - -------------------------- Payable for: Securities Purchased 7,817,908 Fund shares redeemed 0 Due to Adviser 68,258 Other 124,523 --------- Total liabilities 8,010,689 ------------ Net assets applicable to Fund shares outstanding $95,028,071 ============ Fund Shares Outstanding 7,604,679 ============ Pricing of Shares - ----------------- Net asset value per share $12.50 ============ Analysis of Net Assets - ---------------------- Paid in Capital $84,286,741 Accumulated undistributed net realized gain on sale of investments and foreign exchange currency contracts 11,375 Net unrealized appreciation of investments 10,754,353 Accumulated undistributed net investment income (loss) (24,397) ------------ Net assets applicable to Fund shares outstanding $95,028,071 ============
See accompanying notes to financial statements.
The Oakmark Select Fund Statement of Operations - January 31, 1997 Three Months Ended January 31, 1996 ------------------ (Unaudited) Investment Income Dividends $83,169 Interest Income - CP 56,108 Interest Income - Bonds 0 Other Income 0 Total investment income 139,277 ----------- Expenses: Investment advisory fee 68,258 Transfer and dividend disbursing agent fees 21,309 Custodian and accounting fees 4,784 Legal fees 3,526 Audit fees 5,114 Trustees fees 2,333 Registration and blue sky expenses 47,351 Reports to shareholders 761 Amortization of organization cost 177 Other - net 10,584 ----------- Total expenses 164,196 Expense Offset Arrangements (522) ----------- Net Expenses 163,675 ----------- Net investment income (loss) (24,397) Net realized and unrealized gain on investments: Net realized gain on sale of investments 11,375 Net change in unrealized appreciation 10,754,353 ----------- Net realized and unrealized gain on investments 10,765,728 ----------- ----------- Net increase in net assets resulting from operations $10,741,330 ===========
See accompanying notes to financial statements.
The Oakmark Select Fund Statement of Changes in Net Assets - January 31, 1997 Three Months Ended January 31,1996 ------------------ (Unaudited) From Operations: Net investment income (loss) ($24,397) Net realized gain on sale of investments 11,375 Net change in unrealized appreciation 10,754,353 ------------ Net increase in net assets from operations 10,741,330 Distributions to shareholders from: Net investment income 0 Net realized short-term gain 0 Net realized long-term gain 0 ------------ Total Distributions to Shareholders 0 ------------ From Fund share transactions: Reinvestment of dividends and capital gains distributions 0 Proceeds from shares sold, net of fees 87,356,751 Payments for shares redeemed, net of fees (3,070,010) ------------ Net increase in net assets from Fund share transactions 84,286,741 ------------ Total increase in net assets 95,028,071 Net assets: Beginning of period 0 ------------ End of period (including undistributed net investment loss of $24,397) $95,028,071 ============
See accompanying notes to financial statements. HARRIS ASSOCIATES INVESTMENT TRUST THE OAKMARK SELECT FUND 1. Significant Accounting Policies The following are the significant accounting policies of The Oakmark Select Fund ("The Fund"), a series of the Harris Associates Investment Trust (a Massachusetts business trust). These policies are in conformity with generally accepted accounting principles ("GAAP"). The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. Security valuation -- Investments are stated at current value. Securities traded on securities exchanges and securities traded on the NASDAQ National Market are valued at the last sales price on the day of valuation, or if lacking any reported sales that day, at the most recent bid quotation. Over-the-counter securities not so traded are valued at the most recent bid quotation. Money market instruments having a maturity of 60 days or less from the date of valuation are valued on an amortized cost basis which approximates market value. Securities for which quotations are not readily available are valued at a fair value as determined by the Trustees. Security transactions and investment income -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date. Interest income and expenses are recorded on the accrual basis. Fund shares are sold and redeemed on a continuing basis at net asset value. Net asset value per share is determined daily as of the close of regular trading on the New York Stock Exchange on each day the Exchange is open for trading by dividing the total value of the Fund's investments and other assets, less liabilities, by the number of Fund shares outstanding. Federal income taxes, dividends and distributions to shareholders -- No provision is made for Federal income taxes since 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. 2. Transactions with affiliates The Fund has an investment advisory agreement with Harris Associates L.P. (Adviser). For management services and facilities furnished, the Fund pays the Adviser monthly fees at an annual rate of 1.00 percent. This fee is calculated on the total net assets as determined at the end of each preceding calendar month. The investment advisory agreement of the Fund provides that the Adviser will reimburse the Fund to the extent that annual expenses, excluding certain expenses, exceed 2.5% of average net assets. For the three months ended January 31, 1997, it was not necessary for the Adviser to reimburse expenses incurred by the Fund. In connection with the organization of the Fund, expenses of approximately $3,543 were advanced to the Fund by the Adviser. These expenses are being amortized on a straight line basis through October, 2001. Registration expenses of approximately $62,282 were advanced to the Fund by the Adviser. Registration expenses will be amortized over the year ended October 31, 1997. During the three months ended January 31, 1997, the Fund incurred brokerage commissions of $118,678 of which 91,583 was paid to an affiliate of the Adviser. 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): Three Months Ended January 31, 1997
Select Fund ----------- Shares sold 7,872,245 Shares issued in reinvestment of dividends 0 Less shares redeemed (267,566) --------- Net increase in shares outstanding 7,604,679 =========
4. Investment transactions Transactions in investment securities (excluding short term securities) were as follows: Select ------ Purchases $83,043,910 Proceeds from Sales 74,375
The Oakmark Select Fund Financial Highlights For a Share Outstanding throughout the period Three Months Ended January 31, 1997 ---------------- (Unaudited) Net Asset Value, Beginning of Period $10.00 Income From Investment Operations: Net Investment Income (Loss) (0.00) Net Gains or Losses on Securities (both realized and unrealized) 2.50 -------- Total From Investment Operations: 2.50 Less Distributions: Dividends (from net investment income) 0.00 Distributions (from capital gains) 0.00 -------- Total Distributions 0.00 Net Asset Value, End of Period $12.50 ======== Total Return 25% Ratios/Supplemental Data: Net Assets, End of Period ($million) $95.03 Ratio of Expenses to Average Net Assets 1.41%* Ratio of Net Income (Loss) to Average Net Assets -0.21%* Portfolio Turnover Rate 0.13% Average Commission Rate Paid $0.0586
Notes - ----- * Ratios have been determined on an annualized basis using daily average net assets. PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits --------------------------------- (a) Financial statements: -------------------- (1) Financial statements included in Part A of this amendment: Financial Highlights (2) Financial statements included in Part B of this amendment: (i) Audited financial statements of The Oakmark Fund, The Oakmark Small Cap Fund, The Oakmark Balanced Fund, The Oakmark International Fund and The Oakmark International Emerging Value Fund, which is to be named The Oakmark International Small Cap Fund commencing on the effective date of this amendment (schedules of investments at October 31, 1996, statements of assets and liabilities at October 31, 1996, statements of operations for the year ended October 31, 1996, statements of changes in net assets for the year ended October 31, 1996 and, for The Oakmark Fund and The Oakmark International Fund, for the year ended October 31, 1995 and notes to financial statements) incorporated by reference to those portions of Registrant's Annual Report - October 31, 1996. (ii) Unaudited financial statements of The Oakmark Select Fund (schedule of investments at January 31, 1997, statement of assets and liabilities at January 31, 1997, statement of operations for the three months ended January 31, 1997, statement of changes in net assets for the three months ended January 31, 1997 and notes to financial statements). Schedule I for each Fund has been omitted as the required information is presented in the schedules of investments at October 31, 1996 and January 31, 1997. Schedules II, III, IV, V, VI and VII for each Fund are omitted as the required information is not present. (b) 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. 1 Agreement and declaration of trust 2 Bylaws as amended through September 21, 1993 3 None 4 The registrant does not issue share certificates. 5.1 Investment advisory agreement for The Oakmark Fund dated August 30, 1996 (exhibit 5.1 to Post-effective Amendment no. 17*) C-1 5.2 Investment advisory agreement for The Oakmark International Fund dated August 30, 1996 (exhibit 5.2 to Post-effective Amendment no. 17*) 5.3 Investment advisory agreement for The Oakmark Small Cap Fund dated August 30, 1996 (exhibit 5.3 to Post-effective Amendment no. 17*) 5.4 Investment advisory agreement for The Oakmark Balanced Fund dated August 30, 1996 (exhibit 5.4 to Post-effective Amendment no. 17*) 5.5 Investment advisory agreement for The Oakmark International Emerging Value Fund (to be named The Oakmark International Small Cap Fund commencing on the effective date of this amendment) dated August 30, 1996 (exhibit 5.5 to Post-effective Amendment no. 17*) 5.6 Investment advisory agreement for The Oakmark Select Fund dated October 22, 1996 (exhibit 5.6 to Post-effective Amendment no. 17*) 6 None 7 None 8.1 Custody agreement with State Street Bank and Trust Company dated July 10, 1991 8.2 Special custody account agreement (short sales) dated September 24, 1991 8.3 Form of letter agreement dated September 8, 1992 applying custody agreement (exhibit 8.1) to The Oakmark International Fund 8.4 Form of letter agreement dated September 15, 1995 applying custody agreement (exhibit 8.1) and transfer agency agreement to The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund 8.5 Form of letter agreement dated September 30, 1996 applying custody agreement (exhibit 8.1) to The Oakmark Select Fund (exhibit 8.5 to Post-effective Amendment no. 17*) 9 None 10.1 Opinion of Ropes & Gray dated July 11, 1991 - The Oakmark Fund 10.2 Opinion of Bell, Boyd & Lloyd dated July 23, 1992 - The Oakmark International Fund 10.3 Opinion of Ropes & Gray dated September 20, 1995 - The Oakmark International Fund, The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund C-2 10.4 Opinion of Bell, Boyd & Lloyd dated September 20, 1995 - The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund 10.5 Opinion of Bell, Boyd & Lloyd dated October 22, 1996 - The Oakmark Select Fund (exhibit 10.5 to Post-effective Amendment no. 17*) 11 Consent of independent public accountants 12 None 13.1 Organizational expense agreement for The Oakmark Fund dated July 31, 1991 13.2 Organizational expense agreement for The Oakmark International Fund dated September 15, 1992 13.3 Organizational expense agreement for The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund dated July 6, 1995 13.4 Organizational expense agreement for The Oakmark Select Fund dated October 22, 1996 (exhibit 13.4 to Post-effective Amendment no. 17*) 13.5 Form of subscription agreement 14.1 The Oakmark Funds IRA Plan booklet, revised September 30, 1995, as supplemented January 31, 1997 14.2 Form of IRA application and adoption agreement, revised November 1, 1996 15 None 16 Schedule for computation of performance quotations 17 Financial data schedule 18 Form of new account purchase application, revised November 1, 1996 - --------------- * Incorporated by reference Item 25. 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 Fund" and in the Statement of Additional Information under the caption "Investment Adviser" and "Trustees and Officers" is incorporated by reference. C-3 Item 26. Number of Holders of Securities ------------------------------- As of December 27, 1996, the respective series of the Trust had the following numbers of shareholders of record: The Oakmark Fund, 164,336; The Oakmark Select Fund, 1,856; The Oakmark Small Cap Fund, 11,872; The Oakmark Balanced Fund, 1,000; The Oakmark International Fund, 49,191; The Oakmark International Emerging Value Fund, 3,318. Item 27. 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 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 28. 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 29. Principal Underwriters ---------------------- Not applicable C-4 Item 30. Location of Accounts and Records -------------------------------- Mr. Victor A. Morgenstern Harris Associates L.P. Two North La Salle Street, Suite 500 Chicago, Illinois 60602 Item 31. Management Services ------------------- None Item 32. Undertakings ------------ (a) Not applicable (b) Not applicable (c) Registrant undertakes to furnish to each person to whom a prospectus is delivered a copy of the latest annual report(s) to shareholders of Registrant upon request and without charge. (d) Registrant undertakes, if required to do so by the holders of at least 10% of the Registrant's outstanding shares, to call a meeting of shareholders for the purpose of voting upon the question of removal of a director or directors and to assist in communications with other shareholders as required by Section 16(c) of the Investment Company Act of 1940. 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 registration statement pursuant to rule 485(b) under the Securities Act of 1933 and has duly caused this amendment to its registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Chicago, Illinois on February 27, 1997. HARRIS ASSOCIATES INVESTMENT TRUST By /s/ Victor A. Morgenstern ----------------------------------- Victor A. Morgenstern, 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 and President ) Victor A. Morgenstern (chief executive officer) ) ) /s/ Allan J. Reich ) - --------------------------- Trustee ) Allan J. Reich ) ) February 27, 1997 /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/ Donald Terao ) - --------------------------- Treasurer (principal ) Donald Terao accounting officer) )
Exhibits Being Filed with This Amendment ----------------------------------------
Exhibit Number - ------ 1 Agreement and declaration of trust 2 Bylaws as amended through September 21, 1993 8.1 Custody agreement with State Street Bank and Trust Company dated July 10, 1991 8.2 Special custody account agreement (short sales) dated September 24, 1991 8.3 Form of letter agreement dated September 8, 1992 applying custody agreement (exhibit 8.1) to The Oakmark International Fund 8.4 Form of letter agreement dated September 15, 1995 applying custody agreement (exhibit 8.1) and transfer agency agreement to The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund 10.1 Opinion of Ropes & Gray dated July 11, 1991 - The Oakmark Fund 10.2 Opinion of Bell, Boyd & Lloyd dated July 23, 1992 - The Oakmark International Fund 10.3 Opinion of Ropes & Gray dated September 20, 1995 - The Oakmark International Fund, The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund 10.4 Opinion of Bell, Boyd & Lloyd dated September 20, 1995 - The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund 11 Consent of independent public accountants 13.1 Organizational expense agreement for The Oakmark Fund dated July 31, 1991 13.2 Organizational expense agreement for The Oakmark International Fund dated September 15, 1992 13.3 Organizational expense agreement for The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund dated July 6, 1995 13.5 Form of subscription agreement 14.1 The Oakmark Funds IRA Plan booklet, revised September 30, 1995, as supplemented January 31, 1997
14.2 Form of IRA application and adoption agreement, revised November 1, 1996 16 Schedule for computation of performance quotations 17 Financial data schedule 18 Form of new account purchase application, revised November 1, 1996
EX-99.1 2 AGREEMENT AND DECLARATION OF TRUST Exhibit 1 HARRIS ASSOCIATES INVESTMENT TRUST ---------------------------------- Agreement and Declaration of Trust ---------------------------------- AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts, this 1st day of February, 1991 by the Trustees hereunder, and by the holders of shares of beneficial interest to be issued hereunder as hereinafter provided. WITNESSETH that WHEREAS, this Trust has been formed to carry on the business of an investment company; and WHEREAS, the Trustees have agreed to manage all property coming into their hands as trustees of a Massachusetts business trust in accordance with the provisions hereinafter set forth. NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities and other assets, which they may from time to time acquire in any manner as Trustees hereunder, IN TRUST to manage and dispose of the same upon the following terms and conditions for the pro rata benefit of the holders from time to time of Shares in this Trust as hereinafter set forth. ARTICLE I NAME AND DEFINITIONS Name Section 1. This Trust shall be known as "Harris Associates Investment Trust", and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine. Definitions Section 2. Whenever used herein, unless otherwise required by the context or specifically provided: (a) The "Trust" refers to the Massachusetts business trust established by this Agreement and Declaration of Trust, as amended from time to time; (b) "Trustees" refers to the Trustee or Trustees of the Trust named herein or elected in accordance with Article IV; (c) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest in the Trust shall be divided from time to time or, if more than one series of Shares is authorized by the Trustees, the equal proportionate units into which each series of Shares shall be divided from time to time or, if more than one class of Shares of any series is authorized by the Trustees, the equal proportionate units into which each class of such series of Shares shall be divided from time to time; (d) "Shareholder" means a record owner of Shares; (e) The "1940 Act" refers to the Investment Company Act of 1940 and the Rules and Regulations thereunder, all as amended from time to time; (f) The terms "Affiliated Person," "Assignment," "Commission," "Interested Person," "Principal Underwriter" and "Majority Shareholder Vote" (the 67% or 50% requirement of the third sentence of Section 2(a)(42) of the 1940 Act, whichever may be applicable) shall have the meanings given them in the 1940 Act; (g) "Declaration of Trust" shall mean this Agreement and Declaration of Trust as amended or restated from time to time; and (h) "By-Laws" shall mean the By-Laws of the Trust as amended from time to time. ARTICLE II PURPOSE The purpose of the Trust is to engage in the business of a management investment company and to provide investors a managed investment primarily in securities, commodities and debt instruments. ARTICLE III SHARES Division of Beneficial Interest Section 1. The Shares of the Trust shall be issued in one or more series as the Trustees may, without Shareholder approval, authorize. The Trustees may, without Shareholder approval, divide the Shares of any series into two or more classes, Shares of each such class having such preferences or special or relative rights or privileges (including conversion rights, if any) as the Trustees may determine and as are not inconsistent with any provision of this 2 Declaration of Trust. Each series shall be preferred over all other series in respect of the assets allocated to that series. The beneficial interest in each series shall at all times be divided into Shares, without par value, each of which shall, except as the Trustees may otherwise authorize in the case of any series that is divided into two or more classes, represent an equal proportionate interest in the series with each other Share of the same series, none having priority or preference over another. The number of Shares authorized shall be unlimited, and the Shares so authorized may be represented in part by fractional shares. The Trustees may from time to time divide or combine the Shares of any series or class into a greater or lesser number without thereby changing the proportionate beneficial interests in the series or class. Ownership of Shares Section 2. The ownership of Shares shall be recorded on the books of the Trust or its transfer or similar agent. No certificates certifying the ownership of Shares shall be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of Share certificates, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent of the Trust, as the case may be, shall be conclusive as to who are the Shareholders of each series and class and as to the number of Shares of each series and class held from time to time by each Shareholder. Investments in the Trust; Assets of the Series Section 3. The Trustees may accept investments in the Trust from such persons and on such terms and, subject to any requirements of law, for such consideration, which may consist of cash or tangible or intangible property or a combination thereof, as they from time to time authorize. All consideration received by the Trust for the issue or sale of Shares of each series, together with all income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to the series of Shares with respect to which the same were received by the Trust for all purposes, subject only to the rights of creditors, and shall be so handled upon the books of account of the Trust and are herein referred to as "assets of" such series. No Preemptive Rights Section 4. Shareholders shall have no preemptive or other right to receive, purchase or subscribe for any additional Shares or other securities issued by the Trust. Status of Shares and Limitation of Personal Liability Section 5. Shares shall be deemed to be personal property giving only the rights provided in this instrument. Every Shareholder by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms hereof and to have become a party 3 hereto. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the same nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but only to the rights of said decedent under this Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders partners. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust, shall have any power to bind personally any Shareholder, nor except as specifically provided herein to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay. ARTICLE IV THE TRUSTEES Election; Removal Section 1. The number of Trustees shall be fixed by the Trustees, except that, subsequent to any sale of Shares pursuant to a public offering, there shall be not less than three Trustees. Any vacancies occurring in the Board of Trustees may be filled by the Trustees if, immediately after filling any such vacancy, at least two-thirds of the Trustees then holding office shall have been elected to such office by the Shareholders. In the event that at any time less than a majority of the Trustees then holding office were elected to such office by the Shareholders, the Trustees shall call a meeting of Shareholders for the purpose of electing Trustees. Each Trustee elected by the Shareholders or by the Trustees shall serve until the next meeting of Shareholders called for the purpose of electing Trustees and until the election and qualification of his or her successor, or until he or she sooner dies, resigns or is removed. The initial Trustees, each of whom shall serve until the first meeting of Shareholders at which Trustees are elected and until his or her successor is elected and qualified, or until he or she sooner dies, resigns or is removed, shall be Robert J. Sanborn and such other persons as the Trustee or Trustees then in office shall, prior to any sale of Shares pursuant to a public offering, appoint. By vote of a majority of the Trustees then in office, the Trustees may remove a Trustee with or without cause. At any meeting called for the purpose, a Trustee may be removed, with or without cause, by vote of the holders of two- thirds of the outstanding Shares. Effect of Death, Resignation, etc. of a Trustee Section 2. The death, declination, resignation, retirement, removal or incapacity of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust. Powers Section 3. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Trustees, and they shall have all powers necessary or convenient 4 to carry out that responsibility. Without limiting the foregoing, the Trustees may adopt By-Laws not inconsistent with this Declaration of Trust providing for the conduct of the business of the Trust and may amend and repeal them to the extent that such By-Laws do not reserve that right to the Shareholders; they may fill vacancies in their number, including vacancies resulting from increases in their number, and may elect and remove such officers and appoint and terminate such agents as they consider appropriate; they may appoint from their own number, and terminate, any one or more committees consisting of two or more Trustees, including an executive committee which may, when the Trustees are not in session, exercise some or all of the power and authority of the Trustees as the Trustees may determine; they may appoint an advisory board, the members of which shall not be Trustees and need not be Shareholders; they may employ one or more custodians of the assets of the Trust and may authorize such custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities, retain a transfer agent or a Shareholder services agent, or both, provide for the distribution of Shares by the Trust, through one or more principal underwriters or otherwise, set record dates for the determination of Shareholders with respect to various matters, and in general delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees and to any agent or employee of the Trust or to any such custodian or underwriter. Without limiting the foregoing, the Trustees shall have power and authority: (a) To invest and reinvest in securities, options, futures contracts, options on futures contracts and other property, and to hold cash uninvested; (b) To sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the assets of the Trust; (c) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper; (d) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities or other assets; (e) To hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in the name of the Trustees or of the Trust or in the name of a custodian, subcustodian or other depository or a nominee or nominees or otherwise; (f) Subject to the provisions of Article III, Section 3, to allocate assets, liabilities and expenses of the Trust to a particular series of Shares or to apportion the same among two or more series, provided that any liabilities or expenses incurred by a particular series of Shares shall be payable solely out of the assets of that series; and to the extent necessary or appropriate to give effect to the preferences and special or relative 5 rights and privileges of any classes of Shares, to allocate assets, liabilities, income and expenses of a series to a particular class of Shares of that series or to apportion the same among two or more classes of Shares of that series; (g) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any security of which is or was held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer, and to pay calls or subscriptions with respect to any security held in the Trust; (h) To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper; (i) To compromise, arbitrate or otherwise adjust claims in favor of or against the Trust on any matter in controversy, including but not limited to claims for taxes; (j) To enter into joint ventures, general or limited partnerships and any other combinations or associations; (k) To borrow funds, securities or other assets; (1) To endorse or guarantee the payment of any notes or other obligations of any person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof; and to mortgage and pledge the Trust property or any part thereof to secure any of or all of such obligations or obligations incurred pursuant to subparagraph (k) hereof; (m) To purchase and pay for entirely out of Trust property such insurance as they may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers or managers, principal underwriters or independent contractors of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as Shareholder, Trustee, officer, employee, agent, investment adviser or manager, principal underwriter or independent contractor, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such person against such liability; and 6 (n) To pay pensions for faithful service, as deemed appropriate by the Trustees, and to adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust. The Trustees shall not in any way be bound or limited by any present or future law or custom in regard to investments by Trustees. Except as otherwise provided herein or from time to time in the By-Laws, any action to be taken by the Trustees may be taken by a majority of the Trustees present at a meeting of the Trustees (a quorum being present), within or without Massachusetts, including any meeting held by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at a meeting, or by written consents of a majority of the Trustees then in office. Payment of Expenses by Trust Section 4. The Trustees are authorized to pay or to cause to be paid out of the principal or income of the Trust, or partly out of principal and partly out of income, as they deem fair, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust, or in connection with the management thereof, including, but not limited to, the Trustees' compensation and such expenses and charges for the services of the Trust's officers, employees, investment adviser or manager, principal underwriter, auditor, counsel, custodian, transfer agent, Shareholder services agent and such other agents or independent contractors, and such other expenses and charges, as the Trustees may deem necessary or proper to incur, provided, however, that all expenses, fees, charges, taxes and liabilities incurred or arising in connection with a particular series of Shares, as determined by the Trustees, shall be payable solely out of the assets of that series. Ownership of Assets of the Trust Section 5. Title to all of the assets of each series of Shares and of the Trust shall at all times be considered as vested in the Trustees. Advisory, Management and Distribution Section 6. Subject to a favorable Majority Shareholder Vote, the Trustees may, at any time and from time to time, contract for exclusive or nonexclusive advisory and/or management services with Harris Associates L.P., a Delaware limited partnership, or any other partnership, corporation, trust, association or other organization (the "Adviser"), every such contract to comply with such requirements and restrictions as may be set forth in the By-Laws; and any such contract may contain such other terms interpretive of or in addition to said requirements and restrictions as the Trustees may determine, including, without limitation, authority to determine from time to time what investments shall be purchased, held, sold or exchanged and what portion, if any, of the assets of the Trust shall be held uninvested, and to make changes in the 7 Trust's investments. The Trustees may also, at any time and from time to time, contract with the Adviser or any other corporation, trust, association or other organization, appointing it exclusive or nonexclusive distributor or principal underwriter for the Shares, every such contract to comply with such requirements and restrictions as may be set forth in the By-Laws; and any such contract may contain such other terms interpretive of or in addition to said requirements and restrictions as the Trustees may determine. The fact that: (i) any of the Shareholders, Trustees or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, manager, adviser, principal underwriter or distributor or agent of or for any corporation, trust, association or other organization, or of or for any parent or affiliate of any organization, with which an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, shareholder services or other agency contract may have been or may hereafter be made, or that any organization, or any parent or affiliate thereof, is a Shareholder or has an interest in the Trust, or that (ii) any corporation, trust, association or other organization with which an advisory or management contract or principal underwriter's or distributor's contract, or transfer, Shareholder services or other agency contract may have been or may hereafter be made also has an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, shareholder services or other agency contract with one or more other corporations, trusts, associations or other organizations, or has other business or interests shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same or create any liability or accountability to the Trust or its Shareholders. ARTICLE V SHAREHOLDERS' VOTING POWERS AND MEETINGS Voting Powers Section 1. The Shareholders shall have power to vote only (i) for the election of Trustees as provided in Article IV, Section 1, (ii) with respect to any Adviser as provided in Article IV, Section 6, (iii) with respect to any termination of this Trust to the extent and as provided in Article IX, Section 4, (iv) with respect to any amendment of this Declaration of Trust to the extent and as provided in Article IX, Section 7, (v) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, and (vi) with respect to such additional matters relating to the Trust as may be required by law, this Declaration of Trust, the By-Laws or any registration of the Trust with the 8 Securities and Exchange Commission (or any successor agency) or any state, or as the Trustees may consider necessary or desirable. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. Notwithstanding any other provision of this Declaration of Trust, on any matter submitted to a vote of Shareholders, all Shares of the Trust then entitled to vote shall be voted in the aggregate as a single class without regard to series or class except: (1) when required by the 1940 Act or when the Trustees shall have determined that the matter affects one or more series or classes materially differently, Shares shall be voted by individual series or class; and (2) when the Trustees have determined that the matter affects only the interests of one or more series or classes, then only Shareholders of such series or classes shall be entitled to vote thereon. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the Trust receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. At all meetings of Shareholders, unless inspectors of election have been appointed, all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the chairman of the meeting. Unless otherwise specified in the proxy, the proxy shall apply to all Shares of each series of the Trust owned by the Shareholder. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, this Declaration of Trust or the By-Laws to be taken by Shareholders. Voting Power and Meetings Section 2. Meetings of Shareholders of the Trust or of any series or class may be called by the Trustees or such other person or persons as may be specified in the By-Laws and held from time to time for the purpose of taking action upon any matter requiring the vote or the authority of the Shareholders of the Trust or any series or class as herein provided or upon any other matter deemed by the Trustees to be necessary or desirable. Meetings of Shareholders of the Trust or of any series or class shall be called by the Trustees or such other person or persons as may be specified in the By-Laws upon written application. The Shareholders shall be entitled to at least seven days' written notice of any meeting of the Shareholders. Quorum and Required Vote Section 3. Thirty percent of the Shares entitled to vote shall be a quorum for the transaction of business at a Shareholders' meeting, except that where any provision of law or of this Declaration of Trust permits or requires that holders of any series or class shall vote as a series or class, then thirty percent of the aggregate number of Shares of that series or class entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series or class. Any lesser number, however, shall be sufficient for adjournments. Any adjourned session or sessions may be held within a reasonable time after the date set for the 9 original meeting without the necessity of further notice. Except when a larger vote is required by any provision of this Declaration of Trust or the By-Laws, a majority of the Shares voted shall decide any questions and a plurality shall elect a Trustee, provided that where any provision of law or of this Declaration of Trust permits or requires that the holders of any series or class shall vote as a series or class, then a majority of the Shares of that series or class voted on the matter (or a plurality with respect to the election of a Trustee) shall decide that matter insofar as that series or class is concerned. Action by Written Consent Section 4. Any action taken by Shareholders may be taken without a meeting if a majority of Shareholders entitled to vote on the matter (or such larger proportion thereof as shall be required by any express provision of this Declaration of Trust or the By-Laws) consent to the action in writing and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. Additional Provisions Section 5. The By-Laws may include further provisions for Shareholders' votes and meetings and related matters. ARTICLE VI DISTRIBUTIONS, REDEMPTION AND REPURCHASES, AND DETERMINATION OF NET ASSET VALUE Distributions Section 1. The Trustees may, but need not, each year distribute to the Shareholders of each series or class such income and gains, accrued or realized, as the Trustees may determine, after providing for actual and accrued expenses and liabilities (including such reserves as the Trustees may establish) determined in accordance with good accounting practices. The Trustees shall have full discretion to determine which items shall be treated as income and which items as capital and their determination shall be binding upon the Shareholders. Distributions of each year's income of each series, if any be made, may be made in one or more payments, which shall be in Shares, in cash or otherwise and on a date or dates and as of a record date or dates determined by the Trustees. At any time and from time to time in their discretion, the Trustees may distribute to the Shareholders of any one or more series or classes as of a record date or dates determined by the Trustees, in Shares, in cash or otherwise, all or part of any gains realized on the sale or disposition of property of the series or otherwise, or all or part of any other principal of the Trust attributable to the series. In the case of any series not divided into two or more classes of Shares, each distribution pursuant to this Section 1 shall be made ratably according to the number of Shares of the series held by the several Shareholders on the applicable record date thereof, provided that no distribution need be made on Shares purchased 10 pursuant to orders received, or for which payment is made, after such time or times as the Trustees may determine. In the case of any series divided into two or more classes, each distribution pursuant to this Section 1 may be made in whole or in such parts as the Trustees may determine to the Shareholders of any one or more classes, and the distribution to the Shareholders of any class shall be made ratably according to the number of Shares of the class (but need not be made ratably according to the number of Shares of the series, considered without regard to class) held by the several Shareholders on the record date thereof, provided that no distribution need be made on Shares purchased pursuant to orders received, or for which payment is made, after such time or times as the Trustees may determine. Any such distribution paid in Shares will be paid at the net asset value thereof as determined in accordance with Section 7 of this Article VI. Redemptions and Repurchases Section 2. Any holder of Shares of the Trust may by presentation of a written request, together with his or her certificates, if any, for such Shares, in proper form for transfer, at the office of the Trust or at a principal office of a transfer agent appointed by the Trust, redeem his or her Shares for the net asset value thereof determined and computed in accordance with the provisions of this Section 2 and the provisions of Section 7 of this Article VI. Upon receipt by the Trust or its transfer agent of such written request for redemption of Shares, such Shares shall be redeemed at the net asset value per share of the appropriate series next determined after such Shares are tendered in proper order for transfer to the Trust or determined as of such other time fixed by the Trustees as may be permitted or required by the 1940 Act, provided that no such tender shall be required in the case of Shares for which a certificate or certificates have not been issued, and in such case such Shares shall be redeemed at the net asset value per share of the appropriate series next determined after such request has been received or determined at such other time fixed by the Trustees as may be permitted or required by the 1940 Act. The obligation of the Trust to redeem its Shares of each series or class as set forth above in this Section 2 shall be subject to the conditions that during any time of emergency, as hereinafter defined, such obligation may be suspended by the Trust by or under authority of the Trustees for such period or periods during such time of emergency as shall be determined by or under authority of the Trustees. If there is such a suspension, any Shareholder may withdraw any demand for redemption and any tender of Shares which has been received by the Trust during any such period and any tender of Shares, the applicable net asset value of which would but for such suspension be calculated as of a time during such period. Upon such withdrawal, the Trust shall return to the Shareholder the certificates therefor, if any. For the purposes of any such suspension, "time of emergency" shall mean, either with respect to all Shares or any series of Shares, any period during which: (a) the New York Stock Exchange is closed other than for customary weekend and holiday closings; or 11 (b) the Trustees or authorized officers of the Trust shall have determined, in compliance with any applicable rules and regulations of the Securities and Exchange Commission, either that trading on the New York Stock Exchange is restricted, or that an emergency exists as a result of which (i) disposal by the Trust of securities owned by it is not reasonably practicable or (ii) it is not reasonably practicable for the Trust fairly to determine the current value of its net assets; or (c) the suspension or postponement of such obligations is permitted by order of the Securities and Exchange Commission. The Trust may also purchase, repurchase or redeem Shares in accordance with such other methods, upon such other terms and subject to such other conditions as the Trustees may from time to time authorize at a price not exceeding the net asset value of such Shares in effect when the purchase or repurchase or any contract to purchase or repurchase is made. Payment in Kind - ---------------- Section 3. Subject to any generally applicable limitation imposed by the Trustees, any payment on redemption of Shares may, if authorized by the Trustees, be made wholly or partly in kind, instead of in cash. Such payment in kind shall be made by distributing securities or other property constituting, in the opinion of the Trustees, a fair representation of the various types of securities and other property then held by the series of Shares being redeemed (but not necessarily involving a portion of each of the series' holdings) and taken at their value used in determining the net asset value of the Shares in respect of which payment is made. Redemptions at the Option of the Trust - -------------------------------------- Section 4. The Trust shall have the right at its option and at any time to redeem Shares of any Shareholder at the net asset value thereof as determined in accordance with Section 7 of Article VI of this Declaration of Trust: (i) if at such time such Shareholder owns fewer Shares than, or Shares having an aggregate net asset value of less than, an amount determined from time to time by the Trustees; or (ii) to the extent that such Shareholder owns Shares of a particular series of Shares equal to or in excess of a percentage of the outstanding Shares of that series (determined without regard to class) determined from time to time by the Trustees; or (iii) to the extent that such Shareholder owns Shares of the Trust representing a percentage equal to or in excess of such percentage of the aggregate number of outstanding Shares of the Trust or the aggregate net asset value of the Trust determined from time to time by the Trustees. Dividends, Distributions, Redemptions and Repurchases - ----------------------------------------------------- Section 5. No dividend or distribution (including, without limitation, any distribution paid upon termination of the Trust or of any series) with respect to, nor any redemption or repurchase of, the Shares of any series (or of any class) shall be effected by the Trust other than from the assets of such series (or of the series of which such class is a part). 12 Additional Provisions Relating to Redemptions and Repurchases - ------------------------------------------------------------- Section 6. The completion of redemption of Shares shall constitute a full discharge of the Trust and the Trustees with respect to such shares, and the Trustees may require that any certificate or certificates issued by the Trust to evidence the ownership of such Shares shall be surrendered to the Trustees for cancellation or notation. Determination of Net Asset Value - -------------------------------- Section 7. The term "net asset value" of the Shares of each series or class shall mean: (i) the value of all the assets of such series or class; (ii) less the total liabilities of such series or class; (iii) divided by the number of Shares of such series or class outstanding, in each case at the time of each determination. The "number of Shares of such series or class outstanding" for the purposes of such computation shall be exclusive of any Shares of such series or class to be redeemed and not then redeemed as to which the redemption price has been determined, but shall include Shares of such series or class presented for repurchase and not then repurchased and Shares of such series or class to be redeemed and not then redeemed as to which the redemption price has not been determined and Shares of such series or class the sale of which has been confirmed. Any fractions involved in the computation of net asset value per share shall be adjusted to the nearer cent unless the Trustees shall determine to adjust such fractions to a fraction of a cent. The Trustees, or any officer or officers or agent of this Trust designated for the purpose by the Trustees, shall determine the net asset value of the Shares of each series or class, and the Trustees shall fix the times as of which the net asset value of the Shares of each series or class shall be determined and shall fix the periods during which any such net asset value shall be effective as to sales, redemptions and repurchases of, and other transactions in, the Shares of such series or class, except as such times and periods for any such transaction may be fixed by other provisions of this Declaration of Trust or by the By-Laws. In valuing the portfolio investments of any series or class for determination of net asset value per share of such series or class: (a) Each security for which market quotations are readily available shall be valued at current market value determined by methods specified by the Board of Trustees; (b) Each other security, including any security within (a) for which the specified price does not appear to represent a dependable quotation for such security as of the time of valuation, shall be valued at a fair value as determined in good faith by the Trustees; (c) Any cash on hand shall be valued at the face amount thereof; (d) Any cash on deposit, accounts receivable, and cash dividends and interest declared or accrued and not yet received, any prepaid expenses, and any other current asset shall be valued at the face amount thereof, unless the Trustees shall determine that any such item is not 13 worth its face amount, in which case such asset shall be valued at a fair value determined in good faith by the Trustees; and (e) Any other asset shall be valued at a fair value determined in good faith by the Trustees. Notwithstanding the foregoing, short-term debt obligations, commercial paper and repurchase agreements may be, but need not be, valued on the basis of quoted yields for securities of comparable maturity, quality and type, or on the basis of amortized cost. Liabilities of any series or class for accounts payable for investments purchased and for Shares tendered for redemption and not then redeemed as to which the redemption price has been determined shall be stated at the amounts payable therefor. In determining the net asset value of any series or class, the person or persons making such determination on behalf of the Trust may include in liabilities such reserves, estimated accrued expenses and contingencies as such person or persons may in its, his or their best judgment deem fair and reasonable under the circumstances. Any income dividends and gains distributions payable by the Trust shall be deducted as of such time or times on the record date therefor as the Trustees shall determine. The manner of determining the net assets of any series or class or of determining the net asset value of the Shares of any series or class may from time to time be altered as necessary or desirable in the judgment of the Trustees to conform to any other method prescribed or permitted by any applicable law or regulation. Determinations under this Section 7 made in good faith and in accordance with the provisions of the 1940 Act shall be binding on all parties concerned. ARTICLE VII COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES Compensation - ------------ Section 1. The Trustees as such shall be entitled to reasonable compensation from the Trust; they may fix the amount of their compensation. Nothing herein shall in any way prevent the employment of any Trustee for advisory, management, legal, accounting, investment banking or other services and payment for the same by the Trust. Limitation of Liability - ----------------------- Section 2. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, adviser or principal underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee, but nothing herein contained shall protect any Trustee against any liability to which he or she would otherwise be 14 subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Every note, bond, contract, instrument, certificate, Share or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in or with respect to their or his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. ARTICLE VIII INDEMNIFICATION Trustees, Officers, etc. - ------------------------ Section 1. The Trust shall indemnify each of its Trustees and officers (including persons who serve at the Trust's request as directors, officers or trustees of another organization in which the Trust has any interest as a shareholder, creditor or otherwise) (hereinafter referred to as a "Covered Person") against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom, before any court or administrative or legislative body, in which such Covered Person may be or may have been involved as a party or otherwise or with which such person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Covered Person, except that no Covered Person shall be indemnified against any liability to the Trust or its Shareholders to which such Covered Person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. Expenses, including counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), may be paid from time to time by the Trust in advance of the final disposition of any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Covered Person to repay amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under this Article, provided that (a) such Covered Person shall provide security for his undertaking, (b) the Trust shall be insured against losses arising by reason of such Covered Person's failure to fulfill his undertaking or (c) a majority of the Trustees who are disinterested persons and who are not Interested Persons (provided that a majority of such Trustees then in office act on the matter), or independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (but not a full trial-type inquiry), that there is reason to believe such Covered Person ultimately will be entitled to indemnification. 15 Compromise Payment - ------------------ Section 2. As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication in a decision on the merits by a court, or by any other body before which the proceeding was brought, that such Covered Person is liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office, indemnification shall be provided if (a) approved as in the best interest of the Trust, after notice that it involves such indemnification, by at least a majority of the Trustees who are disinterested persons and are not Interested Persons (provided that a majority of such Trustees then in office act on the matter), upon a determination, based upon a review of readily available facts (but not a full trial-type inquiry) that such Covered Person is not liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office, or (b) there has been obtained an opinion in writing of independent legal counsel, based upon a review of readily available facts (but not a full-trial type inquiry) to the effect that such indemnification would not protect such Covered Person against any liability to the Trust to which such Covered Person would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Any approval pursuant to this Section shall not prevent the recovery from any Covered Person of any amount paid to such Covered Person in accordance with this Section as indemnification if such Covered Person is subsequently adjudicated by a court of competent jurisdiction to have been liable to the Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. Indemnification Not Exclusive; Definitions - ------------------------------------------ Section 3. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which any such Covered Person may be entitled. As used in this Article VIII, the term "Covered Person" shall include such person's heirs, executors and administrators, and a "disinterested person" is a person against whom none of the actions, suits or other proceedings in question or another action, suit or other proceeding on the same or similar grounds is then or has been pending. Nothing contained in this article shall affect any rights to indemnification to which personnel of the Trust, other than Trustees and officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of such persons. Shareholders - ------------ Section 4. In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators or other legal representatives or, in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to 16 be held harmless from and indemnified against all loss and expense arising from such liability, but only out of the assets of the particular series of Shares of which he or she is or was a Shareholder. ARTICLE IX MISCELLANEOUS Trustees, Shareholders, etc. Not Personally Liable; Notice - ---------------------------------------------------------- Section 1. All persons extending credit to, contracting with or having any claim against the Trust or a particular series of Shares shall look only to the assets of the Trust or the assets of that particular series of Shares for payment under such credit, contract or claim; and neither the Shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Nothing in this Declaration of Trust shall protect any Trustee against any liability to which such Trustee would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee. Every note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officers or officer shall give notice that this Declaration of Trust is on file with the Secretary of State of The Commonwealth of Massachusetts and shall recite that the same was executed or made by or on behalf of the Trust or by them as Trustees or Trustee or as officers or officer and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets and property of the Trust, and may contain such further recital as he or she or they may deem appropriate, but the omission thereof shall not operate to bind any Trustees or Trustee or officers or officer or Shareholders or Shareholder individually. Trustee's Good Faith Action, Expert Advice, No Bond or Surety - ------------------------------------------------------------- Section 2. The exercise by the Trustees of their powers and discretions hereunder shall be binding upon everyone interested. A Trustee shall be liable for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. 17 Liability of Third Persons Dealing with Trustees - ------------------------------------------------ Section 3. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order. Duration and Termination of Trust - --------------------------------- Section 4. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by vote of Shareholders holding at least two-thirds of the Shares of each series entitled to vote or by the Trustees by written notice to the Shareholders. Any series of Shares may be terminated at any time by vote of Shareholders holding at least two-thirds of the Shares of such series entitled to vote or by the Trustees by written notice to the Shareholders of such series. Upon termination of the Trust or of any one or more series of Shares, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated as may be determined by the Trustees, the Trust shall in accordance with such procedures as the Trustees consider appropriate reduce the remaining assets to distributable form in cash or shares or other securities, or any combination thereof, and distribute the proceeds to the Shareholders of the series involved, ratably according to the number of Shares of such series held by the several Shareholders of such series on the date of termination, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of Shares of that series, provided that any distribution to the Shareholders of a particular class of Shares shall be made to such Shareholders pro rata in proportion to the number of Shares of such class held by each of them. Filing of Copies, References, Headings - -------------------------------------- Section 5. The original or a copy of this instrument and of each amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each amendment hereto shall be filed by the Trust with the Secretary of State of The Commonwealth of Massachusetts and with the Clerk of the City of Boston, as well as any other governmental office where such filing may from time to time be required. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such amendments have been made and as to any matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such amendments. In this instrument and in any such amendment, references to this instrument, and all expressions such as "herein," "hereof" and "hereunder," shall be deemed to refer to this instrument as amended or affected by any such amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. This instrument may be executed in any number of counterparts, each of which shall be deemed an original. 18 Applicable Law - -------------- Section 6. This Declaration of Trust is made in The Commonwealth of Massachusetts, and it is created under and is to be governed by and construed and administered according to the laws of said Commonwealth. The Trust shall be of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust. Amendments - ---------- Section 7. This Declaration of Trust may be amended at any time by an instrument in writing signed by a majority of the then Trustees when authorized so to do by a vote of Shareholders holding a majority of the Shares entitled to vote, except that an amendment which shall affect the holders of one or more series or classes of Shares but not the holders of all outstanding series and classes shall be authorized by vote of the Shareholders holding a majority of the Shares entitled to vote of each series and class affected and no vote of Shareholders of a series or class not affected shall be required. Amendments having the purpose of changing the name of the Trust or of supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision contained herein shall not require authorization by Shareholder vote. IN WITNESS WHEREOF the undersigned has hereunto set his hand in the City of Boston, Massachusetts for himself and his assigns, as of this 1st day of February, 1991. /s/ Robert J. Sanborn -------------------------------------- Robert J. Sanborn THE COMMONWEALTH OF MASSACHUSETTS Boston ss. February 1, 1991 Then personally appeared the above-named Trustee and acknowledged the foregoing instrument to be his free act and deed, before me, /s/ Cathleen A. Danner -------------------------------------- Notary Public My commission expires: 1/7/92 (Notary's Seal) The address of the Trust and the Trustee is Two North LaSalle Street, Chicago, Illinois 60602 19 EX-99.2 3 BYLAWS OF HARRIS ASSOCIATES INVESTMENT TRUST Exhibit 2 BYLAWS OF HARRIS ASSOCIATES INVESTMENT TRUST [as amended through September 21, 1993] 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 president or, if the 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. 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 Trustee or the president of the Trust. 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. 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. 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 president or the treasurer 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. 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 him or her. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting. 2 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 than 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, except that any Trustee who had attained the age of 70 years as of June 15, 1993 shall retire as a Trustee as of the end of the calendar year in which the Trustee attains the age of 72 years. [adopted 6/15/93] Section 4. Officers and Agents ------------------------------- 4.1 Enumeration; Qualification. The officers of the Trust shall be a 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] 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 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] 4.4 Tenure. The 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] 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, 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. [added 9/21/93] 3 4.6 Vice Presidents. In the absence of the president, or in the event of the 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 have such duties and powers as shall be designated from time to time by the Trustees or the president. [amended 9/21/93] 4.7 Treasurer. The treasurer shall be the chief financial and accounting officer 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, and shall have such duties and powers as shall be designated from time to time by the Trustees or the president. The Treasurer shall be responsible for preparation of financial statements of the Trust and shall have such other duties and powers as may be designated from time to time by the Trustees or the President. Any assistant treasurer shall have such duties and powers as shall be designated from time to time by the Trustees. [amended 9/21/93] 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. 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 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. 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. 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 4 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] 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 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. 5 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 or by one of the vice presidents or by 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. Section 11. Fiscal Year ------------------------ Except as from time to time otherwise provided by the Trustees, the fiscal year of the Trust shall end on October 31. 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-99.8.1 4 CUSTODIAN CONTRACT Exhibit 8.1 CUSTODIAN CONTRACT Between HARRIS ASSOCIATES INVESTMENT TRUST and STATE STREET BANK AND TRUST COMPANY TABLE OF CONTENTS -----------------
Page ---- 1. Employment of Custodian and Property to be Held by It...................... 1 2. Duties of the Custodian with Respect to Property of the Trust Held by the Custodian in the United States........................................... 2 2.1 Holding Securities................................................... 2 2.2 Delivery of Securities............................................... 2 2.3 Registration of Securities........................................... 4 2.4 Bank Accounts........................................................ 4 2.5 Availability of Federal Funds........................................ 5 2.6 Collection of Income................................................. 5 2.7 Payment of Fund Monies............................................... 5 2.8 Liability for Payment in Advance of Receipt of Securities Purchased.. 7 2.9 Appointment of Agents................................................ 7 2.10 Deposit of Trust Assets in Securities System........................ 7 2.10A Trust Assets Held in the Custodian's Direct Paper System........... 8 2.11 Segregated Account.................................................. 9 2.12 Ownership Certificates for Tax Purposes............................. 10 2.13 Proxies............................................................. 10 2.14 Communications Relating to Fund Securities.......................... 10 3. Duties of the Custodian with Respect to Property of the Trust Held Outside of the United States..................................................... 10 3.1 Appointment of Foreign Sub-Custodians................................ 10 3.2 Assets to be Held.................................................... 11 3.3 Foreign Securities Depositories...................................... 11 3.4 Segregation of Securities............................................ 11 3.5 Agreements with Foreign Banking Institutions......................... 11 3.6 Access of Independent Accountants of the Trust....................... 12 3.7 Reports by Custodian................................................. 12 3.8 Transactions in Foreign Custody Account.............................. 12 3.9 Liability of Foreign Sub-Custodians.................................. 13 3.10 Liability of Custodian.............................................. 13 3.11 Reimbursement for Advances.......................................... 13 3.12 Monitoring Responsibilities......................................... 13 3.13 Branches of U.S. Banks.............................................. 14 3.14 Tax Law............................................................. 14 4. Payments for Sales or Repurchase or Redemptions of Shares of the Trust..... 14 5. Proper Instructions........................................................ 15 6. Actions Permitted Without Express Authority................................ 15
Page ---- 7. Evidence of Authority...................................................... 16 8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value and Net Income........................................... 16 9. Records.................................................................... 16 10. Opinion of Trust's Independent Accountants................................ 17 11. Reports to Trust by Independent Public Accountants........................ 17 12. Compensation of Custodian................................................. 17 13. Responsibility of Custodian............................................... 17 14. Effective Period, Termination and Amendment............................... 18 15. Successor Custodian....................................................... 19 16. Interpretive and Additional Provisions.................................... 20 17. Additional Series......................................................... 20 18. Massachusetts Law to Apply................................................ 20 19. Prior Contracts........................................................... 20 20. Limitations of Liability of the Trustees and Shareholders................. 20
ii CUSTODIAN CONTRACT ------------------ This Contract between Harris Associates Investment Trust, a business trust organized and existing under the laws of the Commonwealth of Massachusetts, having its principal place of business at Two North LaSalle Street, Chicago, Illinois 60602 hereinafter called the "Trust", and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts 02110, hereinafter called the "Custodian", WITNESSETH: 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 WHEREAS, the Trust intends to offer shares initially in one series, The Oakmark Fund (such series and all other series subsequently established by the Trust and made subject to this Contract in accordance with paragraph 17 are herein referred to individually as a "Fund" and collectively as the "Funds"); NOW THEREFOR, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: 1. Employment of Custodian and Property to be Held by It The Trust hereby employs the Custodian as the custodian of the securities and other assets (sometimes referred to only as "securities") of the Funds of the Trust, including securities which are to be held in custody within the United States ("domestic securities") or outside the United States ("foreign securities") pursuant to the provisions of the Declaration of Trust. The Trust on behalf of the Fund(s) agrees to deliver to the Custodian all securities and cash of the Funds, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Fund(s) from time to time, and the cash consideration received by it for shares of beneficial interest of the Trust representing interests in the Funds, ("Shares") as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Fund held or received by the Fund and not delivered to the Custodian. Upon receipt of "Proper Instructions" (within the meaning of Article 5), the Custodian shall on behalf of the applicable Fund(s) from time to time employ one or more sub-custodians located in the United States, but only in accordance with a resolution adopted by the Board of Trustees of the Trust ("Board of Trustees" which may include the Executive Committee of the Board of Trustees) on behalf of the applicable Fund(s), and provided that the Custodian shall have no more or less responsibility or liability to the Trust on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may employ as sub-custodian for the Trust's foreign securities and other assets on behalf of the applicable Fund(s) the foreign banking institutions and foreign securities depositories designated in Schedule A hereto but only in accordance with the provisions of Article 3. 2. Duties of the Custodian with Respect to Property of the Trust Held by the Custodian in the United States 2.1 Holding Securities. The Custodian shall hold and physically segregate for the account of each Fund all non-cash property to be held by it in the United States, including all domestic securities owned by such Fund, other than (a) securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury, collectively referred to herein as "Securities System," and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian pursuant to Section 2.10A. 2.2 Delivery of Securities. The Custodian shall release and deliver domestic securities owned by a Fund held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions from the Trust on behalf of the applicable Fund, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Fund and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; 3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof; 4) To the depository agent in connection with tender or other similar offers for securities of the Fund; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates 2 or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian; 7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the 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 Custodian's own negligence or willful misconduct; 8) 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; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 9) In the case of warrants, rights or similar 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; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 10) For delivery in connection with any loans of securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Trust on behalf of the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral; 11) For delivery as security in connection with any borrowings by the Trust on behalf of the Fund requiring a pledge of assets by the Trust on behalf of the Fund, but only against receipt of amounts borrowed; 12) For delivery in accordance with the provisions of any agreement among the Trust on behalf of the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or 3 of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund of the Trust; 13) For delivery in accordance with the provisions of any agreement among the Trust on behalf of the Fund, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund of the Trust; 14) Upon receipt of instructions from the transfer agent ("Transfer Agent") for the Trust, for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Trust, related to the Fund ("Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; and 15) For any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions from the Trust on behalf of the applicable Fund, a certified copy of a resolution of the Board of Trustees signed by an officer of the Trust and certified by the Secretary or an Assistant Secretary, specifying the securities of the Fund to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. 2.3 Registration of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Trust on behalf of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, unless the Trust has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub- custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Contract shall be in "street names" or other good delivery form. If, however, the Trust directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Trust on such securities and to notify the Trust on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. 2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Fund of the Trust, subject 4 only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for a Fund may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Fund be approved by resolution of the Board of Trustees. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. 2.5 Availability of Federal Funds. Upon mutual agreement between the Trust on behalf of each applicable Fund and the Custodian, the Custodian shall, upon the receipt of Proper Instructions from the Trust on behalf of a Fund, make federal funds available to such Fund as of specified times agreed upon from time to time by the Trust and the Custodian in the amount of checks received in payment for Shares of such Fund which are deposited into the Fund's account. 2.6 Collection of Income. Subject to the provisions of Section 2.3 relating to the maintenance of securities in "street name", the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to such Fund's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Collection of income due each Fund on securities loaned pursuant to the provisions of Section 2.2(10) shall be the responsibility of the Trust. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Trust with such information or data as may be necessary to assist the Trust in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled. 2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Trust on behalf of the applicable Fund, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Fund in the following cases only: 5 1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.10A; (d) in the case of repurchase agreements entered into between the Trust on behalf of the Fund and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Fund of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Fund or (e) for transfer to a time deposit account of the Trust in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Trust as defined in Article 5; 2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of Shares issued by the Fund as set forth in Article 4 hereof; 4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Trust whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends on Shares of the Fund declared pursuant to the governing documents of the Trust; 6 6) For payment of the amount of dividends received in respect of securities sold short; 7) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions from the Trust on behalf of the Fund, a copy of a resolution of the Board of Trustees certified by the Secretary or an Assistant Secretary of the Trust, 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 purpose, and naming the person or persons to whom such payment is to be made. 2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except as specifically stated otherwise in this Contract, in any and every case where payment for purchase of domestic securities for the account of a Fund is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Trust on behalf of such Fund to so pay in advance, the Custodian shall be absolutely liable to the Trust for such securities to the same extent as if the securities had been received by the Custodian. 2.9 Appointment of Agents. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. 2.10 Deposit of Trust Assets in Securities System. The Custodian may deposit and/or maintain securities owned by a Fund in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934 which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "Securities System," in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, if any, and subject to the following provisions: 1) The Custodian may keep securities of the Fund in a Securities System provided that such securities are represented in an account ("Account") of the Custodian in the Securities System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to securities of the Fund which are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund; 7 3) The Custodian shall pay for securities purchased for the account of the Fund upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon (i) receipt of advice from the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities System of transfers of securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Custodian and be provided to the Trust at its request. Upon request, the Custodian shall furnish the Trust on behalf of the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Trust on behalf of the Fund copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Fund; 4) The Custodian shall provide the Trust for the Fund with any report obtained by the Custodian on the Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the Securities System; 5) The Custodian shall have received from the Trust on behalf of the Fund the initial and each annual certificate, as the case may be, required by Article 14 hereof; 6) Anything to the contrary in this Contract notwithstanding, the Custodian shall be liable to the Trust for the benefit of the Fund for any loss or damage to the Fund resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the Securities System; at the election of the Trust, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. 2.10A Trust Assets Held in the Custodian's Direct Paper System. The Custodian, in accordance with applicable rules of the Securities and Exchange Commission, may deposit and/or maintain securities owned by a Fund in the Direct Paper System of the Custodian subject to the following provisions: 8 1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions from the Trust on behalf of the Fund; 2) The Custodian may keep securities of the Fund in the Direct Paper System only if such securities are represented in an account ("Account") of the Custodian in the Direct Paper System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to securities of the Fund which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Fund; 4) The Custodian shall pay for securities purchased for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Fund; 5) The Custodian shall furnish to the Trust on behalf of the Fund confirmation of each transfer to or from the account of the Fund, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Trust on behalf of the Fund copies of daily transaction sheets reflecting each day's transaction in the Securities System for the account of the Fund; 6) The Custodian shall provide the Trust on behalf of the Fund with any report on its system of internal accounting control as the Trust may reasonably request from time to time. 2.11 Segregated Account. The Custodian shall, upon receipt of Proper Instructions from the Trust on behalf of each applicable Fund, establish and maintain a segregated account or accounts for and on behalf of each such Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.10 or Section 2.10A hereof, (i) in accordance with the provisions of any agreement among the Trust on behalf of the Fund, the Custodian and a broker- dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection 9 with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper corporate purposes, but only, in the case of clause (iv), upon receipt of, in addition to Proper Instructions from the Trust on behalf of the applicable Fund, a copy of a resolution of the Board of Trustees certified by the Secretary or an Assistant Secretary of the Trust, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. 2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Fund held by it and in connection with transfers of securities. 2.13 Proxies. The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities. 2.14 Communications Relating to Fund Securities. Subject to the provisions of Section 2.3 relating to the maintenance of securities in "street name", the Custodian shall transmit promptly to the Trust for each Fund all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Trust on behalf of the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers of the securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. 3. Duties of the Custodian with Respect to Property of the Trust Held Outside of the United States 3.1 Appointment of Foreign Sub-Custodians. The Trust hereby authorizes and instructs the Custodian to employ as sub-custodians for each Fund's securities and 10 other assets maintained outside the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as defined in Section 5 of this Contract, together with a certified resolution of the Trust's Board of Trustees, the Custodian and the Trust may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodian. Upon receipt of Proper Instructions, the Trust may instruct the Custodian to cease the employment of any one or more such sub-custodians for maintaining custody of the Fund's assets. 3.2 Assets to be Held. The Custodian shall limit the securities and other assets maintained in the custody of the foreign sub-custodians to (a) "foreign securities", as defined in paragraph (c)(l) of Rule 17f-5 under the Investment Company Act of 1940, and (b) cash and cash equivalents in such amounts as the Custodian or the Trust may determine to be reasonably necessary to effect the Fund's foreign securities transactions. 3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon in writing by the Custodian and the Trust, assets of the Funds shall be maintained in foreign securities depositories only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof. Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.5 hereof. 3.4 Segregation of Securities. The Custodian shall identify on its books as belonging to each applicable Fund of the Trust, the foreign securities of such Funds held by each foreign sub-custodian. Each agreement pursuant to which the Custodian employs a foreign banking institution shall require that such institution establish a custody account for the Custodian on behalf of the Trust for each applicable Fund of the Trust and physically segregate in each account, securities and other assets of the Funds, and, in the event that such institution deposits the securities of one or more of the Funds in a foreign securities depository, that it shall identify on its books as belonging to the Custodian, as agent for each applicable Fund, the securities so deposited. 3.5 Agreements with Foreign Banking Institutions. Each agreement with a foreign banking institution shall be substantially in the form set forth in Exhibit 1 hereto and shall provide that: (a) the assets of each Fund will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign banking institution or its creditors or agent, except a claim of payment for their safe custody or administration; (b) beneficial ownership for the assets of each Fund will be freely transferable without the payment of money or value other than for custody or administration; (c) adequate records will be maintained identifying the assets as belonging to each applicable Fund; (d) officers of or auditors employed by, or other representatives of the Custodian, including to the extent permitted 11 under applicable law the independent public accountants for the Trust, will be given access to the books and records of the foreign banking institution relating to its actions under its agreement with the Custodian; and (e) assets of the Funds held by the foreign sub- custodian will be subject only to the instructions of the Custodian or its agents. 3.6 Access of Independent Accountants of the Trust. Upon request of the Trust, the Custodian will use its best efforts to arrange for the independent accountants of the Trust to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian. 3.7 Reports by Custodian. The Custodian will supply to the Trust from time to time, as mutually agreed upon, statements in respect of the securities and other assets of the Fund(s) held by foreign sub- custodians, including but not limited to an identification of entities having possession of the Fund(s) securities and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of each applicable Fund indicating, as to securities acquired for a Fund, the identity of the entity having physical possession of such securities. 3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and 2.7 of this Contract shall apply to the foreign securities of the Trust held outside the United States by foreign sub-custodians. (b) Notwithstanding any provision of this Contract to the contrary, settlement and payment for securities received for the account of each applicable Fund and delivery of securities maintained for the account of each applicable Fund may be effected in accordance with the customary established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, by delivery of securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. (c) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract, and the Trust agrees to hold any such nominee harmless from any liability as a holder of record of such securities. 12 3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub- custodian shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and the Trust from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the institution's performance of such obligations. At the election of the Trust, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a foreign banking institution as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Trust has not been made whole for any such loss, damage, cost, expense, liability or claim. 3.10 Liability of Custodian. The Custodian shall be liable for the acts or omissions of a foreign banking institution to the same extent as set forth with respect to sub-custodians generally in this Contract and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.13 hereof, 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 loss where the sub-custodian has otherwise exercised reasonable care. Notwithstanding the foregoing provisions of this paragraph 3.10, in delegating custody duties to State Street London Ltd., the Custodian shall not be relieved of any responsibility to the Trust for any loss due to such delegation, except such loss as may result from (a) political risk (including, but not limited to, exchange control restrictions, confiscation, expropriation, nationalization, insurrection, civil strife or armed hostilities) or (b) other losses (excluding a bankruptcy or insolvency of State Street London Ltd. not caused by political risk) due to Acts of God, nuclear incident or other losses under circumstances where the Custodian and State Street London Ltd. have exercised reasonable care. 3.11 Reimbursement for Advances. If the Trust requires the Custodian to advance cash or securities for any purpose for the benefit of a Fund including the purchase or sale of foreign exchange or of contracts for foreign exchange, or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Fund shall be security therefor and should the Trust fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Funds assets to the extent necessary to obtain reimbursement. 3.12 Monitoring Responsibilities. The Custodian shall furnish annually to the Trust, during the month of June, information concerning the foreign sub-custodians employed by the Custodian. Such information shall be similar in kind and scope 13 to that furnished to the Trust in connection with the initial approval of one or more foreign sub-custodians pursuant to this Contract. In addition, the Custodian will promptly inform the Trust in the event that the Custodian learns of a material adverse change in the financial condition of a foreign sub-custodian or any loss of the assets of the Trust or, in the case of any foreign sub-custodian not the subject of an exemptive order from the Securities and Exchange Commission, the Custodian receives information from such foreign sub-custodian indicating to the Custodian that there appears to be a substantial likelihood that the shareholders' equity of the foreign sub-custodian will decline below $200 million (U.S. dollars or the equivalent thereof) or that its shareholders' equity has or may have declined below that level (in each case computed in accordance with generally accepted U.S. accounting principles). 3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this Contract, the provisions of Article 3 hereof shall not apply where the custody of the Funds assets are maintained in a foreign branch of a banking institution which is a "bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940 meeting the qualification set forth in Section 26(a) of said Act. The appointment of any such branch as a sub-custodian shall be governed by paragraph 1 of this Contract. (b) Cash held for each Fund of the Trust in the United Kingdom shall be maintained in an interest bearing account established for the Trust with the Custodian's London branch, which account shall be subject to the direction of the Custodian, State Street London Ltd., or both, in accordance with the Agreement. 3.14 Tax Law. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Trust or the Custodian as custodian of the Trust by the tax law of the United States of America or 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 or the Custodian as custodian of the Trust by the tax law of jurisdictions 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 jurisdictions for which the Trust has provided such information. 4. Payments for Sales or Repurchase or Redemptions of Shares of the Trust The Custodian shall receive from the Trust or from the Transfer Agent of the Trust, and deposit into the account of the appropriate Fund, such payments as are received for Shares of that 14 Fund issued or sold from time to time by the Trust. The Custodian will provide timely notification to the Trust on behalf of each such Fund and the Transfer Agent of any receipt by it of payments for Shares of such Fund. From such funds as may be available for the purpose but subject to the limitations of the Declaration of Trust and any applicable actions by the Board of Trustees, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares of a Fund, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholder. In connection with the redemption or repurchase of Shares of the Trust, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Trust to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Trust and the Custodian. 5. Proper Instructions Proper Instructions as used throughout this Contract means a writing signed or initialed by one or more person or persons as the Board of Trustees shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Trust shall cause all oral instructions, to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Trustees accompanied by a detailed description of procedures approved by the Board of Trustees, Proper Instructions may include communications effected directly between the Trust and the Custodian by electro-mechanical or electronic devices, provided that the Board of Trustees and the Custodian are satisfied that such procedures afford adequate safeguards for the Funds' assets. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.11. 6. Actions Permitted Without Express Authority The Custodian may in its discretion, without express authority from the Trust on behalf of each applicable Fund: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that no such individual expense shall exceed $50.00 and all such payments shall be accounted for to the Trust on behalf of the Fund; 2) surrender securities in temporary form for securities in definitive form; 15 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Board of Trustees of the Trust. 7. Evidence of Authority The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Trust. The Custodian may receive and accept a certified copy of a resolution adopted by the Board of Trustees as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the Board of Trustees pursuant to the Declaration of Trust as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. 8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value and Net Income The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Trustees to keep the books of account of each Fund and/or compute the net asset value per share of the outstanding shares of each Fund or, if directed in writing to do so by the Trust on behalf of the Fund, shall itself keep such books of account and/or compute such net asset value per share. If so directed, the Custodian shall also calculate daily the net income of the Fund as described in the Trust's currently effective prospectus related to such Fund and shall advise the Trust and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Trust to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the daily income of each Fund shall be made at the time or times described from time to time in the Trust's currently effective prospectus related to such Fund. 9. Records The Custodian shall with respect to each Fund create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Trust under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Trust and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Trust and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Trust's request, supply the Trust with a tabulation of securities owned by each Fund and held by the Custodian and shall, 16 when requested to do so by the Trust and for such compensation as shall be agreed upon between the Trust and the Custodian, include certificate numbers in such tabulations. 10. Opinion of Trust's Independent Accountants The Custodian shall take all reasonable action, as the Trust on behalf of each applicable Fund may from time to time request, to obtain from year to year favorable opinions from the Trust's independent accountants with respect to its activities hereunder in connection with the preparation of the Trust's Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 11. Reports to Trust by Independent Public Accountants The Custodian shall provide the Trust, on behalf of each of the Funds at such times as the Trust may reasonably require, but not less than annually, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, including the Custodian's Direct Paper System, relating to the services provided by the Custodian under this Contract; such reports shall be of sufficient scope and in sufficient detail as may reasonably be required by the Trust to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 12. Compensation of Custodian The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Trust on behalf of each applicable Fund and the Custodian. 13. Responsibility of Custodian So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Trust for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Trust) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be liable for the acts or omissions of a foreign banking institution appointed pursuant to the provisions of Article 3 to the same extent as set forth in Article 1 hereof with respect to sub-custodians located in the United States (except as specifically 17 provided in Article 3.10) and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.11 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from, or caused by, the direction of or authorization by the Trust to maintain custody or any securities or cash of the Trust in a foreign country including, but not limited to, losses resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism. If the Trust on behalf of a Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Trust or the Fund being liable for the payment of money or incurring liability of some other form, the Trust on behalf of the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form reasonably satisfactory to it. If the Trust requires the Custodian to advance cash or securities for any purpose for the benefit of a Fund including the purchase or sale of foreign exchange or of contracts for foreign exchange or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Fund shall be security therefor and should the Trust fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Fund's assets to the extent necessary to obtain reimbursement. 14. Effective Period, Termination and Amendment This Contract shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto, and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid, to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided, however that the Custodian shall not with respect to a Fund act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Trustees of the Trust has approved the initial use of a particular Securities System by such Fund and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Trustees has reviewed the use by such Fund of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian shall not with respect to a Fund act under Section 2.10A hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Trustees has approved the initial use of the Direct Paper System by such Fund and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Trustees has reviewed the use by such Fund of the Direct Paper System; provided further, however, that the Trust shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Declaration of Trust, and further provided, that the Trust on behalf of one or more of the Funds 18 may at any time by action of its Board of Trustees (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Contract, the Trust on behalf of each applicable Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. 15. Successor Custodian If a successor custodian for the Trust, of one or more of the Funds shall be appointed by the Board of Trustees of the Trust, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Fund then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Fund held in a Securities System or the Custodian's Direct Paper System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a resolution of the Board of Trustees, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such resolution. In the event that no written order designating a successor custodian or certified copy of a resolution of the Board of Trustees shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Fund and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Fund and to transfer to an account of such successor custodian all of the securities of each such Fund held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Trust to provide the certified copy of the resolution referred to, or of the Board of Trustees to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect. 19 16. Interpretive and Additional Provisions In connection with the operation of this Contract, the Custodian and the Trust on behalf of each of the Funds, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their respective opinions be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Declaration of Trust of the Trust. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract. 17. Additional Series In the event that the Trust establishes one or more series of Shares in addition to The Oakmark Fund with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Fund hereunder. 18. Massachusetts Law to Apply This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. 19. Prior Contracts This Contract supersedes and terminates, as of the date hereof, all prior contracts, if any, between the Trust on behalf of each of the Funds and the Custodian relating to the custody of the Trust's assets. 20. Limitations of Liability of the Trustees and Shareholders A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of the Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually, and that the obligations of this instrument are not binding upon any of the Trustees or Shareholders individually but are binding only upon the assets and property of the Trust. 20 IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the 10th day of July, 1991. ATTEST HARRIS ASSOCIATES INVESTMENT TRUST /s/ Edie Sue Sutker By /s/ Victor A. Morgenstern - ------------------------- ---------------------------- Assistant Secretary President ATTEST STATE STREET BANK AND TRUST COMPANY /s/ [Signature] By /s/ [Signature] - ------------------------- --------------------------- Assistant Secretary Vice President 21 Schedule A ---------- The following foreign banking institutions and foreign securities depositories have been approved by the Board of Trustees of Harris Associates Investment Trust for use as sub-custodians for the Fund's securities and other assets: (Insert banks and securities depositories) NONE Certified: /s/ Victor A. Morgenstern - ---------------------------------- Fund's Authorized Officer Date: July 10, 1991 ---------------------------- 22 EX-99.8.2 5 SPECIAL CUSTODY ACCOUNT AGREEMENT Exhibit 8.2 SPECIAL CUSTODY ACCOUNT AGREEMENT --------------------------------- (Short Sales) AGREEMENT, dated as of September 24, 1991 by and among State Street Bank and Trust Company, in its capacity as custodian hereunder (the "Bank"), The Oakmark Fund (the "Customer") and Pershing Division of Donaldson, Lufkin and Jenrette (the "Broker"). WHEREAS, Broker is a securities broker-dealer and is a member of several national securities exchanges; and WHEREAS, Customer desires from time to time to sell securities "short" through Broker, such short sales being permitted by Customer's investment policies, and for that purpose has executed a margin agreement (the "Margin Agreement"); and WHEREAS, to facilitate Customer's transactions in short sales of securities, Customer and Broker desire to establish procedures for the compliance by Broker with the provisions of Regulation T of the Board of Governors of the Federal Reserve System and other applicable law ("Margin Rules"); and WHEREAS, to assist Broker and Customer in complying with the Margin Rules, Bank is prepared to act as custodian to hold Collateral as defined below. NOW, THEREFORE, be it agreed as follows: 1. DEFINITIONS As used herein, the following terms have the following meanings: (a) "Adequate Margin" in respect of short sales shall mean such Collateral as is adequate in Broker's reasonable judgment under the Margin Rules and the internal policies of Broker. (b) "Advice from Broker" or "Advice" means a written notice sent to Customer and Bank or transmitted by a facsimile sending device, except that Advices for initial or additional Collateral or with respect to Broker's ability to effect a short sale for Customer may be given orally. With respect to any short sale or Closing Transaction, the Advice from Broker shall mean a standard confirmation in use by Broker and sent or transmitted to Customer and Bank. With respect to substitutions or releases of Collateral, Advice from Broker means a written notice signed by Broker and sent or transmitted to Customer and Bank. An authorized agent of Broker will certify to Customer and Bank the names and signatures of those employees who are authorized to sign Advices from Broker, which certification may be amended from time to time. When used herein, the term "Advise" means the act of sending an Advice from Broker. (c) "Closing Transaction" is a transaction in which Customer purchases securities which have been sold short. (d) "Collateral" shall mean cash or U.S. Government securities or other securities acceptable to Broker. (e) "Insolvency" means that (A) an order, judgment or decree has been entered under the bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law (herein called the "Bankruptcy Law") of any jurisdiction adjudicating the Customer insolvent; or (B) the Customer has petitioned or applied to any tribunal for, or consented to the appointment of, or taking possession by, a trustee, receiver, liquidator or similar official, of the Customer, or commenced a voluntary case under the Bankruptcy Law of the United States or any proceedings relating to the Customer under the Bankruptcy Law of any other jurisdiction, whether now or hereinafter in effect; or (C) any such petition or application has been filed, or any such proceedings commenced, against the Customer and the Customer by any act has indicated its approval thereof, consent thereto or acquiescence therein, or an order for relief has been entered in an involuntary case under the Bankruptcy Law of the United States, as now or hereinafter constituted, or any order, judgment or decree has been entered appointing any such trust, receiver, liquidator or similar official, or approving the petition in any such proceedings, and such order, judgment or decree remains unstayed and in effect for more than 60 days. (f) "Instructions from Customer" or "Instructions" means a request, direction or certification in writing signed by Customer and delivered to Bank and Broker or transmitted by a facsimile sending device. An officer of Customer will certify to Bank and Broker the names and signatures of those persons authorized to sign the instructions, which certification may be amended from time to time. When used herein, the term "Instruct" shall mean the act of sending an Instruction from Customer. (g) "Receipt of Payment" means receipt by Bank of (1) a certified or official bank check or wire transfer to Bank; (2) a written or telegraphic advice from a registered clearing agency that funds have been or will be credited to the account of Bank, or (3) a transfer of funds from any of Broker's accounts maintained at Bank. (h) "Receipt of Securities" means receipt by Bank, of (1) securities in proper form for transfer or (2) a written or telegraphic advice from a registered clearing agency that securities have been credited to the account of Bank for the Special Custody Account. 2 (i) "Special Custody Account" shall have the meaning assigned to that term in Section 2 hereof. 2. SPECIAL CUSTODY ACCOUNT (a) Bank shall open an account on its books entitled "Special Custody Account for [Broker] as Pledgee of [Name of Customer]" ("Special Custody Account") and shall hold therein all securities and similar property as shall be received and accepted by it therein pursuant to this Agreement. Customer agrees to instruct Bank in Instructions from Customer as to cash and specific securities which Bank is to identity on its books and records as pledged to Broker as Collateral in the Special Custody Account. Customer agrees that the value of such cash and securities shall be at least equal in value to what Broker shall initially and from time to time advise Customer in an Advice from Broker is necessary to constitute Adequate Margin. Such collateral (i) will be held by Bank for Broker as agent of Broker, (ii) may be released only in accordance with the terms of this Agreement and (iii) except as required to be released hereunder to Broker, shall not be made available to Broker or to any other person claiming through Broker, including the creditors of the Broker. (b) Customer hereby grants a continuing security interest to Broker in the Collateral in the Special Custody Account. To perfect Broker's security interest, Bank will hold the Collateral in the Special Custody Account, subject to the interest therein of Broker as the pledgee and secured party thereof in accordance with the terms of this Agreement. Such security interest will terminate at such time as Collateral is released as provided herein. Bank shall have no responsibility for the validity or enforceability of such security interest. (c) Bank will confirm in writing to Broker and Customer all pledges, releases or substitutions of Collateral and will supply Broker and Customer with a monthly statement of Collateral and transaction in the Special Custody Account for such month. Bank will also advise Broker upon request of the kind and amount of Collateral pledged to Broker. (d) Upon the request of Customer, Broker shall advise Bank and Customer of any excess of Collateral in the Special Custody Account. Such excess shall at Customer's request be transferred therefrom upon Advice from Broker. Customer represents and warrants to Broker that securities included at any time in the Collateral shall be in good deliverable form (or Bank shall have the unrestricted power to put such securities into good deliverable form) in accordance with the requirements of such exchanges as may be the primary market or markets for such securities. (e) Bank will maintain accounts and records for the Collateral in the Special Custody Account as more fully described in subparagraph 5(a) below. The Collateral shall 3 at all times remain the property of the Customer subject only to the extent of the interest and rights therein of Broker as the pledgee thereof. 3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES (a) From time to time, Customer may place orders with Broker for the short sale of securities. Prior to the acceptance of such orders Broker will advise Customer of Broker's ability to borrow such securities or other properties and acceptance of short sale orders will be contingent upon same. (b) Broker shall, on the last business day of each week, compute the aggregate net credit or debit balance on Customer's open short sales and advise Customer by 11:00 A.M. New York time of the amount of the net debit or credit, as the case may be. If a net debit balance exists on such day, Customer will cause an amount equal to such net debit balance to be paid to Broker by the close of business on such day. If a net credit balance exists on such day, Broker will pay such credit balance to Customer by the close of business on such day. As Customer's open short positions are marked-to-market each week, payments will be made by or to Customer to reflect changes (if any) in the credit or debt balances. Broker will charge interest on debit balances, and Broker will pay interest on credit balances. Balances will be appropriately adjusted when short sales are closed out. 4. PLACING ORDER It is understood and agreed that Customer, when placing with Broker any order to sell short for Customer's account, will designate the order as such and hereby authorizes Broker to mark such order as being "short", and when placing with Broker any order to sell long for Customer's account, will designate the order as such and hereby authorizes Broker to mark such order as being "long". Any sell order which Customer shall designate as being for long account as above provided is for securities then owned by Customer and, if such securities are not then deliverable by Broker from any account of Customer, the placing of such order shall constitute a representation by Customer that it is impracticable for Customer then to deliver such securities to Broker but that Customer deliver them by the settlement date or as soon as possible thereafter. 5. RIGHTS AND DUTIES OF THE BANK (a) Generally. The Bank shall receive and hold in the Special Custody Account, as custodian upon the terms of this Agreement, all Collateral deposited and maintained pursuant to the terms of this Agreement and, except as provided in subparagraph 5(b) below, shall receive and hold all monies and other property paid, distributed or substituted in respect of such Collateral or realized on the sale or other disposition of such Collateral; provided, however, that the Bank shall have no duty to require any money or securities to be delivered to it or to determine that the amount and form of assets delivered to it comply with any applicable requirements. Collateral held in the Special Custody Account shall be released only in accordance with this Agreement or as required by applicable law. 4 The Customer warrants its authority to deposit in such accounts any money, securities and other property received by the Bank. The Bank may hold the securities in the Special Custody Account in bearer, nominee, book entry, or other form and in depository or clearing corporation, with or without indicating that the securities are held hereunder; provided, however, that all securities held in the Special Custody Account shall be identified on the Bank's records as subject to this Agreement and shall be in a form that permits transfer without additional authorization or consent of the Customer. The Customer and Broker hereby agree to hold the Bank and its nominees harmless from any liability as holder of record. (b) Dividends and Interest. Any dividends or interest paid with respect to the Collateral held in the Special Custody Account shall be paid by the Bank to the Customer when collected unless the Bank has received contrary instructions from the Customer. (c) Reports. The Bank shall, as promptly as practical, provide Broker and the Customer with written confirmation of each transfer into and out of the Special Custody Account. The Bank also shall render to the Customer and Broker a monthly statement of the Collateral held in the Special Custody Account. In addition, the Bank will advise the Customer or Broker upon request at any time of the type and amount of Collateral held in the account; provided, however, that the Bank shall have no responsibility for making any determination as to the value of such Collateral. (d) Limitation of Bank's Liability. The Bank's duties and responsibilities are as set forth in this Agreement. The Bank shall act only upon receipt of Advice from Broker regarding release of Collateral. The Bank shall not be liable or responsible for anything done, or omitted to be done by it in good faith and in the absence of negligence and may rely and shall be protected in acting upon any notice, instruction or other communication which it reasonably believes to be genuine and authorized. As between Customer and the Bank, the terms of the Custodian Agreement shall apply with respect to any losses or liabilities of such parties arising out of matters covered by this Agreement. As between the Bank and Broker, Broker shall indemnity and hold the Bank harmless with regard to any losses or liabilities of the Bank (including counsel fees) imposed on or incurred by the Bank arising out of any action or omission of the Bank in accordance with any notice or instruction of Broker under this Agreement. In matters concerning or relating to this Agreement, the Bank shall not be responsible for compliance with any statute or regulation regarding the establishment or maintenance of margin credit, including but not limited to Regulations T or X of the Board of Governors of the Federal Reserve System, or with any rules or regulations of the OCC. The Bank shall not be liable to any party for any acts or omissions of the other parties to this Agreement. 5 (e) Bank shall be paid as compensation for its services pursuant to this Agreement such compensation as may from time to time be agreed upon in writing between Customer and Bank. 6. DEFAULT In the event of a default by Customer of its obligations (i) to maintain Adequate Margin as herein provided, (ii) to timely comply with any obligation on Customer's part to be performed or observed under this Agreement or in the Margin Agreement, (iii) to pay on demand by Broker any losses sustained by Broker as may occur under circumstances contemplated in paragraph 3 above; or (iv) in the event of Customer's Insolvency, Broker has the right to give notice (which notice may be by telegraph, facsimile transmission or hand delivery) to Customer specifying such default and Broker may, no sooner than 2:00 P.M., New York time on the next business day after giving such notice to Customer, if Customer continues to be in default or insolvent at the end of such period, effect a Closing Transaction or buy-in of any securities of which Customer's account may be short. In the event of a default specified in subparagraphs (i), (ii) or (iii) above, Broker shall also have the right, upon like notice and grace period, to sell any and all Collateral in the Special Custody Account and to give Advice to Bank to deliver such Collateral free of payment to Broker, which Advice shall state that, pursuant to this Agreement, the condition precedent to Broker's right to receive such collateral free of payment has occurred. The Bank will provide prompt telephone notice to Customer of any receipt by Bank of Advice from Broker to deliver Collateral free of payment, and shall effect delivery of Collateral to Broker. Such sale or purchase may be made according to Broker's judgment and may be made at Broker's discretion, on the principal exchange or other market for such securities, or in the event such principal market is closed, in a manner commercially reasonable for such securities. 7. LIMITATION OF BROKER LIABILITY Broker shall not be liable for any losses, costs, damages, liabilities or expenses suffered or incurred by Customer as a result of any transaction executed hereunder, or any other action taken or not taken by Broker hereunder for Customer's account at Customer's direction or otherwise, except to the extent that such loss, cost, damage, liability or expense is the result of Broker's own recklessness, willful misconduct or bad faith. 8. CUSTOMER REPRESENTATION Customer represents and warrants that the Collateral will not be subject to any other liens or encumbrances. 9. TERMINATION Any of the parties hereto may terminate this Agreement by notice in writing to the other parties hereto; provided, however, that the status of any short sales, and of Collateral held at the time of such notice to margin such short sales shall not be affected by such termination until the release of such Collateral pursuant to applicable rules of such national securities exchanges of 6 which Broker may be a member. In the event of the release of Collateral, the Collateral shall be transferred to Customer. 10. NOTICE Written communications hereunder shall be telegraphed, sent by facsimile transmission or hand delivered as required herein, when another method of delivery is not specified, may be mailed first class postage prepaid, except that written notice of termination shall be sent by certified mail, addressed: (a) if to Bank, to: State Street Bank and Trust Company 1776 Heritage Drive North Quincy, Massachusetts 02171 Attn: Brenda Casey Telephone: (617) 985-5361 Telecopy: (617) 985-6378 (b) if to Customer, to: The Oakmark Fund c/o Harris Associates L.P. 2 N. LaSalle Street, Suite 500 Chicago, Illinois 60602-3790 Attn: Edie Sutker Telephone: (312) 621-0574 Telecopy: (312) 621-0372 (c) if to Broker, to; Pershing, Division of Donaldson, Lufkin & Jenrette Securities Corp. One Pershing Plaza Jersey City, New Jersey 07399 Attn: Paul Onorio Telephone: (201) 413-3443 Telecopy: (201) 413-5270 11. CONTROLLING LAW The construction and enforcement of this Agreement shall be subject to and governed by the laws of the Commonwealth of Massachusetts. 7 Executed as of the date first above written. STATE STREET BANK AND TRUST COMPANY By: [Signature] ---------------------------- Vice President THE OAKMARK FUND By: /s/ Joseph E. Braucher ---------------------------- Treasurer PERSHING DIVISION OF DONALDSON, LUFKIN AND JENRETTE By: [Signature] ---------------------------- Senior Vice President 8 EX-99.8.3 6 FORM OF LETTER AGREEMENT Exhibit 8.3 [Oakmark Fund Letterhead] September 8, 1992 State Street Bank and Trust Company 1776 Heritage Drive North Quincy, Massachusetts 02171 Gentlemen: This is to advise you that Harris Associates Investment Trust (Trust) has established a new series of shares to be known as The Oakmark International Fund. In accordance with the Additional Series provision in Section 17 of the Custodian Contract dated July 10, 1991 and in Article 8 of the Transfer Agency and Service Agreement dated July 10, 1991 between the Trust and State Street Bank and Trust Company, the Trust hereby requests that you act as Custodian and Transfer Agent for the new series under the terms of the respective contracts. Please indicate your acceptance of the foregoing by executing three copies of this Letter Agreement, returning two to the Trust and retaining one copy for your records. HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Victor A. Morgenstern ------------------------- Victor A. Morgenstern President Agreed to this 8th day of September, 1992. STATE STREET BANK AND TRUST COMPANY By [Signature] ------------------------- Vice President EX-99.8.4 7 FORM OF LETTER AGREEMENT Exhibit 8.4 September 15, 1995 State Street Bank and Trust Company 1776 Heritage Drive North Quincy, Massachusetts 02101 Ladies and Gentlemen: This is to advise you that Harris Associates Investment Trust has established three new series of shares (the "New Funds") to be known as: The Oakmark Small Cap Fund The Oakmark Balanced Fund The Oakmark International Emerging Value Fund In accordance with the Additional Funds provisions in Section 17 of the Custodian Contract dated July 1, 1992 and in Article 10 of the Transfer Agency and Service Agreement dated July 1, 1992 between the Trust and State Street Bank and Trust Company, the Trust hereby requests that you act as Custodian and Transfer Agent for each of the New Funds under the terms of those respective contracts. We anticipate that the New Funds will commence operations on or about September 30, 1995. Please indicate your acceptance of the foregoing by executing two copies of this letter agreement, returning one to the Trust and retaining one copy for your records. HARRIS ASSOCIATES INVESTMENT TRUST By: /s/ Victor A. Morgenstern Victor A. Morgenstern President Agreed to this 27th day of September, 1995. STATE STREET BANK AND TRUST COMPANY By: /s/ ----------------------------- Vice President EX-99.10.1 8 OPINION OF ROPES & GRAY Exhibit 10.1 [Ropes & Gray Letterhead] July 11, 1991 Harris Associates Investment Trust Two North LaSalle Street Chicago, Illinois 60602-3790 Gentlemen: We are furnishing this opinion with respect to the proposed offer and sale from time to time of an indefinite number of shares of beneficial interest (the "Shares") of The Oakmark Fund (the "Fund"), a series of Harris Associates Investment Trust (the "Trust"), being registered under the Securities Act of 1933, as amended, by a Registration Statement on Form N-1A (the "Registration Statement"). We have acted as Massachusetts counsel for the Trust in connection with its organization and are familiar with the action taken by its trustees to authorize the issuance of the Shares. We have examined its by-laws and its Agreement and Declaration of Trust on file at the Office of the Secretary of State of The Commonwealth of Massachusetts and we have also examined such other documents as we deem necessary for the purpose of this opinion. We assume that appropriate action has been or will be taken to register or qualify the sale of the Shares under any applicable state and federal laws regulating sales and offerings of securities and that upon sales of the Shares the Trust will receive the net asset value thereof. Based upon the foregoing, we are of the opinion that the Trust is authorized to issue an unlimited number of Shares and upon the issue of any thereof for cash at net asset value and receipt by the Trust of the authorized consideration therefor, the Shares so issued will be validly issued, fully paid, and nonassessable by the Trust. The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Trust. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the Trust or the Trustees. The Agreement and Declaration of Trust provides for indemnification out of the Trust's property for all loss and expense of any shareholder held personally liable solely by reason of his being or having been a shareholder. Thus, the risk of a shareholder's incurring financial loss on account of shareholder liability is limited to circumstances in which the Trust itself would be unable to meet its obligations. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Ropes & Gray ------------------------- Ropes & Gray 2 EX-99.10.2 9 OPINION OF BELL, BOYD & LLOYD Exhibit 10.2 [Bell, Boyd & Lloyd Letterhead] July 23, 1992 Harris Associates Investment Trust Two North LaSalle Street, #500 Chicago, Illinois 60602 Ladies and Gentlemen: Shares of Beneficial Interest Without Par Value Oakmark International --------------------- We have acted as counsel for Harris Associates Investment Trust (Trust) in connection with the registration under the Securities Act of 1933 (Act) of an indefinite number of shares of beneficial interest, without par value, of the Oakmark International series of the Trust (Series) in registration statement no. 33-38953 on form N-1A (Registration Statement). In this connection we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, records, certificates and other papers as we deemed it necessary to examine for the purpose of this opinion, including the Agreement and Declaration of Trust (Trust Agreement) and bylaws of the Trust, actions of the board of trustees of the Trust authorizing the issuance of shares of the Series, the form of certificates to evidence such shares, and the Registration Statement. Based on the foregoing examination, we are of the opinion that: 1. The Trust is an unincorporated voluntary association legally organized and validly existing under the laws of the Commonwealth of Massachusetts. 2. Upon the issuance and delivery of the shares of the Series in accordance with the Trust Agreement and the actions of the board of trustees authorizing the issuance of such shares, and the receipt by the Trust of the authorized consideration therefor, the shares so issued will be validly issued and outstanding, fully paid and nonassessable (although shareholders of the Series may be subject to liability under certain circumstances as described in the prospectus of the Trust included as Part A of the Registration Statement under the caption "Other Information"). In giving this opinion we have relied upon the attached opinion of Ropes & Gray to us dated July 21, 1992. We consent to the filing of this opinion as an exhibit to the Registration Statement. 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 Act. Very truly yours, /s/ Bell, Boyd & Lloyd --------------------------- 2 EX-99.10.3 10 OPINION OF ROPES & GRAY Exhibit 10.3 [Ropes & Gray Letterhead] September 20, 1995 Bell, Boyd & Lloyd Three First National Plaza 70 West Madison Street, Suite 3300 Chicago, IL 60602 Ladies and Gentlemen: We are furnishing this opinion in connection with the proposed offer and sale from time to time by each of The Oakmark International Fund, The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund of the Harris Associates Investment Trust (the "Trust") of an indefinite number of shares of beneficial interest, without par value (the "Shares"), pursuant to the Trust's Registration Statement on Form N-1A (No. 33-38953) under the Securities Act of 1933, as amended. We are familiar with the action taken by the Trustees of the Trust to authorize the issuance of the Shares. We have examined the Trust's records of Trustee action, its By-Laws and its Agreement and Declaration of Trust, as amended to date. We have examined such other documents as we deem necessary for the purposes of this opinion. We assume that, upon sale of the Shares, the Trust will receive the net asset value thereof. Based upon the foregoing, we are of the opinion that the Trust is authorized to issue an unlimited number of Shares, and that, when the Shares are issued and sold after the Registration Statement has been declared effective and the authorized consideration therefor is received by the Trust, they will be validly issued, fully paid and nonassessable by the Trust. The Trust is an entity of the type commonly known as a "Massachusetts business trust". Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Trust or any series of the Trust (a "Series"). However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the Trust or any Series and requires that notice of such disclaimer be given in every note, bond, contract or other undertaking issued by or on behalf of the Trust. The Agreement and Declaration of Trust provides for indemnification out of property of the Trust or a particular Series for all loss and expense of any shareholder held personally liable for the obligations of the Trust or that particular Series. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Trust or the particular Series itself would be unable to meet its obligations. We consent to the filing of this opinion as an exhibit to the aforesaid Registration Statement. Very truly yours, /s/ Ropes & Gray ---------------------- Ropes & Gray 2 EX-99.10.4 11 OPINION OF BELL, BOYD & LLOYD Exhibit 10.4 CAMERON S. AVERY DIRECT DIAL: 312 807-4302 September 20, 1995 Harris Associates Investment Trust Two North La Salle Street, #500 Chicago, Illinois 60602-3790 Ladies and Gentlemen: The Oakmark Small Cap Fund The Oakmark Balanced Fund The Oakmark International Emerging Value Fund We have acted as counsel for Harris Associates Investment Trust (the "Trust") in connection with the registration under the Securities Act of 1933 (the "Act") of an indefinite number of shares of beneficial interest (the "Shares") of each of the series of the Trust designated The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund (the "Funds") in registration statement no. 33-38953 on form N-1A (the "Registration Statement"). In this connection we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate and other records, certificates and other papers as we deemed it necessary to examine for the purpose of this opinion, including the agreement and declaration of trust (the "Trust Agreement") and bylaws (the "Bylaws") of the Trust, actions of the board of trustees of the Trust authorizing the issuance of shares of the Funds and the Registration Statement. Based on the foregoing examination, we are of the opinion that upon the issuance and delivery of the Shares of each Fund in accordance with the Trust Agreement and the actions of the board of trustees authorizing the issuance of the Shares, and the receipt by the Trust of the authorized consideration therefor, the Shares so issued will be validly issued, fully paid and nonassessable (although shareholders of a Fund may be subject to liability under certain circumstances as described in the statement of additional information of the Trust included as Part B of the Registration Statement under the caption "Declaration of Trust"). Harris Associates Investment Trust September 20, 1995 Page 2 We consent to the filing of this opinion as an exhibit to the Registration Statement. 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 Act. Very truly yours, /s/ Bell, Boyd & Lloyd EX-99.11 12 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 11 [ARTHUR ANDERSEN LOGO] CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated December 6, 1996, 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 Small Cap Fund, The Oakmark Balanced Fund, The Oakmark International Fund, and The Oakmark International Emerging Value Fund). /s/ Arthur Andersen LLP - ------------------------ Chicago, Illinois February 21, 1997 EX-99.13.1 13 ORGANIZATIONAL EXPENSES AGREEMENT Exhibit 13.1 ORGANIZATIONAL EXPENSES AGREEMENT --------------------------------- HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust (the "Trust") and HARRIS ASSOCIATES L.P., a Delaware limited partnership (the "Adviser"), in consideration for the engagement by the Adviser as the investment adviser for the series of the Trust designated The Oakmark Fund (the "Fund") pursuant to a separate agreement, hereby agree as follows: 1. Advancement of Expenses. The Adviser shall pay all of the organizational expenses of the Trust and the Fund, including but not limited to initial franchise taxes, registration fees and fees for services rendered prior to the commencement of the initial public offering of shares of the Fund, subject to the right to be reimbursed pursuant to paragraph 2. 2. Reimbursement and Amortization of Expenses. The Fund shall amortize the organizational expenses from the time total assets of the Fund first reach $15 million until five years from the commencement of the initial public offering of shares of the Fund, and the Fund shall reimburse the Adviser during the period of such amortization by paying to the Adviser on the last business day of each month an amount equal to the organizational expenses amortized by the Fund during that month. 3. Limitation on Reimbursement. If the total assets of the Fund do not reach $15 million within five years after commencement of the initial public offering of shares of the Fund, neither the Fund nor the Trust shall have any obligation to repay any organizational expenses advanced by the Adviser. If the Fund should be liquidated during such five-year period prior to the complete amortization of all organizational expenses, neither the Fund nor the Trust shall have any duty to reimburse the Adviser for organizational expenses unamortized as of the time of liquidation. 4. Obligation of the Trust. This agreement is executed by an officer of the Trust on behalf of the Trust and not individually. The obligations of this agreement are binding only upon the assets and property of the Fund and the Trust and not upon the trustees, officers or shareholders of the Trust individually. The Agreement and Declaration of Trust under which the Trust was organized and operates is on file with the Secretary of the Commonwealth of Massachusetts. Dated: July 31, 1991 HARRIS ASSOCIATES HARRIS ASSOCIATES L.P., INVESTMENT TRUST by HARRIS ASSOCIATES, INC. its General Partner By: /s/ Victor A. Morgenstern By: /s/ Myron R. Szold ---------------------------- ----------------------------- Victor A. Morgenstern Myron R. Szold President President 2 EX-99.13.2 14 ORGANIZATIONAL EXPENSES AGREEMENT Exhibit 13.2 THE OAKMARK INTERNATIONAL FUND ORGANIZATIONAL EXPENSES AGREEMENT --------------------------------- HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust (the "Trust") and HARRIS ASSOCIATES L.P., a Delaware limited partnership (the "Adviser"), in consideration for the engagement by the Adviser as the investment adviser for the series of the Trust designated The Oakmark International Fund (the "Fund") pursuant to a separate agreement, hereby agree as follows: 1. Advancement of Expenses. The Adviser shall pay all of the organizational expenses of the Fund, including but not limited to initial franchise taxes, registration fees and fees for services rendered prior to the commencement of the initial public offering of shares of the Fund, subject to the right to be reimbursed pursuant to paragraph 2. 2. Reimbursement and Amortization of Expenses. The Fund shall amortize the organizational expenses over a period of 60 months beginning with the month following the month in which the Fund commences the initial public offering of shares of the Fund, and the Fund shall reimburse the Adviser during the period of such amortization by paying to the Adviser on the last business day of each month an amount equal to the organizational expenses amortized by the Fund during that month. 3. Limitation on Reimbursement. If the Fund should be liquidated during such 60-month period prior to the complete amortization of all organizational expenses, neither the Fund nor the Trust shall have any duty to reimburse the Adviser for organizational expenses unamortized as of the time of liquidation. 4. Obligation of the Trust. This agreement is executed by an officer of the Trust on behalf of the Trust and not individually. The obligations of this agreement are binding only upon the assets and property of the Fund and the Trust and not upon the trustees, officers or shareholders of the Trust individually. The Agreement and Declaration of Trust under which the Trust was organized and operates is on file with the Secretary of the Commonwealth of Massachusetts. Dated: September 8, 1992 HARRIS ASSOCIATES HARRIS ASSOCIATES L.P., INVESTMENT TRUST by HARRIS ASSOCIATES, INC. its General Partner By: /s/ Victor A. Morgenstern By: /s/ Victor A. Morgenstern ------------------------- ------------------------- Victor A. Morgenstern Victor A. Morgenstern President President 2 EX-99.13.3 15 ORGANIZATIONAL EXPENSES AGREEMENT Exhibit 13.3 HARRIS ASSOCIATES INVESTMENT TRUST Organizational Expenses Agreement --------------------------------- HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust (the "Trust"), and Harris Associates L.P., a Delaware limited partnership (the "Adviser"), in consideration for the engagement by the Adviser as the investment adviser for each of the series of the Trust designated The Oakmark Small Cap Fund, The Oakmark Balanced Fund and The Oakmark International Emerging Value Fund (the "Funds") pursuant to separate agreements, hereby agree as follows: 1. Advancement of Expenses. The Adviser shall pay all of the organizational expenses of each Fund, including but not limited to, registration fees and fees for services rendered prior to the commencement of the initial public offering of shares of the Fund, subject to the right to be reimbursed pursuant to paragraph 2. 2. Reimbursement and Amortization of Expenses. Each Fund shall amortize its organizational expenses on a straight-line basis over a period commencing on the next business day after the net assets of the Fund first exceed $10 million and ending five years after the Fund commences the initial public offering of shares of the Fund; and the Fund shall reimburse the Adviser during the period of such amortization by paying to the Adviser on the last business day of each month an amount equal to the organizational expenses amortized by the Fund during that month. 3. Limitation on Reimbursement. If a Fund should be liquidated during such five-year period prior to the complete amortization of all organizational expenses, neither the Fund nor the Trust shall have any duty to reimburse the Adviser for organizational expenses of the Fund unamortized as of the time of liquidation. 4. Obligation of the Trust. This agreement is executed by an officer of the Trust on behalf of the Trust and not individually. The obligations of this agreement are binding only upon the assets and property of the respective Funds and the Trust and not upon the trustees, officers or shareholders of the Trust individually. The Agreement and Declaration of Trust under which the Trust was organized and operates is on file with the Secretary of the Commonwealth of Massachusetts. Dated July 6, 1995 HARRIS ASSOCIATES INVESTMENT TRUST HARRIS ASSOCIATES L.P., by HARRIS ASSOCIATES, INC. its General Partner /s/ Victor Morgenstern /s/ Victor Morgenstern By: _____________________________ By: ________________________________ EX-99.13.5 16 SUBSCRIPTION AGREEMENT Exhibit 13.5 HARRIS ASSOCIATES INVESTMENT TRUST Subscription Agreement ---------------------- 1. Subscription for Shares. We agree to purchase from Harris Associates Investment Trust 10,000 shares of beneficial interest of the series designated Harris Value Fund (the "Fund") for a price of $10 per share, on the terms and conditions set forth herein and in the preliminary prospectus described below, and agree to tender $100,000 in payment therefor at such time as the board of trustees or the president of the Trust determines. We understand that the Trust has filed a registration statement with the Securities and Exchange Commission (No. 33-_______) on Form N-1A, which contains the preliminary prospectus describing the Trust, the Fund and the shares. We acknowledge receipt of a copy of the preliminary prospectus. We recognize that the Trust will not be fully operational until it commences a public offering of its shares. Accordingly, a number of features of the Trust described in the preliminary prospectus, including redemption of shares upon request of shareholders, will not be available until the Trust registration statement becomes effective under the Securities Act of 1933. 2. Representations and Warranties. We represent and warrant as follows: (a) We are aware that no federal or state agency has made any finding or determination as to the fairness for investment, nor any recommendation nor endorsement, of the shares; (b) We have such knowledge and experience of financial and business matters as will enable us to utilize the information made available to us in connection with the offering of the shares to evaluate the merits and risks of the prospective investment and to make an informed investment decision; (c) We recognize that the Trust has only recently been organized, that the Fund has no financial or operating history and, further, that investment in the Fund involves certain risks, and we have taken full cognizance of and understand all of the risks related to the purchase of the shares and we acknowledge that we have suitable financial resources and anticipated income to bear the economic risk of such an investment; (d) We are purchasing the shares for our own account, for investment, and not with any intention of redemption, distribution, or resale of the shares, either in whole or in part; (e) We will not sell the shares purchased by us without registration of them under the Securities Act of 1933 or exemption therefrom; (f) We have been furnished with and have read this agreement, the preliminary prospectus and such other documents relating to the Fund and the Trust as we have requested and as have been provided to me by the Trust; (g) We have also had the opportunity to ask questions of, and receive answers from, officers of the Trust concerning the Trust and the terms of the offering. 3. Rejection of Subscriptions. We recognize that the Trust reserves the right to reject or limit any subscription. 4. Taxpayer Identification. We certify under penalties of perjury that the number shown on this form is our correct number and that we are not subject to backup withholding as a result of a failure to report all interest and dividend income to the Internal Revenue Service. _______________________________________ Taxpayer Identification Number [PURCHASER] By: ___________________________________ Dated: 2 EX-99.14.1 17 IRA PLAN EXHIBIT 14.1 [LOGO -- THE OAKMARK FAMILY OF FUNDS] ---------------------- No-Load Funds Managed by Harris Associates L.P. ---------------------- IRA PLAN ---------------------- Two North LaSalle Street Chicago, Illinois 60602-3790 1-800-OAK-MARK (1-800-625-6275) [LOGO -- 100% NO-LOAD MUTUAL FUND COUNCIL]
TABLE OF CONTENTS General Information About the IRA Plan.......................................1-8 Types of Retirement Accounts Regular IRA..................................................................1 Spousal IRA..................................................................1 SEP-IRA......................................................................2 Transfers, Rollovers and Direct Rollovers Transfers....................................................................2 Rollovers....................................................................3 Direct Rollovers.............................................................3 Telephone Exchange Plan........................................................4 Establishment of Different Funds...............................................5 Tax Benefits...................................................................5 When Can an Account be Opened?.................................................5 Do I Pay Tax on Dividends and Distributions?...................................5 When May I Make Withdrawals?...................................................6 What If I Make A Withdrawal Before Age 59-1/2?.................................6 Minimum Contribution...........................................................6 Automatic Investment Plan......................................................6 Custodian Fees.................................................................7 Additional Fees................................................................7 Disclosure Statement...........................................................8 IRA Custodial Agreement.......................................................22
This booklet is authorized for distribution only when preceded or accompanied by a current prospectus of The Oakmark Family of Funds. GENERAL INFORMATION ABOUT THE INDIVIDUAL RETIREMENT ACCOUNT PLAN (Effective September 30, 1995) REGULAR IRA Who qualifies? You qualify in any year when you have earnings from employment or self-employment. You qualify even if you are also covered by a retirement program of your employer or a Keogh plan. However, if you and/or your spouse are active participants in such a plan, your deduction for your IRA contribu- tion may be reduced or eliminated depending on your income. See the Disclosure Statement, Section (2), "Deductible Contributions" and "Nondeductible Contri- butions." You may contribute up to $2,000 or 100% of your earned income, whichever is less. Alimony and separate maintenance payments are treated as earned income for this purpose. You may not contribute to your regular IRA for any year if you are over age 70-1/2 before the end of the year. SPOUSAL IRA If your spouse has no earned income (or elects to be treated as having no earned income) and you file a joint return, you may contribute up to the lesser of $2,250 or 100% of your earned income. The contribution may be di- vided between your IRA and your spouse's IRA in any way you decide, so long as the portion allocated to either one does not exceed $2,000. Your spouse's election is made by claiming a spousal IRA deduction on your tax return. 1 SEP-IRA Your employer may set up a simplified employee pension plan (SEP) and contrib- ute to your IRA and the IRA of each other eligible employee up to $30,000 or 15% of compensation, whichever is less. The employer contribution must be based on a written formula, which cannot discriminate in favor of officers, shareholders or self-employed or highly compensated individuals. If your employer chooses and certain conditions are satisfied, you can elect to have your salary reduced by no more than an amount specified by law and to have the reduction contributed to your SEP-IRA, too. Although you may have a SEP-IRA, you can still have a Regular IRA, too. TRANSFERS, ROLLOVERS AND DIRECT ROLLOVERS The purpose of a Transfer, Rollover or a Direct Rollover is to provide retire- ment account portability. Assets may be moved from one retirement account to another. The assets will continue to defer taxation. Although Transfers, Rollovers and Direct Rollovers accomplish similar goals, their guidelines are different. TRANSFERS You may transfer funds from an existing IRA to an Oakmark IRA. The transfer must be direct from your existing IRA to an Oakmark IRA without you having physical receipt of the funds. To transfer: 1) Follow the procedure for opening an Oakmark IRA. 2) Complete the IRA Transfer Authorization Form to instruct your present custodian/trustee to transfer the assets of your present IRA to State Street Bank & Trust Company as successor custodian. Have the IRA Transfer Authoriza- tion Form signature guaranteed if required by your present custodian/trustee. 2 3) Send the completed IRA Transfer Authorization Form, along with a completed Oakmark IRA Application to State Street Bank & Trust Company. 4) State Street Bank & Trust Company and your present custodian/trustee will complete the details of transferring your funds to your Oakmark IRA. ROLLOVERS You may rollover your IRA, derived from your own yearly contributions, to an Oakmark IRA. To rollover: 1) Begin by requesting a distribution of all or any portion of your IRA from your current custodian/trustee. The distribution is issued in the name of the IRA owner. 2) Upon receipt, you may use the funds for up to 60 calendar days. Any inter- est, earnings or profit earned during the 60 day period may not be rolled over. 3) State Street Bank & Trust Company must be in receipt of a completed Oakmark IRA application and funds by the 60th day of the rollover. 4) You may only rollover one distribution per existing IRA within a 365 day period. DIRECT ROLLOVER You may directly rollover funds from your employers Qualified Retirement Plan (QRP) to an Oakmark IRA. QRP's are required to withhold 20% of most distribu- tions to you for payment of income taxes, unless your plan balance is DIRECTLY ROLLED OVER to an IRA or another QRP. You may under certain circumstances make a rollover again to the QRP of your new employer. If you want to have that right, your direct rollover IRA MUST be kept separate from any other IRA you may have. 3 A DIRECT ROLLOVER MAY BE PREFERABLE TO A ROLLOVER FOR MOVING YOUR QRP BALANCE TO AN OAKMARK IRA. To directly rollover: 1) Follow the procedure for opening an Oakmark IRA. 2) Complete the QRP Direct Rollover Authorization Form to instruct your present custodian/trustee to directly rollover the assets of your QRP to State Street Bank & Trust Company as successor custodian. Have the QRP Direct Rollover Authorization Form signature guaranteed if required by your present custodian/trustee. 3) Send the completed QRP Direct Rollover Authorization Form, along with a com- pleted Oakmark IRA application to State Street Bank & Trust Company. 4) State Street Bank & Trust Company and your present custodian/trustee will complete the details of directly rolling over your funds to your Oakmark IRA. TELEPHONE EXCHANGE PLAN Contributions to your IRA are invested at your election in one of the Oakmark Funds or Oakmark Units of Goldman Sachs-Institutional Liquid Assets Government Portfolio (service units). You may exchange your investment among these funds. IF YOU DO NOT WANT THE ABILITY TO EXCHANGE BY TELEPHONE, INDICATE YOUR REFUSAL IN BOX 6 ON THE IRA APPLICATION. Reasonable procedures are used to confirm that instructions received by telephone are genuine, including requesting personal identification information that appears on your application and requiring per- mission to record the conversation. You will bear the risk of loss due to unau- thorized or fraudulent instructions regarding your account, although the Funds may have a risk of such loss if reasonable procedures were not used. 4 ESTABLISHMENT OF DIFFERENT FUNDS Harris Associates Investment Trust, of which The Oakmark Funds are a series, may establish additional funds with different investment objectives in addi- tion to those funds. As new funds are created, it is anticipated that the ex- change plan will be extended to include them. TAX BENEFITS You may be able to deduct part or all of the yearly contributions to your IRA from your gross income, depending on whether you and/or your spouse are active participants in a retirement program of your employer or a Keogh plan, and de- pending on your income. See the Disclosure Statement, Section (2), "Deductible Contributions." You may claim such a deduction even if you do not itemize your deductions. The Oakmark IRA is in the form of IRS Form 5305-A, which is auto- matically deemed acceptable by the Internal Revenue Service. The approval by the IRS relates only to the form of the account and not to the merits of using the account as a retirement plan. WHEN CAN AN ACCOUNT BE OPENED? You can open your account and make a contribution for any year at any time up to the due date of your federal income tax return for that year (excluding ex- tensions). Rollovers and direct transfers from other IRAs or retirement plans can be made at any time during the year, so long as a rollover contribution is made within 60 days after the distribution from the other IRA or retirement plan is received by you. A distribution from a qualified plan may be subject to income tax withholding even if the distribution is rolled over to an IRA. See "Rollover IRA" and "Transfer From a Qualified Plan to an Oakmark IRA," above. DO I PAY TAX ON DIVIDENDS AND DISTRIBUTIONS? No, all dividends and distributions accumulate tax-free. Tax is paid when you (or your spouse, if 5 a spousal account is elected) withdraw your retirement benefits. See the Dis- closure Statement, Section (5), "Income and Penalty Taxes." WHEN MAY I MAKE WITHDRAWALS? Withdrawals can start after age 59-1/2, and must start by April 1 after the end of the year in which you (or your spouse, in the case of a spousal ac- count) reach age 70-1/2. Withdrawals can be made in a lump sum or in install- ments. The Internal Revenue Code imposes complex limits on the length of time over which withdrawals from an IRA can be made. See the Disclosure Statement, Section (4), "Distributions from your IRA." Withdrawals are subject to tax as ordinary income, except for any portion rolled over to another IRA or consid- ered to be a return of nondeductible contributions. See Disclosure Statement, Section (5), "Income and Penalty Taxes." WHAT IF I MAKE A WITHDRAWAL BEFORE AGE 59-1/2? A withdrawal can be made without penalty before age 59-1/2 only in case of death or permanent disability, or in the case of certain periodic payments. Otherwise, a withdrawal before age 59-1/2 is a premature withdrawal and is subject to a penalty tax of 10% of the portion that is included in your in- come, in addition to the regular income tax. But neither the regular income tax nor the 10% penalty tax applies to any portion rolled over to another IRA or considered as a return of your nondeductible contributions. MINIMUM CONTRIBUTION The initial contribution must be at least $1,000 per Fund account and each subsequent contribution must be at least $100 per Fund account. However, you are not required to make a contribution every year. AUTOMATIC INVESTMENT PLAN The Oakmark Funds have an "Automatic Investment Plan" that permits you to buy shares of the 6 Funds automatically on a monthly basis through electronic funds transfer. Under such a plan the initial contribution to an IRA must be at least $1,000 per Fund account and each subsequent contribution must be at least $100 per Fund ac- count. The form for establishing such a plan may be obtained from the Trust. CUSTODIAN FEES Acceptance fee..................................................... $5.00 Annual maintenance fee............................................ $10.00 Disbursement fee.............................................. $10.00 for each disbursement other than an automatic installment payment of benefits. Note: Each IRA account is subject to the above fees, including Spousal IRAs and each of multiple accounts for the same participant. If you do not add the $5.00 acceptance fee to your initial contribution, it will be deducted from your account. The $10.00 annual maintenance fee will be deducted from your account, unless paid separately as billed each December. ADDITIONAL FEES Telephone Exchange into Oakmark Units of ILA Government...... $5.00 per exchange ---------------------- The Oakmark Funds are a series of Harris Associates Investment Trust, which sponsors the Oakmark IRA Plan. The above brief outline of the Plan is not in- tended as a full explanation of the Individual Retirement Plan, but we hope that we have answered some of the questions that occur to you. WE URGE YOU TO READ THE ENCLOSED MATERIAL THOROUGHLY. 7 OAKMARK FUNDS INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT DISCLOSURE STATEMENT (SEPTEMBER 30, 1995) We are required to give you this Disclosure Statement for the purpose of as- suring that you are informed and understand the nature of an Individual Re- tirement Account ("IRA"). This disclosure statement explains the rules gov- erning IRAs. Your Right to Revoke this IRA. You may revoke this IRA at any time within seven days after the later of the date you received this Disclosure Statement or the day you established this IRA. For purposes of revocation, it will be assumed that you received the Disclosure Statement no later than the date of your check or transfer direction with which you opened your IRA. To revoke the IRA, you must either mail or deliver a notice of revocation to the following address: State Street Bank & Trust Company Attention: Oakmark Funds P.O. Box 8510 Boston, MA 02266-8510 If a notice of revocation is mailed, it will be deemed mailed on the date of the postmark (or if sent by certified or registered mail, the date of certifi- cation or registration) if it is deposited in the mail in the United States, first class postage prepaid and properly addressed. If you revoke your IRA, you are entitled to a return of the entire amount contributed. (1) TYPES OF IRAS; ELIGIBILITY In General. There are several types of IRAs. For example, there is a "Regu- lar IRA" to which you may make contributions for yourself. There is also a "Spousal IRA" which you may be able to set up for your spouse. There is also a "Rollover IRA" which you can set up to receive assets from a qualified plan, annuity or another IRA. Finally, there is a SEP-IRA (which is also known as a Simplified Employee Pension Plan) which your employer can establish for you. Following is a general description of the rules which apply to each of these types of IRAs and who is eligible to establish them. 8 (a) REGULAR IRA. You may contribute up to the lesser of $2,000 or 100% of your compensation if you have not reached age 70-1/2 during the taxable year. You may make this contribution even if you or your spouse in an active partic- ipant in a qualified employer plan. However, as explained below, the amount of the contribution which you may deduct may be limited. Compensation includes wages, salary, commissions, bonuses, tips, etc., but does not include income from interest, dividends or other earnings or profits from property, or amounts not includible in your gross income. (b) SPOUSAL IRA. You may contribute to your IRA and an IRA for your non- working spouse if: (1) you have received compensation during the taxable year and (2) you file a joint income tax return for the year with your spouse. Un- der such an arrangement, you may qualify for a total deduction equal to the lesser of $2,250 or 100% of your compensation for the taxable year. You can determine how to divide the contribution between the two accounts but you can- not contribute more than $2,000 annually into either one. While you cannot contribute to your IRA in the taxable year in which you reach 70-1/2, you can still contribute to your spouse's IRA if he or she has not reached 70-1/2. A Spousal IRA does not involve the creation of a joint account. The account of each spouse is separately owned and treated independently from the account of the other spouse. A "non-working spouse" is one who had no earned income for the year, or elects to be treated as having no earned income for this purpose. Your spouse's election is made by claiming a spousal IRA deduction on your tax return. (c) ROLLOVER IRAs. All or a portion of certain distributions from qualified retirement plans, annuities and other IRAs may be "rolled over" tax-free within 60 days after receipt of the distribution without regard to the limits on deductible contributions, but no deduction is allowed with respect to such a contribution. The amount rolled over cannot exceed the fair market value of all property received, reduced by employee contributions (except voluntary de- ductible employee contributions made pursuant to a qualified plan). If you make a rollover from a qualified employer plan to an IRA, you may in turn, un- der certain circumstances make a rollover from the IRA into the qualified pen- sion or profit-sharing plan, qualified annuity plan, or tax-sheltered annuity or custodial account of a subsequent employer. To preserve that right, howev- er, you must keep the rollover IRA separate 9 from any other IRA you may have, since you cannot make a rollover to an em- ployer plan from an IRA to which you have made yearly contributions. You can also transfer assets you hold in one IRA to another IRA by directing the cur- rent trustee or custodian to transfer those assets directly to the new IRA. You may also direct the trustee or custodian of any qualified retirement plan to transfer a distribution from the plan directly to an IRA. You can direct such a so-called "trustee-to-trustee transfer" at any time. However, you may make a rollover of the same assets from one IRA to another IRA only once dur- ing a one-year period. A decision to make a rollover from a qualified plan, as signified by checking the rollover box on the Application, is irrevocable. Rollover amounts you receive may not be deposited in your spouse's IRA, but if you should die while still a participant in a qualified plan, in certain cases your spouse may be allowed to make a tax-free rollover to an IRA of all or any part of the assets distributed from the qualified plan, excluding any contributions (other than voluntary deductible employee contributions) made by you to such plan. The amount of the death payout rolled over by a spouse into an IRA may not subsequently be rolled over into another employer's qualified plan or annuity. The Unemployment Compensation Amendments Act of 1992 (the "1992 Act") made several changes to the tax treatment of rollovers and direct transfers from qualified retirement plans, effective January 1, 1993. First, the 1992 Act expanded the types of distributions that can be rolled over into an IRA. Under prior law, only certain types of total and partial distributions could be rolled over. Under the new law, any distribution from a plan can be rolled over unless it is either (1) one of a series of substan- tially equal periodic payments (such as an annuity), or (2) a minimum distri- bution required to be made after you reach the age of 70-1/2. Second, if a distribution from a plan can be rolled over to an IRA, the plan is required by law to transfer the distribution directly to an IRA, or another employer's plan, if you so direct. Finally, if you do not direct the distribution to be transferred directly to an IRA or another plan, the plan making the distribution will be required to withhold 20% of the distribution for the payment of income taxes. 10 Strict requirements must be met to qualify for tax-free rollover treatment. You should consult your personal tax advisor in connection with rollovers to and from your IRA. (d) SIMPLIFIED EMPLOYEE PENSION PLAN (SEP)-IRA. An employer may adopt a SEP- IRA and contribute to your SEP-IRA even if you are covered by another retire- ment plan. The Code permits an employer to contribute to your SEP-IRA up to 15% of your compensation (computed without regard to the contribution) or $30,000 (or such other amount as may be prescribed by the Secretary of the Treasury), whichever is less. The contributions are deductible by the employer and are generally not includible in your income until you receive distribu- tions. Employer contributions must be made under a written allocation formula which cannot discriminate in favor of so-called "highly compensated employees" (as defined in the Code). Employer contributions are considered discriminatory unless they bear a uniform relationship to the first $200,000 of each partici- pant's compensation. An employer must cover each employee who has attained age 21 and has per- formed service for the employer during at least three of the immediately pre- ceding five calendar years, but employees who earn less than $300 in the year in question, employees covered by certain collective bargaining agreements and certain nonresident aliens may be excluded. "Leased employees" (i.e. those in- dividuals who are not the employer's employees, who are hired through a "leas- ing organization" and who provide services of a nature normally performed by employees in the employer's business on a substantially full-time basis for more than a year) must be treated as regular employees for the purposes of making SEP-IRA contributions, unless the leasing organization provides pre- scribed minimum pension benefits to the leased employees. Any SEP-IRA contri- bution made by the leasing organization attributable to services performed for the employer may be used to reduce the employer's contribution to a leased em- ployee's SEP-IRA. Generally, if the employer does not maintain an integrated plan at any time during the taxable year, Old Age and Survivor Disability Insurance contribu- tions ("OASDI") may be taken into account as contributions by the employer to the employee's SEP-IRA but only if such OASDI contributions are taken into ac- count with respect to each employee maintaining a SEP-IRA. If the SEP-IRA is part of a top-heavy plan as defined in the Code, the employer must make a min- imum contribution to each non-key employee's SEP-IRA for 11 each year that the plan is top-heavy. Generally, a plan is top-heavy if the aggregate of the accounts of key employees as defined in Code Section 416 (i.e., certain officers, owners and highly compensated individuals) exceeds 60% of the aggregate of the accounts of all employees. If the employer main- tains more than one plan, such plans may, or under certain circumstances must, be aggregated for purposes of determining whether the SEP-IRA is top-heavy. Generally, the minimum contribution required to be made to the SEP-IRA of each non-key employee in a top-heavy year is 3% of the employee's compensation. If your employer chooses and if certain conditions are satisfied, you can elect to have your salary reduced by up to $7,000 (or such higher amount as is specified from time to time by the Secretary of the Treasury) and to contrib- ute the reduction to your SEP-IRA. If you reduce your salary under a salary reduction agreement, your salary subject to federal income tax is reduced. Salary reduction is permitted for a year only if your employer does not have more than 25 employees at any time during the preceding year, all employees who participate in the Plan are eligible for salary reduction and at least one-half of the employees (including those not eligible for a SEP-IRA) choose to make salary reduction contributions which may be made by highly compensated individuals. There are also other rules which apply to salary reduction con- tributions. The rules governing integrated and salary reduction SEP-IRAs are complex. We suggest that you discuss them with your tax advisor. You may contribute to a Regular IRA even if you participate in a SEP-IRA. Except as otherwise noted, your SEP-IRA generally is subject to the rules gov- erning a Regular IRA. Your rights to withdraw amounts held in a SEP-IRA cannot be restricted by your employer. (2) CONTRIBUTIONS In General. As explained in this part, the amount of your IRA contributions which you can deduct is subject to limits. All contributions and transfers to your Oakmark IRA must be in cash, except that a rollover contribution may be made in either cash or in shares of one of The Oakmark Funds. Contributions to your Regular IRA or Spousal IRA may be made up to the due date for filing your tax return for the taxable year (excluding extensions thereof) even if you file before 12 the due date. In making contributions, you must indicate the tax year to which the contribution applies. If no tax year is designated, the custodian will as- sume that the contribution is intended to apply to the calendar year in which it is received. The time limit for designating the applicable tax year is April 15. Contributions made by an employer to your SEP-IRA for a calendar year may be made no later than the due date of your employer's tax return (including ex- tensions). In making a SEP-IRA contribution, the tax year to which the contri- bution relates must also be specified or it will be deemed to relate to the calendar year in which it is received. In a SEP-IRA, this designation of the tax year of a contribution must be made by the due date for contributions de- scribed above. Deductible Contributions. If you are single and are not an "active partici- pant" in a retirement plan maintained by your employer, you can deduct the full amount of your IRA contribution up to the lesser of $2,000 or 100% of your compensation for the year. If you are married, you can deduct the full amount of your IRA contribution so long as neither you nor your spouse is an "active participant" in a retirement plan maintained by your respective employers. These plans include qualified pen-sion, profit-sharing, stock bonus or money purchase plans, 401(k) plans, SEP-IRAs, qualified annuity plans, tax- sheltered annuities and custodial accounts and deferred compensation plans of governmental agencies. In general, you are considered to be an active participant in a plan if an employer contribution or forfeiture was credited to your account during the year in the case of a defined contribution plan or, in the case of a defined benefit plan, you are eligible to participate even if you choose not to. You are considered to be an active participant in a plan if you make a contribution to the plan during a year even if your employer does not. For active participation, it does not matter whether any interest you have in a plan is vested or unvested. If you or your spouse is an active participant in a plan, the amount of the deduction you can claim for an IRA contribution is reduced or totally denied depending upon the amount by which your adjusted gross income for the year ex- ceeds the "applicable dollar amount." The applicable dollar amount is $25,000 for single people and $40,000 for married individuals filing a joint tax re- turn. If you are married but are filing separate tax returns, your applicable dollar amount is $0. 13 If your adjusted gross income exceeds your applicable dollar amount by more than $10,000, you may not deduct any portion of your IRA contribution. Howev- er, if it is between $0 and $10,000 more than your applicable dollar amount, you can claim a tax deduction for your contribution. To determine the amount of the deduction, follow these steps. First, determine the amount of the con- tribution you can make. If, for example, you have compensation in excess of $2,000 you could make a $2,000 contribution to your Regular IRA. Next, sub- tract the applicable dollar amount from your adjusted gross income. If you are single and your adjusted gross income is $30,000, the difference would be $5,000. Next, divide this difference by $10,000. In the example $5,000/$10,000 equals 1/2. Accordingly, you may deduct 1/2 of your contribution. If the de- duction limitation is not a multiple of $10, round the deduction to the next $10. If your adjusted gross income does not exceed $35,000 and you are single or $50,000 and you are married, you can deduct $200 regardless of how the com- putation comes out. Married persons who file separate returns are treated as unmarried for pur- poses of these rules if they did not live together at any time during the year. Nondeductible Contributions. Even though you may not be entitled to claim a deduction for contributions to your IRA, you are still allowed to make the contributions to the extent described in "Types of IRAs" above. To the extent that the amount of your contribution exceeds the deduction limit, it is con- sidered a nondeductible contribution. Earnings on these contributions are not taxed until distributed, just like the earnings on deductible contributions. It may therefore be worthwhile making nondeductible contributions. You are required to report the amount of your nondeductible contributions on Form 8606 and attach it to your income tax return. If you overstate this amount, you may be liable for a tax penalty of $100 per overstatement. (3) INVESTMENT AND HOLDING OF CONTRIBUTIONS Contributions to your IRA, and the earnings thereon, are invested at your election either in shares of one of The Oakmark Funds or in Oakmark Units of Goldman Sachs - Institutional Liquid Assets Government Portfolio (service units). 14 Oakmark Units are available in a telephone exchange plan through which you may exchange investments among The Oakmark Funds and Oakmark Units. IF YOU DO NOT WANT THE ABILITY TO EXCHANGE BY TELEPHONE, INDICATE YOUR REFUSAL IN BOX 6 ON THE IRA APPLICATION. Reasonable procedures are used to confirm that instruc- tions received by telephone are genuine, including requesting personal identi- fication information that appears on your application and requiring permission to record the conversation. You will bear the risk of loss due to unauthorized or fraudulent instructions regarding your account, although the Funds may have a risk of such loss if reasonable procedures were not used. A prospectus for Exchange Fund may be requested, and an exchange may be made, by telephoning State Street Bank and Trust Company. The assets in your account are held in a custodial account exclusively for your benefit and the benefit of such beneficiaries as you may designate in writing delivered to the Custodian. The balance in your IRA represents a sepa- rate account which is clearly identified as your property and generally may not be combined for investment with the property of another individual. Your right to the entire balance in your account is nonforfeitable. No part of the assets of your account may be invested in life insurance contracts or in collectibles such as works of art, antiques, coins, stamps, etc. (4) DISTRIBUTIONS FROM YOUR IRA Distributions During Your Life. The law permits distributions to be made from an IRA at any time after you attain age 59-1/2 without penalty, and requires that distributions commence no later than April 1 following the calendar year in which you attain age 70-1/2. Distributions may be in the form of a single payment or, in accordance with regulations, in substantially equal monthly, quarterly or annual payments over your life or the joint lives of you and your designated beneficiary, or over a certain period not extending beyond your life expectancy or the joint and last survivor life expectancy of you and your des- ignated beneficiary. However, if your beneficiary is not your spouse, the law imposes an additional requirement called the minimum distribution incidental benefit requirement. In general, this requirement puts a further limit on the maximum payout period. This further limit is based on a table in the income tax regulations, and if this limit applies to you, you should consult your tax ad- visor to determine your minimum distribution. 15 If you direct distributions over your life or the joint lives of you and your designated beneficiary, the Custodian will purchase an immediate annuity contract from an insurance company you choose with your IRA and your payments will be made under the annuity. You must provide a completed annuity applica- tion from the insurance company of your choosing. Any distribution instruction must specify the reason for the distribution. Examples of such reasons are: premature distributions (i.e. distributions be- fore age 59-1/2), rollovers, disability, death, normal (age 59-1/2 or over), excess contribution returns and other. Distributions After Your Death. If you die after distributions have begun to you, the balance of your IRA must be distributed to your designated benefi- ciary at least as rapidly as under the method of distribution in effect before your death. If you die before the distribution of your interest has begun, the entire balance of your account must be distributed by December 31 of the year in which the 5th anniversary of your death occurs. However, distribution need not be made within this 5-year period if your beneficiary receives payments over a period measured by his or her life or the life expectancy beginning no later than December 31 of the year following the year in which you die. If the bene- ficiary is your spouse, those installmant payments don't have to begin until the later of December 31 of the year following the year in which you die or December 31 of the year in which you would have reached age 70-1/2. In addi- tion, a distribution need not be made within 5 years of your death if your spouse is your beneficiary and he or she elects to treat the entire interest in the IRA (or the remaining part of such interest if distribution has already begun) as his or her own IRA subject to the regular IRA distribution require- ments. In such a case, your spouse will be considered to be the covered indi- vidual under the IRA. If you die before the entire IRA has been distributed to you and your spouse is not your beneficiary, no additional cash contributions or rollover contributions may be accepted by the IRA. If distributions are made from your IRA to your surviving spouse (or to a trust of which your surviving spouse is the income beneficiary), the amount which your surviving spouse or the trust is entitled to receive in each year must be at least equal to the income of your IRA (or of the portion of your IRA which benefits your surviving spouse or the trust) for that year. 16 (5) INCOME AND PENALTY TAXES Income Tax Treatment. Income tax on deductible IRA contributions and earn- ings on both deductible and nondeductible IRA contributions is generally de- ferred until you receive distributions. If you have made both deductible and nondeductible contributions to IRAs you maintain, a portion of each distribu- tion you receive from any IRA (whether or not it is the one to which you made nondeductible contributions) will be considered to be a return of nondeduct- ible contributions and therefore not included in your income for tax purposes. The balance of each distribution will be taxed as ordinary income regardless of its original source. The amount of any distribution which is considered to be a return of nondeductible contributions (as therefore not taxed) is deter- mined by multiplying the amount of the distribution by a fraction. The numera- tor of the fraction is the aggregate amount of nondeductible contributions you have made to all of your IRAs over the years and the denominator is the bal- ance in all your IRAs at the end of the year (after adding back any distribu- tions you received during the year). The aggregate amount which can be ex- cluded from income for all years cannot exceed the amount of nondeductible contributions that you made in those years. Taxable distributions from your account are taxed as ordinary income regard- less of their original source. They are not eligible for special tax treatment that may apply to lump sum distributions from qualified employer plans. A dis- tribution from your account after you attain age 65 is eligible for the re- tirement income credit. Penalty Tax for Premature Distributions. Your IRA is intended to provide in- come for you upon retirement. Accordingly, the law generally imposes a penalty on premature distributions. If you receive a taxable distribution from the IRA before reaching age 59-1/2, a nondeductible 10% penalty will be imposed on the portion of the distribution which is included in your gross income. This pen- alty is in addition to any income tax you must pay on the distribution itself. The penalty does not apply to the extent that the distribution is considered a return of nondeductible contributions or a return of an excess contribution which is permitted tax-free (see below). The penalty also will not apply if the distribution is made due to your permanent disability or death or if the distribution is one of a series of substantially equal periodic payments made over your life (or life expectancy) or over the joint lives (or life expectan- cies) of you and your beneficia- 17 ry. Further, the penalty does not apply in the case of a qualifying rollover distribution. Penalty Tax for Excess Contributions. Contributions to an IRA above the per- missible limits are nondeductible and are subject to an annual nondeductible excise tax of 6% of the amount of such excess contributions for each year that the excess is not withdrawn or eliminated. The tax is paid by the person to whom a deduction is allowed or in the case of a Rollover IRA, by the person for whose benefit it is established. If the person who contributed the excess takes no deduction for it and withdraws the excess amount plus the net earn- ings attributable to such excess on or before the due date (including exten- sions) for filing the Federal income tax return for the year for which the contribution was made, the 6% excise tax will not be applied but the 10% tax on premature distributions will be applied to the amount of net earnings. Gen- erally, if the excess is withdrawn after the due date (including extensions) for filing the tax return for the year for which the contribution was made, not only will the excess contribution be subject to the 6% excise tax, but the amount of such excess and the net income attributable to it will also be in- cludible in income; and if you have not attained the age of 59-1/2, or are not disabled you will also be subject to the previously mentioned 10% penalty tax on premature distributions. The law provides, however, that if an individual has made a contribution to an IRA for a year which does not exceed $2,250 (ex- cluding rollover amounts), all or part of which is an excess contribution for which he did not claim a deduction, and he does not correct the excess contri- bution before the due date (including extensions) for filing his tax return for the year, he nevertheless may withdraw the excess amount contributed (without the net income attributable thereto) at any time without incurring the 10% penalty tax on premature distributions or being required to include the amount withdrawn in income. The 6% excise tax will be imposed even in this special situation for the year of the excess contribution and each subsequent year until the excess is withdrawn or eliminated. The rules discussed above generally apply to SEP-IRAs as well. The law also allows you to withdraw tax-free and without penalty an excess contribution, regardless of the amount, made with respect to a rollover contribution (in- cluding an attempted rollover contribution), if the excess contribution oc- curred because you reasonably relied on erroneous information required to be supplied by the plan, trust or institution making the distribution that was the subject of the rollover. 18 As an alternative to withdrawing excess contributions made to an IRA, such amounts may be eliminated by making reduced contributions; however, you will be required to pay the 6% excise tax on the amount of the excess for the year of the contribution and for each subsequent year until the amount of the ex- cess is deducted in a later year for which you have not contributed the maxi- mum deductible amount. If a contribution is made to your account in an amount less than the permissible limit in order to correct an excess contribution for a previous year for which you did not claim a deduction, you may under certain circumstances, taking into account the limits on contributions, be allowed to treat the amount of the reduction in the current year's contribution as an ad- ditional contribution for the current taxable year. Penalty Tax for Under-Distribution. If after April 1, following the year in which you attain age 70-1/2, the amount distributed is less than the minimum amount required by law to be distributed, a 50% excise tax may be imposed on any such deficiency. The minimum amount required by law to be distributed is generally based on your life expectancy or the joint and survivor life expec- tancy of you and your beneficiary. However, if your beneficiary is not your spouse, the law imposes an additional requirement which is called the minimum distribution incidental benefit requirement. In general, this requirement is designed to prevent you from naming a beneficiary who is much younger than yourself in order to extend your payout period. You should consult your tax advisor to determine your maximum distribution. The Internal Revenue Service may waive the penalty tax for under-distribu- tion if the deficiency was due to reasonable error and reasonable steps are being taken to correct the deficiency. Penalty Tax for Excess Distributions. A 15% penalty tax is imposed on annual distributions from retirement arrangements (including IRAs) to the extent that such distributions in a year are considered "excess distributions." A distri- bution is an "excess distribution" if it exceeds $150,000 (or such higher amount as may be specified by the IRS) during any calendar year. This $150,000 amount will be $112,500 (adjusted for cost-of-living increases) if you elect to have your distribution governed under certain tax rules. You should discuss how this rule applies to you and how you make this election with your tax ad- visor. Prohibited Transactions and Pledging Account Assets. If during any taxable year you engage in a so-called "prohib- 19 ited transaction" with respect to your IRA, the account will lose its tax-ex- empt status. In this event, the fair market value of all account assets, val- ued as of the first day of such taxable year, will be deemed distributed to you and includible in your gross income. These prohibited transactions would include borrowing money from your account. If you pledge your account or any portion thereof as security for a loan, such pledged portion will be deemed distributed to you and, to the extent that it does not represent a return of nondeductible contributions, includible in your gross income. If you have not yet attained age 59-1/2, an additional tax equal to 10% of the amount pledged will be imposed on such funds includible in gross income. If your spouse en- gages in a prohibited transaction with respect to his or her account, the re- sults will be the same. (6) MISCELLANEOUS Federal Income Tax Withholding. Distributions from an IRA to the covered in- dividual or to a beneficiary are subject to Federal income tax withholding un- less the covered individual or beneficiary elects to have no withholding ap- ply. The current withholding rate required by the Internal Revenue Code is 10%. Additional information concerning withholding and election forms will be available no later than at the time a distribution is requested. Federal Estate and Gift Taxes. Generally, your IRA will be included in your estate for Federal estate tax purposes. If your spouse is your beneficiary, your IRA may qualify for a deduction for purposes of that tax. An election un- der an IRA to have a distribution payable to a beneficiary on the death of the covered individual will not be treated as a gift subject to Federal gift tax. Reports to the Internal Revenue Service. You are not required to file Form 5329 with the IRS unless you owe one of the IRA penalty taxes. These are the taxes on excess contributions, premature distributions, prohibited transac- tions and under distributions after age 70-1/2. Financial Information. The growth in value of the mutual fund shares held in your account can neither be guaranteed nor projected. Plan Sponsor. Harris Associates Investment Trust is the sponsor of the Oakmark IRA and performs most of the ministerial functions in connection with the maintenance of the accounts established under the Oakmark IRA. 20 Custodian Fees. State Street Bank and Trust Company as the Custodian of your IRA currently charges an acceptance fee of $5.00 per IRA application, and an annual maintenance fee of $10.00 per account, per fund in which you have an investment. An additional $10.00 fee is charged for each disbursement, other than an automatic installment payout. Note that Spousal IRAs require separate accounts. Each spouse's account is subject to the above fees. If you do not add the $5.00 acceptance fee to your initial contribution, it will be deducted from your account. The $10.00 annual maintenance fee will be deducted from your account, unless paid separately as billed in December. The Custodian may change any of the above fees from time to time. IRS Approval Status. The Oakmark IRA is in the form of IRS Form 5305-A, which is automatically deemed acceptable by the IRS as to form. The approval by the IRS relates only to the form of the account and not to the merits of using the account as a retirement plan. 21 FORM 5305-A (REV. OCTOBER, 1992) DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE OAKMARK FUNDS INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT (UNDER SECTION 408(a) OF THE INTERNAL REVENUE CODE) (SEPTEMBER 30, 1995) ARTICLE I The Custodian may accept additional cash contributions on behalf of the De- positor for a tax year of the Depositor. The total cash contributions are lim- ited to $2,000 for the tax year unless the contribution is a rollover contri- bution described in section 402(c) (but only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified employee pension plan as described in section 408(k). Rollover contributions before January 1, 1993, include rollovers described in section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contri- bution to a simplified employee pension plan as described in section 408(k). ARTICLE II The Depositor's interest in the balance in the custodial account is nonfor- feitable. ARTICLE III 1. No part of the custodial funds may be invested in life insurance con- tracts, nor may the assets of the custodial account be commingled with other property except in a common trust fund or common investment fund (within the meaning of Section 408(a)(5)). 2. No part of the custodial funds may be invested in collectibles (within the meaning of section 408(m)) except as otherwise permitted by section 408(m)(3) which provides an exception for certain gold and silver coins issued under the laws of any state. 22 ARTICLE IV 1. Notwithstanding any provision of this agreement to the contrary, the dis- tribution of the Depositor's interest in the custodial account shall be made in accordance with the following requirements and shall otherwise comply with section 408(a)(6) and Proposed Regulations section 1.408-8, including the in- cidental death benefit provisions of Proposed Regulations section 1.401(a)(9)- 2, the provisions of which are incorporated by reference. 2. Unless otherwise elected by the time distributions are required to begin to the Depositor under paragraph 3, or to the surviving spouse under paragraph 4, other than in the case of a life annuity, life expectancies shall be recal- culated annually. Such election shall be irrevocable as to the Depositor and the surviving spouse and shall apply to all subsequent years. The life expec- tancy of a nonspouse beneficiary may not be recalculated. 3. The Depositors' entire interest in the custodial account must be, or be- gin to be, distributed by the Depositor's required beginning date, (April 1 following the calendar year end in which the Depositor reaches age 70-1/2). By that date, the Depositor may elect, in a manner acceptable to the Custodian, to have the balance in the custodian account distributed in: (a) A single sum payment. (b) An annuity contract that provides equal or substantially equal month- ly, quarterly, or annual payments over the life of the Depositor. (c) An annuity contract that provides equal or substantially equal month- ly, quarterly, or annual payments over the joint and last survivor lives of the Depositor and his or her designated beneficiary. (d) Equal or substantially equal annual payments over a specified period that may not be longer than the Depositor's life expectancy. (e) Equal or substantially equal annual payments over a specified period that may not be longer than the joint life and last survivor expectancy of the Depositor and his or her designated beneficiary. 4. If the Depositor dies before his or her entire interest is distributed to him or her, the entire remaining interest will be distributed as follows: (a) If the Depositor dies on or after distribution of his or her interest has begun, distribution must continue to be made in accordance with paragraph 3. 23 (b) If the Depositor dies before distribution of his or her interest has begun, the entire remaining interest will, at the election of the De- positor or, if the Depositor has not so elected, at the election of the beneficiary or beneficiaries, either (i) Be distributed by December 31 of the year containing the fifth anniversary of the Depositor's death, or (ii) Be distributed in equal or substantially equal payments over the life or life expectancy of the designated beneficiary or beneficiaries starting by December 31 of the year following the year of the Depositor's death. If, however, the benefi- ciary is the Depositor's surviving spouse, then this distri- bution is not required to begin before December 31 of the year in which the Depository would have turned age 70-1/2. (c) Except where distribution in the form of an annuity meeting the re- quirements of section 408(b)(3) and its related regulations has irrev- ocably commenced, distributions are treated as having begun on the De- positor's required beginning date, even though payments may actually have been made before that date. (d) If the Depositor dies before his or her entire interest has been dis- tributed and if the beneficiary is other than the surviving spouse, no additional cash contributions or rollover contributions may be ac- cepted in the account. 5. In the case of a distribution over life expectancy in equal or substan- tially equal annual payments, to determine the minimum annual payment for each year, divide the Depositor's entire Interest in the Custodial account as of the close of business on December 31 of the preceding year by the life expec- tancy of the Depositor (or the joint life and last survivor expectancy of the Depositor and the Depositor's designated beneficiary, or the life expectancy of the designated beneficiary, whichever applies). In the case of distribu- tions under paragraph 3, determine the initial life expectancy (or joint life and last survivor expectancy) using the attained ages of the Depositor and designated beneficiary as of their birthdays in the year the Depositor reaches age 70-1/2. In the case of a distribution in accordance with para- 24 graph (4)(b)(ii), determine life expectancy using the attained age of the des- ignated beneficiary as of the beneficiary's birthday in the year distributions are required to commence. 6. The owner of two or more individual retirement accounts may use the "al- ternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the minimum distribution requirements described above. This method permits an in- dividual to satisfy these requirements by taking from one individual retire- ment account the amount required to satisfy the requirement for another. ARTICLE V 1. The Depositor agrees to provide the Custodian with information necessary for the Custodian to prepare any reports under section 408(i) and Regulations section 1.408-5 and 1.408-6. 2. The Custodian agrees to submit reports to the Internal Revenue Service and the Depositor prescribed by the Internal Revenue Service. ARTICLE VI Notwithstanding any other articles which may be added or incorporated, the provisions of Articles I through III and this sentence will be controlling. Any additional articles that are not consistent with section 408(a) and re- lated regulations will be invalid. ARTICLE VII This agreement will be amended from time to time to comply with the provi- sions of the Code and related regulations. Other amendments may be made with the consent of the persons whose signatures appear below. ARTICLE VIII 1. Definitions. "Investment Company" shall mean an investment company as defined in Internal Revenue Code Section 851(a), shares of which Harris Associates Investment Trust has agreed to offer for investment under this Account. "Investment Com- pany Shares" or "Shares" shall mean shares of beneficial interest or capital stock of the Investment Company. 25 2. Investment of Account Assets. (a) Each contribution forwarded by the Depositor to the Custodian shall identify the Depositor's account number and be accompanied by a state- ment signed by the Depositor identifying the Investment Company Shares in which that contribution is to be invested. The Custodian may return to the Depositor, without liability for interest thereon, any contri- butions which are not accompanied by adequate account identification or an appropriate signed statement directing investment of those con- tributions. (b) Contributions shall be invested in whole and fractional Investment Company Shares at the price and in the manner in which such shares are then being publicly offered by the Investment Company. All distribu- tions received on Investment Company Shares held in the Custodial ac- count shall be reinvested in like Shares and credited to such Account. If any distribution of Investment Company Shares may be received at the election of the shareholder in additional like Shares or in cash or other property, the Custodian shall elect to receive such distribu- tion in additional like Investment Company Shares. (c) All Investment Company Shares acquired by the Custodian shall be reg- istered in the name of the Custodian or its registered nominee. The Depositor shall be the beneficial owner of all Investment Company Shares held in the Custodial Account and the Custodian shall not vote any of such shares, except upon written direction of the Depositor. The Custodian agrees to forward to every Depositor a then current Pro- spectus, reports, notices, proxies and related proxy soliciting mate- rials applicable to Investment Company Shares received by the Custodi- an. (d) The Depositor may at any time, by a manually signed direction deliv- ered to the Custodian, redeem any number of Investment Company Shares held for his account and reinvest the proceeds in the Shares of any other Investment Company. Telephone redemptions and reinvestments shall be done at the price and in the manner in which such Shares are then being redeemed or offered by the respective Investment Companies. 26 (e) Neither the Custodian nor any other party providing services to the custodial account will have any responsibility for rendering advice with respect to the investment and reinvestment of the Depositor's custodial account, nor shall such parties be liable for any loss or diminution in value which results from the Depositor's exercise of in- vestment control over his custodial account. Depositor shall have and exercise exclusive responsibility for and control over the investment of the assets of his custodial account, and neither Custodian nor any other such party shall have any duty to question his directions in that regard or to advise him regarding the purchase, retention or sale of shares of one or more Funds for the custodial account. 3. Amendment and Termination. (a) Harris Associates Investment Trust may amend the Custodial Account in whole or in part (including retroactive amendments) by delivering to the Depositor written notice of such amendment setting forth the sub- stance and effective date of the amendment. The Depositor shall be deemed to have consented to any such amendments not objected to in writing by the Depositor within thirty (30) days of receipt of the no- tice, provided that no amendment shall cause or permit any part of the assets of the Custodial Account to be diverted to purposes other than for the exclusive benefit of the Depositor or his beneficiaries, nor shall any amendment be made except in accordance with the applicable law and regulations affecting this Custodial Account. (b) The Depositor may at any time terminate the Custodial Account by de- livering to the Custodian a written notice of such termination setting forth the effective date thereof, together with any required withhold- ing information. (c) The Custodial Account created by this Agreement shall automatically terminate upon distribution to the Depositor or the beneficiary desig- nated under Paragraph 6 of Article VIII hereof of the entire balance in the Custodial Account. (d) The Custodian may be removed by the Depositor at any time upon thirty (30) days written notice to 27 the Custodian. The Custodian may elect to terminate the Custodial Ac- count upon thirty (30) days written notice to the Depositor. 4. Taxes and Custodial Fees. Any income taxes or other taxes of any kind whatsoever that may be levied or assessed upon or in respect of the assets of the Custodial Account, or the income arising therefrom, any transfer taxes in- curred, all administrative expenses incurred by the Custodian in the perfor- mance of his duties, including fees for legal services rendered to the Custodi- an, and the Custodian's compensation, shall be paid from the Custodial Account. Unusual administrative responsibilities not contemplated by the fee schedule will result in such additional charges as will reasonably compensate the Custo- dian for the services performed. The custodian fee listed in the fee schedule will be deducted by the Custo- dian from the initial contribution received from the Depositor unless such fee is transmitted with the initial contribution. Any fees due and unpaid by Decem- ber 15 of each year will be deducted from the Account and enough Investment Company shares will be redeemed to cover the fees. Fees as listed on the fee schedule will be deducted from the refund or redemption proceeds at the time of distribution or redemption and the remaining balance will be remitted to the Depositor in the case of distribution, or will be reinvested in accordance with the Depositor's instructions. 5. Reports and Notices. (a) The Custodian shall keep adequate records of transactions it is re- quired to perform hereunder. No later than sixty (60) days after the close of each calendar year, or after the Custodian's resignation or removal pursuant to Article VIII, Paragraph 3, the Custodian shall render to Depositor a written report or reports reflecting the trans- actions effected by it during such period and the assets and liabili- ties of the Custodial Account at the close of the period. (b) All communications or notices required or permitted to be given herein shall be deemed to be given upon receipt by the Custodian at State Street Bank and Trust Company, P.O. Box 8510, Boston, Massachusetts 02266-8510, the Investment Company and Harris Associates Investment Trust, Two North LaSalle Street, Chicago, Illinois 28 60602, or the Depositor at his most recent address shown in the Custo- dian's records. The Depositor agrees to advise the Custodian promptly, in writing, of any change of address. 6. Designation of Beneficiary. The Depositor shall have the right, by writ- ten notice to the Custodian, to designate a beneficiary or beneficiaries, pri- mary and contingent, to receive any benefit to which such Depositor may be en- titled in the event of his death prior to the complete distribution of such benefit. In the event the Depositor has not designated any beneficiaries, or if all beneficiaries shall predecease the Depositor, the following persons shall take in the order named: (a) Spouse of the Depositor; (b) If the spouse shall predecease the Depositor, then in equal shares to any children surviving the Depositor and to the descendents then liv- ing of a deceased child, by the right of representation, or (c) If the Depositor shall leave neither spouse nor descendents surviving, then to the personal representative of the Depositor's estate. 7. Inalienability of Benefits. The benefits provided hereunder shall not be subject to alienation, assignment, garnishment, attachment, execution or levy of any kind of any attempt to cause such benefits to be so subjected shall not be recognized except to the extent as may be required by law. 8. Rollover Contributions. The Custodian may receive rollover contributions as described in section 408(d)(3) or any other applicable provisions of the Code, and regulations promulgated thereunder. 9. Conflict in Provisions. To the extent that any of the provisions of Arti- cle VIII shall conflict with the provisions of Articles IV, V or VII, the pro- visions of Article VIII shall prevail. 10. Status of Depositors. Neither the Depositor nor any other person shall have any legal or equitable right against the Custodian or the Investment Com- pany except as provided herein. The Depositor agrees to indemnify and hold the Custodian harmless from and against any liability that the Custodian may incur in the administration of the Account unless arising from the Custodian's own negligence or misconduct. 29 11. Loss of Exemption. If the Custodian receives notice that the Depositor's Account has lost its tax-exempt status under section 408 of the Code for any reason, including by reason of a transaction prohibited by section 4975 of the Code, the Custodian shall distribute to the Depositor the entire balance in the Account, in cash or in kind, in the sole discretion of the Custodian no later than 90 days after the date the Custodian receives such notice. 12. Applicable State Law. This Custodial Account shall be construed, admin- istered and enforced according to the laws of the Commonwealth of Massachu- setts except to the extent Federal law supersedes Massachusetts law. 13. Distributions to Surviving Spouse. If distributions from the Custodial Account are to be made to the Depositor's surviving spouse, or to a trust of which the Depositor's surviving spouse is the income beneficiary, the amount which the surviving spouse (or such trust) is entitled to receive in each year shall not be less than the income of the Custodial Account (or of the portion of the Custodial Account with respect to which the surviving spouse or such trust is the beneficiary) for such year, as determined under section 2056(b)(7) of the Code. 14. Distribution of Assets. Distribution of the assets of the custodial ac- count shall be made at such time and in such form as Depositor (or the Benefi- ciary if Depositor is deceased) shall elect by written order to the Custodian. Neither Custodian nor any other party providing services to the custodial ac- count assumes any responsibility for the tax treatment of any distribution from the custodial account; such responsibility rests solely with the person ordering the distribution. Custodian assumes (and shall have) no responsibility to make any distribu- tion except upon written order of Depositor (or Beneficiary if Depositor is deceased) containing such information as the Custodian may reasonably request. Also, before making any distribution or honoring any assignment of the custo- dial account, Custodian shall be furnished with any and all applications, cer- tificate, tax waivers, signature guarantees and other documents (including proof of any legal representative's authority) deemed necessary or advisable by Custodian. 15. Liability of the Custodian. The parties do not intend to confer any fi- duciary duties on Custodian or any other party providing services to the cus- todial account, and none shall be implied. Neither shall be liable (or assumes 30 any responsibility) for the collection of contributions, the proper amount, time or deductibility of any contribution to the custodial account or the pro- priety of any contributions under this Agreement, or the purpose, time, amount (including any minimum distribution amounts) or propriety of any distribution hereunder, which matters are the responsibility of Depositor and Depositor's Beneficiary. Depositor shall always fully indemnify the Custodian and save them harmless from any and all liability whatsoever which may arise either (i) in connection with this agreement and the matters which it contemplates, except that which arises directly out of the Custodian's negligence or willful misconduct, or (ii) with respect to making or failing to make any distribution, other than for failure to make distribution in accordance with an order therefore which is in full compliance with Article 4. The Custodian shall not be obligated or ex- pected to commence or defend any legal action or proceeding in connection with this agreement or such matters unless agreed upon by the Custodian and Deposi- tor, and unless fully indemnified for so doing to the Custodian's satisfaction. Custodian may conclusively rely upon and shall be protected in acting upon any written order from Depositor or Beneficiary, or any other notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed, and so long as it acts in good faith, in taking or omitting to take any other action in reliance thereon. In its discretion, the Custodian may appoint one or more contractors or serv- ice providers to carry out any of its functions and may compensate them from the custodial account for expenses attendant to those functions. 16. Articles I through VII of this Agreement are in the form promulgated by the Internal Revenue Service. It is anticipated that if and when the Internal Revenue Service promulgates changes to Form 5305-A, the Investment Company will amend this agreement correspondingly. 31 12/93 [RECYCLE LOGO] printed on recycled paper [LOGO OF OAKMARK FAMILY OF FUNDS] INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT SUPPLEMENT New laws have made changes to the rules governing your IRA. These changes, which are effective January 1, 1997, are summarized below. Please keep this summary with your IRA disclosure statement (the pamphlet summarizing the rules governing your IRA). 1. Married IRA Owners--New Contribution Limits Under the old rules, for a married (filing jointly) couple with only one spouse earning compensation, each spouse could have an IRA, but the contributions to both IRAs for a year were limited to $2,250. Under the new rules, if you are married (filing jointly) and each spouse establishes an IRA, each spouse may contribute up to $2,000 to his or her IRA for a year as long as the combined compensation of both spouses for the year (as shown on your joint income tax return) is at least $4,000. If the combined compensation of both spouses is less than $4,000, the higher compensated spouse's IRA contribution may be any amount up to that spouse's compensation, or $2,000 if less. The lower compensated spouse's IRA contribution may be any amount up to that spouse's compensation plus any amount by which the higher compensated spouse's compensation exceeds the higher compensated spouse's IRA contribution. 2. IRA Withdrawals--New Penalty-Free Withdrawals Most withdrawals from an IRA before age 59-1/2 are subject to a 10% penalty tax in addition to regular income taxes. In certain situations, withdrawals before age 59-1/2 are not subject to the 10% penalty. The new rules add two situations in which the penalty is not imposed. First, withdrawals during a year are not subject to the 10% penalty tax to the extent that the withdrawals do not exceed the amount of your deductible medical expenses for the year. Generally speaking, medical expenses paid during a year are deductible if they are greater than 7-1/2% of your adjusted gross income for the year. Second, withdrawals are not subject to the 10% penalty if they do not exceed the premiums you paid for health insurance coverage for yourself, your spouse and dependents. This exception is available only if you have been unemployed and received federal or state unemployment compensation for at least 12 weeks. Withdrawals during the year in which you received the unemployment compensation or during the following year are eligible for this exemption, but not any withdrawals after you have been reemployed for at least 60 days. 3. IRA Withdrawals--Excess Withdrawal Penalty Waived One new rule affects individuals with very large balances in their IRAs (and other tax-favored retirement plans). Under current tax rules, there is a 15% penalty tax on distributions to you during a year from all IRAs and other tax-favored retirement plans above a threshold amount. For 1997, the threshold will be $160,000 (it is indexed annually for cost-of-living changes). Under one of the new laws, the 15% penalty tax described in the preceding paragraph will not apply to withdrawals from your IRA by you (or to distributions to you from other tax-favored retirement plans) during calendar years 1997, 1998 and 1999. However, a related 15% penalty tax on certain excess amounts remaining in your IRAs or retirement plan accounts upon your death continues to apply during these years. Consult your tax adviser to determine whether it would be advantageous for you to make withdrawals from your IRA (or receive distributions from other retirement plan accounts) during this three-year period. EX-99.14.2 18 IRA APPLICATION AND ADOPTION AGREEMENT Exhibit 14.2 THE OAKMARK FAMILY OF FUNDS IRA Application and Adoption Agreement Make checks payable to and mail to: State Street Bank & Trust Company Attention: Oakmark Funds P.O. Box 8510 Boston, MA 02266-8510 1-800-626-9392 General Information Use this form to: . Open a new Oakmark Individual Retirement Account . Transfer an Individual Retirement Account . Rollover an Individual Retirement Account . Directly Rollover a Qualified Retirement Plan (QRP) Indicate your transaction choice and complete the designated sections. Use a separate application for each type of IRA. There is a $5.00 initial acceptance fee, payable upon opening an account. A $10.00 annual maintenance fee will be billed in December or you may pay the fee upon opening an account. Fees are per fund account. Complete Check One Section [_] Regular IRA 1,2,5,6,7 [_] Spousal IRA 1,2,5,6,7 [_] Simplified Employee Pension (SEP) IRA 1,2,5,6,7 [_] Rollover of IRA proceeds from a prior IRA Custodian 1,3,5,6,7 [_] IRA or SEP IRA Asset Transfer from current Trustee/Custodian 1,4,5,6,7 [_] Direct Rollover from a Qualified Retirement Plan (401(a), 401(k) or 403(b) Plans etc.) 1,4,5,6,7 1 Account Registration (Please print or type) __________________________________________ Name __________________________________________ Social Security Number _____________________________________________ Address _____________________________________________ City State Zip ( ) ( ) _____________________________________________ Daytime Telephone Evening Telephone _____________________________________________ Date of Birth 2 Investment Designation Invest the enclosed check as indicated below. . Minimum investment per fund $1,000. . If no tax year is indicated, the current calendar year will be used. Fund $ Amount Tax Year [_] Oakmark Fund (110) $ _________ ______ [_] Oakmark Small Cap Fund (809) $ _________ ______ [_] Oakmark Balanced Fund (810) $ _________ ______ [_] Oakmark Select Fund (808) $ _________ ______ [_] Oakmark International Fund (109) $ _________ ______ [_] Oakmark International Emerging Value Fund (811) $ _________ ______ Oakmark Units of: [_] Government Portfolio (111) $ _________ ______ Total Contributions $ _________ Total Fees ($5 per New Fund Account) $ _________ Total $ _________ 3 Rollover of IRA Assets Invest the enclosed check as indicated below. . Minimum investment per fund $1,000. . This check represents: [_] Rollover from prior IRA Trustee/Custodian [_] Rollover from prior SEP IRA Trustee/Custodian [_] Direct Rollover from a Qualified Retirement Plan Fund $ Amount [_] Oakmark Fund (110) $ _________ [_] Oakmark Small Cap Fund (809) $ _________ [_] Oakmark Balanced Fund (810) $ _________ [_] Oakmark Select Fund (808) $ _________ [_] Oakmark International Fund (109) $ _________ [_] Oakmark International Emerging Value Fund (811) $ _________ Oakmark Units of: [_] Government Portfolio (111) $ _________ Total Rollover Total Fees ($5 per New Fund Account) $ _________ Total $ _________ - -------------------------------------------------------------------------------- 4 IRA Transfer & QRP Direct Rollover Authorization Form To move assets from an existing IRA or a Qualified Retirement Plan, COMPLETE FRONT AND BACK OF THIS SECTION. We will contact the Trustee/Custodian and arrange the movement of assets for you. You should check with the Trustee/Custodian to see if there are any requirements (e.g., Guaranteed Signatures) that must be fulfilled prior to our processing this application. To move assets from more than one Trustee/Custodian, contact the fund at 1-800-626-9392 to obtain additional forms. Type of account to be sent (Check One): [_] Regular IRA [_] SEP-IRA [_] Spousal IRA [_] Direct Rollover from a Qualified Retirement Plan Assets should be invested as indicated below (Provide dollar amounts or percentages): Fund $ Amount *Account Number [_] Oakmark Fund (110) $ ______ ________ [_] Oakmark Small Cap Fund (809) $ ______ ________ [_] Oakmark Balanced Fund (810) $ ______ ________ [_] Oakmark Select Fund (808) $ ______ ________ [_] Oakmark International Fund (109) $ ______ ________ [_] Oakmark International Emerging Value Fund (811) $ ______ ________ Oakmark Units of: [_] Government Portfolio (111) $ ______ ________ Total Transfer/Direct Rollover $ ______ Total Fees ($5 per New Fund Account) $ ______ Total $ ______ *If executing a Transfer or Direct Rollover to an existing Oakmark IRA, write in your account number. If establishing a new Oakmark IRA, write "NEW." (Over) 5 Beneficiary Designation I hereby designate the following individual(s) to receive the balance of my Oakmark IRA upon my death. Primary Beneficiary(ies) ____________________________________________________________ Name Relationship ____________________________________________________________ Social Security Number Date of Birth ____________________________________________________________ Address ____________________________________________________________ City State Zip Secondary Beneficiary(ies) ____________________________________________________________ Name Relationship ____________________________________________________________ Social Security Number Date of Birth ____________________________________________________________ Address ____________________________________________________________ City State Zip Secondary Beneficiary(ies) will receive the balance of an IRA only if there are no surviving Primary Beneficiary(ies). IMPORTANT: This Designation of Beneficiary(ies) may have important tax or estate planning effects. Also, if you are married and reside in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas or Washington), you may need to obtain your spouse's consent if you have not designated your spouse as primary beneficiary for at least half of your account. See your lawyer or other tax professional for additional information. 6 Telephone Exchange Unless you check this box, you will be able to use the phone to make exchanges between your Oakmark IRAs with the same registration information. (Otherwise, exchanges must be made in writing.) [_] I Do Not Want Telephone Exchange. By not checking this box, you authorize the Funds and their agents to act on instructions reasonably believed to be genuine. 7 Signature . I hereby authorize The Oakmark Funds to establish an IRA for my benefit with State Street Bank & Trust Company, pursuant to the terms of The Oakmark Funds Individual Retirement Account Custodial Documents. . I certify that I have read the Disclosure Statement and the Account Custodial Document. I have received and read a current prospectus for The Oakmark Funds and/or Oakmark Units of The Government Portfolio. . I understand that a $10.00 annual maintenance fee may be collected by redeeming sufficient shares from each Fund account balance if not prepaid by December 1. The custodian may change the fee schedule from time to time. . I authorize The Oakmark Funds and their agents to act upon services authorized on this application per instructions that they reasonably believe to be genuine. I agree that The Oakmark Funds will not be liable for any resulting loss, cost or expense. . Under penalty of perjury, I hereby certify that I am NOT currently subject to IRS backup withholding. (Cross out "NOT" if you are currently subject to withholding.) . Under penalty of perjury, I hereby certify that the Taxpayer Identification Number given is correct. . The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. ________________________________________________________ Signature ________________________________________________________ Date Receipt by the investor of The Oakmark Funds confirmation statement shall indicate State Street Bank & Trust Company's acceptance to act as custodian. Thank you for your investment in The Oakmark Funds. - -------------------------------------------------------------------------------- Transfer/Direct Rollover Instructions To: _______________________________________________________________ Name of Your Present Trustee/Custodian _______________________________________________________________ Street _______________________________________________________________ City State Zip _______________________________________________________________ Telephone Retirement Account Number _______________________________________________________________ Asset Amount to be sent (Write "TOTAL" to liquidate all assets) If available, provide a copy of your current retirement account statement. ________________________________________________________________________________ To be completed by State Street Bank & Trust Company: State Street Bank & Trust Company accepts the appointment as successor Custodian of the above Retirement Account and requests the Transfer/Direct Rollover of assets indicated above. Custodian acknowledges that it maintains a qualified Individual Retirement Account. ______________________________________________________________________________ Signature Date ________________________________________________________________________________ Dear Sir or Madam: Send the amount indicated to the custodian of my new Individual Retirement Account. Make checks payable to and mail to: State Street Bank & Trust Company Attention: Oakmark Funds P.O. Box 8510 Boston, MA 02266-8510 Terminate my retirement account if all assets have been sent. This Transfer/Direct Rollover is to be executed from fiduciary to fiduciary, in such a manner that will not place me in actual or constructive receipt of all or any part of my retirement assets. _______________________________________________________________ Applicant's Signature Date _______________________________________________________________ Print Your Name _______________________________________________________________ Social Security Number _______________________________________________________________ Signature Guarantee (Only if required by current Custodian) EX-99.16 19 SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS EXHIBIT 16 The Oakmark Fund Total Return Calculation Initial Investment: $1,000 Period: From November 1, 1995 to October 31, 1996 Number of Days in Period: 365 Total Return: 18.07%
Dividend Dividend Dividend Total Account Date NAV Shares Rate Dollars Shares Shares Value ---- --- ------ ---- -------- -------- ------ ----- 10/31/95 $28.47 35.1247 0.00 $0.00 0.0000 35.1247 $1,000.00 12/13/95 $29.73 35.1247 1.12 $39.51 1.3289 36.4536 $1,083.77 10/31/96 $32.39 36.4536 0.00 $0.00 0.0000 36.4536 $1,180.73
The Oakmark Balanced Fund Total Return Calculation Initial Investment: $1,000 Period: From November 1, 1995 to October 31, 1996 Number of Days in Period: 365 Total Return: 12.90%
Dividend Dividend Dividend Total Account Date NAV Shares Rate Dollars Shares Shares Value ---- --- ------ ---- -------- -------- ------ ----- 11/01/95 $10.00 100.0000 0.00 $0.00 0.0000 100.0000 $1,000.00 10/31/96 $11.29 100.0000 0.00 $0.00 0.0000 100.0000 $1,129.00
The Oakmark Small Cap Fund Total Return Calculation Initial Investment: $1,000 Period: From November 1, 1995 to October 31, 1996 Number of Days in Period: 365 Total Return: 31.90%
Dividend Dividend Dividend Total Account Date NAV Shares Rate Dollars Shares Shares Value ---- --- ------ ---- -------- -------- ------ ----- 11/01/95 $10.00 100.0000 0.00 $0.00 0.0000 100.0000 $1,000.00 10/31/96 $13.19 100.0000 0.00 $0.00 0.0000 100.0000 $1,319.00
The Oakmark International Fund Total Return Calculation Initial Investment: $1,000 Period: From October 31, 1995 to October 31, 1996 Number of Days in Period: 365 Total Return: 24.90%
Dividend Dividend Dividend Total Account Date NAV Shares Rate Dollars Shares Shares Value ---- --- ------ ---- -------- -------- ------ ----- 10/31/95 $12.97 77.1010 0.00 $0.00 0.0000 77.1010 $1,000.00 12/13/95 $12.16 77.1010 1.04 $80.44 6.6151 83.7161 $1,017.99 10/31/96 $14.92 83.7161 0.00 $0.00 0.0000 83.7161 $1,249.04
The Oakmark International Emerging Value Fund Total Return Calculation Initial Investment: $1,000 Period: From November 1, 1995 to October 31, 1996 Number of Days in Period: 365 Total Return: 14.10%
Dividend Dividend Dividend Total Account Date NAV Shares Rate Dollars Shares Shares Value ---- --- ------ ---- -------- -------- ------ ----- 11/01/95 $10.00 100.0000 0.00 $0.00 0.0000 100.0000 $1,000.00 10/31/96 $11.41 100.0000 0.00 $0.00 0.0000 100.0000 $1,141.00
EX-27.1 20 FDS - THE OAKMARK FUND
6 This schedule contains summary financial information extracted from The Oakmark Fund 10/31/96 Annual Report and is qualified in its entirety by reference to such financial statements. 01 The Oakmark Fund 1,000 12-MOS OCT-31-1996 NOV-01-1995 OCT-31-1996 3,133,237 3,921,779 33,443 6 1 3,955,229 8,666 0 12,627 21,293 0 2,883,530 121,453 0 35,496 0 226,362 0 788,548 3,933,936 69,135 15,846 0 43,413 41,568 226,153 290,432 558,153 0 29,456 87,159 0 59,070 40,632 3,733 1,106,867 23,384 87,368 0 0 36,083 0 43,428 3,692,967 24.87 .34 4.70 .28 .84 0 32.39 1.18 0 0
EX-27.2 21 FDS - OAKMARK SMALL CAP FUND
6 This schedule contains summary financial information extracted from The 10/31/96 Annual Report and is qualified in its entirety by reference to such financial statements. 03 Oakmark Small Cap Fund 1,000 12-MOS OCT-31-1996 NOV-01-1995 OCT-31-1996 196,740 216,842 2,313 14 1 219,170 141 0 609 750 0 198,837 16,554 0 (276) 0 (243) 0 20,102 218,420 931 302 19 1,528 (276) (243) 20,102 19,583 0 0 0 0 18,656 2,102 0 218,420 0 0 0 0 957 0 1,529 94,746 10.00 (.02) 3.21 0 0 0 13.19 1.61 0 0
EX-27.3 22 FDS - OAKMARK BALANCED FUND
6 This schedule contains summary financial information extracted from the 10/31/96 Annual Report and is qualified in its entirety by reference to such financial statements. 04 The Oakmark Balanced Fund 1,000 12-MOS OCT-31-1996 NOV-01-1995 OCT-31-1996 13,254 14,158 153 14 1 14,326 452 0 75 527 0 12,608 1,222 0 125 0 162 0 904 13,799 118 261 4 258 125 162 904 1,191 0 0 0 0 1,466 244 0 13,799 0 0 0 0 69 0 258 10,350 10.00 .10 1.19 0 0 0 11.29 2.50 0 0
EX-27.4 23 FDS - OAKMARK INTERNATIONAL FUND
6 This schedule contains summary financial information extracted from the 10/31/96 Annual Report and is qualified in its entirety by reference to such financial statements. 02 Oakmark International Fund 1,000 12-MOS OCT-31-1996 NOV-01-1995 OCT-31-1996 1,092,123 1,175,483 7,062 7,391 0 1,189,936 10,397 0 6,772 17,169 0 1,080,225 78,601 0 46,201 0 (33,902) 0 80,243 1,172,767 26,217 1,709 377 13,480 14,823 1,789 181,185 197,797 0 0 62,116 0 39,590 28,966 4,757 353,036 31,378 26,425 0 0 10,113 0 13,486 1,023,886 12.97 .09 2.90 0 1.04 0 14.92 1.32 0 0
EX-27.5 24 FDS - OAKMARK INTERNATIONAL SMALL CAP FUND
6 This schedule contains summary financial information extracted from The Oakmark International Emerging Value 10/31/96 Annual Report and is qualified in its entirety by reference to such financial statements. 05 Oakmark International Small Cap Fund 1,000 12-MOS OCT-31-1996 NOV-01-1995 OCT-31-1996 39,520 39,815 606 14 338 40,773 827 0 194 1,021 0 38,043 3,483 0 155 0 1,260 0 294 39,752 673 71 6 595 155 1,258 296 1,709 0 0 0 0 3,943 760 0 39,752 0 0 0 0 258 0 599 23,971 10.00 .04 1.37 0 0 0 11.41 2.50 0 0
EX-99.18 25 NEW ACCOUNT PURCHASE APPLICATION THE OAKMARK FAMILY OF FUNDS Exhibit 18 NEW ACCOUNT PURCHASE APPLICATION [OAKMARK FAMILY OF THE FUNDS WILL NOT ACCEPT THIRD PARTY CHECKS FUNDS - LOGO] Make checks payable and mail to: State Street Bank & Trust Company Attention: The Oakmark Funds P.O. Box 8510 Boston, MA. 02266-8510 1-800-626-9392 1. ACCOUNT REGISTRATION Choose one account type. PRINT CLEARLY. [_] INDIVIDUAL or JOINT Name ___________________________________________ Social Security Number _______-________-________ Birthdate _____/_____/_____ Citizenship: [_] U.S. or Resident Alien [_] Other _____________________ *Name __________________________________________ Social Security Number _______-________-________ Birthdate _____/_____/_____ Citizenship: [_] U.S. or Resident Alien [_] Other _____________________ *If second name is on account, registration will be Joint Tenancy with Rights of Survivorship unless otherwise specified. [_] CORPORATIONS, TRUSTS OR OTHER ENTITIES Name ___________________________________________ ________________________________________________ Tax ID Number ___________-______________________ Trustee(s) _____________________________________ ________________________________________________ FBO ____________________________________________ Date of Agreement _____/_____/_____ [_] GIFT/TRANSFER TO MINOR Custodian's Name _______________________________ Minor's Name ___________________________________ Minor's Social Security Number _____-_____-_____ Minor's Birthdate _____/_____/_____ Minor's State of Residence _____________________ Citizenship: [_] U.S. or Resident Alien [_] Other _____________________ 2. MAILING ADDRESS Street, Apt. ___________________________________ City ___________________________________________ State ___________ Zip __________________________ Daytime Phone ( ) ____________________________ Evening Phone ( ) ____________________________ SEND DUPLICATE STATEMENTS TO: Name ___________________________________________ Company ________________________________________ Street _________________________________________ City ___________________________________________ State ___________________ Zip __________________ 3. INVESTMENT . Initial minimum: $1,000 for Small Cap, Balanced, Emerging Value and Select. $2,500 for Oakmark, International and Oakmark Units. . Reduced initial minimum: $1,000 for Oakmark, International and Oakmark Units, if establishing an Automatic Investment Plan of at least $100 per month. Sections 4 and 7 must be completed. . Initial minimum: $1,000 for Gift/Transfer to Minor Account.
OAKMARK FUNDS INITIAL INVESTMENT DISTRIBUTION OPTIONS Distributions will automatically be reinvested in additional shares of your Fund(s) unless you check the box(es) below. [_] Oakmark Fund (110) $ ________________________ [_] [_] Oakmark Small Cap Fund (809) $ ________________________ [_] [_] Oakmark Balanced Fund (810) $ ________________________ [_] [_] Oakmark Select Fund (808) $ ________________________ [_] [_] Oakmark International Fund $ ________________________ [_] [_] Oakmark International Emerging $ ________________________ [_] Vale Fund (811) OAKMARK UNITS OF: [_] Government Portfolio $ ________________________ [_] [_] Tax-Exempt Diversified Portfolio (60) $ ________________________ [_] [_] Short Duration Tax-Free Fund (61) $ ________________________ [_] Total Investment $ ________________________ [_]
4. AUTOMATIC INVESTMENT PLAN [_] This allows you to purchase shares automatically by electronic transfer from your checking account. Transactions will occur on the 15th of the month or the next business day, unless otherwise specified. Beginning _____/_____/_____ invest $ ___________ [_] Monthly [_] Quarterly [_] Annually Transactions should occur on the ____________ of the month. Check the box and complete section 7. 5. TELEPHONE INVESTMENTS [_] This allows you to purchase shares by telephone by calling 1-800-626-9392 between 8:00 AM and 4:00 PM EST and pay for them by electronic transfer from your checking account. Check the box and complete section 7. 6. REDEMPTION AND EXCHANGE OPTIONS A. Telephone Redemptions and Exchanges. This allows you to use the telephone to redeem or exchange shares, unless you check the box below. Redemptions will be made payable to the registered owner(s) and mailed to the address of record. Proceeds from shares redeemed by telephone are limited to a $50,000 maximum per day. Persons having your account information may be able to act upon your behalf. [_] I DO NOT WANT TELEPHONE REDEMPTION. [_] I DO NOT WANT TELEPHONE EXCHANGE. B. Special Redemption Option. [_] This allows you to redeem shares at any time and have the proceeds sent to your checking account. Check the box and complete section 7. C. Systematic Withdrawal Plan. (Account Minimum: $25,000) [_] This allows you to redeem shares automatically and have the proceeds sent to your address of record. Transactions will occur on the 24th of the month or the next business day, unless otherwise specified. Beginning _____/_____/_____ redeem $ ___________ [_] Monthly [_] Quarterly [_] Annually 7. BANK INFORMATION Complete this section if you have selected the Automatic Investment Plan from section 4, Telephone Investments from section 5 or the Special Redemption Option from section 6B. You must use the same checking account for these sections. Any co-signer of your checking account who is not a joint owner of the funds must authorize this service by signing below. A VOIDED CHECK FROM YOUR CHECKING ACCOUNT MUST BE ATTACHED TO THIS FORM. Name of Bank _________________________________ Street Address __________________ City _________________________________________ State ________ Zip Code__________ Name(s) on Checking Account __________________ Checking Account # ______________ ______________________________________________ Bank ABA # ______________________ Co-Signer Signature ______________ Date ______ 8. SIGNATURE By signing this form I certify that: . I have received the current Fund prospectus and agree to be bound by their terms as governed by Illinois law. I have full authority and legal capacity to purchase Fund shares and establish and use any related privileges. TELEPHONE PRIVILEGES . I understand that the Telephone Redemption and Telephone Exchange Privileges will apply to my account unless I have specifically declined those privileges in section 6A of this application. I understand that by signing the application, unless the privileges are declined, I agree that neither the Funds nor their Transfer Agent, their agents, offices, trustees, directors or employees will be liable for any loss, liability or expense for acting or instructions given under the privileges, placing the risk of loss on me. See the discussion of the Telephone Redemption and Telephone Exchange Privileges in the prospectus. TAXPAYER IDENTIFICATION NUMBER CERTIFICATION I certify under penalties of perjury: . All information and certifications on this application are true and correct, including the Social Security or other Tax Identification Number (TIN) in section 1. . If I have not provided a TIN, I have not been issued a number but have applied (or will apply) for one. I understand that if I do not provide the Fund(s) a TIN within 60 days, the Fund(s) will withhold 31% from all my dividend, capital gain and redemption payments until I provide one. . Check one of the following only if applicable: [_] The IRS has informed me I am subject to backup withholding as a result of a failure to report all interest dividend income. [_] I am a trust or organization that qualifies for the IRS backup withholding exemption. . The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. Sign below exactly as your name(s) appear in section 1. - ------------------------ ------------ ------------------------ ------------ Signature Date Signature Date - -------------------------------------- -------------------------------------- Title (if owner is an organization) Title (if owner is an organization) -----END PRIVACY-ENHANCED MESSAGE-----