-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EEU5s4/G4X9q1WK0VWUGUP+RwpCBs7Na0r05LwWsjn9LWE8nFLB+BnbpidxCqs/H DWcw0ljdxc6Bb0rFT/vU0g== 0001104659-08-004786.txt : 20080128 0001104659-08-004786.hdr.sgml : 20080128 20080125201908 ACCESSION NUMBER: 0001104659-08-004786 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 30 FILED AS OF DATE: 20080128 DATE AS OF CHANGE: 20080125 EFFECTIVENESS DATE: 20080128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARRIS ASSOCIATES INVESTMENT TRUST CENTRAL INDEX KEY: 0000872323 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-38953 FILM NUMBER: 08552261 BUSINESS ADDRESS: STREET 1: HARRIS ASSOCIATES LP STREET 2: TWO N LASALLE ST STE 500 CITY: CHICAGO STATE: IL ZIP: 60602-3790 BUSINESS PHONE: 8004769625 MAIL ADDRESS: STREET 1: HARRIS ASSOCIATES LP STREET 2: TWO NORTH LASALLE STREET STE 500 CITY: CHICAGO STATE: IL ZIP: 60602-3790 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARRIS ASSOCIATES INVESTMENT TRUST CENTRAL INDEX KEY: 0000872323 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06279 FILM NUMBER: 08552262 BUSINESS ADDRESS: STREET 1: HARRIS ASSOCIATES LP STREET 2: TWO N LASALLE ST STE 500 CITY: CHICAGO STATE: IL ZIP: 60602-3790 BUSINESS PHONE: 8004769625 MAIL ADDRESS: STREET 1: HARRIS ASSOCIATES LP STREET 2: TWO NORTH LASALLE STREET STE 500 CITY: CHICAGO STATE: IL ZIP: 60602-3790 0000872323 S000002758 Oakmark Fund C000007554 Class I OAKMX C000007555 Class II OARMX 0000872323 S000002759 Oakmark Select C000007556 Class I OAKLX C000007557 Class II OARLX 0000872323 S000002760 Oakmark Equity and Income C000007558 Class I OAKBX C000007559 Class II OARBX 0000872323 S000002761 Oakmark Global C000007560 Class I OAKGX C000007561 Class II OARGX 0000872323 S000002762 Oakmark International C000007562 Class I OAKIX C000007563 Class II OARIX 0000872323 S000002763 Oakmark International Small Cap C000007564 Class I OAKEX C000007565 Class II OAREX 0000872323 S000013607 Oakmark Global Select C000036890 Class I OAKWX C000036891 Class II OARWX 485BPOS 1 a07-29987_2485bpos.htm 485BPOS

 

As filed with the Securities and Exchange Commission on January 28, 2008

Securities Act registration no. 33-38953
Investment Company Act file no. 811-06279

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM N-1A

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933  x

 

Post-Effective Amendment No. 36 x

 

and

 

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940  x

 

Amendment No. 38  x

 


 

HARRIS ASSOCIATES INVESTMENT TRUST

(Registrant)

 

Two North La Salle Street, Suite 500

Chicago, Illinois 60602-3790

 

Telephone number 312/621-0600

 

Janet L. Reali

 

Cameron S. Avery

Harris Associates L.P.

 

Bell, Boyd & Lloyd LLP

Two North La Salle Street, #500

 

70 West Madison Street, #3100

Chicago, Illinois 60602

 

Chicago, Illinois 60602

(Agents for service)

 


 

Amending Parts A, B and C and filing Exhibits

 


 

It is proposed that this filing will become effective:

 

o immediately upon filing pursuant to rule 485(b)

x  on January 28, 2008 pursuant to rule 485(b)

o 60 days after filing pursuant to rule 485(a)(1)

o on                            pursuant to rule 485(a)(1)

o 75 days after filing pursuant to rule 485(a)(2)

o on                            pursuant to rule 485(a)(2)

 


 

 



The Oakmark Fund

The Oakmark
Select Fund

The Oakmark Equity
and Income Fund

The Oakmark
Global Fund

The Oakmark
Global Select Fund

The Oakmark
International Fund

The Oakmark
International Small Cap
Fund

PROSPECTUS

JANUARY 28, 2008

The Securities and Exchange Commission has not approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Advised by Harris Associates L.P.




TABLE OF CONTENTS

OVERVIEW OF THE OAKMARK FUNDS     1    
Investment Objectives     1    
Principal Investment Strategies     1    
THE OAKMARK FUND (OAKMX)     4    
Investment Objective     4    
Principal Investment Strategy     4    
Principal Investment Risks     4    
Is The Fund Right For Me?     4    
Performance Information     4    
Fees and Expenses     6    
THE OAKMARK SELECT FUND (OAKLX)     7    
Investment Objective     7    
Principal Investment Strategy     7    
Principal Investment Risks     7    
Is The Fund Right For Me?     7    
Performance Information     8    
Fees and Expenses     9    
THE OAKMARK EQUITY AND INCOME FUND (OAKBX)     11    
Investment Objective     11    
Principal Investment Strategy     11    
Principal Investment Risks     11    
Is The Fund Right For Me?     12    
Performance Information     12    
Fees and Expenses     14    
THE OAKMARK GLOBAL FUND (OAKGX)     15    
Investment Objective     15    
Principal Investment Strategy     15    
Principal Investment Risks     15    
Is The Fund Right For Me?     16    
Performance Information     16    
Fees and Expenses     18    

 



THE OAKMARK GLOBAL SELECT FUND (OAKWX)     19    
Investment Objective     19    
Principal Investment Strategy     19    
Principal Investment Risks     19    
Is The Fund Right For Me?     19    
Performance Information     20    
Fees and Expenses     21    
THE OAKMARK INTERNATIONAL FUND (OAKIX)     23    
Investment Objective     23    
Principal Investment Strategy     23    
Principal Investment Risks     23    
Is The Fund Right For Me?     24    
Performance Information     24    
Fees and Expenses     26    
THE OAKMARK INTERNATIONAL SMALL CAP FUND (OAKEX)     27    
Investment Objective     27    
Principal Investment Strategy     27    
Principal Investment Risks     27    
Is The Fund Right For Me?     28    
Performance Information     28    
Fees and Expenses     30    
HOW THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES     31    
Investment Techniques     31    
Risk Factors     32    
Change in Objective     35    
MANAGEMENT OF THE FUNDS     36    
INVESTING WITH THE OAKMARK FUNDS     38    
Eligibility To Buy Shares     38    
Types of Accounts – Class I Shares     39    
Types of Accounts – Class II Shares     39    
Investment Minimums     40    
Share Price     40    
General Purchasing Policies     41    
General Redemption Policies     43    
HOW TO BUY CLASS I SHARES     45    
By Check     45    
By Wire Transfer     45    
By Electronic Transfer     46    
By Automatic Investment     46    
By Payroll Deduction     47    
By Exchange     48    
By Internet     48    

 



HOW TO REDEEM CLASS I SHARES     49    
In Writing     49    
By Telephone     49    
By Electronic Transfer     50    
By Exchange     50    
By Wire Transfer     51    
By Automatic Redemption     51    
By Internet     51    
Signature Guarantee     52    
Small Account Fee Policy     52    
Small Account Redemption     52    
SHAREHOLDER SERVICES     53    
Class I Shareholders     53    
Class II Shareholders     56    
DISTRIBUTIONS AND TAXES     57    
Distributions     57    
Taxes     57    
FINANCIAL HIGHLIGHTS     59    
Oakmark Fund     60    
Select Fund     61    
Equity and Income Fund     62    
Global Fund     63    
Global Select Fund     65    
International Fund     66    
International Small Cap Fund     67    

 



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OVERVIEW OF
THE OAKMARK FUNDS

INVESTMENT OBJECTIVES

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

PRINCIPAL INVESTMENT STRATEGIES

Philosophy

The Oakmark Funds (the "Funds") use a value investment philosophy in selecting equity securities. This investment philosophy is based upon the belief that, over time, a company's stock price converges with the company's true business value. By "true business value," we mean an estimate of the price a knowledgeable buyer would pay to acquire the entire business. We believe that investing in securities priced significantly below their true business value presents the best opportunity to achieve a Fund's investment objective.

The Funds' investment adviser, Harris Associates L.P. (the "Adviser"), uses this value philosophy to identify companies that it believes have discounted stock prices compared to the companies' true business values.

In assessing such companies, the Adviser looks for the following characteristics, although not all of the companies selected will have these attributes:

•  free cash flows and intelligent investment of excess cash;

•  earnings that are growing and are reasonably predictable; and

•  high level of manager ownership.

Key Tenets of the Oakmark Investment Philosophy:

1.  Buy businesses that are trading at a significant discount to the Adviser's estimate of the company's intrinsic value. At the time the Adviser buys a company, the Adviser wants the company's stock to be inexpensive relative to what it believes the entire business is worth.

2.  Invest with companies expected to grow shareholder value over time. Value investors can sometimes fall into the trap of buying a stock that is inexpensive for a reason—because the company just doesn't grow. The Adviser looks for good quality, growing businesses with positive free cash flow and intelligent investment of cash.

3.  Invest with management teams that think and act as owners. The Adviser seeks out company managements that understand the dynamics of per share value growth and are focused on achieving such growth. Stock ownership and incentives that align managements' interests with those of shareholders are key components of this analysis.

PROSPECTUS
1



Process

In making its investment decisions, the Adviser uses a "bottom-up" approach focused on individual companies, rather than focusing on specific economic factors or specific industries. In order to select investments that meet the criteria described above, the Adviser uses independent, in-house research to analyze each company. The Adviser does not rely on recommendations generated by "Wall Street." As part of this selection process, the Adviser's analysts typically visit companies and talk to various industry sources.

The chief consideration in the selection of stocks for the Funds is the size of the discount of a company's stock price compared to the company's perceived true business value. Once the Adviser determines that a stock is selling at a significant discount and that the company has the additional qualities mentioned above, the Adviser generally will consider buying that stock for a Fund. The Adviser usually sells a stock when the price approaches its estimated worth. This means the Adviser sets specific "buy" and "sell" targets for each stock held by a Fund. The Adviser also monitors each holding and adjusts those price targets as warranted to reflect changes in a company's fundamentals.

Bottom-Up Investment Process

All portfolio managers at the Adviser strive to abide by a consistent philosophy and process. This process involves a collective effort to identify what the managers believe are the best values in the marketplace. Each Fund 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 process:

Managing Risk

The Adviser tries to manage some of the risks of investing in common stocks by purchasing stocks whose prices it considers low relative to the companies' intrinsic value. The Adviser seeks companies with solid finances and proven records and continuously monitors each portfolio holding.

THE OAKMARK FUNDS
2



For Equity and Income Fund, the Adviser attempts to manage the risks of investing in bonds by conducting independent evaluations of the creditworthiness of the bonds and their issuers and by actively managing the bonds' average duration in anticipation of interest rate changes.

Furthermore, for Global Fund, Global Select Fund, International Fund and International Small Cap Fund, the Adviser attempts to manage some of the risks of investing in securities of non-U.S. issuers by considering the relative political and economic stability of a company's home country, the company's ownership structure, and the company's accounting practices.

Portfolio Structure

The Adviser believes that holding a relatively small number of stocks allows its "best ideas" to have a meaningful impact on Fund performance; therefore, the portfolio of each Fund, except Select Fund and Global Select Fund, typically holds 30 to 60 stocks rather than hundreds. Select Fund and Global Select Fund each generally holds approximately 20 stocks in its portfolio.

The Adviser's value strategy also emphasizes investing for the long-term. The Adviser believes that the market will ultimately discover these undervalued companies, so it gives them the time such recognition requires. The Adviser has found that generally it takes three to five years for the gap between stock price and true business value to close. Therefore, successful implementation of this value investment philosophy requires that the Funds and their shareholders have a long-term investment horizon.

PROSPECTUS
3




THE OAKMARK FUND

INVESTMENT OBJECTIVE

Oakmark Fund seeks long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGY

Oakmark Fund invests primarily in common stocks of U.S. companies.

PRINCIPAL INVESTMENT RISKS

An investor in the Fund should have a long-term perspective and be able to tolerate potentially wide price fluctuations. Your investment in the Fund is subject to risks, including the possibility that the value of the Fund's portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the U.S. or abroad.

Although Oakmark Fund makes every effort to achieve its objective, it cannot guarantee it will attain that objective. The principal risks of investing in the Fund include:

Market risk   Value style risk  
Common stock risk    

 

Your investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. The likelihood of loss may be greater if you invest for a shorter period of time.

For more information on risks, see "How The Funds Pursue Their Investment Objectives—Risk Factors."

IS THE FUND RIGHT FOR ME?

You should consider an investment in Oakmark Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks.

Although the Fund's past performance cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment.

The Fund is not designed for investors whose primary objective is income.

PERFORMANCE INFORMATION

The Fund offers two classes of shares: Class I Shares and Class II Shares. The Fund's Class I Shares are offered to the general public. The Fund's Class II Shares are offered to certain retirement and profit sharing plans.

THE OAKMARK FUND
4



The Fund's past performance (before and after taxes), as provided by the bar chart and performance table that follow, is not an indication of how the Fund will perform in the future. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns.

  Since 1998, the highest and lowest quarterly returns for the Fund's Class I Shares were:
• Highest quarterly return: 17.0%, during the quarter ended June 30, 2003
• Lowest quarterly return: -16.6%, during the quarter ended September 30, 2002
 

 

The following table compares the Fund's average annual total returns (before and after taxes) for one, five and ten years for Class I Shares and the Fund's average annual total returns (before taxes) for one and five years and since inception for Class II Shares to the S&P 500 Index, a widely quoted, unmanaged, market-weighted stock market index that includes 500 of the largest companies publicly traded in the U.S. All returns reflect reinvested dividends. The returns shown for the S&P 500 do not reflect the deduction of fees, expenses or taxes.

Average Annual Total Returns for Periods Ended December 31, 2007

    1 Year   5 Years   10 Years   Since Class II
Inception*
 
Oakmark Fund – Class I  
Return before taxes     -3.64 %     9.51 %     5.17 %     N/A    
Return after taxes on       
distributions
    -4.90 %     8.98 %     4.06 %     N/A    
Return after taxes on       
distributions and sale       
of Fund shares
    -0.61 %     8.27 %     4.00 %     N/A    
Oakmark Fund – Class II  
Return before taxes     -4.01 %     9.13 %     N/A       5.78 %  
S&P 500     5.49 %     12.83 %     5.91 %     5.50 %  

 

*  Inception date for the Fund's Class II Shares is April 5, 2001.

After-tax returns are intended to show the impact of assumed federal income taxes on an investment in the Fund. The Fund's "Return after taxes on distributions" shows the effect of taxable distributions, but assumes that you still hold the Fund shares at the end of the period and so do not have any taxable gain or loss on your investment in shares of the Fund. The Fund's "Return after taxes on distributions and sale of Fund shares" shows the effect of both taxable distributions and any taxable gain or loss that would be realized if you purchased Fund shares at the beginning and sold at the end of the specified period.

PROSPECTUS
5



After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans, qualified plans, education savings accounts or individual retirement accounts. In some cases, the after-tax returns may exceed the return before taxes due to an assumed tax benefit from any losses on a sale of Fund shares at the end of the measurement period.

FEES AND EXPENSES

Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

    Class I   Class II  
Maximum sales charge (load)
imposed on purchases
  None   None  
Maximum deferred sales
charge (load)
  None   None  
Redemption fee (as a
percentage of
amount redeemed)
  2% of redemption
proceeds on shares held
for 90 days or less
  2% of redemption
proceeds on shares held
for 90 days or less
 
Exchange fee   None*   None*  

 

*  An exchange transaction is a redemption of shares and a purchase of shares and may result in a 2% redemption fee on shares held for 90 days or less.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

    Class I   Class II  
Management fees     .87 %     .87 %  
Distribution (12b-1) fees     None       None    
Other expenses (including service fees)     .14 %     .49 %  
Total Annual Fund Operating Expenses     1.01 %     1.36 %  

 

Example. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated and then redeem all of your shares at the end of those periods, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:

    Class I   Class II  
1 Year   $ 103     $ 138    
3 Years     322       431    
5 Years     588       745    
10 Years     1,236       1,635    

 

THE OAKMARK FUND
6



THE OAKMARK SELECT FUND

INVESTMENT OBJECTIVE

Select Fund seeks long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGY

Select Fund invests primarily in common stocks of U.S. companies. The Fund is non-diversified, which means that it is not limited under the Investment Company Act of 1940 to a percentage of assets that it may invest in any one issuer. The Fund could own as few as 12 securities, but generally will have approximately 20 securities in its portfolio.

PRINCIPAL INVESTMENT RISKS

An investor in the Fund should have a long-term perspective and be able to tolerate potentially wide price fluctuations. Your investment in the Fund is subject to risks, including the possibility that the value of the Fund's portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the U.S. or abroad.

Although Select Fund makes every effort to achieve its objective, it cannot guarantee it will attain that objective. The principal risks of investing in the Fund include:

Market risk   Non-diversification risk  
Common stock risk   Value style risk  

 

Your investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. The likelihood of loss may be greater if you invest for a shorter period of time.

For more information on risks, see "How The Funds Pursue Their Investment Objectives—Risk Factors."

IS THE FUND RIGHT FOR ME?

You should consider an investment in Select Fund if you are looking for long-term capital appreciation by investing in a non-diversified fund and are willing to accept the associated risks.

Although the Fund's past performance cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment.

The Fund is not designed for investors whose primary objective is income.

PROSPECTUS
7



PERFORMANCE INFORMATION

The Fund offers two classes of shares: Class I Shares and Class II Shares. The Fund's Class I Shares are offered to the general public. The Fund's Class II Shares are offered to certain retirement and profit sharing plans.

The Fund's past performance (before and after taxes), as provided by the bar chart and performance table that follow, is not an indication of how the Fund will perform in the future. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns.

  Since 1998, the highest and lowest quarterly returns for the Fund's Class I Shares were:
• Highest quarterly return: 21.5%, during the quarter ended December 31, 1998
• Lowest quarterly return: -17.2%, during the quarter ended September 30, 1998
 

 

The following table compares the Fund's average annual total returns (before and after taxes) for one, five and ten years for Class I Shares and the Fund's average annual total returns (before taxes) for one and five years and since inception for Class II Shares to the S&P 500 Index, a widely quoted, unmanaged, market-weighted stock market index that includes 500 of the largest companies publicly traded in the U.S. All returns reflect reinvested dividends. The returns shown for the S&P 500 do not reflect the deduction of fees, expenses or taxes.

Average Annual Total Returns for Periods Ended December 31, 2007

    1 Year   5 Years   10 Years   Since Class II
Inception*
 
Select Fund – Class I  
Return before taxes     -14.04 %     7.70 %     10.35 %     N/A    
Return after taxes on       
distributions
    -15.52 %     6.76 %     9.15 %     N/A    
Return after taxes on       
distributions and sale       
of Fund shares
    -7.04 %     6.74 %     8.84 %     N/A    
Select Fund – Class II  
Return before taxes     -14.38 %     7.38 %     N/A       8.80 %  
S&P 500     5.49 %     12.83 %     5.91 %     1.66 %  

 

*  Inception date for the Fund's Class II Shares is December 31, 1999.

After-tax returns are intended to show the impact of assumed federal income taxes on an investment in the Fund. The Fund's "Return after taxes on distributions"

THE OAKMARK SELECT FUND
8



shows the effect of taxable distributions, but assumes that you still hold the Fund shares at the end of the period and so do not have any taxable gain or loss on your investment in shares of the Fund. The Fund's "Return after taxes on distributions and sale of Fund shares" shows the effect of both taxable distributions and any taxable gain or loss that would be realized if you purchased Fund shares at the beginning and sold at the end of the specified period.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans, qualified plans, education savings accounts or individual retirement accounts. In some cases, the after-tax returns may exceed the return before taxes due to an assumed tax benefit from any losses on a sale of Fund shares at the end of the measurement period.

FEES AND EXPENSES

Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

    Class I   Class II  
Maximum sales charge (load)
imposed on purchases
  None   None  
Maximum deferred
sales charge (load)
  None   None  
Redemption fee
(as a percentage
of amount redeemed)
  2% of redemption
proceeds on shares held
for 90 days or less
  2% of redemption
proceeds on shares held
for 90 days or less
 
Exchange fee   None*   None*  

 

*  An exchange transaction is a redemption of shares and a purchase of shares and may result in a 2% redemption fee on shares held for 90 days or less.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

    Class I   Class II  
Management fees     .85 %     .85 %  
Distribution (12b-1) fees     None       None    
Other expenses (including service fees)     .12 %     .50 %  
Total Annual Fund Operating Expenses     .97 %     1.35 %  

 

PROSPECTUS
9



Example. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated and then redeem all of your shares at the end of those periods, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:

    Class I   Class II  
1 Year   $ 99     $ 137    
3 Years     309       428    
5 Years     536       739    
10 Years     1,190       1,624    

 

THE OAKMARK SELECT FUND
10



THE OAKMARK EQUITY AND INCOME FUND*

INVESTMENT OBJECTIVE

Equity and Income Fund seeks income and preservation and growth of capital.

PRINCIPAL INVESTMENT STRATEGY

Equity and Income Fund invests primarily in a diversified portfolio of U.S. equity and fixed-income securities (although the Fund may invest up to 25% of its total assets in securities of non-U.S. companies). The Fund is intended to present a balanced investment program between growth and income by investing approximately 50-75% of its total assets in common stock, including securities convertible into common stock, and up to 50% of its assets in U.S. government securities and debt securities rated at time of purchase within the two highest grades assigned by Moody's Investors Service, Inc. or by Standard & Poor's Corporation Ratings Group, a division of The McGraw-Hill Companies. The Fund may also invest up to 20% of its assets in unrated or lower rated debt securities, sometimes called junk bonds.

PRINCIPAL INVESTMENT RISKS

An investor in the Fund should have a long-term perspective and be able to tolerate potentially wide price fluctuations. Your investment in the Fund is subject to risks, including the possibility that the value of the Fund's portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the U.S. or abroad.

Although Equity and Income Fund makes every effort to achieve its objectives, it cannot guarantee it will attain those objectives. The principal risks of investing in the Fund include:

Market risk   Government-sponsored entity securities risk  
Common stock risk   Value style risk  
Debt securities risk    

 

Your investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. The likelihood of loss may be greater if you invest for a shorter period of time.

For more information on risks, see "How The Funds Pursue Their Investment Objectives—Risk Factors."

*  NOTE: Equity and Income Fund is open to new investors who purchase shares directly from the Funds. Please refer to "Investing with The Oakmark Funds — Eligibility to Buy Shares" for new account eligibility criteria.

PROSPECTUS
11



IS THE FUND RIGHT FOR ME?

You should consider an investment in Equity and Income Fund if you are seeking current income and preservation and growth of capital and are willing to accept the associated risks. The Fund is intended to present a balanced investment program between growth and income.

If you invest in the Fund, you should be willing to accept short-term price fluctuations, which will occur from time to time. You should not consider investing in the Fund if you cannot tolerate moderate short-term declines in share value or if you are seeking the higher returns historically achieved by funds that invest primarily in stocks.

PERFORMANCE INFORMATION

The Fund offers two classes of shares: Class I Shares and Class II Shares. The Fund's Class I Shares are offered to the general public. The Fund's Class II Shares are offered to certain retirement and profit sharing plans.

The Fund's past performance (before and after taxes), as provided by the bar chart and performance table that follow, is not an indication of how the Fund will perform in the future. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns.

  Since 1998, the highest and lowest quarterly returns for the Fund's Class I Shares were:
• Highest quarterly return: 13.2%, during the quarter ended June 30, 2003
• Lowest quarterly return: -8.6%, during the quarter ended September 30, 2002
 

 

THE OAKMARK EQUITY AND INCOME FUND
12



The following table compares the Fund's average annual total returns (before and after taxes) for one, five and ten years for Class I Shares and the Fund's average annual total returns (before taxes) for one and five years and since inception for Class II Shares to the Lipper Balanced Fund Index, an index of 30 balanced funds. All returns reflect reinvested dividends. The returns shown for the Lipper Balanced Fund Index do not reflect the deduction of fees, expenses or taxes.

Average Annual Total Returns for Periods Ended December 31, 2007

    1 Year   5 Years   10 Years   Since Class II
Inception*
 
Equity and Income
Fund – Class I
     
Return before taxes     11.97 %     12.88 %     11.89 %     N/A    
Return after taxes on       
distributions
    10.51 %     12.06 %     10.78 %     N/A    
Return after taxes on       
distributions and sale 
of Fund shares
    9.17 %     11.08 %     10.07 %     N/A    
Equity and Income       
Fund – Class II
                     
Return before taxes     11.59 %     12.55 %     N/A       11.85 %  
Lipper Balanced 
Fund Index
    6.55 %     10.33 %     6.14 %     4.52 %  

 

*  Inception date for the Fund's Class II Shares is July 12, 2000.

After-tax returns are intended to show the impact of assumed federal income taxes on an investment in the Fund. The Fund's "Return after taxes on distributions" shows the effect of taxable distributions, but assumes that you still hold the Fund shares at the end of the period and so do not have any taxable gain or loss on your investment in shares of the Fund. The Fund's "Return after taxes on distributions and sale of Fund shares" shows the effect of both taxable distributions and any taxable gain or loss that would be realized if you purchased Fund shares at the beginning and sold at the end of the specified period.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans, qualified plans, education savings accounts or individual retirement accounts. In some cases, the after-tax returns may exceed the return before taxes due to an assumed tax benefit from any losses on a sale of Fund shares at the end of the measurement.

PROSPECTUS
13



FEES AND EXPENSES

Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

    Class I   Class II  
Maximum sales charge (load)
imposed on purchases
  None   None  
Maximum deferred
sales charge (load)
  None   None  
Redemption fee
(as a percentage
of amount redeemed)
  None   None  
Exchange fee   None   None  

 

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

    Class I   Class II  
Management fees     .70 %     .70 %  
Distribution (12b-1) fees     None       None    
Other expenses (including service fees)     .13 %     .47 %  
Total Annual Fund Operating Expenses     .83 %     1.17 %  

 

Example. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated and then redeem all of your shares at the end of those periods, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:

    Class I   Class II  
1 Year   $ 85     $ 119    
3 Years     265       372    
5 Years     460       644    
10 Years     1,025       1,420    

 

THE OAKMARK EQUITY AND INCOME FUND
14



THE OAKMARK GLOBAL FUND*

INVESTMENT OBJECTIVE

Global Fund seeks long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGY

Global Fund invests primarily in common stocks of U.S. and non-U.S. companies. The Fund invests in the securities of companies located in at least three countries. Typically, the Fund invests between 25-75% of its total assets in securities of U.S. companies and between 25-75% of its total assets in securities of non-U.S. companies. The Fund's non-U.S. investments include foreign government obligations and common stock of non-U.S. issuers. There are no geographic limits on the Fund's non-U.S. investments, but the Fund does not expect to invest more than 15% of its assets in securities of companies based in emerging markets.

PRINCIPAL INVESTMENT RISKS

An investor in the Fund should have a long-term perspective and be able to tolerate potentially wide price fluctuations. Your investment in the Fund is subject to risks, including the possibility that the value of the Fund's portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the U.S. or abroad, and currency fluctuations.

Although Global Fund makes every effort to achieve its objective, it cannot guarantee it will attain that objective. The principal risks of investing in the Fund include:

Market risk   Non-U.S. securities risk  
Common stock risk   Value style risk  

 

Your investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. The likelihood of loss may be greater if you invest for a shorter period of time.

For more information on risks, see "How The Funds Pursue Their Investment Objectives—Risk Factors."

*  NOTE: Global Fund is open to new investors who purchase shares directly from the Funds. Please refer to "Investing with The Oakmark Funds — Eligibility to Buy Shares" for new account eligibility criteria.

PROSPECTUS
15



IS THE FUND RIGHT FOR ME?

You should consider an investment in Global Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks.

Although the Fund's past performance cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment.

The Fund is not designed for investors whose primary objective is income.

PERFORMANCE INFORMATION

The Fund offers two classes of shares: Class I Shares and Class II Shares. The Fund's Class I Shares are offered to the general public. The Fund's Class II Shares are offered to certain retirement and profit sharing plans.

The Fund's past performance (before and after taxes), as provided by the bar chart and performance table that follow, is not an indication of how the Fund will perform in the future. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns.

  Since 2000, the highest and lowest quarterly returns for the Fund's Class I Shares were:
• Highest quarterly return: 33.5%, during the quarter ended June 30, 2003
• Lowest quarterly return: -17.7%, during the quarter ended September 30, 2002
 

 

THE OAKMARK GLOBAL FUND
16



The following table compares the Fund's average annual total returns (before and after taxes) for one and five years and since inception for Class I Shares and the Fund's average annual total returns (before taxes) for one and five years and since inception for Class II Shares to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index that includes countries throughout the world, in proportion to world stock market capitalization. All returns reflect reinvested dividends. The returns shown for the MSCI World Index do not reflect the deduction of fees, expenses or taxes.

Average Annual Total Returns for Periods Ended December 31, 2007

    1 Year   5 Year   Since Class I
Inception*
  Since Class II
Inception*
 
Global Fund – Class I  
Return before taxes     7.33 %     21.06 %     16.19 %     N/A    
Return after taxes on       
distributions
    5.62 %     19.98 %     15.40 %     N/A    
Return after taxes on        
distributions and sale       
of Fund shares
    7.31 %     18.73 %     14.49 %     N/A    
Global Fund – Class II  
Return before taxes     6.92 %     20.64 %     N/A       19.33 %  
MSCI World Index     9.04 %     16.96 %     4.76 %     10.31 %  

 

*  Inception dates for the Fund's Class I and Class II Shares are August 4, 1999 and October 10, 2001, respectively.

After-tax returns are intended to show the impact of assumed federal income taxes on an investment in the Fund. The Fund's "Return after taxes on distributions" shows the effect of taxable distributions, but assumes that you still hold the Fund shares at the end of the period and so do not have any taxable gain or loss on your investment in shares of the Fund. The Fund's "Return after taxes on distributions and sale of Fund shares" shows the effect of both taxable distributions and any taxable gain or loss that would be realized if you purchased Fund shares at the beginning and sold at the end of the specified period.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans, qualified plans, education savings accounts or individual retirement accounts. In some cases, the after-tax returns may exceed the return before taxes due to an assumed tax benefit from any losses on a sale of Fund shares at the end of the measurement period.

PROSPECTUS
17



FEES AND EXPENSES

Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

    Class I   Class II  
Maximum sales charge (load)
imposed on purchases
  None   None  
Maximum deferred
sales charge (load)
  None   None  
Redemption fee
(as a percentage
of amount redeemed)
  2% of redemption
proceeds on shares held
for 90 days or less
  2% of redemption
proceeds on shares held
for 90 days or less
 
Exchange fee   None*   None*  

 

*  An exchange transaction is a redemption of shares and a purchase of shares and may result in a 2% redemption fee on shares held for 90 days or less.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

    Class I   Class II  
Management fees     .97 %     .97 %  
Distribution (12b-1) fees     None       None    
Other expenses (including service fees)     .16 %     .56 %  
Total Annual Fund Operating Expenses     1.13 %     1.53 %  

 

Example. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated and then redeem all of your shares at the end of those periods, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:

    Class I   Class II  
1 Year   $ 115     $ 156    
3 Years     359       483    
5 Years     622       834    
10 Years     1,375       1,824    

 

THE OAKMARK GLOBAL FUND
18



THE OAKMARK
GLOBAL SELECT FUND

INVESTMENT OBJECTIVE

Global Select Fund seeks long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGY

Global Select Fund invests primarily in common stocks of U.S. and non-U.S. companies. The Fund invests in the securities of companies located in at least three countries. The Fund is non-diversified, which means that the Fund may invest a greater portion of its assets in a more limited number of issuers than a diversified fund. The Fund could own as few as 12 securities, but generally will have approximately 20 securities in its portfolio. Typically, the Fund will invest at least 40% of its total assets in securities of non-U.S. companies (unless the Adviser deems market conditions and/or company valuations less favorable to non-U.S. companies, in which case the Fund will invest at least 30% of its total assets in securities of non-U.S. companies). There are no geographic limits on the Fund's non-U.S. investments, but the Fund does not expect to invest more than 15% of its assets in securities of companies based in emerging mark ets.

PRINCIPAL INVESTMENT RISKS

An investor in the Fund should have a long-term perspective and be able to tolerate potentially wide price fluctuations. Your investment in the Fund is subject to risks, including the possibility that the value of the Fund's portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the U.S. or abroad, and currency fluctuations.

Although Global Select Fund makes every effort to achieve its objective, it cannot guarantee it will attain that objective. The principal risks of investing in the Fund include:

Market risk   Non-diversification risk  
Common stock risk   Value style risk  
Non-U.S. securities risk    

 

Your investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. The likelihood of loss may be greater if you invest for a shorter period of time.

For more information on risks, see "How The Funds Pursue Their Investment Objectives—Risk Factors."

IS THE FUND RIGHT FOR ME?

You should consider an investment in Global Select Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks.

Although the Fund's past performance cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results.

PROSPECTUS
19



Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment.

The Fund is not designed for investors whose primary objective is income.

PERFORMANCE INFORMATION

The Fund offers two classes of shares: Class I Shares and Class II Shares. The Fund's Class I Shares are offered to the general public. The Fund's Class II Shares are offered to certain retirement and profit-sharing plans.

The Fund's past performance (before and after taxes), as provided by the bar chart and performance table that follow, is not an indication of how the Fund will perform in the future. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the Fund's historical returns.

  Since 2007, the highest and lowest quarterly returns for the Fund's Class I Shares were:
• Highest quarterly return: 7.8%, during the quarter ended June 30, 2007
• Lowest quarterly return: -8.2%, during the quarter ended December 31, 2007
 

 

The following table compares the Fund's average annual total returns (before and after taxes) for one year and since inception for Class I Shares to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index that includes countries throughout the world, in proportion to world stock market capitalization. All returns reflect reinvested dividends. The returns shown for the MSCI World Index do not reflect the deduction of fees, expenses or taxes.

Average Annual Total Returns for Periods Ended December 31, 2007

    1 Year   Since Class I
Inception*
  Since Class II
Inception*
 
Global Select Fund – Class I  
Return before taxes     -1.16 %     5.31 %   N/A  
Return after taxes on distributions     -2.23 %     4.37 %   N/A  
Return after taxes on distributions
and sale of Fund shares
    -0.33 %     4.14 %   N/A  
MSCI World Index     9.04 %     14.32 %   N/A  

 

*  Inception date for the Fund's Class I Shares is October 2, 2006. As of December 31, 2007, there were no Class II Shares outstanding.

THE OAKMARK GLOBAL SELECT FUND
20



After-tax returns are intended to show the impact of assumed federal income taxes on an investment in the Fund. The Fund's "Return after taxes on distributions" shows the effect of taxable distributions, but assumes that you still hold the Fund shares at the end of the period and so do not have any taxable gain or loss on your investment in shares of the Fund. The Fund's "Return after taxes on distributions and sale of Fund shares" shows the effect of both taxable distributions and any taxable gain or loss that would be realized if you purchased Fund shares at the beginning and sold at the end of the specified period.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans, qualified plans, education savings accounts or individual retirement accounts. In some cases, the after-tax returns may exceed the return before taxes due to an assumed tax benefit from any losses on a sale of Fund shares at the end of the measurement period.

FEES AND EXPENSES

Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

    Class I   Class II  
Maximum sales charge (load)
imposed on purchases
  None
  None
 
Maximum deferred sales
charge (load)
  None
  None
 
Redemption fee (as a
percentage of
amount redeemed)
  2% of redemption
proceeds on shares held
for 90 days or less
  2% of redemption
proceeds on shares held
for 90 days or less
 
Exchange fee   None*   None*  

 

*  An exchange transaction is a redemption of shares and a purchase of shares and may result in a 2% redemption fee on shares held for 90 days or less.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

    Class I   Class II  
Management fees     .93 %     .93 %  
Distribution (12b-1) fees     None       None    
Other expenses (including service fees)     .38 %     .63 %  
Total Annual Fund Operating Expenses     1.31 %     1.56 %  

 

PROSPECTUS
21



Example. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated and then redeem all of your shares at the end of those periods, reinvest all dividends and distributions, earn a 5% return each year, and estimated expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:

    Class I   Class II  
1 Year   $ 133     $ 159    
3 Years     415       493    
5 Years     718       850    
10 Years     1,579       1,856    

 

THE OAKMARK GLOBAL SELECT FUND
22



THE OAKMARK
INTERNATIONAL FUND

INVESTMENT OBJECTIVE

International Fund seeks long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGY

International Fund invests primarily in common stocks of non-U.S. companies. The Fund may invest in mature markets (examples are Japan, Canada, and the United Kingdom) and in less developed markets (examples are Mexico, Brazil, and South Korea). Ordinarily, the Fund will invest in the securities of at least five countries outside the U.S. There are no geographic limits on the Fund's non-U.S. investments, but the Fund does not expect to invest more than 35% of its assets in securities of companies based in emerging markets.

PRINCIPAL INVESTMENT RISKS

An investor in the Fund should have a long-term perspective and be able to tolerate potentially wide price fluctuations. Your investment in the Fund is subject to risks, including the possibility that the value of the Fund's portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the U.S. or abroad, and currency fluctuations.

Although International Fund makes every effort to achieve its objective, it cannot guarantee it will attain that objective. The principal risks of investing in the Fund include:

Market risk   Non-U.S. securities risk  
Common stock risk   Value style risk  

 

Your investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. The likelihood of loss may be greater if you invest for a shorter period of time.

For more information on risks, see "How The Funds Pursue Their Investment Objectives—Risk Factors."

PROSPECTUS
23



IS THE FUND RIGHT FOR ME?

You should consider an investment in International Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks.

Although the Fund's past performance cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment.

The Fund is not designed for investors whose primary objective is income.

PERFORMANCE INFORMATION

The Fund offers two classes of shares: Class I Shares and Class II Shares. The Fund's Class I Shares are offered to the general public. The Fund's Class II Shares are offered to certain retirement and profit sharing plans.

The Fund's past performance (before and after taxes), as provided by the bar chart and performance table that follow, is not an indication of how the Fund will perform in the future. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns.

  Since 1998, the highest and lowest quarterly returns for the Fund's Class I Shares were:
• Highest quarterly return: 25.4%, during the quarter ended June 30, 2003
• Lowest quarterly return: -22.9%, during the quarter ended September 30, 2002
 

 

The following table compares the Fund's average annual total returns (before and after taxes) for one, five and ten years for Class I Shares and the Fund's average annual total returns (before taxes) for one and five years and since inception for Class II Shares to the Morgan Stanley Capital International (MSCI) World ex U.S. Index, an

THE OAKMARK INTERNATIONAL FUND
24



unmanaged index that includes countries throughout the world, excluding the U.S. and Canada, in proportion to world stock market capitalization. All returns reflect reinvested dividends. The returns shown for the MSCI World ex U.S. Index do not reflect the deduction of fees, expenses or taxes.

Average Annual Total Returns for Periods Ended December 31, 2007

    1 Year   5 Years   10 Years   Since Class II
Inception*
 
International
Fund – Class I
     
Return before taxes     -0.51 %     19.51 %     11.94 %     N/A    
Return after taxes on        
distributions
    -2.90 %     18.20 %     10.60 %     N/A    
Return after taxes on        
distributions and sale        
of Fund shares
    3.36 %     17.36 %     10.19 %     N/A    
International
Fund – Class II
     
Return before taxes     -0.94 %     19.06 %     N/A       11.64 %  
MSCI World ex 
U.S. Index
    12.44 %     22.12 %     8.99 %     7.03 %  

 

*  Inception date for the Fund's Class II Shares is November 4, 1999.

After-tax returns are intended to show the impact of assumed federal income taxes on an investment in the Fund. The Fund's "Return after taxes on distributions" shows the effect of taxable distributions, but assumes that you still hold the Fund shares at the end of the period and so do not have any taxable gain or loss on your investment in shares of the Fund. The Fund's "Return after taxes on distributions and sale of Fund shares" shows the effect of both taxable distributions and any taxable gain or loss that would be realized if you purchased Fund shares at the beginning and sold at the end of the specified period.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans, qualified plans, education savings accounts or individual retirement accounts. In some cases, the after-tax returns may exceed the return before taxes due to an assumed tax benefit from any losses on a sale of Fund shares at the end of the measurement period.

PROSPECTUS
25



FEES AND EXPENSES

Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

    Class I   Class II  
Maximum sales charge (load)
imposed on purchases
  None   None  
Maximum deferred
sales charge (load)
  None   None  
Redemption fee
(as a percentage
of amount redeemed)
  2% of redemption
proceeds on shares held
for 90 days or less
  2% of redemption
proceeds on shares held
for 90 days or less
 
Exchange fee   None*   None*  

 

*  An exchange transaction is a redemption of shares and a purchase of shares and may result in a 2% redemption fee on shares held for 90 days or less.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

    Class I   Class II  
Management fees     .88 %     .88 %  
Distribution (12b-1) fees     None       None    
Other expenses (including service fees)     .17 %     .56 %  
Total Annual Fund Operating Expenses     1.05 %     1.44 %  

 

Example. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated and then redeem all of your shares at the end of those periods, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:

    Class I   Class II  
1 Year   $ 107     $ 147    
3 Years     334       456    
5 Years     579       787    
10 Years     1,283       1,724    

 

THE OAKMARK INTERNATIONAL FUND
26



THE OAKMARK INTERNATIONAL SMALL CAP FUND

INVESTMENT OBJECTIVE

International Small Cap Fund seeks long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGY

International Small Cap Fund invests primarily in common stocks of non-U.S. 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.

The Fund may invest in mature markets (examples are Japan, Canada, and the United Kingdom) and in less developed markets (examples are Mexico, Brazil, and South Korea). Ordinarily, the Fund will invest in the securities of at least five countries outside the U.S. There are no geographic limits on the Fund's non-U.S. investments, but the Fund does not expect to invest more than 35% of its assets in securities of companies based in emerging markets.

PRINCIPAL INVESTMENT RISKS

An investor in the Fund should have a long-term perspective and be able to tolerate potentially wide price fluctuations. Your investment in the Fund is subject to risks, including the possibility that the value of the Fund's portfolio holdings may fluctuate in response to events specific to the companies in which the Fund invests, as well as economic, political or social events in the U.S. or abroad, and currency fluctuations.

Although International Small Cap Fund makes every effort to achieve its objective, it cannot guarantee it will attain that objective. The principal risks of investing in the Fund include:

Market risk   Small cap stock risk  
Common stock risk   Value style risk  
Non-U.S. securities risk    

 

Your investment in the Fund is a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money by investing in the Fund. The likelihood of loss may be greater if you invest for a shorter period of time.

For more information on risks, see "How The Funds Pursue Their Investment Objectives—Risk Factors."

PROSPECTUS
27



IS THE FUND RIGHT FOR ME?

You should consider an investment in International Small Cap Fund if you are looking for long-term capital appreciation and are willing to accept the associated risks.

Although the Fund's past performance cannot predict future results, stock investments historically have outperformed most bond and money-market investments over the long term. This higher return comes at the expense of greater short-term price fluctuations, down, as well as up. Therefore, the Fund is intended for investors with a long-term investment horizon and is not managed for short-term results. Thus, you should not consider investing in this Fund if you anticipate a near-term need (typically, three years or less) for either the principal of or gains from your investment.

The Fund is not designed for investors whose primary objective is income.

PERFORMANCE INFORMATION

The Fund offers two classes of shares: Class I Shares and Class II Shares. The Fund's Class I Shares are offered to the general public. The Fund's Class II Shares are offered to certain retirement and profit sharing plans.

The Fund's past performance (before and after taxes), as provided by the bar chart and performance table that follow, is not an indication of how the Fund will perform in the future. The bar chart can help you evaluate the potential risk and reward of investing in the Fund by showing changes in the performance of the Fund's Class I Shares from year to year. The chart indicates the volatility of the Fund's historical returns.

  Since 1998, the highest and lowest quarterly returns for the Fund's Class I Shares were:
• Highest quarterly return: 29.2%, during the quarter ended June 30, 2003
• Lowest quarterly return: -22.3%, during the quarter ended September 30, 2002
 

 

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28



The following table compares the Fund's average annual total returns (before and after taxes) for one, five and ten years for Class I Shares and the Fund's average annual total returns (before taxes) for one and five years and since inception for Class II Shares to the Morgan Stanley Capital International (MSCI) World ex U.S. Index, an unmanaged index that includes countries throughout the world, excluding the U.S. and Canada, in proportion to world stock market capitalization. All returns reflect reinvested dividends. The returns shown for the MSCI World ex U.S. Index do not reflect the deduction of fees, expenses or taxes.

Average Annual Total Returns for Periods Ended December 31, 2007

    1 Year   5 Years   10 Years   Since Class II
Inception*
 
International Small Cap
Fund – Class I
     
Return before taxes     -8.33 %     24.13 %     17.07 %     N/A    
Return after taxes on        
distributions
    -12.02 %     21.71 %     15.29 %     N/A    
Return after taxes on        
distributions and sale        
of Fund shares
    -0.19 %     21.42 %     15.01 %     N/A    
International Small Cap
Fund – Class II
     
Return before taxes     -8.41 %     24.04 %     N/A       17.44 %  
MSCI World ex  
U.S. Index
    12.44 %     22.12 %     8.99 %     8.83 %  

 

*  Inception date for the Fund's Class II Shares is January 8, 2001.

After-tax returns are intended to show the impact of assumed federal income taxes on an investment in the Fund. The Fund's "Return after taxes on distributions" shows the effect of taxable distributions, but assumes that you still hold the Fund shares at the end of the period and so do not have any taxable gain or loss on your investment in shares of the Fund. The Fund's "Return after taxes on distributions and sale of Fund shares" shows the effect of both taxable distributions and any taxable gain or loss that would be realized if you purchased Fund shares at the beginning and sold at the end of the specified period.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans, qualified plans, education savings accounts or individual retirement accounts. In some cases, the after-tax returns may exceed the return before taxes due to an assumed tax benefit from any losses on a sale of Fund shares at the end of the measurement period.

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FEES AND EXPENSES

Below are the fees and expenses that you would pay if you buy and hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

    Class I   Class II  
Maximum sales charge (load)
imposed on purchases
  None   None  
Maximum deferred
sales charge (load)
  None   None  
Redemption fee
(as a percentage
of amount redeemed)
  2% of redemption
proceeds on shares held
for 90 days or less
  2% of redemption
proceeds on shares held
for 90 days or less
 
Exchange fee   None*   None*  

 

*  An exchange transaction is a redemption of shares and a purchase of shares and may result in a 2% redemption fee on shares held for 90 days or less.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

    Class I   Class II  
Management fees     1.15 %     1.15 %  
Distribution (12b-1) fees     None       None    
Other expenses (including service fees)     .19 %     .28 %  
Total Annual Fund Operating Expenses     1.34 %     1.43 %  

 

Example. The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 for the time periods indicated and then redeem all of your shares at the end of those periods, reinvest all dividends and distributions, earn a 5% return each year, and operating expenses remain constant. Your actual returns and costs may be higher or lower than those shown, but based on these assumptions, your expenses would be:

    Class I   Class II  
1 Year   $ 136     $ 146    
3 Years     425       452    
5 Years     734       782    
10 Years     1,613       1,713    

 

THE OAKMARK INTERNATIONAL SMALL CAP FUND
30




HOW THE FUNDS PURSUE THEIR
INVESTMENT OBJECTIVES

INVESTMENT TECHNIQUES

In addition to the principal investment strategies described above, each of the Funds may employ the following techniques in pursuing their investment objectives.

Equity Securities. The types of equity securities in which each Fund may invest include common and preferred stocks and warrants or other similar rights and convertible securities. The chief consideration in selecting an equity security for a Fund is the size of the discount of the market price relative to the Adviser's determination of the true business value of the security.

Debt Securities. Each Fund may invest in debt securities of both governmental and corporate issuers. Each of Oakmark Fund, Select Fund, Global Fund and Global Select Fund may invest up to 25% of its assets, Equity and Income Fund may invest up to 20% of its assets, and each of International Fund and International Small Cap Fund may invest up to 10% of its assets (valued at the time of investment) in debt securities that are rated below investment grade (commonly called junk bonds), without a minimum rating requirement. Descriptions of the ratings used by Standard & Poor's Corporation Ratings Group, a division of The McGraw-Hill Companies ("S&P"), and Moody's Investors Service, Inc. ("Moody's") are included in Appendix A to the Statement of Additional Information.

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

Forward currency transactions may involve currencies of the different countries in which a Fund may invest, and serve as hedges against possible variations in the exchange rate between these currencies. The Funds' forward currency transactions are limited to transaction hedging and portfolio hedging involving either specific transactions or actual or anticipated portfolio positions. Transaction hedging is the purchase or sale of a forward contract with respect to a specific receivable or payable of a Fund accruing in connection with the purchase or sale of portfolio securities. Portfolio hedging is the use of a forward contract with respect to an actual or anticipated portfolio security position denominated or quoted in a particular currency. The Funds may engage in portfolio hedging with respect to the currency of a particular country in amounts approximating actual or anticipated positions in securities denominated in such cur rency. 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. Although forward contracts may be used to protect a Fund from adverse currency movements, the use of such hedges may reduce or eliminate the potentially positive effect of currency revaluations on the Fund's total return.

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Short-Term Investments. In seeking to achieve its investment objective, a Fund ordinarily invests on a long-term basis, but on occasion may also invest on a short-term basis, for example, where short-term perceptions have created a significant gap between price and value. Occasionally, securities purchased on a long-term basis may be sold within 12 months after purchase in light of a change in the circumstances of a particular company or industry or in light of general market or economic conditions or if a security achieves its price target in an unexpected shorter period.

Temporary Defensive Investments. In response to adverse market, economic, political, or other unusual conditions, a Fund may utilize a temporary defensive investment strategy by holding cash (U.S. dollars, foreign currencies, or multinational currency units) or investing without limitation in high-quality debt obligations, money market instruments or repurchase agreements. Under normal market conditions, the potential for income or capital growth on these securities will tend to be lower than the potential for income or capital growth on other securities that may be owned by the Fund. During periods when the Fund has assumed a temporary defensive position, it may miss certain other investment opportunities and it may not achieve its investment objective.

Liquidity Program. Each Fund may participate in one or more liquidity programs that are designed to provide an alternative liquidity source for mutual funds experiencing net redemptions of their shares. The Funds will pay the program sponsor fees for providing such liquidity. See the Statement of Additional Information for more information.

RISK FACTORS

You may be subject to the following risks if you invest in the Funds:

General Risks. All investments, including those in mutual funds, have risks, and no one investment is suitable for all investors. Each Fund is intended for long-term investors. Only Equity and Income Fund is intended to present a balanced investment program between growth and income.

Market Risk. Each Fund is subject to market risk—the risk that the securities markets will increase or decrease in value. Market risk applies to every security. Security prices may fluctuate widely over short or extended periods in response to company, market or economic news. Securities markets also tend to move in cycles, with periods of rising security prices and periods of falling security prices. If there is a general decline in the securities markets, it is possible your investment may lose value regardless of the individual results of the companies in which a Fund invests.

Each Fund's portfolio tends to be fairly concentrated, whether it is classified as a diversified or non-diversified fund. As a result, the appreciation or depreciation of any one security held by a Fund will have a greater impact on the Fund's net asset value than it would if the Fund invested in a larger number of securities. Although that strategy has the potential to generate attractive returns over time, it also increases a Fund's volatility. As a result, when you redeem your shares of the Fund, they may be worth more or less than you paid for them.

Common Stock Risk. Each Fund invests significantly in common stocks, which are a type of equity security that represents an ownership interest in a corporation. Common stocks are subject to greater fluctuations in market value than other asset classes as a result of such factors as a company's business performance, investor perceptions, stock market trends and general economic conditions. The rights of common stockholders are subordinate to all other claims on a company's assets including debt holders and preferred stockholders; therefore, a Fund could lose money if a company in which it invests becomes financially distressed.

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Value Style Risk. Investing in "value" stocks presents the risk that the stocks may never reach what the Adviser believes are their full market values, either because the market fails to recognize what the Adviser considers to be the companies' true business values or because the Adviser misjudged those values. In addition, value stocks may fall out of favor with investors and underperform growth stocks during given periods.

To the extent that a Fund invests in the following types of securities, you also may be subject to other risks:

Small and Mid Cap Securities Risk. During some periods, the securities of small and mid cap companies, as a class, have performed better than the securities of large companies, and in some periods they have performed worse. Stocks of small and mid cap companies tend to be more volatile and less liquid than stocks of large companies.

Small and mid cap companies, as compared to larger companies, may have a shorter history of operations, may not have as great an ability to raise additional capital, may have a less diversified product line making them susceptible to market pressure, and may have a smaller public market for their shares.

Non-U.S. Securities Risk. International investing allows you to achieve greater diversification and to take advantage of changes in foreign economies and market conditions. Many foreign economies have, from time to time, grown faster than the U.S. economy, and the returns on investments in those countries have exceeded those of similar U.S. investments, although there can be no assurance that those conditions will continue.

You should understand and consider carefully the greater risks involved in investing internationally. These include: less public information with respect to companies; less governmental supervision of stock exchanges, securities brokers and companies; different accounting, auditing and financial reporting standards; different settlement periods and trading practices; less liquidity and frequently greater price volatility in non-U.S. markets; imposition of foreign taxes; and sometimes less advantageous legal, operational and financial protections applicable to foreign subcustodial arrangements.

Although the Funds try to invest in companies located in countries having stable political environments, there is the possibility of restriction of foreign investment, expropriation of assets, or confiscatory taxation, seizure or nationalization of foreign bank deposits or other assets, establishment of exchange controls, the adoption of foreign government restrictions, or other political, social or diplomatic developments that could adversely affect investment in these countries. Economies in individual emerging markets may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payments positions. Many emerging market countries have experienced high rates of inflation for many years, which have had and may continue to have very negative effects on the economies and securi ties markets of those countries.

The securities markets of emerging countries are substantially smaller, less developed, less liquid and more volatile than the securities markets of the U.S. and other more developed countries. Disclosure and regulatory standards in many respects are less stringent than in the U.S. and other major markets. There also may be a lower level of monitoring and regulation of emerging markets and the activities of investors in such markets, and enforcement of existing regulations has been extremely limited.

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33



The Funds may invest in American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) or Global Depositary Receipts (GDRs) that are not sponsored by the issuer of the underlying security. To the extent it does so, a Fund would probably bear its proportionate share of the expenses of the depository and might have greater difficulty in receiving copies of the issuer's shareholder communications than would be the case with a sponsored ADR, EDR or GDR.

The cost of investing in securities of non-U.S. issuers typically is higher than the cost of investing in U.S. securities. International Fund, International Small Cap Fund, Global Fund, and Global Select Fund provide an efficient way for an individual to participate in non-U.S. markets, but their expenses, including advisory and custody fees, are higher than for a typical domestic equity fund.

Currency Risk. Non-U.S. securities are generally denominated and traded in foreign currencies. The exchange rates between currencies can fluctuate daily. As a result, the values of a Fund's non-U.S. securities may be affected by changes in exchange rates between foreign currencies and the U.S. dollar, as well as between currencies of countries other than the U.S. For example, if the value of the U.S. dollar rises compared to a foreign currency, the value of an investment traded in that currency will fall because it will be worth fewer U.S. dollars. The Funds may try to hedge the risk of loss resulting from currency exchange fluctuation; however, there can be no guarantee that any hedging activity will be undertaken or, if undertaken, be successful. Further, hedging activity may reduce the risk of loss from currency fluctuations, but may also limit or reduce the opportunity for gain. Other currency-related risks include the possible imposition of exchange control regulations and currency restrictions that would prevent cash from being brought back to the U.S.

Debt Securities Risk. Each Fund may invest in debt securities of both governmental and corporate issuers. A decline in prevailing levels of interest rates generally increases the value of debt securities in a Fund's portfolio, while an increase in rates usually reduces the value of those securities. As a result, to the extent that a Fund invests in debt securities, interest rate fluctuations will generally affect its net asset value, but not the income it receives from debt securities it owns. In addition, if the debt securities contain call, prepayment, or redemption provisions, during a period of declining interest rates, those securities are likely to be redeemed, and the Fund would probably be unable to replace them with securities having as great a yield.

Neither International Fund nor International Small Cap Fund will invest more than 10% of its respective total assets in securities rated below investment grade or, if unrated, that are considered by the Adviser to be of comparable quality; Equity and Income Fund will not invest more than 20% of its total assets in such securities; and each of the other Funds will not invest more than 25% of its total assets in such securities.

Investment in medium- and lower-grade debt securities involves greater risk, including the possibility of issuer default or bankruptcy. Lower-grade debt securities (commonly called "junk bonds") are obligations of companies rated BB or lower by S&P or Ba or lower by Moody's. Lower-grade debt securities are considered speculative and may be in poor standing or actually in default. Medium-grade debt securities are those rated BBB by S&P or Baa by Moody's. Securities so rated are considered to have speculative characteristics. An economic downturn could severely disrupt the market in medium and lower grade debt securities and adversely affect the value of outstanding bonds and the ability of the issuers to repay principal and interest. In addition, lower-quality bonds are less sensitive to interest rate changes than higher-quality instruments and generally are more sensitive to adverse economic changes or individual corpora te developments. During a period of adverse economic changes,

THE OAKMARK FUNDS
34



including a period of rising interest rates, issuers of such bonds may experience difficulty in servicing their principal and interest payment obligations.

The market for medium- and lower-grade debt securities tends to be less broad than the market for higher-quality debt securities. The market for unrated debt securities is even narrower. During periods of thin trading in these markets, the spread between bid and asked prices is likely to increase significantly, and a Fund may have greater difficulty selling its portfolio of these debt securities. The market value of these securities and their liquidity may be affected by adverse publicity and investor perceptions.

Government-Sponsored Entity Securities Risk. 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 Risk. 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.

If you invest in Select Fund or Global Select Fund, you will be subject to the following additional risk:

Non-Diversification Risk. Each Fund, except Select Fund and Global Select Fund, is classified as a diversified fund and generally intends to hold approximately 30 to 60 stocks. Select Fund and Global Select Fund are classified as non-diversified funds, meaning that they each may invest a greater portion of their assets in fewer issuers than a diversified fund. Select Fund and Global Select Fund each generally intends to hold approximately 20 stocks. A non-diversified fund may be subject to greater risk than a diversified fund because changes in the financial condition or market assessment of a single issuer may cause greater fluctuation in the value of a non-diversified fund's shares. Lack of broad diversification may also cause a non-diversified fund to be more susceptible to economic, political or regulatory events than a diversified fund.

PORTFOLIO HOLDINGS DISCLOSURE

Information on the Funds' portfolio holdings disclosure policies and procedures is available in the Statement of Additional Information.

CHANGE IN OBJECTIVE

Each Fund's investment objective may be changed by the board of trustees without shareholder approval. Shareholders will receive at least 30 days' written notice of any change in a Fund's objective. If the board of trustees approves a change in a Fund's investment objective, you should consider whether that Fund remains an appropriate investment in light of your then current financial position and needs. There can be no assurance that a Fund will achieve its investment objective.

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35



MANAGEMENT OF THE FUNDS

The Oakmark Funds' investments and business affairs are managed by Harris Associates L.P. The Adviser also serves as investment adviser to individuals, trusts, retirement plans, endowments and foundations, and as sub-adviser to other mutual funds and as manager to private partnerships. Together with a predecessor, the Adviser has advised and managed mutual funds since 1970. The Adviser's address is Two North LaSalle Street, Suite 500, Chicago, Illinois 60602-3790.

Subject to the overall authority of the board of trustees, the Adviser furnishes continuous investment supervision and management to the Funds and also furnishes office space, equipment, and management personnel.

Each Fund pays a management fee to the Adviser for serving as investment adviser and for providing administrative services. The fees reflected below are expressed as a percentage of average daily net assets. For the fiscal year ended September 30, 2007, the management fees paid by the Funds, as a percentage of average daily net assets, were:

Fund  
Oakmark Fund     .87 %  
Select Fund     .85    
Equity and Income Fund     .70    
Global Fund     .97    
Global Select Fund     .93    
International Fund     .88    
International Small Cap Fund     1.15    

 

The Adviser has contractually agreed to reimburse each Fund to the extent that its annual ordinary operating expenses of a class exceed the following percentages of the average daily net assets of that class:

Fund   Class I   Class II  
Oakmark Fund     1.50 %     1.75 %  
Select Fund     1.50       1.75    
Equity and Income Fund     1.00       1.25    
Global Fund     1.75       2.00    
Global Select Fund     1.75       2.00    
International Fund     2.00       2.25    
International Small Cap Fund     2.00       2.25    

 

The agreement is effective through January 31, 2009.

A discussion regarding the basis for the approval of the Funds' current investment advisory agreements with the Adviser by the board of trustees will be available in the Funds' semi-annual report to shareholders dated March 31, 2008.

Oakmark Fund is managed by William C. Nygren, C.F.A., and Kevin G. Grant, C.F.A. Mr. Nygren joined the Adviser as an analyst in 1983 and was the Adviser's Director of Research from September 1990 to March 1998. Previously, he had been

THE OAKMARK FUNDS
36



an analyst with Northwestern Mutual Life Insurance Company. He holds an M.S. in Finance from the University of Wisconsin-Madison (1981) and a B.S. in Accounting from the University of Minnesota (1980). Mr. Grant joined the Adviser as an analyst in 1988, and has been a senior investment analyst since 1994. He holds an M.B.A. in Finance from Loyola University (1991) and a B.S. in Computer Science from the University of Wisconsin-Madison (1987).

Select Fund is managed by Mr. Nygren and Henry R. Berghoef, C.F.A. Mr. Berghoef joined the Adviser as an analyst in 1994. He has been the Director of Domestic Research since 2003 and was Associate Director of Domestic Research from 2000 to 2002. He holds an M.B.A. from George Washington University (1985), an M.A. in International Studies from Johns Hopkins University (1974), and a B.A. in History from Calvin College (1971).

Equity and Income Fund is managed by Clyde S. McGregor, C.F.A., and Edward A. Studzinski, C.F.A. Mr. McGregor joined the Adviser as an analyst in 1981 and began managing portfolios in 1986. He holds an M.B.A. in Finance from the University of Wisconsin-Madison (1977) and a B.A. in Economics and Religion from Oberlin College (1974). Mr. Studzinski joined the Adviser as an analyst in 1995. Previously, Mr. Studzinski was Vice President and Investment Officer at Mercantile National Bank of Indiana. He holds an M.B.A. in Marketing and Finance from Northwestern University (1985), a J.D. from Duke University (1974), and an A.B. in History from Boston College (1971).

Global Fund is managed by Robert A. Taylor, C.F.A., and Mr. McGregor. Mr. McGregor is responsible for the day-to-day management of the Fund's U.S. portfolio, and Mr. Taylor manages the day-to-day affairs of the Fund's non-U.S. portfolio. Mr. Taylor joined the adviser as an international analyst in 1994. He has been the Director of International Research since 2004. He holds a B.B.A. from the University of Wisconsin (1994).

Global Select Fund is managed by Mr. Nygren and David G. Herro, C.F.A. Mr. Herro joined the Adviser in 1992 as a portfolio manager and analyst. Previously, he had been an international portfolio manager for the State of Wisconsin Investment Board and The Principal Financial Group. He holds an M.A. in Economics from the University of Wisconsin—Milwaukee (1985) and a B.S. in Business and Economics from the University of Wisconsin—Platteville (1983).

International Fund is managed by Mr. Herro.

International Small Cap Fund is managed by Mr. Herro and Chad M. Clark, C.F.A. Mr. Clark joined the Adviser in 1995 as an international analyst. Previously, he had been a financial analyst in the corporate finance department at William Blair & Company. He holds a B.S. in industrial management from Carnegie Mellon University (1994).

The Statement of Additional Information provides additional information regarding portfolio manager compensation, other accounts managed by each portfolio manager, and each portfolio manager's ownership of shares of the Fund(s) each such portfolio manager manages.

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37



INVESTING WITH
THE OAKMARK FUNDS

The Funds are "no-load" mutual funds, which means that they do not impose any commission or sales charge when shares are purchased or sold. However, all Funds, other than Equity and Income Fund, impose a 2% redemption fee on redemptions of Class I Shares and Class II Shares held for 90 days or less. See "Investing with The Oakmark Funds—General Redemption Policies—90-Day Redemption Fee on Fund Shares." Equity and Income Fund does not impose a redemption fee.

ELIGIBILITY TO BUY SHARES

All Funds. Each Fund generally is available for purchase only by residents of the U.S., Puerto Rico, Guam, and the U.S. Virgin Islands.

Equity and Income Fund and Global Fund. Equity and Income Fund and Global Fund closed to new purchases through most financial services companies ("Intermediaries") on May 7, 2004 and December 15, 2003, respectively. If you are a shareholder (in your own name or as a beneficial owner of shares held in someone else's name) of one of those Funds, you may continue to make additional investments in that Fund and reinvest your dividends and capital gains distributions.

You may open a new account in either of those Funds, even though that Fund is closed, if:

•  You purchase shares directly from The Oakmark Funds;

•  You purchase through an employee retirement plan that currently includes shares of the Fund as an investment alternative and whose records are maintained by a trust company or plan administrator;

•  You are transferring or "rolling over" into an IRA account of the Fund from an employee benefit plan through which you held shares of the Fund (if your plan doesn't qualify for rollovers, you may still open a new account with all or part of the proceeds of a distribution from the plan);

•  You purchase into an annuity account offered by a company that currently includes shares of the Fund as an investment alternative for such account; or

•  The Adviser determines that your investment in the Fund would not adversely affect the Adviser's ability to manage the Fund effectively.

The Trust reserves the right to re-open any Fund to new investors or to modify the extent to which future sales of shares are limited.

If you have any questions about your eligibility to purchase shares of Equity and Income Fund and Global Fund, please call an investor services representative at 1-800-OAKMARK.

Oakmark Units. Oakmark Units are ILA Administration Units of beneficial interest of the Federal Portfolio, a cash management vehicle for existing and prospective Fund investors ("Oakmark Units"). The Federal Portfolio is a portfolio of Goldman Sachs Trust, which includes the Goldman Sachs—Institutional Liquid Asset Portfolios.

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38



For a prospectus and more complete information on the Oakmark Units, including management fees and expenses, please call 1-800-OAKMARK (1-800-625-6275) or visit oakmark.com. Please read the prospectus carefully before you invest or send money.

TYPES OF ACCOUNTS – CLASS I SHARES

A Fund's Class I Shares are offered to members of the general public. You may set up your account in any of the following ways:

Individual or Joint Ownership. Individual accounts are owned by one person. Joint accounts can have two or more owners, and provide for rights of survivorship.

Gift or Transfer to a Minor (UGMA, UTMA). These gift or transfer accounts let you give money to a minor for any purpose. The gift is irrevocable and the minor gains control of the account once he/she reaches the age of majority. Your application should include the minor's social security number.

Trust for Established Employee Benefit or Profit-Sharing Plan. The trust or plan must be established before you can open an account and you must include the date of establishment of the trust or plan on your application.

Business or Organization. You may invest money on behalf of a corporation, association, partnership or similar institution. You should include a certified resolution with your application that indicates which officers are authorized to act on behalf of the entity.

Retirement. A qualified retirement account enables you to defer taxes on investment income and capital gains. Your contributions may be tax-deductible. For detailed information on the tax advantages and consequences of investing in individual retirement accounts (IRAs) and retirement plan accounts, please consult your tax advisor. The types of IRAs available to you are: Traditional IRA, Roth IRA, Rollover IRA, SIMPLE IRA, and Coverdell Education Savings Account (formerly called an Education IRA). For detailed information on these accounts, see the Oakmark IRA Booklet and Coverdell Education Savings Booklet.

The Fund may be used as an investment in other kinds of retirement plans, including, but not limited to, Keogh plans maintained by self-employed individuals or owner-employees, traditional pension plans, corporate profit-sharing and money purchase pension plans, section 403(b)(7) custodial tax-deferred annuity plans, other plans maintained by tax-exempt organizations, cash balance plans and any and all other types of retirement plans. All of these accounts need to be established by the plan's trustee and the plan's trustee should contact the Fund regarding the establishment of an investment relationship.

TYPES OF ACCOUNTS – CLASS II SHARES

A Fund's Class II Shares are offered only for purchase through certain retirement plans, such as 401(k) and profit sharing plans. To purchase or redeem Class II Shares you must do so through an Intermediary. The purchase of Class II Shares is contingent upon an agreement between the Intermediary and the Fund(s). A Fund's Class II Shares pay a service fee at the annual rate of up to .25% of the average

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39



annual value of the Fund's Class II Shares. This service fee is paid to the Intermediary for performing services associated with the administration of a retirement plan.

If you invest in Class II Shares, the procedures by which you can purchase or redeem shares are governed by the terms of your retirement plan. Please contact your plan sponsor or service provider for information on how to buy and sell your Class II Shares, or contact an Oakmark investor services representative at 1-800-OAKMARK.

INVESTMENT MINIMUMS

(Applies to Class I Shares Only)

Type of Account   Initial Investment   Subsequent Investment  
Regular investing account   $ 1,000     $ 100    
Traditional or Roth IRA     1,000       100    
SIMPLE IRA
    Determined on a
case by case basis
      Determined on a
case by case basis
   
Coverdell Education Savings
Account (formerly called the
Education IRA)
    500       100    
Automatic Investment Plan
or Payroll Deduction Plan
    500       100    

 

SHARE PRICE

Net Asset Value. The share price is also called the net asset value (the "NAV") of a share. The NAV of a Class I or Class II share is determined by the Fund's custodian as of the close of regular session trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange (the "NYSE") on any day on which the NYSE is open for trading. A Fund's NAV will not be calculated on days when the NYSE is closed, such as on Saturdays and Sundays and on certain holidays, as more fully discussed in the Statement of Additional Information under "Purchasing and Redeeming Shares."

The NAV of a class of Fund shares is determined by dividing the value of the assets attributable to that class, less liabilities attributable to that class, by the number of shares of the class outstanding.

Trading in securities of non-U.S. issuers takes place in various markets on some days and at times when the NYSE is not open for trading. In addition, securities of non-U.S. issuers may not trade on some days when the NYSE is open for trading. The value of the Funds' portfolios may change on days when the Funds are not open for business and you cannot purchase or redeem Fund shares.

Securities held by the Funds are generally valued at market value. The Funds value debt securities maturing less than 61 days from the date of purchase at amortized cost. If a market quotation is not readily available or is deemed unreliable, or if an event that is expected to affect the value of a portfolio security occurs after the close of the primary market or exchange on which that security is traded and before the close of the NYSE, the security will be valued at a fair value determined in good faith in accordance with Fund policies and procedures. The Funds may use a systematic fair valuation model provided by an independent pricing service to value

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securities of non-U.S. issuers in order to adjust for changes in value that may occur between the close of certain foreign exchanges and the NYSE.

Although fair valuation may be more commonly used with equity securities of non-U.S. issuers it may also be used in a range of other circumstances, including thinly-traded domestic securities or fixed-income securities. 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.

Purchase Price and Effective Date. Each purchase of a Fund's Class I Shares is made at the NAV of Class I Shares next determined as follows:

•  A purchase by check, wire transfer or electronic transfer is made at the NAV next determined after receipt and acceptance by the Funds' transfer agent of your check or wire transfer or your electronic transfer investment instruction. An order is not accepted until the Funds' transfer agent has received an application or appropriate instruction along with the intended investment, if applicable, and any other required documentation.

•  A purchase through an Intermediary, such as a broker-dealer, bank, retirement plan service provider, or retirement plan sponsor that is the Fund's authorized agent for the receipt of orders, is made at the NAV next determined after the Intermediary receives and accepts the order.

•  A purchase through an Intermediary that is not an authorized agent of the Fund for the receipt of orders, is made at the NAV next determined after the Fund's transfer agent receives and accepts the order.

Each purchase of a Fund's Class II Shares through an Intermediary is made at the NAV of Class II Shares next determined after the Intermediary receives and accepts the order.

Each Fund reserves the right to reject any purchase order accepted by an Intermediary if it determines that the order is not in the best interests of the Fund or its shareholders.

Price information may be obtained by visiting The Oakmark Funds' website at oakmark.com or by calling 1-800-OAKMARK and choosing menu option 1 to access our voice recognition system.

GENERAL PURCHASING POLICIES

You may open an account and add to an account by purchasing directly from a Fund or through an Intermediary.

•  If you buy shares of a Fund through an Intermediary, the Intermediary may charge a fee for its services. Any such charge could constitute a substantial portion of a smaller account and may not be in your best interest. You may purchase a Fund's shares directly from the Fund without the imposition of any charges other than those described in this prospectus. See "How to Buy Class I Shares."

•  Once a Fund accepts your purchase order, you may not cancel or revoke it; however, you may redeem the shares. The Fund may withhold redemption proceeds until it is reasonably satisfied it has received your payment. This confirmation process may take up to 10 days.

•  Each Fund reserves the right, under limited circumstances, to cancel any purchase or exchange order it receives.

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Excessive and Short-Term Trading. The Funds are intended for long-term investment purposes, and thus purchases, redemptions and exchanges of Fund shares should be made with a view toward long-term investment objectives. Excessive trading, short-term trading and other abusive trading activities may be detrimental to a Fund and its long-term shareholders by disrupting portfolio management strategies, increasing brokerage and administrative cost, harming Fund performance and diluting the value of shares. Such trading may also require a Fund to sell securities to meet redemptions, which could cause taxable events that impact shareholders. If your investment horizon is not long-term, then you should not invest in the Funds.

The Funds' board of trustees has adopted policies and procedures that seek to discourage and not accommodate excessive or short-term trading activities. These policies and procedures include, among other things: (1) imposing a redemption fee on all Funds, other than Equity and Income Fund, as described below; (2) utilizing a third-party systematic fair valuation service; and (3) monitoring trading activity. In addition, each Fund reserves the right to reject or restrict, without prior notice, any purchase or exchange order it receives, including any order from a retirement plan participant, and any order transmitted by a shareholder's or retirement plan participant's Intermediary, that Fund management determines, in its sole discretion, not to be in the Fund's best interest. The Funds also reserve the right to reject or restrict all purchases received from an Intermediary, including retirement plans, even if not all shareholders or plan participants investing through that intermediary are involved in excessive or short-term trading.

Despite the Funds' efforts to detect and prevent abusive trading activity, there can be no assurance that the Funds will be able to identify all of those who may engage in abusive trading and curtail their activity in every instance. In particular, it may be difficult to identify such activity in certain omnibus accounts and other accounts traded through Intermediaries, some of which may be authorized agents of the Funds. Omnibus accounts are comprised of multiple investors whose purchases, exchanges and redemptions are aggregated before being submitted to the Funds. Consequently, the Funds may not have knowledge of the identity of investors and their transactions as those transactions are submitted to the Funds.

Under a federal rule, the Funds are required to have an agreement with many of their Intermediaries obligating the Intermediaries to provide, upon a Fund's request, information regarding the Intermediaries' customers and their transactions. However, there can be no guarantee that all excessive, short-term or other abusive trading activity will be detected, even with such agreements in place. The Funds will not accept purchase orders from Intermediaries who materially fail to comply with such agreements.

To the degree the Funds are able to detect excessive or short-term trading in accounts maintained by an Intermediary, the Funds will seek the cooperation of the Intermediary to stop such trading. However, there can be no assurance that the Intermediary will cooperate in all instances. Certain Intermediaries may not presently possess the operational or technical capabilities to track purchase, redemption or exchange orders made by an individual investor as requested by the Funds. Certain Intermediaries, in particular retirement plan administrators and sponsors, may possess other capabilities or utilize other techniques to deter excess or short-term trading upon which the Funds may rely. These other capabilities and techniques may be more or less restrictive than those utilized by the Funds. Accordingly, you should consult with your Intermediary to determine what purchase and exchange limitations may be applicable to your transact ions.

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GENERAL REDEMPTION POLICIES

You may redeem your shares by contacting a Fund directly or through an Intermediary.

•  The price at which your redemption order will be processed is the NAV next determined after proper redemption instructions are received. See "Investing with The Oakmark Funds—Share Price—Net Asset Value."

•  The Funds cannot accept a redemption request that specifies a particular redemption date or price.

•  Once a Fund accepts your redemption order, you may not cancel or revoke it.

•  The Funds generally will mail redemption proceeds within seven days after receipt of your redemption request. If you recently made a purchase, the Funds may withhold redemption proceeds until they are reasonably satisfied that they have received your payment. This confirmation process may take up to 10 days.

•  The Funds reserve the right at any time without prior notice to suspend, limit, modify or terminate any privilege, including the telephone exchange privilege, or its use in any manner by any person or class.

Redemption in Kind. The Funds generally intend to pay all redemptions in cash. Each Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the Fund's NAV during any 90-day period for any one shareholder. Redemptions in excess of those amounts will normally be paid in cash, but may be paid wholly or partly by a distribution in kind of marketable securities. Brokerage costs may be incurred by a shareholder who receives securities and desires to convert them to cash.

90-Day Redemption Fee on Fund Shares. All Funds, other than Equity and Income Fund, impose a short-term trading fee on redemptions of their 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. For example, if you purchase shares on March 1, you must hold the shares for at least 91 days or until May 30; otherwise, you will be assessed the redemption fee. 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 in the account. Equity and Income Fund does not impose a redemption fee.

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.

Certain Intermediaries, who utilize omnibus accounts with the Funds, have agreed to charge the Funds' redemption fee on their customers' accounts and remit such fee to the Funds. In this case, the amount of the fee and the holding period generally will be consistent with the Funds' short-term trading fee. However, due to operational requirements, an Intermediary's methods for tracking and calculating the fee may differ in some respects from those utilized by the Funds.

The redemption fee does not apply to certain types of accounts held through Intermediaries, including: (i) certain employer-sponsored retirement plans; (ii) certain broker wrap fee and other fee-based programs; and (iii) certain omnibus

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accounts where the omnibus accounts holder does not have the operational capability to impose a redemption fee on its underlying customer's accounts.

If you purchase Fund shares through an Intermediary, you should contact your Intermediary or refer to your plan documents for more information on whether a redemption fee will be applied to redemptions of your shares. When cooperation from an Intermediary is necessary to impose a redemption fee on its customers' accounts, different or additional exemptions may be applied by the Intermediary. Redemption fees may be waived under certain circumstances involving involuntary redemptions imposed by Intermediaries.

In addition, the redemption fee does not apply to:

•  shares of Equity and Income Fund;

•  shares acquired by automatic reinvestment of dividends or distributions of a Fund;

•  shares redeemed pursuant to a systematic withdrawal plan;

•  shares redeemed following the death or disability (as defined in the Internal Revenue Code) of the shareholder, including a registered joint owner;

•  shares redeemed as a result of involuntary redemptions, such as those resulting from a shareholder's failure to maintain a minimum investment in a Fund or pursuant to the requirements of the Funds' anti-money laundering policies and procedures;

•  shares redeemed to return excess contributions or in connection with required minimum distributions from retirement accounts;

•  shares redeemed in connection with a court order, including a qualified domestic relations order, or in connection with a shareholder's forfeiture of assets;

•  shares acquired in connection with a change in account registration; and

•  shares redeemed by a liquidity service provider under a liquidity program.

In addition to the circumstances previously noted, each Fund reserves the right to waive the redemption fee at its discretion where it believes such waiver is in the Fund's best interests, including but not limited to when it determines that imposition of a redemption fee is not necessary to protect the Fund from the effects of short-term trading. In addition, each Fund reserves the right to modify or eliminate the redemption fee or waivers at any time. In order to determine your eligibility to receive a waiver, it may be necessary for you to provide the Funds or your Intermediary with information and records regarding your circumstance.

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HOW TO BUY CLASS I SHARES

For investors who purchase directly from the Fund(s) and not through an Intermediary

BY CHECK

Opening an Account

•  Complete and sign the New Account Registration Form, enclose a check made payable to The Oakmark Funds and mail the Form and your check to the address indicated to the right.

•  Your initial investment must be at least $1,000.

•  PLEASE NOTE: The Funds do not accept cash, drafts, starter checks, checks made payable to a party other than The Oakmark Funds, checks drawn on banks outside of the U.S. or purchase orders specifying a particular purchase date or price per share.

•  The Funds will withhold redemption proceeds for up to 10 days after purchase of shares by check.

Adding to an Account

•  Mail your check made payable to The Oakmark Funds with either the additional investment form attached to your confirmation statement or a note with the amount of the purchase, your account number, and the name in which your account is registered to:

The Oakmark Funds
P.O. Box 219558
Kansas City, MO 64121-9558

•  Your subsequent investments must be at least $100.

BY WIRE TRANSFER

Opening an Account

•  Generally, you may not open an account by wire transfer.

Adding to an Account

•  Instruct your bank to transfer funds to State Street Bank and Trust Co., ABA#011000028, DDA# 9904-632-8. Specify the Fund name, your account number and the registered account name(s) in the instructions.

•  Your subsequent investments must be at least $100.

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BY ELECTRONIC TRANSFER

Opening an Account

•  You may open a new account by electronic transfer only by visiting oakmark.com. Choose "Open an Account" in the drop-down menu under the "Investing with Us" tab and then follow the instructions.

•  The maximum initial investment via oakmark.com is $100,000.

•  The Funds will withhold redemption proceeds for up to 10 days after purchase of shares by electronic transfer.

Adding to an Account

•  If you established the electronic transfer privilege on your New Account Registration Form, call the Funds' Voice Recognition System, OAKLINK, at 1-800-OAKMARK and choose menu option 1, and follow the instructions, or call an investor service representative at 1-800-OAKMARK.

•  Your subsequent investments must be at least $100.

•  If you did not establish the electronic transfer privilege on your New Account Registration Form, you may add the privilege by obtaining a Shareholder Services Form by visiting the Oakmark Funds' website at oakmark.com or by calling an investor service representative at 1-800-OAKMARK.

Confirm with your bank or credit union that it is a member of the Automated Clearing House (ACH) system.

BY AUTOMATIC INVESTMENT

Opening an Account

•  Choose the Automatic Investment Plan on your New Account Registration Form.

•  Your initial investment must be at least $500 and be made by check payable to The Oakmark Funds.

•  In addition to your investment check, send a check marked "Void" or a deposit slip from your bank account along with your New Account Registration Form.

Adding to an Account

•  If you chose the Automatic Investment Plan when you opened your account, subsequent purchases of shares will be made automatically, either monthly or quarterly, by electronic transfer from your bank account in the dollar amount you specified.

•  Your subsequent investments must be at least $100.

•  If you did not establish the electronic transfer privilege on your New Account Registration Form, you may add the privilege by obtaining a Shareholder Services Form by visiting The Oakmark Funds' website at oakmark.com or by calling an investor service representative at 1-800-OAKMARK.

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BY PAYROLL DEDUCTION

Opening an Account

•  Complete and sign the New Account Registration Form and the Payroll Deduction Plan Application, enclose a check made payable to The Oakmark Funds and return both forms and the check for at least $500 to:

The Oakmark Funds
P.O. Box 219558
Kansas City, MO 64121-9558

•  Your initial investment must be at least $500 and be made by check.

•  The Payroll Deduction Plan Application allows you to purchase shares of the Fund on a monthly, bi-monthly, or quarterly basis by instructing your employer to deduct from your paycheck a specified dollar amount.

Adding to an Account

•  If you completed the Payroll Deduction Plan Application, subsequent purchases of shares will be made automatically, either monthly, bi-monthly or quarterly, by deducting the dollar amount you specified from your pay.

•  Your subsequent investments must be at least $100.

•  If you want to establish the Payroll Deduction Plan, obtain a Payroll Deduction Plan Application by visiting The Oakmark Funds' website at oakmark.com or by calling an investor service representative at 1-800-OAKMARK.

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BY EXCHANGE

You may purchase shares of a Fund by exchange of shares of another Fund or by exchange of Oakmark Units (see "Investing with The Oakmark Funds—Eligibility to Buy Shares—Oakmark Units" above).

Opening an Account

•  Call an investor service representative at 1-800-OAKMARK. The new account into which you are making the exchange will have exactly the same registration as the account from which you are exchanging shares.

•  Your initial investment into your new account must be at least $1,000.

•  Obtain a current prospectus for the Fund into which you are exchanging by visiting The Oakmark Funds' website at oakmark.com or calling an investor service representative at 1-800-OAKMARK.

Adding to an Account

•  Call the Funds' Voice Recognition System, OAKLINK, at 1-800-OAKMARK and choose menu option 1, and follow the instructions, or call an investor service representative at 1-800-OAKMARK.

•  Send a letter of instruction, indicating your name, the name of the Fund, and the Fund account number from which you wish to redeem shares, and the name of the Fund and the Fund account number into which you wish to buy shares, to:

The Oakmark Funds
P.O. Box 219558
Kansas City, MO 64121-9558

•  Your subsequent investments must be at least $100.

•  The Trust may refuse at any time any exchange request it considers detrimental to a Fund.

•  An exchange transaction is a redemption of shares in one Fund and a simultaneous purchase of shares in a different Fund that, for federal income tax purposes, may result in a capital gain or loss. An exchange may result in a 2% redemption fee on shares of a Fund, other than Equity and Income Fund, held for 90 days or less.

BY INTERNET

Opening an Account

•  Visit The Oakmark Funds' website at oakmark.com, choose "Open an Account" in the drop-down menu under the "Investing with Us" tab and then follow the instructions.

•  Your initial investment into your new account must be at least $1,000.

Adding to an Account

•  Visit The Oakmark Funds' website at oakmark.com, log in to your account and then follow the instructions.

•  Your subsequent investments must be at least $100.

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HOW TO REDEEM CLASS I SHARES

For investors who redeem directly from the Funds and not through an Intermediary

IN WRITING

By mail:

The Oakmark Funds
P.O. Box 219558
Kansas City, MO 64121-9558

Express delivery or courier:

The Oakmark Funds
330 West 9th Street
Kansas City, MO 64105-1514
Ph: 617-449-6274

Your redemption request must:

•  identify the Fund and give your account number;

•  specify the number of shares or dollar amount to be redeemed; and

•  be signed in ink by all account owners exactly as their names appear on the account registration.

BY TELEPHONE

•  You may redeem shares from your account by calling the Funds' Voice Recognition System, OAKLINK, at 1-800-OAKMARK and choosing menu option 1, saying Redeem and then following the instructions, or by calling an investor service representative at 1-800-OAKMARK Monday through Friday between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. Proceeds of an IRA redemption over the phone may only be sent to the address, not to a bank account. You may not redeem a Roth IRA, Simplified Employee Pension Plan (SEP) or Coverdell Education Savings Account by phone.

•  A check for the proceeds will be sent to your address of record, generally within seven days of receiving your proper request, or within 10 days of your purchase if you purchased the shares by check. You may select the overnight delivery option for your check for a fee. Overnight delivery is not available to a P.O. Box. See "Investing with The Oakmark Funds—General Redemption Policies."

•  A redemption request received by telephone after the close of regular session trading on the NYSE (usually 4:00 p.m. Eastern time) is deemed received on the next business day.

•  You may not redeem by telephone shares held in an account for which you have changed the address within the preceding 30 days.

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BY ELECTRONIC TRANSFER

•  To redeem shares from your account by electronic transfer, call the Funds' Voice Recognition System, OAKLINK, at 1-800-OAKMARK and choose menu option 1 and follow the instructions, or call an investor service representative at 1-800-OAKMARK.

•  Payment of the proceeds will be made by electronic transfer only to a checking account previously designated by you at a bank that is a member of the ACH system. Confirm with your bank or credit union that it is a member of ACH.

•  Payment of the proceeds will normally be sent on the next business day after receipt of your request or within 10 days of your purchase if you purchased the shares by electronic transfer.

•  A redemption request received by telephone after the close of regular session trading on the NYSE (usually 4:00 p.m. Eastern time) is deemed received on the next business day.

•  If the proceeds of your redemption are sent by electronic transfer, your bank will be notified of the transfer on the day the proceeds are sent, but your bank account may not receive "good funds" for at least one week thereafter.

BY EXCHANGE

•  You may redeem some or all of your shares of a Fund and use the proceeds to buy shares of another Oakmark Fund or Oakmark Units either in writing or by calling the Funds' Voice Recognition System, OAKLINK, at 1-800-OAKMARK and choosing menu option 1 and following the instructions, or by calling an investor service representative at 1-800-OAKMARK.

•  Obtain a current prospectus for a Fund into which you are exchanging by visiting The Oakmark Funds' website at oakmark.com or by calling an investor service representative at 1-800-OAKMARK.

•  An exchange request received by telephone after the close of regular session trading on the NYSE (usually 4:00 p.m. Eastern time) is deemed received on the next business day.

•  The Trust may refuse at any time any exchange request it considers detrimental to a Fund.

•  An exchange transaction is a redemption of shares in one Fund and a simultaneous purchase of shares in a different Fund that, for federal income tax purposes, may result in a capital gain or loss. An exchange may result in a 2% redemption fee on shares of a Fund, other than Equity and Income Fund, held for 90 days or less.

See also the section entitled "How to Buy Class I Shares—By Exchange."

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BY WIRE TRANSFER

•  To redeem shares from your account by wire transfer, call an investor service representative at 1-800-OAKMARK.

•  The proceeds will be paid by wire transfer to your bank account.

•  The cost of the wire transfer (currently $5) will be deducted from your account, or from the redemption proceeds if you redeem your entire account.

•  Some transactions require a signature guarantee. See "How to Redeem Class I Shares—Signature Guarantee."

•  Payment of the proceeds will normally be wired on the next business day after receipt of your request.

•  A redemption request received by telephone after the close of regular session trading on the NYSE (usually 4:00 p.m. Eastern time) is deemed received on the next business day.

•  A wire transfer will normally result in your bank receiving "good funds" on the business day following the date of redemption of your shares.

BY AUTOMATIC REDEMPTION

•  You may automatically redeem a fixed dollar amount of shares each month or quarter and have the proceeds sent by check to you or deposited by electronic transfer into your bank account by so electing on your New Account Registration Form or Shareholder Services Form.

•  Because withdrawal payments may have tax consequences, you should consult your tax advisor before establishing such a plan.

BY INTERNET

•  Visit The Oakmark Funds' web site at oakmark.com, log in to your account and then follow the instructions.

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SIGNATURE GUARANTEE

A Stamp 2000 Medallion Signature Guarantee must be included in your request to redeem your Fund shares, and your request must be in writing, if:

•  your account registration has been changed within the last 30 days;

•  the redemption check is to be mailed to an address different from the one on your account;

•  the redemption check is to be made payable to someone other than the registered account owner; or

•  you are instructing a Fund to transmit the proceeds to a bank account that you have not previously designated as the recipient of such proceeds.

The signature guarantee must be a Stamp 2000 Medallion Signature Guarantee. You may be able to obtain such a signature guarantee from a bank, securities broker-dealer, credit union (if authorized under state law), securities exchange or association, clearing agency or savings association. You cannot obtain a signature guarantee from a notary public.

SMALL ACCOUNT FEE POLICY

Each Fund reserves the right to assess an annual fee of $25 on any account that, due to redemptions, falls below the minimum amount required to establish the account, as described above. The fee is assessed by the automatic redemption of shares in the account in an amount sufficient to pay the fee. The fee does not apply to an account with an active investment builder or payroll deduction programs or to a retirement account.

SMALL ACCOUNT REDEMPTION

Each Fund reserves the right to redeem shares in any account, including any account held in the name of an Intermediary, 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. 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.

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SHAREHOLDER SERVICES

CLASS I SHAREHOLDERS

If you are a holder of a Fund's Class I Shares, the following services are available to you.

Reporting to Shareholders. You will receive a confirmation statement reflecting each of your purchases and sales of Fund shares, as well as periodic statements detailing distributions made by the Funds. Shares purchased by reinvestment of dividends or pursuant to an automatic investment plan will be confirmed to you quarterly. In addition, the Funds will send you periodic reports showing Fund portfolio holdings and will provide you annually with tax information. We suggest that you keep your account statements with your other important financial papers. You may need them for tax purposes.

The Funds reduce the number of duplicate prospectuses, annual and semi-annual reports your household receives by sending only one copy of each to those addresses shared by two or more accounts. Call the Funds at 1-800-OAKMARK to request individual copies of these documents. The Funds will begin sending individual copies thirty days after receiving your request.

Customer Identification Program. Federal law requires all financial institutions, including mutual funds, to obtain, verify and record information that identifies each person who opens an account.

In order to open an account, the Funds will ask you to provide certain identifying information on the account application, including your full name, address, date of birth and social security number or taxpayer identification number. If you fail to provide the appropriate information, we may reject your application and all monies received to establish your account will be returned to you. As a result, it is very important that the application be filled out completely in order to establish an account.

After your account is established, the Funds are required to take steps to verify your identity. These actions may include checking your identifying information against various databases. If the Funds are unable to verify your identity from the information you provide, you may be restricted from making future purchases for or transfers of shares from your account; or, your account may be closed and the redemption proceeds will be paid to you. You will receive the share price next calculated after the Funds determine that they are unable to verify your identity; so, your redemption proceeds may be more or less than the amount you paid for your shares and the redemption may be a taxable transaction.

IRA Plans. The Trust has a master IRA plan that allows you to invest in a Traditional IRA, Roth IRA, Coverdell Education Savings Account or SIMPLE IRA on a tax-sheltered basis in the Funds or Oakmark Units. The plan also permits you to "roll over" or transfer to your Traditional IRA a lump sum distribution from a qualified pension or profit-sharing plan, thereby postponing federal income tax on the

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distribution. If your employer has a SEP, you may establish a Traditional IRA with a Fund to which your employer may contribute, subject to special rules designed to avoid discrimination. Information on IRAs may be obtained by visiting The Oakmark Funds' website at oakmark.com or calling an investor service representative at 1-800-OAKMARK.

Establishing Privileges. You may establish any of the shareholder privileges when you complete an application to purchase shares of a Fund. If you have already established an account and want to add or change a privilege, visit The Oakmark Funds' website at oakmark.com to obtain a Shareholder Services Form and return the completed form to the Oakmark Funds, or call an investor service representative at 1-800-OAKMARK to request the appropriate form.

Voice Recognition System ("OAKLINK"). To obtain information about your account, such as account balance, last transaction and distribution information, to purchase, redeem or exchange shares of a Fund or Oakmark Units, or to order duplicate statements, call the Funds' Voice Recognition System, OAKLINK, at 1-800-OAKMARK (choose menu option 1). Please note: you must have a personal identification number (a "PIN") to access account information through OAKLINK. To establish a PIN, call 1-800-OAKMARK and choose menu options 1, **, 1, then 6 and you will be prompted for your social security number and account number information for PIN establishment for system access. If you have problems, please contact an Investor Service Representative at 1-800-OAKMARK Monday through Friday between the hours of 8:00 a.m. and 6:00 p.m. Eastern time.

Website. To learn more about The Oakmark Funds, or to obtain a prospectus, account application, shareholder report, account servicing form, average cost information or each Fund's daily NAV, to establish systematic investing privileges or to read portfolio manager commentaries visit The Oakmark Funds' website at oakmark.com. To perform transactions, change your address, order duplicate statements or obtain information about your account, such as your account balance, your last transaction and account history, log into your account and follow the instructions.

Forms for Servicing Accounts. To facilitate investing, the Funds make the following forms available:

•  New Account Registration Form

•  IRA Application

•  IRA Transfer of Assets Form

•  IRA Distribution Form

•  Add-A-Fund Form

•  Education Savings Account Application (formerly Education IRA)

•  Education Savings Account Transfer of Assets Form

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•  Shareholder Services Form (which includes forms to add or change your: address, social security or tax ID number, electronic transactions, bank information, distribution options, systematic withdrawal plan, automatic investment plan)

•  Name Change Request

•  Change of Beneficiary Form

•  Check Writing Signature Form

•  Transfer on Death Form

•  Payroll Deduction Application

•  Power of Attorney

Telephone and Internet Transactions. You may perform many transactions—including exchanges, purchases and redemptions—by telephone and over the Internet. To prevent unauthorized transactions in your account, the Funds will take precautions designed to confirm that instructions communicated through the telephone or Internet are genuine. For example, the Funds or their agents may record a telephone call, request a PIN or password, request more information and send written confirmations of telephone and Internet transactions. The Funds request that shareholders review these written confirmations and notify the Funds immediately if there is a problem. A Fund will not be responsible for any loss, liability, cost or expense resulting from an unauthorized transaction initiated by telephone or the Internet if it or its transfer agent follows reasona ble procedures designed to verify the identity of the caller or Internet user.

Account Address Change. You may change the address of record for your Fund account by sending written instructions to the Funds at The Oakmark Funds, P.O. Box 219558, Kansas City, MO 64121-9558 or by telephoning an investor service representative at 1-800-OAKMARK. You may change your address by visiting The Oakmark Funds' website at oakmark.com and logging in to your account and following the instructions. You may also change your address by noting the change on the investment slip included as part of your quarterly account statement. Please be sure to sign the slip as authorization. P.O. Box addresses will only be accepted with accompanying street address information. If you change your address of reco rd without a signature guarantee, unless you request that the redemption proceeds be sent to your bank account of record with the Funds, the Funds will not honor the redemption request for the following 30 days. During that period, the Funds will require written redemption requests with signature guarantees.

Account Registration Change. You may change the name on your account registration only by sending your written instructions with a Stamp 2000 Medallion Signature Guarantee, as described above, to the transfer agent at The Oakmark Funds, P.O. Box 219558, Kansas City, MO 64121-9558. See "How to Redeem Class I Shares—Signature Guarantee." Please note that a new account application or other documentation may be required depending on the type of account registration.

Account Transcripts. You may order a transcript of activity in your account(s) by calling an investor service representative at 1-800-OAKMARK. The Funds may assess a processing charge for a transcript order.

PROSPECTUS
55



CLASS II SHAREHOLDERS

If you are a holder of a Fund's Class II Shares, your 401(k) or other retirement plan will provide shareholder services to you as required in accordance with your plan agreement. You should contact your plan sponsor or service provider for information about the services available to you under the terms of your plan.

THE OAKMARK FUNDS
56



DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

Each Fund distributes to its shareholders substantially all net investment income as dividends and any net capital gains realized from sales of the Fund's portfolio securities. Equity and Income Fund may declare and pay dividends from net investment income semi-annually, while each of the other Funds expects to declare and pay dividends annually. Net realized long-term capital gains, if any, are paid to shareholders at least annually.

All of your income dividends and capital gain distributions will be reinvested in additional shares unless you elect to have distributions paid by check. If any check from a Fund mailed to you is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in additional Fund shares.

TAXES

The following discussion of U.S. and foreign taxation applies only to U.S. shareholders and is not intended to be a full discussion of income tax laws and their effect. You may wish to consult your own tax advisor.

Taxes on Transactions. When you redeem shares, you will experience a capital gain or loss if there is a difference between the tax basis of your shares and the price you receive when you redeem them. The federal tax treatment will depend on how long you owned the shares and your individual tax position. You may be subject to state and local taxes on your investment in a Fund, depending on the laws of your home state or locality.

Exchanges. If you perform an exchange transaction, it is considered a sale and purchase of shares for federal income tax purposes and may result in a capital gain or loss.

Distributions. Distributions from investment income (dividends) and net short-term capital gains are taxable as ordinary income except as noted below. Distributions of long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held your Fund shares. Distributions will be taxable to you whether received in cash or reinvested in Fund shares.

The Trust will send you an annual statement to advise you as to the source of your distributions for tax purposes. If you are not subject to income taxation, you will not be required to pay tax on amounts distributed to you.

Taxes on Distributions. Distributions are subject to federal income tax, and may be subject to state or local taxes. If you are a U.S. citizen residing outside the U.S., your distributions also may be taxed by the country in which you reside.

Your distributions are taxable whether you take them in cash or reinvest them in additional shares.

PROSPECTUS
57



For federal tax purposes, the Fund's income and short-term capital gain distributions are taxed as ordinary income and long-term capital gain distributions are taxed as long-term capital gains, except that "qualified dividend income" of noncorporate investors who satisfy certain holding period requirements is taxed at long-term capital gain rates, which currently reach a maximum of 15%. The character of a capital gain depends on the length of time that the Fund held the asset it sold.

Every January, each of your Funds will send you and the Internal Revenue Service ("IRS") a statement called Form 1099 showing the amount of taxable distributions you received (including those reinvested in additional shares) in the previous calendar year.

Average Cost Calculation. Each shareholder is responsible for tax reporting and Fund share cost calculation. To facilitate your tax reporting, each Fund provides you with an average cost statement with your 1099 tax form. This average cost statement is based on transaction activity in an account for the period during which you held the account directly with the Fund.

Buying Into a Distribution. Purchasing a Fund's shares in a taxable account shortly before a distribution by the Fund is sometimes called "buying into a distribution." You pay income taxes on a distribution whether you reinvest the distribution in shares of the Fund or receive it in cash. In addition, you pay taxes on the distribution whether the value of your investment decreased, increased or remained the same after you bought shares of the Fund.

A Fund may build up capital gains during the period covered by a distribution (over the course of the year, for example) when securities in the Fund's portfolio are sold at a profit. After subtracting any capital losses, the Fund distributes those gains to you and other shareholders, even if you did not own the shares when the gains occurred (if you did not hold the Fund earlier in the year, for example), and you incur the full tax liability on the distribution.

Foreign Income Taxes. Investment income received by a Fund from sources within foreign countries may be subject to foreign income taxes withheld at the source. If a Fund pays nonrefundable taxes to foreign governments during the year, the taxes will reduce the Fund's dividends but will still be included in your taxable income. However, if a Fund qualifies for, and makes, a special election, you may be able to claim an offsetting credit or deduction on your tax return for your share of foreign taxes paid by a Fund.

Backup Withholding. You must furnish to the Funds your properly certified social security or other tax identification number to avoid the Federal income tax backup withholding on dividends, distributions and redemption proceeds. If you do not do so or the IRS informs the Fund that your tax identification number is incorrect, the Fund may be required to withhold a percentage of your taxable distributions and redemption proceeds. Because each Fund must promptly pay to the IRS all amounts withheld, it is usually not possible for a Fund to reimburse you for amounts withheld. You may claim the amount withheld as a credit on your federal income tax return.

THE OAKMARK FUNDS
58




FINANCIAL HIGHLIGHTS

The following tables are intended to help you understand each Fund's financial performance during the last five years (or since it began operations, if less than five years). Certain information reflects financial results for a single Fund share. Total returns represent the rate you would have earned (or lost) on an investment, assuming reinvestment of all dividends and distributions. The information for the fiscal year ended September 30, 2007 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, whose report, along with each Fund's financial statements, is included in the annual report and is incorporated by reference in the Statement of Additional Information, which are available on request. Deloitte & Touche LLP has also audited the information for the fiscal years ended September 30, 2006, 2005, 2004, and 2003. For each year shown, all information is for the fiscal year ended September 30, unless otherwise noted.

PROSPECTUS
59



THE OAKMARK FUND

For a share outstanding throughout each period

    CLASS I  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 44.64     $ 40.75     $ 38.68     $ 33.85     $ 28.08    
Income from investment
operations:
 
Net investment income     0.47 (a)     0.39 (a)     0.34       0.16       0.13    
Net gains or losses on
investments (both
realized and unrealized)
    4.60       3.85       1.90       4.81       5.75    
Total from investment
operations:
    5.07       4.24       2.24       4.97       5.88    
Less distributions:  
Dividends (from net
investment income)
    (0.43 )     (0.35 )     (0.17 )     (0.14 )     (0.11 )  
Distributions (from
capital gains)
    (2.00 )     0.00       0.00       0.00       0.00    
Total distributions     (2.43 )     (0.35 )     (0.17 )     (0.14 )     (0.11 )  
Redemption fee per share     0.00 (b)     0.00 (b)     0.00 (b)     0.00 (b)        
Net asset value, end of period   $ 47.28     $ 44.64     $ 40.75     $ 38.68     $ 33.85    
Total return     11.51 %     10.46 %     5.79 %     14.73 %     20.99 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 5,656.9     $ 5,486.2     $ 6,340.4     $ 6,474.0     $ 4,769.4    
Ratio of expenses to
average net assets
    1.01 %*     1.05 %*     1.03 %*     1.05 %     1.14 %  
Ratio of net investment
income to average net
assets
    1.01 %     0.94 %     0.79 %     0.47 %     0.48 %  
Portfolio turnover rate     12 %     9 %     16 %     19 %     21 %  
    CLASS II  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 44.35     $ 40.51     $ 38.45     $ 33.68     $ 28.04    
Income from investment
operations:
 
Net investment income     0.32 (a)     0.25 (a)     0.26 (a)     0.04 (a)     0.05 (a)  
Net gains or losses on
investments (both
realized and unrealized)
    4.55       3.82       1.87       4.78       5.69    
Total from investment
operations:
    4.87       4.07       2.13       4.82       5.74    
Less distributions:  
Dividends (from net
investment income)
    (0.25 )     (0.23 )     (0.07 )     (0.05 )     (0.10 )  
Distributions (from
capital gains)
    (2.00 )     0.00       0.00       0.00       0.00    
Total distributions     (2.25 )     (0.23 )     (0.07 )     (0.05 )     (0.10 )  
Redemption fee per share     0.00 (b)     0.00 (b)                    
Net asset value, end of period   $ 46.97     $ 44.35     $ 40.51     $ 38.45     $ 33.68    
Total return     11.11 %     10.08 %     5.55 %     14.32 %     20.52 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 29.1     $ 37.5     $ 43.7     $ 51.9     $ 21.1    
Ratio of expenses to
average net assets
    1.36 %*     1.40 %*     1.26 %*     1.40 %     1.53 %  
Ratio of net investment
income to average net
assets
    0.67 %     0.59 %     0.58 %     0.11 %     0.06 %  
Portfolio turnover rate     12 %     9 %     16 %     19 %     21 %  

 

*  The ratio excludes expense offset arrangement.

(a)  Computed using average shares outstanding throughout the period.

(b)  Amounts round to less than $0.01 per share.

THE OAKMARK FUNDS
60



THE OAKMARK SELECT FUND

For a share outstanding throughout each period

    Class I  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 34.48     $ 33.44     $ 31.20     $ 27.55     $ 21.67    
Income from investment
operations:
 
Net investment income     0.38 (a)     0.36 (a)     0.29       0.15 (a)     0.05    
Net gains or losses on
investments (both
realized and unrealized)
    2.11       2.76       2.19       3.60       5.85    
Total from investment
operations:
    2.49       3.12       2.48       3.75       5.90    
Less distributions:  
Dividends (from net
investment income)
    (0.39 )     (0.29 )     (0.24 )     (0.10 )     (0.02 )  
Distributions (from
capital gains)
    (3.53 )     (1.79 )     0.00       0.00       0.00    
Total distributions     (3.92 )     (2.08 )     (0.24 )     (0.10 )     (0.02 )  
Redemption fee per share     0.00 (b)     0.00 (b)     0.00 (b)     0.00 (b)        
Net asset value, end of period   $ 33.05     $ 34.48     $ 33.44     $ 31.20     $ 27.55    
Total return     7.00 %     9.58 %     7.98 %     13.64 %     27.25 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 5,397.4     $ 5,776.6     $ 5,908.0     $ 5,463.0     $ 4,993.0    
Ratio of expenses to
average net assets
    0.97 %*     0.99 %*     1.00 %*     1.00 %     1.02 %  
Ratio of net investment
income to average net
assets
    1.11 %     1.08 %     0.87 %     0.50 %     0.23 %  
Portfolio turnover rate     10 %     22 %     21 %     14 %     20 %  
    Class II  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 34.23     $ 33.24     $ 31.00     $ 27.37     $ 21.56    
Income from investment
operations:
 
Net investment income (loss)     0.27 (a)     0.26 (a)     0.21       0.09 (a)     0.00 (b)  
Net gains or losses on
investments (both
realized and unrealized)
    2.09       2.72       2.18       3.58       5.81    
Total from investment
operations:
    2.36       2.98       2.39       3.67       5.81    
Less distributions:  
Dividends (from net
investment income)
    (0.24 )     (0.20 )     (0.15 )     (0.04 )     0.00    
Distributions (from
capital gains)
    (3.53 )     (1.79 )     0.00       0.00       0.00    
Total distributions     (3.77 )     (1.99 )     (0.15 )     (0.04 )     0.00    
Redemption fee per share     0.00 (b)     0.00 (b)                    
Net asset value, end of period   $ 32.82     $ 34.23     $ 33.24     $ 31.00     $ 27.37    
Total return     6.65 %     9.18 %     7.72 %     13.40 %     26.95 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 36.2     $ 68.1     $ 85.2     $ 98.0     $ 93.1    
Ratio of expenses to
average net assets
    1.35 %*     1.34 %*     1.25 %*     1.21 %     1.29 %  
Ratio of net investment
income (loss) to average
net assets
    0.79 %     0.78 %     0.65 %     0.29 %     (0.04 )%  
Portfolio turnover rate     10 %     22 %     21 %     14 %     20 %  

 

*  The ratio excludes expense offset arrangement.

(a)  Computed using average shares outstanding throughout the period.

(b)  Amounts round to less than $0.01 per share.

PROSPECTUS
61



THE OAKMARK EQUITY AND INCOME FUND

For a share outstanding throughout each period

    Class I  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 26.49     $ 25.41     $ 23.12     $ 20.30     $ 17.18    
Income from investment
operations:
 
Net investment income     0.58 (a)     0.44       0.31       0.15       0.17    
Net gains or losses on
investments (both
realized and unrealized)
    3.41       1.18       2.77       2.81       3.19    
Total from investment
operations:
    3.99       1.62       3.08       2.96       3.36    
Less distributions:  
Dividends (from net
investment income)
    (0.50 )     (0.34 )     (0.20 )     (0.14 )     (0.24 )  
Distributions (from
capital gains)
    (1.31 )     (0.20 )     (0.59 )     0.00       0.00    
Total distributions     (1.81 )     (0.54 )     (0.79 )     (0.14 )     (0.24 )  
Redemption fee per share     0.00 (b)     0.00 (b)     0.00 (b)     0.00 (b)        
Net asset value, end of period   $ 28.67     $ 26.49     $ 25.41     $ 23.12     $ 20.30    
Total return     15.77 %     6.51 %     13.65 %     14.64 %     19.75 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 12,489.5     $ 10,414.5     $ 9,223.2     $ 7,577.9     $ 4,138.0    
Ratio of expenses to
average net assets
    0.83 %*     0.86 %*     0.89 %*     0.92 %     0.93 %  
Ratio of net investment
income to average net
assets
    2.14 %     1.88 %     1.36 %     0.78 %     1.07 %  
Portfolio turnover rate     67 %     81 %     112 %     72 %     48 %  
    Class II  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 26.35     $ 25.29     $ 23.03     $ 20.24     $ 17.15    
Income from investment
operations:
 
Net investment income     0.48 (a)     0.35       0.28       0.11       0.16    
Net gains or losses on
investments (both
realized and unrealized)
    3.40       1.19       2.72       2.79       3.15    
Total from investment
operations:
    3.88       1.54       3.00       2.90       3.31    
Less distributions:  
Dividends (from net
investment income)
    (0.42 )     (0.28 )     (0.15 )     (0.11 )     (0.22 )  
Distributions (from
capital gains)
    (1.31 )     (0.20 )     (0.59 )     0.00       0.00    
Total distributions     (1.73 )     (0.48 )     (0.74 )     (0.11 )     (0.22 )  
Redemption fee per share     0.00 (b)     0.00 (b)                    
Net asset value, end of period   $ 28.50     $ 26.35     $ 25.29     $ 23.03     $ 20.24    
Total return     15.38 %     6.18 %     13.34 %     14.36 %     19.46 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 915.1     $ 718.1     $ 582.0     $ 478.7     $ 246.6    
Ratio of expenses to
average net assets
    1.17 %*     1.18 %*     1.14 %*     1.17 %     1.17 %  
Ratio of net investment
income to average net
assets
    1.82 %     1.57 %     1.11 %     0.53 %     0.84 %  
Portfolio turnover rate     67 %     81 %     112 %     72 %     48 %  

 

*  The ratio excludes expense offset arrangement.

(a)  Computed using average shares outstanding throughout the period.

(b)  Amounts round to less than $0.01 per share.

THE OAKMARK FUNDS
62



THE OAKMARK GLOBAL FUND

For a share outstanding throughout each period

    Class I  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value,
beginning of period
  $ 26.69     $ 23.91     $ 19.73     $ 16.98     $ 11.30    
Income from investment
operations:
 
Net investment income     0.18 (b)     0.27       0.17       0.09       0.01    
Net gains or losses on
investments (both
realized and unrealized)
    5.06       3.74       4.48       2.71       5.67    
Total from investment
operations:
    5.24       4.01       4.65       2.80       5.68    
Less distributions:  
Dividends (from net
investment income)
    (0.31 )     (0.26 )     (0.10 )     0.00 (a)     0.00    
Distributions (from
capital gains)
    (3.54 )     (0.97 )     (0.37 )     (0.05 )     0.00    
Total distributions     (3.85 )     (1.23 )     (0.47 )     (0.05 )     0.00    
Redemption fee per share     0.00 (a)     0.00 (a)     0.00 (a)     0.00 (a)        
Net asset value, end of period   $ 28.08     $ 26.69     $ 23.91     $ 19.73     $ 16.98    
Total return     21.29 %     17.46 %     23.88 %     16.54 %     50.27 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 3,006.2     $ 2,282.2     $ 1,842.9     $ 1,336.3     $ 704.8    
Ratio of expenses to
average net assets
    1.13 %*     1.18 %*     1.20 %*     1.26 %     1.28 %  
Ratio of net investment
income (loss) to
average net assets
    0.66 %     1.18 %     0.81 %     0.47 %     0.00 %(c)  
Portfolio turnover rate     35 %     41 %     17 %     16 %     42 %  

 

*  The ratio excludes expense offset arrangement.

(a)  Amounts round to less than $0.01 per share.

(b)  Computed using average shares outstanding throughout the period.

(c)  Amount rounds to less than 0.01%.

PROSPECTUS
63



THE OAKMARK GLOBAL FUND

For a share outstanding throughout each period

    Class II  
    Year Ended September 30  
    2007   2006   2005   2004   2003  
Net asset value,
beginning of period
  $ 26.31     $ 23.63     $ 19.53     $ 16.84     $ 11.24    
Income from investment
operations:
 
Net investment income
(loss)
    0.07 (b)     0.18       0.11       0.05       0.02    
Net gains or losses on
investments (both
realized and unrealized)
    4.99       3.69       4.43       2.69       5.58    
Total from investment
operations:
    5.06       3.87       4.54       2.74       5.60    
Less distributions:  
Dividends (from net
investment income)
    (0.21 )     (0.22 )     (0.07 )     0.00       0.00    
Distributions (from
capital gains)
    (3.54 )     (0.97 )     (0.37 )     (0.05 )     0.00    
Total distributions     (3.75 )     (1.19 )     (0.44 )     (0.05 )     0.00    
Redemption fee per share     0.00 (a)     0.00 (a)                    
Net asset value, end of period   $ 27.62     $ 26.31     $ 23.63     $ 19.53     $ 16.84    
Total return     20.82 %     17.01 %     23.53 %     16.32 %     49.82 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 90.3     $ 77.1     $ 58.6     $ 24.7     $ 5.8    
Ratio of expenses to
average net assets
    1.53 %*     1.56 %*     1.45 %*     1.50 %     1.46 %  
Ratio of net investment
income (loss) to
average net assets
    0.25 %     0.80 %     0.63 %     0.37 %     (0.01 )%  
Portfolio turnover rate     35 %     41 %     17 %     16 %     42 %  

 

*  The ratio excludes expense offset arrangement.

(a)  Amounts round to less than $0.01 per share.

(b)  Computed using average shares outstanding throughout the period.

THE OAKMARK FUNDS
64



THE OAKMARK GLOBAL SELECT FUND

For a share outstanding throughout each period

    CLASS I  
    October 2, 2006
through
September 30,
2007 (a)
 
Net asset value, beginning of period   $ 10.00    
Income from investment operations:  
Net investment income     0.12 (b)  
Net gains or losses on investments
(both realized and unrealized)
    1.49    
Total from investment operations:     1.61    
Less distributions:  
Dividends (from net investment income)     (0.01 )  
Distributions (from capital gains)     (0.00 )  
Total distributions     (0.01 )  
Redemption fee per share     0.01    
Net asset value, end of period   $ 11.61    
Total return     16.23 %*  
Ratios/supplemental data:  
Net assets, end of period ($million)   $ 377.7    
Ratio of expenses to average net assets     1.31 %**†  
Ratio of net investment income to average net assets     1.01 %  
Portfolio turnover rate     33 %  

 

*  Data has not been annualized.

**  Data has been annualized.

†  The ratio excludes expense offset arrangement.

(a)  The date on which fund shares were first offered for sale to the public was October 2, 2006.

(b)  Computed using average shares outstanding throughout the period.

PROSPECTUS
65



THE OAKMARK INTERNATIONAL FUND

For a share outstanding throughout each period

    Class I  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 26.83     $ 23.52     $ 18.98     $ 15.67     $ 12.17    
Income from investment
operations:
 
Net investment income     0.43       0.41       0.27       0.24       0.11    
Net gains or losses on
investments (both
realized and unrealized)
    3.25       4.49       4.59       3.18       3.52    
Total from investment
operations:
    3.68       4.90       4.86       3.42       3.63    
Less distributions:  
Dividends (from net
investment income)
    (0.44 )     (0.59 )     (0.27 )     (0.11 )     (0.13 )  
Distributions (from
capital gains)
    (3.48 )     (1.00 )     (0.05 )     0.00       0.00    
Total distributions     (3.92 )     (1.59 )     (0.32 )     (0.11 )     (0.13 )  
Redemption fee per share     0.00 (a)     0.00 (a)     0.00 (a)     0.00 (a)        
Net asset value, end of period   $ 26.59     $ 26.83     $ 23.52     $ 18.98     $ 15.67    
Total return     14.53 %     22.14 %     25.85 %     21.92 %     29.97 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 8,446.6     $ 7,200.5     $ 5,627.4     $ 4,036.9     $ 2,676.6    
Ratio of expenses to
average net assets
    1.05 %*     1.08 %*(b)     1.11 %*     1.20 %     1.25 %  
Ratio of net investment
income to average net
assets
    1.65 %     1.80 %     1.32 %     1.40 %     1.03 %  
Portfolio turnover rate     50 %     37 %     14 %     21 %     34 %  
    Class II  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 26.61     $ 23.36     $ 18.86     $ 15.58     $ 12.13    
Income from investment
operations:
 
Net investment income     0.35       0.34       0.22       0.18       0.08    
Net gains or losses on
investments (both
realized and unrealized)
    3.19       4.45       4.55       3.16       3.48    
Total from investment
operations:
    3.54       4.79       4.77       3.34       3.56    
Less distributions:  
Dividends (from net
investment income)
    (0.35 )     (0.54 )     (0.22 )     (0.06 )     (0.11 )  
Distributions (from
capital gains)
    (3.48 )     (1.00 )     (0.05 )     0.00       0.00    
Total distributions     (3.83 )     (1.54 )     (0.27 )     (0.06 )     (0.11 )  
Redemption fee per share     0.00 (a)     0.00 (a)                    
Net asset value, end of period   $ 26.32     $ 26.61     $ 23.36     $ 18.86     $ 15.58    
Total return     14.04 %     21.71 %     25.50 %     21.52 %     29.52 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 586.9     $ 496.0     $ 362.9     $ 259.2     $ 123.2    
Ratio of expenses to
average net assets
    1.44 %*     1.47 %*(b)     1.38 %*     1.53 %     1.67 %  
Ratio of net investment
income to average net
assets
    1.31 %     1.43 %     1.08 %     1.18 %     0.69 %  
Portfolio turnover rate     50 %     37 %     14 %     21 %     34 %  

 

*  The ratio excludes expense offset arrangement.

(a)  Amounts round to less than $0.01 per share.

(b)  The ratio was revised from 1.10% to 1.08% for Class I shares and from 1.49% to 1.47% for Class II shares after release of the financial statements contained in the Funds' annual report to shareholders for the period ended September 30, 2006.

THE OAKMARK FUNDS
66



THE OAKMARK INTERNATIONAL SMALL CAP FUND

For a share outstanding throughout each period

    Class I  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 24.09     $ 22.79     $ 18.26     $ 13.74     $ 10.17    
Income from investment
operations:
 
Net investment income     0.32       0.42       0.20       0.11       0.11    
Net gains or losses on
investments (both
realized and unrealized)
    2.77       5.12       4.98       4.52       3.82    
Total from investment
operations:
    3.09       5.54       5.18       4.63       3.93    
Less distributions:  
Dividends (from net
investment income)
    (0.56 )     (0.70 )     (0.27 )     (0.12 )     (0.09 )  
Distributions (from
capital gains)
    (3.43 )     (3.54 )     (0.38 )     0.00       (0.27 )  
Total distributions     (3.99 )     (4.24 )     (0.65 )     (0.12 )     (0.36 )  
Redemption fee per share     0.00 (a)     0.00 (a)     0.00 (a)     0.01          
Net asset value, end of period   $ 23.19     $ 24.09     $ 22.79     $ 18.26     $ 13.74    
Total return     13.35 %     28.50 %     29.04 %     33.94 %     39.78 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 1,326.5     $ 1,274.5     $ 1,007.2     $ 734.1     $ 477.8    
Ratio of expenses to
average net assets
    1.34 %*     1.37 %*     1.41 %*     1.49 %     1.57 %  
Ratio of net investment
income to average net
assets
    1.19 %     1.73 %     0.96 %     0.72 %     0.99 %  
Portfolio turnover rate     57 %     44 %     47 %     29 %     30 %  
    Class II  
    Year Ended September 30,  
    2007   2006   2005   2004   2003  
Net asset value, beginning
of period
  $ 24.05     $ 22.77     $ 18.25     $ 13.69     $ 10.14    
Income from investment
operations:
 
Net investment income     0.29       0.41       0.18       0.13       0.08    
Net gains or losses on
investments (both
realized and unrealized)
    2.79       5.10       4.98       4.52       3.81    
Total from investment
operations:
    3.08       5.51       5.16       4.65       3.89    
Less distributions:  
Dividends (from net
investment income)
    (0.55 )     (0.69 )     (0.26 )     (0.09 )     (0.07 )  
Distributions (from
capital gains)
    (3.43 )     (3.54 )     (0.38 )     0.00       (0.27 )  
Total distributions     (3.98 )     (4.23 )     (0.64 )     (0.09 )     (0.34 )  
Redemption fee per share     0.00 (a)     0.00 (a)                    
Net asset value, end of period   $ 23.15     $ 24.05     $ 22.77     $ 18.25     $ 13.69    
Total return     13.29 %     28.33 %     28.94 %     34.11 %     39.39 %  
Ratios/supplemental data:  
Net assets, end of period
($million)
  $ 0.9     $ 0.8     $ 0.6     $ 0.5     $ 0.4    
Ratio of expenses to
average net assets
    1.43 %*     1.47 %*     1.49 %*     1.39 %     1.81 %  
Ratio of net investment
income to average net
assets
    1.12 %     1.62 %     0.87 %     0.75 %     0.72 %  
Portfolio turnover rate     57 %     44 %     47 %     29 %     30 %  

 

*  The ratio excludes expense offset arrangement.

(a)  Amount rounds to less than $0.01 per share.

PROSPECTUS
67



NOTES:




NOTES:



You may obtain more information about The Oakmark Funds' investments in the Funds' semi-annual and annual reports to shareholders. These reports contain information on the market conditions and investment strategies that significantly affected The Oakmark Funds' performance during the last fiscal year.

You may wish to read the Statement of Additional Information for more information about The Oakmark Funds. The Statement of Additional Information is incorporated by reference into this prospectus, which means that it is considered to be part of this prospectus.

You may obtain free copies of The Oakmark Funds' semi-annual and annual reports and the Statement of Additional Information, request other information, and discuss your questions about The Oakmark Funds by writing or calling:

The Oakmark Funds
P.O. Box 219558
Kansas City, MO 64121-9558
1-800-OAKMARK
(1-800-625-6275)

The requested documents will be sent within three business days of your request.

You may also obtain the Funds' Statement of Additional Information and the annual, semi-annual and quarterly reports to shareholders, along with other information, free of charge, by visiting The Oakmark Funds' website at oakmark.com.

Text-only versions of all Fund documents can be viewed online or downloaded from the EDGAR Database on the SEC's internet web site at www.sec.gov. You may also review and copy those documents by visiting the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-942-8090. In addition, copies of the Fund documents may be obtained, after mailing the appropriate duplicating fee, by writing to the SEC's Public Reference Section, Washington, DC 20549-0102 or by e-mail request at publicinfo@sec.gov.

Harris Associates Investment Trust

811-06279

HASPROS08




 

STATEMENT OF ADDITIONAL INFORMATION

 

 January 28, 2008

 

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 Global Select Fund (“Global Select 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 of each Fund for the most recent fiscal year may be found in the Funds’ annual report and are incorporated herein by reference.

 

Table of Contents

 

The Funds

 

2

 

 

 

Investment Restrictions

 

2

 

 

 

How the Funds Invest

 

4

 

 

 

Investment Adviser

 

13

 

 

 

Portfolio Managers

 

15

 

 

 

Codes of Ethics

 

17

 

 

 

Proxy Voting Policies and Procedures

 

17

 

 

 

Trustees and Officers

 

18

 

 

 

Principal Shareholders

 

24

 

 

 

Purchasing and Redeeming Shares

 

25

 

 

 

Additional Tax Information

 

28

 

 

 

Distributor

 

30

 

 

 

Portfolio Holdings Disclosure

 

30

 

 

 

Portfolio Transactions

 

31

 

 

 

Declaration of Trust

 

34

 

 

 

Custodian and Transfer Agent

 

34

 

 

 

Independent Registered Public Accounting Firm

 

34

 

 

 

Appendix A – Bond Ratings

 

A-1

 

 

 

Appendix B – Financial Statements

 

B-1

 

1



 

THE FUNDS

 

Oakmark Fund, Select Fund, Global Fund, Global Select 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 and Global 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 a Fund are offered to members of the general public.  As described more fully in the prospectus, Class II Shares of a 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 the Fund’s Class II Shares.  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 and Global 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.             [Funds other than Global Select Fund] 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]; [Global Select Fund only] Borrow money except for temporary or emergency purposes in amounts not exceeding 33-1/3% of the value of the Fund’s assets at the time of borrowing, including the amount borrowed.

 

5.             [Funds other than Global Select Fund] Issue any senior security except in connection with permitted borrowings; [Global Select Fund only] Issue any senior security in contravention of the Investment Company Act of 1940;

 

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 [the

 


(1)           A repurchase agreement involves a sale of securities to a Fund with the concurrent agreement of the seller (bank, securities dealer or clearing house) 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



 

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.             [Funds other than Global Select Fund] Purchase and sell commodities or commodity contracts, except that it may enter into forward foreign currency contracts; [Global Select Fund only] Purchase and sell physical commodities or commodity 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 (“ADRs”));(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 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 [Global Select Fund may invest in stock futures and index futures].

 

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 and Global 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 120-160 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 ($4.90 billion as of December 31, 2007).  The mean market capitalization of companies included in the S&P Small Cap 600 Index was $927 million as of December 31, 2007.  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 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 that policy.

 

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.  Global Select Fund typically invests at least 40% of its total assets in securities of non-U.S. issuers (unless the Adviser deems market and/or company valuations less favorable to non-U.S. issuers, in which case the Fund will invest at least 30% of its total assets in securities of non-U.S. issuers).  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 U.S. The Funds may invest in securities of non-U.S. issuers directly or in the form of ADRs, European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), or other securities representing underlying shares of foreign issuers.  Positions in these securities are not necessarily denominated in the same currency as the common stocks into which they may be converted.  ADRs are receipts typically issued by an American bank or trust company and trading in U.S. markets evidencing ownership of the underlying securities.  EDRs are European receipts evidencing a similar arrangement.  Generally ADRs, in registered form, are designed for use in the U.S. securities markets and EDRs, in bearer form, are designed for use in European securities markets.  GDRs are receipts that may trade in U.S. or non-U.S. markets.  The Funds may invest in both “sponsored” and “unsponsored” ADRs, EDRs or GDRs.  In a sponsored depositary receipt, the issuer typically pays some or all of the expenses of the depository and agrees to provide its regular shareholder communications to depositary receipt holders.  An unsponsored depositary receipt is created independently of the issuer of the underlying security.  The depositary receipt holders generally pay the expenses of the depository and do not have an undertaking from the issuer of the underlying security to furnish shareholder communications.

 

With respect to portfolio securities of non-U.S. issuers or denominated in foreign currencies, a Fund’s investment performance is affected by the strength or weakness of the U.S. dollar against these currencies.  For example, if the dollar falls in value relative to the Japanese yen, the dollar value of a yen-denominated stock held in the portfolio will rise even though the price of the stock remains unchanged.  Conversely, if the dollar rises in value

 

5



 

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 U.S.; 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; frequently greater transaction and custody costs; risk expropriation; 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, Global Fund and Global Select Fund in privatizations in appropriate circumstances.  In certain of those markets, the ability of foreign entities such as International Fund, International Small Cap Fund, Global Fund and Global Select 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

 

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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 Corporation Ratings Group, 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.

 

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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 U.S. 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

 

9



 

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

 

Notwithstanding the above, each Fund may purchase securities that, although privately placed, are eligible for purchase and sale under Rule 144A under the 1933 Act.  That 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 that 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 may consider (1) the frequency of trades and quotes, (2) the number of dealers and potential purchasers, (3) dealer undertakings to make a market and (4) 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.

 

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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 that the Fund may have to pay in connection with such short sale.  Certain provisions of the Internal Revenue Code of 1986, as amended (the “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 security 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 non-U.S. 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 underlying securities as a dividend or distribution or upon a conversion or exchange and liquid assets held by the

 

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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 the value of the portfolios, 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.  The defensive investments of International Fund, International Small Cap Fund, Global Fund and Global Select Fund may be in 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.

 

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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.

 

Liquidity Programs

 

Each Fund may participate in one or more liquidity programs that are designed to provide an alternative liquidity source for mutual funds experiencing net redemptions of their shares.  Under such a liquidity program, the program sponsor provides a participating Fund with a source of cash by purchasing Fund shares in an amount not exceeding the value of the net shares being redeemed by other shareholders and that are to settle the next business day.  Following its purchase of Fund shares, the liquidity program sponsor generally will redeem those shares when the Fund experiences net sales or at the end of a maximum holding period set by the program sponsor or at other times in the program sponsor’s discretion.  A program sponsor periodically may redeem its entire share position in a Fund and request that such redemption be met in-kind (that is, through a distribution of securities from the Fund’s portfolio) in accordance with the Fund’s redemption in-kind policies.  The Funds will pay the program sponsors fees for providing such liquidity.  Liquidity program sponsors will not be subject to any redemption fee when redeeming shares they have purchased under a liquidity program.  In accordance with federal securities laws, some liquidity program sponsors are prohibited from acquiring more than 3% of a Fund’s outstanding voting securities. See also “Additional Tax Information.”

 

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, the fees of trustees not affiliated with the Adviser and the compensation of the Funds’ chief compliance officer.

 

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; 0.60% from $12.5-16 billion; and 0.585% over $16 billion

 

 

 

 

 

Global

 

1.00% up to $2 billion; 0.95% from $2-4 billion; 0.90% from $4-8 billion; and 0.875% over $8 billion

 

 

 

 

 

Global Select

 

1.00% up to $2 billion; 0.95% from $2-3 billion; 0.875% from $3-7 billion; and 0.85% over $7 billion

 

 

13



 

Fund

 

Fee

 

 

 

 

 

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; 0.815% from $7.5-11 billion; 0.805% from $11-16.5 billion; and 0.80% over $16.5 billion

 

 

 

 

 

International Small Cap

 

1.25% up to $500 million; 1.10% from $500 million to $1.5 billion; 1.05% from $1.5-3.5 billion; and 1.025% over $3.5 billion

 

 

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

 

 

 

Type of

 

Year Ended

 

Year Ended

 

Year Ended

 

Fund

 

Payment

 

September 30, 2007

 

September 30, 2006

 

September 30, 2005

 

 

 

 

 

 

 

 

 

 

 

Oakmark

 

Advisory fee

 

$

51,887,047

 

$

50,810,228

 

$

59,184,688

 

Select

 

Advisory fee

 

50,982,717

 

51,360,669

 

49,906,327

 

Equity and Income

 

Advisory fee

 

86,511,792

 

73,931,558

 

63,670,347

 

Global

 

Advisory fee

 

27,575,178

 

21,200,163

 

16,115,537

 

Global Select *

 

Advisory fee

 

2,195,107

 

N/A

 

N/A

 

International

 

Advisory fee

 

78,627,916

 

61,243,264

 

47,254,405

 

International Small Cap

 

Advisory fee

 

16,364,055

 

13,155,012

 

10,432,050

 

 


*Global Select Fund commenced operations on October 2, 2006.

 

The Agreement for each Fund (except for Global Select Fund) was for an initial term through October 31, 2001.  The Agreement for Global Select Fund was for an initial term through October 31, 2007.  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 John T. Hailer, David G. Herro, Robert M. Levy, John R. Raitt, Kristi L. Rowsell and Pierre Servant.  Mr. Raitt is the president and chief executive officer of HAI.  HAI is a wholly-owned subsidiary of Natixis Global Asset Management, L.P. (“Natixis US”), as is the Adviser.  Natixis US is a limited partnership that owns investment management and distribution and service entities.

 

Natixis US is part of Natixis Global Asset Management, an international asset management group based in Paris, France.  Natixis Global Asset Management Group is ultimately owned, principally, directly or indirectly, by three large affiliated French financial services entities: Natixis, an investment banking and financial services firm; the Caisse Nationale des Caisses d’Epargne (“CNCE”), a financial institution owned by French regional savings banks known as the Caisses d’Epargne; and, the Banque Fédérale des Banques Populaires (“BFBP”), a financial institution  owned by regional cooperative banks known as the Banques Populaires.  The registered address of Natixis is 45, rue Saint-Dominique, 75007 Paris, France.  The registered address of CNCE is 5, rue Masseran, 75007 Paris, France.  The registered address of BFBP is 5, rue Leblanc, 75011 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 and Select Fund; 1.00% in the case of Equity and Income Fund; 1.75% in the case of Global Fund and Global Select 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 and Select Fund, 1.75% (1.50% + .25%); Equity and

 

14



 

Income Fund, 1.25% (1.00% + .25%); Global Fund and Global Select 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, 2009.

 

Expenses allocable to each class of Fund shares are calculated daily.  If a Fund is entitled to any reduction in fees or expenses, reimbursement is made monthly.

 

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.  On February 27, 2007, the Court granted summary judgment in favor of the Adviser.  Plaintiffs filed an appeal with the Seventh Circuit Court of Appeals on March 20, 2007.  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 continues to defend them vigorously.

 

PORTFOLIO MANAGERS

 

Portfolio Managers’ Management of Other Accounts

 

                Many of the Fund’s portfolio managers manage 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, 2007, unless otherwise indicated.  None of these accounts has an advisory fee based on the performance of the account.

 

 

 

 

 

Registered Investment
Companies
(other than The Oakmark
Funds)

 

Other Pooled Investment
Vehicles

 

Other Accounts†
(Harris Associates L.P.
Separately Managed
Accounts)

 

Name of Portfolio
Manager

 

Funds Managed

 

Number
of
Accounts

 

Total Assets

 

Number
of
Accounts

 

Total Assets

 

Number
of
Accounts

 

Total Assets

 

William Nygren

 

Oakmark Select Global Select

 

3

 

$

2,874,566,330

 

0

 

$

0

 

0

 

$

0

 

Kevin Grant

 

Oakmark

 

0

 

$

0

 

0

 

$

0

 

0

 

$

0

 

Henry Berghoef

 

Select

 

1

 

$

90,470,147

 

0

 

$

0

 

0

 

$

0

 

Clyde McGregor

 

Equity and Income Global

 

0

 

$

0

 

2

 

$

783,789,732

 

128

 

$

1,009,327,141

 

Edward Studzinski

 

Equity and Income

 

0

 

$

0

 

0

 

$

0

 

0

 

$

0

 

Robert Taylor

 

Global

 

2

 

$

2,917,162,530

 

2

 

$

783,789,732

 

8

 

$

1,322,418,452

 

David Herro

 

Global Select International International Small Cap

 

6

 

$

4,435,832,495

 

5

 

$

2,512,281,593

 

15

 

$

2,985,647,264

 

Chad Clark

 

International Small Cap

 

4

 

$

1,518,669,965

 

2

 

$

2,112,105,568

 

8

 

$

1,840,463,657

 

 


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

 

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

 

15



 

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 each account’s specific investment objectives, guidelines, restrictions and circumstances.  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.

 

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.  A 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 benchmarks, including: S&P 500, Russell Mid-Cap Value, Russell 1000 Value, Lipper Balanced, 60/40 S&P/Lehman (60% S&P 500 and 40% Lehman Bond Index), Morgan Stanley Capital World International (“MSCI”) Index, MSCI World ex-U.S. 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 shorter- and longer-term periods, including one year, three years, five years, ten years, since a Fund’s inception or since the portfolio manager has been managing the Fund, as applicable. Performance is measured 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.

 

16



 

Portfolio Managers’ Ownership of Fund Shares

 

The following table sets forth the dollar range of shares of the Funds beneficially owned by each Fund’s portfolio manager as of September 30, 2007.

 

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

 

Over $1,000,000

Global

 

Clyde McGregor

 

Over $1,000,000

 

 

Robert Taylor

 

Over $1,000,000

Global Select Fund

 

David Herro

 

Over $1,000,000

 

 

William Nygren

 

Over $1,000,000

International

 

David Herro

 

Over $1,000,000

International Small Cap

 

David Herro

 

Over $1,000,000

 

 

Chad Clark

 

Over $1,000,000

 

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 the Funds’ portfolio securities 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.

 

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.

 

17



 

·      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 usually will 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 usually will 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 usually also will 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 usually will vote against proposals for supermajority voting rights, against the adoption of poison pill plans, 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 usually will 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 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 Trust’s Board of Trustees 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 12 months ended the preceding June 30 will be available through a link on the Funds’ website at oakmark.com and on the SEC’s website at 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:

 

18



 

Trustees Who Are Not Interested Persons of the Trust

 

Name, Address and Age at
December 31, 2007

 

Position(s) with
Trust

 

Year First
Elected or
Appointed to
Current Position

 

Principal
Occupation(s)
Held During
Past Five Years
#

 

Number of
Portfolios
in Fund
Overseen
by Trustee

 

Other
Directorships
Held by
Trustee

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael J. Friduss, 65

 

Trustee

 

1995

 

Principal, MJ Friduss & Associates, Inc. (telecommunications consultants)

 

7

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

Thomas H. Hayden, 56

 

Trustee

 

1995

 

Principal, TerraNova Market Strategies, LLC (market research and strategic consulting practice) since July 2006; President, Greenhouse Communications (advertising agency) from 2004 to 2006; Executive Vice President, Campbell Mithun, (advertising and marketing communication agency), prior thereto

 

7

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

Christine M. Maki, 47

 

Trustee

 

1995

 

Senior Vice President—Tax, Global Hyatt Corporation (hotel management)

 

7

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

Allan J. Reich, 59

 

Trustee

 

1993

 

Partner, Seyfarth Shaw LLP (law firm)

 

7

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

Steven S. Rogers, 50

 

Trustee

 

2006

 

Clinical Professor of Finance & Management, Kellogg Graduate School of Management, Northwestern University; Entrepreneur-in-Residence, Ewing Marion Kauffman Foundation

 

7

 

Director, SC Johnson Wax (manufacturer of household cleaning, personal care and insecticide products), SuperValu, Inc. (supermarket retailer and food distributor), AMCORE Financial, Inc. (bank holding company), and W.S. Darley & Co. (fire fighting and emergency equipment manufacturers)

 

 

 

 

 

 

 

 

 

 

 

 

 

Burton W. Ruder, 64

 

Trustee

 

1995

 

President, The Academy Financial Group (venture capital investment and transactional financing firm); Manager, Cedar Green Associates (real estate management firm)

 

7

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

Gary N. Wilner, M.D., 67

 

Trustee and Chairman of the Board of Trustees

 

1993

 

Retired, since 2004; Senior Attending Physician, Evanston Hospital; Medical Director – Cardiopulmonary Wellness Program, Evanston Hospital Corporation, prior thereto

 

7

 

Chairman of the Board of Directors, North American Scientific, Inc. (developer of radioisotopic products for the treatment and diagnosis of disease)

 

 

19



 

Trustees Who Are Interested Persons of the Trust

 

Name, Address and Age at
December 31, 2007

 

Position(s) with
Trust

 

Year First
Elected or
Appointed to
Current Position

 

Principal
Occupation(s)
Held During
Past Five Years
#

 

Number of
Portfolios
in Fund
Overseen
by Trustee

 

Other
Directorships
Held by
Trustee

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter S. Voss*, 61

 

Trustee

 

1995

 

Retired, since 2007; Chairman and Chief Executive Officer, IXIS Asset Management Group, Chairman, President and Chief Executive Officer, IXIS Asset Management US Corporation (investment management), Chairman, IXIS Asset Management US, LLC and Member of the Supervisory Board, IXIS Asset Management; Director, Harris Associates, Inc. (“HAI”) prior thereto

 

7

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

John R. Raitt*, 53

 

Trustee and
President

 

2003

 

President and Chief Executive Officer, HAI, Harris Associates L.P. (“HALP”) and Harris Associates Securities L.P. (“HASLP”)

 

7

 

None

 

 

Other Officers of the Trust

 

Name, Address and Age at
December 31, 2007

 

Position(s) with
Trust

 

Year First
Elected or
Appointed to
Current Position

 

Principal
Occupation(s)
Held During
Past Five Years
#

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert M. Levy, 57

 

Executive Vice President

 

2004

 

Chairman, HAI; Chief Investment Officer of Domestic Equity, HALP; Portfolio Manager, HALP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Henry R. Berghoef, 58

 

Vice President and Portfolio Manager (The Oakmark Select Fund)

 

2000

 

Director of Domestic Research, HALP, since 2003; Portfolio Manager and Analyst, HALP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chad M. Clark, 35

 

Vice President and Portfolio Manager (The Oakmark International Small Cap Fund)

 

2005

 

Portfolio Manager, HALP; International Analyst, HALP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard J. Gorman, 42

 

Chief Compliance Officer, Vice President and Assistant Secretary

 

2006

 

Chief Compliance Officer of the Trust, since 2006; Senior Special Counsel, Investment Management Regulation, United States Securities and Exchange Commission, prior thereto

 

 

 

 

 

 

20



 

Name, Address and Age at
December 31, 2007

 

Position(s) with
Trust

 

Year First
Elected or
Appointed to
Current Position

 

Principal
Occupation(s)
Held During
Past Five Years
#

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kevin G. Grant, 43

 

Vice President and Portfolio Manager (The Oakmark Fund)

 

2000

 

Portfolio Manager and Analyst, HALP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David G. Herro, 47

 

Vice President and Portfolio Manager (The Oakmark Global Select Fund, The Oakmark International Fund and The Oakmark International Small Cap Fund)

 

1992

 

Chief Investment Officer of International Equity, HALP; Portfolio Manager and Analyst, HALP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John J. Kane, 36

 

Treasurer

 

2005

 

Manager – Mutual Fund and Institutional Services, HALP, since 1999; Supervisor-Mutual Fund and Institutional Services, HALP, since 1999; Assistant Treasurer to the Trust since 1999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clyde S. McGregor, 55

 

Vice President and Portfolio Manager (The Oakmark Equity and Income Fund and The Oakmark Global Fund)

 

1995

 

Portfolio Manager, HALP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

William C. Nygren, 49

 

Vice President and Portfolio Manager (The Oakmark Fund, The Oakmark Select Fund and The Oakmark Global Select Fund)

 

1996

 

Portfolio Manager and Analyst, HALP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vineeta D. Raketich, 36

 

Vice President

 

2003

 

Director, International Operations and Client Relations, HALP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Janet L. Reali, 56

 

Vice President and Secretary

 

2001

 

Vice President, General Counsel and Secretary, HAI, HALP and HASLP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kristi L. Rowsell, 41

 

Vice President, and Principal Financial Officer

 

2005

 

Director, Chief Financial Officer and Treasurer, HAI; Chief Financial Officer, HALP and HASLP, prior thereto

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Edward A. Studzinski, 58

 

Vice President and Portfolio Manager (The Oakmark Equity and Income Fund)

 

2000

 

Portfolio Manager and Analyst, HALP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert A. Taylor, 35

 

Vice President and Portfolio Manager (The Oakmark Global Fund)

 

2005

 

Director of International Research, since 2004; Portfolio Manager and Analyst, HALP

 

 

 

 

 

 

21



 

Name, Address and Age at
December 31, 2007

 

Position(s) with
Trust

 

Year First
Elected or
Appointed to
Current Position

 

Principal
Occupation(s)
Held During
Past Five Years
#

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Andrew Tedeschi, 42

 

Assistant Treasurer

 

2008

 

Accounting Manager of Mutual Fund Financial Administration for the Van Kampen Funds, Morgan Stanley and Assistant Treasurer, Henderson Global North America, prior thereto

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher P. Wright, 33

 

Vice President

 

2005

 

Director of Mutual Fund Operations, HALP, since 2004; Assistant Director 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. Raitt is a trustees who is an “interested person” of the Trust as defined in the 1940 Act because he is an officer of the Adviser and a director of HAI.  Mr Voss is deemed to be an “interested person” of the Trust because he is a consultant to an affiliate of the Adviser.

 

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

 

The committees of the board of trustees include an executive committee, audit committee, governance committee and the committee on contracts.  The following table identifies the members of those committees as of September 30, 2007, the function of each committee, and the number of meetings of each committee held during the fiscal year ended September 30, 2007.

 

Committee

 

Members of
Committee

 

Number of meetings
during fiscal year ended
September 30, 2007

 

Principal Functions of Committee

 

 

 

 

 

 

 

Executive Committee

 

Gary N. Wilner, M.D.*
Burton W. Ruder
Peter S. Voss

 

1**

 

The executive committee generally has the authority to exercise the powers of the board during intervals between meetings.

 

 

 

 

 

 

 

Audit Committee

 

Allan J. Reich*
Michael J. Friduss
Christine M. Maki
Steven S. Rogers
Burton W. Ruder
Gary N. Wilner, M.D.

 

5

 

The principal responsibilities of the audit committee include the following:

·      to oversee the accounting and financial reporting policies and practices of the 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.

 

22



 

Committee

 

Members of
Committee

 

Number of meetings
during fiscal year ended
September 30, 2007

 

Principal Functions of Committee

 

 

 

 

 

 

 

Governance Committee

 

Michael J. Friduss*
Thomas H. Hayden
Burton W. Ruder
Gary N. Wilner, M.D.

 

4

 

The governance committee makes recommendations to the board regarding board committees and committee assignments, the composition of the board, candidates for election as non-interested trustees and compensation of non-interested trustees, and oversees the process for evaluating the functioning of the board.

 

 

 

 

 

 

 

Committee on Contracts

 

Thomas H. Hayden*
Christine M. Maki
Allan J. Reich
Steven S. Rogers
Gary N. Wilner, M.D.

 

3

 

The committee on contracts is responsible for reviewing in the first instance, and making recommendations to the board regarding, investment advisory agreements and any other agreements relating to the management or administration of any Fund.

 

 

 

 

 

 

 

Pricing Committee

 

John R. Raitt
Janet L. Reali
Kristi L. Rowsell
Vineeta D. Raketich
John J. Kane

 

10

 

The committee is authorized, on behalf of the board, to determine, in accordance with the valuation procedures established by the board, fair valuations of portfolio securities.

 


*      Chair of the committee.

 

**   The executive committee took action by unanimous written consent one time during the fiscal year ended September 30, 2007.

 

The following table shows the compensation paid by the Trust during the fiscal year ended September 30, 2007 to each trustee who was not an “interested person” of the Trust:

 

Name of Trustee

 

Aggregate
Compensation
from the Trust*

 

Average
Compensation
per Fund

 

Michael J. Friduss

 

$

126,500

 

$

18,071

 

Thomas H. Hayden

 

123,500

 

17,643

 

Christine M. Maki

 

121,500

 

17,357

 

Allan J. Reich

 

128,500

 

18,357

 

Steven S. Rogers

 

115,500

 

16,500

 

Marvin R. Rotter**

 

75,293

 

10,756

 

Burton W. Ruder

 

133,500

 

19,071

 

Gary N. Wilner, M.D.

 

202,500

 

28,929

 

 


*      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, 2007, the total amounts accrued under the plan were $824,787 for Mr. Friduss, $822,452 for Mr. Hayden, $815,280 for Ms. Maki, $1,150,551 for Mr. Rotter, $475,597 for Mr. Ruder and $921,168 for Dr. Wilner.  

 

**   Mr. Rotter resigned from the Board of Trustees effective July 11, 2007.

 

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 Institutional Liquid Assets (“ILA”)

 

23



 

Administration Units (“Oakmark Units”) of the Federal Portfolio of Goldman Sachs Trust, 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 or its parent 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 (the “1934 Act”)) by each trustee (within dollar ranges) as of December 31, 2007.

 

Trustee

 

Oakmark Fund

 

Select Fund

 

Equity and
Income Fund

 

Global Fund

 

Global
Select Fund

 

International
Fund

 

International
Small Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael J. Friduss

 

Over $100,000

 

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

 

$50,001 – 100,000

 

Over $100,000

 

$50,001 – 100,000

 

$50,001 – 100,000

 

None

 

None

 

Christine M. Maki

 

Over $100,000

 

Over $100,000

 

$10,001 – 50,000

 

Over $100,000

 

$50,001 – 100,000

 

Over $100,000

 

$50,001 – 100,000

 

John R. Raitt

 

Over $100,000

 

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

 

Over $100,000

 

$10,001 – 50,000

 

$50,001 – 100,000

 

$10,001 – 50,000

 

Steven S. Rogers

 

$1 – 10,000

 

$1 – 10,000

 

$10,001 – 50,000

 

$10,001 – 50,000

 

$1 – 10,000

 

None

 

$1 – 10,000

 

Burton W. Ruder

 

$10,001 – 50,000

 

$10,001 – 50,000

 

$10,001 – 50,000

 

Over $100,000

 

None

 

Over $100,000

 

Over $100,000

 

Peter S. Voss

 

Over $100,000

 

Over $100,000

 

None

 

None

 

$50,001 – 100,000

 

Over $100,000

 

Over $100,000

 

Gary N. Wilner, M.D.

 

$50,001 – 100,000

 

Over $100,000

 

$1 – 10,000

 

Over $100,000

 

$50,001 – 100,000

 

Over $100,000

 

$50,001 – 100,000

 

 

At December 31, 2007, the trustees and officers as a group owned beneficially less than 1% of the outstanding Class II shares of each Fund and less than 1% of the outstanding Class I shares of each Fund other than: Select Fund, as to which the trustees and officers owned 1.58%, Global Select Fund, as to which they owned 6.08% and International Small Cap Fund, as to which they owned 1.61%.

 

PRINCIPAL SHAREHOLDERS

 

The only persons known by the Trust to own of record or “beneficially” (within the meaning of that term as defined in rule 13d-3 under the Securities Exchange Act of 1934) 5% or more of the outstanding shares of any Fund as of December 31, 2007 were:

 

24



 

 

 

 

 

Percentage of Outstanding

 

Name and Address

 

Fund and Class

 

Shares Held

 

 

 

 

 

 

 

Charles Schwab & Co Inc.

 

Oakmark Fund, Class I

 

23.28

%

101 Montgomery Street

 

Oakmark Fund, Class II

 

5.43

 

San Francisco, CA 94104-4151

 

Oakmark Select Fund, Class I

 

25.47

 

 

 

Oakmark Select Fund, Class II

 

5.19

 

 

 

Oakmark Equity and Income Fund, Class I

 

28.75

 

 

 

Oakmark Global Fund, Class I

 

33.60

 

 

 

Oakmark Global Select Fund, Class I

 

22.72

 

 

 

Oakmark International Fund, Class I

 

28.00

 

 

 

Oakmark International Small Cap Fund, Class I

 

46.20

 

 

 

 

 

 

 

Orchard Trust Company TTEE

 

Oakmark Fund, Class II

 

8.13

%

8515 East Orchard Road 2T2

 

Oakmark Select Fund, Class II

 

5.30

 

Greenwood Village, CO, 80111-5002

 

Oakmark International Fund, Class II

 

5.12

 

 

 

 

 

 

 

Merrill Lynch Pierce Fenner & Smith Inc.

 

Oakmark Fund, Class II

 

9.89

%

4800 Deer Lake Drive, E 3rd Floor

 

Oakmark Select Fund, Class II

 

39.57

 

Jacksonville, FL, 32246

 

Oakmark Equity and Income Fund, Class II

 

15.79

 

 

 

Oakmark International Fund, Class I

 

7.22

 

 

 

Oakmark International Fund, Class II

 

28.75

 

 

 

Oakmark International Small Cap Fund, Class II

 

44.27

 

 

 

 

 

 

 

Metropolitan Life Co

 

Oakmark Fund, Class II

 

16.54

%

8515 East Orchard Road 2T2

 

 

 

 

 

Greenwood Village, CO, 80111-5002

 

 

 

 

 

 

 

 

 

 

 

Reliance Trust Company

 

Oakmark Fund, Class II

 

26.03

%

8515 East Orchard Road 2T2

 

Oakmark Select Fund, Class II

 

17.64

 

Greenwood Village, CO, 80111-5002

 

Oakmark Equity and Income Fund, Class II

 

7.06

 

 

 

 

 

 

 

Nationwide Trust Company

 

Oakmark Fund, Class II

 

29.74

%

PO Box 182029

 

Oakmark Equity and Income Fund, Class II

 

18.88

 

Columbus, OH 43218-2029

 

Oakmark International Fund, Class II

 

9.00

 

 

 

 

 

 

 

Trustlynx & Co

 

Oakmark International Small Cap Fund, Class II

 

20.10

%

PO Box 173736

 

 

 

 

 

Denver, CO, 80217-3736

 

 

 

 

 

 

 

 

 

 

 

National Financial Services Corp

 

Oakmark Fund, Class I

 

28.23

%

200 Liberty Street

 

Oakmark Select Fund, Class I

 

28.59

 

New York, NY, 10281-1003

 

Oakmark Select Fund, Class II

 

7.11

 

 

 

Oakmark Equity and Income Fund, Class I

 

26.79

 

 

 

Oakmark Global Fund, Class I

 

22.19

 

 

 

Oakmark Global Fund, Class II

 

90.29

 

 

 

Oakmark Global Select Fund, Class I

 

25.31

 

 

 

Oakmark International Fund, Class I

 

12.84

 

 

 

Oakmark International Small Cap Fund, Class I

 

16.93

 

 

 

Oakmark International Small Cap Fund, Class II

 

35.64

 

 

 

 

 

 

 

Priac TTEE

 

Oakmark Select Fund, Class II

 

14.05

%

280 Trumble Street

 

Oakmark Equity and Income Fund, Class II

 

5.44

 

One Commercial Place

 

 

 

 

 

Hartford, CT 06103

 

 

 

 

 

 

 

 

 

 

 

Wachovia Bank FBO

 

Oakmark Equity and Income Fund, Class II

 

11.30

%

1525 West WT Harris Blvd

 

 

 

 

 

Charlotte, NC, 28288-0001

 

 

 

 

 

 

 

 

 

 

 

Hartford Life Insurance Company

 

Oakmark Equity and Income Fund, Class II

 

13.96

%

PO Box 2999

 

 

 

 

 

Hartford, CT, 06104-2999

 

 

 

 

 

 

 

 

 

 

 

Great West Life & Annuity Ins. Co

 

Oakmark International Fund, Class II

 

46.66

%

8515 East Orchard Road 2T2

 

 

 

 

 

Greenwood Village, CO, 80111-5002

 

 

 

 

 

 

 

 

 

 

 

Prudential Investment Management Service

 

Oakmark International Fund, Class I

 

8.07

%

194 Wood Ave S Ste 201

 

 

 

 

 

Iselin, NJ, 08830-2710

 

 

 

 

 

 

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.”

 

25



 

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 Mondays 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.

 

The net asset value per Class I Share or per Class II Share of a 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 generally are valued at the last sale price on the exchange where the security is principally traded, or lacking a reported sale price 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 outside the U.S. generally are based upon market quotations that, 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 61 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, Global Fund and Global Select 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 Funds’ portfolio securities may not occur on days when the NYSE is closed.  Therefore, the calculation of net asset value does not take place contemporaneously with the determinations of the prices of many of the Funds’ portfolio securities and the value of the Funds’ portfolios may be significantly affected on days when shares of the Funds may not be purchased or redeemed.  Even on days on which both non-U.S. markets and the NYSE are open, several hours may have passed between the time when trading in a non-U.S. 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:

 

26



 

Amount of Difference

 

Action Taken

 

 

 

< 1/2 of 1% of the originally computed NAV

 

If the Fund has either paid excessive redemption proceeds or received insufficient subscription proceeds, the Fund may have incurred a fund loss. The Fund determines whether it has incurred a net fund loss or a net fund benefit during the error period.

 

If the Fund has incurred a net 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 net benefit from the error, no action is taken. A net benefit cannot be carried forward to offset a future fund loss.

 

 

 

= or > 1/2  of 1% of the originally computed NAV

 

If any shareholder has sustained a loss exceeding $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.

 

Certain Intermediaries perform recordkeeping, administrative and/or shareholder servicing services for their customers that may otherwise be performed by the Funds’ transfer agent.  In some circumstances, the Funds and the Adviser will pay an Intermediary for providing those services.  Each Fund pays a portion of the fees charged by an Intermediary for those services provided to the underlying beneficial owners of shares of the Fund.  The Fund pays the lesser of (a) 75% of the fees and (b) the estimated fees that the Fund would pay its transfer agent with respect to those shares if the shares had been registered in the names of the beneficial owners on the books of the transfer agent.  The Adviser pays the balance of the Intermediary’s fees, which may include compensation for marketing or distribution services provided by the Intermediary.  Generally, the fees payable by a Fund and the Adviser to an Intermediary are not expected to exceed 0.40% of the average annual value of assets held by the Intermediary (or 0.65% in the case of Class II shares, which includes a .25% fee attributable to servicing of retirement accounts).  In addition, the Adviser and/or the Funds’ distributor may make payments for various additional services or other  

 

27



 

expenses for the services listed above or for distribution-related services out of their profits or other available sources.

 

Although Fund share transactions may generally be done directly with the Funds at no charge, certain Intermediaries may charge a transaction-based or other fee for their services.  Those charges are retained by such Intermediaries and are not shared with the Funds, the Adviser or the Funds’ distributor. 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 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

 

Every Fund, other than Equity and Income Fund, imposes a short-term trading fee on redemptions of Fund 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.  The redemption fee does not apply to certain types of accounts or types of transactions, as discussed in the Funds’ prospectus under “90-Day Redemption Fee on Fund Shares.”  Equity and Income Fund does not impose a redemption fee.

 

Money Market Exchange Fund

 

The Adviser acts as a Service Organization for Oakmark Units the Federal Portfolio of Goldman Sachs Trust, which Oakmark Units may be purchased directly or by exchanging shares of a Fund.  For acting as such, the Adviser receives a fee at the annual rate of 0.25% of the average daily net assets of the Oakmark Units, of which 0.15% is paid by the Federal Portfolio and 0.10% is paid by Goldman Sachs Asset Management, L.P.

 

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 Code 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

 

28



 

amounts, although constituting a return of your investment, would be taxable either as dividends or capital gain distributions.

 

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.

 

Liquidity Programs

 

Some aspects of the tax treatment of the liquidity programs in which the Funds may participate are uncertain because the IRS has published little or no direct guidance relating to such programs.  As a result, certain or all transactions under the liquidity programs could have significant adverse tax consequences to a Fund and its shareholders, if the Fund’s determination of the tax treatment is not upheld upon challenge by the IRS. See “How the Funds Invest–Liquidity Programs” for additional information about liquidity programs.

 

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

 

29



 

transactions is a gain, the dividend paid by any of these Funds will be increased; if the result is a loss, the income dividend paid by any of these Funds will be decreased.

 

Income received by a Fund from sources within various foreign countries will be subject to foreign income taxes withheld at the source.  Under the Code, if more than 50% of the value of the Fund’s total assets at the close of its taxable year comprise securities issued by foreign corporations, the Fund may file an election with the Internal Revenue Service to “pass through” to the Fund’s shareholders the amount of foreign income taxes paid by the Fund.  Pursuant to this election, shareholders will be required to: (i) include in gross income, even though not actually received, their respective pro rata share of foreign taxes paid by the Fund; (ii) treat their pro rata share of foreign taxes as paid by them; and (iii) either deduct their pro rata share of foreign taxes in computing their taxable income, or use it as a foreign tax credit against U.S. income taxes (but not both).  No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions.

 

International Fund, International Small Cap Fund, Global Fund and Global Select 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. Each Fund may also disclose portfolio holdings to its third-party service providers or counterparties in connection with services being provided or transactions being entered into, such as, among other things, custodial, brokerage, research, analytics, securities lending, accounting and legal. The disclosure of portfolio holdings to such third parties generally 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. In addition, in the case of a redemption of Fund shares in-kind, certain portfolio holdings will be disclosed to the redeeming shareholders. Neither the Trust nor the Adviser may receive compensation or other consideration in connection with the disclosure of portfolio holdings.

 

30



 

Disclosure of each Fund’s complete holdings is required to be made quarterly within 60 days after 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 sec.gov.

 

Additionally, each Fund posts on its website at www.oakmark.com a complete list of its portfolio holdings usually within 10 business days after fiscal quarter-end.

 

PORTFOLIO TRANSACTIONS

 

The Adviser is responsible, subject to the supervision of the board of trustees, for selecting brokers and dealers (“brokers”) for the execution of each Fund’s portfolio transactions.  The Adviser seeks to place purchase and sale orders in a manner that is fair and reasonable to each Fund. The primary consideration in placing all portfolio transactions is the Adviser’s ability to obtain “best execution” of such orders.  Best execution means prompt and reliable execution at the most favorable price, taking into account a number of relevant factors including, among other things, the overall direct net economic result to a Fund (involving both price paid or received and any commissions and other costs paid), the efficiency with which the transaction is effected, the ability to effect the transaction in the desired price range with a minimum market impact, the reliability, integrity and financial condition of the broker, and the ability of the broker to commit resources to the execution of the trade.  Such factors are weighed by the Adviser in determining the overall reasonableness of the brokerage commission. In selecting brokers for portfolio transactions, the Adviser takes into account its past experiences in determining those brokers who are likely to help achieve best execution.

 

There are many instances when, in the Adviser’s judgment, more than one broker can offer comparable execution services.  In selecting among such brokers, consideration may be given to those brokers that supply research and other services or products in addition to execution services.  These services and products are primarily proprietary research provided by the executing broker relating to companies, industries, investment strategy and economic, financial and political conditions useful to the Adviser in advising the Funds and other accounts.  The Adviser is authorized to allocate brokerage to brokers who have provided brokerage and research services or products, as such services and products are defined in Section 28(e) of the 1934 Act, for a Fund and/or other accounts for which the Adviser exercises investment discretion (sometimes referred to as “soft dollar” arrangements).  Such arrangements may cause a Fund to pay a commission for effecting a securities transaction in excess of the amount another broker would have charged for effecting that transaction, if the Adviser determines that an arrangement qualifies for the safe harbor provided by Section 28(e) of the 1934 Act.

 

The Adviser is the principal source of information and advice to the Funds, and the research and other services provided by brokers to the Adviser are considered to be in addition to the information and advice provided by the Adviser to the Funds.  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 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.  In addition, it is understood by the board of trustees that other clients of the Adviser might also benefit from the research and other services obtained from brokers through whom a Fund effects securities transactions, and that not all such research and services may be used by the Adviser for the Funds.

 

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.

 

31



 

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.

 

                The aggregate commissions paid by Oakmark Fund, Select Fund, and Equity and Income Fund decreased significantly during the 2007 fiscal year compared to the prior two years.  Those decreases resulted primarily from a general decline in commission rates in the U.S. and increased use of direct market access brokers, algorithmic trading and other alternative trading venues, and, to a lesser extent, generally lower portfolio turnover rates.  The aggregate commissions paid by International Fund increased significantly during the 2007 fiscal year compared to the prior two years, primarily as a result of growth in the Fund’s net assets and an increase in the Fund’s portfolio turnover rate.  The aggregate commissions paid by Global Fund and International Small Cap Fund increased significantly during the 2007 fiscal year compared to the 2005 fiscal year, primarily as a result of growth in the Funds’ net assets and, particularly with respect to Global Fund, an increase in the portfolio turnover rate.

 

The total commissions paid to the affiliated broker for all of the Funds decreased to zero in fiscal years 2007 and 2006 compared to 2005 because the affiliated broker ceased trading operations in June 2005.

 

 

 

Year Ended
September 30, 2007

 

Year Ended
September 30, 2006

 

Year Ended
September 30, 2005

 

Oakmark Fund

 

 

 

 

 

 

 

Aggregate commissions

 

$

1,300,441

 

2,153,638

 

2,549,820

 

Commissions paid to affiliate

 

$

0

 

0

 

144,892

 

Percentage of aggregate commissions paid to affiliate**

 

0

%

0

%

5.68

%

 

 

 

 

 

 

 

 

Select Fund

 

 

 

 

 

 

 

Aggregate commissions

 

$

1,607,007

 

2,524,885

 

3,713,661

 

Commissions paid to affiliate

 

$

0

 

0

 

59,518

 

Percentage of aggregate commissions paid to affiliate**

 

0

%

0

%

1.60

%

 

 

 

 

 

 

 

 

Equity and Income Fund

 

 

 

 

 

 

 

Aggregate commissions

 

$

2,534,960

 

3,298,181

 

4,903,984

 

Commissions paid to affiliate

 

$

0

 

0

 

41,253

 

Percentage of aggregate commissions paid to affiliate**

 

0

%

0

%

0.84

%

 

 

 

 

 

 

 

 

Global Fund

 

 

 

 

 

 

 

Aggregate commissions

 

$

2,377,388

 

2,557,474

 

1,102,771

 

Commissions paid to affiliate

 

$

0

 

0

 

1,251

 

Percentage of aggregate commissions paid to affiliate**

 

0

%

0

%

0.11

%

 

 

 

 

 

 

 

 

Global Select Fund*

 

 

 

 

 

 

 

Aggregate commissions

 

$

337,511

 

N/A

 

N/A

 

Commissions paid to affiliate

 

$

0

 

N/A

 

N/A

 

Percentage of aggregate commissions paid to affiliate**

 

0

%

N/A

 

N/A

 

 

 

 

 

 

 

 

 

International Fund

 

 

 

 

 

 

 

Aggregate commissions

 

$

12,381,890

 

8,847,660

 

4,543,752

 

Commissions paid to affiliate

 

$

0

 

0

 

 

Percentage of aggregate commissions paid to affiliate**

 

0

%

0

%

 

 

 

32



 

International Small Cap Fund

 

 

 

 

 

 

 

Aggregate commissions

 

$

2,450,772

 

1,725,418

 

1,861,293

 

Commissions paid to affiliate

 

$

0

 

0

 

 

Percentage of aggregate commissions paid to affiliate*

 

0

%

0

%

 

 


*      Global Select Fund commenced operations on October 2, 2006.

 

**   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:

 

Fund

 

Year Ended
September 30, 2007

 

Year Ended
September 30, 2006

 

Year Ended
September 30, 2005

 

Oakmark

 

0

%

0

%

4.85

%

Select

 

0

%

0

%

1.24

%

Equity and Income

 

0

%

0

%

0.18

%

Global

 

0

%

0

%

0.27

%

Global Select

 

0

%

N/A

 

N/A

 

International

 

0

%

0

%

 

International Small Cap

 

0

%

0

%

 

 

During the year ended September 30, 2007, each Fund paid brokers that provided research and brokerage products or services to the Adviser the following commissions on portfolio transactions:  Oakmark Fund, $136,571; Select Fund, $285,300; Equity and Income Fund, $212,392; International Fund, $1,003,974; International Small Cap Fund, $303,887; Global Fund, $307,565; and Global Select Fund, $71,135; and the aggregate dollar amounts involved in those transactions for those respective Funds were: $205,875,144, $209,670,293, $578,560,911, $693,273,512, $186,247,209, $241,978,628 and $77,205,766.

 

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  

 

33



 

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.

 

During the most recent fiscal year, Global Fund, Global Select Fund and International Fund acquired securities of their regular brokers or dealers, as defined in Rule 10b-1 of the 1940 Act.  As of September 30, 2007, those Funds held securities of such regular brokers or dealers having the following aggregate values: Global Fund held $89,639,450 of Credit Suisse Group and $92,030,200 of UBS AG; Global Select Fund held $14,187,680 of Citigroup, Inc. and $18,743,706 of UBS AG; and International Fund held $317,977,376 of Credit Suisse Group and $357,399,356 of UBS AG.

 

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

 

State Street Bank and Trust Company (“State Street”), 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, State Street 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.  State Street 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 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 SEC, 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.

 

34



 

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 Corporation Ratings Group, 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 audited financial statements for each of the Funds for the fiscal year ended September 30, 2007, the notes thereto and report of the independent registered public accounting firm thereon are incorporated herein by reference from the Trust’s annual report.

 

B-1



 

PART C

 

OTHER INFORMATION

 

Item 23.

 

EXHIBITS

 

 

 

Note:

 

As used herein, “Registration Statement” refers to this registration statement under the Securities Act of 1933, no. 33-38953. “Pre-effective Amendment” refers to a pre-effective amendment to the Registration Statement, and “Post-effective Amendment” refers to a post-effective amendment to the Registration Statement.

 

(a)

 

Agreement and declaration of trust (exhibit 1 to Post-effective Amendment no. 18*)

 

 

 

(b)

 

Bylaws as amended and restated through July 27, 2005 (exhibit (b) to Post-effective Amendment no. 32*)

 

 

 

(c)

 

The registrant does not issue share certificates

 

 

 

(d)    (1)

 

Investment advisory agreement for The Oakmark Fund dated October 30, 2000 (exhibit (d)(1) to Post-effective Amendment no. 25*)

 

 

 

(d)    (2)

 

First amendment to investment advisory agreement for The Oakmark Fund dated April 18, 2001 (exhibit (d)(2) to Post-effective Amendment no. 26*)

 

(d)    (3)

 

Second amendment to investment advisory agreement for The Oakmark Fund dated November 1, 2004

    

(d)    (4)

 

Investment advisory agreement for The Oakmark Select Fund dated October 30, 2000 (exhibit (d)(2) to Post-effective Amendment no. 25*)

 

 

 

(d)    (5)

 

First amendment to investment advisory agreement for The Oakmark Select Fund dated April 18, 2001 (exhibit (d)(4) to Post-effective Amendment no. 26*)

 

(d)    (6)

 

Second amendment to investment advisory agreement for The Oakmark Select Fund dated November 1, 2004

    

(d)    (7)

 

Investment advisory agreement for The Oakmark Small Cap Fund dated October 30, 2000 (exhibit (d)(3) to Post-effective Amendment no. 25*)

 

 

 

(d)    (8)

 

First amendment to investment advisory agreement for The Oakmark Small Cap Fund dated April 18, 2001 (exhibit (d)(6) to Post-effective Amendment no. 26*)

 

 

 

(d)    (9)

 

Investment advisory agreement for The Oakmark Equity and Income Fund dated October 30, 2000 (exhibit (d)(4) to Post-effective Amendment no. 25*)

 

 

 

(d)    (10)

 

First amendment to investment advisory agreement for The Oakmark Equity and Income Fund dated April 18, 2001 (exhibit (d)(8) to Post-effective Amendment no. 26*)

 

(d)   (11)

 

Second amendment to investment advisory agreement for The Oakmark Equity and Income Fund dated November 1, 2003

 

 

 

(d)   (12)

 

Third amendment to investment advisory agreement for The Oakmark Equity and Income Fund dated November 1, 2004

 

 

 

(d)   (13)

 

Fourth amendment to investment advisory agreement for The Oakmark Equity and Income Fund dated November 1, 2007

 



 

(d)   (14)

 

Investment advisory agreement for The Oakmark Global Fund dated October 30, 2000 (exhibit (d)(5) to Post-effective Amendment no. 25*)

 

 

 

(d)   (15)

 

First amendment to investment advisory agreement for The Oakmark Global Fund dated April 18, 2001 (exhibit (d)(10) to Post-effective Amendment no. 26*)

 

 

 

(d)   (16)

 

Second amendment to investment advisory agreement for The Oakmark Global Fund dated November 1, 2003

 

 

 

(d)   (17)

 

Third amendment to investment advisory agreement for The Oakmark Global Fund dated November 1, 2007

 

 

 

(d)   (18)

 

Investment advisory agreement for The Oakmark International Fund dated October 30, 2000 (exhibit (d)(6) to Post-effective Amendment no. 25*)

 

 

 

(d)   (19)

 

First amendment to investment advisory agreement for The Oakmark International Fund dated April 18, 2001 (exhibit (d)(12) to Post-effective Amendment no. 26*)

 

 

 

(d)   (20)

 

Second amendment to investment advisory agreement for The Oakmark International Fund dated November 1, 2004

 

 

 

(d)   (21)

 

Third amendment to investment advisory agreement for The Oakmark International Fund dated November 1, 2006

 

 

 

(d)   (22)

 

Fourth amendment to investment advisory agreement for The Oakmark International Fund dated November 1, 2007

 

 

 

(d)   (23)

 

Investment advisory agreement for The Oakmark International Small Cap Fund dated October 30, 2000 (exhibit (d)(7) to Post-effective Amendment no. 25*)

 

 

 

(d)   (24)

 

First amendment to investment advisory agreement for The Oakmark International Small Cap Fund dated April 18, 2001 (exhibit (d)(14) to Post-effective Amendment no. 26*)

 

 

 

(d)   (25)

 

Second amendment to investment advisory agreement for The Oakmark International Small Cap Fund dated November 1, 2004

 

 

 

(d)   (26)

 

Third amendment to investment advisory agreement for The Oakmark International Small Cap Fund dated November 1, 2006

 

 

 

(d)   (27)

 

Investment advisory agreement dated September 1, 2006 for The Oakmark Global Select Fund (exhibit (d)(22) to Post-effective Amendment no. 34*)

 

(e)   (1)

 

Distribution agreement dated January 26, 2001 (exhibit (e) to Post-effective Amendment no. 25*)

 

 

 

(e)   (2)

 

First amendment to Distribution Agreement dated April 18, 2001 (exhibit (e)(2) to Post-effective Amendment no. 26*)

 

 

 

(e)  (3)

 

Letter agreement dated September 14, 2006 applying distribution agreement (exhibit (e)(1)) to The Oakmark Global Select Fund (exhibit (e)(3) to Post-effective Amendment no. 34*)

 

(f)

 

None

  

(g)    (1)

 

Custodian agreement with Investors Bank & Trust Company dated as of April 1, 2002 (exhibit (g)(1) to Post-effective Amendment no. 28*)

 



 

(g)    (2)

 

Foreign custody delegation agreement with Investors Bank & Trust Company dated as of April 1, 2002 (exhibit (g)(2) to Post-effective Amendment no. 28*)

 

 

 

(g)    (3)

 

Special custody and pledge agreement among Harris Associates Investment Trust, Pershing LLC and Investors Bank & Trust Company dated as of May 9, 2005 (exhibit (g)(3) to Post-effective Amendment no. 32*)

 

 

 

(g)    (4)

 

Letter agreement dated September 12, 2006 applying custodian agreement (exhibit (g)(1)) to The Oakmark Global Select Fund (exhibit (g)(4) to Post-effective Amendment no. 34*)

 

(g)    (5)

 

Form of Second Amendment Agreement between Harris Associates Investment Trust and State Street Bank & Trust regarding assumption of Custodian Agreement dated as of [                                   ], 2008

 

(h)    (1)

 

Transfer agency and service agreement with Boston Financial Data Services, Inc. dated October 1, 2005 (exhibit (h)(1) to Post-effective Amendment no. 32*)

 

 

 

(h)    (2)

 

Administrative agreement with Investors Bank & Trust Company dated as of April 1, 2002 (exhibit (h)(5) to Post-effective Amendment no. 28*)

 

 

 

(h)    (3)

 

Letter agreement dated September 11, 2006 applying transfer agency and service agreement (exhibit (h)(1)) to The Oakmark Global Select Fund (exhibit (h)(3) to Post-effective Amendment no. 34*)

 

 

 

(h)    (4)

 

Letter agreement dated September 12, 2006 applying administration agreement (exhibit (h)(2)) to The Oakmark Global Select Fund (exhibit (h)(4) to Post-effective Amendment no. 34*)

 

 

 

(i)    (1)

 

Opinion of Bell, Boyd & Lloyd dated November 1, 1998 - The Oakmark Fund (exhibit 10.1 to Post-effective Amendment no. 21*)

 

 

 

(i)    (2)

 

Opinion of Bell, Boyd & Lloyd dated July 23, 1992 - The Oakmark International Fund (exhibit 10.2 to Post-effective Amendment no. 18*)

 

 

 

(i)    (3)

 

Opinion of Bell, Boyd & Lloyd dated September 20, 1995 - The Oakmark Small Cap Fund, The Oakmark Equity and Income Fund and The Oakmark International Small Cap Fund (exhibit 10.4 to Post-Effective Amendment no. 18*)

 

 

 

(i)    (4)

 

Opinion of Bell, Boyd & Lloyd dated October 22, 1996 - The Oakmark Select Fund (exhibit 10.5 to Post-effective Amendment no. 17*)

 

 

 

(i)    (5)

 

Opinion of Bell, Boyd & Lloyd dated May 21, 1999 - The Oakmark Global Fund (exhibit (i)(6) to Post-effective Amendment no. 22*)

 

 

 

(i)    (6)

 

Opinion of Bell, Boyd & Lloyd LLC dated September 15, 2006 — The Oakmark Global Select Fund (exhibit (i)(6) to Post-effective Amendment no. 34*)

 

 

 

(i)    (7)

 

Opinion of Ropes & Gray LLP dated September 15, 2006 — The Oakmark Global Select Fund (exhibit (i)(7) to Post-effective Amendment no. 34*)

 

(i)    (8)

 

Consent of Bell, Boyd & Lloyd LLP dated January 25, 2008

 

(j)

 

Consent of independent registered public accounting firm dated January 25, 2008

    

(k)

 

None

 

 

 

(l)   (1)

 

Organizational expense agreement for The Oakmark Fund dated July 31, 1991 (exhibit 13.1 to Post-effective Amendment no. 18*)

 



 

(l)    (2)

 

Organizational expense agreement for The Oakmark International Fund dated September 15, 1992 (exhibit 13.2 to Post-effective Amendment no. 18*)

 

 

 

(l)    (3)

 

Organizational expense agreement for The Oakmark Small Cap Fund, The Oakmark Equity and Income Fund and The Oakmark International Small Cap Fund dated July 6, 1995 (exhibit 13.3 to Post-effective Amendment no. 18*)

 

 

 

(l)    (4)

 

Organizational expense agreement for The Oakmark Select Fund dated October 22, 1996 (exhibit 13.4 to Post-effective Amendment no. 17*)

 

 

 

(l)    (5)

 

Form of subscription agreement (exhibit 13.5 to Post-effective Amendment no. 18*)

 

 

 

(l)    (6)

 

Subscription agreement for The Oakmark Global Select Fund dated September 14, 2006 (exhibit (l)(6) to Post-effective Amendment no. 34*)

 

 

 

(l)    (7)

 

Expense limitation agreement dated September 1, 2006 (exhibit (l)(7) to Post-effective Amendment no. 34*)

 

(l)    (8)

 

Expense limitation agreement dated January 16, 2007 (exhibit (l)(8) to Post-effective Amendment no. 35*)

 

 

 

(l)    (9)

 

Expense limitation agreement dated January 11, 2008

 

(m)

 

None

 

 

 

(n)

 

Rule 18f-3 plan (exhibit 18 to Post-effective Amendment no. 21*)

 

(p)    (1)

 

Code of ethics and statement on insider trading of Harris Associates L.P., Harris Associates Securities L.P. and Harris Associates Investment Trust, as amended on November 13, 2007

 

 

 

(p)    (2)

 

Code of ethics for non-interested trustees of Harris Associates Investment Trust dated October 24, 2007

 


*                 Incorporated by reference

 

Item 24.          Persons Controlled By Or Under Common Control With Registrant

 

The registrant does not consider that there are any persons directly or indirectly controlling, controlled by, or under common control with, the registrant within the meaning of this item.  The information in the prospectus under the caption “Management of the Funds” and in the Statement of Additional Information under the caption “Investment Adviser” and “Trustees and Officers” is incorporated by reference.

 

Item 25.          Indemnification

 

Article VIII of the agreement and declaration of trust of registrant (exhibit 1 to this registration statement, which is incorporated herein by reference) provides that registrant shall provide certain indemnification of its trustees and officers.  In accordance with Section 17(h) of the Investment Company Act, that provision shall not protect any person against any liability to the registrant or its shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, negligence or reckless disregard of the duties involved in the conduct of his office.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a trustee, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or

 



 

controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

The registrant, its trustees and officers, Harris Associates L.P. (“HALP”) (the investment adviser to registrant) and certain affiliated persons of HALP and affiliated persons of such persons are insured under insurance maintained by registrant and HALP, within the limits and subject to the limitations of the policy, against certain expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been such trustees, directors or officers.  The policy expressly excludes coverage for any trustee or officer whose personal dishonesty, fraudulent breach of trust, lack of good faith, or intention to deceive or defraud has been finally adjudicated or may be established or who willfully fails to act prudently.

 

Item 26.          Business And Other Connections Of Investment Adviser

 

The information in the prospectus under the caption “Management of the Funds” is incorporated by reference. Neither HALP nor its general partner has at any time during the past two years been engaged in any other business, profession, vocation or employment of a substantial nature either for its own account or in the capacity of director, officer, employee, partner or trustee, except that HALP is a registered commodity trading adviser and commodity pool operator and its general partner is also the general partner of a securities broker-dealer firm.

 

Item 27.          Principal Underwriters

 

(a)                   Harris Associates Securities L.P. acts as principal underwriter for the registrant.

 

(b)                   Set forth below is information with respect to each officer of Harris Associates Securities L.P.:

 

NAME

 

POSITIONS AND OFFICES
WITH UNDERWRITER

 

POSITIONS AND OFFICES WITH
REGISTRANT

 

 

 

 

 

John R. Raitt

 

Chief Executive Officer

 

President

Robert Levy

 

Chairman

 

Executive Vice President

Kristi L. Rowsell

 

Chief Financial Officer

 

Vice President and Principal Financial Officer

Janet L. Reali

 

Chief Compliance Officer

 

Vice President and Secretary

 

The principal business address of each officer of Harris Associates Securities L.P. is Two North LaSalle Street, Suite 500, Chicago, Illinois 60602.

 

(c)                                                          There are no commissions or other compensation received from the registrant directly or indirectly, by any principal underwriter who is not an affiliated person of the registrant or an affiliated person of an affiliated person.

 

Item 28.                               Location of Accounts and Records

 

(1)                                                          State Street Bank & Trust Company

200 Clarendon Street
P.O. Box 9130
Boston, MA 02117-9138
Rule 31a-1(a); Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8)

 



 

(2)                   Harris Associates L.P.
Two North LaSalle Street, Suite 500
Chicago, IL 60602
Rule 31a-1(a); Rule 31a-1(b)(4), (9), (10), (11);
Rule 31a-1(d); Rule 31a-1(f); Rule 31a-2(a);
Rule 31a-2(c); Rule 31a-2(e)

 

(3)                   Boston Financial Data Services, Inc.
Two Heritage Drive
Quincy, MA 02171
Rule 31a-1; Rule 31a-1(b)(1)

 

Item 29.          Management Services

 

None

 

Item 30.          Undertakings

 

Not applicable

 



 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this post-effective amendment pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago and State of Illinois on January 28, 2008.

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By

/s/ John R. Raitt

 

 

John R. Raitt, President

 

Pursuant to the requirements of the Securities Act of 1933, this post-effective amendment to the registration statement has been signed below by the following persons in the capacities and on the date indicated.

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ Michael J. Friduss

 

Trustee

 

 

Michael J. Friduss

 

 

 

 

 

 

 

 

 

/s/ Thomas H. Hayden

 

Trustee

 

 

Thomas H. Hayden

 

 

 

 

 

 

 

 

 

/s/ Christine M. Maki

 

Trustee

 

 

Christine M. Maki

 

 

 

 

 

 

 

 

 

/s/ Allan J. Reich

 

Trustee

 

 

Allan J. Reich

 

 

 

 

 

 

 

 

 

/s/ Steven S. Rogers

 

Trustee

 

January 28, 2008

Steven S. Rogers

 

 

 

 

 

 

 

 

 

/s/ Burton W. Ruder

 

Trustee

 

 

Burton W. Ruder

 

 

 

 

 

 

 

 

 

/s/ Peter S. Voss

 

Trustee

 

 

Peter S. Voss

 

 

 

 

 

 

 

 

 

/s/ Gary N. Wilner

 

Trustee

 

 

Gary N. Wilner

 

 

 

 

 

 

 

 

 

/s/ John R. Raitt

 

Trustee and President

 

 

John R. Raitt

 

(Chief executive officer)

 

 

 

 

 

 

 

/s/ Kristi L. Rowsell

 

Vice President (Principal

 

 

Kristi L. Rowsell

 

financial and accounting

 

 

 

 

officer)

 

 

 



 

Index of Exhibits

 

Exhibit

 

 

Number

 

Exhibits

 

 

 

(d)(3)

 

Second amendment to investment advisory agreement for The Oakmark Fund dated November 1, 2004

 

 

 

(d)(6)

 

Second amendment to investment advisory agreement for The Oakmark Select Fund dated November 1, 2004

 

 

 

(d)(11)

 

Second amendment to investment advisory agreement for The Oakmark Equity and Income Fund dated November 1, 2003

 

 

 

(d)(12)

 

Third amendment to investment advisory agreement for The Oakmark Equity and Income Fund dated November 1, 2004

 

 

 

(d)(13)

 

Fourth amendment to investment advisory agreement for The Oakmark Equity and Income Fund dated November 1, 2007

 

 

 

(d)(16)

 

Second amendment to investment advisory agreement for The Oakmark Global Fund dated November 1, 2003

 

 

 

(d)(17)

 

Third amendment to investment advisory agreement for The Oakmark Global Fund dated November 1, 2007

 

 

 

(d)(20)

 

Second amendment to investment advisory agreement for The Oakmark International Fund dated November 1, 2004

 

 

 

(d)(21)

 

Third amendment to investment advisory agreement for The Oakmark International Fund dated November 1, 2006

 

 

 

(d)(22)

 

Fourth amendment to investment advisory agreement for The Oakmark International Fund dated November 1, 2007

 

 

 

(d)(25)

 

Second amendment to investment advisory agreement for The Oakmark International Small Cap Fund dated November 1, 2004

 

 

 

(d)(26)

 

Third amendment to investment advisory agreement for The Oakmark International Small Cap Fund dated November 1, 2006

 

 

 

(g)(5)

 

Form of Second Amendment Agreement between Harris Associates Investment Trust and State Street Bank & Trust regarding assumption of Custodian Agreement dated as of [__________________], 2008

 

 

 

(i)(8)

 

Consent of Bell, Boyd & Lloyd LLP dated January 25, 2008

 

 

 

(j)

 

Consent of independent registered public accounting firm dated January 25, 2008

 

 

 

(l)(9)

 

Expense limitation agreement dated January 11, 2008

 

 

 

(p)(1)

 

Code of ethics and statement on insider trading of Harris Associates L.P., Harris Associates Securities L.P. and Harris Associates Investment Trust, as amended on November 13, 2007

 



 

(p)(2)

 

Code of ethics for non-interested trustees of Harris Associates Investment Trust dated October 24, 2007

 


EX-99.(D)(3) 2 a07-29987_2ex99dd3.htm EX-99.(D)(3)

Exhibit 99.(d)(3)

 

SECOND AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940 Act”) as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.                                       Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 1.00% 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% on net assets in excess of $10 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

 

Dated:             November 1, 2004

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

by Harris Associates, Inc.

 

its General Partner

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(6) 3 a07-29987_2ex99dd6.htm EX-99.(D)(6)

Exhibit 99.(d)(6)

 

SECOND AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK SELECT FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940 Act”) as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark Select Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.                                       Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 1.00% 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% on net assets in excess of $10 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

 

Dated:             November 1, 2004

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

by Harris Associates, Inc.

 

its General Partner

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(11) 4 a07-29987_2ex99dd11.htm EX-99.(D)(11)

Exhibit 99.(d)(11)

 

SECOND AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK EQUITY AND INCOME FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940 Act”) as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark Equity and Income Fund (the “Fund”) dated October 30, 2000, as heretofore amended,  is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of .75% on the first $5 billion of net assets, .70% on the next $2.5 billion of net assets, .675% on the next $2.5 billion of net asset, .65% on net assets in excess of $10 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

Dated:    November 1, 2003

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

by Harris Associates, Inc.

 

its General Partner

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(12) 5 a07-29987_2ex99dd12.htm EX-99.(D)(12)

Exhibit 99.(d)(12)

 

THIRD AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK EQUITY AND INCOME FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940 Act”) as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark Equity and Income Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 0.75% 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% on net assets in excess of $12.5 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

Dated:    November 1, 2004

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

by Harris Associates, Inc.

 

its General Partner

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(13) 6 a07-29987_2ex99dd13.htm EX-99.(D)(13)

Exhibit 99.(d)(13)

 

FOURTH AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK EQUITY AND INCOME FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940, as amended, as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark Equity and Income Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 0.75% 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, 0.60% from $12.5-16.0 billion and 0.585% in excess of $16.0 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

Dated:    November 1, 2007

 

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

 

by Harris Associates, Inc.

 

 

its General Partner

 

 

 

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(16) 7 a07-29987_2ex99dd16.htm EX-99.(D)(16)

Exhibit 99.(d)(16)

 

SECOND AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK GLOBAL FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940 Act”) as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark Global Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 1.00% on the first $2 billion of net assets, .95% on the next $2 billion of net assets, .90% on net assets in excess of $4 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

 

Dated:    November 1, 2003

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By:

/s/ Robert M. Levy

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

by Harris Associates, Inc.

 

its General Partner

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(17) 8 a07-29987_2ex99dd17.htm EX-99.(D)(17)

Exhibit 99.(d)(17)

 

THIRD AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK GLOBAL FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940, as amended, as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark Global Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 1.00% up to $2.0 billion, 0.95% from $2-4 billion, 0.90% from $4-8 billion and 0.875% in excess of $8.0 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

 

Dated:    November 1, 2007

 

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

 

by Harris Associates, Inc.

 

 

its General Partner

 

 

 

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(20) 9 a07-29987_2ex99dd20.htm EX-99.(D)(20)

Exhibit 99.(d)(20)

 

SECOND AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK INTERNATIONAL FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940 Act”) as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark International Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 1.00% 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% on net assets in excess of $7.5 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

Dated:    November 1, 2004

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

by Harris Associates, Inc.

 

its General Partner

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(21) 10 a07-29987_2ex99dd21.htm EX-99.(D)(21)

Exhibit 99.(d)(21)

 

THIRD AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK INTERNATIONAL FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940, as amended as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark International Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 1.00% up to $2 billion, 0.95% from $2-3 billion, 0.85% from $3-5 billion, 0.825% from $5-7.5 billion; 0.815% from $7.5-11 billion and 0.805% in excess of $11 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

Dated:    November 1, 2006

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

by Harris Associates, Inc.

 

its General Partner

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(22) 11 a07-29987_2ex99dd22.htm EX-99.(D)(22)

Exhibit 99.(d)(22)

 

FOURTH AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK INTERNATIONAL FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940, as amended, as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark International Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 1.00% up to $2 billion, 0.95% from $2-3 billion, 0.85% from $3-5 billion, 0.825% from $5-7.5 billion, 0.815% from $7.5-11 billion, 0.805% from $11-16.5 billion and 0.800% in excess of $16.5 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

Dated:    November 1, 2007

 

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

 

by Harris Associates, Inc.

 

 

its General Partner

 

 

 

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(25) 12 a07-29987_2ex99dd25.htm EX-99.(D)(25)

Exhibit 99.(d)(25)

 

SECOND AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK INTERNATIONAL SMALL CAP FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940 Act”) as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark International Small Cap Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 1.25% up to $500 million, 1.10% from $500 million to $1.5 billion and 1.05% on net assets in excess of $1.5 billion.  The fee for a month shall be paid as soon as practicable after the last day of that month.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

Dated:    November 1, 2004

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

by Harris Associates, Inc.

 

its General Partner

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(D)(26) 13 a07-29987_2ex99dd26.htm EX-99.(D)(26)

Exhibit 99.(d)(26)

 

THIRD AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

FOR

THE OAKMARK INTERNATIONAL SMALL CAP FUND

 

HARRIS ASSOCIATES INVESTMENT TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as an open-end diversified management investment company (the “Trust”), and HARRIS ASSOCIATES L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940, as amended as an investment adviser (the “Adviser”), agree that paragraph 6 of the investment advisory agreement between the parties for The Oakmark International Small Cap Fund (the “Fund”) dated October 30, 2000, as heretofore amended, is further amended as of the date of this amendment to read as follows:

 

6.             Compensation of Adviser.  For the services to be rendered and the charges and expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall pay out of Fund assets to the Adviser a monthly fee, based on the Fund’s net assets as of the last business day of the preceding month, at the annual rate of 1.25% on the first $500 million, 1.10% from $500 million - $1.5 billion, 1.05% from $7.5-3.5 billion and 1.025% in excess of $3.5 billion.  The fee payable hereunder shall be reduced proportionately during any month in which this agreement is not in effect for the entire month.

 

 

Dated:    November 1, 2006

 

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

 

 

By:

/s/ John R. Raitt

 

 

 

 

 

 

HARRIS ASSOCIATES L.P.

 

by Harris Associates, Inc.

 

its General Partner

 

 

 

 

 

By:

/s/ John R. Raitt

 

 


EX-99.(G)(5) 14 a07-29987_2ex99dg5.htm EX-99.(G)(5)

Exhibit 99.(g)(5)

 

SECOND AMENDMENT AGREEMENT

 

SECOND AMENDMENT AGREEMENT, effective as of January [    ], 2008, by and between HARRIS ASSOCIATES INVESTMENT TRUST, a business trust organized under the laws of the Commonwealth of Massachusetts (the “Fund”) and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company (the “Bank”).

 

WHEREAS, the Fund and Investors Bank & Trust Company (“IBT”) entered into a Custodian Agreement dated as of April 1, 2002 (as amended, modified or supplemented from time to time, the “Custodian Agreement”) and an Administration Agreement dated as of April 1, 2002 (as amended, modified or supplemented from time to time, the “Administration Agreement”);

 

WHEREAS, IBT merged with and into Bank, effective July 2, 2007, with the result that State Street now serves as Custodian under the Custodian Agreement and Administrator under the Administration Agreement; and

 

WHEREAS, the Fund has requested that State Street amend the Custodian Agreement and the Administration Agreement and State Street has agreed to do so as an accommodation to the Fund notwithstanding that as amended, neither the Custodian Agreement nor the Administration Agreement is identical to the form of custodian agreement and administration agreement customarily entered into by State Street as custodian and as administrator, in order that the services to be provided to the Fund on behalf of its Portfolios by State Street, as successor by merger to IBT, may be made consistently and predictably to the Fund.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein set forth, the parties hereto agree as follows:

 

1.             Amendment of the Custodian Agreement.

 

(a)                                  Section 16, Termination, Paragraph 16.1 is hereby amended by replacing the first sentence of such paragraph 16.1 in its entirety with the following:

 

“The term of this Agreement shall commence upon the date first noted above and continue in full force and effect through and including June 30, 2011 (the “Initial Term”), unless earlier terminated as provided herein.”

 

2.             Amendment of the Administration Agreement.

 

(a)                                  Section 7 (a) of the Administration Agreement is hereby amended by replacing the first sentence of such Section 7(a) in its entirety with the following:

 

“The term of this Agreement shall commence upon the date first noted above and continue in full force and effect through and including June 30, 2011 (the “Initial Term”), unless earlier terminated as provided herein.”

 

3.             Miscellaneous.

 



 

(a)                                Except as amended hereby, the Custodian and Administration Agreements shall remain in full force and effect.

 

(b)                               The Fund hereby confirms that Appendix A to each Agreement is true, correct and complete in all respects as of the date hereof.

 

(c)                                This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[The remainder of this page is intentionally left blank.]

 



 

IN WITNESS WHEREOF, each party hereto has caused this Second Amendment Agreement to be executed by its duly authorized officer, as the case may be, as of the date and year first above written.

 

 

STATE STREET BANK AND TRUST COMPANY

 

 

 

By:

 

 

Name:

Michael Rogers

Title:

Executive Vice President

 

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 


EX-99.(I)(8) 15 a07-29987_2ex99di8.htm EX-99.(I)(8)

Exhibit 99.(i)(8)

 

 

70 West Madison Street, Suite 3100

Chicago, Illinois 60602-4207

312.372.1121 Ÿ Fax 312.827.8000

 

January 25, 2008

 

As counsel for Harris Associates Investment Trust (the “Registrant”), we consent to the incorporation by reference of our opinion for each of the Registrant’s series, filed with the Registrant’s registration statement on Form N-1A, Securities Act File No. 33-38953 on each of the dates listed below:

 

Series

 

Date of Opinion

 

Date of Filing

 

 

 

 

 

The Oakmark International Fund

 

July 23, 1992

 

February 28, 1997

The Oakmark Equity and Income Fund

 

September 20, 1995

 

February 28, 1997

The Oakmark International Small Cap Fund

 

September 20, 1995

 

February 28, 1997

The Oakmark Select Fund

 

October 22, 1996

 

October 23, 1996

The Oakmark Fund

 

November 1, 1998

 

November 5, 1998

The Oakmark Global Fund

 

May 21, 1999

 

May 21, 1999

The Oakmark Global Select Fund

 

September 15, 2006

 

September 20, 2006

 

In giving this consent we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933.

 

 

 

Very truly yours,

 

 

 

/s/ BELL, BOYD & LLOYD LLP

 

 

chicago Ÿ washington

 


EX-99.(J) 16 a07-29987_2ex99dj.htm EX-99.(J)

Exhibit 99.(j)

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the incorporation by reference in this Post-Effective Amendment No. 36 to Registration Statement No. 33-38953 of Harris Associates Investment Trust on Form N-1A of our report dated October 29, 2007 appearing in the Annual Report of The Oakmark Fund, The Oakmark Select Fund, The Oakmark Global Select Fund, The Oakmark Equity and Income Fund, The Oakmark Global Fund, The Oakmark International Fund and The Oakmark International Small Cap Fund for the year ended September 30, 2007, and to the reference to us under the headings “Financial Highlights” in the Prospectus and “Independent Registered Public Accounting Firm” in the Statement of Additional Information, which are part of such Registration Statement.

 

 

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

January 25, 2008

 


EX-99.(L)(9) 17 a07-29987_2ex99dl9.htm EX-99.(L)(9)

Exhibit 99.(l)(9)

 

January 11, 2008

 

Harris Associates Investment Trust
Two North LaSalle Street
Chicago IL 60602

 

Ladies and Gentlemen:

 

Harris Associates L.P. (“HALP”) hereby undertakes as follows:

 

In the interest of limiting the expenses of each of the following classes of series of Harris Associates Investment Trust referred to below (each a “Fund Class”), commencing February 1, 2008, HALP undertakes to reimburse each Fund Class to the extent, but only to the extent, that its annualized expenses (excluding taxes, interest, all commissions and other normal charges incident to the purchase and sale of portfolio securities, and extraordinary charges such as litigation costs, but including fees paid to HALP) exceed the percent set forth opposite the Fund Class of average net assets of the Fund Class through January 31, 2009.

 

 

 

Class I

 

Class II

 

The Oakmark Fund

 

1.50

%

1.75

%

The Oakmark Select Fund

 

1.50

%

1.75

%

The Oakmark Equity and Income Fund

 

1.00

%

1.25

%

The Oakmark Global Fund

 

1.75

%

2.00

%

The Oakmark Global Select Fund

 

1.75

%

2.00

%

The Oakmark International Fund

 

2.00

%

2.25

%

The Oakmark International Small Cap Fund

 

2.00

%

2.25

%

 

The amount of the expense reimbursement to any Fund Class (or any offsetting reimbursement by a Fund Class to HALP) shall be computed on an annual basis, but accrued and paid monthly.

 

This undertaking shall be binding upon any successors and assigns of HALP.

 

Very truly yours,

 

HARRIS ASSOCIATES L.P.

 

/s/ John R. Raitt

John R. Raitt

Chief Executive Officer

 


EX-99.(P)(1) 18 a07-29987_2ex99dp1.htm EX-99.(P)(1)

Exhibit 99.(p)(1)

 

Harris Associates L.P., Harris Associates Securities L.P. and Harris Associates Investment Trust

 

Code of Ethics and Statement on Insider Trading

As Amended November 13, 2007

 

I.              DEFINITIONS

 

A.            Firm or Harris.  The term “Firm” or “Harris” shall include Harris Associates L.P. (“HALP”) and Harris Associates Securities L.P. (“HASLP”).

 

B.            Trust.     The term “Trust” shall mean Harris Associates Investment Trust, including any series of shares of beneficial interest of the Trust (each, a “Fund”).

 

C.            Employee.  The term “Employee” shall include any person employed by the Firm, whether on a full or part-time basis and all partners, officers, shareholders and directors (other than Non-Access Directors (as defined below)) of the Firm.

 

D.            Access Person.  The term “Access Person” shall have the meaning set forth in Section 17j-1(a)(1) of the Investment Company Act of 1940 and rules thereunder (the “Act”) and Section 204A-1(e)(1) of the Investment Advisers Act of 1940 (the “Advisers Act”).  Accordingly, Access Person means any director, officer, general partner, or Advisory Person (as defined below) of the Trust or HALP, but shall not include (1) any trustee of the Trust who is not an “interested person” of the Trust; (2) any trustee of the Trust who is designated an “interested person”, as defined in Section 2(a)(19) of the Investment Company Act of 1940, but is not a director, officer, general partner or Advisory Person of HALP, HASLP or Harris Associates, Inc.; and (3) in the case of HALP, shall not include any Non-Access Director.

 

E.             Advisory Person.  The term “Advisory Person” shall have the meaning set forth in Section 17j-1(a)(2) of the Act.  Accordingly, Advisory Person means any Employee of the Firm, who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities (as defined below) by a Client (as defined below), or whose functions relate to the making of any recommendations with respect to purchases and sales.  For the purpose of this Code, each Employee of the Firm with an office at the Firm’s principal place of business shall be deemed to be an Advisory Person.

 

F.             Persons Subject to this Code.  Each Employee is subject to this Code.  In addition, Non-Access Directors are subject to the following provisions of this Code: II.A, II.B, II.C.i, II.J, and III (other than III.B.3 (i), (ii) and (iv) and the last sentence of III.B.4).

 

G.            Covered Security.  The term “Covered Security” shall have the meaning set forth in Section 2(a)(36) of the Act(1), including any right to acquire such security, except that it shall not include

 


(1) Sec. 2(a)(36) “Security” means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

 

1



 

securities which are direct obligations of the Government of the United States, bankers’ acceptances, bank certificates of deposit, commercial paper, high quality short-term debit instruments (including repurchase agreements), and shares issued by open-end investment companies other than Reportable Funds (defined below).  In addition, all exchange-traded funds (“ETFs”), whether registered as open-end management companies or unit investment trusts, shall be treated as Covered Securities for reporting purposes only.

 

H.            Reportable Fund.  The term “Reportable Fund” shall have the meaning set forth in Section 204A-1(e)(9) of the Advisers Act.  Reportable Fund means any investment company registered under the Act that is advised or sub-advised or distributed by the Firm or any affiliated company (e.g. IXIS Asset Management Advisers, Loomis Sayles, or Hansberger).  Reportable Funds include, for example, open-ended investment companies and closed-end funds(2).  A current list of Reportable Funds is maintained on the Compliance page of the Firm’s intranet site.

 

I.              Beneficial Interest or Ownership.   The term “beneficial interest or ownership” shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and rules thereunder, which includes any interest in which a person, directly or indirectly, has or shares a direct or indirect pecuniary interest.  A pecuniary interest is the opportunity, directly or indirectly, to profit or share in any profit derived from any transaction.  Each person will be assumed to have a pecuniary interest, and therefore, beneficial interest or ownership, in all securities held by that person, that person’s spouse, all members of that person’s immediate family and adults sharing the same household with that person (other than mere roommates) and all minor children of that person and in all accounts subject to their direct or indirect influence or control and/or through which they obtain the substantial equivalent of ownership, such as trusts in which they are a trustee or beneficiary, partnerships in which they are the general partner, corporations in which they are a controlling shareholder or any other similar arrangement.  Any questions an Employee may have about whether an interest in a security or an account constitutes beneficial interest or ownership should be directed to the Firm’s General Counsel or Compliance Department.  Examples of beneficial interest or ownership are attached as Appendix A.

 

J.             Client.  The term “Client” shall mean any client of HALP, including any Fund.

 


(2)           Reportable Funds that are money market funds are not subject to the Code’s reporting requirements or holding periods (see Section II.G – Procedures to Implement Trading Restrictions and Reporting Obligations).

 

2



 

K.            Special Compliance Person.  The term “Special Compliance Person” shall mean the current Compliance Officer of IXIS Asset Management – North America.

 

L.            Non-Access Director.  The term “Non-Access Director” shall mean any person who is a Director of Harris Associates, Inc., the corporate general partner of HALP and HASLP, but who is not an officer or employee of any of HALP, HASLP or Harris Associates, Inc. and who meets all of the following conditions:

 

i)              He or she, in connection with his or her regular functions or duties, does not make, participate in or obtain information regarding the purchase or sale of Covered Securities by a registered investment company, and whose functions do not relate to the making of recommendations with respect to such purchases or sales;

ii)             He or she does not have access to nonpublic information regarding any Firm clients’ purchases or sales of securities (other than information contained in standard account statements or reports that the Firm may furnish to such person in his or her capacity as a client of the Firm), or nonpublic information regarding the portfolio holdings of any Reportable Fund; and

iii)            He or she is not involved in making securities recommendations to Firm clients, and does not have access to such recommendations that are nonpublic (other than information contained in standard account statements or reports that the Firm may furnish to such person in his or her capacity as a client of the Firm).

 

3



 

II.            CODE OF ETHICS

 

A.            GENERAL STATEMENT

 

Harris seeks to foster a reputation for integrity and professionalism.  That reputation is a vital business asset.  The confidence and trust placed in us by investors in mutual funds and clients with accounts advised by the Firm is something that is highly valued and must be protected. The Firm owes a fiduciary duty to its advisory clients, and the fundamental principle of the Firm is that at all times the interests of its Clients come first.  As a result, any activity which creates even the suspicion of misuse of material non-public information by the Firm or any of its Employees, which gives rise to or appears to give rise to any breach of fiduciary duty owed to any Client, or which creates any actual or potential conflict of interest between any Client and the Firm or any of its Employees or even the appearance of any conflict of interest must be avoided and is prohibited.

 

The Investment Company Act and rules make it illegal for any person covered by the Code, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by the Trust to:

 

i)                                         employ any device, scheme, or artifice to defraud the Trust;

 

ii)                                      make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of circumstances under which they are made, not misleading or in any way mislead the Trust regarding a material fact;

 

iii)                                   engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Trust; or

 

iv)                                  engage in any manipulative practice with respect to the Trust.

 

The restrictions on personal securities transactions contained in this Code are intended to help the Firm monitor for compliance with these prohibitions.

 

Additionally, the federal securities laws require that an investment adviser maintain a record of every transaction in any Covered Security and Reportable Fund in which an Access Person acquires any direct or indirect beneficial interest or ownership, except any transaction in an account in which the Access Person has no direct or indirect control or influence.

 

To attempt to ensure that each Person Subject to this Code satisfies this Code and these record keeping obligations, the Firm has developed the following rules relating to personal securities trading, outside employment, personal investments with external investment managers and confidentiality.

 

The General Counsel, Chief Executive Officer, and Chief Compliance Officer, acting in concert, have the authority to grant written waivers of the provisions of this Code in appropriate instances.  However, the Firm expects that waivers will be granted only in rare instances, and some provisions of the Code that are mandated by the Act or the Advisers Act cannot be waived.

 

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The Firm expects all Access Persons to comply with the spirit of the Code as well as the specific rules contained in the Code.  Any violations of the Code must be reported promptly to the Firm’s Chief Compliance Officer.

 

B.            COMPLIANCE WITH FEDERAL SECURITIES LAWS

 

More generally, Firm personnel and Non-Access Directors are required to comply with applicable federal securities laws at all times.  Examples of applicable federal securities laws include:

 

i)

the Securities Act of 1933, Securities Act of 1934, Sarbanes-Oxley Act of 2002 and SEC rules thereunder;

 

 

ii)

the Investment Advisers Act of 1940 and SEC rules thereunder;

 

 

iii)

the Investment Company Act of 1940 and SEC rules thereunder;

 

 

iv)

Title V of the Gramm-Leach-Bliley Act of 1999 (privacy and security of client non-public information); and

 

 

v)

the Bank Secrecy Act, as it applies to mutual funds and investment advisers, and SEC and Department of the Treasury rules thereunder.

 

C.            RESTRICTIONS ON EMPLOYEE TRADING

 

No trading activity by an Employee in any security in which an Employee has any beneficial interest or ownership which is also the subject of a Client portfolio purchase or sale shall disadvantage or appear to disadvantage such Client transaction. Further, the following specific restrictions apply to all trading activity for Advisory Persons:

 

i)                                         Any transaction in a security in anticipation of client orders (“frontrunning”) is prohibited,

 

ii)                                      Any transaction in a security which is the subject of a Firm recommendation is prohibited until the tenth business day following the dissemination of the recommendation, or any longer period specified in this Code,

 

iii)                                   Any transaction in a security which the Advisory Person knows or has reason to believe is being purchased or sold or considered for purchase or sale(3) by any investment company advised by the Firm is prohibited until the transaction by such investment company has been completed or consideration of such transaction has been abandoned,(4)

 


(3)           A security is “being considered for purchase or sale”; the earlier of, when a recommendation to purchase or sell has been made and communicated or the security is placed on the research project list and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation.

 

(4)           Among the clients of the Firm are private investment partnerships (partnerships) in which various Employees of the Firm have equity interests.  This trading prohibition shall not restrict purchases or sales for the accounts of such partnerships provided that the Trust and such accounts are treated fairly and equitably in connection with such purchases and sales.

 

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iv)           Any transaction in a security on the same day or within two business days after any Client, including a registered investment company, advised by the Firm has a pending or actual transaction is prohibited.  If an Advisory Person places a same day order for such security prior to the Client placing an order, the Employee’s order will be canceled,

 

v)            Any transaction involving options, single stock futures, or other derivatives relating to any security on the Firm’s approved list or which are held by any investment company advised by the Firm that appears to evade the restrictions of the Code is prohibited, and

 

vi)           Any acquisition of an equity security in an initial public offering is prohibited.

 

Additionally, no Employee of the Firm shall knowingly sell to or purchase from the Funds or the Trust any security or other property except, in the case of the Funds, securities issued by the Funds.  Neither shall the Firm, HASL nor any Employee share in the profits or losses in any account of a customer carried by the Firm or HASL or any other NASD member, except to the extent provided for by Rule 205-3 of the Investment Advisors Act of 1940 and/or NASD Rule 2330.

 

D.            PRIVATE PLACEMENTS AND INVESTMENTS WITH EXTERNAL MONEY MANAGERS.

 

No Advisory Person or Access Person shall acquire any security or interest in a private placement or commit initial capital to any account for which such person has any beneficial interest (other than non-affiliated mutual funds where the account is held directly at such fund) with an external investment manager without the prior written approval of the Firm’s Chief Executive Officer and Chief Compliance Officer.  For purposes of this Code, “private placement” shall mean any limited offering that is generally not available to the public, including unregistered investment pool vehicles (e.g., hedge funds, commodity pools), Rule 144A securities, limited partnerships, etc.

 

In deciding whether to grant approval, consideration will be given to whether the investment is consistent with the Firm’s investment philosophy and guidelines and should be offered to Clients, and whether the investment creates an actual conflict or the appearance of a conflict of interest.  An Advisory Person who has acquired a security in a private placement must disclose that investment to the Firm’s Chief Executive Officer and Chief Compliance Officer if such Advisory Person later participates in the consideration of that issuer for inclusion on any list of securities approved for purchase by Firm clients.

 

E.             ADDITIONAL RESTRICTION ON FUND MANAGERS OF INVESTMENT COMPANY ACCOUNTS.

 

Any Access Person who is a fund manager of any registered investment company that is advised by the Firm is prohibited from buying or selling a security for an account in which he or she has a beneficial interest within fifteen calendar days before and after the investment company that he/she manages

 

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trades in that security.  Any profits realized on trades within the proscribed periods shall be required to be disgorged.(5)

 

F.             CERTAIN ACCOUNTS EXEMPT FROM REQUIREMENTS OF CODE.

 

Any account (including open-end investment companies and limited partnerships) for which the Firm acts as investment adviser or general partner shall be managed in accordance with the Firm’s trading procedures for a Client account.  Any such account shall be exempt from the provisions of Sections C and E of Part II of this Code if:  (1) the account has been seeded by affiliated persons of the firm and is being managed in anticipation of investments by persons not affiliated with the Firm; or (2) unaffiliated persons of the Firm are also invested in the account; or (3) the account is operated as a model portfolio in contemplation of management of client accounts in the same or a similar strategy.

 

G.            PROCEDURES TO IMPLEMENT TRADING RESTRICTIONS AND REPORTINGOBLIGATIONS.

 

1)            Trading through Harris’ Trading Desk.

 

All Advisory Persons who have personal accounts that hold or can hold Covered Securities are required to maintain such accounts at Pershing LLC (“Pershing”), the Firm’s prime broker.  All transactions in Covered Securities in which an Advisory Person has any beneficial interest or ownership or in any accounts in which an Advisory Person has discretion, other than fee paying accounts (“Advisory Person account”), must be processed through the Firm’s trading desk.

 

Additionally, all transactions in Reportable Funds in which an Advisory Person has any beneficial interest or ownership must be processed (i) directly with the fund; (ii) through the Firm’s mutual fund trading desk for the Advisory Person’s Pershing brokerage account; or (iii) through the Firm’s Profit Sharing and Savings Plan.  Reportable Funds are not allowed to be held in outside brokerage accounts.  An Advisory Person may have beneficial ownership of Reportable Funds in his or her spouse’s retirement or 401(k) plan held at another bank or broker.  In such instances, the Advisory Person should contact the Chief Compliance Officer to apply for a waiver to transact and hold Reportable Funds through the spouse’s plan  Reportable Fund transactions effected pursuant to an automatic investment plan or in any account over which the Access Person has no direct or indirect influence or control do not need to be reported.  Changes in allocations of funds connected to an automatic investment plan are considered volitional transactions and need to be reported.

 

Transactions at brokers other than Pershing or banks are not permitted except in unusual circumstances and then only after the Advisory Person has:  (i) provided notice in writing to his/her Supervisor and the Compliance Department prior to opening or placing an initial order in an account with such other broker or bank, (ii) obtained the written approval of his/her Supervisor and the Compliance Department prior to opening or placing an initial order in such account, (iii) provided such other broker or bank with a written notice of the Advisory Person’s affiliation with Harris and request that copies of

 


(5)           Any profits disgorged shall be given to a tax-exempt charitable organization of Harris’ choosing.

 

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confirmations and statements be sent to the Firm’s Compliance Department, and provide a report to the Firm that includes the name of the broker or bank with whom the account was established, the date the account was established, and the date the report is submitted.  A copy of such written notice and request should also be provided to his/her Supervisor and the Compliance Department.

 

Even after an Advisory Person has obtained approval to execute transactions through another broker or bank, the Advisory Person must still present the Firm’s trading desk with an order ticket for an order to be executed at the other broker or bank.  In those exceptional situations in which it is inappropriate for the Firm’s trading desk to place the order, the Advisory Person must promptly present the trading desk with a completed order ticket reflecting the details of the transaction and clearly indicating that the transaction has been completed.

 

2)            Monitoring of Trades.

 

Transactions for an account of an Advisory Person that are executed through the Firm’s trading desk are to be monitored by the Trading Department and reviewed and approved by the Chief Compliance Officer (or such party to whom he or she delegates).  These transactions are non-discretionary  transactions, should be so marked on the original order ticket as “unsolicited and unsupervised” and may not be executed if they are in conflict with discretionary orders.  Should a conflict arise, sharing of executions may be approved by the Chief Investment Officer, or in his/her absence, the Trading Supervisor.

 

The Firm’s Compliance Department will access Advisory Person trade information online from Pershing (including the title and exchange ticker symbol or CUSIP number of each Covered Security or Reportable Fund involved, the date of the transaction, the interest rate and maturity rate (if applicable), the number of shares and principal amount of each Covered Security or Reportable Fund involved, the nature of the transaction (i.e. buy/sell), the price at which the transaction was effected, the name of the broker or bank through which the transaction was effected, and the date on which the report is submitted).

 

Transactions at brokers other than Pershing, in addition to being placed through the trading desk, are to be monitored by the Compliance Department. To accomplish this, all Access Persons shall submit to the Compliance Department within thirty days after any transaction a report which includes the title and exchange ticker or CUSIP number of the Covered Security, the date of the transaction, the interest rate and maturity rate (if applicable), the number of shares and principal amount of each Covered Security involved, the nature of the transaction (i.e. buy/sell), the price at which the transaction was effected, the name of the broker or bank through which the transaction was effected and the date on which the report is submitted.  This requirement may be satisfied by having the broker or bank send the Firm duplicate copies of confirmations and statements, provided that such confirmations and statements contain all of the information otherwise required to be provided in the report.  The Compliance Department will maintain copies of all such transaction reports.

 

3)            Cancellation of Trades.

 

Any transaction for an account of an Access Person is subject to cancellation or reversal if it is

 

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determined by either the Chief Executive Officer (or such party to whom he delegates), the Trading Supervisor, or the Compliance Department that the transaction is or was in conflict with or appeared to be in conflict with any Client transaction or any of the trading restrictions of this Code.  Cancellations or reversals of transactions may be required after an extended period past the settlement date.  The Trading Supervisor may also prevent the execution of orders for an Advisory Person’s account if it appears that the trade may have to be canceled or reversed.

 

Client transactions include transactions for any investment company managed by the Firm, any other discretionary advisory clients or any other accounts managed or advised by Employees of the Firm for a fee.

 

The determination that a transaction of an Access Person may conflict with a Client transaction will be subjective and individualized and may include questions about timely and adequate dissemination of information, availability of bids and offers, as well as many other factors deemed pertinent for that transaction or series of transactions.  It is possible that a cancellation or reversal of a transaction could be costly to an Access Person or his/her family.  Therefore, great care is required to adhere to the Firm’s trading restrictions and avoid conflicts or the appearance of conflicts.

 

4)            Holding Periods for Reportable Funds

 

No Advisory Person may purchase and sell, or conversely sell and repurchase shares of the same Reportable Fund within 30 calendar days.  This restriction applies to purchases and sales in all accounts in which the Advisory Person has a beneficial ownership interest, including retirement plans and 401(k) plan investments. Note that an exchange of shares counts as a sale of shares for purposes of this prohibition.

 

For purposes of applying the 30-day holding period, the most recent purchase (or sale) will be measured against the sale (or purchase) in question.  That is, a last-in-first-out analysis will apply.

 

All volitional purchase and sale transactions of Reportable Funds in any share class and in any account will be evaluated for purposes of applying the Holding Period, for example if an Access Person purchased a Reportable Fund in his  Pershing brokerage account and sold the Reportable Fund in his 401(k) account within 30 days, he would have violated the Holding Period.

 

Hardship exemptions may be requested in advance from the Compliance Department.  The Chief Executive Officer, General Counsel, and Chief Compliance Officer must approve any such waiver in accordance with Section II.A, above.

 

5)            Participation in Dividend Reinvestment Plans and Systematic Purchase Plans.

 

Advisory Persons may purchase Covered Securities through dividend reinvestment plans or systematic purchase plans without processing such transactions through the Firm’s trading desk.  Purchases are permitted only after the Advisory Person has:  (i) provided notice in writing to his/her Supervisor and the Compliance Department prior to opening an account or placing an initial purchase, and (ii) obtained the written approval of his/her Supervisor and the Compliance Department prior to opening

 

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an account or placing an initial purchase. Notice and approval shall not be required in connection with purchase of shares or units of ETFs. Even after the Advisory Person has obtained approval to invest in such a plan, the Advisory Person must provide the Compliance Department with duplicate copies of statements within thirty days after the end of each calendar quarter.  Such report or statements must contain all of the information required to be reported with respect to transactions in Covered Securities under II(F)(2) above.  The Compliance Department will maintain copies of all such transaction reports.

 

6)            Reporting All Other Securities Transactions.

 

Because the obligations of an investment adviser to maintain records of Employee’s personal securities transactions is broader than the type of transactions discussed above in this Section, all Employees have the following additional reporting obligations.  Any transaction in a Covered Security not required to be placed through the Firm’s trading desk in which an Employee has any beneficial interest or ownership (such as, real estate or oil and gas limited partnership interests and other privately placed securities and funds) must be reported to the Compliance Department.  This report must be submitted within thirty days after the end of each calendar quarter and include:  the title and exchange ticker symbol or CUSIP number, price, number of shares and principal amount of each Covered Security involved, the date and nature of the transaction (i.e. buy/sell), the name of the broker or bank used, if any, interest rate and maturity, if applicable, and the date on which the report is submitted.  This report may be in any form, including a copy of a confirmation or monthly statement.  However, no report is necessary for any transaction in an account in which the Employee has no control or influence.

 

7)            Initial and Annual Reporting Requirements.

 

Each Access Person shall initially disclose in writing to the Compliance Department or within ten days of becoming an Access Person, and annually thereafter within forty-five days after each calendar year-end, the title and exchange ticker or CUSIP number, type of security, number of shares and principal amount of all Covered Securities and Reportable Funds beneficially owned by such Access Person, and the date the Access Person submits the report, with information as of a date that is no more than forty-five days from the date of becoming a Access Person or as of the preceding December 31 for annual reporting and the name of the broker or bank with whom the Access Person maintains an account in which he or she has beneficial ownership of any security.  An Access Person need not make an Initial or Annual Report for Covered Securities held in any account over which the Employee has no direct or indirect influence or control.

 

H.            CONFIDENTIALITY & OBLIGATIONS OF EMPLOYEES

 

During the period of employment with the Firm an Employee will have access to certain “confidential information” concerning the Firm and its clients.  This information is a valuable asset and the sole property of the Firm and may not be misappropriated and used outside of the Firm by an Employee or former Employee.  “Confidential Information”, defined as all information not publicly available about the business of the Firm, may include, but is not limited to, Client and prospect names and records, research, trading and portfolio information and systems, information concerning externally managed entities or accounts which have been considered or made on behalf of fee paying clients, and the financial records of the Firm and/or its Employees.  In order to protect the interests of the Firm, an

 

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Employee or ex-Employee shall not, without the express written consent of the Firm’s Chief Executive Officer, disclose directly or indirectly confidential information to anyone outside of the Firm.  An Employee should be extremely careful to avoid inadvertent disclosures and to exercise maximum effort to keep confidential information confidential.  Any questions concerning the confidentiality of information should be directed to the Chief Executive Officer or the General Counsel.  An abuse of the Firm’s policy of confidentiality could subject an Employee to immediate disciplinary action that may include dismissal from the Firm.

 

I.              OUTSIDE EMPLOYMENT, ASSOCIATIONS AND BUSINESS ACTIVITIES

 

1)            Outside Employment and Associations.

 

It is Harris’s policy not to permit Advisory Persons to hold outside positions of authority, including that of being an officer, partner, director or employee of another business entity (except in the case of entities managed by the Firm).  Also, Harris requires that all Advisory Persons make their positions with the Firm a full-time job.  The approval of Harris, and in some cases the approval of the NASD, is required before any Advisory Person may hold any outside position with any business organization, regardless of whether such position is compensated or not.  Any exception to this policy must be approved in writing by the Firm’s Chief Executive Officer (or other person as he may delegate) and the Access Person’s Supervisor, and a copy of such approval shall be provided by the Advisory Person to the Compliance Department.  Any change in the status of such approved position immediately must be reported in writing to the Compliance Department and the Advisory Person’s Supervisor.  Any income or compensation received by an Advisory Person for serving in such position must be paid in full to the Firm.  Under no circumstance may an Advisory Person represent or suggest that Harris has approved or recommended the business activities of the outside organization or any person associated with it.

 

2)            Outside Business Activities.

 

To further avoid actual or potential conflicts of interest and to maintain impartial investment advice, and equally important, the appearance of impartial investment advice, each Advisory Person must disclose in writing to the Compliance Department any special relationships and/or investments or business activities that they or their families have which could influence the investment activities of the Firm. If an Employee has any questions about any activities and the need for disclosure, the Employee should be cautious and direct any questions to the Firm’s General Counsel or Compliance Department.

 

J.             Certification of Compliance by Access Persons.

 

The Firm shall distribute the Code to each Employee and Non-Access Director upon inception of employment and whenever the Code is amended, but no less frequently than annually.  Each Access Person and Non-Access Director is required to certify in writing annually that (i) he or she has read and understands the Code, (ii) recognizes that he or she is subject to the Code, and, in the case of

 

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Access Persons, (iii) he or she has disclosed or reported all Personal Securities Transactions required to be disclosed or reported under the Code.

 

Each Access Person who has not engaged in any personal securities transactions during the preceding year for which a report was required to be filed pursuant to the Code shall include a certification to that effect in his or her annual certification.

 

K.            Annual Report to the Trust’s Board of Trustees.

 

The officers of the Trust shall prepare an annual report to the board of trustees of the Trust that:

 

i)              summarizes existing procedures concerning personal investing and any changes in those procedures during the past year;

 

ii)             describes issues that arose during the previous year under the Code or procedures concerning personal investing, including but not limited to information about material violations of the Code and sanctions imposed;

 

iii)            certifies to the board that the Trust has adopted procedures reasonably necessary to prevent its Investment Personnel and Access Persons from violating the Code; and

 

iv)           identifies any recommended changes in existing restrictions or procedures based upon experience under the Code, evolving industry practices, or developments in applicable laws or regulations.

 

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III.           POLICY STATEMENT ON INSIDER TRADING

 

A.            BACKGROUND

 

Trading securities while in possession of material, nonpublic information or improperly communicating that information to others may expose you to stringent penalties.  Criminal sanctions may include a fine of up to $1,000,000 and/or ten years imprisonment.  The Securities and Exchange Commission (SEC) can recover the profits gained or losses avoided through the violative trading, obtain a penalty of up to three times the illicit windfall and issue an order permanently barring you from the securities industry.  Finally, you may be sued by investors seeking to recover damages for insider trading violations.

 

Regardless of whether a government inquiry occurs, Harris views seriously any violation of this Policy Statement.  Such violations constitute grounds for disciplinary sanctions, including dismissal.

 

The law of insider trading is unsettled; an individual legitimately may be uncertain about the application of the Policy Statement in a particular circumstance.  Often, a single question can forestall disciplinary action or complex legal problems.  You should direct any questions relating to the Policy Statement to the General Counsel, or, in her absence,  a member of the Stock Selection Group, or the Compliance Department.  You also must notify the General Counsel, or, in her absence,  a member of the Stock Selection Group or the Compliance Department immediately if you have any reason to believe that a violation of the Policy Statement has occurred or is about to occur.

 

B.            POLICY STATEMENT ON INSIDER TRADING

 

No person to whom this Policy Statement applies may trade, either personally or on behalf of others (such as Clients), while in possession of material, nonpublic information; nor may such persons communicate material, nonpublic information to others in violation of the law. This Policy Statement is drafted broadly; it will be applied and interpreted in a similar manner.  This Policy Statement applies to securities trading and information handling by all Access Persons (including their spouses, minor children and adult members of their households).

 

The section below reviews principles important to this Policy Statement.

 

1.             What is Material Information?

 

Information is “material” when there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions.  Generally, this is information whose disclosure will have a substantial effect on the price of a company’s securities.  No simple “bright line” test exists to determine when information is material; assessments of materiality involve a highly fact-specific inquiry.  For this reason, you should direct any questions about whether information is material to  the General Counsel, or, in her absence,  a member of the Stock Selection Group, or Compliance Department.

 

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Material information often relates to a company’s results and operations including, for example, dividend changes, earnings results, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments.

 

Material information also may relate to the market for a company’s securities.  Information about a significant order to purchase or sell securities may, in some contexts, be deemed material.  Similarly, prepublication information regarding reports in the financial press also may be deemed material.

 

2.             What is Nonpublic Information?

 

Information is “nonpublic” until it has been disseminated broadly to investors in the marketplace.  Tangible evidence of such dissemination is the best indication that the information is public.  For example, information is public after it has become available to the general public through a public filing with the SEC or some other governmental agency, the Dow Jones “tape” or the WALL STREET JOURNAL or some other publication of general circulation, and after sufficient time has passed so that the information has been disseminated widely.

 

3.             Identifying Inside Information

 

Before executing any trade for yourself or others, including Clients, you must determine whether you have access to material, nonpublic information.  If you think that you might have access to material, nonpublic information, you should take the following steps:

 

i)              Immediately alert the Trading Department to restrict trading in the security by placing the security on the restricted list maintained in the trading room. No reason or explanation should be given to the Trading Department for the restriction.

 

ii)             Report the information and proposed trade immediately to the General Counsel and the Chief Compliance Officer, or in their absence, a member of the Stock Selection Group.

 

iii)            Do not purchase or sell the securities on behalf of yourself or others, including Clients.

 

iv)           Do not communicate the information inside or outside Harris other than to the above individuals.

 

v)            After the above individuals have reviewed the issue, the Firm will determine whether the information is material and nonpublic and, if so, what action(s) the Firm should take.

 

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4.             Contacts with Public Companies

 

For Harris, contacts with public companies represent an important part of our research efforts.  Harris may make investment decisions on the basis of the Firm’s conclusions formed through such contacts and analysis of publicly-available information.  Difficult legal issues arise, however, when, in the course of these contacts, an Access Person becomes aware of material, nonpublic information.  This could happen, for example, if a company’s Chief Financial Officer prematurely discloses quarterly results to an analyst or an investor relations representative makes a selective disclosure of adverse news to a handful of investors.  In such situations, Harris must make a judgment as to its further conduct.  To protect yourself, Clients and the Firm, you should contact the General Counsel, or in her absence, a member of the Stock Selection Group, or Compliance Department immediately if you believe that you may have received material, nonpublic information.

 

5.             Tender Offers

 

Tender offers represent a particular concern in the law of insider trading for two reasons. First, tender offer activity often produces extraordinary gyrations in the price of the target company’s securities.  Trading during this time period is more likely to attract regulatory attention (and produces a disproportionate percentage of insider trading cases).  Second, the SEC has adopted a rule which expressly forbids trading and “tipping” while in possession of material, nonpublic information regarding a tender offer received from the tender offeror, the target company or anyone acting on behalf of either. Employees should exercise particular caution any time they become aware of nonpublic information relating to a tender offer.

 

C.            PROCEDURES TO IMPLEMENT THE POLICY STATEMENT ON INSIDER TRADING

 

1.             Personal Securities Trading

 

The restrictions on Employee trading and procedures to implement those restrictions and the Firm’s reporting obligations, which are set forth in Section II above, constitute the same procedures to implement this Policy Statement.  Review those procedures carefully and direct any questions about their scope or applicability to the General Counsel or the Compliance Department.

 

2.             Restrictions on Disclosures

 

Harris Employees shall not disclose any nonpublic information (whether or not it is material) relating to Harris or its securities transactions to any person outside Harris (unless such disclosure has been authorized by Harris).  Material, nonpublic information may not be communicated to anyone, including persons within Harris, except as provided in Section III(B)(3) above.  Such information must be secured.  For example, access to files containing material, nonpublic information and computer files containing such information should be restricted, and conversations containing such information, if appropriate at all, should be conducted in private.

 

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IV.           RETENTION OF RECORDS

 

The Compliance Department or the Secretary of the Trust will maintain the records listed below for a period of five years.  Such records shall be maintained at the Firm’s principal place of business in an easily accessible place:

 

i)              a list of all persons subject to the Code during that period;

 

ii)             receipts signed by all persons subject to the Code acknowledging receipt of copies of the Code and acknowledging that they are subject to it;

 

iii)            a copy of each Code of Ethics that has been in effect at any time during the period;

 

iv)           a copy of each report filed pursuant to the Code and a record of any known violations and actions taken as a result thereof during the period as well as a record of all persons responsible for reviewing these reports; and

 

v)            a copy of any decision and the reasons supporting the decision, to approve the acquisition of Limited Offerings.

 

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ACKNOWLEDGMENT OF RECEIPT OF CODE OF  ETHICS AND STATEMENT ON
INSIDER TRADING

 

Code of Ethics. Harris Associates L.P. (“HALP”), Harris Associates Securities L.P. (“HASLP”) and Harris Associates Investment Trust (the “Trust”) have adopted a written Code of Ethics and Statement on Insider Trading (the “Code”) to avoid potential conflicts of interest by HALP and HASLP personnel and to govern the use and handling of material non-public information.  A copy of the Code is attached to this acknowledgement.  As a condition of your continued employment with HALP and HASLP, and/or the retention of your position, if any, as an officer of the Trust or a member of the board of HALP’s general partner, you are required to read, understand and abide by the Code.

 

Compliance Program.   The Code requires that all personnel (other than Non-Access Directors) furnish to the Compliance Department information regarding any investment account in which you have a “beneficial interest.”  You are also required to furnish to the Compliance Department copies of your monthly or quarterly account statements, or other documents, showing all purchases or sales of securities in any such account, or which are effected by you or for your benefit, or the benefit of any member of your household.  Additionally, you are required to furnish a report of your personal securities holdings within ten calendar days of commencement of your employment with HALP or HASLP and annually thereafter.  These requirements apply to any investment account, such as an account at a brokerage house, trust account at a bank, custodial account or similar types of accounts.

 

This compliance program also requires that employees report any contact with any securities issuer, government or its personnel, or others, that, in the usual course of business, might involve material non-public financial information.  The Code requires that employees bring to the attention of the General Counsel any information they receive from any source, which might be material non-public information.

 

Any questions concerning the Code should be directed to the General Counsel or the Compliance Department.

 

I affirm that I have read and understand the Code.  I agree to the terms and conditions set forth in the Code.

 

 

 

 

 

 

Signature

 

Date

 

 

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ANNUAL AFFIRMATION OF COMPLIANCE
FOR ACCESS PERSONS AND NON-ACCESS DIRECTORS

 

I affirm that:

 

1.             I have again read and, during the past year to the best of my knowledge, have complied with provisions of the Code of Ethics and Statement of Insider Trading (the “Code”) that pertain to me.

 

2.             I have provided to the Compliance Department the names and addresses of each investment account that I have with any firm, including, but not limited to, broker-dealers, banks and others.  (List of known accounts attached.) (Access Persons only)

 

3.             I have provided to the Compliance Department copies of account statements or other reports showing each and every transaction in any security in which I have a beneficial interest, as defined in the Code, during the most recently ended calendar year

 

or

 

during the most recent calendar year there were no transactions in any security in which I had a beneficial interest required to be reported pursuant to the Code. (Access Persons only)

 

4.             I have provided to the Compliance Department a report of my personal securities holdings as of the end of the most recent calendar year, including all required information for each security in which I have any direct or indirect beneficial ownership. (Access Persons only)

 

 

 

 

 

Signature

 

Date

 

 

 



 

APPENDIX A

 

Examples of Beneficial Interest

 

For purposes of the Code, you will be deemed to have a beneficial interest in a security if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security.  Examples of beneficial ownership under this definition include:

 

·      securities you own, no matter how they are registered, and including securities held for you by others (for example, by a custodian or broker, or by a relative, executor or administrator) or that you have pledged to another (as security for a loan, for example);

 

·      securities held by a trust of which you are a beneficiary (except that, if your interest is a remainder interest and you do not have or participate in investment control of trust assets, you will not be deemed to have a beneficial interest in securities held by the trust);

 

·      securities held by you as trustee or co-trustee, where either you or any member of your immediate family (i.e., spouse, children or descendants, stepchildren, parents and their ancestors, and stepparents, in each case treating a legal adoption as blood relationship) has a beneficial interest (using these rules) in the trust.

 

·      securities held by a trust of which you are the settlor, if you have the power to revoke the trust without obtaining the consent of all the beneficiaries and have or participate in investment control;

 

·      securities held by any partnership in which you are a general partner, to the extent of your interest in partnership capital or profits;

 

·      securities held by a personal holding company controlled by you alone or jointly with others;

 

·      securities held by (i) your spouse, unless legally separated, or you and your spouse jointly, or (ii) your minor children or any immediate family member of you or your spouse (including an adult relative), directly or through a trust, who is sharing your home, even if the securities were not received from you and the income from the securities is not actually used for the maintenance of your household; or

 

·      securities you have the right to acquire (for example, through the exercise of a derivative security), even if the right is not presently exercisable, or securities as to which, through any other type of arrangement, you obtain benefits substantially equivalent to those of ownership.

 

You will not be deemed to have beneficial ownership of securities in the following situations:

 

·      securities held by a limited partnership in which you do not have a controlling interest and do not have or share investment control over the partnership’s portfolio; and

 



 

·      securities held by a foundation of which you are a trustee and donor, provided that the beneficiaries are exclusively charitable and you have no right to revoke the gift.

 

These examples are not exclusive.  There are other circumstances in which you may be deemed to have a beneficial interest in a security.  Any questions about whether you have a beneficial interest should be directed to the General Counsel or Compliance Department.

 


EX-99.(P)(2) 19 a07-29987_2ex99dp2.htm EX-99.(P)(2)

Exhibit 99.(p)(2)

 

HARRIS ASSOCIATES INVESTMENT TRUST

 

Code of Ethics for Non-management Trustees
as amended October 24, 2007

 

The following Code of Ethics has been adopted in accordance with Rule l7j-1 under the Investment Company Act of 1940 (the “Act”) by the board of trustees of Harris Associates Investment Trust (the “Trust”) on March 8, 1994, and has been amended by the board of trustees of the trust on June 9, 1998, April 18, 2000, July 17, 2002, July 27, 2005 and October 24, 2007.

 

The Act and rules and regulations thereunder make it illegal for any Person Subject to the Code, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by the Trust to:

 

·      employ any device, scheme, or artifice to defraud the Trust;

 

·      make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of circumstances under which they are made, not misleading or in any way mislead the Trust regarding a material fact;

 

·      engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Trust; or

 

·      engage in any manipulative practice with respect to the Trust.

 

1.     Definitions of Terms Used.

 

·      Adviser:  Harris Associates L.P. (“HALP”), the investment adviser to the Trust.

 

·      Beneficial Interest or Ownership:  Beneficial interest or ownership of a person shall be interpreted in the same manner as it would be in determining whether the person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder, but applied to all securities owned or acquired and not only those within the scope of Section 16.  Examples of beneficial interest or ownership are attached as Appendix A.

 

·      Code:  This Code of Ethics.

 

·      Distributor:  Harris Associate Securities, L.P.

 

·      Fund:  Each of The Oakmark Fund, The Oakmark Select Fund, The Oakmark Equity and Income Fund, The Oakmark Global Fund, The Oakmark International Fund and The Oakmark International Small Cap Fund, The Oakmark Global Select Fund and any other series of shares of beneficial interest of the Trust.

 

·      Non-management trustee:  A trustee of the Trust who is either a Non-interested Trustee or an Other Non-management Trustee.

 

1



 

·      Non-interested Trustee:  A trustee of the Trust who is not an “interested person” of the Trust as defined in section 2(a)(19) of the Act.

 

·      Person Subject to the Code:  Each Non-management Trustee of the Trust.

 

·      Security:  A “covered security” as defined in section 2(a)(36) of the Act, which includes any right to acquire such security but does not include securities issued by the Government of the United States, short-term debt securities that are “government securities” within the meaning of Section 2(a)(16) of the Act, bankers acceptances, bank certificates of deposit, commercial paper and securities issued by a registered open-end investment company.

 

·      Trust:  Harris Associates Investment Trust.

 

·      Other Non-management Trustee:  A trustee of the Trust who is neither a Non-interested Trustee nor an “affiliated person” (as defined in section 2(a)(3) of the Act) of the Adviser or the Distributor.

 

2.     Consideration of Transaction for a Fund.  The Adviser shall be deemed to be considering a transaction in a security for a Fund, the earlier of (a) when a recommendation to purchase or sell a security has been made and communicated to the Trust or the security is placed on the research project list and (b) with respect to the person making the recommendations, when such person seriously considers making such recommendation.

 

3.     Prohibited Securities Transactions.

 

(a)         No Person Subject to the Code shall purchase or sell, directly or indirectly, any security in which he or she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership or interest and when the person knows or has reason to believe that securities of the same class are being purchased or sold or considered for purchase or sale by a Fund, until the Fund’s transactions have been completed or consideration of such transaction is abandoned.

 

(b)        This prohibition does not apply to any transaction in an investment advisory account of any Person Subject to the Code (either alone or with others) over which the investment adviser for the account exercises investment discretion if the Person Subject to the Code did not have knowledge of the transaction until after the transaction had been executed; provided that the Person Subject to the Code had previously identified the account to the Secretary of the Trust.

 

(c)         Among the advisory clients of the Adviser are private investment partnerships in which various Persons Subject to the Code may have equity interests. This section 3 shall not restrict purchases or sales for the accounts of such partnerships provided that a Fund and such accounts are treated fairly and equitably in connection with such purchases and sales.

 

2



 

4.     Exempted Transactions. The provisions of this Code are not intended to restrict unnecessarily the personal investment activities of Persons Subject to the Code. Therefore, the provisions of Section 3 of this Code shall not apply to:

 

(a)         Purchases or sales effected in any account over which the Persons Subject to the Code has no direct or indirect influence or control;

 

(b)        Purchases or sales of securities that are not eligible for purchase or sale by a Fund;

 

(c)         Purchases or sales that are non-volitional on the part of either the Person Subject to the Code or a Fund;

 

(d)        Purchases that are part of an automatic dividend reinvestment plan;

 

(e)         Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities to the extent such rights were acquired from such issuer, and sales of such rights so acquired; and

 

(f)         Purchases or sales that receive the prior approval of the Chief Compliance Officer of the Trust or Adviser on the ground that they are not inconsistent with this Code or the provisions of Rule 17-j-l(a).

 

5.     Reporting Securities Transactions.

 

(a)         Duty to Report.  If any Person Subject to the Code has a beneficial interest in a transaction in a security and at the time of the transaction knew, or in the ordinary course of fulfilling his or her official duties as a trustee of the Trust should have known, that on the day of the transaction or within 15 days before or after that day a purchase or sale of that class of security was made or being considered for a Fund, he or she shall report the transaction to the Chief Compliance Officer of the Trust within 10 days after the end of the calendar quarter in which the transaction occurred.

 

(b)        Form of Report.  A report pursuant to Section 5(a) may be in any form (including a copy of a confirmation or monthly brokerage statement) but must include:

 

(i)          the date of the transaction;

 

(ii)         the title, interest rate and maturity date (if applicable), number of shares, and the principal amount (if applicable) of the security;

 

(iii)        the nature of the transaction (i.e., purchase, sale, gift, or other type of acquisition or disposition);

 

(iv)       the price at which the transaction was effected;

 

3



 

(v)        the name of the broker, dealer or bank with or through whom the transaction was effected;

 

(v)        the name of the reporting person; and

 

(vi)       the date on which the report is submitted.

 

6.     Additional Reporting Requirements for Other Non-management Trustees.

 

(a)         Each Other Non-management Trustee shall also file the following reports with the Chief Compliance Officer of the Trust unless excepted by paragraph (b) of this section 6:

 

(i)          Initial Holdings Report.  No later than 10 days after the person becomes an Other Non-management Trustee (which information must be current as of a date no more than 45 days prior to the date the person becomes an Other Non-management Trustee):

 

(A)          The title, number of shares and principal amount of each Security in which the Interested Person had any direct or indirect beneficial ownership when the person became an Other Non-management Trustee;

 

(B)           The name of any broker, dealer or bank with whom the Other Non-management Trustee maintained an account in which any securities were held for the direct or indirect benefit of the Other Non-management Trustee as of the date the person became an Other Non-management Trustee; and

 

(C)           The date that the report is submitted by the Other Non-management Trustee.

 

(ii)         Quarterly Transaction Reports.  No later than 30 days after the end of each calendar quarter, the following information:

 

(A)          With respect to any transaction during the quarter in a Security in which the Other Non-management Trustee had any direct or indirect beneficial ownership:

 

1.        The date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each Security involved;

 

2.        The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);

 

4



 

3.        The price of the Security at which the transaction was effected;

 

4.        The name of the broker, dealer or bank with or through which the transaction was effected; and

 

5.        The date that the report is submitted by the Other Non-management Trustee.

 

(B)             With respect to any account established by the Interested Person in which any securities were held during the quarter for the direct or indirect benefit of the Other Non-management Trustee:

 

1.        The name of the broker, dealer or bank with whom the Other Non-management Trustee established the account;

 

2.        The date the account was established; and

 

3.        The date that the report is submitted by the Other Non-management Trustee.

 

(iii)        Annual Holdings Reports.  Annually, the following information (which information must be current as of a date no more than 45 days before the report is submitted):

 

(A)          The title, number of shares and principal amount of each Security in which the Interested Person had any direct or indirect beneficial ownership;

 

(B)           The name of any broker, dealer or bank with whom the Other Non-management Trustee maintains an account in which any securities are held for the direct or indirect benefit of the Other Non-management Trustee; and

 

(C)           The date that the report is submitted by the Other Non-management Trustee.

 

(b)      Exceptions from Reporting Requirements.  A person need not make a report under paragraph (a) of this section with respect to transactions effected for, or Covered Securities held in, any account over which the person has no direct or indirect influence or control, provided that such account has been identified pursuant to  section 3, of this Code.

 

7.     Transactions with a Fund or the Trust.  No Person Subject to the Code will knowingly sell to or purchase from a Fund or the Trust any security or other property except securities issued by a Fund.

 

5



 

8.     Enforcement.

 

(a)      Confidentiality; Additional Information.  Reports filed pursuant to Section 5 of the Code will be maintained in strictest confidence but will be reviewed by the Trust or the Adviser to verify compliance with the Code. Additional information may be required to clarify the nature of particular transactions.

 

(b)      Sanctions for Non-compliance.  Conduct that is not in accordance with the Code shall constitute grounds for appropriate sanctions by the Trust, including letters of sanction, suspension, or removal from office.

 

(c)      Retention of Records.  The Secretary of the Trust will maintain the records listed below for a period of five years.  Such records shall be maintained at the Trust’s principal place of business in an easily accessible place:

 

(i)       a list of all Persons Subject to the Code during the period;

 

(ii)      receipts signed by al1 persons subject to the Code acknowledging receipt of copies of the Code and acknowledging that they are subject to it;

 

(iii)     a copy of each Code of Ethics that has been in effect at any time during the period; and

 

(iv)    a copy of each report filed pursuant to the Code and a record of any known violations and actions taken as a result thereof during the period as well as a record of all persons responsible for reviewing these reports.

 

6



 

ACKNOWLEDGMENT OF RECEIPT OF
CODE OF ETHICS AND STATEMENT ON INSIDER TRADING
FOR UNAFFILIATED TRUSTEES

 

Harris Associates Investment Trust (the “Trust”) has adopted a written Code of Ethics for Other Non-management Trustees (the “Code”) to avoid potential conflicts of interest.  A copy of the Code is attached to this acknowledgement.  As a condition of the retention of your position as a trustee, you are required to read, understand and abide by the Code.

 

Any questions concerning the Code should be directed to the Chief Compliance Officer of the Trust.

 

 

I affirm that I have read and understand the Code.  I agree to the terms and conditions set forth in the Code.

 

 

 

 

 

 

Signature

 

Date

 

 

7



 

Examples of Beneficial Interest

 

For purposes of the Code, you will be deemed to have a beneficial interest in a security if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security.  Examples of beneficial ownership under this definition include:

 

·      securities you own, no matter how they are registered, and including securities held for you by others (for example, by a custodian or broker, or by a relative, executor or administrator) or that you have pledged to another (as security for a loan, for example);

 

·      securities held by a trust of which you are a beneficiary (except that, if your interest is a remainder interest and not a current income interest and you do not have or participate in investment control of trust assets, you will not be deemed to have a beneficial interest in securities held by the trust);

 

·      securities held by you as trustee or co-trustee, where either you or any member of your immediate family (i.e., spouse, child, descendant, stepchild, parent or other ancestor or step-parent, in each case treating a legal adoption as blood relationship) has a beneficial interest (using these rules) in the trust.

 

·      securities held by a trust of which you are the settlor, if you have the power to revoke the trust without obtaining the consent of all the beneficiaries and have or participate in investment control;

 

·      securities held by any partnership in which you are a general partner, to the extent of your interest in partnership capital or profits;

 

·      securities held by a personal holding company controlled by you alone or jointly with others;

 

·      securities held by (i) your spouse, unless legally separated, or you and your spouse jointly, or (ii) a minor child or any other immediate family member of you or your spouse (including an adult relative), directly or through a trust, who is sharing your home, even if the securities were not received from you and the income from the securities is not actually used for the maintenance of your household; or

 

·      securities you have the right to acquire (for example, through the exercise of a derivative security), even if the right is not currently exercisable, or securities as to which, through any other type of arrangement, you obtain benefits substantially equivalent to those of ownership.

 

You will not be deemed to have beneficial ownership of securities in the following situations:

 

8



 

·      securities held by a limited partnership in which you do not have a controlling interest and do not have or share investment control over the partnership’s portfolio; and

 

·      securities held by a foundation of which you are a trustee and donor, provided that the beneficiaries are exclusively charitable and you have no right to revoke the gift.

 

These examples are not exclusive.  There are other circumstances in which you may be deemed to have a beneficial interest in a security.  Any questions about whether you have a beneficial interest should be directed to the Chief Compliance Officer of the Trust.

 

9


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