HARRIS ASSOCIATES INVESTMENT TRUST

                        Supplement dated August 1, 2006
           to Prospectus of The Oakmark Funds dated January 27, 2006

     Effective October 1, 2006, the section on page 24 of the prospectus
entitled "THE OAKMARK INTERNATIONAL SMALL CAP FUND - PRINCIPAL INVESTMENT
STRATEGY" is amended by deleting the first paragraph and inserting the
following:

     "International Small Cap Fund invests primarily in common stocks of
     non-U.S. companies. Under normal market conditions, the Fund invests at
     least 80% of its net assets (plus any borrowings for investment purposes)
     in the stocks of "small cap companies." A small cap company is one whose
     market capitalization is less than $5 billion at the time of investment."

SUPPJUL06


                                             STATEMENT OF ADDITIONAL INFORMATION

               January 27, 2006 as supplemented on August 1, 2006

                                THE OAKMARK FUNDS
                                  No-Load Funds


                                                        Two North LaSalle Street
                                                    Chicago, Illinois 60602-3790
                                        Telephone 1-800-OAKMARK (1-800-625-6275)
                                                                 www.oakmark.com

This Statement of Additional Information relates to The Oakmark Fund
("Oakmark Fund"), The Oakmark Select Fund ("Select Fund"), The Oakmark Equity
and Income Fund, ("Equity and Income Fund"), The Oakmark Global Fund ("Global
Fund"), The Oakmark International Fund ("International Fund") and The Oakmark
International Small Cap Fund ("International Small Cap Fund"), each a series
of Harris Associates Investment Trust (the "Trust"). This Statement of
Additional Information is not a prospectus but provides information that
should be read in conjunction with the Funds' prospectus dated the same date
as this Statement of Additional Information and any supplement thereto. You
may obtain a prospectus or semi-annual or annual report from the Funds at no
charge by writing, telephoning or accessing the Funds at their address,
telephone number or website shown above. The financial statements for each of
the Funds for the most recent fiscal year may be found in the Funds' annual
report to shareholders and are incorporated herein by reference.

                                TABLE OF CONTENTS

                                                                
THE FUNDS                                                           2

INVESTMENT RESTRICTIONS                                             2

HOW THE FUNDS INVEST                                                4

INVESTMENT ADVISER                                                 14

PORTFOLIO MANAGERS                                                 16

CODE OF ETHICS                                                     18

PROXY VOTING POLICIES AND PROCEDURES                               18

TRUSTEES AND OFFICERS                                              20

PRINCIPAL SHAREHOLDERS                                             26

PURCHASING AND REDEEMING SHARES                                    27

ADDITIONAL TAX INFORMATION                                         30

DISTRIBUTOR                                                        32

PORTFOLIO HOLDINGS DISCLOSURE                                      32

PORTFOLIO TRANSACTIONS                                             33

DECLARATION OF TRUST                                               36

CUSTODIAN AND TRANSFER AGENT                                       36

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                      36

APPENDIX A -- BOND RATINGS                                         A-1

APPENDIX B -- FINANCIAL STATEMENTS                                 B-1




                                        1


                                    THE FUNDS

     Oakmark Fund, Select Fund, Global Fund, International Fund and
International Small Cap Fund seek long-term capital appreciation. Equity and
Income Fund seeks income and preservation and growth of capital.

     The Funds are series of the Trust, an open-end management investment
company, and each Fund other than Select Fund is diversified. The Trust is a
Massachusetts business trust organized under an Agreement and Declaration of
Trust dated February 1, 1991 (the "Declaration of Trust").

     Each Fund's shares are divided into two share classes: Class I Shares and
Class II Shares. Class I Shares of each Fund are offered to members of the
general public. As described more fully in the prospectus, Class II Shares of
each Fund are offered to certain retirement and profit sharing plans. Class II
Shares of a Fund pay a service fee at the annual rate of .25% of the average net
assets of Class II Shares of the Fund. This service fee is paid to an
administrator for performing the services associated with the administration of
such retirement plans. The shares of each class of a Fund represent an interest
in the same portfolio of investments of the Fund. All shares of a Fund have
equal voting rights (except as to matters affecting the interests of only one
class) and the shares of each class are entitled to participate pro rata in any
dividends and other distributions declared by the Trust's board of trustees. All
shares of a Fund of a given class have equal rights in the event of liquidation
of that class. All shares issued will be fully paid and non-assessable and will
have no preemptive or conversion rights.

                             INVESTMENT RESTRICTIONS

     In pursuing their respective investment objectives no Fund will:

     1.   [THIS RESTRICTION DOES NOT APPLY TO SELECT FUND] In regard to 75% of
its assets, invest more than 5% of its assets (valued at the time of investment)
in securities of any one issuer, except in U.S. government obligations;

     2.   Acquire securities of any one issuer which at the time of investment
(a) represent more than 10% of the voting securities of the issuer or (b) have a
value greater than 10% of the value of the outstanding securities of the issuer;

     3.   Invest more than 25% of its assets (valued at the time of investment)
in securities of companies in any one industry, except that this restriction
does not apply to investments in U.S. government obligations;

     4.   Borrow money except from banks for temporary or emergency purposes in
amounts not exceeding 10% of the value of the Fund's assets at the time of
borrowing [the Fund will not purchase additional securities when its borrowings,
less receivables from portfolio securities sold, exceed 5% of the value of the
Fund's total assets];

     5.   Issue any senior security except in connection with permitted
 borrowings;

     6.    Underwrite the distribution of securities of other issuers; however
the Fund may acquire "restricted" securities which, in the event of a resale,
might be required to be registered under the Securities Act of 1933 on the
ground that the Fund could be regarded as an underwriter as defined by that act
with respect to such resale;

     7.   Make loans, but this restriction shall not prevent the Fund from (a)
investing in debt obligations, (b) investing in repurchase agreements,(1) or (c)
[FUNDS OTHER THAN OAKMARK FUND] lending its portfolio securities

- ----------
(1)  A repurchase agreement involves a sale of securities to a Fund with the
     concurrent agreement of the seller (bank or securities dealer) to
     repurchase the securities at the same price plus an amount equal to an
     agreed-upon interest rate within a specified time. In the event of a
     bankruptcy or other default of a seller of a repurchase agreement, the Fund
     could experience both delays in liquidating the underlying securities and
     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


[the Fund will not lend securities having a value in excess of 33% of its
assets, including collateral received for loaned securities (valued at the time
of any loan)];

     8.   Purchase and sell real estate or interests in real estate, although
it may invest in marketable securities of enterprises which invest in real
estate or interests in real estate;

     9.   Purchase and sell commodities or commodity contracts, except that it
may enter into forward foreign currency contracts;

     10.  Acquire securities of other investment companies except (a) by
purchase in the open market, where no commission or profit to a sponsor or
dealer results from such purchase other than the customary broker's commission
or (b) where the acquisition results from a dividend or a merger, consolidation
or other reorganization;(2)

     11.  Make margin purchases or participate in a joint or on a joint or
several basis in any trading account in securities;

     12. Invest in companies for the purpose of management or the exercise of
control;

     13.  Invest more than 15% of its net assets (valued at the time of
investment) in illiquid securities, including repurchase agreements maturing in
more than seven days;

     14.  [OAKMARK FUND, SELECT FUND AND EQUITY AND INCOME FUND ONLY] Invest
more than 2% of its net assets (valued at the time of investment) in warrants
not listed on the New York or American stock exchanges, valued at cost, nor more
than 5% of its net assets in all warrants, provided that warrants acquired in
units or attached to other securities shall be deemed to be without value for
purposes of this restriction; [GLOBAL FUND, INTERNATIONAL FUND AND INTERNATIONAL
SMALL CAP FUND ONLY] Invest more than 10% of its net assets (valued at the time
of investment) in warrants valued at the lower of cost or market, provided that
warrants acquired in units or attached to securities shall be deemed to be
without value for purposes of this restriction;

     15.  [OAKMARK FUND, SELECT FUND AND EQUITY AND INCOME 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);(3)

     16.  Make short sales of securities unless (i) the Fund owns at least an
equal amount of such securities, or of securities that are convertible or
exchangeable, or anticipated to be convertible or exchangeable, into at least an
equal amount of such securities with no restriction other than the payment of
additional consideration or (ii) immediately after such a short sale, the
aggregate value of all securities that the Fund is short (excluding short sales
against-the-box(4)) does not exceed 5% of the value of the Fund's net assets,
and the Fund covers such a short sale as required by the current rules and
positions of the Securities and Exchange Commission or its staff;

- ----------
(2)  In addition to this investment restriction, the Investment Company Act of
     1940 provides that a Fund may neither purchase more than 3% of the voting
     securities of any one investment company nor invest more than 10% of the
     Fund's assets (valued at the time of investment) in all investment company
     securities purchased by the Fund. Investment in the shares of another
     investment company would require the Fund to bear a portion of the
     management and advisory fees paid by that investment company, which might
     duplicate the fees paid by the Fund.

(3)  Although securities represented by American Depositary Receipts ("ADRs")
     are not subject to restriction 15, none of these Funds has any present
     intention to invest more than the indicated percentage of its total assets
     in ADRs and securities of foreign issuers.

(4)  A short sale "against the box" involves the sale of a security with respect
     to which the Fund already owns or has the right to acquire an equivalent
     amount of such security in kind or amount, or securities that are
     convertible or exchangeable, or anticipated to be convertible or
     exchangeable, into at least an equal amount of such securities with no
     restriction other than the payment of additional consideration.

                                        3


     17.  Purchase a call option or a put option if, immediately thereafter,
the aggregate market value of all call and put options then held would exceed
10% of its net assets;

     18.  Write any call option or put option unless the option is covered* and
immediately thereafter the aggregate market value of all portfolio securities or
currencies required to cover such options written by the Fund would not exceed
15% of its net assets;

     19.  Invest in futures or options on futures, except that it may invest in
forward foreign currency contracts.

     The first 10 restrictions listed above, except the bracketed portions and
the footnotes related to the restrictions, are fundamental policies and may be
changed only with the approval of the holders of a "majority of the outstanding
voting securities" of the respective Fund, which is defined in the Investment
Company Act of 1940 (the "1940 Act") as the lesser of (i) 67% of the shares of
the Fund present at a meeting if more than 50% of the outstanding shares of the
Fund are present in person or represented by proxy or (ii) more than 50% of the
outstanding shares of the Fund. Those restrictions not designated as
"fundamental," and a Fund's investment objective, may be changed by the board of
trustees without shareholder approval. A Fund's investment objective will not be
changed without at least 30 days' notice to shareholders.

     Notwithstanding the foregoing investment restrictions, a Fund may purchase
securities pursuant to the exercise of subscription rights, provided, in the
case of each Fund other than Select Fund, that such purchase will not result in
the Fund's ceasing to be a diversified investment company. Japanese and European
corporations frequently issue additional capital stock by means of subscription
rights offerings to existing shareholders at a price substantially below the
market price of the shares. The failure to exercise such rights would result in
a Fund's interest in the issuing company being diluted. The market for such
rights is not well developed in all cases and, accordingly, a Fund may not
always realize full value on the sale of rights. The exception applies in cases
where the limits set forth in the investment restrictions would otherwise be
exceeded by exercising rights or would have already been exceeded as a result of
fluctuations in the market value of a Fund's portfolio securities with the
result that the Fund would be forced either to sell securities at a time when it
might not otherwise have done so, or to forego exercising the rights.

                              HOW THE FUNDS INVEST

BOTTOM-UP INVESTMENT PROCESS

     All portfolio managers at Harris Associates L.P., investment adviser to The
Oakmark Funds (the "Adviser"), strive to abide by a consistent philosophy and
process. This process involves a collective, unified effort at identifying what
the managers believe are the best values in the marketplace.

- ----------
*    In the case of a call option, the option is covered if the Fund owns (a)
     the securities underlying the option, (b) other securities with respect to
     which the Fund anticipates receiving the underlying securities as a
     dividend or distribution or upon a conversion or exchange and liquid assets
     held by the Fund having a value at least equal to the value of such
     underlying securities are segregated on the books of the Fund's custodian
     or (c) an absolute and immediate right to acquire the underlying security
     without additional consideration (or, if additional consideration is
     required, liquid assets held by the Fund having a value at least equal to
     that amount are segregated on the books of the Fund's custodian) upon
     conversion or exchange of other securities held in its portfolio. In the
     case of a put option, the option is covered if assets having a value at
     least equal to the exercise price of the option are segregated on the books
     of the Fund's custodian on a daily basis. For purposes of this restriction,
     the aggregate market value of all portfolio securities or currencies
     required to cover such options written by the Fund is the aggregate value
     of all securities held to cover call options written plus the value of all
     liquid assets required to be so segregated in connection with call and put
     options written.

                                        4


     Each manager typically constructs a focused portfolio from a list of
approved stocks, built on a stock by stock basis from the bottom up. The
following chart illustrates this bottom-up investment process:

                          BOTTOM-UP INVESTMENT PROCESS

                   UNIVERSE OF THOUSANDS OF EQUITY SECURITIES
                     (ALL STOCKS AVAILABLE FOR INVESTMENT.)

                                CRITERIA SCREENS
                  (MANAGERS AND RESEARCH TEAM SCREEN FOR STOCKS
                       THAT THEY BELIEVE ARE WORTH FURTHER
                                 CONSIDERATION.)

                      QUANTITATIVE AND QUALITATIVE RESEARCH
         (RIGOROUS ANALYSIS IS PERFORMED TO ENSURE THAT THE STOCK MEETS
                           CERTAIN "VALUE" STANDARDS.)

                                  APPROVED LIST
                       (APPROXIMATELY 125-150 SECURITIES.)

                                     INVEST
            (MANAGERS SELECT STOCKS FROM THE APPROVED LIST FOR THEIR
                                SPECIFIC FUNDS.)

SMALL CAP SECURITIES

     Certain of the Funds may invest in "small cap companies." For those Funds
other than International Small Cap Fund, a small cap company is one whose
market capitalization is no larger than the largest market capitalization of
the companies included in the S&P Small Cap 600 Index ($3.67 billion as of
June 30, 2006). The mean market capitalization of companies included in the
S&P Small Cap 600 Index was $916 million as of June 30, 2006. Over time, the
largest market capitalization of the companies included in the S&P Small Cap
600 Index will change. As it does, the size of the companies in which each
Fund invests may change.


     For International Small Cap Fund, a small cap company shall be defined as
above until September 30, 2006, thereafter, a small cap company is one whose
market capitalization is less than $5 billion at the time of investment.
Under normal market conditions, International Small Cap Fund invests at least
80% of its net assets (plus any borrowings for investment purposes) in stocks
of small cap companies. International Small Cap Fund will notify shareholders
at least 60 days prior to changing its 80% policy of investing in small cap
companies.


SECURITIES OF NON-U.S. ISSUERS

     International Fund and International Small Cap Fund invest primarily in
securities of non-U.S. issuers, Global Fund typically invests between 25-75% of
its total assets in securities of non-U.S. issuers and the other Funds each may
invest up to 25% of their assets 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

                                        5


example, if the dollar falls in value relative to the Japanese yen, the dollar
value of a yen-denominated stock held in the portfolio will rise even though the
price of the stock remains unchanged. Conversely, if the dollar rises in value
relative to the yen, the dollar value of the yen-denominated stock will fall.
See discussion of transaction hedging and portfolio hedging under "Currency
Exchange Transactions."

     You should understand and consider carefully the risks involved in
international investing. Investing in securities of non-U.S. issuers, which are
generally denominated in foreign currencies, and utilization of forward foreign
currency exchange contracts involve certain considerations comprising both risks
and opportunities not typically associated with investing in U.S. securities.
These considerations include: fluctuations in exchange rates of foreign
currencies; possible imposition of exchange control regulation or currency
restrictions that would prevent cash from being brought back to the United
States; less public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers, and issuers of
securities; different accounting, auditing and financial reporting standards;
different settlement periods and trading practices; less liquidity and
frequently greater price volatility; imposition of foreign taxes; and sometimes
less advantageous legal, operational and financial protections applicable to
foreign subcustodial arrangements.

     Although the Funds try to invest in companies located in countries having
stable political environments, there is the possibility of expropriation of
assets, confiscatory taxation, seizure or nationalization of foreign bank
deposits or other assets, establishment of exchange controls, the adoption of
foreign government restrictions, or other political, social or diplomatic
developments that could adversely affect investment in these countries.

     PRIVATIZATIONS. Some governments have been engaged in programs of selling
part or all of their stakes in government owned or controlled enterprises
("privatizations"). The Adviser believes that privatizations may offer
opportunities for significant capital appreciation, and intends to invest assets
of International Fund, International Small Cap Fund and Global Fund in
privatizations in appropriate circumstances. In certain of those markets, the
ability of foreign entities such as International Fund, International Small Cap
Fund and Global Fund to participate in privatizations may be limited by local
law, and/or the terms on which such Funds may be permitted to participate may be
less advantageous than those afforded local investors. There can be no assurance
that governments will continue to sell companies currently owned or controlled
by them or that privatization programs will be successful.

     EMERGING MARKETS. Investments in emerging markets securities include
special risks in addition to those generally associated with foreign investing.
Many investments in emerging markets can be considered speculative, and the
value of those investments can be more volatile than in more developed foreign
markets. This difference reflects the greater uncertainties of investing in less
established markets and economies. Emerging markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have not kept pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when a portion of the assets is
uninvested and no return is earned thereon. The inability to make intended
security purchases due to settlement problems could cause a Fund to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to a Fund
due to subsequent declines in the value of those securities or, if a Fund has
entered into a contract to sell a security, in possible liability to the
purchaser. Costs associated with transactions in emerging markets securities are
typically higher than costs associated with transactions in U.S. securities.
Such transactions also involve additional costs for the purchase or sale of
foreign currency.

     Certain foreign markets (including emerging markets) may require
governmental approval for the repatriation of investment income, capital or the
proceeds of sales of securities by foreign investors. In addition, if a
deterioration occurs in an emerging market's balance of payments or for other
reasons, a country could impose temporary restrictions on foreign capital
remittances. A Fund could be adversely affected by delays in, or a refusal to
grant, required governmental approval for repatriation of capital, as well as by
the application to the Fund of any restrictions on investments.

     The risk also exists that an emergency situation may arise in one or more
emerging markets. As a result, trading of securities may cease or may be
substantially curtailed and prices for a Fund's securities in such markets may
not be readily available. A Fund may suspend redemption of its shares for any
period during which an emergency exists, as determined by the Securities and
Exchange Commission (the "SEC"). Accordingly, if a Fund believes that
appropriate circumstances exist, it will promptly apply to the SEC for a
determination that such an

                                        6


emergency is present. During the period commencing from a Fund's identification
of such condition until the date of the SEC action, that Fund's securities in
the affected markets will be valued at fair value determined in good faith by or
under the direction of the Trust's board of trustees.

     Income from securities held by a Fund could be reduced by taxes withheld
from that income, or other taxes that may be imposed by the emerging market
countries in which the Fund invests. Net asset value of a Fund may also be
affected by changes in the rates or methods of taxation applicable to the Fund
or to entities in which the Fund has invested. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain emerging market
countries. In an attempt to control inflation, certain emerging market countries
have imposed wage and price controls. Of these countries, some, in recent years,
have begun to control inflation through prudent economic policies.

     Emerging market governmental issuers are among the largest debtors to
commercial banks, foreign governments, international financial organizations and
other financial institutions. Certain emerging market governmental issuers have
not been able to make payments of interest or principal on debt obligations as
those payments have come due. Obligations arising from past restructuring
agreements may affect the economic performance and political and social
stability of those issuers.

     Governments of many emerging market countries have exercised and continue
to exercise substantial influence over many aspects of the private sector
through ownership or control of many companies. The future actions of those
governments could have a significant effect on economic conditions in emerging
markets, which in turn, may adversely affect companies in the private sector,
general market conditions and prices and yields of certain of the securities in
a Fund's portfolio. Expropriation, confiscatory taxation, nationalization,
political, economic and social instability have occurred throughout the history
of certain emerging market countries and could adversely affect Fund assets
should any of those conditions recur.

     CURRENCY EXCHANGE TRANSACTIONS. Each Fund may enter into currency exchange
transactions either on a spot (I.E., cash) basis at the spot rate for purchasing
or selling currency prevailing in the foreign exchange market or through a
forward currency exchange contract ("forward contract"). A forward contract is
an agreement to purchase or sell a specified currency at a specified future date
(or within a specified time period) and price set at the time of the contract.
Forward contracts are usually entered into with banks, foreign exchange dealers
or broker-dealers, are not exchange-traded and are usually for less than one
year, but may be renewed.

     Forward currency transactions may involve currencies of the different
countries in which a Fund may invest, and serve as hedges against possible
variations in the exchange rate between these currencies. A Fund's currency
transactions are limited to transaction hedging and portfolio hedging involving
either specific transactions or actual or anticipated portfolio positions.
Transaction hedging is the purchase or sale of a forward contract with respect
to specific receivables or payables of a Fund accruing in connection with the
purchase or sale of portfolio securities. Portfolio hedging is the use of a
forward contract with respect to an actual or anticipated portfolio security
position denominated or quoted in a particular currency. When a Fund owns or
anticipates owning securities in countries whose currencies are linked, the Fund
may aggregate such positions as to the currency hedged.

     If a Fund enters into a forward contract hedging an anticipated or actual
holding of portfolio securities, liquid assets of the Fund, having a value at
least as great as the amount of the excess, if any, of the Fund's commitment
under the forward contract over the value of the portfolio position being
hedged, will be segregated on the books of the Fund and held by the Fund's
custodian and marked to market daily, while the contract is outstanding.

     At the maturity of a forward contract to deliver a particular currency, a
Fund may sell the portfolio security related to such contract and make delivery
of the currency received from the sale, or it may retain the security and either
purchase the currency on the spot market or terminate its contractual obligation
to deliver the currency by entering into an offsetting contract with the same
currency trader for the purchase on the same maturity date of the same amount of
the currency.

     It is impossible to forecast precisely the market value of a portfolio
security being hedged with a forward currency contract. Accordingly, at the
maturity of a contract it may be necessary for a Fund to purchase additional
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less

                                        7


than the amount of currency the Fund is obligated to deliver under the forward
contract and if a decision is made to sell the security and make delivery of the
currency. Conversely, it may be necessary to sell on the spot market some of the
currency received upon the sale of the portfolio security if the sale proceeds
exceed the amount of currency the Fund is obligated to deliver.

     If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between the Fund's
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the current market price.

     Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in currency exchange transactions varies with such factors as the
currency involved, the length of the contract period, and prevailing market
conditions. Since currency exchange transactions are usually conducted on a
principal basis, no fees or commissions are involved.

DEBT SECURITIES

     Each Fund may invest in debt securities, including lower-rated securities
(I.E., securities rated BB or lower by Standard & Poor's, a division of the
McGraw-Hill Companies ("S&P"), or Ba or lower by Moody's Investor Services, Inc.
("Moody's"), commonly called "junk bonds") and securities that are not rated.
There are no restrictions as to the ratings of debt securities acquired by a
Fund or the portion of a Fund's assets that may be invested in debt securities
in a particular ratings category, except that each of International Fund and
International Small Cap Fund will not invest more than 10% of its respective
total assets in securities rated below investment grade, Equity and Income Fund
will not invest more than 20% of its total assets in such securities, and each
of the other Funds will not invest more than 25% of its total assets in such
securities.

     Securities rated BBB or Baa are considered to be medium grade and to have
speculative characteristics. Lower-rated debt securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in medium- and lower-quality debt securities involves
greater investment risk, including the possibility of issuer default or
bankruptcy. An economic downturn could severely disrupt the market for such
securities and adversely affect the value of such securities. In addition,
lower-quality bonds are less sensitive to interest rate changes than
higher-quality instruments and generally are more sensitive to adverse economic
changes or individual corporate developments. During a period of adverse
economic changes, including a period of rising interest rates, issuers of such
bonds may experience difficulty in making their principal and interest payments.

     Medium- and lower-quality debt securities may be less marketable than
higher-quality debt securities because the market for them is less broad. The
market for unrated debt securities is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely to
increase significantly, and a Fund may have greater difficulty selling its
portfolio securities. See "Investing with The Oakmark Funds - Share Price" in
the prospectus. The market value of those securities and their liquidity may be
affected by adverse publicity and investor perceptions.

     A description of the characteristics of bonds in each ratings category is
included in Appendix A to this statement of additional information.

                                        8


WHEN-ISSUED, DELAYED-DELIVERY AND OTHER SECURITIES

     Each Fund may purchase securities on a when-issued or delayed-delivery
basis. Although the payment and interest terms of these securities are
established at the time a Fund enters into the commitment, the securities may be
delivered and paid for a month or more after the date of purchase, when their
value may have changed. A Fund makes such commitments only with the intention of
actually acquiring the securities, but may sell the securities before settlement
date if the Adviser deems it advisable for investment reasons. A Fund may
utilize spot and forward foreign currency exchange transactions to reduce the
risk inherent in fluctuations in the exchange rate between one currency and
another when securities are purchased or sold on a when-issued or
delayed-delivery basis.

     At the time a Fund enters into a binding obligation to purchase securities
on a when-issued basis, liquid assets of the Fund having a value at least as
great as the purchase price of the securities to be purchased will be segregated
on the books of the Fund and held by the custodian throughout the period of the
obligation. The use of these investment strategies, as well as any borrowing by
a Fund, may increase net asset value fluctuation.

     A Fund may also enter into a contract with a third party that provides for
the sale of securities held by the Fund at a set price, with a contingent right
for the Fund to receive additional proceeds from the purchaser upon the
occurrence of designated future events, such as a tender offer for the
securities of the subject company by the purchaser, and satisfaction of any
applicable conditions. Under such an arrangement, the amount of contingent
proceeds that the Fund will receive from the purchaser, if any, will generally
not be determinable at the time such securities are sold. The Fund's rights
under such an arrangement will not be secured and the Fund may not receive the
contingent payment if the purchaser does not have the resources to make the
payment. The Fund's rights under such an arrangement also generally will be
illiquid and subject to the limitations on ownership of illiquid securities.

GOVERNMENT-SPONSORED ENTITY SECURITIES

     Each Fund may invest in government-sponsored entity securities, which are
securities issued by entities such as the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association and the Federal Home Loan
Banks, among others. Although such an issuer may be chartered or sponsored by an
Act of Congress, its securities are neither issued nor guaranteed by the United
States Treasury.

INFLATION-INDEXED SECURITIES.

     Each Fund may invest in inflation-indexed debt securities issued by
governments, their agencies or instrumentalities or corporations. The
principal amount of such a security is periodically adjusted according to
changes in the rate of inflation as measured by the consumer price index
("CPI"). The interest rate is fixed at issuance as a percentage of the
principal amount as so adjusted from time to time. If the CPI declines, the
principal amount of the security will be reduced and, consequently, the
amount of interest payable on the security will also be reduced. Conversely,
the principal amount and the amount of interest will increase if the CPI
adjustment is positive. Any increase in the principal amount of an
inflation-indexed debt security is taxable currently as ordinary income, even
though the investor does not receive the principal until maturity.

     In the case of U.S. Treasury inflation-indexed debt securities, repayment
of the principal upon maturity (as adjusted for inflation) is guaranteed.
However, the current market value of this type of security is not guaranteed and
will fluctuate.

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

                                        9


the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell. Restricted securities will be priced at
fair value as determined in good faith by or under the direction of the board of
trustees.

     Notwithstanding the above, each Fund may purchase securities that, although
privately placed, are eligible for purchase and sale under Rule 144A under the
1933 Act. This rule permits certain qualified institutional buyers, such as the
Funds, to trade in privately placed securities even though such securities are
not registered under the 1933 Act. The Adviser, under the supervision of the
board of trustees, may consider whether securities purchased under Rule 144A are
liquid and thus not subject to the Fund's restriction of investing no more than
15% of its assets in illiquid securities. (See restriction 13 under "Investment
Restrictions.") A determination of whether a Rule 144A security is liquid or not
is a question of fact. In making this determination the Adviser will consider
the trading markets for the specific security, taking into account the
unregistered nature of a Rule 144A security. In addition, the Adviser could
consider the (1) frequency of trades and quotes, (2) number of dealers and
potential purchasers, (3) dealer undertakings to make a market, (4) and the
nature of the security and of market place trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A securities would be monitored and, if as a
result of changed conditions, it is determined that a Rule 144A security is no
longer liquid, the Fund's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that the Fund does not
invest more than 15% of its assets in illiquid securities.

     Investing in Rule 144A securities could have the effect of increasing the
amount of a Fund's assets invested in illiquid securities if qualified
institutional buyers are unwilling to purchase such securities.

PRIVATE PLACEMENTS

     Each Fund may acquire securities in private placements. Because an active
trading market may not exist for such securities, the sale of such securities
may be subject to delay and additional costs. No Fund will purchase such a
security if more than 15% of the value of such Fund's net assets would be
invested in illiquid securities.

SHORT SALES

     Each Fund may make short sales of securities if (a) the Fund owns at least
an equal amount of such securities, or of securities that are convertible or
exchangeable, or anticipated to be convertible or exchangeable, into at least an
equal amount of such securities with no restriction other than the payment of
additional consideration or (b) immediately after such a short sale, the
aggregate value of all securities that the Fund is short (excluding the value of
securities sold short against-the-box, as defined below) does not exceed 5% of
the value of the Fund's net assets, and the Fund covers such short sales as
described in the following paragraph.

     A short sale against-the-box involves the sale of a security with respect
to which the Fund already owns or has the right to acquire an equivalent
security in kind and amount, or securities that are convertible or exchangeable,
or anticipated to be convertible or exchangeable, into such securities with no
restriction other than the payment of additional consideration.

     In a short sale, a Fund does not deliver from its portfolio the securities
sold and does not receive immediately the proceeds from the short sale. Instead,
the Fund borrows the securities sold short from a broker-dealer through which
the short sale is executed, and the broker-dealer delivers such securities, on
behalf of the Fund, to the purchaser of such securities. Such broker-dealer is
entitled to retain the proceeds from the short sale until the Fund delivers to
such broker-dealer the securities sold short. In addition, the Fund is required
to pay to the broker-dealer the amount of any dividends paid on shares sold
short. Finally, in order to cover its short positions, the Fund must deposit and
continuously maintain in a separate account with the Fund's custodian either (1)
an equivalent amount of the securities sold short or securities convertible into
or exchangeable for such securities without the payment of additional
consideration or (2) cash, U.S. government securities or other liquid securities
having a value equal to the excess of (a) the market value of the securities
sold short over (b) the value of any cash, U.S. government securities or other
liquid securities deposited as collateral with the broker in connection with the
short sale. A Fund is said to have a short position in the securities sold until
it delivers to the broker-dealer the securities sold, at which time the Fund
receives the proceeds of the sale. A Fund may close out a short position by
purchasing on the open market and delivering to the broker-dealer an equal
amount of the securities sold short, rather than by delivering portfolio
securities.

                                       10


     Short sales may protect a Fund against the risk of losses in the value of
its portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding loss in the
short position. The extent to which such gains or losses are offset will depend
upon the amount of securities sold short relative to the amount the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the conversion premium.

     Short sale transactions involve certain risks. If the price of the security
sold short increases between the time of the short sale and the time a Fund
replaces the borrowed security, the Fund will incur a loss and if the price
declines during this period, the Fund will realize a short-term capital gain.
Any realized short-term capital gain will be decreased, and any incurred loss
increased, by the amount of transaction costs and any premium, dividend or
interest which the Fund may have to pay in connection with such short sale.
Certain provisions of the Internal Revenue Code may limit the degree to which a
Fund is able to enter into short sales. There is no limitation on the amount of
each Fund's assets that, in the aggregate, may be deposited as collateral for
the obligation to replace securities borrowed to effect short sales and
allocated to segregated accounts in connection with short sales.

LENDING OF PORTFOLIO SECURITIES

     Each Fund except Oakmark Fund may lend its portfolio securities to
broker-dealers and banks to the extent indicated in restriction 7 under
"Investment Restrictions." Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current basis in an
amount at least equal to the market value of the securities loaned by a Fund.
The Fund would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and would also receive an
additional return that may be in the form of a fixed fee or a percentage of the
earnings on the collateral. The Fund would have the right to call the loan and
obtain the securities loaned at any time on notice of not more than five
business days. In the event of bankruptcy or other default of the borrower, the
Fund could experience delays in liquidating the loan collateral or recovering
the loaned securities and incur expenses related to enforcing its rights. There
could also be a decline in the value of the collateral or in the value of the
securities loaned while the Fund seeks to enforce its rights thereto and the
Fund could experience subnormal levels of income and lack of access to income
during this period. In addition, the Fund may not exercise proxy voting rights
for a secuity that is on loan.

FOREIGN INVESTMENT COMPANIES

     Certain markets are closed in whole or in part to direct equity investments
by foreigners. A Fund may be able to invest in such markets solely or primarily
through foreign government-approved or authorized investment vehicles, which may
include other investment companies. A Fund may also invest in other investment
companies that invest in foreign securities. As a shareholder in an investment
company, a Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time the
Fund would continue to pay its own management fees and other expenses. In
addition, investing through such vehicles may be subject to limitation under the
1940 Act. Under the 1940 Act, a Fund may invest up to 10% of its assets in
shares of investment companies and up to 5% of its assets in any one investment
company, as long as the Fund does not own more than 3% of the voting stock of
any one investment company. The Funds do not intend to invest in such vehicles
or funds unless, in the judgment of the Adviser, the potential benefits of the
investment justify the payment of any applicable fee, premium or sales charge.

OPTIONS

     Each Fund may purchase and sell both call options and put options on
securities. An option on a security is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option at a specified exercise price at any time during the term of the option.
The writer of an option on an individual security has the obligation upon
exercise of a call option to deliver the underlying security upon payment of the
exercise price or upon exercise of a put option to pay the exercise price upon
delivery of the underlying security.

     A Fund will not write any call option or put option unless the option is
covered and immediately thereafter the aggregate market value of all portfolio
securities or currencies required to cover such options written by the Fund
would not exceed 15% of its net assets. In the case of a call option, the option
is covered if the Fund owns (a) the securities underlying the option, (b) other
securities with respect to which the Fund anticipates receiving the

                                       11


underlying securities as a dividend or distribution or upon a conversion or
exchange and liquid assets held by the Fund having a value at least equal to the
value of such underlying securities are segregated on the books of the Fund's
custodian or (c) an absolute and immediate right to acquire the underlying
security without additional consideration (or, if additional consideration is
required, liquid assets held by the Fund having a value at least equal to that
amount are segregated on the books of the Fund's custodian) upon conversion or
exchange of other securities held in its portfolio. In the case of a put option,
the option is covered if assets having a value at least equal to the exercise
price of the option are segregated on the books of the Fund's custodian on a
daily basis. For purposes of this restriction, the aggregate market value of all
portfolio securities or currencies required to cover such options written by the
Fund is the aggregate value of all securities held to cover call options written
plus the value of all liquid assets required to be so segregated in connection
with call and put options written.

     If an option written by a Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by a Fund expires, the Fund realizes a capital loss equal to the
premium paid.

     Prior to the earlier of exercise or expiration, the writer may close out
the option by an offsetting purchase or sale of an option of the same series
(type, exchange, underlying security or index, exercise price and expiration).
There can be no assurance, however, that a closing purchase or sale transaction
can be effected when a Fund desires.

     If a Fund closes out an option it has written, it will realize a capital
gain from a closing purchase transaction if the cost of the closing option is
less than the premium received from writing the option, or, if it is more, the
Fund will realize a capital loss. If the premium received from a closing sale
transaction is more than the premium paid to purchase the option, the Fund will
realize a capital gain or, if it is less, the Fund will realize a capital loss.
The principal factors affecting the market value of a put or a call option
include supply and demand, interest rates, the current market price of the
underlying security in relation to the exercise price of the option, the
volatility of the underlying security or index, and the time remaining until the
expiration date.

     A put or call option purchased by a Fund is an asset of the Fund, valued
initially at the premium paid for the option. The premium received for an option
written by a Fund is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at the last
reported sale price, or, if no sale price is available, at the mean between the
last bid and asked prices, or if the mean is not available, at the most recent
bid quotation.

     There are several risks associated with transactions in options. For
example, there are significant differences between the securities markets and
the options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when, and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.

     There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If a Fund was unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option would expire and become worthless. If
a Fund was unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until the option
expired. As the writer of a covered call option on a security, a Fund foregoes,
during the option's life, the opportunity to profit from increases in the market
value of the security covering the call option above the sum of the premium and
the exercise price of the call. If trading were suspended in an option purchased
or written by a Fund, that Fund would not able to close out the option. If
restrictions on exercise were imposed, the Fund might be unable to exercise an
option it has purchased.

TEMPORARY DEFENSIVE INVESTMENT STRATEGIES

     Each Fund has the flexibility to respond promptly to changes in market,
economic, political, or other unusual 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 obligations, money market instruments or repurchase
agreements. Most or all of the defensive investments of International Fund,
International Small Cap Fund

                                       12


and Global Fund will be securities of U.S. issuers denominated in dollars. It
is impossible to predict whether, when or for how long a Fund will employ a
defensive strategy.

     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 and
may invest any portion of its assets in money market instruments.

                                       13



                               INVESTMENT ADVISER

     The Adviser furnishes continuing investment supervision to the Funds and is
responsible for overall management of the Funds' business affairs pursuant to
investment advisory agreements relating to the respective Funds (the
"Agreements"). The Adviser furnishes office space, equipment and personnel to
the Funds, and assumes the expenses of printing and distributing the Funds'
prospectus, profiles and reports to prospective investors.

     Each Fund pays the cost of its custodial, stock transfer, dividend
disbursing, bookkeeping, audit and legal services. Each Fund also pays other
expenses such as the cost of proxy solicitations, printing and distributing
notices and copies of the prospectus and shareholder reports furnished to
existing shareholders, taxes, insurance premiums, the expenses of maintaining
the registration of that Fund's shares under federal and state securities laws
and the fees of trustees not affiliated with the Adviser.

     For its services as investment adviser, the Adviser receives from each Fund
a monthly fee based on that Fund's net assets at the end of the preceding month.
Basing the fee on net assets at the end of the preceding month has the effect of
(i) delaying the impact of changes in assets on the amount of the fee and (ii)
in the first year of a fund's operation, reducing the amount of the aggregate
fee by providing for no fee in the first month of operation. The annual rates of
fees as a percentage of each Fund's net assets are as follows:



          FUND                                                           FEE
- ------------------------              ---------------------------------------------------------------------
                                   
        Oakmark                       1.00% up to $2  billion;  0.90%  from $2-3  billion;  0.80% from $3-5
                                      billion;  0.75% from $5-7.5 billion;  0.70% from $7.5-10 billion; and
                                      0.65% over $10 billion

        Select                        1.00% up to $1 billion; 0.95% from $1-1.5
                                      billion; 0.90% from $1.5-2 billion; 0.85%
                                      from $2-2.5 billion; 0.80% from $2.5-5
                                      billion; 0.75% from $5-10 billion; and
                                      0.725% over $10 billion

        Equity                        and Income 0.75% up to $5 billion; 0.70%
                                      from $5-7.5 billion; 0.675% from $7.5-10
                                      billion; 0.65% from $10-12.5 billion; and
                                      0.60% over $12.5 billion

        Global                        1.00% up to $2 billion;  0.95% from $2-4  billion;  and 0.90% over $4
                                      billion

        International                 1.00% up to $2 billion; 0.95% from $2-3
                                      billion; 0.85% from $3-5 billion; 0.825%
                                      from $5-7.5 billion; and 0.815% over $7.5
                                      billion

        International Small Cap       1.25% up to $500  million;  1.10% from $500 million to $1.5  billion;
                                      and 1.05% over $1.5 billion


                                       14


     The table below shows gross advisory fees paid by the Funds and any expense
reimbursements by the Adviser to them, which are described in the prospectus.


                          TYPE OF           YEAR ENDED               YEAR ENDED             YEAR ENDED
          FUND            PAYMENT       SEPTEMBER 30, 2005       SEPTEMBER 30, 2004     SEPTEMBER 30, 2003
       ---------------------------------------------------------------------------------------------------
                                                                               
       Oakmark          Advisory fee        $ 59,184,688            $ 50,652,178           $ 37,074,474

       Select           Advisory fee          49,906,327              48,070,958             38,938,068

       Equity and
        Income          Advisory fee          63,670,347              46,997,810             23,468,519

       Global           Advisory fee          16,115,537              12,245,761              2,982,092

       International    Advisory fee          47,254,405              36,337,644             19,015,386

       International
        Small Cap       Advisory fee          10,432,050               7,616,526              4,626,713


     The Agreement for each Fund was for an initial term that expired on October
31, 2001. Each Agreement continues 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 60 days' written notice, and automatically
terminates in the event of its assignment as defined in the 1940 Act.

     The Adviser is a limited partnership managed by its general partner, Harris
Associates, Inc. ("HAI"), whose directors are David G. Herro, Robert M. Levy,
John R. Raitt, Kristi L. Rowsell, G. Neal Ryland and Peter S. Voss. Mr. Raitt is
the president and chief executive officer of HAI. HAI is a wholly-owned
subsidiary of IXIS Asset Management North America, L.P. ("IXIS AMNA"). IXIS AMNA
owns 99.67% of the limited partnership interests in the Adviser and, through its
wholly-owned subsidiary, IXIS Asset Management Holdings, LLC ("IXIS Holdings"),
all of the outstanding shares of HAI. IXIS AMNA is a limited partnership that
owns investment management and distribution and service entities.

     IXIS AMNA is part of IXIS Asset Management Group, an international asset
management group based in Paris, France. IXIS Asset Management Group is
ultimately owned principally, directly or indirectly, by three large affiliated
French financial services entities: the Caisse des Depots et Consignations
("CDC"), a public sector financial institution created by the French government
in 1816; the Caisse Nationale des Caisses d'Epargne ("CNC"), a financial
institution owned by CDC and by French regional savings banks known as the
Caisses d'Epargne; and CNP Assurances, a large French life insurance company.
The registered address of CNC is 5, rue Masseran, 75007 Paris, France. The
registered office of CDC is 56, rue de Lille, 75007 Paris, France. The
registered address of CNP Assurances is 4, place Raoul Dautry, 75015 Paris,
France.

     The Adviser has contractually agreed to reimburse Class I Shares of each
Fund to the extent that the annual ordinary operating expenses of that class
exceed the following percentages of the average net assets of Class I Shares:
1.50% in the case of Oakmark Fund or Select Fund; 1.00% in the case of Equity
and Income Fund; 1.75% in the case of Global Fund; and 2.00% in the case of
International Fund and International Small Cap Fund. The Adviser has also
contractually agreed to reimburse Class II Shares of each Fund to the extent
that the annual ordinary operating expenses of that class exceed the following
percentages of the average net assets of Class II Shares: Oakmark Fund or Select
Fund,1.75% (1.50% + .25%); Equity and Income Fund, 1.25% (1.00% + .25%); Global
Fund, 2.00% (1.75% + .25%); and International Fund and International Small Cap
Fund, 2.25% (2.00% + .25%). Each such agreement is effective through January 31,
2007.

     For the purpose of determining the expense of a share class of a Fund,
the pro rata portion of the Fund's expenses attributable to a share class of
that Fund is calculated daily. If a Fund is entitled to any reduction in fees
or expenses, reimbursement is made monthly.

                                       15


LITIGATION INVOLVING THE ADVISER

     In August 2004, a complaint entitled JONES, ET AL. V. HARRIS ASSOCIATES
L.P. was filed in the U.S. District Court for the Western District of Missouri
against the Adviser alleging, among other things, that the Adviser breached its
fiduciary duty by charging excessive management fees to Oakmark Fund, Equity and
Income Fund, and Global Fund in violation of Section 36(b) of the 1940 Act. The
case was subsequently transferred to the U.S. District Court for the Northern
District of Illinois. Plaintiffs seek unspecified damages and other relief,
including a return by the Adviser of management fees paid by those Funds. The
Adviser believes these allegations are without merit and intends to defend them
vigorously.

                               PORTFOLIO MANAGERS

PORTFOLIO MANAGERS' MANAGEMENT OF OTHER ACCOUNTS

         Many of the Portfolio Managers of the Funds managed other accounts in
addition to managing one or more of the Funds. The following table sets forth
the number and total assets of the mutual funds and other accounts managed by
each Portfolio Manager as of September 30, 2005, unless otherwise indicated.
None of these accounts has an advisory fee based on the performance of the
account.




                                                   REGISTERED INVESTMENT
                          NAME OF PORTFOLIO            COMPANIES              OTHER POOLED INVESTMENT
              FUND              MANAGER         (OTHER THAN OAKMARK FUNDS)            VEHICLES                  OTHER ACCOUNTS
              ----              -------         --------------------------            --------                  --------------
                                                                                                         (HARRIS ASSOCIATES L.P.
                                                                                                             SEPARATELY MANAGED
                                                                                                                 ACCOUNTS)+
                                                                                              
                                               Number                       Number                       Number
                                                of                            of                           of
                                              Accounts     Total Assets     Accounts     Total Assets    Accounts    Total Assets
Oakmark                   William Nygren      4         $ 2,027,724,772     0                       0    0                       0
                          Kevin Grant         0                       0     0                       0    0                       0
Select                    William Nygren      4         $ 2,027,724,772     0                       0    0                       0
                          Henry Berghoef      1         $    44,685,611     0                       0    0                       0
Equity and Income         Clyde McGregor      0                       0     2         $   585,352,167    156       $ 1,196,309,590
                          Edward Studzinski   0                       0     0                       0    0                       0
Global                    Clyde McGregor      0                       0     2         $   585,352,167    156       $ 1,196,309,590
                          Robert Taylor++     2         $ 1,488,577,084     4         $ 4,123,558,910    8         $ 1,139,598,060
International             David Herro         6         $ 2,416,117,310     4         $ 5,028,545,910    11        $ 2,211,724,289
International Small Cap   David Herro         6         $ 2,416,117,310     4         $ 5,028,545,910    11        $ 2,211,724,289
                          Chad Clark          5         $ 1,221,843,608     2         $ 1,460,536,262    6         $ 1,344,479,565

- ----------
+ Personal investment accounts of portfolio managers and their families are not
reflected.

++ The individual assumed co-portfolio manager responsibility on October 1,
2005, therefore information for this individual is as of that date.


MATERIAL CONFLICTS OF INTEREST

     Conflicts of interest may arise in the allocation of investment
opportunities and the allocation of aggregated orders among the Funds and the
other accounts managed by the portfolio managers. A portfolio manager
potentially could give favorable treatment to some accounts for a variety of
reasons, including favoring larger accounts, accounts that have a different
advisory fee arrangement (including any accounts that pay performance-based
fees), accounts of affiliated companies, or accounts in which the portfolio
manager has a personal investment. With respect to the allocation of investment
opportunities, the Adviser makes decisions to recommend, purchase, sell or hold
securities for all of its client accounts, including the Funds, based on the
specific investment objectives, guidelines, restrictions and circumstances of
each account. It is the Adviser's policy to allocate investment opportunities to
each account, including the Funds, over a period of time on a fair and equitable
basis relative to its other accounts. With respect to the allocation of
aggregated orders, each account that participates in an aggregated order will
participate at the average share price, and where the order has not been
completely filled, each institutional account, including the Funds, will
generally participate on a pro rata basis. For more information on how the
Adviser aggregates orders and allocates securities among the accounts
participating in those orders, see the section "Portfolio Transactions" in this
Statement of Additional Information.

                                       16


     The Adviser has compliance policies and procedures in place that it
believes are reasonably designed to mitigate these conflicts. However, there is
no guarantee that such procedures will detect each and every situation in which
an actual or potential conflict may arise.

PORTFOLIO MANAGERS COMPENSATION STRUCTURE

     Each of the Funds' portfolio managers is compensated solely by the Adviser.
Compensation for each of the portfolio managers is based on the Adviser's
assessment of the individual's long-term contribution to the investment success
of the firm and is structured as follows:

     (1)  Base salary. The base salary is a fixed amount, and each portfolio
          manager receives the same base salary.

     (2)  Participation in a discretionary bonus pool. A discretionary bonus
          pool for each of the Adviser's domestic and international investment
          groups is allocated among the senior level employees of the group and
          is paid annually.

     (3)  Participation in a long-term compensation plan that provides current
          compensation to certain key employees of the Adviser and deferred
          compensation to both current and former key employees. The
          compensation plan consists of bonus units awarded to participants that
          vest and are paid out over a period of time.

     The determination of the amount of each portfolio manager's
participation in the discretionary bonus pool and the long-term compensation
plan is based on a variety of qualitative and quantitative factors. The
factor given the most significant weight is the subjective assessment of the
individual's contribution to the overall investment results of the Adviser's
domestic or international investment group, whether as a portfolio manager, a
research analyst, or both.

     The quantitative factors considered in evaluating the contribution of
a portfolio manager include the performance of the portfolios managed by that
individual relative to benchmarks, peers and other portfolio managers, as well
as the assets under management in the Funds and other accounts managed by the
portfolio manager. The portfolio manager's compensation is not based solely on
an evaluation of the performance of the Funds or the amount of Fund assets.
Performance is measured in a number of ways, including by Fund, by other
accounts and by strategy, and is compared to one or more of the following
benchmarks: S&P500, Russell Mid-Cap Value, Russell 1000 Value, Lipper Balanced,
60/40 S&P/Lehman (60% S&P500 and 40% Lehman Bond Index), Morgan Stanley Capital
International EAFE (Europe, Australasia Far East) Index, and the Adviser's
approved lists of stocks, depending on whether the portfolio manager manages
accounts in a particular strategy for which a given benchmark would be
applicable. Performance is measured over one and three-year periods and on a
pre-tax and after-tax basis to the extent such information is available.

     If a portfolio manager also serves as a research analyst, then his
compensation is also based on the contribution made to the Adviser in that role.
The specific quantitative and qualitative factors considered in evaluating a
research analyst's contributions include, among other things, new investment
ideas, the performance of investment ideas covered by the analyst during the
current year as well as over longer-term periods, the portfolio impact of the
analyst's investment ideas, other contributions to the research process, and an
assessment of the quality of analytical work. In addition, an individual's other
contributions to the Adviser, such as a role in investment thought leadership
and management of the firm, are taken into account in the overall compensation
process.

                                       17


PORTFOLIO MANAGERS' OWNERSHIP OF FUND SHARES

     The following table sets forth the dollar range of shares of the Funds
beneficially owned by the Portfolio Manager of each Fund as of September 30,
2005.



              FUND                          NAME OF PORTFOLIO MANAGER             DOLLAR RANGE OF FUND HOLDINGS
              ----                          -------------------------             -----------------------------
                                                                            
              Oakmark                       William Nygren                        Over $1,000,000
                                            Kevin Grant                           Over $1,000,000
              Select                        William Nygren                        Over $1,000,000
                                            Henry Berghoef                        Over $1,000,000
              Equity and Income             Clyde McGregor                        Over $1,000,000
                                            Edward Studzinski                     $500,001-$1,000,000*
              Global                        Clyde McGregor                        Over $1,000,000
                                            Robert Taylor                         Over $1,000,000
              International                 David Herro                           Over $1,000,000
              International Small Cap       David Herro                           Over $1,000,000
                                            Chad Clark                            $100,001-$500,000**



                  * As of December 31, 2005, Mr. Studzinski beneficially owned
                    over $1,000,000 of the Fund's shares.

                  **As of December 31, 2005, Mr. Clark beneficially owned over
                    $1,000,000 of the Fund's shares.

                                 CODES OF ETHICS

     The Trust, the Adviser and the Funds' distributor, Harris Associates
Securities L.P. ("HASLP"), establish standards and procedures for the detection
and prevention of certain conflicts of interest, including activities by which
persons having knowledge of the investments and investment intentions of the
Trust might take advantage of that knowledge for their own benefit. The Trust,
the Adviser and HASLP have adopted codes of ethics to meet those concerns and
legal requirements. Although the codes do not prohibit employees who have
knowledge of the investments and investment intentions of any of the Funds from
engaging in personal securities investing, they regulate such investing by those
employees.

                      PROXY VOTING POLICIES AND PROCEDURES

     The Adviser, as part of its management responsibilities, is responsible for
exercising all voting rights with respect to portfolio securities of the Funds
in accordance with the Adviser's proxy voting policies and procedures.

     The Adviser exercises voting rights solely with the goal of serving the
best interests of its clients (including the Funds) as shareholders of a
company. In determining how to vote on any proposal, the Adviser's Proxy
Committee considers the proposal's expected impact on shareholder value and does
not consider any benefit to the Adviser or its employees or affiliates.

     The Adviser considers the reputation, experience and competence of a
company's management when it evaluates the merits of investing in a particular
company, and it invests in companies in which it believes management goals and
shareholder goals are aligned. Therefore, on most issues, the Adviser casts
votes in accordance with management's recommendations. However, when the Adviser
believes that management's position on a particular issue is not in the best
interests of the Funds and their shareholders, the Adviser will vote contrary to
management's recommendation.

                                       18


PROXY VOTING GUIDELINES

     The Adviser's Proxy Committee has established a number of proxy voting
guidelines on various issues of concern to investors. The Proxy Committee
normally votes proxies in accordance with those guidelines unless it determines
that it is in the best economic interests of a Fund and its shareholders to vote
contrary to the guidelines. The voting guidelines generally address issues
related to boards of directors, auditors, equity based compensation plans, and
shareholder rights.

     -    With respect to a company's board of directors, the Adviser believes
          that there should be a majority of independent directors and that
          audit, compensation and nominating committees should consist solely of
          independent directors, and it will normally vote in favor of proposals
          that ensure such independence.

     -    With respect to auditors, the Adviser believes that the relationship
          between a public company and its auditors should be limited primarily
          to the audit engagement, and it will normally vote in favor of
          proposals to prohibit or limit fees paid to auditors for any services
          other than auditing and closely-related activities that do not raise
          any appearance of impaired independence.

     -    With respect to equity based compensation plans, the Adviser believes
          that appropriately designed plans approved by a company's shareholders
          can be an effective way to align the interests of long-term
          shareholders and the interests of management, employees and directors.
          However, the Adviser will normally vote against plans that
          substantially dilute its clients' ownership interest in the company or
          provide participants with excessive awards. The Adviser will also
          normally vote in favor of proposals to require the expensing of
          options.

     -    With respect to shareholder rights, the Adviser believes that all
          shareholders of a company should have an equal voice and that barriers
          that limit the ability of shareholders to effect corporate change and
          to realize the full value of their investment are not desirable.
          Therefore, the Adviser will normally vote against proposals for
          supermajority voting rights, against the issuance of poison pill
          preferred shares, and against proposals for different classes of stock
          with different voting rights.

     -    With respect to "social responsibility" issues, the Adviser believes
          that matters related to a company's day-to-day business operations are
          primarily the responsibility of management. The Adviser is focused on
          maximizing long-term shareholder value and will normally vote against
          shareholder proposals requesting that a company disclose or change
          certain business practices unless it believes the proposal would have
          a substantial positive economic impact on the company.

     The proxy voting committee may determine not to vote a Fund's proxy if it
has concluded that the costs of or disadvantages resulting from voting outweigh
the economic benefits of voting. For example, in some non-U.S. jurisdictions,
the sale of securities voted may be prohibited for some period of time, usually
between the record and meeting dates ("share blocking"), and the Adviser may
determine that the loss of investment flexibility resulting from share blocking
outweighs the benefit to be gained by voting.

CONFLICTS OF INTEREST

     The Proxy Committee, in consultation with the Adviser's legal and
compliance departments, will monitor and resolve any potential conflicts of
interest with respect to proxy voting. A conflict of interest might exist, for
example, when an issuer who is soliciting proxy votes also has a client
relationship with the Adviser, when a client of the Adviser is involved in a
proxy contest (such as a corporate director), or when one of the Adviser's
employees has a personal interest in a proxy matter. When a conflict of interest
arises, in order to ensure that proxies are voted solely in the best interest of
the Funds and their shareholders, the Adviser will vote in accordance with
either its written guidelines or the recommendation of an independent voting
service. If the Adviser believes that voting in accordance with the guidelines
or the recommendation of the voting service would not be in the collective best
interests of the Funds and their shareholders, the Executive Committee of the
Board of Trustees of the Funds will determine how shares should be voted.

HOW TO OBTAIN THE OAKMARK FUNDS' PROXY VOTING RECORD

     No later than August 31 of each year, information regarding how the
Adviser, on behalf of the Funds, voted proxies relating to the Funds' portfolio
securities for the twelve months ended the preceding June 30 will be

                                       19


available through a link on the Funds' website at www.oakmark.com and on the
SEC's website at http://www.sec.gov.

                              TRUSTEES AND OFFICERS

     The board of trustees has overall responsibility for the Funds' operations.
Each of the trustees and officers serves until the election and qualification of
his or her successor, or until he or she sooner dies, resigns, or is removed or
disqualified. The retirement age for trustees is 72. Information regarding the
trustees and officers of the Trust including their principal business activities
during the past five years is set forth below:

              TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE TRUST



                                                                                                     NUMBER OF
                                                          YEAR FIRST            PRINCIPAL            PORTFOLIOS    OTHER
                                                          ELECTED OR          OCCUPATION(S)          IN FUND       DIRECTORSHIPS
  NAME, ADDRESS+ AND AGE AT      POSITION(S) WITH        APPOINTED TO          HELD DURING           OVERSEEN      HELD BY
       AUGUST 1, 2006                  TRUST            CURRENT OFFICE      PAST FIVE YEARS#         BY TRUSTEE    TRUSTEE
      -----------------                -----            --------------      ----------------         ----------    -------
                                                                                                          
MICHAEL J. FRIDUSS, 63                Trustee                1995         Principal, MJ                    6              None
                                                                          Friduss &
                                                                          Associates, Inc.
                                                                          (telecommunications
                                                                          consultants)

THOMAS H. HAYDEN, 55                  Trustee                1995         President,                      6              None
                                                                          Greenhouse
                                                                          Communications
                                                                          (advertising
                                                                          agency), since 2004;
                                                                          Executive Vice
                                                                          President, Campbell
                                                                          Mithun, (advertising
                                                                          and marketing
                                                                          communication
                                                                          agency), prior
                                                                          thereto

CHRISTINE M. MAKI, 45                 Trustee                1995         Vice President--Tax,            6              None
                                                                          Hyatt Corporation
                                                                          (hotel management)

ALLAN J. REICH, 58                    Trustee                1993         Partner, Seyfarth               6              None
                                                                          Shaw LLP (law firm),
                                                                          since 2003; Vice
                                                                          Chairman of D'Ancona
                                                                          & Pflaum LLC (law
                                                                          firm), prior thereto

STEVEN S. ROGERS, 49                  Trustee                2006         Clinical Professor              6           Director,
                                                                          of Finance &                                Duquesne
                                                                          Management, Kellogg                         Light
                                                                          Graduate School of                          (electric
                                                                          Management,                                 utility
                                                                          Northwestern                                company);
                                                                          University since                            Director, SC
                                                                          1995;                                       Johnson Wax
                                                                          Entrepreneur-in-Residence,                  (manufacturer
                                                                          Ewing Marion                                of household
                                                                          Kauffman Foundation                         cleaning,
                                                                          since 1994                                  personal care
                                                                                                                      and
                                                                                                                      insecticide
                                                                                                                      products);
                                                                                                                      Director,
                                                                                                                      SuperValu,
                                                                                                                      Inc.
                                                                                                                      (supermarket
                                                                                                                      retailer and
                                                                                                                      food
                                                                                                                      distributor);
                                                                                                                      Director,
                                                                                                                      AMCORE
                                                                                                                      Financial,
                                                                                                                      Inc. (bank
                                                                                                                      holding
                                                                                                                      company)
                                                                                                                      since 2005;
                                                                                                                      and Director,
                                                                                                                      W.S. Darley &
                                                                                                                      Co.

MARVIN R. ROTTER, 59                  Trustee                1995         Retired since 2004;             6              None
                                                                          Senior Advisor to
                                                                          Chief Executive
                                                                          Officer, AXA
                                                                          Advisors, LLC
                                                                          (formerly named
                                                                          Rotter & Associates)
                                                                          prior thereto

BURTON W. RUDER, 62                   Trustee                1995         President, The                  6              None
                                                                          Academy Financial
                                                                          Group (venture
                                                                          capital investment
                                                                          and transaction
                                                                          financing firm);
                                                                          Manager, Cedar Green
                                                                          Associates (real
                                                                          estate management
                                                                          firm)


                                       20




                                                                                                     NUMBER OF
                                                          YEAR FIRST            PRINCIPAL            PORTFOLIOS    OTHER
                                                          ELECTED OR          OCCUPATION(S)          IN FUND       DIRECTORSHIPS
  NAME, ADDRESS+ AND AGE AT      POSITION(S) WITH        APPOINTED TO          HELD DURING           OVERSEEN      HELD BY
        AUGUST 1, 2006                 TRUST            CURRENT OFFICE      PAST FIVE YEARS#         BY TRUSTEE    TRUSTEE
      -----------------                -----            --------------      ----------------         ----------    -------
                                                                                                    
GARY N. WILNER, M.D., 66            Trustee and              1993         Retired, since 2004;            6        Director, North
                                  Chairman of the                         Senior Attending                         American
                                 Board of Trustees                        Physician, Evanston                      Scientific,
                                                                          Hospital; Medical                        Inc. (developer
                                                                          Director -                               of
                                                                          Cardiopulmonary                          radioisotopic
                                                                          Wellness Program,                        products for
                                                                          Evanston Hospital                        the treatment
                                                                          Corporation, prior                       and diagnosis
                                                                          thereto                                  of disease)



                TRUSTEES WHO ARE INTERESTED PERSONS OF THE TRUST




                                                                                                     NUMBER OF
                                                          YEAR FIRST            PRINCIPAL            PORTFOLIOS    OTHER
                                                          ELECTED OR          OCCUPATION(S)          IN FUND       DIRECTORSHIPS
  NAME, ADDRESS+ AND AGE AT      POSITION(S) WITH        APPOINTED TO          HELD DURING           OVERSEEN      HELD BY
         AUGUST 1, 2006                TRUST            CURRENT OFFICE      PAST FIVE YEARS#         BY TRUSTEE    TRUSTEE
      -----------------                -----            --------------      ----------------         ----------    -------
                                                                                                    
PETER S. VOSS*, 59                    Trustee                1995         Chairman and Chief               6       Chairman, AEW
                                                                          Executive Officer,                       Real Estate
                                                                          IXIS Asset                               Income Fund
                                                                          Management Group;                        (closed-end
                                                                          President and Chief                      investment
                                                                          Executive Officer,                       company);
                                                                          IXIS Asset                               Chairman and
                                                                          Management North                         Chief
                                                                          America, L.P.,                           Executive
                                                                          formerly named CDC                       Officer, IXIS
                                                                          IXIS Asset                               Advisor Funds
                                                                          Management North                         (open-end
                                                                          America, L.P.                            investment
                                                                          (investment                              company - 14
                                                                          management); Member                      portfolios)
                                                                          of the Supervisory
                                                                          Board, IXIS Asset
                                                                          Management;
                                                                          Director, Harris
                                                                          Associates, Inc.
                                                                          ("HAI")

JOHN R. RAITT*, 51                  Trustee and              2003         President and Chief              6       None
                                     President                            Executive Officer,
                                                                          HAI, Harris
                                                                          Associates L.P.
                                                                          ("HALP") and Harris
                                                                          Associates
                                                                          Securities L.P.
                                                                          ("HASLP") since
                                                                          2003; Chief
                                                                          Operating Officer,
                                                                          HALP 2001- 2002;
                                                                          Director of
                                                                          Research, HALP,
                                                                          prior thereto


                                       21


                           OTHER OFFICERS OF THE TRUST



                                                          YEAR FIRST            PRINCIPAL
                                                          ELECTED OR          OCCUPATION(S)
  NAME, ADDRESS+ AND AGE AT       POSITION(S) WITH       APPOINTED TO          HELD DURING
        AUGUST 1, 2006                TRUST            CURRENT OFFICE      PAST FIVE YEARS#
      -----------------                -----            --------------      ----------------
                                                                 
ROBERT M. LEVY, 56                 Executive Vice            2004         Chairman, HAI; Chief
                                     President                            Investment Officer
                                                                          of Domestic Equity,
                                                                          HALP, since 2001;
                                                                          President and Chief
                                                                          Executive Officer,
                                                                          HAI, HALP and HASLP,
                                                                          1997 - 2002;
                                                                          Portfolio Manager,
                                                                          HALP

HENRY R. BERGHOEF, 56            Vice President and          2000         Director of Domestic
                                 Portfolio Manager                        Research, HALP,
                                (The Oakmark Select                       since 2003;
                                       Fund)                              Associate Director
                                                                          of Research, 2001 -
                                                                          2002; Portfolio
                                                                          Manager and Analyst,
                                                                          HALP

CHAD M. CLARK, 34                Vice President and          2005         Portfolio Manager,
                                 Portfolio Manager                        HALP, since 2001;
                                    (The Oakmark                          International
                                International Small                       Analyst, HALP
                                     Cap Fund)

KEVIN G. GRANT, 42               Vice President and          2000         Portfolio Manager
                                 Portfolio Manager                        and Analyst, HALP
                                 (The Oakmark Fund)

DAVID G. HERRO, 45               Vice President and          1992         Chief Investment
                                 Portfolio Manager                        Officer of
                                    (The Oakmark                          International
                                 International Fund                       Equity, since 2003;
                                  and The Oakmark                         Portfolio Manager
                                International Small                       and Analyst, HALP
                                     Cap Fund)

JOHN J. KANE, 35                     Treasurer               2005         Manager - Mutual
                                                                          Fund and
                                                                          Institutional
                                                                          Services, HALP

CLYDE S. MCGREGOR, 53            Vice President and          1995         Portfolio Manager,
                                 Portfolio Manager                        HALP
                                (The Oakmark Equity
                                and Income Fund and
                                 The Oakmark Global
                                       Fund)

WILLIAM C. NYGREN, 47            Vice President and          1996         Portfolio Manager
                                 Portfolio Manager                        and Analyst, HALP
                                 (The Oakmark Fund
                                  and The Oakmark
                                    Select Fund)

VINEETA D. RAKETICH, 35            Vice President            2003         Manager,
                                                                          International
                                                                          Operations and
                                                                          Client Relations,
                                                                          HALP, since 2003;
                                                                          Supervisor, Mutual
                                                                          Fund and
                                                                          Institutional
                                                                          Services, HALP,
                                                                          prior thereto


                                       22





                                                          YEAR FIRST            PRINCIPAL
                                                          ELECTED OR          OCCUPATION(S)
  NAME, ADDRESS+ AND AGE AT       POSITION(S) WITH       APPOINTED TO          HELD DURING
        AUGUST 1, 2006                 TRUST            CURRENT OFFICE      PAST FIVE YEARS#
      -----------------                -----            --------------      ----------------
                                                                 
JANET L. REALI, 55               Vice President and          2001         Vice President,
                                     Secretary                            General Counsel and
                                                                          Secretary, HAI, HALP
                                                                          and HASLP

RICHARD J. GORMAN, 40             Chief Compliance           2006         Chief Compliance Officer
                                   Officer, Vice                          of the Trust, since 2006;
                                   President and                          Senior Special
                                Assistant Secretary                       Counsel, Invesment
                                                                          Management Regulation,
                                                                          United States
                                                                          Securities and
                                                                          Exchange Commission,
                                                                          prior thereto

KRISTI L. ROWSELL, 39             Vice President,            2005         Director, Chief
                                Principal Financial                       Financial Officer
                                      Officer                             and Treasurer, HAI;
                                                                          Chief Financial
                                                                          Officer, HALP and
                                                                          HASLP, prior thereto

EDWARD A. STUDZINSKI, 56         Vice President and          2000         Portfolio Manager
                                 Portfolio Manager                        and Analyst, HALP
                                (The Oakmark Equity
                                  and Income Fund)

ROBERT A. TAYLOR, 34             Vice President and          2005         Director of
                                 Portfolio Manager                        International
                                                                          Research, since
                                (The Oakmark Global                       2004; Portfolio
                                       Fund)                              Manager and Analyst,
                                                                          HALP

CHRISTOPHER P. WRIGHT, 32          Vice President            2005         Director of Mutual
                                                                          Fund Operations,
                                                                          HALP, since 2004;
                                                                          Assistant Director
                                                                          of Mutual Fund
                                                                          Operations, HALP,
                                                                          2002-2004; Manager
                                                                          of Mutual Fund
                                                                          Operations, HALP,
                                                                          prior thereto.


- -----------
+    Unless otherwise noted, the business address of each officer and trustee
     listed in the table is Two North LaSalle Street, Suite 500, Chicago,
     Illinois 60602-3790.

#    As used in this table, "HALP," "HAI" and "HASLP" refer to the Adviser, the
     general partner of the Adviser, and the Fund's distributor, respectively.

*    Mr. Voss and Mr. Raitt are trustees who are "interested persons" of the
     Trust as defined in the 1940 Act because Mr. Voss is an officer of the
     Adviser's parent company, Mr. Raitt is an officer of the Adviser, and both
     Mr. Raitt and Mr. Voss are on the board of HAI.


     The Adviser, on customary terms, manages investment accounts controlled by
Mr. Reich.


     The committees of the board of trustees including an executive committee,
audit committee, governance committee and management contracts committee. The
following table identifies the members of those committees, the function of each
committee, and the number of meetings of each committee held during the fiscal
year ended September 30, 2005.
                                       23




                                                NUMBER OF MEETINGS
                     MEMBERS OF                 DURING FISCAL YEAR ENDED
COMMITTEE            COMMITTEE*                 SEPTEMBER 30, 2005          PRINCIPAL FUNCTIONS OF COMMITTEE
- ---------            ---------                  ------------------          --------------------------------
                                                                   
EXECUTIVE COMMITTEE  Gary N. Wilner, M.D.**                1***             The executive committee generally has the
                     Burton W. Ruder                                        authority to exercise the powers of the board
                     Peter S. Voss                                          during intervals between meetings.

AUDIT COMMITTEE      Allan J. Reich*                       5                The principal responsibilities of the audit
                     Michael J. Friduss                                     committee include the following:
                     Thomas H. Hayden                                       - to oversee the accounting and financial
                     Christine M. Maki                                        reporting policies and practices of the
                     Gary N. Wilner, M.D.                                     Trust, its internal controls and, as
                                                                              appropriate, the internal controls of
                                                                              certain service providers;
                                                                            - to oversee the quality and objectivity of
                                                                              the financial statements of the Funds and
                                                                              the independent audits thereof;
                                                                            - to approve the selection of the independent
                                                                              registered public accounting firm of the
                                                                              Funds;
                                                                            - to act as liaison between the independent
                                                                              auditors of the Funds and the full board of
                                                                              trustees; and
                                                                            - to oversee the portfolio transaction
                                                                              policies and practices of the Funds.

GOVERNANCE           Michael J. Friduss**                  7                The governance committee makes recommendations
COMMITTEE            Allan J. Reich                                         to the board regarding board committees and
                     Marvin R. Rotter                                       committee assignments, the composition of the
                     Burton W. Ruder                                        board, candidates for election as
                     Gary N. Wilner, M.D.                                   non-interested trustees and compensation of
                                                                            non-interested trustees, and oversees the
                                                                            process for evaluating the functioning of the
                                                                            board.

MANAGEMENT           Thomas H. Hayden**                    8                The committee on management contracts is
CONTRACTS COMMITTEE  Christine M. Maki                                      responsible for reviewing in the first
                     Marvin R. Rotter                                       instance, and making recommendations to the
                     Burton W. Ruder                                        board regarding, investment advisory agreements
                     Gary N. Wilner, M.D.                                   and any other agreements relating to the
                                                                            management or administration of any Fund.

PRICING COMMITTEE    John R. Raitt                         5                The committee is authorized, on behalf of the
                     Janet L. Reali                                         board, to determine, in accordance with the
                     Kristi L. Rowsell                                      valuation procedures established by the board,
                     Vineeta D. Raketich                                    fair valuations of portfolio securities.
                     John J. Kane


- ----------

*   Steven Rogers was elected as a trustee on April 26, 2006 and was appointed
    to the audit and management contracts committees.
**  Chair of the committee.
*** The executive committee took action by unanimous written consent one time
during the fiscal year ended September 30, 2005.


                                       24


     The following table shows the compensation paid by the Trust for the fiscal
year ended September 30, 2005 to each trustee who was not an "interested person"
of the Trust:




                                                             AGGREGATE                          AVERAGE
                                                           COMPENSATION                      COMPENSATION
           NAME OF TRUSTEE*                               FROM THE TRUST**                     PER FUND
           ---------------                                ---------------                      --------
                                                                                          
      Michael J. Friduss                                      142,342                           23,724
      Thomas H. Hayden                                        134,000                           22,333
      Christine M. Maki                                       132,500                           22,083
      Allan J. Reich                                          138,250                           23,042
      Marvin R. Rotter                                        141,000                           23,500
      Burton W. Ruder                                         145,000                           24,167
      Gary N. Wilner, M.D.                                    183,158                           30,526


*  Steven Rogers was elected as a trustee on April 26, 2006 and thus does not
   appear in this chart. Victor A. Morgenstern resigned as a trustee effective
   December 31, 2004. Mr. Morgenstern received $86,000 in aggregate
   compensation from the Trust for the last calendar quarter of 2004.

** Each Fund is a series of the Trust and the Trust constitutes the entire fund
   complex. Aggregate compensation includes compensation that was deferred
   pursuant to the deferred compensation plan as described below. As of
   September 30, 2005, the total amounts accrued under the plan were $600,867
   for Mr. Friduss, $571,463 for Mr. Hayden, $626,070 for Ms. Maki, $714,459 for
   Mr. Rotter, $389,285 for Mr. Ruder and $676,320 for Dr. Wilner.

     The Trust has a deferred compensation plan (the "Plan") that permits any
trustee who is not an "interested person" of the Trust to elect to defer receipt
of all or a portion of his or her compensation as a trustee for two or more
years. The deferred compensation of a participating trustee is credited to a
book reserve account of the Trust when the compensation would otherwise have
been paid to the trustee. The value of the trustee's deferral account at any
time is equal to the value that the account would have had if contributions to
the account had been invested and reinvested in shares of one or more of the
Oakmark Funds or the Goldman Sachs Institutional Liquid Assets Government
Portfolio as designated by the trustee. At the time for commencing distributions
from a trustee's deferral account, which is no later than when the trustee
ceases to be a member of the board of trustees, the trustee may elect to receive
distributions in a lump sum or over a period of five years. Each Fund's
obligation to make distributions under the Plan is a general obligation of that
Fund. No Fund will be liable for any other Fund's obligations to make
distributions under the Plan.

     Trustees who are "interested persons" of the Trust, as well as the officers
of the Trust, are compensated by the Adviser and not by the Trust. The Trust
does not provide any pension or retirement benefits to its trustees.

     The following table shows the value of shares of each Fund "beneficially"
owned (within the meaning of that term as defined in rule 16a-1(a)(2) under the
Securities Exchange Act of 1934) by each trustee (within dollar ranges) as of
December 30, 2005.




                                                       EQUITY AND                            INTERNATIONAL    INTERNATIONAL
      TRUSTEE*         OAKMARK FUND    SELECT FUND     INCOME FUND        GLOBAL FUND            FUND         SMALL CAP FUND
      -------          ------------    -----------     -----------        -----------            ----         --------------
                                                                                               
MICHAEL J. FRIDUSS     Over 100,000    Over 100,000   Over 100,000        Over 100,000        Over 100,000        Over 100,000

THOMAS H. HAYDEN      10,001-50,000    Over 100,000   10,001-50,000      50,001-100,000           None                None

CHRISTINE M. MAKI     50,001-100,000   Over 100,000   10,001-50,000       Over 100,000       10,001-50,000       10,001-50,000

JOHN R. RAITT          Over 100,000    Over 100,000   Over 100,000        Over 100,000        Over 100,000        Over 100,000

ALLAN J. REICH         Over 100,000    Over 100,000   Over 100,000       50,001-100,000      50,001-100,000      10,001-50,000


                                       25




                                                       EQUITY AND                            INTERNATIONAL    INTERNATIONAL
      TRUSTEE*          OAKMARK FUND    SELECT FUND     INCOME FUND        GLOBAL FUND            FUND         SMALL CAP FUND
      -------          ------------    -----------     -----------        -----------            ----         --------------
                                                                                               
MARVIN R. ROTTER           None            None           None                None            Over 100,000            None

BURTON W. RUDER            None       10,001-50,000   10,001-50,000       Over 100,000        Over 100,000        Over 100,000

PETER S. VOSS          Over 100,000    Over 100,000  50,001-100,000           None            Over 100,000        Over 100,000

GARY N.               50,001-100,000   Over 100,000     1-10,000          Over 100,000        Over 100,000       50,001-100,000
WILNER, M.D.

*Steven Rogers was elected as a trustee on April 26, 2006 and thus does not
appear in this chart.



     At December 31, 2005 the trustees and officers as a group owned
beneficially less than 1% of the outstanding Class II shares of each Fund and
Class I shares of Oakmark Fund, Equity and Income Fund, Global Fund and
International Fund and the following percentages of the outstanding shares of
each of the other Funds: Select, 1.4, and International Small Cap, 1.4.

                             PRINCIPAL SHAREHOLDERS

     The only persons known by the Trust to own of record or "beneficially"
(within the meaning of that term as defined in rule 13d-3 under the Securities
Exchange Act of 1934) 5% or more of the outstanding shares of any Fund as of
December 30, 2005 were:




                                                                                                  PERCENTAGE OF OUTSTANDING
                   NAME AND ADDRESS                               FUND AND CLASS                         SHARES HELD
                   ----------------                               --------------                         -----------
                                                                                                       
Charles Schwab & Co. Inc. (1)                          Oakmark, Class I                                      28.13%
101 Montgomery Street                                  International Fund, Class I                           35.77
San Francisco, CA 94104-4122                           Select, Class I                                       25.28
                                                       Equity and Income, Class I                            31.88
                                                       International Small Cap, Class I                      45.18
                                                       Global, Class I                                       37.87

Great West Life Annuity Insurance Co. (1)              International, Class II                               41.79%
8515 East Orchard Road
Greenwood Village, CO 80111-5002

Hartford Life Insurance Company                        Equity and Income, Class II                           5.27%
P.O. Box 2999
Hartford, CT 06104-2999

Merrill Lynch Pierce Fenner & Smith Inc. (1)           Oakmark, Class II                                     12.76%
4800 Deer Lake Drive E., 3rd Floor                     International Small Cap, Class II                     42.32
Jacksonville, FL 32246-6484                            Select, Class II                                      50.68
                                                       Equity and Income, Class II                           31.45
                                                       International, Class II                               33.28
                                                       Global, Class II                                       6.32

MetLife Retirement Plan Group Gap TTEE (1)             Oakmark, Class II                                     14.14%
2 Montgomery Street
Jersey City, NJ 07302-3802

National Financial Services Corp. (1)                  International Small Cap, Class II                     45.22%
200 Liberty Street
New York, NY 10281-1003

                                       26




                                                                                                  PERCENTAGE OF OUTSTANDING
                   NAME AND ADDRESS                               FUND AND CLASS                         SHARES HELD
                   ----------------                               --------------                         -----------
                                                                                                       
National Financial Services Corp. (1)                  Oakmark, Class I                                      23.65%
P.O. Box 3908, 5th Floor                               International, Class I                                10.02
Church Street Station                                  Select, Class I                                       31.12
New York, NY 10008-3908                                Equity and Income, Class I                            26.40
                                                       International Small Cap, Class I                      18.67
                                                       Global, Class I                                       22.92

Nationwide Trust Company, FSB                          Oakmark, Class II                                     23.01%
P.O. Box 182029                                        Equity and Income, Class II                           21.31
Columbus, OH 43218-2029                                International, Class II                                9.65
                                                       Global, Class II                                      91.12

Prudential Investment Management Service (1)           International Class I                                  6.41%
194 Wood Ave. S., Ste. 201
Iselin, NJ 08830-2710

Prudential Retirement Insurance and Annuity Company    Select, Class II                                      11.90%
280 Trumbull Street
Hartford, CT 06103-3509

Reliance Trust Co TTEE (1)                             Oakmark, Class II                                     33.07%
FBO MetLife Retirement Plans Group                     Equity and Income, Class II                            6.28
21 Montgomery Street
Jersey City, NJ 07302

Reliance Trust Co. (1)                                 Select, Class II                                      21.74%
FBO MetLife Defined Contribution Group
2 Montgomery Street, 3rd Floor
Jersey City, NJ 07302-3802

Trustlynx & Co.                                        International Small Cap, Class II                     12.46%
P.O. Box 173736
Denver, CO 80217-3736

Union Bank Trust Nominee (1)                           Equity and Income, Class II                            6.59%
FBO SelectBenefit Ominbus
P.O. Box 85484
San Diego, CA 92186-5484

Wachovia Bank (1)                                      Oakmark, Class II                                      6.87%
1525 West Wt Harris Boulevard,                         Equity and Income, Class II                            7.46
Charlotte, NC 28288-0001

- ----------
     (1) Shares are held for accounts of customers.

                         PURCHASING AND REDEEMING SHARES

     Purchases and redemptions are discussed in the Funds' prospectus under the
headings "Investing with The Oakmark Funds," "How to Buy Class I Shares," "How
to Sell Class I Shares" and "Shareholder Services."

NET ASSET VALUE

     The Funds' net asset values are determined only on days on which the New
York Stock Exchange (the "NYSE") is open for trading. The NYSE is regularly
closed on Saturdays and Sundays and on New Year's Day, the third Monday in
January and February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving and Christmas. If one of these holidays falls on a
Saturday or Sunday, the NYSE will be closed on the preceding Friday or the
following Monday, respectively.

                                       27


     The net asset value per Class I Share or per Class II Share of each Fund is
determined by the Trust's custodian. The net asset value of Class I Shares of a
Fund is determined by dividing the value of the assets attributable to Class I
Shares of the Fund, less liabilities attributable to that class, by the number
of Class I Shares outstanding. Similarly, the net asset value of Class II Shares
of a Fund is determined by dividing the value of the assets attributable to
Class II Shares of the Fund, less liabilities attributable to that class, by the
number of Class II Shares outstanding. Domestic securities traded on securities
exchanges are generally valued at the last sale price on the exchange where the
security is principally traded, or lacking a reported sale at the time of
valuation, at the most recent bid quotation. Each over-the-counter security
traded on the NASDAQ National Market System shall be valued at the NASDAQ
Official Closing Price ("NOCP"), or lacking a NOCP at the time of valuation, at
the most recent bid quotation. Other over-the-counter securities 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. The values of securities of
non-U.S. issuers that are traded on an exchange are generally based upon market
quotations which, depending upon local convention or regulation, may be last
sale price, last bid or asked price, the mean between last bid and asked prices,
an official closing price, or may be valued based on a pricing composite. The
market value of exchange-traded securities is determined by using prices
provided by one or more professional pricing services, or, as needed, by
obtaining market quotations from independent broker-dealers. Debt obligations
and money market instruments maturing in more than 60 days from the date of
purchase are valued at the latest bid quotation. Debt obligations and money
market instruments with a maturity of 60 days or less from the date of purchase
are valued on an amortized cost basis. Securities for which quotations are not
available and any other assets are valued at a fair value as determined in good
faith by or under the direction of the board of trustees. All assets and
liabilities initially expressed in foreign currencies are converted into U.S.
dollars at the mean of the bid and offer prices of such currencies against U.S.
dollars quoted by any major bank or dealer. If such quotations are not
available, the rate of exchange will be determined in accordance with policies
established in good faith by or under the direction of the board of trustees.

     Trading in the portfolio securities of International Fund, International
Small Cap Fund or Global Fund (and of any other Fund, to the extent it invests
in securities of non-U.S. issuers) takes place in various foreign markets on
days (such as Saturday) when the NYSE is not open and the Funds do not calculate
their net asset value. In addition, trading in the Fund's portfolio securities
may not occur on days when the NYSE is not 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. Even on days on which both the foreign markets
and the NYSE are open, several hours may have passed between the time when
trading in a foreign market closes and the NYSE closes and the Funds calculate
their net asset values.

     Computation of net asset value (and the sale and redemption of a Fund's
shares) may be suspended or postponed during any period when (a) trading on the
NYSE is restricted, as determined by the SEC, or that exchange is closed for
other than customary weekend and holiday closings, (b) the SEC has by order
permitted such suspension, or (c) an emergency, as determined by the SEC, exists
making disposal of portfolio securities or valuation of the net assets of a Fund
not reasonably practicable. A Fund may value a security at a fair value if it
appears that the valuation of the security has been materially affected by
events occurring after the close of the primary market or exchange on which the
security is traded but before the time as of which the net asset value is
calculated. The Trust has retained a third party service provider to assist in
determining estimates of fair values for foreign securities. That service
utilizes statistical data based on historical performance of securities, markets
and other data in developing factors used to estimate a fair value. When fair
value pricing is employed, the value of a portfolio security used by a Fund to
calculate its NAV may differ from quoted or published prices for the same
security. Estimates of fair value utilized by the Funds as described above may
differ from the value realized on the sale of those securities and the
differences may be material to the net asset value of the applicable Fund.

     The Trust has adopted a policy regarding the correction of any error in the
computation of NAV in accordance with guidance provided by the SEC. When an
error is discovered, the difference between the originally computed (erroneous)
NAV and the correct NAV is calculated. If the difference is equal to or less
than one cent per share, the error is deemed immaterial and no action is taken.
If the difference is greater than one cent per share, the following actions are
taken:



                     AMOUNT OF DIFFERENCE                                  ACTION TAKEN
                     --------------------                                  ------------
                                                         
   LESS THAN 1/2 of 1% of the originally computed NAV       The Fund determines whether it has


                                       28


                                                         
                                                            incurred a loss or a benefit. If the Fund
                                                            has either paid excessive redemption proceeds or
                                                            received insufficient subscription proceeds
                                                            ("fund loss"), the party responsible for the
                                                            error is expected to reimburse the Fund for the
                                                            amount of the loss. If the Fund has received a
                                                            benefit from the error, no action is taken.

 = or GREATER  THAN 1/2 of 1% of the originally             If any shareholder has sustained a loss exceeding
 computed NAV                                               $10, the Fund or the party responsible for the
                                                            error is expected to pay the shareholder any
                                                            additional redemption proceeds owed and either
                                                            refund excess subscription monies paid or credit
                                                            the shareholder's account with additional shares
                                                            as of the date of the error.

                                                            Either the responsible party or the individual
                                                            shareholders who experienced a benefit as a
                                                            result of the error are expected to reimburse the
                                                            Fund for any fund losses attributable to them.



SHARES PURCHASED THROUGH INTERMEDIARIES

     Class I Shares of any of the Funds may be purchased through certain
financial service companies, such as broker-dealers, banks, retirement plan
service providers and retirement plan sponsors, who are agents of the Funds for
the limited purpose of receiving and transmitting instructions for the purchase
or sale of fund shares ("Intermediaries"). Class II Shares of each Fund are
offered only for purchase through certain retirement plans, such as 401(k), and
profit sharing plans. To purchase Class II Shares, you must do so through an
Intermediary.

     An Intermediary accepts purchase and sale orders as an authorized agent of
the Funds pursuant to a written agreement. Any purchase or sale is made at the
net asset value next determined after receipt and acceptance of the order by the
Intermediary. Federal securities laws require Intermediaries to segregate any
orders received on a business day after the close of regular session trading on
the NYSE and transmit those orders separately for execution at the net asset
value next determined after that business day. The Funds have no ability to
verify compliance by the Intermediaries with that requirement.

     For services provided by an Intermediary with respect to Fund shares held
through that Intermediary for its customers, the Intermediary may charge a fee
of up to 0.40% of the average annual value of such shares. Each Fund may pay a
portion of those fees for sub-transfer agency and shareholder servicing
services, not to exceed the estimated fees that the Fund would have paid to its
own transfer agent if those shares were registered directly in the customers'
names on the books of the Fund's transfer agent. The balance of those fees is
paid by the Adviser. Intermediaries may be paid from assets attributable to
Class II shares of a Fund an additional service fee, at the rate of up to 0.25%
of the average annual value of Class II Shares of the Fund purchased or held
through the Intermediaries, for services associated with the administration of
retirement plans.

     The Trust reserves the right to waive minimum investment requirements for
purchases made through Intermediaries.

REDEMPTION IN KIND

     Each Fund 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 those amounts will
normally be paid in cash, but may be

                                       29


paid wholly or partly by a distribution in kind of marketable securities.
Brokerage costs may be incurred by a shareholder who receives securities and
desires to convert them to cash.

SMALL ACCOUNT FEE AND REDEMPTION POLICY

     Due to the relatively high cost of maintaining small accounts, each Fund
reserves the right to assess an annual fee of $25 on any account or to redeem
all the shares in any account, and send the proceeds to the registered owner of
the account if the account value has been reduced below $1,000 as a result of
redemptions. Prior to redeeming all of the shares in such account, a Fund or its
agent will make a reasonable effort to notify the registered owner if the
account falls below the minimum in order to give the owner 30 days to increase
the account value to $1,000 or more. The agreement and declaration of trust also
authorizes the Trust to redeem shares under certain other circumstances as may
be specified by the board of trustees.

90-DAY REDEMPTION FEE - CLASS I SHARES

     Each Fund imposes a short-term trading fee on redemptions of Class I Shares
held for 90 days or less to offset two types of costs to the Fund caused by
short-term trading: portfolio transaction and market impact costs associated
with erratic redemption activity and administrative costs associated with
processing redemptions. The fee is paid to the Fund and is 2% of the redemption
value and is deducted from either the redemption proceeds or from the balance of
the account. The "first-in, first-out" (FIFO) method is used to determine the
holding period, which means that if you bought shares on different days, the
shares purchased first will be redeemed first for purposes of determining
whether the short-term trading fee applies.

     No Fund imposes a redemption fee on a redemption of:

     -    shares acquired by reinvestment of dividends or distributions of the
          Fund;
     -    shares held in an account of certain retirement plans or profit
          sharing plans or purchased through certain Intermediaries;
     -    shares redeemed pursuant to a systematic withdrawal plan;
     -    shares redeemed pursuant to a required minimum distribution;
     -    shares redeemed from account that has changed registration; or
     -    an account that is closed because the Funds cannot verify the owner's
          identity pursuant to the Funds' customer identification program.

MONEY MARKET EXCHANGE FUND

     The Adviser acts as a Service Organization for the Institutional Liquid
Assets Service Units ("Oakmark Units") of the Government Portfolio of Goldman
Sachs Trust, which Oakmark Units may be purchased directly or by exchanging
shares of a Fund. For its services, the Adviser receives fees at a rate of 0.50%
of the average annual net assets of the portfolio, pursuant to a 12b-1 plan
adopted by the Goldman Sachs Trust.

ANTI-MONEY LAUNDERING COMPLIANCE

     The Funds are required to comply with various anti-money laundering laws
and regulations. Consequently, a Fund may be required to "freeze" the account of
a shareholder if the shareholder appears to be involved in suspicious activity
or if certain account information matches information on government lists of
known terrorists or other suspicious persons, or the Fund may be required to
transfer the account or proceeds of the account to a government agency.

                           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.

                                       30


     The Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Act")
reduced the maximum tax rate on long-term capital gains of noncorporate
investors from 20% to 15%. The Act also reduced to 15% the maximum tax rate on
"qualified dividend income" received by noncorporate shareholders who satisfy
certain holding period requirements. The amount of dividends that may be
eligible for the reduced rate may not exceed the amount of aggregate qualifying
dividends received by that Fund. To the extent a Fund distributes amounts of
dividends, including capital gain dividends, that the Fund determines are
eligible for the reduced rates, it will identify the relevant amounts in its
annual tax information reports to its shareholders. Without further legislative
change, the rate reductions enacted by the Act will lapse, and the previous
rates will be reinstated, for taxable years beginning on or after January 1,
2009.

     You will be advised annually as to the source of distributions for tax
purposes. If you are not subject to tax on your income, you will not be required
to pay tax on these amounts.

     If you realize a loss on sale of Fund shares held for six months or less,
your short-term loss is recharacterized as long-term to the extent of any
long-term capital gain distributions you have received with respect to those
shares.

     A Fund may be required to withhold federal income tax ("backup
withholding") from certain payments to you, generally redemption proceeds and
payments of dividends and distributions. Backup withholding may be required if:

     -    You fail to furnish your properly certified social security or other
          tax identification number;

     -    You fail to certify that your tax identification number is correct or
          that you are not subject to backup withholding due to the
          underreporting of certain income;

     -    You fail to certify that you are a U.S. Person (including a U.S.
          resident alien); or

     -    The IRS informs the Fund that your tax identification number is
          incorrect.

     As modified by the Act, the backup withholding percentage is 28% for
amounts paid through 2010, when the percentage will increase to 31% unless
amended by Congress.

     Those certifications are contained in the application that you complete
when you open your Fund account. Each Fund must promptly pay the IRS all amounts
withheld. Therefore, it usually is not possible for the Funds to reimburse you
for amounts withheld. You may, however, claim the amount withheld as a credit on
your federal income tax return.

INTERNATIONAL FUND AND INTERNATIONAL SMALL CAP FUND

     Dividends and distributions paid by International Fund and International
Small Cap Fund are not eligible for the dividends-received deduction for
corporate shareholders, if as expected, none of such Funds' income consists of
dividends paid by United States corporations. Capital gain distributions paid by
the Funds are never eligible for this deduction.

     Certain foreign currency gains and losses, including the portion of gain or
loss on the sale of debt securities attributable to foreign exchange rate
fluctuations are taxable as ordinary income. If the net effect of these
transactions is a gain, the dividend paid by any of these Funds will be
increased; if the result is a loss, the income dividend paid by any of these
Funds will be decreased.

     Income received by a Fund from sources within various foreign countries
will be subject to foreign income taxes withheld at the source. Under the Code,
if more than 50% of the value of the Fund's total assets at the close of its
taxable year comprise securities issued by foreign corporations, the Fund may
file an election with the Internal Revenue Service to "pass through" to the
Fund's shareholders the amount of foreign income taxes paid by the Fund.
Pursuant to this election, shareholders will be required to: (i) include in
gross income, even though not actually received, their respective pro rata share
of foreign taxes paid by the Fund; (ii) treat their pro rata share of foreign
taxes as paid by them; and (iii) either deduct their pro rata share of foreign
taxes in computing their taxable

                                       31


income, or use it as a foreign tax credit against U.S. income taxes (but not
both). No deduction for foreign taxes may be claimed by a shareholder who does
not itemize deductions.

     International Fund, International Small Cap Fund and Global Fund intend to
meet the requirements of the Code to "pass through" to their shareholders
foreign income taxes paid, but there can be no assurance that they will be able
to do so. Each shareholder will be notified within 60 days after the close of
each taxable year of a Fund, if the foreign taxes paid by the Fund will "pass
through" for that year, and, if so, the amount of each shareholder's pro rata
share (by country) of (i) the foreign taxes paid, and (ii) the Fund's gross
income from foreign sources. Of course, shareholders who are not liable for
federal income taxes, such as retirement plans qualified under Section 401 of
the Code, will not be affected by any such "pass through" of foreign tax
credits.

     The discussion of taxation above is not intended to be a full discussion of
income tax laws and their effect on shareholders. You are encouraged to consult
your own tax advisor. The foregoing information applies to U.S. shareholders.
U.S. citizens residing in a foreign country should consult their tax advisors as
to the tax consequences of ownership of Fund shares.

                                   DISTRIBUTOR

     Shares of the Funds are offered for sale by HASLP without any sales
commissions, 12b-1 fees, or other charges to the Funds or their shareholders.
HASLP is an affiliate of the Adviser. All distribution expenses relating to the
Funds are paid by the Adviser, including the payment or reimbursement of any
expenses incurred by HASLP. The Distribution Agreement will continue in effect
from year to year provided such continuance is approved annually (i) by a
majority of the trustees or by a majority of the outstanding voting securities
of the Funds and (ii) by a majority of the trustees who are not parties to the
Distribution Agreement or interested persons of any such party.

     The Trust has agreed to pay all expenses in connection with registration of
its shares with the SEC and any auditing and filing fees required in compliance
with various state securities laws. The Adviser bears all sales and promotional
expenses, including the cost of prospectuses and other materials used for sales
and promotional purposes by HASLP. HASLP offers the Funds' shares only on a best
efforts basis. HASLP is located at Two North LaSalle Street, Chicago, Illinois
60602-3790.

                          PORTFOLIO HOLDINGS DISCLOSURE

     The Adviser maintains portfolio holdings disclosure policies and
procedures that govern the timing and circumstances of disclosure to
shareholders and third parties of information regarding the portfolio
investments held by a Fund. These portfolio holdings disclosure policies have
been approved by the board of trustees. The board of trustees periodically
reviews these policies and procedures to ensure they adequately protect
shareholders. It is the policy of the Funds and their service providers to
protect the confidentiality of portfolio holdings and to prevent the
selective disclosure of non-public information about each Funds' portfolio
holdings.

     Rating and ranking organizations such as Lipper, Inc. and Morningstar,
Inc. or consultants and/or other financial industry institutions may request
a complete list of portfolio holdings in order to rank or rate a Fund or to
assess the risks of the Fund's portfolio and to produce related performance
attribution statistics. Similarly, an Intermediary may be provided with
portfolio holdings in order to allow the Intermediary to prepare Fund
information for shareholders on a timely basis. The disclosure of portfolio
holdings to such third parties will be subject to a requirement that those
third parties maintain the confidentiality of such information and that the
information be used only for a stated legitimate business purpose other than
for trading. The Funds' Chief Compliance Officer, Chief Executive Officer and
Treasurer are authorized to disclose each Fund's portfolio securities in
accordance with the procedures. Neither the Trust nor the Adviser may receive
compensation or other consideration in connection with the disclosure of
portfolio holdings.

     Disclosure of each Fund's complete holdings is required to be made
quarterly within 60 days of the end of each fiscal quarter in the annual and
semi-annual reports to Fund shareholders and in the quarterly reports on Form
N-Q in the first and third quarters. These reports are available, free of
charge, on the EDGAR database on the SEC's website at www.sec.gov.
                                       32


     Additionally, each Fund, except Select Fund, posts on its website at
www.oakmark.com a complete list of its portfolio holdings within 30 days of
month-end. Also, each Fund, including Select Fund, posts on its website a
complete list of portfolio holdings within 12 business days of fiscal
quarter-end.

                             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.

     In valuing brokerage services, the Adviser makes a judgment as to which
brokers are capable of providing the most favorable net price (not necessarily
the lowest commission) and the best execution in a particular transaction. Best
execution connotes not only general competence and reliability of a broker, but
specific expertise and effort of a broker in overcoming the anticipated
difficulties in fulfilling the requirements of particular transactions, because
the problems of execution and the required skills and effort vary greatly among
transactions.

     Although some transactions involve only brokerage services, many involve
research services as well. In valuing research services, the Adviser makes a
judgment of the usefulness of research and other information provided by a
broker to the Adviser in managing a Fund's investment portfolio. In some cases,
the information, e.g., data or recommendations concerning particular securities,
relates to the specific transaction placed with the broker, but for the greater
part the research consists of a wide variety of information concerning
companies, industries, investment strategy and economic, financial and political
conditions and prospects, useful to the Adviser in advising the Funds.

     The Adviser is the principal source of information and advice to the Funds,
and is responsible for making and initiating the execution of the investment
decisions for each Fund. However, the board of trustees recognizes that it is
important for the Adviser, in performing its responsibilities to the Funds, to
continue to receive and evaluate the broad spectrum of economic and financial
information that many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of the Funds to take into account the
value of the information received for use in advising the Funds. Consequently,
the commission paid to brokers 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.

     Prior to its ceasing portfolio trading operations in June 2005, HASLP
was permitted to 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, had determined that portfolio transactions for a Fund
may be executed through HASLP if, in the judgment of the Adviser, the use of
HASLP was 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 charged 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 had adopted procedures that were
reasonably designed to provide that any commission, fee or other remuneration
paid to HASLP was consistent with the foregoing standard. The Funds did not
effect principal transactions with HASLP. In executing transactions through
HASLP, the Funds were subject to, and complied with, section 17(e) of the
1940 Act and rules thereunder.

     The reasonableness of brokerage commissions paid by the Funds in
relation to transaction and research services received is evaluated by the
staff of the Adviser on an ongoing basis. The general level of brokerage
charges and other aspects of the Funds' portfolio transactions are reviewed
periodically by the board of trustees.

     The following table shows the aggregate brokerage commissions (excluding
the gross underwriting spread on securities purchased in initial public
offerings) paid by each Fund during the periods indicated, as well as the
aggregate commissions paid to affiliated persons of the Trust.

     There were substantial decreases in the aggregate commissions paid by
Oakmark Fund and Global Fund during the 2005 fiscal year resulting primarily
from a general decline in commission rates. There was a substantial increase

                                       33


in the aggregate commissions paid by International Small Cap Fund, resulting
primarily from an increase in the portfolio turnover rate.

     The total commissions paid to affiliated brokers for all of the Funds,
except Select Fund, were lower in fiscal year 2005 compared to 2004 and 2003.
Those commissions were lower primarily because the affiliated broker ceased
trading operations in June 2005 and because the Funds used more direct access
brokers and electronic trading venues at lower commission rates.




                                                      YEAR ENDED                  YEAR ENDED                  YEAR ENDED
                                                  SEPTEMBER 30, 2005          SEPTEMBER 30, 2004          SEPTEMBER 30, 2003
                                                  ------------------          ------------------          ------------------
                                                                                                       
Oakmark Fund
     Aggregate commissions                            $2,549,820                  $5,076,567                    $4,534,892
     Commissions paid to affiliate                     144,892                      188,945                        951,978
     Percentage of aggregate commissions
       paid to affiliate*                               5.68%                        3.72%                          20.9%

Select Fund
     Aggregate commissions                            3,713,661                    3,554,160                     3,748,486
     Commissions paid to affiliate                      59,518                      37,119                         544,621
     Percentage of aggregate commissions
       paid to affiliate*                               1.60%                        1.04%                          14.5%

Equity and Income Fund
     Aggregate commissions                            4,903,984                    5,456,305                     3,773,931
     Commissions paid to affiliate                      41,253                      251,104                        845,629
     Percentage of aggregate commissions
       paid to affiliate*                               0.84%                        4.6%                           22.4%

Global Fund
     Aggregate commissions                            1,102,771                    1,844,307                     1,652,256
     Commissions paid to affiliate                      1,251                       45,850                         171,703
     Percentage of aggregate commissions
       paid to affiliate*                               0.11%                        2.41%                          10.4%

International Fund
     Aggregate commissions                            4,543,752                    5,431,968                     5,497,451
     Commissions paid to affiliate                        --                          --                            --
     Percentage of aggregate commissions
       paid to affiliate*                                 --                          --                            --

International Small Cap Fund
     Aggregate commissions                            1,861,293                    1,086,752                       758,356
     Commissions paid to affiliate                        --                          --                            --
     Percentage of aggregate commissions
       paid to affiliate*                                 --                          --                            --

- ----------
*   The percent of the dollar amount of each Fund's aggregate transactions
    involving the payment of brokerage commissions that were executed through
    the affiliate for each of the periods is shown below:

                                       34



                                            YEAR ENDED               YEAR ENDED                 YEAR ENDED
                   FUND                 SEPTEMBER 30, 2005       SEPTEMBER 30, 2004         SEPTEMBER 30, 2003
                   ----                 ------------------       ------------------         ------------------
                                                                                         
       Oakmark                                4.85%                    4.13%                      21.0%
       Select                                 1.24%                    1.40%                      20.5
       Equity and Income                      0.18%                    1.95%                      18.8
       Global                                 0.27%                    2.78%                      11.0
       International                            --                       --                       10.6
       International Small Cap                  --                       --                        --


     Most options transactions are executed by non-affiliated brokers but are
processed through the affiliate. The affiliate remits the commission on those
transactions to the executing broker and does not retain any portion thereof.
For the fiscal year ended September 30, 2005, no fund paid such commissions.
For the fiscal year ended September 30, 2004, those commission amounts were:
Oakmark Fund, $95,093; Select Fund, $114,297; Equity and Income Fund,
$66,236; Global Fund, $3,000; and the aggregate dollar amounts involved in
those transactions for those respective Funds were: $3,457,070, $3,837,836,
$4,627,960, $158,670. Such commissions are not included in commissions paid
to affiliates.

     During the year ended September 30, 2005, brokers that provided research
products or services to the Adviser were paid the following commissions on
portfolio transactions: Oakmark Fund, $424,410; Select Fund, $644,410; Equity
and Income Fund, $814,964; International Fund, $1,203,111; International Small
Cap Fund, $531,504; Global Fund, $274,830; and the aggregate dollar amounts
involved in those transactions for those respective Funds were: $324,121,376,
$395,924,040, $602,644,046, $531,657,375, $218,552,237, $155,454,787.

     Transactions of the Funds in the over-the-counter market are executed with
primary market makers acting as principal except where it is believed that
better prices and execution may be obtained otherwise.

     When the Adviser believes it desirable, appropriate and feasible to
purchase or sell the same security for a number of client accounts at the same
time, the Adviser may aggregate its clients' orders ("Aggregated Orders"),
including orders on behalf of the Funds, in a way that seeks to obtain more
favorable executions, in terms of the price at which the security is purchased
or sold, the costs of the execution of the orders, and the efficiency of the
processing of the transactions. Each account that participates in an Aggregated
Order will participate at the average share price.

     The trade allocation process takes place on as timely a basis as possible,
i.e. as a client order is completed in full, or, in the case of a partially
executed Aggregated Order, at the market's close when the average price can be
calculated. The trader will aggregate trade orders of different portfolio
managers if the trader believes the Aggregated Order would provide each client
with an opportunity to achieve a more favorable execution.

     In the case of an Aggregated Order that has not been completely filled, the
Adviser's traders determine an average execution price and then allocate
securities among the accounts participating in the order. Institutional
accounts, including the Funds, are generally allocated in proportion to the size
of the order placed for each account (i.e. pro rata).

     Although the Adviser believes that the ability to aggregate orders for
client accounts will in general benefit its clients as a whole over time, in any
particular instance, such aggregation may result in a less favorable price or
execution for a particular client than might have been obtained if the
transaction had been effected on an unaggregated basis.

     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 total portfolio turnover rate of Equity and
Income Fund was much higher in fiscal year 2005 compared to 2004 and 2003,
although the portfolio turnover rate of the equity portion of the portfolio
remained relatively stable during those periods. The increase in total portfolio
turnover resulted from changes in the fixed income portion of the portfolio
driven primarily by a combination of tax trading as well as portfolio
repositioning to lessen the impact of a rising interest rate environment on the
fixed income assets.

                                       35


     The Funds acquired securities of certain regular brokers or dealers, as
defined in Rule 10b-1 of the 1940 Act, during their most recent fiscal year.
As of September 30, 2005, the Funds held securities of the following regular
brokers or dealers having the following aggregate values: Oakmark Fund held
$132,008,000 of Citigroup, Inc.; Equity and Income Fund held $172,608,000 of
Morgan Stanley; and International Fund held $115,507,591 of Credit Suisse
Group.
                              DECLARATION OF TRUST

     The Trust was organized as a Massachusetts business trust on February 1,
1991. The Declaration of Trust disclaims liability of the shareholders, trustees
and officers of the Trust for acts or obligations of the Trust. The Declaration
of Trust provides for indemnification out of the Trust's assets for all losses
and expenses of any shareholder held personally liable for obligations of the
Trust. Thus, although shareholders of a business trust may, under certain
circumstances, be held personally liable under Massachusetts law for the
obligations of the Trust, the risk of a shareholder incurring financial loss on
account of shareholder liability is believed to be remote because it is limited
to circumstances in which the disclaimer is inoperative and the Trust itself is
unable to meet its obligations. The Trust and the Adviser believe that the risk
to any one series of sustaining a loss on account of liabilities incurred by
another series is remote.

                          CUSTODIAN AND TRANSFER AGENT

     Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, P.O. Box
9130, Boston, Massachusetts 02117-9130, is the custodian for the Trust and, as
such, performs certain services for the Funds as directed by authorized persons
of the Trust. For example, as custodian, IBT 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 and making all payments covering expenses of the Funds. IBT also
performs certain portfolio accounting and administrative services for the Funds,
such as monitoring each Fund's compliance with its investment guidelines,
testing each Fund's compliance with Subchapter M of the Internal Revenue Code,
calculating each Fund's periodic dividend rates and total returns, preparing
certain tax forms, preparing financial information for presentation to the
Adviser, the Trust's board of trustees and each Fund's shareholders and for
filing with the Securities and Exchange Commission, and calculating each Fund's
excise tax distributions. Each Fund pays the custodian a monthly fee for the
provision of such services. 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.

     Boston Financial Data Services ("BFDS"), Two Heritage Drive, Quincy,
Massachusetts, 02171, performs transfer agency services for the Funds. BFDS
maintains shareholder accounts and prepares and mails shareholder account
statements, processes shareholder transactions, mails shareholders reports,
prepares and mails distribution payments, maintains records of Fund transactions
and provides blue sky reporting services. The Trust pays BFDS for its services
based on the number of open shareholder accounts.

                  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     Deloitte & Touche LLP, 111 S. Wacker Drive, Chicago, IL 60606-4302, audits
and reports on the Funds' 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.
                                       36


                           APPENDIX A -- BOND RATINGS

     A rating by a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general and
are not absolute standards of quality or guarantees as to the credit-worthiness
of an issuer. Consequently, the Adviser believes that the quality of debt
securities in which the Fund invests should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell, or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the rating services
from other sources which they consider reliable. Ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.

     The following is a description of the characteristics of ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's, a division of
The McGraw-Hill Companies ("S&P").

RATINGS BY MOODY'S:

     Aaa. Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or an exceptionally stable margin and
principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.

     Aa. Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in the Aaa bonds, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.

     A. Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

     Baa. Bonds rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

     Ba. Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
other good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

     B. Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

     Caa. Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

     Ca. Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

     C. Bonds rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

                                       A-1


RATINGS BY S&P:

     AAA. Debt rated AAA has the highest rating. Capacity to pay interest and
repay principal is extremely strong.

     AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.

     A. Debt rated A has a very strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

     BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.

     BB-B-CCC-CC. Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

     C. This rating is reserved for income bonds on which no interest is being
paid.

     D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

     NOTE: The ratings from AA to B may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within the major rating
categories.

                                       A-2


                       APPENDIX B -- FINANCIAL STATEMENTS

         The financial statements for each of the Funds for the fiscal year
ended September 30, 2005, the notes thereto and report of the independent
registered public accounting firm thereon, are incorporated herein by reference
from the Funds' annual report to shareholders.

                                      B-1