<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-06279
Harris Associates Investment Trust
(Exact name of registrant as specified in charter)
Two North La Salle Street, Suite 500
Chicago, Illinois 60602-3790
(Address of principal executive offices) (Zip Code)
John R. Raitt Cameron S. Avery
Harris Associates L.P. Bell, Boyd & Lloyd LLC
Two North La Salle Street, #500 Three First National Plaza, #3300
Chicago, Illinois 60602 Chicago, Illinois 60602
(Name and address of agents for service)
Registrant's telephone number, including area code: (312) 621-0600
Date of fiscal year end: 09/30/04
Date of reporting period: 3/31/04
<Page>
ITEM 1. REPORTS TO SHAREHOLDERS.
<Page>
[GRAPHIC]
THE OAKMARK FUND
THE OAKMARK
SELECT FUND
THE OAKMARK SMALL
CAP FUND
THE OAKMARK EQUITY
AND INCOME FUND
THE OAKMARK
GLOBAL FUND
THE OAKMARK
INTERNATIONAL FUND
THE OAKMARK
INTERNATIONAL SMALL
CAP FUND
SEMI-ANNUAL REPORT
MARCH 31, 2004
ADVISED BY HARRIS ASSOCIATES L.P.
[OAKMARK LOGO]
FAMILY OF FUNDS
<Page>
THE OAKMARK FAMILY OF FUNDS
2004 Semi-Annual Report
<Table>
PRESIDENT'S LETTER 1
SUMMARY INFORMATION 2
COMMENTARY ON THE OAKMARK AND OAKMARK SELECT FUNDS 4
THE OAKMARK FUND
Letter from the Portfolio Managers 6
Schedule of Investments 7
THE OAKMARK SELECT FUND
Letter from the Portfolio Managers 11
Schedule of Investments 12
THE OAKMARK SMALL CAP FUND
Letter from the Portfolio Managers 14
Schedule of Investments 17
THE OAKMARK EQUITY AND INCOME FUND
Letter from the Portfolio Managers 20
Schedule of Investments 22
THE OAKMARK GLOBAL FUND
Letter from the Portfolio Managers 28
Global Diversification Chart 30
Schedule of Investments 31
COMMENTARY ON THE INTERNATIONAL AND INTERNATIONAL SMALL CAP FUNDS 36
THE OAKMARK INTERNATIONAL FUND
Letter from the Portfolio Managers 37
International Diversification Chart 38
Schedule of Investments 39
THE OAKMARK INTERNATIONAL SMALL CAP FUND
Letter from the Portfolio Managers 44
International Diversification Chart 45
Schedule of Investments 46
FINANCIAL STATEMENTS
Statements of Assets and Liabilities 52
Statements of Operations 54
Statements of Changes in Net Assets 56
Notes to Financial Statements 63
OAKMARK PHILOSOPHY AND PROCESS 82
THE OAKMARK GLOSSARY 83
TRUSTEES AND OFFICERS 85
</Table>
FORWARD-LOOKING STATEMENT DISCLOSURE
One of our most important responsibilities as mutual fund managers is to
communicate with shareholders in an open and direct manner. Some of our comments
in our letters to shareholders are based on current management expectations and
are considered "forward-looking statements". Actual future results, however, may
prove to be different from our expectations. You can identify forward-looking
statements by words such as "estimate", "may", "will", "expect", "believe",
"plan" and other similar terms. We cannot promise future returns. Our opinions
are a reflection of our best judgment at the time this report is compiled, and
we disclaim any obligation to update or alter forward-looking statements as a
result of new information, future events, or otherwise.
<Page>
PRESIDENT'S LETTER
[PHOTO OF JOHN R. RAITT]
DEAR FELLOW SHAREHOLDERS,
Both domestic and international stock markets produced moderate gains in the
first quarter, extending the worldwide recovery in stock prices that began
roughly a year ago. All of our funds had positive returns and achieved new highs
in net asset value during the quarter. We are pleased that our disciplined value
investment style continues to reward our shareholders.
THE ECONOMY AND THE MARKET
The U.S. economy continues to grow at a healthy rate. Low interest rates and low
inflation are fueling this growth. In addition, employment growth accelerated
significantly in the past quarter, and corporate earnings also showed
significant improvement, aided by high productivity growth. Many of these same
factors are also driving strong economic growth internationally.
Despite the mostly positive economic headlines, our outlook for stock returns
remains tempered by valuation. Most broad market indices are up 35% or more in
the past 12 months. We believe U.S. market valuations now broadly reflect
assumptions of sustained, robust economic recovery. While our analysis indicates
that our holdings are priced at discounts to growing business values, finding
new stock ideas that sell at deep discounts has become more difficult. We are
finding more stock values internationally, but discounts to value have narrowed
there, too.
We still believe that stocks' prospective returns are attractive compared to
other asset classes. However, we also believe that higher share valuations make
this a stock pickers' market. Values exist, but they are tougher to find. The
rigors of our disciplined, bottom-up investment process, which focuses on
finding undervalued stocks, help us to take advantage of market volatility and
to unearth value in today's market. Our patient, long-term approach, which helps
us avoid over reacting to short term events, gives us an extra edge.
INDUSTRY GOVERNANCE AND REGULATION
Over the past quarter, the SEC and Congress have proposed several new rules and
regulations for the mutual fund industry in response to abusive practices by
fund companies. We believe in setting high standards for the treatment of our
shareholders, but we also believe that abuses by other fund companies harm
investors and their confidence in our industry. In this spirit, we support and
encourage sensible new rules and regulations to protect fund investors and
enhance fund governance. If you would like to learn more about our position on
these issues, please visit our web site at www.oakmark.com.
Thank you for your continued investment and confidence in the Oakmark Family of
Funds. We welcome your comments and questions. You can reach us via e-mail at
ContactOakmark@oakmark.com.
/s/ John R. Raitt
JOHN R. RAITT
PRESIDENT OF THE OAKMARK FUNDS
PRESIDENT AND CEO OF HARRIS ASSOCIATES L.P.
1
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THE OAKMARK FAMILY OF FUNDS
SUMMARY INFORMATION
<Table>
<Caption>
THE OAKMARK THE OAKMARK
THE OAKMARK SELECT SMALL CAP
PERFORMANCE FOR PERIOD(1) FUND-CLASS I FUND-CLASS I FUND-CLASS I
ENDED MARCH 31, 2004 (OAKMX) (OAKLX) (OAKSX)
- -------------------------------------------------------------------------------------------------------------------
3 MONTHS* 1.44% 2.45% 7.03%
6 MONTHS* 12.95% 14.26% 18.74%
1 YEAR 32.53% 32.83% 46.87%
AVERAGE ANNUAL TOTAL
RETURN FOR:
3 YEAR 6.22% 9.59% 12.30%
5 YEAR 5.29% 13.66% 9.44%
10 YEAR 11.54% N/A N/A
SINCE INCEPTION 16.91% 21.81% 11.62%
(8/5/91) (11/1/96) (11/1/95)
VALUE OF $10,000
FROM INCEPTION DATE $ 72,327 $ 43,214 $ 25,239
TOP FIVE EQUITY Washington Washington Checkpoint
HOLDINGS AS OF Mutual, Inc. 3.4% Mutual, Inc. 17.0% Systems, Inc. 4.6%
MARCH 31, 2004(2) First Data H&R Block, Inc. 7.3% Ciber, Inc. 4.5%
Corporation 2.6% Yum! Brands, Inc. 6.0% Hanger Orthopedic
COMPANY AND % OF TOTAL H&R Block, Inc. 2.5% First Data Group, Inc. 4.3%
NET ASSETS McDonald's Corporation 5.7% Mentor Graphics
Corporation 2.4% Burlington Corporation 4.3%
Yum! Brands, Inc. 2.4% Resources, Inc. 4.7% Ralcorp
Holdings, Inc. 3.9%
TOP FIVE INDUSTRIES Retail 9.6% Banks & Thrifts 17.0% Food & Beverage 10.3%
AS OF MARCH 31, 2004 Food & Beverage 8.3% Retail 14.0% Computer Software 9.9%
Pharmaceuticals 7.8% Other Consumer Medical Products 8.3%
INDUSTRIES AND % OF TOTAL Banks & Thrifts 6.4% Goods & Services 11.2% Computer Services 4.9%
NET ASSETS Cable Systems & Information & Banks & Thrifts 4.8%
Satellite TV 6.2% Services 7.4%
Pharmaceuticals 6.4%
</Table>
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data call 1-800-OAKMARK.
* Not annualized
2
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<Table>
<Caption>
THE OAKMARK THE OAKMARK
EQUITY AND GLOBAL
PERFORMANCE FOR PERIOD(1) INCOME FUND-CLASS I FUND-CLASS I
ENDED MARCH 31, 2004 (OAKBX) (OAKGX)
- -------------------------------------------------------------------------------------
3 MONTHS* 4.18% 3.89%
6 MONTHS* 13.75% 18.31%
1 YEAR 31.35% 73.04%
AVERAGE ANNUAL TOTAL
RETURN FOR:
3 YEAR 12.48% 22.33%
5 YEAR 13.89% N/A
10 YEAR N/A N/A
SINCE INCEPTION 14.90% 17.29%(3)
(11/1/95) (8/4/99)
VALUE OF $10,000
FROM INCEPTION DATE $ 32,200 $ 21,029
TOP FIVE EQUITY Burlington Diageo plc 4.7%
HOLDINGS AS OF Resources, Inc. 3.4% First Data
MARCH 31, 2004(2) Caremark Rx, Inc. 3.4% Corporation 4.7%
First Data Nestle SA 4.1%
COMPANY AND % OF TOTAL Corporation 3.2% Euronext NV 4.0%
NET ASSETS Cardinal Takeda Chemical
Health, Inc. 2.8% Industries, Ltd. 3.8%
General Dynamics
Corporation 2.6%
TOP FIVE INDUSTRIES U.S. Government Food & Beverage 11.9%
AS OF MARCH 31, 2004 Notes 25.0% Pharmaceuticals 10.5%
Oil & Natural Gas 6.6% Banks & Thrifts 7.3%
INDUSTRIES AND % OF TOTAL Health Care Services 6.6% Other Financial 6.6%
NET ASSETS Retail 6.0% Computer Services 6.3%
Aerospace & Defense 5.4%
<Caption>
THE OAKMARK THE OAKMARK
INTERNATIONAL INTERNATIONAL
PERFORMANCE FOR PERIOD(1) FUND-CLASS I SMALL CAP FUND-CLASS I
ENDED MARCH 31, 2004 (OAKIX) (OAKEX)
- -------------------------------------------------------------------------------------
3 MONTHS* 3.61% 6.54%
6 MONTHS* 19.93% 25.51%
1 YEAR 62.00% 85.03%
AVERAGE ANNUAL TOTAL
RETURN FOR:
3 YEAR 10.80% 19.01%
5 YEAR 11.36% 14.37%
10 YEAR 9.08% N/A
SINCE INCEPTION 11.89% 11.85%
(9/30/92) (11/1/95)
VALUE OF $10,000
FROM INCEPTION DATE $ 36,419 $ 25,685
TOP FIVE EQUITY Diageo plc 3.5% Neopost SA 4.3%
HOLDINGS AS OF Aventis SA 3.5% D.F.S. Furniture
MARCH 31, 2004(2) Euronext NV 3.4% Company plc 3.8%
GlaxoSmithKline plc 3.3% Schlinder
COMPANY AND % OF TOTAL Takeda Chemical Holding AG 3.7%
NET ASSETS Industries, Ltd. 3.0% Kobenhavns
Lufthavne A/S
(Copenhagen
Airports A/S CPH) 3.6%
Ansell Limited 3.6%
TOP FIVE INDUSTRIES Food & Beverage 14.4% Retail 9.4%
AS OF MARCH 31, 2004 Pharmaceuticals 12.1% Airport Maintenance 7.0%
Banks & Thrifts 11.7% Machinery & Industrial
INDUSTRIES AND % OF TOTAL Chemicals 8.1% Processing 6.2%
NET ASSETS Other Financial 7.4% Diversified
Conglomerates 6.1%
Medical Products 6.0%
</Table>
3
<Page>
THE OAKMARK AND OAKMARK SELECT FUNDS
AT OAKMARK, WE LOOK FOR STOCKS WITH PRICES LESS THAN 60% OF INTRINSIC VALUE,
WITH INTRINSIC VALUE THAT IS LIKELY TO GROW AND WITH MANAGEMENT THAT ACTS IN THE
INTEREST OF OUTSIDE SHAREHOLDERS. THE COMBINATION OF THESE FACTORS CREATES OUR
BIGGEST COMPETITIVE ADVANTAGE--THE ABILITY TO BE MORE PATIENT THAN MOST
INVESTORS.
[PHOTO OF WILLIAM C. NYGREN]
"He that is greedy of gain troubleth his own house." Book of Proverbs
It was a big quarter for the word "greed." It was frequently used in courtrooms
explaining the behavior of former CEOs who were standing trial. It was used in
articles about fund companies that courted market timers. It was used in Warren
Buffett's annual letter referencing excessive CEO compensation. And it was used
to explain investors' behavior who are now more interested in buying stocks than
they were a year ago when stocks were much cheaper.
In his book ORIGINS OF THE CRASH,(4) one of my favorite business writers, Roger
Lowenstein, also makes frequent use of the word greed. His cataloging of events
leading up to the 2000 stock market collapse assigns blame to greedy CEOs,
greedy accountants, greedy Wall Street analysts, and greedy investors. Even
though the peak occurred just four years ago, Lowenstein's book serves as a
great reminder of just how extreme the excesses were: during "the first quarter
of 2000, a technology company was going public and doubling every other day--a
speculative orgy without precedent in public markets." The book should be
required reading before anyone is allowed to say that the bubble is now back!
During the real bubble, CEOs overly incentivized by stock options became
exclusively focused on the short term; audits were marketed not just on price
but on leniency; analysts hyped stocks to create banking business; and investors
bought stocks not because of investment merits, but because prices had risen and
they wanted in on the gravy train. Lowenstein says, "The distinction between
self-interest and greed ... in the '90s was utterly lost."
In the investment criteria we list at the top of this report each quarter, we
say we seek to invest with a "management that acts in the interest of outside
shareholders." We have further said that we want them incentivized with stock
ownership, stock options, and bonuses that pay them for increasing business
value. Effectively, we want them to maximize their personal profits by doing
what is most profitable for us, the outside shareholders. One could argue that
by using the dictionary definition of greed--the desire for wealth beyond one's
needs--we are asking management to be greedy. But many times greed and value
maximization do overlap. That's why Gordon Gekko's "Greed is good!" speech to
the shareholders of Teldar Paper didn't sound entirely self-serving. For tough
decisions like downsizing or selling off divisions, as well as for high return
investments that result in a growing business, greed may result in the same
course of action as value maximization. Greed and value maximization, however,
part ways when short-term goals are pursued that cause long-term damage. As
Lowenstein said, in the 90s, "the credo of shareholder value ... became a maxim
not for enhancing business values, a process that occurs only over years, but
for enhancing day-by-day quotations of shares." We have always been troubled by
managements that are more concerned about their stock prices than they are about
building business value. Managements often ask our advice on what they can do to
get a higher stock price. Our answer has remained the same for years, and it's
not necessarily the one they want to hear. "Run the business to maximize
long-term value and invest excess cash in your highest return
opportunities--among the opportunities being evaluated, always include share
repurchase. If you do, the stock price will take care of itself." Anything short
of that is not behaving like an owner. A business owner would never sacrifice
long-term value in exchange for simply having people believe the business is
more valuable today--unless it is being sold! A management focused only on next
year's stock price won't make the necessary investments for long-term success.
That's why we look at management's overall incentives. We want managements to
make high return investments, even when the payoffs won't be evident for several
years. Warren Buffett commented on the short-term focus that can result from an
options-only incentive plan, saying "Who ever washes a rental car?" Options can
help align a manager's interests with the shareholders, but true ownership
creates a better long-term alignment. By focusing on a five-year time frame, we
hopefully avoid most of the managers who aren't washing our cars!
HIGHLIGHTS
- At Oakmark, we add value through stock selection rather than macro
forecasts.
- If management maximizes business value growth, their stock price should
follow.
- We don't believe current market valuations indicate a "Bubble Redux."
With so much greed in the air, some of our value peers have sold stocks and
increased their cash position anticipating better opportunities (lower prices)
ahead. We share some of their concerns because by definition, the higher the
market goes, the tougher it is to find stocks that
4
<Page>
will continue achieving high returns. But, we have never shown an ability to add
value through timing the market, or for that matter, through use of any macro
level forecasts. A NEW YORK TIMES headline last month read "Time for Optimism?
Pessimism? Pick Your Gauge." The article contained bull and bear arguments that
each sounded compelling. An investor who read only one side could have been
easily convinced. Last quarter BARRONS ran a story about the likelihood of a
strong rebound in inflation. It was well written and had strong statistical
backing. However, later in the same issue, an interview with a highly successful
fund manager gave an equally sound argument that deflation was right around the
corner!
Usually, a compelling argument can be made for higher or lower stock prices,
higher or lower inflation, economic boom or recession. Not only do we lack the
ability to select the prophetic ones, but over our five-year time frame, their
conclusions generally tend to be less significant than projecting how a specific
business is likely to change. That's why we spend our time at the company
level--trying to identify companies whose futures are being underpriced. We
agree with Lowenstein's comment that "a true analyst is better equipped to
appraise the medium-term future in rough terms than he is to forecast the here
and now with precision." So we don't try to forecast the market--we simply buy
out-of-favor stocks that appear to be selling below growing business values and
hold them until the gap has closed. While it has been hard this year to find new
stocks selling below 60% of value, we believe our existing holdings continue to
sell at a discount and continue to see growth in their value.
When my children were younger, they enjoyed a story called "The Magic Fish" by
Freya Littledale. In this story, a fisherman catches a talking fish that claims
to be a prince and begs for freedom. Upon returning home and telling his wife
that he set the fish free, the fisherman is berated for not getting anything in
return. The wife demands he ask the fish for a new house. The fish delivers, but
the greedy wife keeps asking for more and more until finally the fish takes back
everything. Those who want us to believe that the current stock market is the
"Bubble Redux" would say today's investor is behaving like the greedy wife.
We're not so sure. Seeing two sides to most every story, we would ask if perhaps
those who are waiting for double-digit expected returns while bonds yield only
4% aren't being just as greedy!
/s/ William C. Nygren
WILLIAM C. NYGREN, CFA
PORTFOLIO MANAGER
bnygren@oakmark.com
5
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THE OAKMARK FUND
REPORT FROM BILL NYGREN AND KEVIN GRANT, PORTFOLIO MANAGERS
[PHOTO]
[PHOTO]
[CHART]
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM ITS INCEPTION
(8/5/91) TO PRESENT (3/31/04) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX(5)
<Table>
<Caption>
THE OAKMARK FUND (CLASS I) S & P 500
8/5/91 $ 10,000 $ 10,000
12/31/91 $ 13,020 $ 10,909
3/31/92 $ 14,690 $ 10,634
6/30/92 $ 15,230 $ 10,836
9/30/92 $ 16,800 $ 11,178
12/31/92 $ 19,386 $ 11,741
3/31/93 $ 20,927 $ 12,253
6/30/93 $ 21,494 $ 12,313
9/30/93 $ 23,095 $ 12,631
12/31/93 $ 25,300 $ 12,924
3/31/94 $ 24,242 $ 12,434
6/30/94 $ 24,951 $ 12,486
9/30/94 $ 26,663 $ 13,097
12/31/94 $ 26,138 $ 13,095
3/31/95 $ 28,539 $ 14,370
6/30/95 $ 30,303 $ 15,741
9/30/95 $ 32,841 $ 16,992
12/31/95 $ 35,134 $ 18,015
3/31/96 $ 36,386 $ 18,982
6/30/96 $ 37,661 $ 19,834
9/30/96 $ 37,945 $ 20,447
12/31/96 $ 40,828 $ 22,152
3/31/97 $ 42,456 $ 22,746
6/30/97 $ 48,917 $ 26,716
9/30/97 $ 52,009 $ 28,717
12/31/97 $ 54,132 $ 29,542
3/31/98 $ 59,517 $ 33,663
6/30/98 $ 57,909 $ 34,775
9/30/98 $ 49,899 $ 31,316
12/31/98 $ 56,155 $ 37,985
3/31/99 $ 55,888 $ 39,877
6/30/99 $ 62,332 $ 42,688
9/30/99 $ 53,882 $ 40,023
12/31/99 $ 50,277 $ 45,977
3/31/2000 $ 45,767 $ 47,032
6/30/2000 $ 46,950 $ 45,783
9/30/2000 $ 49,815 $ 45,339
12/31/2000 $ 56,201 $ 41,791
3/31/2001 $ 60,342 $ 36,837
6/30/2001 $ 65,927 $ 38,993
9/30/2001 $ 59,986 $ 33,269
12/31/2001 $ 66,479 $ 36,824
3/31/2002 $ 69,250 $ 36,926
6/30/2002 $ 63,463 $ 31,979
9/30/2002 $ 52,927 $ 26,454
12/31/2002 $ 56,902 $ 28,686
3/31/2003 $ 54,576 $ 27,783
6/30/2003 $ 63,826 $ 32,059
9/30/2003 $ 64,034 $ 32,907
12/31/2003 $ 71,301 $ 36,914
3/31/2004 $ 72,327 $ 37,539
</Table>
AVERAGE ANNUAL TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
TOTAL RETURN INCEPTION
LAST 3 MONTHS* 1-YEAR 5-YEAR 10-YEAR (8/5/91)
- ---------------------------------------------------------------------------------
OAKMARK FUND (CLASS I) 1.44% 32.53% 5.29% 11.54% 16.91%
S&P 500 1.69% 35.12% -1.20% 11.67% 11.01%
Dow Jones Average(6) -0.31% 32.66% 3.07% 13.31% 12.69%
Lipper Large Cap 2.42% 37.82% 1.21% 10.69% 10.68%
Value Index(7)
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data, call 1-800-OAKMARK or visit www.oakmark.com.
* Not annualized
The Oakmark Fund increased in value by 1% in the quarter, slightly trailing the
S&P 500. Over the last twelve months, the Fund increased by 33% compared to 35%
for the S&P 500. Though we always strive to do better than the market, we rely
on an investment approach that focuses on risk. That approach generally keeps us
away from the most popular stocks, which means that we tend to add more value
when markets are not unusually strong. We sold three positions this past
quarter. We decided our outlook on Safeway had been too optimistic given the
high percentage of their sales that come from markets that don't yet have
Wal-Mart or other superstore competitors. Though Safeway still looks
undervalued, we believe other companies have less uncertainty and are equally
undervalued. Further, sale of Safeway allowed us to increase our capital loss
carryforward. On the positive side, shares of JC Penney and Guidant achieved our
price targets and were sold. Two new positions were added: Limited Brands,
described below, and Raytheon, which is described on our website.
LIMITED BRANDS (LTD--$20)
LTD is a specialty retailer with well-known brands including Victoria's Secret,
Bath & Body Works, Express, and its namesake, Limited. LTD stock is down from a
high of $28 which was reached four years ago. While Victoria's Secret and Bath &
Body Works have become highly profitable category dominant chains, the other
brands have struggled. Victoria's Secret and Bath & Body Works now account for
two-thirds of LTD's sales and 90% of operating income. Despite this, investors
seem focused on the struggling turnaround efforts in the lesser chains.
Management has intelligently used the cash generated by these businesses,
including a recently completed $1 billion share repurchase (10% of the
outstanding shares). We believe Victoria's Secret and Bath & Body Works are
above-average franchises, are well insulated from Wal-Mart competition, and
should continue growing at above-average rates. Success in the turnarounds of
Limited and Express is possible and would be nice, but isn't assumed in our
outlook. Selling at fifteen times estimated earnings, LTD is being priced as a
below-average business.
Best wishes,
/s/ William C. Nygren /s/ Kevin G. Grant
WILLIAM C. NYGREN, CFA KEVIN G. GRANT, CFA
Portfolio Manager Portfolio Manager
bnygren@oakmark.com kgrant@oakmark.com
6
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THE OAKMARK FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
NAME SHARES HELD MARKET VALUE
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS--90.4%
FOOD & BEVERAGE--8.3%
Anheuser-Busch Companies, Inc. 2,450,000 $ 124,950,000
Diageo plc (b) 1,821,000 96,294,480
Kraft Foods Inc. 2,845,000 91,068,450
H.J. Heinz Company 2,310,000 86,139,900
General Mills, Inc. 1,805,000 84,257,400
-----------------
482,710,230
HOUSEHOLD PRODUCTS--1.2%
The Clorox Company 1,390,200 $ 67,994,682
OTHER CONSUMER GOODS & SERVICES--6.0%
H&R Block, Inc. (c) 2,829,300 $ 144,379,179
Fortune Brands, Inc. 1,745,600 133,765,328
Mattel, Inc. 3,874,300 71,442,092
-----------------
349,586,599
BROADCASTING & PROGRAMMING--2.4%
Liberty Media Corporation, Class A (a) 9,199,400 $ 100,733,430
The Walt Disney Company 1,500,000 37,485,000
-----------------
138,218,430
BUILDING MATERIALS & CONSTRUCTION--2.2%
Masco Corporation 4,133,600 $ 125,826,784
CABLE SYSTEMS & SATELLITE TV--6.2%
Time Warner Inc. (a) 7,297,700 $ 123,039,222
Comcast Corporation, Special Class A (a) 3,300,000 92,004,000
The DIRECTV Group, Inc. (a) 5,021,618 77,232,485
EchoStar Communications Corporation (a) 2,075,000 67,956,250
-----------------
360,231,957
HARDWARE--1.9%
The Black & Decker Corporation 1,922,200 $ 109,450,068
MOTORCYCLES--1.8%
Harley-Davidson, Inc. 1,962,500 $ 104,679,750
PUBLISHING--2.5%
Gannett Co., Inc. 884,500 $ 77,959,830
Knight-Ridder, Inc. 916,000 67,097,000
-----------------
145,056,830
RECREATION & ENTERTAINMENT--1.3%
Carnival Corporation (d) 1,678,300 $ 75,372,453
</Table>
7
<Page>
<Table>
<Caption>
NAME SHARES HELD MARKET VALUE
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS--90.4% (CONT.)
RESTAURANTS--4.8%
McDonald's Corporation 4,900,000 $ 139,993,000
Yum! Brands, Inc (a) 3,674,000 139,575,260
-----------------
279,568,260
RETAIL--9.6%
The Gap, Inc. 6,326,700 $ 138,681,264
The Home Depot, Inc. 3,281,500 122,596,840
The Kroger Co. (a) 5,150,000 85,696,000
Kohl's Corporation (a) 1,700,500 82,185,165
Limited Brands 4,090,000 81,800,000
Toys 'R' Us, Inc. (a)(c) 3,125,000 52,500,000
-----------------
563,459,269
BANK & THRIFTS--6.4%
Washington Mutual, Inc. 4,687,300 $ 200,194,583
U.S. Bancorp 3,700,000 102,305,000
The Bank of New York Company, Inc. 2,300,000 72,450,000
-----------------
374,949,583
INSURANCE--3.5%
MGIC Investment Corporation 1,740,600 $ 111,798,738
AFLAC Incorporated 2,367,000 95,011,380
-----------------
206,810,118
OTHER FINANCIAL--2.1%
Fannie Mae 1,670,000 $ 124,164,500
HEALTH CARE SERVICES--1.1%
AmerisourceBergen Corp 1,200,000 $ 65,616,000
MEDICAL PRODUCTS--1.5%
Baxter International Inc. 2,800,000 $ 86,492,000
PHARMACEUTICALS--7.8%
Merck & Co., Inc. 2,350,000 $ 103,846,500
Bristol-Myers Squibb Company 3,950,000 95,708,500
Abbott Laboratories 2,300,000 94,530,000
Schering-Plough Corporation 5,625,000 91,237,500
Chiron Corporation (a) 1,659,900 73,052,199
-----------------
458,374,699
TELECOMMUNICATIONS--1.7%
Sprint Corporation 5,426,800 $ 100,015,924
</Table>
8
<Page>
<Table>
<Caption>
SHARES HELD/
NAME PAR VALUE MARKET VALUE
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS--90.4% (CONT.)
COMPUTER SERVICES--5.4%
First Data Corporation 3,615,000 $ 152,408,400
SunGard Data Systems, Inc. (a) 3,203,700 87,781,380
Automatic Data Processing, Inc. 1,800,000 75,600,000
-----------------
315,789,780
COMPUTER SYSTEMS--1.4%
Sun Microsystems, Inc. (a) 19,870,000 $ 82,659,200
OFFICE EQUIPMENT--1.4%
Xerox Corporation (a) 5,472,400 $ 79,732,868
AEROSPACE & DEFENSE--3.9%
Honeywell International, Inc. 3,050,000 $ 103,242,500
Raytheon Company 2,500,000 78,350,000
The Boeing Company 1,152,800 47,345,496
-----------------
228,937,996
OTHER INDUSTRIAL GOODS & SERVICES--0.8%
Illinois Tool Works Inc. 604,200 $ 47,870,766
WASTE DISPOSAL--1.8%
Waste Management, Inc. 3,474,300 $ 104,854,374
OIL & NATURAL GAS--3.4%
ConocoPhillips 1,435,335 $ 100,200,736
Burlington Resources, Inc. (c) 1,571,100 99,969,093
-----------------
200,169,829
TOTAL COMMON STOCKS (COST: $4,161,379,404) 5,278,592,949
SHORT TERM INVESTMENTS--10.4%
U.S. GOVERNMENT BILLS--7.0%
United States Treasury Bills, 0.88% - 0.94%
due 4/1/2004 - 7/1/2004 $ 410,000,000 $ 409,525,587
TOTAL U.S. GOVERNMENT BILLS (COST: $409,534,826) 409,525,587
REPURCHASE AGREEMENTS--3.4%
IBT Repurchase Agreement, 0.91% dated 3/31/2004
due 4/1/2004, repurchase price $195,504,942
collateralized by U.S. Government Agency Securities
with an aggregate market value plus accrued interest
of $205,275,000 $ 195,500,000 $ 195,500,000
</Table>
9
<Page>
<Table>
<Caption>
NAME PAR VALUE MARKET VALUE
- ---------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS--10.4% (CONT.)
REPURCHASE AGREEMENTS--3.4% (CONT.)
IBT Repurchase Agreement, 0.76% dated 3/31/2004
due 4/1/2004, repurchase price $4,051,277
collateralized by a U.S. Government Agency Security
with a market value plus accrued interest of $4,253,750 $ 4,051,191 $ 4,051,191
-----------------
TOTAL REPURCHASE AGREEMENTS (COST: $199,551,191) 199,551,191
TOTAL SHORT TERM INVESTMENTS (COST: $609,086,017) 609,076,778
Total Investments (Cost $4,770,465,421)--100.8% $ 5,887,669,727
Other Liabilities In Excess Of Other Assets--(0.8%) (46,682,679)
-----------------
TOTAL NET ASSETS--100% $ 5,840,987,048
=================
</Table>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) See footnote number five in the Notes to Financial Statements regarding
transactions in securities of affiliated issuers.
(d) Represents a foreign domiciled corporation.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
<Page>
THE OAKMARK SELECT FUND
REPORT FROM BILL NYGREN AND HENRY BERGHOEF, PORTFOLIO MANAGERS
[PHOTO]
[PHOTO]
[CHART]
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK SELECT FUND FROM ITS INCEPTION
(11/1/96) TO PRESENT (3/31/04) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX(5)
<Table>
<Caption>
THE OAKMARK SELECT FUND (CLASS I) S & P 500
11/1/96 $ 10,000 $ 10,000
12/31/96 $ 11,420 $ 10,543
3/31/97 $ 12,140 $ 10,826
6/30/97 $ 14,180 $ 12,715
9/30/97 $ 16,340 $ 13,668
12/31/97 $ 17,704 $ 14,060
3/31/98 $ 20,078 $ 16,021
6/30/98 $ 20,462 $ 16,551
9/30/98 $ 16,936 $ 14,904
12/31/98 $ 20,575 $ 18,078
3/31/99 $ 22,766 $ 18,979
6/30/99 $ 24,482 $ 20,317
9/30/99 $ 22,028 $ 19,048
12/31/99 $ 23,557 $ 21,882
3/31/2000 $ 25,667 $ 22,384
6/30/2000 $ 24,324 $ 21,790
9/30/2000 $ 27,432 $ 21,578
12/31/2000 $ 29,637 $ 19,890
3/31/2001 $ 32,826 $ 17,532
6/30/2001 $ 35,865 $ 18,558
9/30/2001 $ 34,496 $ 15,834
12/31/2001 $ 37,359 $ 17,526
3/31/2002 $ 38,306 $ 17,574
6/30/2002 $ 35,206 $ 15,220
9/30/2002 $ 29,720 $ 12,590
12/31/2002 $ 32,699 $ 13,653
3/31/2003 $ 32,535 $ 13,223
6/30/2003 $ 37,806 $ 15,258
9/3/2003 $ 37,820 $ 15,662
12/31/2003 $ 42,181 $ 17,569
3/31/2004 $ 43,214 $ 17,866
</Table>
AVERAGE ANNUAL TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
TOTAL RETURN INCEPTION
LAST 3 MONTHS* 1-YEAR 5-YEAR (11/1/96)
- ---------------------------------------------------------------------------------
OAKMARK SELECT FUND (CLASS I) 2.45% 32.83% 13.66% 21.81%
S&P 500 1.69% 35.12% -1.20% 8.14%
S&P MidCap 400(8) 5.06% 49.10% 11.74% 14.43%
Lipper Mid Cap Value Index(9) 5.60% 53.35% 11.50% 10.63%
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data, call 1-800-OAKMARK or visit www.oakmark.com.
* Not annualized
The Oakmark Select Fund increased in value by 2% in the quarter, slightly
exceeding the S&P 500. The Fund's performance was positively affected by
Washington Mutual's 7% return. As the fund's largest holding, Washington
Mutual's performance frequently is the largest contributor to NAV(10) changes.
Our holding that increased the most in the quarter was Toys 'R' Us. We first
bought Toys 'R' Us in early 2000 believing that new management would succeed at
improving the profitability of their toy stores. Although the shopping
experience today is much better, the profits aren't. Fortunately, continued
growth at Babies 'R' Us and growing real estate value underneath the toy stores
has allowed the stock to increase despite disappointing progress on our primary
thesis. This outcome highlights the value of our investment approach. By
investing only when we believe stocks are selling at large discounts to value,
we have benefited from a cushion that Benjamin Graham, the "father of value
investing," referred to as a "margin of safety." While the company's earnings
have fallen far short of our projections, the stock has increased in price, and
we still believe it is selling at a discount to business value. We are pleased
with the steps management is now considering which include a downsizing of the
toy division.
During the quarter we sold our position in Starwood Hotels. We purchased
Starwood a year ago when the Iraq war caused a cutback in travel plans. The
stock, which then troughed at $22, exceeded $40 last quarter. We still like the
business but believe the current quote approximates full business value.
Starwood was replaced in the portfolio with The Gap. We believe Gap is one of
the strongest global apparel names, and we are very pleased with the new
management, led by CEO Paul Pressler. We think that the stores look better,
which is confirmed by higher same-store-sales. Our confidence is growing that
Gap's turnaround will be successful, so despite the higher price, we believe the
stock is very attractive.
Thank you for your continued support,
/s/ William C. Nygren /s/ Henry R. Berghoef
WILLIAM C. NYGREN, CFA HENRY R. BERGHOEF, CFA
Portfolio Manager Portfolio Manager
bnygren@oakmark.com berghoef@oakmark.com
11
<Page>
THE OAKMARK SELECT FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
NAME SHARES HELD MARKET VALUE
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS--93.9%
OTHER CONSUMER GOODS & SERVICES--11.2%
H&R Block, Inc. (b) 8,259,800 $ 421,497,594
Mattel, Inc. 12,270,900 226,275,396
-----------------
647,772,990
CABLE SYSTEMS & SATELLITE TV--4.4%
Time Warner Inc. (a) 15,240,000 $ 256,946,400
INFORMATION SERVICES--7.4%
Moody's Corporation 3,123,600 $ 221,150,880
The Dun & Bradstreet Corporation (a)(b) 3,934,900 210,517,150
-----------------
431,668,030
PUBLISHING--3.3%
Knight-Ridder, Inc. 2,606,500 $ 190,926,125
RESTAURANTS--6.0%
Yum! Brands, Inc (a) 9,207,000 $ 349,773,930
RETAIL--14.0%
Toys 'R' Us, Inc. (a)(b) 12,622,700 $ 212,061,360
Office Depot, Inc. (a) 11,084,900 208,617,818
The Gap, Inc. 9,400,000 206,048,000
The Kroger Co. (a) 11,035,700 183,634,048
-----------------
810,361,226
BANK & THRIFTS--17.0%
Washington Mutual, Inc. 23,151,400 $ 988,796,294
INVESTMENT MANAGEMENT--2.6%
Janus Capital Group, Inc. 9,169,600 $ 150,198,048
HEALTH CARE SERVICES--3.3%
IMS Health Incorporated 8,303,441 $ 193,138,038
PHARMACEUTICALS--6.4%
Chiron Corporation (a) 4,641,100 $ 204,254,811
Bristol-Myers Squibb Company 6,990,200 169,372,546
-----------------
373,627,357
TELECOMMUNICATIONS--3.8%
Sprint Corporation 11,999,600 $ 221,152,628
COMPUTER SERVICES--5.7%
First Data Corporation 7,815,400 $ 329,497,264
OFFICE EQUIPMENT--4.0%
Xerox Corporation (a) 15,854,700 $ 231,002,979
</Table>
12
<Page>
<Table>
<Caption>
SHARES HELD/
NAME PAR VALUE MARKET VALUE
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS--93.9% (CONT.)
OIL & NATURAL GAS--4.8%
Burlington Resources, Inc. (b) 4,326,800 $ 275,314,284
TOTAL COMMON STOCKS (COST: $3,584,332,713) 5,450,175,593
SHORT TERM INVESTMENTS--5.9%
U.S. GOVERNMENT BILLS--3.8%
United States Treasury Bills, 0.865% - 0.895%
due 4/1/2004 - 5/20/2004 $ 220,000,000 $ 219,854,010
TOTAL U.S. GOVERNMENT BILLS (COST: $219,861,555) 219,854,010
REPURCHASE AGREEMENTS--2.1%
IBT Repurchase Agreement, 0.91% dated 3/31/2004
due 4/1/2004, repurchase price $119,003,008
collateralized by U.S. Government Agency Securities
with an aggregate market value plus accrued interest
of $124,950,000 $ 119,000,000 $ 119,000,000
IBT Repurchase Agreement, 0.76% dated 3/31/2004
due 4/1/2004, repurchase price $3,687,463
collateralized by a U.S. Government Agency Security
with a market value plus accrued interest of $3,871,754 3,687,385 3,687,385
-----------------
TOTAL REPURCHASE AGREEMENTS (COST: $122,687,385) 122,687,385
TOTAL SHORT TERM INVESTMENTS (COST: $342,548,940) 342,541,395
Total Investments (Cost $3,926,881,653)--99.8% $ 5,792,716,988
Other Assets In Excess Of Other Liabilities--0.2% 12,113,583
-----------------
TOTAL NET ASSETS--100% $ 5,804,830,571
=================
</Table>
(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements regarding
transactions in securities of affiliated issuers.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<Page>
THE OAKMARK SMALL CAP FUND
REPORT FROM JAMES P. BENSON AND EDWARD A. STUDZINSKI, PORTFOLIO MANAGERS
[PHOTO]
[PHOTO]
[CHART]
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK SMALL CAP FUND FROM ITS
INCEPTION (11/1/95) TO PRESENT (3/31/04) AS COMPARED TO THE RUSSELL 2000
INDEX(11)
<Table>
<Caption>
THE OAKMARK SMALL CAP FUND (CLASS I) RUSSELL 2000
11/1/95 $ 10,000 $ 10,000
12/31/95 $ 10,330 $ 10,695
3/31/96 $ 11,460 $ 11,241
6/30/96 $ 12,470 $ 11,803
9/30/96 $ 13,250 $ 11,843
12/31/96 $ 14,440 $ 12,459
3/31/97 $ 15,220 $ 11,815
6/30/97 $ 17,660 $ 13,730
9/30/97 $ 20,340 $ 15,774
12/31/97 $ 20,290 $ 15,245
3/31/98 $ 21,732 $ 16,779
6/30/98 $ 20,467 $ 15,997
9/30/98 $ 14,976 $ 12,774
12/31/98 $ 17,620 $ 14,857
3/31/99 $ 16,069 $ 14,051
6/30/99 $ 18,205 $ 16,237
9/30/99 $ 16,558 $ 15,210
12/31/99 $ 16,224 $ 18,015
3/31/2000 $ 15,974 $ 19,292
6/30/2000 $ 15,926 $ 18,562
9/30/2000 $ 18,014 $ 18,768
12/31/2000 $ 16,937 $ 17,471
3/31/2001 $ 17,816 $ 16,335
6/30/2001 $ 21,218 $ 18,688
9/30/2001 $ 18,026 $ 14,788
12/31/2001 $ 21,391 $ 17,906
3/31/2002 $ 24,014 $ 18,619
6/30/2002 $ 22,369 $ 17,064
9/30/2002 $ 17,445 $ 13,412
12/31/2002 $ 18,595 $ 14,238
3/31/2003 $ 17,185 $ 13,598
6/30/2003 $ 20,092 $ 16,784
9/30/2003 $ 21,255 $ 18,307
12/31/2003 $ 23,581 $ 20,966
3/31/2004 $ 25,239 $ 22,278
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
TOTAL RETURN INCEPTION
LAST 3 MONTHS* 1-YEAR 5-YEAR (11/1/95)
- --------------------------------------------------------------------------------
OAKMARK SMALL CAP FUND (CLASS I) 7.03% 46.87% 9.44% 11.62%
Russell 2000 6.26% 63.83% 9.65% 9.98%
S&P Small Cap 600(12) 6.22% 56.49% 13.10% 12.40%
Lipper Small Cap Value Index(13) 5.96% 65.89% 16.54% 13.48%
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data, call 1-800-OAKMARK or visit www.oakmark.com.
* Not annualized
"When it is a question of money, everybody is of the same religion."
Voltaire
OUR RESULTS
The Oakmark Small Cap Fund increased 7% for the quarter ended March 31, which
also reflects the calendar year gain. During 2004, the Fund has outperformed the
market averages while also outperforming our primary benchmark, the Russell 2000
Index, which has gained 6% year-to-date. We are pleased with this result because
we believe that absolute positive returns preserve and grow your capital. We are
even more pleased that over the past three-year and five-year periods we have
grown and compounded the capital of our long-term investors at a 12% and 9%
annualized rate, respectively. Please do not think for one moment however, that
those returns are going to lead us to complacency. We began 2004 with a renewed
focus on our goal of continuing to provide consistent returns. While Oscar Wilde
may have said, "Consistency is the last refuge of the unimaginative," we feel
that in the investment business consistently above-average returns requires both
imagination and discipline. We also firmly believe that you, our investors,
sought this consistency and discipline when you elected to partner with us by
committing capital to the fund.
TIDAL CHARTS
Particularly strong performers during the quarter were Central Parking
Corporation, CIBER Inc., Jack in the Box Inc., Levitt Corporation, and Peoples
Bank of Bridgeport. Over time, we have noted that many value stocks have a
tendency to sit for long periods with a huge gap between our assessment of
intrinsic value and the current market price until a catalyst or some other
piece of information triggers a greater appreciation of the opportunity
presented by the gap. Then, the gap narrows and often closes within a very short
period. We mention this sequence of events because it speaks to the importance
of a long-term focus, rather than allowing one's self to be blown about by the
vagaries of changing short-term perceptions that have little to do with a
company's long-term business value. It also speaks to the foolishness of trying
to time the market, especially in today's world of accelerated information
flows.
The worst performer during the quarter was R.G. Barry, which saw its share price
sell-off when it reported a slowdown in sales of its slipper products, along
with the attendant back-up in inventories. We continue to monitor this situation
closely, weighing the statistical cheapness of the investment against a
management that for a continued period has been unable to avoid tripping over
its own feet in executing a turnaround.
14
<Page>
HIGHLIGHTS
- Gaps between price and value can remain for long periods, but close quickly
when a catalyst occurs.
- Small caps are significantly under-followed by Wall Street, presenting us
with real opportunity.
- Our focus remains the same: to search for businesses trading at a
margin-of-safety discount to intrinsic value.
Five positions--Central Parking Corporation, Jack in the Box, Optimal Robotics
Corporation, Penn Fed Financial Corporation, and PMI--were sold out during the
quarter. Four of those issues reached our assessment of fair valuation. We sold
one position, Optimal Robotics, after its management changed its strategy to
focus more on management, rather than shareholder, returns. After we exited the
position, management sold the one business that had represented the major
unpinning of our investment thesis. Seven new positions were initiated during
the quarter in American Italian Pasta, Coolbrands International, FTI Consulting,
Levitt Corporation, NeighborCare Inc., PRIMEDIA, Inc., and Watson Wyatt &
Company Holdings. While the buoyant market of 2003 and the beginning of 2004 has
eliminated many compelling values that existed at the beginning of 2003, our
analytical team has diligently examined the "New Low" list as well as other
sources to uncover some very interesting and undervalued situations. We have NOT
undertaken a strategy of turning the portfolio over merely for the sake of
turning the portfolio over. Rather, we have removed issues from the portfolio
because they had reached their valuation targets or our assessments had proven
faulty, and we have been able to replace them with what we believe are more
attractive issues. We also note that our holdings have not appreciated to the
point where a wholesale liquidation is appropriate based on valuation.
We would point out that there IS a reason why we construct portfolios rather
than focus on individual stocks. To use a baseball analogy, ours is a business
of hitting singles and doubles. If there is an occasional home run, that's nice,
but the singles and doubles provide consistent returns over time while allowing
control of the risk we are undertaking. And, we believe that the market and its
participants will present us with other opportunities to buy a lot of very high
quality securities at very reasonable prices. In the interim, we are looking for
one or two really good ideas a year (and are thankful whenever we are able to
find a few more than that).
MAKING SAUSAGE
Is there anything unique about the process of investing in small cap value
stocks? Aside from liquidity issues, perhaps the biggest difference from the
large cap area is a much diminished information flow. This is not because of the
companies themselves, which are oftentimes quite happy to talk to institutional
or even individual investors. Rather, Wall Street research often provides little
information. A company like Microsoft might have twenty different analysts from
the Street following it. For the top two hundred largest capitalization stocks,
it is not unusual to have at least ten analysts from different companies poking
and prodding the news releases and financials, talking to management, and
producing earnings estimates. The information flow on these companies tends to
be huge. And, given that even a blind pig can find an acorn on occasion,
sometimes one or more of the Street analysts will be outliers in their research
and offer an insight that makes it possible to exploit an inefficiency in price,
however briefly. The opposite is true in the small cap arena.
Probably some ten years ago, the Street started pulling back on the number of
companies it covered. Companies like Merrill Lynch, which used to proudly
announce that their analysts followed more companies than any other firm on Wall
Street, have increasingly trimmed back their coverage to following fewer than a
thousand companies. Given that our benchmark is the Russell 2000, that means a
lot of companies are either not being covered or are covered by at best one or
two institutional analysts, often at small regional or second-tier firms. Many
of the companies in The Oakmark Small Cap Fund are followed by one or two
analysts. That presents us with an opportunity.
Of course, another opportunity comes from the nature of the information flow
about these companies. Most large cap companies, followed by an abundance of
Street analysts as well as buy side analysts for institutional investors,
tightly control access to management, including what have become rigidly
scripted investor presentations and guidelines even for the types of questions
investors can ask. Earnings guidance information is now the high point of a
quarter's information, and woe unto the analyst who deviates greatly from that
guidance. What used to pass for analysis has now become information distribution
by what are very close to being "embedded" reporters, with all that that may
subsume.
Contrarily, in the small cap world, analysts get to meet managements, attend
analyst days where there is the opportunity for interchange with many levels of
management, and still tour plants and other operating facilities. Often these
companies do not have a true head of investor relations (the guardian of
relative truth), so one's idea of the intellectual and moral makeup of
managements comes from direct exchange. One also gets the opportunity to learn
about industries and competitors in considerably more depth than one usually
gets from visiting a large cap company.
At Harris Associates, we are blessed with a very high quality group of analysts
who present us with a continuing flow of well-researched, interesting ideas.
While we won't go so far as saying that the portfolio manager could easily be
replaced by a coin-flipping primate, the fundamental work of our analysts makes
our daily jobs considerably easier.
THE FUTURE
One of the nice aspects of our job and the focus of our firm is that as
fundamental value investors, we don't spend a lot of time trying to guess the
future, especially what we have no control over and no ability to assess. We
leave it
15
<Page>
to others who make their living predicting economic growth or interest rates.
This is probably for the best because we don't think we have any especial talent
in that area, and they may actually be ones where the coin-flipping primate can
truly excel (or perhaps already has, depending on one's opinion of various
commentators). Instead, we plod along, looking to unearth the occasional diamond
in the rough of an investment opportunity. In our favor, the continued and even
intensified focus on short-term events drives many investment analysis and
portfolio management decisions today. Sometimes (actually more than sometimes),
doing nothing is the correct decision if you have confidence in your original
assessment. Regardless, we are not going to do anything different this coming
year from what we have done in the past: searching for business values at that
margin of safety discount to intrinsic value that we like. We remain grateful to
you, our shareholders and partners, for your patience and confidence in
entrusting us with your capital to manage.
/s/ James P. Benson /s/ Edward A. Studzinski
JAMES P. BENSON, CFA EDWARD A. STUDZINSKI, CFA
Portfolio Manager Portfolio Manager
jbenson@oakmark.com estudzinski@oakmark.com
16
<Page>
THE OAKMARK SMALL CAP FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
NAME SHARES HELD MARKET VALUE
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS--93.4%
FOOD & BEVERAGE--10.3%
Ralcorp Holdings, Inc. (a) 500,000 $ 15,215,000
Del Monte Foods Company (a) 1,100,000 12,375,000
American Italian Pasta Company, Class A 200,000 7,986,000
CoolBrands International, Inc. (a)(b) 290,000 5,047,895
-----------------
40,623,895
HOUSEHOLD PRODUCTS--3.7%
Tupperware Corporation 825,000 $ 14,693,250
OTHER CONSUMER GOODS & SERVICES--2.3%
Callaway Golf Company 475,000 $ 9,015,500
SECURITY SYSTEMS--4.6%
Checkpoint Systems, Inc. (a) 968,300 $ 18,300,870
APPAREL--2.7%
Oakley, Inc. 671,200 $ 9,960,608
R.G. Barry Corporation (a) 269,150 783,226
-----------------
10,743,834
AUTOMOBILE RENTALS--2.4%
Dollar Thrifty Automotive Group, Inc. (a) 375,000 $ 9,476,250
BUILDING MATERIALS & CONSTRUCTION--3.3%
Integrated Electrical Services, Inc. (a) 956,600 $ 10,752,184
Insituform Technologies, Inc., Class A (a) 150,000 2,344,500
-----------------
13,096,684
CONSULTING SERVICES--2.5%
FTI Consulting, Inc. (a) 360,000 $ 5,997,600
Watson Wyatt & Company Holdings 158,500 4,000,540
-----------------
9,998,140
HOME BUILDERS--2.7%
Levitt Corporation, Class A (a) 427,300 $ 10,468,850
HUMAN RESOURCES--2.1%
Hudson Highland Group, Inc. (a) 300,000 $ 8,364,000
INFORMATION SERVICES--2.9%
eFunds Corporation (a)(c) 706,700 $ 11,589,880
MARKETING SERVICES--2.1%
Grey Global Group, Inc. 11,750 $ 8,107,500
PUBLISHING--0.2%
PRIMEDIA Inc. (a) 314,500 $ 849,150
</Table>
17
<Page>
<Table>
<Caption>
NAME SHARES HELD MARKET VALUE
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS--93.4% (CONT.)
RESTAURANTS--2.7%
Triarc Companies, Inc., Class B 500,000 $ 5,480,000
Triarc Companies, Inc. 250,000 2,735,000
Landry's Restaurants, Inc. 88,700 2,645,921
-----------------
10,860,921
RETAIL--2.2%
ShopKo Stores, Inc. (a) 600,000 $ 8,772,000
BANK & THRIFTS--4.8%
People's Bank of Bridgeport, Connecticut 300,000 $ 13,947,000
BankAtlantic Bancorp, Inc., Class A 295,700 5,015,072
-----------------
18,962,072
INSURANCE--1.1%
U.S.I. Holdings Corporation (a) 283,000 $ 4,185,570
OTHER FINANCIAL--3.1%
NCO Group, Inc. (a) 530,000 $ 12,386,100
REAL ESTATE--1.8%
Trammell Crow Company (a) 495,000 $ 6,944,850
HEALTH CARE SERVICES--2.5%
NeighborCare, Inc. (a) 400,000 $ 9,700,000
MEDICAL PRODUCTS--8.3%
Hanger Orthopedic Group, Inc. (a) 950,000 $ 17,147,500
CONMED Corporation (a) 400,000 11,816,000
Advanced Medical Optics, Inc. (a) 150,000 3,660,000
-----------------
32,623,500
COMPUTER SERVICES--4.9%
CIBER, Inc. (a) 1,625,000 $ 17,875,000
Interland, Inc. (a) 400,000 1,652,000
-----------------
19,527,000
COMPUTER SOFTWARE--9.9%
Mentor Graphics Corporation (a) 950,000 $ 16,929,000
MSC.Software Corp. (a) 1,350,000 11,893,500
Sybase, Inc. (a) 495,000 10,390,050
-----------------
39,212,550
DATA STORAGE--2.0%
Imation Corp. 215,000 $ 8,088,300
</Table>
18
<Page>
<Table>
<Caption>
SHARES HELD/
NAME PAR VALUE MARKET VALUE
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS--93.4% (CONT.)
AEROSPACE & DEFENSE--1.7%
Herley Industries, Inc. (a) 211,500 $ 3,993,120
Teledyne Technologies Incorporated (a) 140,000 2,618,000
-----------------
6,611,120
FORESTRY PRODUCTS--2.1%
Schweitzer-Mauduit International, Inc. 250,700 $ 8,097,610
OIL & NATURAL GAS--4.5%
St. Mary Land & Exploration Company 300,000 $ 10,029,000
Cabot Oil & Gas Corporation 250,000 7,640,000
-----------------
17,669,000
TOTAL COMMON STOCKS (COST: $275,438,474) 368,968,396
SHORT TERM INVESTMENTS--6.5%
U.S. GOVERNMENT BILLS--5.1%
United States Treasury Bills, 0.935% - 0.955%
due 4/1/2004 - 4/22/2004 $ 20,000,000 $ 19,993,623
TOTAL U.S. GOVERNMENT BILLS (COST: $19,993,623) 19,993,623
REPURCHASE AGREEMENTS--1.4%
IBT Repurchase Agreement, 0.91% dated 3/31/2004
due 4/1/2004, repurchase price $3,500,088 collateralized
by a U.S. Government Agency Security with a market
value plus accrued interest of $3,675,000 $ 3,500,000 $ 3,500,000
IBT Repurchase Agreement, 0.76% dated 3/31/2004
due 4/1/2004, repurchase price $2,157,368 collateralized
by a U.S. Government Agency Security with a market
value plus accrued interest of $2,265,188 2,157,322 2,157,322
-----------------
TOTAL REPURCHASE AGREEMENTS (COST: $5,657,322) 5,657,322
TOTAL SHORT TERM INVESTMENTS (COST: $25,650,945) 25,650,945
Total Investments (Cost $301,089,419)--99.9% $ 394,619,341
Other Assets In Excess Of Other Liabilities--0.1% 559,625
-----------------
TOTAL NET ASSETS--100% $ 395,178,966
=================
</Table>
(a) Non-income producing security.
(b) Represents a foreign domiciled corporation.
(c) See footnote number five in the Notes to Financial Statements regarding
transactions in securities of affiliated issuers.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<Page>
THE OAKMARK EQUITY AND INCOME FUND
REPORT FROM CLYDE S. McGREGOR AND EDWARD A. STUDZINSKI, PORTFOLIO MANAGERS
[PHOTO]
[PHOTO]
[CHART]
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK EQUITY AND INCOME FUND FROM ITS
INCEPTION (11/1/95) TO PRESENT (3/31/04) AS COMPARED TO THE LIPPER BALANCED FUND
INDEX(14)
<Table>
<Caption>
THE OAKMARK EQUITY AND INCOME FUND (CLASS I) LIPPER BALANCED FUND INDEX
11/1/95 $ 10,000 $ 10,000
12/31/95 $ 10,240 $ 10,473
3/31/96 $ 10,500 $ 10,707
6/30/96 $ 11,040 $ 10,925
9/30/96 $ 11,110 $ 11,213
12/31/96 $ 11,805 $ 11,840
3/31/97 $ 12,153 $ 11,895
6/30/97 $ 13,430 $ 13,178
9/30/97 $ 14,810 $ 14,024
12/31/97 $ 14,941 $ 14,243
3/31/98 $ 16,233 $ 15,370
6/30/98 $ 16,320 $ 15,599
9/30/98 $ 15,191 $ 14,701
12/31/98 $ 16,792 $ 16,392
3/31/99 $ 16,792 $ 16,655
6/30/99 $ 18,457 $ 17,402
9/30/99 $ 17,518 $ 16,682
12/31/99 $ 18,119 $ 17,863
3/31/2000 $ 18,924 $ 18,396
6/30/2000 $ 18,886 $ 18,174
9/30/2000 $ 20,761 $ 18,535
12/31/2000 $ 21,723 $ 18,290
3/31/2001 $ 22,621 $ 17,374
6/30/2001 $ 24,445 $ 17,984
9/30/2001 $ 23,751 $ 16,621
12/31/2001 $ 25,635 $ 17,698
3/31/2002 $ 26,708 $ 17,805
6/30/2002 $ 25,855 $ 16,628
9/30/2002 $ 23,640 $ 14,986
12/31/2002 $ 25,087 $ 15,807
3/31/2003 $ 24,515 $ 15,516
6/30/2003 $ 27,750 $ 17,209
9/30/2003 $ 28,308 $ 17,562
12/31/2003 $ 30,908 $ 18,958
3/31/2004 $ 32,200 $ 19,410
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
TOTAL RETURN INCEPTION
LAST 3 MONTHS* 1-YEAR 5-YEAR (11/1/95)
- ------------------------------------------------------------------------------
OAKMARK EQUITY & INCOME
FUND (CLASS I) 4.18% 31.35% 13.89% 14.90%
Lipper Balanced Fund Index 2.39% 25.10% 3.11% 8.19%
S&P 500(5) 1.69% 35.12% -1.20% 9.92%
Lehman Govt./Corp. Bond(15) 3.08% 6.15% 7.56% 7.33%
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data, call 1-800-OAKMARK or visit www.oakmark.com.
* Not annualized
QUARTER REVIEW
The Equity and Income Fund produced a return of 4% for the quarter ended March
31. This result modestly exceeded the 2% that the Lipper Balanced Fund Index
reported. The fund's return has now bested the Balanced Fund Index in 15 of the
past 17 quarters. While we are competitive individuals who enjoy achieving
relative success, our goal in managing the fund is not to beat a benchmark.
Rather, we seek to earn positive rates of return in all material time periods
while always maintaining an unhedged commitment to common stocks of at least
50%.
The world is exceptionally confusing these days. Issues like the plague of
terrorism, an unusually polarized U.S. election cycle, a synchronized global
economic recovery, historically low interest rates, and troubling corporate
governance issues have combined to make investing based on macro factors
hazardous. Many investors who desire consistent positive returns have attempted
to cope with uncertainty by moving money to hedge funds and investment
partnerships that employ various esoteric strategies. These entities often pay
little attention to the underlying fundamentals of their investments, instead
treating securities more like mathematical abstractions. Hedge funds do,
however, account for an ever-increasing share of trading volume.
We, of course, have our own opinions on macro issues, but we do not make these
opinions central to how we invest your money based on those opinions. Instead,
careful analysis of corporate business values drives our investment decisions.
We have built the fund's record on thousands of decisions concerning individual
securities, and we will continue to expend our energies in that manner. Since
the fund's inception at the end of 1995, it has generated positive results in
all but one calendar year and 25 out of 33 quarters. We hope to improve upon
that record.
HIT AND MISS
In our first 34 reports to shareholders we have written extensively (AD
NAUSEAM?) about our investing philosophy and process. Many reports also waxed
eloquent about our fixed income approach. At the moment we find that we do not
have anything new to say on these topics. Therefore, the remainder of this
report will discuss individual equity holdings. Please recognize, however, that
this does not imply any shift in our investing emphasis but rather a failing of
our creative muse.
To format the discussion, we are shamelessly imitating a relatively new column
of the
20
<Page>
HIGHLIGHTS
- Careful analysis of long-term business values drives our investment
decisions, not opinions about macro issues.
- This quarter, we talk about our investing hits and misses, specifically,
Caremark and First Health.
- As always, we continue to focus on companies priced below business value
with shareholder-oriented management.
WALL STREET JOURNAL titled "Tracking the Numbers/Hit and Miss." This column asks
portfolio managers to describe experiences with one stock position that worked
and one that failed. To make this more topical for our fund report, we will
focus on two stocks that materially affected the fund's recent results.
HIT
Caremark, a pharmacy benefit manager (PBM) based in Birmingham, Alabama.
AVERAGE PRICE WE PAID: $20.37. The stock closed the quarter at $33.25.
WHY WE BOUGHT IT: We began purchasing shares in August 2002. Earlier that summer
the financial press had questioned the accounting treatment of prescription
co-payments by several PBMs, including Caremark. This industry seemed
interesting to us because of the rapid growth rate in pharmaceutical
expenditures, the even faster growth rate of the mail order pharmacy segment,
and the attendant focus on drug cost containment. Caremark itself attracted us
for many reasons, including its strong management team and its large specialty
pharmaceutical business (distribution of expensive biotechnology drugs). 2002
stock market weakness and accounting paranoia (Caremark was an Arthur Anderson
client) gave us the opportunity to invest at a great price.
HOW IT DID: To the date of this letter, Caremark has proven to be an ideal
experience for the fund. The stock remained in a tight trading range for our
first six months of ownership before rallying vigorously in mid-2003. The
company then announced an agreement to acquire another major factor in its
industry, Advance PCS. The market received this news negatively, offering us
another opportunity to increase our holding at favorable prices. At the time of
this writing Caremark has assumed the position of largest stock holding in the
fund.
THE LATEST: Caremark closed on its purchase of Advance PCS on March 24. After
some initial discomfort with this deal, investors warmed to the idea that the
additional scale would produce significant cost advantages. The stock gained 31%
in the March quarter and was the largest single contributor to the fund's
quarterly return.
MISS
First Health, a nationwide outsourcer of healthcare solutions based in Downers
Grove, Illinois.
AVERAGE PRICE WE PAID: $24.15. We sold the stock for an average price of $20.22.
WHY WE BOUGHT IT: We began purchasing shares in January 2002 believing that the
company was unique in offering corporate clients a nationwide healthcare
solution. We thought that investors misunderstood the company, classifying it as
a managed care provider (I.E., an HMO that underwrites health care insurance for
its clients) rather than a company that simply provides health care solutions
without the insurance liability. We also admired management's use of capital.
HOW IT DID: The share price of First Health meandered within a tight range until
November 2003 when the company announced a significant earnings shortfall. The
stock dropped 24% on the news. Subsequently, our research analysts' work on this
industry suggested that the competitive environment for First Health had
deteriorated and that the company's proprietary advantages had dissipated. Since
this change in perception materially affected our reasons for owning the stock,
we sold it.
THE LATEST: First Health shares appear to have stabilized in the low $20s as
investors await more data that would provide clarity concerning the competitive
landscape.
So what do we take from this? Both of our subject companies are in the business
of helping corporate America deal with rising health costs, both have
shareholder-oriented, entrepreneurial management teams, and both have particular
service offerings with a claim to a proprietary position. What changed was that
the competitive position of Caremark actually strengthened while First Health's
weakened. In today's hyper-competitive world economy, it may be that business
values themselves are less stable than in the past.
In closing, we would once again like to thank our investors for entrusting us
with their assets.
/s/ Clyde S. McGregor /s/ Edward A. Studzinski
CLYDE S. MCGREGOR, CFA EDWARD A. STUDZINSKI, CFA
Portfolio Manager Portfolio Manager
mcgregor@oakmark.com estudzinski@oakmark.com
21
<Page>
THE OAKMARK EQUITY AND INCOME FUND
SCHEDULE OF INVESTMENTS MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
NAME SHARES HELD MARKET VALUE
- -------------------------------------------------------------------------------------------------------
EQUITY AND EQUIVALENTS--59.0%
COMMON STOCKS--59.0%
FOOD & BEVERAGE--4.5%
Diageo plc (b) 2,300,000 $ 121,624,000
Nestle SA (a)(b) 1,600,000 102,036,800
Kraft Foods Inc. 1,700,000 54,417,000
Dean Foods Company (a) 800,000 26,720,000
-----------------
304,797,800
CABLE SYSTEMS & SATELLITE TV--1.2%
The DIRECTV Group, Inc. (a) 5,026,722 $ 77,310,984
HARDWARE--0.6%
The Stanley Works 962,100 $ 41,062,428
INFORMATION SERVICES--2.3%
Ceridian Corporation (a) 4,800,000 $ 94,608,000
ChoicePoint Inc. (a) 1,500,000 57,045,000
-----------------
151,653,000
MARKETING SERVICES--1.2%
The Interpublic Group of Companies, Inc. (a) 5,250,000 $ 80,745,000
PRINTING--1.7%
R.R. Donnelley & Sons Company 3,779,500 $ 114,329,875
RESTAURANTS--0.9%
Darden Restaurants, Inc. 2,413,400 $ 59,828,186
RETAIL--5.7%
The TJX Companies, Inc. 6,500,000 $ 159,640,000
Costco Wholesale Corporation (a) 3,200,000 120,192,000
J.C. Penney Company, Inc. 1,700,000 59,126,000
Office Depot, Inc. (a) 2,230,000 41,968,600
-----------------
380,926,600
INSURANCE--2.9%
SAFECO Corporation 3,850,000 $ 166,204,500
RenaissanceRe Holdings Ltd. (c) 600,000 31,200,000
-----------------
197,404,500
REAL ESTATE--0.2%
Hospitality Properties Trust 313,500 $ 14,546,400
HEALTH CARE SERVICES--6.2%
Caremark Rx, Inc. (a) 6,800,000 $ 226,100,000
Cardinal Health, Inc. 2,709,700 186,698,330
-----------------
412,798,330
</Table>
22
<Page>
<Table>
<Caption>
NAME SHARES HELD MARKET VALUE
- -------------------------------------------------------------------------------------------------------
EQUITY AND EQUIVALENTS--59.0% (CONT.)
MEDICAL CENTERS--2.0%
Laboratory Corporation of America Holdings (a) 3,500,000 $ 137,375,000
MEDICAL PRODUCTS--1.3%
Apogent Technologies, Inc. (a) 1,700,000 $ 52,156,000
Techne Corporation (a) 750,000 30,607,500
Edwards Lifesciences Corporation (a) 100,000 3,195,000
-----------------
85,958,500
PHARMACEUTICALS--4.2%
Abbott Laboratories 4,000,000 $ 164,400,000
Watson Pharmaceuticals, Inc. (a) 2,708,700 115,905,273
-----------------
280,305,273
COMPUTER SERVICES--3.2%
First Data Corporation 5,017,500 $ 211,537,800
COMPUTER SOFTWARE--2.3%
Synopsys, Inc. (a) 4,250,000 $ 123,080,000
Mentor Graphics Corporation (a) 1,750,000 31,185,000
-----------------
154,265,000
COMPUTER SYSTEMS--0.7%
The Reynolds and Reynolds Company, Class A 1,715,100 $ 48,725,991
DATA STORAGE--0.6%
Imation Corp. 1,000,000 $ 37,620,000
AEROSPACE & DEFENSE--5.4%
General Dynamics Corporation 1,972,400 $ 176,194,492
Rockwell Collins, Inc. 3,107,900 98,240,719
Honeywell International, Inc. 1,889,500 63,959,575
Raytheon Company 778,800 24,407,592
-----------------
362,802,378
AGRICULTURAL EQUIPMENT--0.0%
Alamo Group, Inc. 114,500 $ 1,991,155
DIVERSIFIED CONGLOMERATES--0.2%
Textron, Inc. 296,800 $ 15,774,920
INSTRUMENTS--1.0%
Varian, Inc. (a) 1,649,400 $ 66,256,398
MACHINERY & INDUSTRIAL PROCESSING--0.9%
Rockwell Automation, Inc. 1,700,000 $ 58,939,000
AGRICULTURAL OPERATIONS--1.9%
Monsanto Company 3,500,000 $ 128,345,000
</Table>
23
<Page>
<Table>
<Caption>
SHARES HELD/
NAME PAR VALUE MARKET VALUE
- -------------------------------------------------------------------------------------------------------
EQUITY AND EQUIVALENTS--59.0% (CONT.)
FORESTRY PRODUCTS--1.3%
Plum Creek Timber Company, Inc. 2,657,044 $ 86,300,789
OIL & NATURAL GAS--6.6%
Burlington Resources, Inc. (d) 3,575,000 $ 227,477,250
XTO Energy, Inc. 5,624,916 141,972,880
St. Mary Land & Exploration Company 1,200,000 40,116,000
Cabot Oil & Gas Corporation 1,125,000 34,380,000
-----------------
443,946,130
TOTAL COMMON STOCKS (COST: $3,017,913,310) 3,955,546,437
TOTAL EQUITY AND EQUIVALENTS (COST: $3,017,913,310) 3,955,546,437
FIXED INCOME--31.2%
PREFERRED STOCKS--0.0%
BANK & THRIFTS--0.0%
Fidelity Capital Trust I, Preferred, 8.375% 43,500 $ 447,615
TOTAL PREFERRED STOCKS (COST: $435,000) 447,615
CORPORATE BONDS--2.2%
BROADCASTING & PROGRAMMING--0.2%
Liberty Media Corporation, 8.25% due 2/1/2030, Debenture $ 12,900,000 $ 15,880,674
BUILDING MATERIALS & CONSTRUCTION--0.0%
Juno Lighting, Inc., 11.875% due 7/1/2009,
Senior Subordinated Note $ 750,000 $ 804,375
CABLE SYSTEMS & SATELLITE TV--1.0%
Time Warner Inc., 5.625% due 5/1/2005 $ 50,000,000 $ 52,053,900
Cablevision Systems New York Group, 144A, 8.00%
due 4/15/2012 (e)(f) 10,000,000 10,000,000
CSC Holdings Inc., 7.875% due 12/15/2007 3,000,000 3,225,000
-----------------
65,278,900
HOTELS & MOTELS--0.0%
Park Place Entertainment, 7.00% due 7/15/2004, Senior Notes $ 2,750,000 $ 2,777,500
RETAIL--0.3%
The Gap, Inc., 6.90% due 9/15/2007 $ 9,187,000 $ 10,197,570
Toys 'R' Us, Inc., 7.875% due 4/15/2013 5,000,000 5,250,000
Rite Aid Corporation, 7.625% due 4/15/2005, Senior Notes 4,900,000 4,973,500
-----------------
20,421,070
</Table>
24
<Page>
<Table>
<Caption>
NAME PAR VALUE MARKET VALUE
- -------------------------------------------------------------------------------------------------------
FIXED INCOME--31.2% (CONT.)
HEALTH CARE SERVICES--0.4%
Omnicare, Inc., 6.125% due 6/1/2013 $ 20,000,000 $ 20,850,000
NeighborCare Inc., 144A, 6.875% due 11/15/2013 (e) 4,000,000 4,170,000
-----------------
25,020,000
MEDICAL PRODUCTS--0.0%
Apogent Technologies Inc., 6.50% due 5/15/2013 $ 1,000,000 $ 1,065,000
OFFICE EQUIPMENT--0.2%
Xerox Corporation, 7.125% due 6/15/2010 $ 15,000,000 $ 15,900,000
MACHINERY & INDUSTRIAL PROCESSING--0.0%
Columbus McKinnon Corporation New York, 8.50%
due 4/1/2008 $ 3,000,000 $ 2,820,000
OTHER INDUSTRIAL GOODS & SERVICES--0.1%
Sealed Air Corporation, 144A, 5.625% due 7/15/2013 (e) $ 8,300,000 $ 8,699,479
ELECTRIC UTILITIES--0.0%
Midland Funding Corporation, 11.75% due 7/23/2005 $ 458,220 $ 484,568
TOTAL CORPORATE BONDS (COST: $150,261,804) 159,151,566
GOVERNMENT AND AGENCY SECURITIES--29.0%
CANADIAN GOVERNMENT BONDS--2.3%
Canada Government, 3.00% due 12/1/2005 $ 100,000,000 $ 77,031,904
Canada Government, 3.50% due 6/1/2004 100,000,000 76,316,150
-----------------
153,348,054
DANISH GOVERNMENT BONDS--0.3%
Kingdom of Denmark, 4.00% due 11/15/2004 $ 100,000,000 $ 16,722,066
NEW ZEALAND GOVERNMENT BONDS--0.1%
New Zealand Government, 6.50% due 2/15/2005 $ 10,000,000 $ 6,738,050
UNITED KINGDOM GOVERNMENT BONDS--0.6%
United Kingdom of Great Britain and Northern Ireland,
5.00% due 6/7/2004 $ 20,000,000 $ 36,930,631
</Table>
25
<Page>
<Table>
<Caption>
NAME PAR VALUE MARKET VALUE
- -------------------------------------------------------------------------------------------------------
FIXED INCOME--31.2% (CONT.)
U.S. GOVERNMENT NOTES--25.0%
United States Treasury Notes, 3.375% due 1/15/2007,
Inflation Indexed $ 248,943,750 $ 274,353,439
United States Treasury Notes, 1.50% due 7/31/2005 250,000,000 250,820,250
United States Treasury Notes, 1.25% due 5/31/2005 250,000,000 250,156,250
United States Treasury Notes, 5.75% due 11/15/2005 200,000,000 213,929,600
United States Treasury Notes, 1.625% due 1/31/2005 200,000,000 200,867,200
United States Treasury Notes, 1.50% due 2/28/2005 150,000,000 150,515,700
United States Treasury Notes, Inflation Indexed, 4.25%
due 1/15/2010 110,060,000 131,943,010
United States Treasury Notes, 1.625% due 4/30/2005 125,000,000 125,600,625
United States Treasury Notes, 1.875% due 9/30/2004 50,000,000 50,212,900
United States Treasury Notes, 1.625% due 2/28/2006 25,000,000 25,039,050
-----------------
1,673,438,024
U.S. GOVERNMENT AGENCIES--0.7%
Federal Home Loan Mortgage Corporation, 3.00%
due 11/17/2006 $ 10,000,000 $ 10,104,420
Federal Home Loan Mortgage Corporation, 2.35%
due 5/5/2008 7,100,000 7,109,202
Fannie Mae, 2.25% due 12/30/2008 6,975,000 6,983,293
Federal Home Loan Bank, 3.00% due 12/30/2009 5,000,000 5,114,800
Federal Home Loan Mortgage Corporation, 3.00%
due 1/7/2011 4,900,000 4,940,033
Fannie Mae, 5.125% due 5/4/2012 4,013,000 4,090,025
Federal Home Loan Bank, 3.125% due 7/10/2009 4,000,000 3,955,040
Federal Home Loan Bank, 3.875% due 12/15/2004 1,000,000 1,019,507
-----------------
43,316,320
TOTAL GOVERNMENT AND AGENCY SECURITIES (COST: $1,880,929,833) 1,930,493,145
TOTAL FIXED INCOME (COST: $2,031,626,637) 2,090,092,326
SHORT TERM INVESTMENTS--10.6%
U.S. GOVERNMENT BILLS--7.0%
United States Treasury Bills, 0.885%-0.955% $ 470,000,000 $ 469,453,440
due 4/1/2004 - 7/1/2004
TOTAL U.S. GOVERNMENT BILLS (COST: $469,458,763) 469,453,440
</Table>
26
<Page>
<Table>
<Caption>
NAME PAR VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS--10.6% (CONT.)
REPURCHASE AGREEMENTS--3.6%
IBT Repurchase Agreement, 0.91% dated 3/31/2004
due 4/1/2004, repurchase price $234,005,915
collateralized by U.S. Government Agency Securities
with an aggregate market value plus accrued interest
of $245,700,000 $ 234,000,000 $ 234,000,000
IBT Repurchase Agreement, 0.76% dated 3/31/2004
due 4/1/2004, repurchase price $4,719,443
collateralized by a U.S. Government Agency Security
with a market value plus accrued interest of $4,955,310 4,719,343 4,719,343
---------------
TOTAL REPURCHASE AGREEMENTS (COST: $238,719,343) 238,719,343
TOTAL SHORT TERM INVESTMENTS (COST: $708,178,106) 708,172,783
Total Investments (Cost $5,757,718,053)--100.8% $ 6,753,811,546
Other Liabilities In Excess Of Other Assets--(0.8%) (52,696,175)
---------------
TOTAL NET ASSETS--100% $ 6,701,115,371
===============
</Table>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) Represents a foreign domiciled corporation.
(d) See footnote number five in the Notes to Financial Statements regarding
transactions in securities of affiliated issuers.
(e) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(f) Security valued at a fair value determined by pricing committees established
by the Board of Trustees.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
<Page>
THE OAKMARK GLOBAL FUND
REPORT FROM CLYDE S. McGREGOR AND MICHAEL J. WELSH, PORTFOLIO MANAGERS
[PHOTO]
[PHOTO]
[CHART]
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK GLOBAL FUND FROM ITS INCEPTION
(8/4/99) TO PRESENT (3/31/04) AS COMPARED TO THE MSCI WORLD INDEX(16)
<Table>
<Caption>
THE OAKMARK GLOBAL FUND (CLASS I) MSCI WORLD INDEX
8/4/99 $ 10,000 $ 10,000
9/30/99 $ 9,180 $ 9,883
12/31/99 $ 9,981 $ 11,550
3/31/2000 $ 10,061 $ 11,668
6/30/2000 $ 10,381 $ 11,255
9/30/2000 $ 10,922 $ 10,689
12/31/2000 $ 11,562 $ 10,028
3/31/2001 $ 11,480 $ 8,739
6/30/2001 $ 13,289 $ 8,959
9/30/2001 $ 11,071 $ 7,676
12/31/2001 $ 13,880 $ 8,335
3/31/2002 $ 15,387 $ 8,364
6/30/2002 $ 14,372 $ 7,601
9/30/2002 $ 11,828 $ 6,204
12/31/2002 $ 13,587 $ 6,678
3/31/2003 $ 12,153 $ 6,340
6/30/2003 $ 16,225 $ 7,420
9/30/2003 $ 17,774 $ 7,779
12/31/2003 $ 20,242 $ 8,889
3/31/2004 $ 21,029 $ 9,121
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
TOTAL RETURN INCEPTION
LAST 3 MONTHS* 1-YEAR 3-YEAR (8/4/99)
- -----------------------------------------------------------------------------------------------------
OAKMARK GLOBAL FUND (CLASS I) 3.89% 73.04% 22.33% 17.29%(3)
MSCI World 2.62% 43.87% 1.46% -1.95%
Lipper Global Fund Index(17) 3.83% 46.75% 2.31% 1.01%
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The fund's high performance may not be repeated.
The investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Current performance may be lower or higher than the performance data quoted.
Average annual total return measures annualized change, while total return
measures aggregate change. To obtain current month end performance data, call
1-800-OAKMARK or visit www.oakmark.com.
* Not annualized
FELLOW SHAREHOLDERS,
The Oakmark Global Fund gained 4% for the three-month period ending March 31,
2004, compared with the 3% increase for the MSCI World Index and the 4% increase
for the Lipper Global Fund Index.
Over the past twelve months, The Oakmark Global Fund has returned 73%, compared
to the smaller gains of 44% and 47% for the MSCI World Index and the Lipper
Global Fund Index, respectively. Most importantly, since inception the Fund has
returned 17% annualized compared to a 2% decline in the MSCI World Index and 1%
return in the Lipper Global Fund Index.
PORTFOLIO COMPOSITION
We made few changes during the quarter. We sold two companies, L.M. Ericsson
(Sweden) and First Health Group (US). Ericsson, the mobile network equipment
powerhouse, significantly contributed to performance over the past twelve months
as the share price more than tripled before hitting our sell price during the
quarter. We became less comfortable in our assessment of First Health's business
franchise after a very poor earnings announcement, and we sold our entire
position.
We also exchanged our shares in Concord EFS for shares in First Data Corp, who
completed their acquisition this quarter. First Data, along with Diageo, are now
your Fund's largest holdings at just under 5% each of fund assets.
We added one new position during the quarter, Switzerland-based Lonza Group.
Lonza is one of the world's leading suppliers of active ingredients, chemical
intermediates, and biotechnology solutions to the pharmaceutical and
agrochemical industries. Their main businesses are: Exclusive Synthesis,
Biotechnology, Organic Fine Chemicals, and Performance Chemicals.
Currently, Exclusive Synthesis is Lonza's biggest profit generator. The business
is based on the outsourcing trend in the life science industry, which entrusts
specialized companies with the manufacturing of advanced intermediates and
active ingredients. Lonza has state-of-the-art, multipurpose plants that can be
adapted to each customer's individual needs. This advanced customization
capability makes them the world's leader in exclusive custom manufacturing for
global life sciences companies.
28
<Page>
HIGHLIGHTS
- The portfolio is more heavily weighted to international stocks, as we're
finding more attractive valuations overseas.
- High-quality businesses in Europe represent a better risk-reward trade-off
than in emerging markets.
- Despite strong performance, we remain excited about the value and quality
of the Fund's portfolio.
We purchased the stock during the quarter after the release of disappointing
2003 results caused the share price to weaken. We believe the market is
underestimating the growth potential in both Lonza's Exclusive Synthesis and
Biotechnology segments. On a normalized basis we think Lonza is valued at just
over 10x earnings. Management is also sound with strong shareholder orientation.
We've respected Chairman Sergio Marchionne's ability for a number of years and
applauded his quick decision to replace the operationally-deficient former CEO.
GLOBAL OUTLOOK
Currently, your portfolio is composed of roughly 35% US-listed companies, 47% in
the UK and Europe, 3% in Latin America, and 15% in the Asia Pacific region. As
you've probably surmised from our dwindling US market weighting, we continue to
have difficulty finding new US stocks that are more attractive than current
holdings or new overseas opportunities. However, we continued to increase our
holdings in several US companies during the quarter, namely Burlington Resources
and Waste Management.
Internationally, we continue to find companies that meet our value criteria in a
number of areas, including blue-chip European consumer non-durables (Nestle,
Henkel, and Diageo), pharmaceuticals (Takeda Chemical, Aventis, and
GlaxoSmithKline), and financial services (Australia and New Zealand Bank, Bank
of Ireland, Banca Popolare di Verona, and Julius Baer Holding).
Over the past twelve months, we have seen strong price appreciation around the
globe in equities, fixed income, and natural resources. Many asset classes
formerly (and usually) thought risky, such as junk bonds, emerging markets, and
technology/story stocks, have been the strongest performers. The risk premium we
demand for investing in emerging markets, for example, has all but evaporated in
most cases. In sum, we think high-quality businesses, especially in the UK and
Europe, represent a much more interesting risk-reward relationship.
As an example, let's use Diageo plc, the world's largest spirits company. Diageo
generates tremendous amounts of free cash flow from their high return on capital
business, much of which is returned to shareholders in the form of rising
dividends and share repurchases. In addition the company is well-positioned to
take advantage of the growth of those same emerging markets of which investors
are so currently enamored.
At 14x this year's earnings and a 4% dividend yield, we find Diageo's valuation
too cheap in a relatively dear world. And unlike investing in many emerging
markets, there are also no corporate governance concerns--management is solely
focused on increasing shareholders' wealth.
LOOKING FORWARD
Despite the Fund's strong performance we remain excited about the value and
quality of the names, such as First Data, Diageo and Lonza, in the portfolio. We
thank you for your support.
/s/ Clyde S. McGregor /s/ Michael J. Welsh
CLYDE S. McGREGOR, CFA MICHAEL J. WELSH, CFA, CPA
Portfolio Manager Portfolio Manager
mcgregor@oakmark.com mwelsh@oakmark.com
29
<Page>
GLOBAL DIVERSIFICATION--MARCH 31, 2004 (UNAUDITED)
[CHART]
<Table>
<Caption>
% OF FUND
EQUITY MARKET VALUE
- ---------------------------------
- - EUROPE 47.0%
Great Britain 12.5%
Switzerland 9.2%
* France 8.9%
* Netherlands 7.0%
* Italy 3.8%
* Germany 2.8%
* Ireland 2.8%
- - UNITED STATES 35.0%
- - PACIFIC RIM 14.7%
Japan 7.2%
Australia 4.7%
Korea 2.8%
- - LATIN AMERICA 2.9%
Mexico 2.9%
- - OTHER 0.4%
Israel 0.4%
</Table>
* Euro currency countries comprise 25.3% of the Fund.
30
<Page>
THE OAKMARK GLOBAL FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--92.8%
FOOD & BEVERAGE--11.9%
Diageo plc (Great Britain) Beverages, Wines, & Spirits
Manufacturer 4,842,100 $ 63,437,634
Nestle SA (Switzerland) Food & Beverage Manufacturer 217,800 55,559,469
Cadbury Schweppes plc
(Great Britain) Beverage & Confectionary
Manufacturer 4,383,000 34,692,126
Lotte Chilsung Beverage
Co., Ltd. (Korea) (b) Soft Drinks, Juices & Sports
Drinks Manufacturer 13,430 7,625,608
---------------
161,314,837
HOUSEHOLD PRODUCTS--2.6%
Henkel KGaA (Germany) Consumer Chemical
Products Manufacturer 456,800 $ 34,851,145
BROADCASTING & PROGRAMMING--2.5%
Grupo Televisa S.A
(Mexico) (c) Television Production &
Broadcasting 566,500 $ 26,818,110
Liberty Media
Corporation, Class A
(United States) (a) Broadcast Services & Programming 650,000 7,117,500
---------------
33,935,610
CABLE SYSTEMS & SATELLITE TV--0.8%
Time Warner Inc.
(United States) (a) Motion Picture Production,
Distribution, & Other Services 675,000 $ 11,380,500
HUMAN RESOURCES--1.2%
Michael Page
International plc
(Great Britain)(b) Recruitment Consultancy Services 4,815,400 $ 16,382,413
INFORMATION SERVICES--6.1%
eFunds Corporation
(United States) (a)(b) Electronic Debit Payment Services 1,745,000 $ 28,618,000
Equifax Inc.
(United States) Credit Reporting & Collection 1,038,300 26,808,906
Ceridian Corporation
(United States) (a) Data Management Services 1,348,000 26,569,080
---------------
81,995,986
</Table>
31
<Page>
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--92.8% (CONT.)
MARKETING SERVICES--1.7%
The Interpublic
Group of Companies,
Inc. (United States) (a) Advertising & Marketing Service 1,545,000 $ 23,762,100
MOTORCYCLES--0.3%
Ducati Motor Holding
S.p.A. (Italy) (a)(b) Motorcycle Manufacturer 2,650,000 $ 4,278,376
RETAIL--4.9%
The TJX Companies, Inc.
(United States) Discount Apparel & Home
Fashion Retailer 1,501,000 $ 36,864,560
Bulgari S.p.A. (Italy) Jewelry Manufacturer & Retailer 3,236,100 29,432,314
---------------
66,296,874
BANK & THRIFTS--7.3%
Bank of Ireland (Ireland) Commercial Bank 2,812,000 $ 35,122,112
Australia and New
Zealand Banking
Group Limited
(Australia) Commercial Bank 2,260,000 32,790,656
Washington Mutual, Inc.
(United States) Thrift 415,000 17,724,650
Banco Popolare di Verona
e Novara Scrl (Italy) Commercial Bank 863,600 14,070,188
---------------
99,707,606
FINANCIAL SERVICES--2.0%
Julius Baer Holding Ltd.,
Zurich (Switzerland) Asset Management 69,100 $ 19,973,622
Credit Suisse Group
(Switzerland) Investment Services & Insurance 190,700 6,611,697
---------------
26,585,319
OTHER FINANCIAL--6.6%
Euronext (Netherlands) (b) Stock Exchange 1,814,000 $ 54,131,279
Fannie Mae (United States) Mortgage Finance 250,000 18,587,500
Daiwa Securities
Group Inc. (Japan) Stock Broker 2,062,000 16,806,828
---------------
89,525,607
HEALTH CARE SERVICES--2.1%
Cardinal Health, Inc.
(United States) Wholesale Drug Distributor 410,000 $ 28,249,000
</Table>
32
<Page>
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--92.8% (CONT.)
MEDICAL CENTERS--2.6%
Laboratory Corporation of
America Holdings
(United States) (a) Medical Laboratory &
Testing Services 892,000 $ 35,011,000
MEDICAL PRODUCTS--1.9%
Ansell Limited (Australia) Protective Rubber &
Plastics Products 4,708,100 $ 25,832,603
PHARMACEUTICALS--10.5%
Takeda Chemical
Industries, Ltd. (Japan) Pharmaceuticals & Food
Supplements 1,159,700 $ 51,599,060
Aventis S.A. (France) Pharmaceuticals 614,800 47,321,711
GlaxoSmithKline plc
(Great Britain) Pharmaceuticals 2,187,200 43,033,043
---------------
141,953,814
TELECOMMUNICATIONS--2.0%
SK Telecom Co., Ltd.
(Korea) Mobile Telecommunications 147,000 $ 27,586,614
COMPUTER SERVICES--6.3%
First Data Corporation
(United States) Data Processing & Management 1,495,750 $ 63,060,820
Meitec Corporation
(Japan) (b) Software Engineering Services 603,500 22,743,012
---------------
85,803,832
COMPUTER SOFTWARE--3.1%
Synopsys, Inc.
(United States) (a) Electronic Design Automation 1,118,000 $ 32,377,280
Novell, Inc.
(United States) (a) Network & Internet
Integration Software 831,000 9,456,780
---------------
41,834,060
OFFICE EQUIPMENT--2.0%
Neopost SA (France) Mailroom Equipment Supplier 494,750 $ 26,678,256
AIRPORT MAINTENANCE--0.7%
Grupo Aeroportuario
del Sureste S.A. de
C.V. (Mexico) (b)(c) Airport Operator 463,000 $ 9,653,550
</Table>
33
<Page>
<Table>
<Caption>
SHARES HELD/
NAME PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--92.8% (CONT.)
DIVERSIFIED CONGLOMERATES--2.8%
Vivendi Universal SA
(France) (a) Multimedia 1,430,500 $ 37,969,709
INSTRUMENTS--0.4%
Orbotech, Ltd. (Israel) (a) Optical Inspection Systems 228,700 $ 5,500,235
WASTE DISPOSAL--2.6%
Waste Management, Inc.
(United States) Waste Management Services 1,175,000 $ 35,461,500
CHEMICALS--5.0%
Akzo Nobel N.V
(Netherlands) Chemical Producer 915,500 $ 33,650,602
Lonza Group AG,
Registered Shares
(Switzerland) (b) Industrial Organic Chemicals 655,400 33,463,600
---------------
67,114,202
OIL & NATURAL GAS--2.9%
Burlington Resources, Inc.
(United States) (b) Oil & Natural Gas Exploration
& Production 630,000 $ 40,086,900
TOTAL COMMON STOCKS (COST: $1,021,856,662) 1,258,751,648
SHORT TERM INVESTMENTS--7.4%
U.S. GOVERNMENT BILLS--5.2%
United States Treasury Bills, 0.94% - 0.955%
due 4/1/2004 - 4/29/2004 $ 70,000,000 $ 69,981,644
TOTAL U.S. GOVERNMENT BILLS (COST: $69,981,644) 69,981,644
REPURCHASE AGREEMENTS--2.2%
IBT Repurchase Agreement, 0.91% dated3/31/2004
due 4/1/2004, repurchase price $27,500,695
collateralized by U.S. Government Agency Securities
with an aggregate market value plus accrued interest
of $28,875,000 $ 27,500,000 $ 27,500,000
</Table>
34
<Page>
<Table>
<Caption>
NAME PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS--7.4% (CONT.)
REPURCHASE AGREEMENTS--2.2% (CONT.)
IBT Repurchase Agreement, 0.76% dated 3/31/2004
due 4/1/2004, repurchase price $2,607,411
collateralized by a U.S. Government Agency Security
with a market value plus accrued interest
of $2,737,724 $ 2,607,356 $ 2,607,356
---------------
TOTAL REPURCHASE AGREEMENTS (COST: $30,107,356) 30,107,356
TOTAL SHORT TERM INVESTMENTS (COST: $100,089,000) 100,089,000
Total Investments (Cost $1,121,945,662)--100.2% $ 1,358,840,648
Other Liabilities In Excess Of Other Assets--(0.2%) (2,462,877)
---------------
TOTAL NET ASSETS--100% $ 1,356,377,771
===============
</Table>
(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements regarding
transactions in securities of affiliated issuers.
(c) Represents an American Depository Receipt.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35
<Page>
THE OAKMARK INTERNATIONAL AND
OAKMARK INTERNATIONAL SMALL CAP FUNDS
FELLOW SHAREHOLDERS,
Your Funds ended the quarter with a return of 4% and 7%, respectively, for The
Oakmark International and International Small Cap Funds. This compares to a
return of 4% for the MSCI World ex U.S. Index.(18) The returns were mixed versus
the relevant index primarily due to an underweighted position in the strong
Japanese market.
More importantly, over the past year, your Funds performed 62% and 85%,
respectively, while the MSCI World ex U.S. Index returned 57%.
FAVORABLE CONDITIONS V. SCREAMING BUYS
As equity markets have recovered very strongly over the past year, we no longer
believe the markets are significantly over-sold. However, we do believe a much
more favorable investment climate exists. Notwithstanding the upcoming election
in the U.S. as well as continued fears surrounding terrorism, the world, in our
view, is in pretty good shape.
Growth is very strong in places like North America, Australasia, East Asia, and
India. The UK and "New Europe" are also performing well. Hopefully, "Old Europe"
and Japan (which is showing some signs of life) will also catch the growth wave.
However, we do not believe that either of these two areas are capable of
sustainable economic growth unless bona fide structural reform occurs.
Given the level of per capita income and overall economic improvement in the
developing markets and large population centers like China and India, we believe
we have reached the inflection point where these markets have a significant
impact on the world economy. This provides a nice tail wind for many of the
companies in which your fund is invested.
COMPANY VALUATIONS: THE EARTH IN BALANCE
With a much tamer macroeconomic environment, we are witnessing far less extremes
in global company valuations. In the late 90s we witnessed huge valuation
differentials between tech related and non-tech related stocks. Also, small cap
companies traded at a significant discount to large caps, and emerging markets
were coming off a harsh bear market. Today, though tech stocks are pricey, they
are not as outrageously priced as they were in '99 and '00. The differential in
valuations between foreign large and small cap stocks has evaporated, and
emerging market stocks are back in vogue. In fact, we would argue that in
certain places, such as China, India, and Hong Kong, stocks are now expensive,
which is not all that surprising given the focus these regions have attracted.
HIGHLIGHTS
- World equity markets are no longer over-sold, but the investment climate is
much more favorable.
- Economic improvement in developing markets and population centers are
starting to have a large impact on the global economy.
- We're finding value in developed-market blue chips that are high-quality
businesses.
We have been able to find value in the most obvious types of companies:
developed market blue chips. After years of underperforming, stocks in the
consumer non-durable, pharmaceuticals, and financial service sectors have
lagged, whereas their prospects and valuations have improved. We are very happy
to invest in these quality businesses that fulfill our value definition of being
both high quality as well as inexpensively priced.
/s/ David G. Herro /s/ Michael J. Welsh
DAVID G. HERRO, CFA MICHAEL J. WELSH, CFA, CPA
Portfolio Manager Portfolio Manager
dherro@oakmark.com mwelsh@oakmark.com
36
<Page>
THE OAKMARK INTERNATIONAL FUND
REPORT FROM DAVID G. HERRO AND MICHAEL J. WELSH, PORTFOLIO MANAGERS
[PHOTO]
[PHOTO]
[CHART]
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL FUND FROM ITS
INCEPTION (9/30/92) TO PRESENT (3/31/04) AS COMPARED TO THE MSCI WORLD EX U.S.
INDEX(18)
<Table>
<Caption>
THE OAKMARK INTERNATIONAL FUND (CLASS I) MSCI WORLD EX U.S. INDEX
9/30/92 $ 10,000 $ 10,000
12/31/92 $ 10,043 $ 9,628
3/31/93 $ 11,890 $ 10,766
6/30/93 $ 12,300 $ 11,834
9/30/93 $ 13,387 $ 12,562
12/31/93 $ 15,424 $ 12,729
3/31/94 $ 15,257 $ 13,133
6/30/94 $ 14,350 $ 13,748
9/30/94 $ 15,278 $ 13,830
12/31/94 $ 14,026 $ 13,664
3/31/95 $ 13,563 $ 13,924
6/30/95 $ 14,749 $ 14,060
9/30/95 $ 15,507 $ 14,631
12/31/95 $ 15,193 $ 15,222
3/31/96 $ 17,021 $ 15,681
6/30/96 $ 18,383 $ 15,937
9/30/96 $ 18,347 $ 15,950
12/31/96 $ 19,450 $ 16,268
3/31/97 $ 20,963 $ 16,016
6/30/97 $ 22,700 $ 18,094
9/30/97 $ 23,283 $ 18,027
12/31/97 $ 20,097 $ 16,637
3/31/98 $ 22,994 $ 19,083
6/30/98 $ 20,253 $ 19,233
9/30/98 $ 16,322 $ 16,404
12/31/98 $ 18,688 $ 19,759
3/31/99 $ 21,258 $ 20,070
6/30/99 $ 25,728 $ 20,650
9/30/99 $ 23,896 $ 21,535
12/31/99 $ 26,065 $ 25,277
3/31/2000 $ 26,012 $ 25,416
6/30/2000 $ 27,856 $ 24,530
9/30/2000 $ 27,306 $ 22,663
12/31/2000 $ 29,324 $ 21,897
3/31/2001 $ 26,763 $ 18,825
6/30/2001 $ 29,437 $ 18,629
9/30/2001 $ 23,728 $ 16,062
12/31/2001 $ 27,819 $ 17,212
3/31/2002 $ 31,006 $ 17,310
6/30/2002 $ 30,315 $ 16,923
9/30/2002 $ 23,365 $ 13,603
12/31/2002 $ 25,465 $ 14,492
3/31/2003 $ 22,481 $ 13,402
6/30/2003 $ 28,198 $ 15,978
9/30/2003 $ 30,368 $ 17,269
12/31/2003 $ 35,152 $ 20,206
3/31/2004 $ 36,419 $ 21,063
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
TOTAL RETURN INCEPTION
LAST 3 MONTHS* 1-YEAR 5-YEAR 10-YEAR (9/30/92)
- --------------------------------------------------------------------------------------------------------------
OAKMARK INTERNATIONAL
FUND (CLASS I) 3.61% 62.00% 11.36% 9.08% 11.89%
MSCI World ex. U.S. 4.24% 57.16% 0.98% 4.83% 6.69%
MSCI EAFE(19) 4.34% 57.54% 0.53% 4.55% 6.48%
Lipper International
Fund Index(20) 4.99% 56.57% 2.87% 5.94% 7.99%
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The fund's high performance may not be repeated.
The investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Current performance may be lower or higher than the performance data quoted.
Average annual total return measures annualized change, while total return
measures aggregate change. To obtain current month end performance data, call
1-800-OAKMARK or visit www.oakmark.com.
* Not annualized
The Oakmark International Fund gained 4% for the quarter, slightly less
than the benchmark indices. The returns were lower than the relevant indices
primarily due to an underweighted position in the strong Japanese market.
For the past twelve months, your Fund is up 62%. Individual securities that
contributed to performance most significantly during the quarter were French
pharmaceutical Aventis; European securities exchange Euronext; and two Mexican
companies, multimedia and broadcasting powerhouse Grupo Televisa and beverage
company Fomento Economico Mexicano ("FEMSA").
The share price of Aventis was driven up during the quarter by an acquisition
bid by Sanofi-Synthelabo, as well as from overtures from Novartis. Management
has responded to the situation in a very shareholder-oriented fashion, and is
working hard to maximize the value of the company.
Euronext is the pan-European exchange comprising Amsterdam, Paris, Brussels, and
Lisbon, as well as the derivatives exchange LIFFE. In 2003, Euronext's operating
profit improved significantly, and the share price has also benefited recently
from the market's delayed recognition of their strong position in clearing and
an increasingly liquid balance sheet.
Positive changes to Televisa's shareholder structure, as well as its continued
positive underlying results, have bolstered the share price. Finally, FEMSA
continues to show strong results from their brewing business (with brands like
Dos Equis and Tecate) as well as from their pan-American soft-drink bottling
operations.
The most significant detractor from quarterly performance was UK pharmaceutical
GlaxoSmithKline. Several of our pharmaceutical holdings underperformed during
the quarter. These companies continue to suffer from intense debate regarding
pricing, disappointing pipelines, and the short-term profit outlook. We continue
to believe these concerns are somewhat overblown and already fully reflected in
share prices. Our long-term expectations for this industry remain positive.
Other underperformers in the portfolio included Lonza (Switzerland) and BMW
(Germany).
We continue to like the quality and price attractiveness of the portfolio. Thank
you for your continued confidence.
/s/ David G. Herro /s/ Michael J. Welsh
DAVID G. HERRO, CFA MICHAEL J. WELSH, CFA, CPA
Portfolio Manager Portfolio Manager
dherro@oakmark.com mwelsh@oakmark.com
37
<Page>
INTERNATIONAL DIVERSIFICATION--MARCH 31, 2004 (UNAUDITED)
[CHART]
<Table>
<Caption>
% OF FUND
EQUITY MARKET VALUE
- ---------------------------------------
- - EUROPE 75.1%
Great Britain 23.8%
* France 14.9%
Switzerland 13.8%
* Germany 7.7%
* Netherlands 7.1%
* Italy 2.8%
* Ireland 2.7%
* Finland 1.6%
Sweden 0.7%
- - PACIFIC RIM 20.1%
Japan 8.6%
Australia 4.8%
Korea 4.1%
Hong Kong 1.3%
Singapore 1.3%
- - LATIN AMERICA 3.9%
Mexico 3.9%
- - OTHER 0.8%
Israel 0.8%
- - NORTH AMERICA 0.1%
Canada 0.1%
</Table>
* Euro currency countries comprise 36.8% of the Fund.
38
<Page>
THE OAKMARK INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.0%
FOOD & BEVERAGE--14.4%
Diageo plc (Great Britain) Beverages, Wines, &
Spirits Manufacturer 10,943,000 $ 143,367,140
Cadbury Schweppes plc
(Great Britain) Beverage & Confectionary
Manufacturer 15,103,800 119,548,924
Nestle SA (Switzerland) Food & Beverage Manufacturer 454,800 116,016,743
Pernod-Ricard SA (France) Manufactures Wines, Spirits,
& Fruit Juices 642,425 78,263,072
Fomento Economico
Mexicano S.A. de C.V
(Mexico) (b) Soft Drink & Beer Manufacturer 1,005,900 49,560,693
Lotte Chilsung Beverage
Co., Ltd. (Korea) (c) Soft Drinks, Juices & Sports
Drinks Manufacturer 83,400 47,354,856
Heineken Holding NV,
Class A (Netherlands) Brewer 486,000 17,433,079
Heineken NV (Netherlands) Brewer 398,000 15,966,140
Molson Inc., Class A
(Canada) Brewer 211,500 5,206,575
---------------
592,717,222
HOUSEHOLD PRODUCTS--2.6%
Henkel KGaA (Germany) Consumer Chemical Products
Manufacturer 1,386,950 $ 105,816,102
OTHER CONSUMER GOODS & SERVICES--1.5%
Swatch Group AG, Bearer
Shares (Switzerland) Watch Manufacturer 473,900 $ 61,567,327
Swatch Group AG,
Registered Shares
(Switzerland) Watch Manufacturer 24,700 646,663
---------------
62,213,990
AUTOMOBILES--2.8%
Bayerische Motoren
Werke (BMW) AG
(Germany) Luxury Automobile Manufacturer 2,807,600 $ 114,322,382
AUTOMOTIVE--1.8%
Compagnie Generale
des Etablissements
Michelin (France) Tire Manufacturer 1,582,500 $ 71,779,151
</Table>
39
<Page>
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.0% (CONT.)
BROADCASTING & PROGRAMMING--2.4%
Grupo Televisa S.A
(Mexico) (b) Television Production &
Broadcasting 2,056,000 $ 97,331,040
HUMAN RESOURCES--1.9%
Michael Page
International plc
(Great Britain) (c) Recruitment Consultancy Services 22,748,600 $ 77,392,733
MARKETING SERVICES--3.1%
Publicis Groupe
(France) Advertising & Media Services 2,355,100 $ 71,495,345
Aegis Group plc
(Great Britain) Media Services 30,524,200 54,033,695
---------------
125,529,040
PUBLISHING--4.8%
Reed Elsevier plc
(Great Britain) Publisher 12,954,300 $ 115,195,451
John Fairfax Holdings
Limited (Australia) Newspaper Publisher 32,814,100 83,619,597
---------------
198,815,048
RECREATION & ENTERTAINMENT--0.7%
Nintendo Company,
Ltd. (Japan) Video Game Manufacturer 284,800 $ 28,702,575
RETAIL--4.8%
Signet Group plc
(Great Britain) Jewelry Retailer 44,427,200 $ 90,318,493
J Sainsbury plc
(Great Britain) Food Stores 11,499,000 55,129,311
Giordano International
Limited (Hong Kong) (c) Pacific Rim Clothing Retailer &
Manufacturer 81,018,300 50,682,897
---------------
196,130,701
BANK & THRIFTS--11.7%
Bank of Ireland (Ireland) Commercial Bank 8,554,200 $ 106,842,664
Australia and New Zealand
Banking Group Limited
(Australia) Commercial Bank 7,348,800 106,624,768
BNP Paribas SA (France) Commercial Banking 1,156,000 70,741,711
</Table>
40
<Page>
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.0% (CONT.)
BANK & THRIFTS--11.7% (CONT.)
United Overseas Bank
Limited, Foreign
Shares (Singapore) Commercial Banking 6,178,368 $ 49,450,562
Banco Popolare di
Verona e Novara
Scrl (Italy) Commercial Bank 2,938,400 47,873,829
Sanpaolo IMI S.p.A. (Italy) Banking Services 3,933,600 44,876,197
Svenska Handelsbanken
AB (Sweden) Commercial Banking 1,498,800 28,320,869
UniCredito Italiano S.p.A.
(Italy) Banking Services 3,547,700 16,977,905
Kookmin Bank (Korea) (a) Commercial Banking 231,168 9,404,472
---------------
481,112,977
FINANCIAL SERVICES--1.2%
Credit Suisse Group
(Switzerland) Investment Services & Insurance 1,413,600 $ 49,010,456
OTHER FINANCIAL--7.4%
Euronext (Netherlands) (c) Stock Exchange 4,603,200 $ 137,363,343
Daiwa Securities Group
Inc. (Japan) Stock Broker 10,255,000 83,585,846
Deutsche Boerse
AG (Germany) Electronic Trading Systems 1,415,400 80,415,234
---------------
301,364,423
PHARMACEUTICALS--12.1%
Aventis S.A. (France) Pharmaceuticals 1,858,400 $ 143,042,725
GlaxoSmithKline plc
(Great Britain) Pharmaceuticals 6,945,600 136,654,308
Takeda Chemical
Industries, Ltd. (Japan) Pharmaceuticals & Food
Supplements 2,787,100 124,007,710
Novartis AG (Switzerland) Pharmaceuticals 2,201,600 93,544,527
---------------
497,249,270
TELECOMMUNICATIONS--2.6%
SK Telecom Co.,
Ltd. (Korea) Mobile Telecommunications 560,000 $ 105,091,864
COMPUTER SERVICES--1.8%
Meitec
Corporation (Japan) (c) Software Engineering Services 1,899,100 $ 71,567,944
</Table>
41
<Page>
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.0% (CONT.)
OPTICAL EQUIPMENT--0.8%
Olympus
Corporation (Japan) Optical Equipment Manufacturer 1,447,000 $ 31,080,980
AIRPORT MAINTENANCE--0.1%
Grupo Aeroportuario
del Sureste S.A. de
C.V. (Mexico) (b)(c) Airport Operator 242,000 $ 5,045,700
DIVERSIFIED CONGLOMERATES--2.3%
Vivendi Universal SA
(France) (a) Multimedia 3,550,500 $ 94,240,792
Haw Par Corporation
Limited (Singapore) Healthcare & Leisure Products 58,338 170,742
---------------
94,411,534
INSTRUMENTS--0.7%
Orbotech, Ltd.
(Israel) (a) Optical Inspection Systems 1,237,700 $ 29,766,685
MACHINERY & INDUSTRIAL PROCESSING--1.5%
Metso Corporation
(Finland) Paper & Pulp Machinery 4,523,200 $ 60,947,960
OTHER INDUSTRIAL GOODS & SERVICES--2.3%
Enodis plc
(Great Britain) (a)(c) Food Processing Equipment 33,585,320 $ 58,059,048
Chargeurs SA (France) (c) Wool, Textile Production &
Trading 1,050,201 35,280,468
---------------
93,339,516
TRANSPORTATION SERVICES--2.1%
Associated British Ports
Holdings plc
(Great Britain) Port Operator 9,564,299 $ 85,094,130
CHEMICALS--8.1%
Akzo Nobel N.V.
(Netherlands) Chemical Producer 2,931,300 $ 107,744,412
Givaudan (Switzerland) Fragrance & Flavor
Compound Manufacturer 202,300 103,370,794
Lonza Group AG,
Registered Shares
(Switzerland) (c) Industrial Organic Chemicals 1,958,600 100,002,756
Syngenta AG (Switzerland) Crop Protection Products 252,800 18,447,891
---------------
329,565,853
</Table>
42
<Page>
<Table>
<Caption>
SHARES HELD/
NAME DESCRIPTION PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.0% (CONT.)
OIL & NATURAL GAS--0.5%
Total SA (France) Oil & Natural Gas
Exploration & Production 100,000 $ 18,384,417
TOTAL COMMON STOCKS (COST: $3,045,072,845) 3,923,783,693
SHORT TERM INVESTMENTS--3.9%
U.S. GOVERNMENT BILLS--1.5%
United States Treasury Bills, 0.915% - 0.955%
due 4/1/2004 - 4/15/2004 $ 60,000,000 $ 59,989,092
TOTAL U.S. GOVERNMENT BILLS (COST: $59,989,092) 59,989,092
REPURCHASE AGREEMENTS--2.4%
IBT Repurchase Agreement, 0.91% dated 3/31/2004
due 4/1/2004, repurchase price $95,002,401
collateralized by U.S. Government Agency Securities
with an aggregate market value plus accrued interest
of $99,750,000 $ 95,000,000 $ 95,000,000
IBT Repurchase Agreement, 0.76% dated 3/31/2004
due 4/1/2004, repurchase price $2,411,391
collateralized by a U.S. Government Agency Security
with a market value plus accrued interest
of $2,531,907 2,411,340 2,411,340
---------------
TOTAL REPURCHASE AGREEMENTS (COST: $97,411,340) 97,411,340
TOTAL SHORT TERM INVESTMENTS (COST: $157,400,432) 157,400,432
Total Investments (Cost $3,202,473,277)--99.9% $ 4,081,184,125
Other Assets In Excess Of Other Liabilities--0.1% 4,950,349
---------------
TOTAL NET ASSETS--100% $ 4,086,134,474
===============
</Table>
(a) Non-income producing security.
(b) Represents an American Depository Receipt.
(c) See footnote number five in the Notes to Financial Statements regarding
transactions in securities of affiliated issuers.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
43
<Page>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
REPORT FROM DAVID G. HERRO AND MICHAEL J. WELSH, PORTFOLIO MANAGERS
[PHOTO]
[PHOTO]
[CHART]
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND
FROM ITS INCEPTION (11/1/95) TO PRESENT (3/31/04) AS COMPARED TO THE MSCI WORLD
EX U.S. INDEX(19)
<Table>
<Caption>
THE OAKMARK INTERNATIONAL SMALL CAP FUND (CLASS I) MSCI WORLD EX U.S. INDEX
11/1/95 $ 10,000 $ 10,000
12/31/95 $ 9,630 $ 10,684
3/31/96 $ 10,970 $ 11,006
6/30/96 $ 11,570 $ 11,186
9/30/96 $ 11,590 $ 11,195
12/31/96 $ 12,038 $ 11,418
3/31/97 $ 12,080 $ 11,241
6/30/97 $ 13,181 $ 12,699
9/30/97 $ 12,672 $ 12,652
12/31/97 $ 9,642 $ 11,677
3/31/98 $ 11,429 $ 13,394
6/30/98 $ 9,892 $ 13,499
9/30/98 $ 8,211 $ 11,513
12/31/98 $ 10,529 $ 13,868
3/31/99 $ 13,118 $ 14,086
6/30/99 $ 15,317 $ 14,493
9/30/99 $ 15,439 $ 15,114
12/31/99 $ 16,190 $ 17,741
3/31/2000 $ 15,387 $ 17,839
6/30/2000 $ 15,529 $ 17,217
9/30/2000 $ 14,908 $ 15,906
12/31/2000 $ 14,756 $ 15,369
3/31/2001 $ 15,232 $ 13,213
6/30/2001 $ 15,777 $ 13,075
9/30/2001 $ 13,987 $ 11,273
12/31/2001 $ 16,671 $ 12,080
3/31/2002 $ 18,370 $ 12,149
6/30/2002 $ 18,831 $ 11,877
9/30/2002 $ 14,641 $ 9,547
12/31/2002 $ 15,818 $ 10,172
3/31/2003 $ 13,882 $ 9,406
6/30/2003 $ 17,933 $ 11,215
9/30/2003 $ 20,465 $ 12,121
12/31/2003 $ 24,109 $ 14,182
3/31/2004 $ 25,685 $ 14,783
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
TOTAL RETURN INCEPTION
LAST 3 MONTHS* 1-YEAR 5-YEAR (11/1/95)
- --------------------------------------------------------------------------------
OAKMARK INTERNATIONAL
SMALL CAP FUND (CLASS I) 6.54% 85.03% 14.37% 11.85%
MSCI World ex. U.S. 4.24% 57.16% 0.98% 4.75%
Lipper International
Small Cap Average(21) 8.90% 76.32% 10.10% 11.72%
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The fund's high performance may not be repeated.
The investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Current performance may be lower or higher than the performance data quoted.
Average annual total return measures annualized change, while total return
measures aggregate change. To obtain current month end performance data, call
1-800-OAKMARK or visit www.oakmark.com.
* Not annualized
The Oakmark International Small Cap Fund gained 7% for the quarter, slightly
more than the relevant index. For the past twelve months, your Fund is up 85%.
The strongest performers for the quarter included most of our Japanese holdings,
especially brokerage firm Ichiyoshi Securities, ophthalmic (eye) specialist
Santen Pharmaceutical, and the entertainment software firm Square Enix.
Ichiyoshi's share price was buoyed by strong equity markets, and the company
announced they would significantly increase dividend payouts. Santen recently
announced a North American distribution alliance with Johnson & Johnson. Because
Santen's superior anti-infective product has strong growth potential in the
U.S., the alliance should provide the necessary distribution scale and know-how
to penetrate the market.
Stock selection in France also positively affected the Fund's returns for the
quarter. LISI and Carbone Lorraine showed particularly strong share price
performance.
Another strong performer was UK-based retailer Carpetright plc., which continues
to demonstrate the strength of its business model. The company generated strong
cash flows despite a difficult operating environment in 2003.
The most significant detractors from quarterly performance were capital
equipment manufacturer Alfa Laval (Sweden), financial services provider Julius
Baer Holding (Switzerland), and Baycorp Advantage (Australia). The declines in
these stock prices were minor on an absolute basis.
We continue to like the quality and price attractiveness of the portfolio. Thank
you for your continued confidence.
/s/ David G. Herro /s/ Michael J. Welsh
DAVID G. HERRO, CFA MICHAEL J. WELSH, CFA, CPA
Portfolio Manager Portfolio Manager
dherro@oakmark.com mwelsh@oakmark.com
44
<Page>
INTERNATIONAL DIVERSIFICATION--MARCH 31, 2004 (UNAUDITED)
[CHART]
<Table>
<Caption>
% OF FUND
EQUITY MARKET VALUE
--------------------------------------
- - EUROPE 68.8%
* France 14.9%
Switzerland 14.1%
Great Britain 12.1%
* Italy 9.6%
Denmark 7.1%
* Germany 4.3%
Sweden 2.5%
* Spain 2.1%
* Finland 1.7%
* Austria 0.4%
- - PACIFIC RIM 27.3%
Japan 10.8%
Australia 7.3%
Korea 3.5%
New Zealand 3.1%
Thailand 0.9%
Hong Kong 0.8%
China 0.5%
Philippines 0.4%
- - LATIN AMERICA 3.9%
Mexico 3.9%
</Table>
* Euro currency countries comprise 33% of the Fund.
45
<Page>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.1%
FOOD & BEVERAGE--5.9%
Campari Group (Italy) Soft Drinks, Wines, &
Spirits Producer 290,500 $ 13,097,876
Baron de Ley, S.A.
(Spain) (a) Wines & Spirits Manufacturer 162,285 7,109,313
Geest plc (Great Britain) Fresh Produce Distributor 717,600 6,453,998
Hite Brewery Co.,
Ltd. (Korea) Brewer 68,000 4,943,832
Alaska Milk Corporation
(Philippines)(b) Milk Producer 49,394,000 2,593,899
Kook Soon Dang Brewery
Co., Ltd. (Korea) Wine & Spirits Manufacturer 122,676 2,371,951
Grupo Continental,
S.A. (Mexico) Soft Drink Manufacturer 1,152,600 2,226,496
---------------
38,797,365
HOUSEHOLD PRODUCTS--0.7%
Societe BIC SA (France) Consumer & Office Supplies 101,800 $ 4,321,815
OTHER CONSUMER GOODS & SERVICES--1.8%
Vitec Group plc
(Great Britain) Photo Equipment & Supplies 1,365,684 $ 8,876,842
Royal Doulton plc
(Great Britain) (a)(b) Tableware & Giftware 22,373,000 3,403,512
---------------
12,280,354
BROADCASTING & PUBLISHING--2.0%
Tamedia AG (Switzerland) TV Broadcasting & Publishing 161,983 $ 13,432,487
BUILDING MATERIALS & CONSTRUCTION--1.3%
Fletcher Building Limited
(New Zealand) Building Materials Manufacturer 2,952,800 $ 8,730,195
HUMAN RESOURCES--1.8%
DIS Deutscher Industrie
Service AG (Germany) Recruitment Consultancy Services 510,249 $ 11,710,091
INFORMATION SERVICES--3.4%
Baycorp Advantage
Limited (Australia) (a)(b) Credit Reference Services 11,540,500 $ 22,519,987
</Table>
46
<Page>
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.1% (CONT.)
MARKETING SERVICES--3.0%
Asatsu-DK, Inc. (Japan) Advertising Services Provider 459,700 $ 14,326,365
LG Ad Inc. (Korea) Advertising & Marketing Services 312,880 5,214,667
---------------
19,541,032
MOTORCYCLES--1.5%
Ducati Motor Holding
S.p.A. (Italy) (a)(b) Motorcycle Manufacturer 6,083,600 $ 9,821,860
PUBLISHING--1.8%
Recoletos Grupo de
Comunicacion,
S.A. (Spain) Publisher 761,000 $ 5,965,177
Matichon Public
Company Limited,
Foreign Shares
(Thailand) (b) Newspaper Publisher 2,039,500 5,716,524
---------------
11,681,701
RECREATION & ENTERTAINMENT--2.7%
Square Enix Co.,
Ltd. (Japan) Entertainment Software 436,800 $ 13,026,303
Konami Sports
Corporation (Japan) Fitness Centers 245,000 4,358,009
---------------
17,384,312
RETAIL--9.4%
D.F.S. Furniture Company
plc (Great Britain) Furniture Retailer & Manufacturer 3,122,000 $ 24,811,859
Carpetright plc
(Great Britain) Carpet Retailer 1,067,400 19,810,257
Bulgari S.p.A. (Italy) Jewelry Manufacturer & Retailer 1,889,300 17,183,174
---------------
61,805,290
BANK & THRIFTS--1.8%
Jyske Bank A/S
(Denmark) (a) Commercial Banking 222,400 $ 11,836,826
FINANCIAL SERVICES--2.2%
Julius Baer Holding Ltd.,
Zurich (Switzerland) Asset Management 49,090 $ 14,189,654
OTHER FINANCIAL--2.1%
Ichiyoshi Securities
Co., Ltd. (Japan) Stock Broker 1,959,000 $ 13,713,094
</Table>
47
<Page>
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.1% (CONT.)
MEDICAL PRODUCTS--6.0%
Ansell Limited (Australia) Protective Rubber &
Plastics Products 4,265,150 $ 23,402,206
Coloplast A/S, Class B
(Denmark) Healthcare Products &
Services Provider 101,500 9,428,595
Hogy Medical Co.,
Ltd. (Japan) Medical Supplies Manufacturer 79,800 3,627,099
Golden Meditech
Company
Limited (China) Medical Instruments & Supplies 7,751,000 3,381,741
---------------
39,839,641
PHARMACEUTICALS--2.9%
Santen Pharmaceutical
Co., Ltd. (Japan) Pharmaceuticals 1,147,000 $ 19,137,748
TELECOMMUNICATIONS--0.8%
Asia Satellite
Telecommunications
Holdings Limited
(Hong Kong) Satellite Operator 2,818,500 $ 5,045,404
COMPUTER SERVICES--3.4%
Morse plc (Great Britain) Business & Technology Solutions 5,187,300 $ 13,152,043
Alten (France) (a) Systems Consulting & Engineering 298,141 4,828,107
Sopra Group (France) Computer Engineering 111,930 4,738,100
---------------
22,718,250
COMPUTER SYSTEMS--2.2%
Lectra (France) (a) Manufacturing Process Systems 1,663,000 $ 14,427,153
OFFICE EQUIPMENT--4.3%
Neopost SA (France) Mailroom Equipment Supplier 526,300 $ 28,379,518
AIRPORT MAINTENANCE--7.0%
Kobenhavns Lufthavne
A/S (Copenhagen
Airports A/S - CPH)
(Denmark) Airport Management & Operations 184,100 $ 23,461,339
Grupo Aeroportuario
del Sureste S.A. de
C.V. (Mexico) (b)(c) Airport Operator 1,076,600 22,447,110
---------------
45,908,449
</Table>
48
<Page>
<Table>
<Caption>
NAME DESCRIPTION SHARES HELD MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.1% (CONT.)
DIVERSIFIED CONGLOMERATES--6.1%
Financiere Marc de
Lacharriere SA (Fimalac)
(France) Diversified Operations 386,364 $ 15,480,334
Pargesa Holding AG
(Switzerland) Diversified Operations 5,374 14,939,567
Tae Young Corp. (Korea) Heavy Construction 283,560 9,675,276
Financiere Marc de
Lacharriere SA (Fimalac),
Warrants (France) (a) Diversified Operations 31,866 133,323
---------------
40,228,500
ENVIRONMENTAL PRODUCTS & SERVICES--0.3%
Munters AB (Sweden) Cooling & Moisture Control Systems 77,400 $ 1,908,982
INSTRUMENTS--1.2%
Vaisala Oyj,
Class A (Finland) Atmospheric Observation Equipment 312,900 $ 7,816,294
MACHINERY & INDUSTRIAL PROCESSING--6.2%
Pfeiffer Vacuum
Technology AG
(Germany) Vacuum Pump Manufacturer 423,840 $ 15,338,971
Alfa Laval (Sweden) Filtration & Separation Equipment 1,061,100 13,999,980
Carbone Lorraine
SA (France) Electrical Systems Manufacturer 210,000 9,147,909
Andritz AG (Austria) General Industrial Machinery 48,000 2,222,669
---------------
40,709,529
OTHER INDUSTRIAL GOODS & SERVICES--6.0%
Schindler Holding
AG (Switzerland) Elevator & Escalator Manufacturer 76,150 $ 24,266,723
LISI (France) Industrial Fastener Manufacturer 241,813 11,902,520
Kone Oyj, Class B
(Finland) Elevators 54,300 3,242,051
---------------
39,411,294
PRODUCTION EQUIPMENT--3.3%
Interpump Group
S.p.A. (Italy) (b) Pump & Piston Manufacturer 4,604,900 $ 20,223,952
NSC Groupe (France) Textile Equipment Manufacturer 12,316 1,060,882
---------------
21,284,834
TRANSPORTATION SERVICES--1.6%
Mainfreight Limited
(New Zealand) (b) Logistics Services 8,935,381 $ 10,614,982
</Table>
49
<Page>
<Table>
<Caption>
SHARES HELD/
NAME DESCRIPTION PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--96.1% (CONT.)
CHEMICALS--3.4%
Gurit-Heberlein
AG (Switzerland) Chemical Producer 29,850 $ 22,395,751
TOTAL COMMON STOCKS (COST: $440,341,671) 631,592,392
SHORT TERM INVESTMENTS--3.4%
U.S. GOVERNMENT BILLS--1.5%
United States Treasury Bills, 0.935% - 0.95%
due 4/8/2004 - 4/22/2004 $ 10,000,000 $ 9,996,350
TOTAL U.S. GOVERNMENT BILLS (COST: $9,996,350) 9,996,350
REPURCHASE AGREEMENTS--1.9%
IBT Repurchase Agreement, 0.91% dated 3/31/2004
due 4/1/2004, repurchase price $10,000,253
collateralized by U.S. Government Agency Securities
with an aggregate market value plus accrued interest
of $10,500,000 $ 10,000,000 $ 10,000,000
IBT Repurchase Agreement, 0.76% dated 3/31/2004
due 4/1/2004, repurchase price $2,744,770
collateralized by a U.S. Government Agency Security
with a market value plus accrued interest
of $2,881,948 2,744,712 2,744,712
---------------
TOTAL REPURCHASE AGREEMENTS (COST: $12,744,712) 12,744,712
TOTAL SHORT TERM INVESTMENTS (COST: $22,741,062) 22,741,062
Total Investments (Cost $463,082,733)--99.5% $ 654,333,454
Foreign Currencies (Cost $328,629)--0.1% 331,818
Other Assets In Excess Of Other Liabilities--0.4% 2,679,842
---------------
TOTAL NET ASSETS--100% $ 657,345,114
===============
</Table>
(a) Non-income producing security.
(b) See footnote number five in the Notes to Financial Statements regarding
transactions in securities of affiliated issuers.
(c) Represents an American Depository Receipt.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
<Page>
[OAKMARK LOGO]
FAMILY OF FUNDS
(This page has been intentionally left blank.)
51
<Page>
THE OAKMARK FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES--MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
THE OAKMARK THE OAKMARK
THE OAKMARK SELECT SMALL CAP
FUND FUND FUND
---------------------------------------------------
ASSETS
Investments in unaffiliated securities,
at value (a) $ 5,590,821,455 $ 4,673,326,600 $ 383,029,461
Investments in affiliated securities, at
value (b) 296,848,272 1,119,390,388 11,589,880
Foreign currency, at value (c) 0 0 0
Receivable for:
Securities sold 12,571,340 0 7,879,797
Fund shares sold 14,868,864 12,677,646 425,007
Dividends and interest 7,490,836 5,917,580 305,425
Tax reclaim 0 0 0
--------------- --------------- ---------------
Total receivables 34,931,040 18,595,226 8,610,229
Other assets 79,702 82,115 32,724
--------------- --------------- ---------------
Total assets $ 5,922,680,469 $ 5,811,394,329 $ 403,262,294
LIABILITIES AND NET ASSETS
Payable for:
Securities purchased $ 74,605,649 $ 660,026 $ 7,309,965
Fund shares redeemed 4,071,925 3,515,433 265,675
Due to Adviser 137,970 134,463 10,580
Due to transfer agent 483,758 277,040 68,616
Trustees fees 24,592 25,110 10,119
Deferred trustee compensation 736,759 610,245 264,455
Foreign tax expense 0 0 0
Other 1,632,768 1,341,441 153,918
--------------- --------------- ---------------
Total liabilities 81,693,421 6,563,758 8,083,328
--------------- --------------- ---------------
Net assets applicable to fund shares
outstanding $ 5,840,987,048 $ 5,804,830,571 $ 395,178,966
=============== =============== ===============
ANALYSIS OF NET ASSETS
Paid in capital $ 5,016,655,611 $ 4,023,893,029 $ 320,935,027
Accumulated undistributed net realized
gain (loss) of investments, forward
contracts, options, short sales and
foreign currency exchange transactions (305,576,249) (92,291,372) (18,080,467)
Net unrealized appreciation
(depreciation) of investments 1,117,204,306 1,865,835,335 93,516,913
Net unrealized appreciation
(depreciation)--other 0 0 8,786
Accumulated undistributed net investment
income (loss) 12,703,380 7,393,579 (1,201,293)
--------------- --------------- ---------------
Net assets applicable to Fund shares
outstanding $ 5,840,987,048 $ 5,804,830,571 $ 395,178,966
=============== =============== ===============
PRICE OF SHARES
Net asset value per share: Class I
(without par value) $ 38.08 $ 31.37 $ 20.40
=============== =============== ===============
Class I--Net assets $ 5,801,806,019 $ 5,696,434,688 $ 394,084,504
Class I--Shares outstanding (Unlimited
shares authorized) 152,358,405 181,579,852 19,315,219
Net asset value per share: Class II
(without par value) $ 37.92 $ 31.20 $ 20.26
=============== =============== ===============
Class II--Net assets $ 39,181,029 $ 108,395,883 $ 1,094,462
Class II--Shares outstanding
(Unlimited shares authorized) 1,033,298 3,474,180 54,015
(a) Identified cost of investments in
unaffiliated securities $ 4,591,213,779 $ 3,349,471,558 $ 292,686,256
(b) Identified cost of investments in
affiliated securities 179,251,642 577,410,095 8,403,163
(c) Identified cost of foreign currency 0 0 0
</Table>
52
<Page>
<Table>
<Caption>
THE OAKMARK THE OAKMARK THE OAKMARK THE OAKMARK
EQUITY AND GLOBAL INTERNATIONAL INTERNATIONAL
INCOME FUND FUND FUND SMALL CAP FUND
--------------------------------------------------------------------
ASSETS
Investments in unaffiliated securities,
at value (a) $ 6,526,334,296 $ 1,141,857,910 $ 3,498,434,380 $ 556,991,628
Investments in affiliated securities, at
value (b) 227,477,250 216,982,738 582,749,745 97,341,826
Foreign currency, at value (c) 0 0 0 331,818
Receivable for:
Securities sold 7,887,650 0 4,942,960 1,103,127
Fund shares sold 40,559,998 12,954,836 16,301,161 2,914,347
Dividends and interest 19,386,595 2,961,456 10,791,753 1,638,467
Tax reclaim 0 188,176 2,048,367 615,995
--------------- --------------- --------------- ---------------
Total receivables 67,834,243 16,104,468 34,084,241 6,271,936
Other assets 78,162 49,813 61,517 34,476
--------------- --------------- --------------- ---------------
Total assets $ 6,821,723,951 $ 1,374,994,929 $ 4,115,329,883 $ 660,971,684
LIABILITIES AND NET ASSETS
Payable for:
Securities purchased $ 114,934,387 $ 17,308,294 $ 22,266,939 $ 1,881,467
Fund shares redeemed 3,191,906 564,247 4,766,800 771,324
Due to Adviser 126,240 36,300 103,744 21,795
Due to transfer agent 237,653 62,597 181,481 33,690
Trustees fees 24,453 12,310 19,226 10,691
Deferred trustee compensation 383,819 225,752 392,252 237,477
Foreign tax expense 0 0 0 444,083
Other 1,710,122 407,658 1,464,967 226,043
--------------- --------------- --------------- ---------------
Total liabilities 120,608,580 18,617,158 29,195,409 3,626,570
--------------- --------------- --------------- ---------------
Net assets applicable to fund shares
outstanding $ 6,701,115,371 $ 1,356,377,771 $ 4,086,134,474 $ 657,345,114
=============== =============== =============== ===============
ANALYSIS OF NET ASSETS
Paid in capital $ 5,688,356,870 $ 1,106,578,682 $ 3,343,237,578 $ 494,779,901
Accumulated undistributed net realized
gain (loss) of investments, forward
contracts, options, short sales and
foreign currency exchange transactions 10,527,568 14,874,509 (132,211,328) (28,376,830)
Net unrealized appreciation
(depreciation) of investments 996,093,493 236,929,137 878,837,852 190,826,114
Net unrealized appreciation
(depreciation)--other 188,995 13,159 88,004 36,633
Accumulated undistributed net investment
income (loss) 5,948,445 (2,017,716) (3,817,632) 79,296
--------------- --------------- --------------- ---------------
Net assets applicable to Fund shares
outstanding $ 6,701,115,371 $ 1,356,377,771 $ 4,086,134,474 $ 657,345,114
=============== =============== =============== ===============
PRICE OF SHARES
Net asset value per share: Class I
(without par value) $ 22.94 $ 20.03 $ 18.67 $ 17.11
=============== =============== =============== ===============
Class I--Net assets $ 6,313,264,653 $ 1,338,264,734 $ 3,855,255,039 $ 656,901,588
Class I--Shares outstanding (Unlimited
shares authorized) 275,262,210 66,818,977 206,489,876 38,403,220
Net asset value per share: Class II
(without par value) $ 22.87 $ 19.84 $ 18.58 $ 17.08
=============== =============== =============== ===============
Class II--Net assets $ 387,850,718 $ 18,113,037 $ 230,879,435 $ 443,526
Class II--Shares outstanding
(Unlimited shares authorized) 16,958,324 912,789 12,424,140 25,974
(a) Identified cost of investments in
unaffiliated securities $ 5,604,109,929 $ 947,376,241 $ 2,781,654,398 $ 385,947,591
(b) Identified cost of investments in
affiliated securities 153,608,124 174,569,421 420,818,879 77,135,142
(c) Identified cost of foreign currency 0 0 0 328,629
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
<Page>
STATEMENTS OF OPERATIONS--PERIOD ENDED MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
THE OAKMARK THE OAKMARK
THE OAKMARK SELECT SMALL CAP
FUND FUND FUND
---------------------------------------------------
INVESTMENT INCOME:
Dividends from unaffiliated securities $ 39,569,075 $ 38,140,538 $ 1,298,271
Dividends from affiliated securities 1,636,670 4,706,340 0
Interest Income 2,272,261 1,978,868 136,221
Other income 39,662 52,731 5,898
Foreign taxes withheld 34,435 0 0
--------------- --------------- ---------------
Total investment income 43,552,103 44,878,477 1,440,390
EXPENSES:
Investment advisory fee 23,864,630 23,958,554 1,888,230
Transfer and dividend disbursing agent
fees 1,434,105 762,368 180,928
Other shareholder servicing fees 2,273,010 2,153,849 130,047
Service Fee--Class II 36,308 115,254 1,098
Reports to shareholders 774,959 632,528 41,900
Custody and accounting fees 295,476 305,789 29,183
Registration and blue sky expenses 141,525 46,998 13,632
Trustee fees 55,284 56,108 22,926
Deferred trustee compensation 103,499 105,821 42,679
Legal fees 42,083 43,334 17,335
Audit fees 22,415 23,516 6,506
Other 171,627 176,844 45,443
--------------- --------------- ---------------
Total expenses 29,214,921 28,380,963 2,419,907
NET INVESTMENT INCOME (LOSS): 14,337,182 16,497,514 (979,517)
NETREALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on unaffiliated
securities 23,432,761 72,545,020 (6,996,152)
Net realized gain on affiliated securities 2,222,577 11,318,223 688,409
Net realized gain on options 1,764,022 2,170,031 45,568
Net realized gain (loss) on short sales (737) (1,959) 0
Net realized gain (loss) on foreign
currency transactions 0 0 850
Net change in unrealized appreciation
(depreciation) of investments and
foreign currencies 590,395,990 628,913,839 71,742,284
Net change in appreciation (depreciation)
--other 0 0 8,786
Deferred foreign taxes 0 0 0
Net realized and unrealized gain on
investments and foreign currency
transactions: 617,814,613 714,945,154 65,489,745
--------------- --------------- ---------------
Net increase in net assets resulting from
operations $ 632,151,795 $ 731,442,668 $ 64,510,228
=============== =============== ===============
</Table>
54
<Page>
<Table>
<Caption>
THE OAKMARK THE OAKMARK THE OAKMARK THE OAKMARK
EQUITY AND GLOBAL INTERNATIONAL INTERNATIONAL
INCOME FUND FUND FUND SMALL CAP FUND
--------------------------------------------------------------------
INVESTMENT INCOME:
Dividends from unaffiliated securities $ 13,387,345 $ 4,779,536 $ 19,971,303 $ 5,443,481
Dividends from affiliated securities 997,500 443,883 933,992 380,696
Interest Income 25,735,493 498,563 774,327 123,927
Other income 4,005 56 0 0
Foreign taxes withheld 43,493 (376,041) (2,083,614) (688,763)
--------------- --------------- --------------- ---------------
Total investment income 40,167,836 5,345,997 19,596,008 5,259,341
EXPENSES:
Investment advisory fee 19,881,975 5,393,852 16,818,167 3,558,522
Transfer and dividend disbursing agent
fees 736,872 178,066 541,948 81,545
Other shareholder servicing fees 2,997,627 511,455 1,635,553 268,281
Service Fee--Class II 393,112 13,434 217,877 141
Reports to shareholders 767,949 128,564 519,099 69,697
Custody and accounting fees 353,560 496,925 1,866,174 336,394
Registration and blue sky expenses 300,091 125,301 142,098 25,745
Trustee fees 55,959 28,397 44,369 24,379
Deferred trustee compensation 103,516 51,407 81,014 45,145
Legal fees 42,204 20,882 32,742 18,288
Audit fees 20,863 8,071 15,702 7,546
Other 170,965 64,318 125,466 50,450
--------------- --------------- --------------- ---------------
Total expenses 25,824,693 7,020,672 22,040,209 4,486,133
NET INVESTMENT INCOME (LOSS): 14,343,143 (1,674,675) (2,444,201) 773,208
NETREALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on unaffiliated
securities 80,541,618 14,837,990 78,374,034 5,187,780
Net realized gain on affiliated securities 0 50,009 411,833 252,457
Net realized gain on options 0 363,653 0 0
Net realized gain (loss) on short sales 0 0 0 0
Net realized gain (loss) on foreign
currency transactions 180,636 (51,663) 78,639 53,163
Net change in unrealized appreciation
(depreciation) of investments and
foreign currencies 584,008,876 155,164,277 527,624,543 121,144,024
Net change in appreciation (depreciation)
--other 102,127 38,270 (39,741) (23,426)
Deferred foreign taxes 0 0 0 (444,083)
Net realized and unrealized gain on
investments and foreign currency
transactions: 664,833,257 170,402,536 606,449,308 126,169,915
--------------- --------------- --------------- ---------------
Net increase in net assets resulting from
operations $ 679,176,400 $ 168,727,861 $ 604,005,107 $ 126,943,123
=============== =============== =============== ===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
THE OAKMARK FUND
-----------------------------------------
PERIOD ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
-----------------------------------------
FROM OPERATIONS:
Net investment income $ 14,337,182 $ 19,384,779
Net realized gain (loss) on investments 27,418,623 (137,687,746)
Net change in unrealized appreciation (depreciation) of
investments 590,395,990 867,321,548
------------------- -------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 632,151,795 749,018,581
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class I (20,505,870) (13,880,781)
Net investment income--Class II (37,100) (29,599)
------------------- -------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (20,542,970) (13,910,380)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 952,516,311 1,533,121,113
Proceeds from shares sold--Class II 20,632,501 17,938,866
Reinvestment of distributions--Class I 18,843,543 13,078,556
Reinvestment of distributions--Class II 8,676 700
Payments for shares redeemed--Class I (547,624,193) (810,690,610)
Redemption fees Class I 46,208 0
Payments for shares redeemed--Class II (5,559,958) (6,723,524)
------------------- -------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 438,863,088 746,725,101
------------------- -------------------
TOTAL INCREASE IN NET ASSETS 1,050,471,913 1,481,833,302
NET ASSETS:
Beginning of period 4,790,515,135 3,308,681,833
------------------- -------------------
End of period $ 5,840,987,048 $ 4,790,515,135
=================== ===================
Undistributed net investment income $ 12,703,380 $ 18,909,168
=================== ===================
FUND SHARE TRANSACTIONS--CLASS I:
Shares sold 25,701,195 49,341,298
Shares issued in reinvestment of dividends 534,720 425,457
Less shares redeemed (14,757,688) (26,435,618)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 11,478,227 23,331,137
=================== ===================
FUND SHARE TRANSACTIONS--CLASS II:
Shares sold 560,084 576,827
Shares issued in reinvestment of dividends 247 23
Less shares redeemed (154,467) (225,241)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 405,864 351,609
=================== ===================
</Table>
56
<Page>
<Table>
<Caption>
THE OAKMARK
SELECT FUND
-----------------------------------------
PERIOD ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
-----------------------------------------
FROM OPERATIONS:
Net investment income $ 16,497,514 $ 10,063,549
Net realized gain (loss) on investments 86,031,315 (101,697,160)
Net change in unrealized appreciation (depreciation) of
investments 628,913,839 1,121,320,614
------------------- -------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 731,442,668 1,029,687,003
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class I (18,710,631) (3,934,423)
Net investment income--Class II (118,882) 0
------------------- -------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (18,829,513) (3,934,423)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 525,833,145 917,786,177
Proceeds from shares sold--Class II 21,250,751 37,698,020
Reinvestment of distributions--Class I 17,456,336 3,705,408
Reinvestment of distributions--Class II 58,212 0
Payments for shares redeemed--Class I (539,500,117) (654,181,633)
Redemption fees Class I 60,514 0
Payments for shares redeemed--Class II (19,028,695) (26,725,613)
------------------- -------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 6,130,146 278,282,359
------------------- -------------------
TOTAL INCREASE IN NET ASSETS 718,743,301 1,304,034,939
NET ASSETS:
Beginning of period 5,086,087,270 3,782,052,331
------------------- -------------------
End of period $ 5,804,830,571 $ 5,086,087,270
=================== ===================
Undistributed net investment income $ 7,393,579 $ 9,725,578
=================== ===================
FUND SHARE TRANSACTIONS--CLASS I:
Shares sold 17,279,097 36,086,657
Shares issued in reinvestment of dividends 595,510 150,625
Less shares redeemed (17,521,987) (26,578,347)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 352,620 9,658,935
=================== ===================
FUND SHARE TRANSACTIONS--CLASS II:
Shares sold 700,673 1,482,025
Shares issued in reinvestment of dividends 1,944 0
Less shares redeemed (628,178) (1,069,612)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 74,439 412,413
=================== ===================
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
<Page>
<Table>
<Caption>
THE OAKMARK
SMALL CAP FUND
-----------------------------------------
PERIOD ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
-----------------------------------------
FROM OPERATIONS:
Net investment loss $ (979,517) $ (2,414,871)
Net realized loss on investments (6,262,175) (11,322,124)
Net realized gain on foreign currency transactions 850 0
Net change in unrealized appreciation (depreciation) of
investments 71,742,284 80,258,968
Net change in unrealized appreciation (depreciation)
--other 8,786 0
------------------- -------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 64,510,228 66,521,973
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 37,370,497 50,502,211
Proceeds from shares sold--Class II 288,093 216,335
Payments for shares redeemed--Class I (57,944,082) (123,497,018)
Redemption fees Class I 29,583 0
Payments for shares redeemed--Class II (88,986) (123,957)
------------------- -------------------
NET DECREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (20,344,895) (72,902,429)
------------------- -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 44,165,333 (6,380,456)
NET ASSETS:
Beginning of period 351,013,633 357,394,089
------------------- -------------------
End of period $ 395,178,966 $ 351,013,633
=================== ===================
Undistributed net investment loss $ (1,201,293) $ (221,776)
=================== ===================
FUND SHARE TRANSACTIONS--CLASS I:
Shares sold 1,915,238 3,238,264
Less shares redeemed (2,984,401) (8,156,424)
------------------- -------------------
NET DECREASE IN SHARES OUTSTANDING (1,069,163) (4,918,160)
=================== ===================
FUND SHARE TRANSACTIONS--CLASS II:
Shares sold 14,759 13,910
Less shares redeemed (4,757) (7,871)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 10,002 6,039
=================== ===================
</Table>
58
<Page>
<Table>
<Caption>
THE OAKMARK
EQUITY AND INCOME FUND
-----------------------------------------
PERIOD ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
-----------------------------------------
FROM OPERATIONS:
Net investment income $ 14,343,143 $ 34,174,070
Net realized gain on investments 80,541,618 9,562,063
Net realized gain on foreign currency transactions 180,636 370,636
Net change in unrealized appreciation (depreciation) of
investments 584,008,876 517,697,982
Net change in unrealized appreciation (depreciation)
--other 102,127 87,469
------------------- -------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 679,176,400 561,892,220
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class I (30,409,110) (33,616,359)
Net investment income--Class II (1,530,815) (1,569,445)
------------------- -------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (31,939,925) (35,185,804)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 1,935,149,079 2,076,491,027
Proceeds from shares sold--Class II 147,419,713 144,338,218
Reinvestment of distributions--Class I 29,355,523 32,429,243
Reinvestment of distributions--Class II 514,106 321,834
Payments for shares redeemed--Class I (398,443,405) (709,955,319)
Redemption fees Class I 84,144 0
Payments for shares redeemed--Class II (44,849,275) (46,269,411)
------------------- -------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 1,669,229,885 1,497,355,592
------------------- -------------------
TOTAL INCREASE IN NET ASSETS 2,316,466,360 2,024,062,008
NET ASSETS:
Beginning of period 4,384,649,011 2,360,587,003
------------------- -------------------
End of period $ 6,701,115,371 $ 4,384,649,011
=================== ===================
Undistributed net investment income $ 5,948,445 $ 23,545,227
=================== ===================
FUND SHARE TRANSACTIONS--CLASS I:
Shares sold 88,279,231 109,874,694
Shares issued in reinvestment of dividends 1,399,884 1,796,634
Less shares redeemed (18,245,553) (38,350,539)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 71,433,562 73,320,789
=================== ===================
FUND SHARE TRANSACTIONS--CLASS II:
Shares sold 6,798,152 7,706,490
Shares issued in reinvestment of dividends 24,563 17,840
Less shares redeemed (2,050,082) (2,462,923)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 4,772,633 5,261,407
=================== ===================
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59
<Page>
<Table>
<Caption>
THE OAKMARK
GLOBAL FUND
-----------------------------------------
PERIOD ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
-----------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ (1,674,675) $ 9,446
Net realized gain on investments 15,251,652 3,814,882
Net realized loss on foreign currency transactions (51,663) (168,173)
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies 155,164,277 114,576,882
Net change in unrealized appreciation (depreciation)
--other 38,270 (43,405)
------------------- -------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 168,727,861 118,189,632
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class I (52,482) 0
Net realized gain--Class I (2,853,676) 0
Net realized gain--Class II (25,590) 0
------------------- -------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (2,931,748) 0
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 584,100,705 524,732,272
Proceeds from shares sold--Class II 12,569,273 6,645,694
Reinvestment of distributions--Class I 2,804,200 0
Reinvestment of distributions--Class II 20,731 0
Payments for shares redeemed--Class I (117,878,917) (112,770,994)
Redemption fees Class I 218,441 0
Payments for shares redeemed--Class II (1,850,210) (2,412,970)
------------------- -------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 479,984,223 416,194,002
------------------- -------------------
TOTAL INCREASE IN NET ASSETS 645,780,336 534,383,634
NET ASSETS:
Beginning of period 710,597,435 176,213,801
------------------- -------------------
End of period $ 1,356,377,771 $ 710,597,435
=================== ===================
Undistributed net investment loss $ (2,017,716) $ (290,559)
=================== ===================
FUND SHARE TRANSACTIONS--CLASS I:
Shares sold 31,239,104 34,670,227
Shares issued in reinvestment of dividends 155,616 0
Less shares redeemed (6,086,912) (8,703,761)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 25,307,808 25,966,466
=================== ===================
FUND SHARE TRANSACTIONS--CLASS II:
Shares sold 663,902 462,296
Shares issued in reinvestment of dividends 1,160 0
Less shares redeemed (97,167) (171,894)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 567,895 290,402
=================== ===================
</Table>
60
<Page>
<Table>
<Caption>
THE OAKMARK
INTERNATIONAL FUND
-----------------------------------------
PERIOD ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
-----------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ (2,444,201) $ 20,158,139
Net realized gain (loss) on investments 78,785,867 (194,137,263)
Net realized gain (loss) on foreign currency
transactions 78,639 (659,981)
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies 527,624,543 712,978,826
Net change in unrealized appreciation (depreciation)
--other (39,741) 294,152
------------------- -------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 604,005,107 538,633,873
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class I (20,084,750) (15,119,015)
Net investment income--Class II (570,848) (515,254)
------------------- -------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (20,655,598) (15,634,269)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 1,023,957,732 1,342,461,828
Proceeds from shares sold--Class II 117,528,761 210,555,153
Reinvestment of distributions--Class I 18,162,578 13,994,235
Reinvestment of distributions--Class II 279,537 172,223
Payments for shares redeemed--Class I (419,389,764) (573,914,822)
Redemption fees Class I 280,208 0
Payments for shares redeemed--Class II (37,879,223) (158,686,779)
------------------- -------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 702,939,829 834,581,838
------------------- -------------------
TOTAL INCREASE IN NET ASSETS 1,286,289,338 1,357,581,442
NET ASSETS:
Beginning of period 2,799,845,136 1,442,263,694
------------------- -------------------
End of period $ 4,086,134,474 $ 2,799,845,136
=================== ===================
Undistributed net investment income (loss) $ (3,817,632) $ 19,282,167
=================== ===================
FUND SHARE TRANSACTIONS--CLASS I:
Shares sold 58,012,314 98,256,816
Shares issued in reinvestment of dividends 1,091,501 1,050,618
Less shares redeemed (23,387,678) (43,071,914)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 35,716,137 56,235,520
=================== ===================
FUND SHARE TRANSACTIONS--CLASS II:
Shares sold 6,606,015 15,141,504
Shares issued in reinvestment of dividends 16,860 12,959
Less shares redeemed (2,107,207) (11,241,101)
------------------- -------------------
NET INCREASE IN SHARES OUTSTANDING 4,515,668 3,913,362
=================== ===================
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61
<Page>
<Table>
<Caption>
THE OAKMARK INTERNATIONAL
SMALL CAP FUND
-----------------------------------------
PERIOD ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
-----------------------------------------
FROM OPERATIONS:
Net investment income $ 773,208 $ 3,739,176
Net realized gain (loss) on investments 5,440,237 (33,475,417)
Net realized gain (loss) on foreign currency
transactions 53,163 (58,650)
Net change in unrealized appreciation (depreciation) of
investments and foreign currencies 121,144,024 160,461,142
Net change in unrealized appreciation (depreciation)
--other (23,426) 36,163
Deferred foreign taxes (444,083) 0
------------------- -------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 126,943,123 130,702,414
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class I (4,209,195) (3,076,432)
Net investment income--Class II (2,982) (1,637)
Net realized gain--Class I 0 (9,181,861)
Net realized gain--Class II 0 (6,548)
------------------- -------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (4,212,177) (12,266,478)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold--Class I 109,541,987 122,746,015
Proceeds from shares sold--Class II 39,982 978,707
Reinvestment of distributions--Class I 3,863,970 11,533,652
Reinvestment of distributions--Class II 1,508 4,554
Payments for shares redeemed--Class I (57,181,044) (132,515,271)
Redemption fees Class I 249,166 0
Payments for shares redeemed--Class II (145,830) (945,332)
------------------- -------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 56,369,739 1,802,325
------------------- -------------------
TOTAL INCREASE IN NET ASSETS 179,100,685 120,238,261
NET ASSETS:
Beginning of period 478,244,429 358,006,168
------------------- -------------------
End of period $ 657,345,114 $ 478,244,429
=================== ===================
Undistributed net investment income $ 79,296 $ 3,518,265
=================== ===================
FUND SHARE TRANSACTIONS--CLASS I:
Shares sold 6,901,509 11,051,169
Shares issued in reinvestment of dividends 260,200 1,095,314
Less shares redeemed (3,532,857) (12,545,416)
------------------- -------------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 3,628,852 (398,933)
=================== ===================
FUND SHARE TRANSACTIONS--CLASS II:
Shares sold 2,534 88,462
Shares issued in reinvestment of dividends 102 432
Less shares redeemed (8,775) (85,057)
------------------- -------------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (6,139) 3,837
=================== ===================
</Table>
62
<Page>
THE OAKMARK FAMILY OF FUNDS
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of The Oakmark Fund
("Oakmark"), The Oakmark Select Fund ("Select"), The Oakmark Small Cap Fund
("Small Cap"), The Oakmark Equity and Income Fund ("Equity and Income"), The
Oakmark Global Fund ("Global"), The Oakmark International Fund
("International"), and The Oakmark International Small Cap Fund ("Int'l Small
Cap") collectively referred to as "the Funds", each a series of Harris
Associates Investment Trust (the "Trust"), a Massachusetts business trust, which
is registered as an investment company under the Investment Company Act of 1940.
These policies are in conformity with accounting principles generally accepted
in the United States of America ("GAAP"). The presentation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates and assumptions.
CLASS DISCLOSURE--
Each Fund offers two classes of shares: Class I Shares and Class II Shares.
Class I Shares are offered to the general public. Class II Shares are offered to
certain retirement plans such as 401(k) and profit sharing plans. Class II
Shares pay a service fee at the annual rate of .25% of average net assets of
Class II Shares of the Funds. This service fee is paid to an administrator for
performing the services associated with the administration of such retirement
plans.
Income, realized and unrealized capital gains and losses and expenses of the
Funds that are not directly attributable to a specific class of shares are
prorated among the classes based on the relative net assets of each class.
Expenses directly attributable to a class of shares are recorded to the specific
class.
REDEMPTION FEES--
Each Fund imposes a short-term trading fee on redemptions of Class I Shares held
for 90 days or less to offset two types of costs to the Fund caused by
short-term trading: portfolio transaction and market impact costs associated
with erratic redemption activity and administrative costs associated with
processing redemptions. The fee is 2% of the redemption value and is deducted
from the redemption proceeds and retained by the Fund. The "first-in, first-out"
(FIFO) method is used to determine the holding period.
SECURITY VALUATION--
Securities traded on securities exchanges and over-the-counter securities are
valued at the last sales price on the day of valuation, or lacking any reported
sales that day, at the most recent bid quotation. Securities traded on the
NASDAQ National Market are valued at the NASDAQ Official Closing Price ("NOCP"),
or lacking an NOCP, at the most recent bid quotation on the NASDAQ National
Market. 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 maturing in less than 61 days from the
date of purchase are valued on an amortized cost basis which approximates market
value. Options are valued at the last reported sale price on the day of
valuation, or lacking any reported sales that day, at the mean of the most
recent bid and ask quotations. Securities for which quotations are not readily
available, or securities which may have been affected by a significant event
after the price was determined, and other assets are valued at a fair value as
determined by or under the direction of pricing committees established by the
Board of Trustees. Securities traded in foreign markets are valued using prices
reported by local foreign markets. The Funds' net asset values are determined at
the time of the close of the New York Stock Exchange. The pricing committees
will evaluate movements in the U.S. markets after the close of foreign markets
and may adjust security prices to reflect changes in reaction to U.S. markets as
determined by a third party model. At March 31, 2004, the Funds held one
security for which a quotation was not readily available, and no securities
which may have been affected by a significant event after the price was
determined.
FOREIGN CURRENCY TRANSLATIONS--
Values of investments and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars using the mean of the bid and offer
prices of such currencies at the time of valuation. Purchases and sales of
investments and dividend and interest income are converted at the prevailing
rate of exchange on the respective dates of such transactions.
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized gain or loss from securities.
Net realized gains or losses on foreign currency transactions arise from sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the amounts
of dividends, interest, and foreign withholding taxes recorded and the U.S.
dollar equivalent of the amounts actually received or paid, and the realized
gains or losses resulting from the portfolio and transaction hedges. Net
unrealized foreign exchange gains and losses arise from changes in the fair
value of assets and liabilities, other than investments in securities at fiscal
year end, resulting from changes in exchange rates.
63
<Page>
For the period ended March 31, 2004, net unrealized appreciation (depreciation)
- - other included the following components:
<Table>
<Caption>
SMALL EQUITY & INTER- INT'L
CAP INCOME GLOBAL NATIONAL SMALL CAP
- ------------------------------------------------------------------------------------------------------
Unrealized appreciation
(depreciation) on
dividends and
dividend reclaims
receivable $ -- $ 188,995 $ 47,357 $ 225,588 $ 55,143
Unrealized appreciation
(depreciation) on open
securities
purchases and sales 8,786 -- (34,198) (137,584) (18,510)
------------ ------------ ------------ ------------ ------------
Net Unrealized
appreciation
(depreciation) -
Other $ 8,786 $ 188,995 $ 13,159 $ 88,004 $ 36,633
============ ============ ============ ============ ============
</Table>
SECURITY TRANSACTIONS AND INVESTMENT INCOME--
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis. Bond discount is
accreted and premium is amortized over the expected life of each applicable
security. Withholding taxes on foreign dividends have been provided for in
accordance with the Funds' understanding of the applicable country's tax rules
and rates. Corporate gains taxes on the appreciation of certain foreign
securities have been accrued for in accordance with the Funds' understanding of
the applicable country's tax rules and rates, and are recorded as Deferred
Foreign Taxes on the Statements of Operations. Net realized gains and losses on
investments are determined by the specific identification method. Net realized
gains and losses on investments are determined by the specific identification
method.
FORWARD FOREIGN CURRENCY CONTRACTS--
The Funds' currency transactions are limited to transaction hedging and
portfolio hedging involving either specific transactions or portfolio positions.
The contractual amounts of forward foreign exchange contracts do not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. Risks arise from the possible inability
of counter parties to meet the terms of their contracts and from movements in
currency values. At March 31, 2004, the Funds had no forward foreign currency
contracts outstanding.
DISTRIBUTIONS TO SHAREHOLDERS--
Income, dividends and capital gains distributions are determined in accordance
with federal income tax regulations, which may differ from GAAP. To the extent
the tax and book differences are permanent in nature, such amounts are
reclassified among paid in capital, undistributed net investment income and
accumulated undistributed net realized gain (loss). Those differences are
primarily related to foreign currency transactions, deferral of losses on wash
sales, and character of capital loss carryforwards. The Funds also utilize, when
appropriate, earnings and profits distributed to shareholders on redemption of
shares as a part of the dividends paid deduction for income tax purposes.
SHORT SALES--
The Fund may sell a security it does not own in anticipation of a decline in the
fair value of that security. When the Fund sells a security short, it must
borrow the security sold short and deliver it to the broker-dealer through which
it made the short sale. A gain, limited to the price at which the Fund sold the
security short, or loss, unlimited in size, will be recognized upon the
termination of a short sale. At March 31, 2004, the Funds had no securities sold
short.
ACCOUNTING FOR OPTIONS--
When a Fund writes an option, the premium received by the Fund is recorded as a
liability and is subsequently adjusted to the current market value of the option
written. Premiums received from writing options that expire are recorded by the
Fund on the expiration date as realized gains from option transactions. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or if the premium is less than the amount paid for the closing
purchase transaction, as a realized loss. If a call option is exercised, the
premium is added to the proceeds from the sale of the underlying security or
currency in determining whether the Fund has realized a gain or a loss. If a put
option is exercised, the premium reduces the cost basis of the security or
currency purchased by the Fund. In writing an option, the Fund bears the market
risk of an unfavorable change in the price of the security or currency
underlying the written option. Exercise of an option written by the Fund could
result in the Fund selling or buying a security or currency at a price different
from the current market value. Options written by the Funds do not give rise to
counterparty credit risk, as they obligate the Funds, not their counterparties,
to perform. At March 31, 2004, the Funds had no written options outstanding.
When a Fund purchases an option, the premium paid by the Fund is recorded as an
asset and is subsequently adjusted to the current market value of the option
purchased. Purchasing call options tends to increase the Fund's exposure to the
underlying instrument. Purchasing put options tends to decrease the Fund's
exposure to the underlying instrument. Premiums paid for purchasing options
which expire are treated as realized losses. Premiums paid for purchasing
options which are exercised or closed are added to the amounts paid or offset
against
64
<Page>
the proceeds on the underlying security to determine the realized gain or loss.
The risk associated with purchasing put and call options is potential loss of
the premium paid. At March 31, 2004, the Funds held no options.
COMMITTED LINE OF CREDIT--
The Funds have an unsecured committed line of credit with Investors Bank & Trust
Company ("IBT") in the amount of $450 million. Borrowings under that arrangement
bear interest at .45% above the Federal Funds Effective Rate. There were no
borrowings during the period ended March 31, 2004.
REPURCHASE AGREEMENTS--
Each Fund, through its custodian, receives delivery of the underlying securities
collateralizing repurchase agreements. It is each Fund's policy that the market
value of the collateral be at least equal to 105% of the repurchase price,
including interest. Each Fund's adviser is responsible for determining that the
value of the collateral is at all times at least equal to 105% of the repurchase
price, including interest. Repurchase agreements could involve certain risks in
the event of default or insolvency of the counterparty including possible delays
or restrictions upon a Fund's ability to dispose of the underlying securities.
EXPENSE OFFSET ARRANGEMENT--
IBT serves as custodian of the Funds. IBT's fee may be reduced by credits which
are an earnings allowance calculated on the average daily cash balances each
Fund maintains with IBT. Credit balances used to reduce the Funds' custodian
fees, if any, would be reported as a reduction of total expenses in the
Statements of Operations.
SECURITY LENDING--
Each Fund except Oakmark may lend its portfolio securities to broker-dealers and
banks. 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
fair value of the securities loaned by the Fund. Collateral is marked to market
and monitored daily. 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, and the bank shall
return the securities within five business days or less. In the event of
bankruptcy or other default of the borrower, the Fund could experience delays in
liquidating the loan collateral or recovering the loaned securities and incur
expenses related to enforcing its rights. In addition, there could be a decline
in the value of the collateral or in the fair 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 that period.
RECLASSIFICATIONS--
Certain amounts have been reclassified to conform with the current presentation.
2. TRANSACTIONS WITH AFFILIATES
Each Fund has an investment advisory agreement with Harris Associates L.P.
("Adviser"). For management services and facilities furnished, the Funds pay the
Adviser monthly fees. Each fee is calculated on the total net assets as
determined at the end of each preceding calendar month. Annual fee rates are as
follows:
<Table>
<Caption>
FUND ADVISORY FEES FUND ADVISORY FEES
-------------------------------------------------------------------------------------------------------------------
Oakmark 1.00% up to $2 billion; Equity and Income 0.75% up to $5 billion
0.90% on the next $1 billion; 0.70% on the next $2.5 billion
0.80% on the next $2 billion; and 0.675% on the next $2.5 billion; and
0.75% over $5 billion 0.65% over $10 billion
Select 1.00% up to $1 billion; Global 1.00% up to $2 billion
0.95% on the next $500 million; 0.95% on the next $2 billion; and
0.90% on the next $500 million; 0.90% over $4 billion
0.85% on the next $500 million;
0.80% on the next $2.5 billion; and International 1.00% up to $2 billion;
0.75% over $5 billion 0.95% on the next $1 billion; and
0.85% over $3 billion
Small Cap 1.00%
Int'l Small Cap 1.25% up to $500 million; and
1.10% over $500 million
</Table>
65
<Page>
The Adviser undertakes to reimburse each Fund Class 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 excluding fees paid to the
Adviser) exceed the percent set forth opposite the Fund Class of average net
assets of the Fund Class through January 31, 2005.
<Table>
<Caption>
FUND CLASS I CLASS II
---------------------------------------------------------------------------------------
Oakmark 1.50% 1.75%
Select 1.50 1.75
Small Cap 1.50 1.75
Equity & Income 1.00 1.25
Global 1.75 2.00
International 2.00 2.25
Int'l Small Cap 2.00 2.25
</Table>
For the period ended March 31, 2004, the Funds incurred brokerage commissions,
including commissions paid to an affiliate of the Adviser, Harris Associates
Securities L.P., as follows:
<Table>
<Caption>
FUND TOTAL COMMISSIONS COMMISSIONS PAID TO AFFILIATES
-----------------------------------------------------------------------------------------------------------
Oakmark $ 1,919,484 $ 117,690
Select 1,719,833 35,862
Small Cap 513,730 68,364
Equity & Income 2,488,851 189,384
Global 1,297,471 28,505
International 2,787,160 0
Intl Small Cap 399,896 0
</Table>
CDC IXIS Asset Management Services Co., an affiliate of the Adviser, provides
transfer agent services to the Funds. The fees are based on the number of open
accounts and the reimbursement of out-of-pocket expenses. For the period ended
March 31, 2004, the Funds incurred the following transfer agent expenses:
<Table>
<Caption>
FUND TRANSFER AGENT FEES
----------------------------------------------------------------------------------------------------
Oakmark $ 1,434,105
Select 762,368
Small Cap 180,928
Equity & Income 736,872
Global 178,066
International 541,948
Intl Small Cap 81,545
</Table>
The Adviser has entered into agreements with service providers to provide
recordkeeping, processing, shareholder communications and other services to the
Funds. These services would be provided by the Funds if the shares were held in
accounts registered directly with the Funds' transfer agent. Accordingly, the
Funds pay a portion of these fees pursuant to a separate agreement with the
Adviser. These fees are reflected as other shareholder servicing fees in the
Statements of Operations.
The non-interested Trustees of the Trust may participate in the Trust's Deferred
Compensation Plan for Independent Trustees. Participants in the plan may elect
to defer all or a portion of their compensation. Amounts deferred are retained
by the Trust and represent an unfunded obligation of the Trust. The value of
amounts deferred for a participant is determined by reference to the change in
value of Class I shares of one or more of the Funds or a money market fund as
specified by the participant. Benefits under the plan are payable upon
retirement. The interested trustees are not compensated by the Funds.
66
<Page>
3. FEDERAL INCOME TAXES
It is the policy of each Fund to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its net taxable income, including any net realized gains on investments, to
its shareholders. Therefore, no federal income tax provision is required.
<Table>
<Caption>
COST OF INVESTMENTS NET UNREALIZED
FOR FEDERAL INCOME GROSS UNREALIZED GROSS UNREALIZED APPRECIATION
FUND TAX PURPOSES APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------
Oakmark $ 4,770,465,421 $ 1,199,436,580 $ (82,232,274) $ 1,117,204,306
Select 3,926,881,653 1,920,257,119 (54,421,784) 1,865,835,335
Small Cap 301,089,419 100,267,962 (6,738,040) 93,529,922
Equity & Income 5,757,718,053 1,004,753,565 (8,660,072) 996,093,493
Global 1,121,945,662 240,297,925 (3,402,939) 236,894,986
Internationa l3,202,473,277 894,476,695 (15,765,847) 878,710,848
Intl Small Cap 463,082,733 197,130,040 (5,879,319) 191,250,721
</Table>
4. INVESTMENT TRANSACTIONS
For the period ended March 31, 2004, transactions in investment securities
(excluding short term and U.S. Government securities) were as follows (in
thousands):
<Table>
<Caption>
EQUITY & INT'L
OAKMARK SELECT SMALL CAP INCOME GLOBAL INTERNATIONAL SMALL CAP
-----------------------------------------------------------------------------------------------------------------
Purchases $ 675,068 $ 432,191 $ 74,334 $ 1,331,369 $ 505,727 $ 863,589 $ 105,821
Proceeds from sales 404,099 415,890 98,627 368,644 72,426 207,925 54,340
</Table>
Purchases at cost and proceeds from sales of long-term U.S. Government
securities for the period ended March 31, 2004 were $536,365 and $46,003
respectively for Equity and Income.
Transactions in options written during the period ended March 31, 2004 were as
follows:
<Table>
<Caption>
OAKMARK SELECT SMALL CAP
---------------------------------------------------------------------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------
Options outstanding at
September 30, 2003 0 $ 0 0 $ 0 950 $ 116,769
Options written 26,250 2,173,021 29,750 2,349,762 0 0
Options terminated in closing
purchase transactions (6,993) (683,121) (8,397) (811,727) (500) (57,872)
Options expired (17,107) (1,180,339) (20,978) (1,503,162) (450) (58,897)
Options exercised (2,150) (309,560) (375) (34,873) 0 0
------- ----------- ------- ----------- ---- -----------
Options outstanding at
March 31, 2004 0 $ 0 0 $ 0 0 $ 0
</Table>
<Table>
<Caption>
GLOBAL
----------------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------------------------------------------------------------------------------------------------
Options outstanding at September 30, 2003 3,000 $ 255,988
Options written 1,000 155,663
Options expired (3,000) (363,653)
Options exercised (1,000) (47,998)
------ ------------
Options outstanding at March 31, 2004 0 $ 0
</Table>
67
<Page>
5. INVESTMENTS IN AFFILIATED ISSUERS
An affiliated issuer, as defined under the Investment Company Act of 1940, is
one in which the Trust's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of each Fund's
investments in securities of these issuers for the period ended March 31, 2004,
is set forth below:
SUMMARY OF TRANSACTIONS WITH AFFILIATED ISSUERS
THE OAKMARK FUND
<Table>
<Caption>
MARKET VALUE
PURCHASES SALES DIVIDEND MARCH 31,
AFFILIATES SHARES HELD (COST) PROCEEDS INCOME 2004
-----------------------------------------------------------------------------------------------------------------------------
Burlington Resources,Inc 1,571,100 $ 0 $ 0 $ 471,330 $ 99,969,093
H&R Block, Inc. 2,829,300 0 10,836,226 1,165,340 144,379,179
Toys 'R' Us, Inc. 3,125,000 $ 0 0 0 52,500,000
---------------- ---------------- ---------------- ----------------
TOTALS $ 0 $ 10,836,226 $ 1,636,670 $ 296,848,272
</Table>
THE OAKMARK SELECT FUND
<Table>
<Caption>
MARKET VALUE
PURCHASES SALES DIVIDEND MARCH 31,
AFFILIATES SHARES HELD (COST) PROCEEDS INCOME 2004
-----------------------------------------------------------------------------------------------------------------------------
Burlington Resources, Inc. 4,326,800 $ 0 $ 0 $ 1,298,040 $ 275,314,284
H&R Block, Inc. 8,259,800 0 33,137,226 3,408,300 421,497,594
The Dun & Bradstreet
Corporation 3,934,900 0 29,537,786 0 210,517,150
Toys 'R' Us, Inc. 12,622,700 1,567,695 16,425,605 0 212,061,360
---------------- ---------------- ---------------- ----------------
TOTALS $ 1,567,695 $ 79,100,617 $ 4,706,340 $ 1,119,390,388
</Table>
THE OAKMARK SMALL CAP FUND
<Table>
<Caption>
MARKET VALUE
PURCHASES SALES DIVIDEND MARCH 31,
AFFILIATES SHARES HELD (COST) PROCEEDS INCOME 2004
-----------------------------------------------------------------------------------------------------------------------------
eFunds Corporation 706,700 $ 0 $ 10,636,615 $ 0 $ 11,589,880
---------------- ---------------- ---------------- ----------------
TOTALS $ 0 $ 10,636,615 $ 0 $ 11,589,880
</Table>
THE OAKMARK EQUITY & INCOME FUND
<Table>
<Caption>
MARKET VALUE
PURCHASES SALES DIVIDEND MARCH 31,
AFFILIATES SHARES HELD (COST) PROCEEDS INCOME 2004
-----------------------------------------------------------------------------------------------------------------------------
Burlington Resources, Inc. 3,575,000 $ 74,735,466 $ 0 $ 997,500 $ 227,477,250
---------------- ---------------- ---------------- ----------------
TOTALS $ 74,735,466 $ 0 $ 997,500 $ 227,477,250
</Table>
68
<Page>
THE OAKMARK GLOBAL FUND
<Table>
<Caption>
MARKET VALUE
PURCHASES SALES DIVIDEND MARCH 31,
AFFILIATES SHARES HELD (COST) PROCEEDS INCOME 2004
-----------------------------------------------------------------------------------------------------------------------------
Burlington Resources, Inc. 630,000 $ 33,267,449 $ 0 $ 140,100 $ 40,086,900
Ducati Motor Holding S.p.A 2,650,000 1,209,621 0 0 4,278,376
eFunds Corporation 1,745,000 0 1,547,877 0 28,618,000
Euronext 1,814,000 20,811,931 0 0 54,131,279
Grupo Aeroportuario
del Sureste S.A. de C.V. 463,000 0 0 0 9,653,550
Lonza group AG, Registered
Shares 655,400 34,039,200 0 0 33,463,600
Lotte Chilsung Beverage Co., Ltd. 13,430 0 0 16,496 7,625,608
Meitec Corporation 603,500 8,029,610 0 287,287 22,743,012
Michael Page International plc 4,815,400 0 0 0 16,382,413
---------------- ---------------- ---------------- ----------------
TOTALS $ 97,357,811 $ 1,547,877 $ 443,883 $ 216,982,738
</Table>
THE OAKMARK INTERNATIONAL FUND
<Table>
<Caption>
MARKET VALUE
PURCHASES SALES DIVIDEND MARCH 31,
AFFILIATES SHARES HELD (COST) PROCEEDS INCOME 2004
-----------------------------------------------------------------------------------------------------------------------------
Chargeurs SA 1,050,201 $ 0 $ 0 $ 0 $ 35,280,468
Enodis plc 33,585,320 0 0 0 58,059,048
Euronext 4,603,200 34,528,624 0 0 137,363,343
Giordano International Limited 81,018,300 0 1,218,671 0 50,682,897
Grupo Aeroportuario
del Sureste S.A. de C.V 242,000 0 0 0 5,045,700
Lonza group AG, Registered
Shares 1,958,600 75,603,636 0 0 100,002,756
Lotte Chilsung Beverage Co., Ltd. 83,400 0 0 0 47,354,856
Meitec Corporation 1,899,100 10,528,968 0 933,992 71,567,944
Michael Page International plc 22,748,600 0 3,009,020 0 77,392,733
---------------- ---------------- ---------------- ----------------
TOTALS $ 120,661,228 $ 4,227,691 $ 933,992 $ 582,749,745
</Table>
THE OAKMARK INT'L SMALL CAP FUND
<Table>
<Caption>
MARKET VALUE
PURCHASES SALES DIVIDEND MARCH 31,
AFFILIATES SHARES HELD (COST) PROCEEDS INCOME 2004
-----------------------------------------------------------------------------------------------------------------------------
Alaska Milk Corporation 49,394,000 $ 0 $ 0 $ 45,492 $ 2,593,899
Baycorp Advantage Limited 11,540,500 0 5,450,387 0 22,519,987
Ducati Motor Holding S.p.A 6,083,600 4,756,853 0 0 9,821,860
Grupo Aeroportuario del Sureste
S.A. de C.V 1,076,600 250,806 0 0 22,447,110
Interpump Group S.p.A 4,604,900 7,612,730 0 0 20,223,952
Mainfreight Limited 8,935,381 960,574 0 124,248 10,614,982
Matichon Public Company
Limited, Foreign Shares 2,039,500 0 0 210,956 5,716,524
Royal Doulton plc 22,373,000 0 0 0 3,403,512
---------------- ---------------- ---------------- -------------------
TOTALS $ 13,580,963 $ 5,450,387 $ 380,696 $ 97,341,826
</Table>
69
<Page>
[OAKMARK LOGO]
FAMILY OF FUNDS
(This page has been intentionally left blank.)
70
<Page>
THE OAKMARK FUND
FINANCIAL HIGHLIGHTS-CLASS I
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED YEAR ENDED
2004 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 33.85 $ 28.08 $ 32.01
Income (Loss) From Investment
Operations:
Net Investment Income 0.09 0.13 0.12
Net Gains (Losses) on Securities
(both realized and unrealized) 4.28 5.75 (3.85)
------------ ------------- -------------
Total From Investment Operations: 4.37 5.88 (3.73)
Less Distributions:
Dividends (from net investment income) (0.14) (0.11) (0.20)
Distributions (from capital gains) 0.00 0.00 0.00
------------ ------------- -------------
Total Distributions (0.14) (0.11) (0.20)
------------ ------------- -------------
Redemption Fee Per Share 0.00(a) -- --
------------ ------------- -------------
Net Asset Value, End of Period $ 38.08 $ 33.85 $ 28.08
============ ============= =============
Total Return 12.95% 20.99% (11.77)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 5,801.8 $ 4,769.4 $ 3,300.9
Ratio of Expenses to Average Net Assets 1.07%* 1.14% 1.17%
Ratio of Net Investment Income to Average Net Assets 0.53%* 0.48% 0.38%
Portfolio Turnover Rate 8% 21% 44%
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 26.95 $ 34.37 $ 33.54
Income (Loss) From Investment
Operations:
Net Investment Income 0.07 0.49 0.36
Net Gains (Losses) on Securities
(both realized and unrealized) 5.38 (2.91) 2.51
------------ ------------- -------------
Total From Investment Operations: 5.45 (2.42) 2.87
Less Distributions:
Dividends (from net investment income) (0.39) (0.26) (0.44)
Distributions (from capital gains) 0.00 (4.74) (1.60)
------------ ------------- -------------
Total Distributions (0.39) (5.00) (2.04)
------------ ------------- -------------
Redemption Fee Per Share -- -- --
------------ ------------- -------------
Net Asset Value, End of Period $ 32.01 $ 26.95 $ 34.37
============ ============= =============
Total Return 20.42% (7.55)% 7.98%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 3,109.1 $ 2,038.7 $ 4,772.8
Ratio of Expenses to Average Net Assets 1.15% 1.21% 1.11%
Ratio of Net Investment Income to Average Net Assets 0.73% 1.42% 1.02%
Portfolio Turnover Rate 57% 50% 13%
</Table>
FINANCIAL HIGHLIGHTS-CLASS II
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED APRIL 5, 2001
MARCH 31, YEAR ENDED YEAR ENDED THROUGH
2004 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002 2001 (b)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 33.68 $ 28.04 $ 31.97 $ 32.09
Income (Loss) From Investment Operations:
Net Investment Income 0.04 0.05 0.16 0.05
Net Gains (Losses) on Securities
(both realized and unrealized) 4.25 5.69 (3.92) (0.17)
------------ ------------- ------------- -------------
Total From Investment Operations: 4.29 5.74 (3.76) (0.12)
Less Distributions:
Dividends (from net investment income) (0.05) (0.10) (0.17) 0.00
Distributions (from capital gains) 0.00 0.00 0.00 0.00
------------ ------------- ------------- -------------
Total Distributions (0.05) (0.10) (0.17) 0.00
------------ ------------- ------------- -------------
Net Asset Value, End of Period $ 37.92 $ 33.68 $ 28.04 $ 31.97
============ ============= ============= =============
Total Return 12.75% 20.52% (11.85)% (0.37)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 39.2 $ 21.1 $ 7.7 $ 0.1
Ratio of Expenses to Average Net Assets 1.42%* 1.53% 1.44% 1.32%*
Ratio of Net Investment Income to Average Net Assets 0.16%* 0.06% 0.35% 0.46%*
Portfolio Turnover Rate 8% 21% 44% 57%
</Table>
* Data has been annualized.
(a) Rounds to less than $0.01 per share.
(b) The date on which Class II shares were first sold to the public was April
5, 2001.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71
<Page>
THE OAKMARK SELECT FUND
FINANCIAL HIGHLIGHTS-CLASS I
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED YEAR ENDED
2004 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 27.55 $ 21.67 $ 25.20
Income (Loss) From Investment Operations:
Net Investment Income 0.09 0.05 0.02
Net Gains (Losses) on Securities
(both realized and unrealized) 3.83 5.85 (3.50)
------------ ------------- -------------
Total From Investment Operations: 3.92 5.90 (3.48)
Less Distributions:
Dividends (from net investment income) (0.10) (0.02) (0.05)
Distributions (from capital gains) 0.00 0.00 0.00
------------ ------------- -------------
Total Distributions (0.10) (0.02) (0.05)
------------ ------------- -------------
Redemption Fee Per Share 0.00(a) -- --
------------ ------------- -------------
Net Asset Value, End of Period $ 31.37 $ 27.55 $ 21.67
============ ============= =============
Total Return 14.26% 27.25% (13.85)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 5,696.4 $ 4,993.0 $ 3,717.6
Ratio of Expenses to Average Net Assets 1.00%* 1.02% 1.07%
Ratio of Net Investment Income to Average Net Assets 0.59%* 0.23% 0.09%
Portfolio Turnover Rate 8% 20% 32%
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 21.45 $ 20.92 $ 16.76
Income (Loss) From Investment Operations:
Net Investment Income 0.03 0.13 0.19
Net Gains (Losses) on Securities
(both realized and unrealized) 5.17 4.32 4.73
------------- ------------- -------------
Total From Investment Operations: 5.20 4.45 4.92
Less Distributions:
Dividends (from net investment income) (0.09) (0.20) (0.05)
Distributions (from capital gains) (1.36) (3.72) (0.71)
------------- ------------- -------------
Total Distributions (1.45) (3.92) (0.76)
------------- ------------- -------------
Redemption Fee Per Share -- -- --
------------- ------------- -------------
Net Asset Value, End of Period $ 25.20 $ 21.45 $ 20.92
============= ============= =============
Total Return 25.75% 24.53% 30.07%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 4,161.4 $ 1,772.0 $ 1,638.9
Ratio of Expenses to Average Net Assets 1.08% 1.17% 1.16%
Ratio of Net Investment Income to Average Net Assets 0.26% 0.76% 0.98%
Portfolio Turnover Rate 21% 69% 67%
</Table>
FINANCIAL HIGHLIGHTS-CLASS II
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED DECEMBER 31, 1999
MARCH 31, YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
2004 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002 2001 2000 (b)
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 27.37 $ 21.56 $ 25.10 $ 21.40 $ 18.42
Income From Investment Operations:
Net Investment Income (Loss) 0.06 0.00(c) (0.04) 0.00 0.10
Net Gains or Losses on Securities
(both realized and unrealized) 3.81 5.81 (3.50) 5.10 2.88
------------ ------------- ------------- ------------- -----------------
Total From Investment Operations: 3.87 5.81 (3.54) 5.10 2.98
Less Distributions:
Dividends (from net investment
income) (0.04) 0.00 0.00 (0.06) 0.00
Distributions (from capital gains) 0.00 0.00 0.00 (1.34) 0.00
------------ ------------- ------------- ------------- -----------------
Total Distributions (0.04) 0.00 0.00 (1.40) 0.00
------------ ------------- ------------- ------------- -----------------
Net Asset Value, End of Period $ 31.20 $ 27.37 $ 21.56 $ 25.10 $ 21.40
============ ============= ============= ============= =================
Total Return 14.13% 26.95% (14.10)% 25.28% 16.18%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $ 108.4 $ 93.1 $ 64.4 $ 35.4 $ 6.8
Ratio of Expenses to Average Net
Assets 1.25%* 1.29% 1.36% 1.40% 1.41%*
Ratio of Net Investment Income
(Loss) to Average Net Assets 0.34%* (0.04)% (0.19)% (0.08)% 0.59%*
Portfolio Turnover Rate 8% 20% 32% 21% 69%
</Table>
* Data has been annualized.
(a) Rounds to less than $0.01 per share.
(b) The date on which Class II shares were first sold to the public was
December 31, 1999.
(c) Amount rounds to less than $(0.01) per share.
72
<Page>
THE OAKMARK SMALL CAP FUND
FINANCIAL HIGHLIGHTS-CLASS I
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED YEAR ENDED
2004 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 17.18 $ 14.10 $ 14.57
Income (Loss) From Investment Operations:
Net Investment Income (Loss) (0.05) (0.12) (0.11)
Net Gains (Losses) on Securities
(both realized and unrealized) 3.27 3.20 (0.36)
------------ ------------- -------------
Total From Investment Operations: 3.22 3.08 (0.47)
Less Distributions:
Dividends (from net investment income) 0.00 0.00 0.00
Distributions (from capital gains) 0.00 0.00 0.00
------------ ------------- -------------
Total Distributions 0.00 0.00 0.00
------------ ------------- -------------
Redemption Fee Per Share 0.00(a) -- --
------------ ------------- -------------
Net Asset Value, End of Period $ 20.40 $ 17.18 $ 14.10
============ ============= =============
Total Return 18.74% 21.84% (3.23)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 394.1 $ 350.3 $ 356.9
Ratio of Expenses to Average Net Assets 1.26%* 1.36% 1.33%
Ratio of Net Investment Loss to Average Net Assets (0.51)%* (0.69)% (0.67)%
Portfolio Turnover Rate 21% 13% 22%
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 15.10 $ 13.88 $ 12.63
Income (Loss) From Investment Operations:
Net Investment Income (Loss) 0.00 0.00 0.14
Net Gains (Losses) on Securities
(both realized and unrealized) (0.02) 1.22 1.20
------------- ------------- -------------
Total From Investment Operations: (0.02) 1.22 1.34
Less Distributions:
Dividends (from net investment income) 0.00 0.00 0.00
Distributions (from capital gains) (0.51) 0.00 (0.09)
------------- ------------- -------------
Total Distributions (0.51) 0.00 (0.09)
------------- ------------- -------------
Redemption Fee Per Share -- -- --
------------- ------------- -------------
Net Asset Value, End of Period $ 14.57 $ 15.10 $ 13.88
============= ============= =============
Total Return 0.07% 8.79% 10.56%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 264.6 $ 248.7 $ 437.1
Ratio of Expenses to Average Net Assets 1.27% 1.50%(b) 1.48%
Ratio of Net Investment Loss to Average Net Assets (0.28)% (0.41)%(b) (0.44)%
Portfolio Turnover Rate 47% 28% 68%
</Table>
* Data has been annualized.
(a) Rounds to less than $0.01 per share.
(b) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Advisers, ratios would have been as follows:
<Table>
<Caption>
SEPTEMBER 30,
2000
- ---------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.59%
Ratio of Net Income (Loss) to Average Net Assets (0.50)%
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73
<Page>
FINANCIAL HIGHLIGHTS-CLASS II
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED APRIL 10, 2002
MARCH 31, YEAR ENDED THROUGH
2004 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002 (a)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 17.10 $ 14.09 $ 19.71
Income (Loss) From Investment Operations:
Net Investment Loss (0.06) (0.16) (0.20)(b)
Net Gains (Losses) on Securities
(both realized and unrealized) 3.22 3.17 (5.42)
------------ ------------- --------------
Total From Investment Operations: 3.16 3.01 (5.62)
------------ ------------- --------------
Net Asset Value, End of Period $ 20.26 $ 17.10 $ 14.09
============ ============= ==============
Total Return 18.48% 21.36% (28.51)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 1.1 $ 0.8 $ 0.5
Ratio of Expenses to Average Net Assets 1.60%* 1.75%(c) 1.48%*
Ratio of Net Investment Loss to Average Net Assets (0.84)%* (1.08)%(c) (0.85)%*
Portfolio Turnover Rate 21% 13% 22%
</Table>
* Data has been annualized.
(a) The date on which Class II shares were first sold to the public was April
10, 2002.
(b) Computed using average shares outstanding throughout the period.
(c) If the fund had paid all of its expenses and there had been no expense
reimbursement by the Adviser, ratios would have been as follows:
<Table>
<Caption>
SEPTEMBER 30,
2003
- ---------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.85%
Ratio of Net Income (Loss) to Average Net Assets (1.18)%
</Table>
74
<Page>
THE OAKMARK EQUITY AND INCOME FUND
FINANCIAL HIGHLIGHTS-CLASS I
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED YEAR ENDED
2004 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 20.30 $ 17.18 $ 17.45
Income (Loss) From Investment Operations:
Net Investment Income 0.05 0.17 0.33(b)
Net Gains (Losses) on Securities
(both realized and unrealized) 2.73 3.19 (0.40)
------------ ------------- -------------
Total From Investment Operations: 2.78 3.36 (0.07)
Less Distributions:
Dividends (from net investment income) (0.14) (0.24) (0.16)
Distributions (from capital gains) 0.00 0.00 (0.04)
------------ ------------- -------------
Total Distributions (0.14) (0.24) (0.20)
------------ ------------- -------------
Redemption Fee Per Share 0.00(a) -- --
------------ ------------- -------------
Net Asset Value, End of Period $ 22.94 $ 20.30 $ 17.18
============ ============= =============
Total Return 13.75% 19.75% (0.47)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 6,313.3 $ 4,138.0 $ 2,241.9
Ratio of Expenses to Average Net Assets 0.92%* 0.93% 0.96%
Ratio of Net Investment Income to Average Net Assets 0.53%* 1.07% 1.71%
Portfolio Turnover Rate 8% 48% 73%
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 16.50 $ 15.68 $ 13.99
Income (Loss) From Investment Operations:
Net Investment Income 0.08 0.35 0.39
Net Gains (Losses) on Securities
(both realized and unrealized) 2.11 2.28 1.72
------------- ------------- -------------
Total From Investment Operations: 2.19 2.63 2.11
Less Distributions:
Dividends (from net investment income) (0.24) (0.45) (0.21)
Distributions (from capital gains) (1.00) (1.36) (0.21)
------------- ------------- -------------
Total Distributions (1.24) (1.81) (0.42)
------------- ------------- -------------
Redemption Fee Per Share -- -- --
------------- ------------- -------------
Net Asset Value, End of Period $ 17.45 $ 16.50 $ 15.68
============= ============= =============
Total Return 14.40% 18.51% 15.32%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 620.1 $ 54.5 $ 60.3
Ratio of Expenses to Average Net Assets 0.98% 1.24% 1.18%
Ratio of Net Investment Income to Average Net Assets 2.07% 3.04% 2.65%
Portfolio Turnover Rate 124% 87% 81%
</Table>
FINANCIAL HIGHLIGHTS-CLASS II
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED JULY 13, 2000
MARCH 31, YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
2004 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002 2001 2000 (c)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 20.24 $ 17.15 $ 17.40 $ 16.49 $ 15.51
Income (Loss) From Investment
Operations:
Net Investment Income 0.03 0.16 0.30(b) 0.07 0.30
Net Gains (Losses) on Securities
(both realized and unrealized) 2.71 3.15 (0.40) 2.08 0.68
------------ ------------- ------------- ------------- -------------
Total From Investment Operations: 2.74 3.31 (0.10) 2.15 0.98
Less Distributions:
Dividends (from net investment
income) (0.11) (0.22) (0.11) (0.24) 0.00
Distributions (from capital gains) 0.00 0.00 (0.04) (1.00) 0.00
------------ ------------- ------------- ------------- -------------
Total Distributions (0.11) (0.22) (0.15) (1.24) 0.00
------------ ------------- ------------- ------------- -------------
Net Asset Value, End of Period $ 22.87 $ 20.24 $ 17.15 $ 17.40 $ 16.49
============ ============= ============= ============= =============
Total Return 13.56% 19.46% (0.60)% 14.07% 6.32%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $ 387.9 $ 246.6 $ 118.7 $ 3.3 $ 0.4
Ratio of Expenses to Average Net
Assets 1.17%* 1.17% 1.20% 1.23% 1.32%*
Ratio of Net Investment Income to
Average Net Assets 0.28%* 0.84% 1.50% 1.95% 2.59%*
Portfolio Turnover Rate 8% 48% 73% 124% 87%
</Table>
* Data has been annualized.
(a) Rounds to less than $0.01 per share.
(b) Computed using average shares outstanding throughout the period.
(c) The date on which Class II shares were first sold to the public was July
13, 2000.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
75
<Page>
THE OAKMARK GLOBAL FUND
FINANCIAL HIGHLIGHTS-CLASS I
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED YEAR ENDED
2004 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002
- -------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 16.98 $ 11.30 $ 10.83
Income (Loss) From Investment Operations:
Net Investment Income (Loss) (0.02) 0.01 0.00(b)(e)
Net Gains (Losses) on Securities
(both realized and unrealized) 3.12 5.67 0.76(f)
------------ ------------- -------------
Total From Investment Operations: 3.10 5.68 0.76
Less Distributions:
Dividends (from net investment income) 0.00(b) 0.00 0.00
Distributions (from capital gains) (0.05) 0.00 (0.29)
------------ ------------- -------------
Total Distributions (0.05) 0.00 (0.29)
------------ ------------- -------------
Redemption Fee Per Share 0.00(c) -- --
------------ ------------- -------------
Net Asset Value, End of Period $ 20.03 $ 16.98 $ 11.30
============ ============= =============
Total Return 18.31% 50.27% 6.84%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 1,338.3 $ 704.8 $ 175.6
Ratio of Expenses to Average Net Assets 1.23%* 1.28% 1.55%
Ratio of Net Investment Income (Loss) to Average Net
Assets (0.29)%* 0.00%(d) (0.01)%
Portfolio Turnover Rate 7% 42% 86%
<Caption>
AUGUST 4, 1999
YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 1999 (a)
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 10.91 $ 9.18 $ 10.00
Income (Loss) From Investment Operations:
Net Investment Income (Loss) 0.03 0.11 0.01
Net Gains (Losses) on Securities
(both realized and unrealized) 0.12 1.63 (0.83)
------------- ------------- --------------
Total From Investment Operations: 0.15 1.74 (0.82)
Less Distributions:
Dividends (from net investment income) (0.17) (0.01) 0.00
Distributions (from capital gains) (0.06) 0.00 0.00
------------- ------------- --------------
Total Distributions (0.23) (0.01) 0.00
------------- ------------- --------------
Redemption Fee Per Share -- -- --
------------- ------------- --------------
Net Asset Value, End of Period $ 10.83 $ 10.91 $ 9.18
============= ============= ==============
Total Return 1.37% 18.97% (8.20)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 48.2 $ 27.2 $ 24.0
Ratio of Expenses to Average Net Assets 1.75%(g) 1.75%(g) 1.75%*(g)
Ratio of Net Investment Income (Loss) to Average Net
Assets 0.00%(g) 0.54%(g) 0.98%*(g)
Portfolio Turnover Rate 114% 147% 7%
</Table>
* Data has been annualized.
(a) The date which Fund shares were first offered for sale to the public was
August 4, 1999.
(b) Amount rounds to less than $(0.01) per share.
(c) Rounds to less than $0.01 per share.
(d) Rounds to less than 0.01%.
(e) Computed using average shares outstanding throughout the period.
(f) The amount shown for a share outstanding does not correspond with the
aggregate net realized and unrealized gain/loss for the period due to the
timing of purchases and redemptions of Fund shares in relation to the
fluctuating market values of the Fund.
(g) If the Fund had paid all of its expenses and there had been no expense
reimbursement by the Advisers, ratios would have been as follows:
<Table>
<Caption>
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.80% 1.96% 2.22%*
Ratio of Net Income (Loss) to Average Net Assets (0.05)% 0.34% 0.51%*
</Table>
76
<Page>
FINANCIAL HIGHLIGHTS-CLASS II
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED OCTOBER 10, 2001
MARCH 31, YEAR ENDED THROUGH
2004 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002 (a)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 16.84 $ 11.24 $ 11.25
Income (Loss) From Investment Operations:
Net Investment Income (Loss) (0.02) 0.02 (0.03)
Net Gains (Losses) on Securities
(both realized and unrealized) 3.07 5.58 0.31(c)
------------ ------------- ----------------
Total From Investment Operations: 3.05 5.60 0.28
Less Distributions:
Dividends (from net investment income) 0.00(b) 0.00 0.00
Distributions (from capital gains) (0.05) 0.00 (0.29)
------------ ------------- ----------------
Total Distributions (0.05) 0.00 (0.29)
------------ ------------- ----------------
Net Asset Value, End of Period $ 19.84 $ 16.84 $ 11.24
============ ============= ================
Total Return 18.16% 49.82% 2.31%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 18.1 $ 5.8 $ 0.6
Ratio of Expenses to Average Net Assets 1.44%* 1.46% 1.86%*
Ratio of Net Investment Loss to Average Net Assets (0.45)%* (0.01)% (0.26)%*
Portfolio Turnover Rate 7% 42% 86%
</Table>
* Data has been annualized.
(a) The date on which Class II shares were first sold to the public was October
10, 2001.
(b) Rounds to less than $(0.01) per share.
(c) The amount shown for a share outstanding does not correspond with the
aggregate net realized and unrealized gain/loss for the period due to the
timing of purchases and redemptions of Fund shares in relation to the
fluctuating market values of the Fund.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
77
<Page>
THE OAKMARK INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS-CLASS I
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED YEAR ENDED
2004 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 15.67 $ 12.17 $ 12.51
Income (Loss) From Investment Operations:
Net Investment Income (Loss) (0.02) 0.11 0.14
Net Gains (Losses) on Securities
(both realized and unrealized) 3.13 3.52 (0.31)
------------ ------------- -------------
Total From Investment Operations: 3.11 3.63 (0.17)
Less Distributions:
Dividends (from net investment income) (0.11) (0.13) (0.17)
Distributions (from capital gains) 0.00 0.00 0.00
------------ ------------- -------------
Total Distributions (0.11) (0.13) (0.17)
------------ ------------- -------------
Redemption Fee Per Share 0.00(a) -- --
------------ ------------- -------------
Net Asset Value, End of Period $ 18.67 $ 15.67 $ 12.17
============ ============= =============
Total Return 19.93% 29.97% (1.53)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 3,855.3 $ 2,676.6 $ 1,393.8
Ratio of Expenses to Average Net Assets 1.21%* 1.25% 1.31%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.12)%* 1.03% 1.34%
Portfolio Turnover Rate 6% 34% 24%
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 15.40 $ 13.95 $ 10.42
Income (Loss) From Investment Operations:
Net Investment Income (Loss) 0.20 1.02 (0.34)
Net Gains (Losses) on Securities
(both realized and unrealized) (2.07) 0.92 4.89
------------- ------------- -------------
Total From Investment Operations: (1.87) 1.94 4.55
Less Distributions:
Dividends (from net investment income) (0.51) (0.49) (0.24)
Distributions (from capital gains) (0.51) 0.00 (0.78)
------------- ------------- -------------
Total Distributions (1.02) (0.49) (1.02)
------------- ------------- -------------
Redemption Fee Per Share -- -- --
------------- ------------- -------------
Net Asset Value, End of Period $ 12.51 $ 15.40 $ 13.95
============= ============= =============
Total Return (13.10)% 14.27% 46.41%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 738.5 $ 782.4 $ 811.1
Ratio of Expenses to Average Net Assets 1.30% 1.30% 1.29%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.40% 1.87% 1.94%
Portfolio Turnover Rate 58% 64% 54%
</Table>
FINANCIAL HIGHLIGHTS-CLASS II
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED NOVEMBER 4, 1999
MARCH 31, YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
2004 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002 2001 2000 (b)
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 15.58 $ 12.13 $ 12.47 $ 15.37 $ 14.36
Income (Loss) From Investment
Operations:
Net Investment Income (Loss) (0.03) 0.08 0.15 0.17 0.96
Net Gains (Losses) on Securities
(both realized and unrealized) 3.09 3.48 (0.37) (2.10) 0.54
------------ ------------- ------------- ------------- ----------------
Total From Investment Operations: 3.06 3.56 (0.22) (1.93) 1.50
Less Distributions:
Dividends (from net investment
income) (0.06) (0.11) (0.12) (0.49) (0.49)
Distributions (from capital gains) 0.00 0.00 0.00 (0.48) 0.00
------------ ------------- ------------- ------------- ----------------
Total Distributions (0.06) (0.11) (0.12) (0.97) (0.49)
------------ ------------- ------------- ------------- ----------------
Net Asset Value, End of Period $ 18.58 $ 15.58 $ 12.13 $ 12.47 $ 15.37
============ ============= ============= ============= ================
Total Return 19.71% 29.52% (1.76)% (13.44)% 10.79%
Ratios/Supplemental Data:
Net Assets, End of Period
($million) $ 230.9 $ 123.2 $ 48.5 $ 1.9 $ 0.1
Ratio of Expenses to Average Net
Assets 1.50%* 1.67% 1.58% 1.64% 1.50%*
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.39)%* 0.69% 1.33% 0.62% 1.98%*
Portfolio Turnover Rate 6% 34% 24% 58% 64%
</Table>
* Data has been annualized.
(a) Rounds to less than $0.01 per share.
(b) The date on which Class II shares were first sold to the public was
November 4, 1999.
78
<Page>
THE OAKMARK INTERNATIONAL SMALL CAP FUND
FINANCIAL HIGHLIGHTS-CLASS I
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED YEAR ENDED
2004 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 13.74 $ 10.17 $ 10.00
Income (Loss) From Investment Operations:
Net Investment Income 0.02 0.11 0.11
Net Gains (Losses) on Securities
(both realized and unrealized) 3.46 3.82 0.36(c)
------------ ------------- -------------
Total From Investment Operations: 3.48 3.93 0.47
Less Distributions:
Dividends (from net investment income) (0.12) (0.09) (0.16)
Distributions (from capital gains) 0.00 (0.27) (0.14)
------------ ------------- -------------
Total Distributions (0.12) (0.36) (0.30)
------------ ------------- -------------
Redemption Fee Per Share 0.01 -- --
------------ ------------- -------------
Net Asset Value, End of Period $ 17.11 $ 13.74 $ 10.17
============ ============= =============
Total Return 25.51% 39.78% 4.68%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 656.9 $ 477.8 $ 357.7
Ratio of Expenses to Average Net Assets 1.50%* 1.57% 1.64%
Ratio of Net Investment Income to Average Net Assets 0.26%* 0.99% 1.28%
Portfolio Turnover Rate 10% 30% 42%
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 11.51 $ 12.64 $ 6.89
Income (Loss) From Investment Operations:
Net Investment Income 0.13 0.23 0.24
Net Gains (Losses) on Securities
(both realized and unrealized) (0.81) (0.66) 5.71
------------- ------------- --------------
Total From Investment Operations: (0.68) (0.43) 5.95
Less Distributions:
Dividends (from net investment income) (0.34) (0.11) (0.20)
Distributions (from capital gains) (0.49) (0.59) 0.00
------------- ------------- --------------
Total Distributions (0.83) (0.70) (0.20)
------------- ------------- --------------
Redemption Fee Per Share -- -- --
------------- ------------- --------------
Net Asset Value, End of Period $ 10.00 $ 11.51 $ 12.64
============= ============= ==============
Total Return (6.18)% (3.44)% 88.02%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 118.9 $ 90.3 $ 155.4
Ratio of Expenses to Average Net Assets 1.74% 1.77% 1.79%
Ratio of Net Investment Income to Average Net Assets 1.83% 1.99% 2.31%
Portfolio Turnover Rate 49% 40% 126%
</Table>
FINANCIAL HIGHLIGHTS-CLASS II
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
PERIOD ENDED JANUARY 8, 2001
MARCH 31, YEAR ENDED YEAR ENDED THROUGH
2004 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2003 2002 2001 (a)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 13.69 $ 10.14 $ 9.97 $ 10.73
Income From Investment Operations:
Net Investment Income 0.02 0.08 0.13(b) 0.15
Net Gains (Losses) on Securities
(both realized and unrealized) 3.46 3.81 0.30(b)(c) (0.91)
------------ ------------- ------------- ---------------
Total From Investment Operations: 3.48 3.89 0.43 (0.76)
Less Distributions:
Dividends (from net investment income) (0.09) (0.07) (0.12) 0.00
Distributions (from capital gains) 0.00 (0.27) (0.14) 0.00
------------ ------------- ------------- ---------------
Total Distributions (0.09) (0.34) (0.26) 0.00
------------ ------------- ------------- ---------------
Net Asset Value, End of Period $ 17.08 $ 13.69 $ 10.14 $ 9.97
============ ============= ============= ===============
Total Return 25.52% 39.39% 4.25% (7.08)%
Ratios/Supplemental Data:
Net Assets, End of Period ($million) $ 0.4 $ 0.4 $ 0.3 $ 0.0
Ratio of Expenses to Average Net Assets 1.49%* 1.81% 1.87% 1.97%*
Ratio of Net Investment Income to Average Net Assets 0.20%* 0.72% 1.06% 1.76%*
Portfolio Turnover Rate 10% 30% 42% 49%
</Table>
* Data has been annualized
(a) The date on which Class II shares were first sold to the public was January
8, 2001.
(b) Computed using average shares outstanding throughout the period.
(c) The amount shown for a share outstanding does not correspond with the
aggregate net realized and unrealized gain/loss for the period due to the
timing of purchases and redemption of Fund shares in relation to the
fluctuating market values of the Fund.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
79
<Page>
This material must be preceded or accompanied by a prospectus. To order a
prospectus, which explains management fees and expenses and the special risks of
investing in the funds, visit www.oakmark.com or call 1-800-OAKMARK. Please read
the prospectus carefully before investing.
The discussion of investments and investment strategy of the funds represents
the investments of the funds and the views of fund managers and Harris
Associates L.P., the funds' investment adviser, at the time of this article, and
are subject to change without notice.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data call 1-800-OAKMARK.
INVESTING IN VALUE STOCKS PRESENTS THE RISK THAT VALUE STOCKS MAY FALL OUT OF
FAVOR WITH INVESTORS AND UNDERPERFORM GROWTH STOCKS DURING GIVEN PERIODS.
THE OAKMARK SELECT FUND CLOSED TO NEW INVESTORS AS OF 5/4/01.
BECAUSE THE OAKMARK SELECT FUND IS NON-DIVERSIFIED, THE PERFORMANCE OF EACH
HOLDING WILL HAVE A GREATER IMPACT ON THE FUND'S TOTAL RETURN, AND MAY MAKE THE
FUND'S RETURN MORE VOLATILE THAN A MORE DIVERSIFIED FUND.
THE OAKMARK EQUITY & INCOME FUND WILL CLOSE TO CERTAIN NEW INVESTORS AS OF
5/7/04.
EQUITY AND INCOME INVESTS IN MEDIUM- AND LOWER-QUALITY DEBT SECURITIES THAT HAVE
HIGHER YIELD POTENTIAL BUT PRESENT GREATER INVESTMENT AND CREDIT RISK THAN
HIGHER-QUALITY SECURITIES, WHICH MAY RESULT IN GREATER SHARE PRICE VOLATILITY.
AN ECONOMIC DOWNTURN COULD SEVERELY DISRUPT THE MARKET IN MEDIUM OR LOWER GRADE
DEBT SECURITIES AND ADVERSELY AFFECT THE VALUE OF OUTSTANDING BONDS AND THE
ABILITY OF THE ISSUERS TO REPAY PRINCIPAL AND INTEREST.
THE OAKMARK GLOBAL FUND AND THE OAKMARK INTERNATIONAL FUND CLOSED TO CERTAIN NEW
INVESTORS AS OF 12/15/03.
THE OAKMARK INTERNATIONAL SMALL CAP FUND CLOSED TO NEW INVESTORS AS OF 5/10/02.
INVESTING IN FOREIGN SECURITIES REPRESENTS RISKS WHICH IN SOME WAY MAY BE
GREATER THAN IN U.S. INVESTMENTS. THOSE RISKS INCLUDE: CURRENCY FLUCTUATION;
DIFFERENT REGULATION, ACCOUNTING STANDARDS, TRADING PRACTICES AND LEVELS OF
AVAILABLE INFORMATION; GENERALLY HIGHER TRANSACTION COSTS; AND POLITICAL RISKS.
THE STOCKS OF SMALLER COMPANIES OFTEN INVOLVE MORE RISK THAN THE STOCKS OF
LARGER COMPANIES. STOCKS OF SMALL COMPANIES TEND TO BE MORE VOLATILE AND HAVE A
SMALLER PUBLIC MARKET THAN STOCKS OF LARGER COMPANIES. SMALL COMPANIES MAY HAVE
A SHORTER HISTORY OF OPERATIONS THAN LARGER COMPANIES, MAY NOT HAVE AS GREAT AN
ABILITY TO RAISE ADDITIONAL CAPITAL AND MAY HAVE A LESS DIVERSIFIED PRODUCT
LINE, MAKING THEM MORE SUSCEPTIBLE TO MARKET PRESSURE.
1. Total return includes change in share prices and in each case includes
reinvestment of any dividends and capital gain distributions.
The performance information for Class I shares of The Oakmark Fund, The
Oakmark Select Fund, The Oakmark Small Cap Fund, The Oakmark Equity &
Income Fund, The Oakmark Global Fund, The Oakmark International Fund and
The Oakmark International Small Cap Fund does not reflect the imposition of
a 2% redemption fee on shares held by an investor for 90 days or less. The
purpose of this redemption fee is to deter market timers.
2. Portfolio holdings are subject to change without notice and are not
intended as recommendations of individual stocks.
3. During the period since inception (8/4/99 - 3/31/04), IPO's contributed an
annualized 1.83% to the performance of the Oakmark Global Fund. As the IPO
environment changes and the total net assets of the Fund grow, the impact
of IPOs on performance is expected to diminish. "IPO" stands for Initial
Public Offering, which is the first sale of stock by a company to the
public.
4. The quoted passages are taken from "Origins of the Crash" written by Roger
Lowenstein and published in 2004 by The Penguin Press, New York.
80
<Page>
5. The S&P 500 Index is a broad market-weighted average of U.S. blue-chip
companies. This index is unmanaged and investors cannot actually make
investments in this index.
6. The Dow Jones Industrial Average is an unmanaged index that includes only
30 big companies. This index is unmanaged and investors cannot actually
make investments in this index.
7. The Lipper Large Cap Value Fund Index measures the performance of the 30
largest U.S. large-cap value funds tracked by Lipper. This index is
unmanaged and investors cannot actually make investments in this index.
8. The S&P MidCap 400 is an unmanaged broad market-weighted index of 400
stocks that are in the next tier down from the S&P 500 and that are chosen
for market size, liquidity, and industry group representation. This index
is unmanaged and investors cannot actually make investments in this index.
9. The Lipper Mid Cap Value Fund Index measures the performance of the 30
largest U.S. mid-cap value funds tracked by Lipper. This index is unmanaged
and investors cannot actually make investments in this index.
10. NAV stands for Net Asset Value. NAV is the dollar value of a single mutual
fund share, based on the value of the underlying assets of the fund minus
its liabilities divided by the number of shares outstanding.
11. The Russell 2000 Index is an unmanaged, market-weighted index, with
dividends reinvested, of 2,000 small companies, formed by taking the
largest 3,000 small companies and eliminating the largest 1,000 of those
companies. This index is unmanaged and investors cannot actually make
investments in this index.
12. The S&P Small Cap 600 Index measures the performance of selected U.S.
stocks with small market capitalizations. This index is unmanaged and
investors cannot actually make investments in this index.
13. The Lipper Small Cap Value Fund Index measures the performance of the 30
largest U.S. small-cap value funds tracked by Lipper. This index is
unmanaged and investors cannot actually make investments in this index.
14. The Lipper Balanced Fund Index measures the performance of the 30 largest
U.S. balanced funds tracked by Lipper. This index is unmanaged and
investors cannot actually make investments in this index.
15. The Lehman Govt./Corp. Bond Index is an unmanaged index that includes the
Lehman Government and Lehman Corporate indices. This index is unmanaged and
investors cannot actually make investments in this index.
16. The MSCI World Index is made up of 20 country sub-indexes, including the
stock exchanges of the U.S., Europe, Canada, Australia and New Zealand, and
the Far East. This index is unmanaged and investors cannot actually make
investments in this index.
17. The Lipper Global Fund Index measures the performance of the 30 largest
mutual funds that invest in securities throughout the world. This index is
unmanaged and investors cannot actually make investments in this index.
18. The Morgan Stanley World Ex U.S. Index is made up of 19 country
sub-indexes, excluding the U.S. This index is unmanaged and investors
cannot actually make investments in this index.
19. Morgan Stanley Capital International Europe, Australasia and Far East Index
("EAFE") is an unmanaged index of companies throughout the world in
proportion to world stock market capitalizations, excluding the U.S. and
Canada. This index is unmanaged and investors cannot actually make
investments in this index.
20. The Lipper International Fund Index reflects the net asset value weighted
total return of the 30 largest international equity funds. This index is
unmanaged and investors cannot actually make investments in this index.
21. The Lipper International Small Cap Average includes 100 mutual funds that
invest in securities whose primary markets are outside of the U.S. This
index is unmanaged and investors cannot actually make investments in this
index.
81
<Page>
THE OAKMARK FAMILY OF FUNDS
INVESTMENT PHILOSOPHY
All Oakmark managers follow a consistent investment philosophy--to invest in
companies they believe are trading at a substantial discount to underlying
business value. Critical to this philosophy is to invest with management teams
who are committed to maximizing the company's business value.
THREE KEY TENETS OF OUR INVESTMENT PHILOSOPHY:
1 Buy businesses trading at a significant discount to our estimate of true
business value.
2 Invest in companies expected to grow shareholder value over time.
3 Invest with management teams who think and act as owners.
INVESTMENT PROCESS
We seek to identify undervalued companies through an intensive, in-house
research process. This process is not based on macro-economic factors, such as
the performance of the economy or the direction of interest rates. Nor is it
based on technical factors, such as the performance of the stock market itself.
And, while some value managers might use only one summary statistic--such as
price-earnings ratio--our investment professionals take a more in-depth approach
using a range of valuation measures appropriate for a specific company or
industry.
From the universe of thousands of equity securities, our team generates
investment ideas through a variety of methods. If a security appears attractive,
detailed quantitative and qualitative research follows. This careful process of
identifying undervalued stocks results in an "approved list."
THE RESULT: a unified effort aimed at identifying the best values in the
marketplace. From the list of approved stocks, each fund manager constructs a
relatively focused portfolio, built on a stock-by-stock basis from the bottom
up.
WHO SHOULD INVEST
Any investor who is seeking a disciplined value manager for the purposes of
growing and diversifying a portfolio should consider one of The Oakmark Funds,
keeping in mind that all equity investments should be considered long-term
investments. As value investors, we recognize that patience is a virtue and
believe that, over the long term, investors are rewarded for their patience. We
generally hold the companies in which we invest for three to five years, a time
horizon that we encourage our shareholders to consider as well.
HOW TO USE VALUE FUNDS IN AN OVERALL PORTFOLIO
Investment styles tend to move in cycles. One style may be in favor for a few
years while the other is out of favor, and vice versa. Diversifying the stock
portion of your portfolio may help reduce overall volatility--and potentially
provide more consistent returns over time.
INVEST
Managers select stocks from the approved list for their specific funds
APPROVED LIST
Securities available for investment
QUANTITATIVE AND QUALITATIVE RESEARCH
Rigorous analysis is performed to ensure that the stock meets
our strict value standards
CRITERIA SCREENS
Managers and research team screen for stocks that are worth
further consideration
UNIVERSE OF THOUSANDS OF EQUITY SECURITIES
All stocks available for investment
BOTTOM-UP INVESTMENT PROCESS
82
<Page>
THE OAKMARK GLOSSARY
BOOK VALUE - A company's common stock equity as it appears on a balance sheet,
equal to total assets minus liabilities, preferred stock, and intangible assets
such as goodwill. A company's book value often differs substantially from
economic value, especially in industries such as media.
BUSINESS VALUE/INTRINSIC VALUE - The perceived or estimated actual value of a
security, as opposed to its current market price or book value. Business value
can be evaluated based on what a knowledgeable buyer would pay for a business if
the company were sold in its entirety.
GROWTH INVESTING - Investors who look for companies based on whether the stock
of a company is growing earnings and/or revenue faster than the industry as a
whole or the overall market. Growth investors generally expect high rates of
growth to persist, and the stock, in turn, to deliver returns exceeding the
market's. A growth mutual fund is generally one that emphasizes stocks believed
to offer above-average growth prospects, with little to no emphasis on the
stock's current price.
M & A (MERGERS & ACQUISITIONS) - Merger: the combining of two or more entities
into one, through a purchase acquisition or a pooling of interests. Acquisition:
can also be called a takeover, and is defined as acquiring control of a
corporation, called a target, by stock purchase or exchange, either hostile or
friendly.
MARKET CAPITALIZATION (MARKET CAP OR CAP) - The market price of an entire
company on any given day, calculated by multiplying the number of shares
outstanding by the price per share.
MOMENTUM INVESTING - Approach to investing based on the belief that stock price
trends are likely to continue. Momentum investors tend to buy stocks that have
been outperforming the market and to sell those stocks when their relative
performance deteriorates. Momentum investors do not consider a company's
underlying value or fundamentals in their investment decisions.
MULTIPLE - A ratio used to measure a stock's valuation, usually greater than 1.
Sometimes used to mean price/earnings ratio.
P/B OR PRICE-TO-BOOK RATIO - A stock's capitalization divided by its book value.
The value is the same whether the calculation is done for the whole company or
on a per-share basis.
P/E OR PRICE-TO-EARNINGS RATIO - The most common measure of a stock's valuation.
It is equal to a stock's capitalization divided by its after-tax earnings over a
12-month period. The value is the same whether the calculation is done for the
whole company or on a per-share basis. Equivalently, the cost an investor in a
given stock must pay per dollar of current annual earnings. Also called earnings
multiple.
SHARE REPURCHASE - Program through which a corporation buys back its own shares
in the open market, typically an indication that the corporation's management
believes the stock price is undervalued.
VALUE INVESTING - Investors who utilize valuation measures such as business
value (including growth rate), price/earnings ratio, price/book ratio, and yield
to gauge the attractiveness of a company. Managers who employ a value investment
style believe that the true, underlying value of a company is not reflected in
its current share price, and, over time, the price has potential to increase as
the market recognizes the overall value of the business. Value stocks sell at
relatively low prices in relation to their underlying business value, earnings,
or book value.
Stocks become undervalued for a variety of reasons, including an overall
market decline, or when a specific industry falls into disfavor and investors
view all companies in that industry in the same light. Consequently, an
individual company's stock price may fall, even though it may be only
temporarily affected by the industry's problems and its underlying value has
remained unchanged.
"X TIMES EARNINGS" ("12 TIMES EARNINGS") - Another way to express a stock's
price-to-earnings (P/E) ratio. A stock with a P/E ratio of 12 sells at 12 times
earnings.
83
<Page>
[OAKMARK LOGO]
FAMILY OF FUNDS
(This page has been intentionally left blank.)
84
<Page>
THE OAKMARK FAMILY OF FUNDS
TRUSTEES AND OFFICERS
TRUSTEES
Victor A. Morgenstern--CHAIRMAN
Michael J. Friduss
Thomas H. Hayden
Christine M. Maki
John R. Raitt
Allan J. Reich
Marv R. Rotter
Burton W. Ruder
Peter S. Voss
Gary N. Wilner, M.D.
OFFICERS
John R. Raitt--PRESIDENT
Robert M. Levy--EXECUTIVE VICE PRESIDENT
James P. Benson--VICE PRESIDENT
Henry R. Berghoef--VICE PRESIDENT
Kevin G. Grant--VICE PRESIDENT
David G. Herro--VICE PRESIDENT
Clyde S. McGregor--VICE PRESIDENT
William C. Nygren--VICE PRESIDENT
Vineeta Raketich--VICE PRESIDENT
Janet L. Reali--VICE PRESIDENT AND SECRETARY
Ann W. Regan--VICE PRESIDENT--
SHAREHOLDER OPERATIONS AND ASSISTANT SECRETARY
Edward A. Studzinski--VICE PRESIDENT
Michael J. Welsh--VICE PRESIDENT
Kristi L. Rowsell--TREASURER
John J. Kane--ASSISTANT TREASURER
OTHER INFORMATION
INVESTMENT ADVISER
Harris Associates L.P.
Two North LaSalle Street
Chicago, Illinois 60602-3790
TRANSFER AGENT
CDC IXIS Asset Management Services, Inc.
Boston, Massachusetts
LEGAL COUNSEL
Bell, Boyd & Lloyd LLC
Chicago, Illinois
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Chicago, Illinois
FOR MORE INFORMATION:
Please call 1-800-OAKMARK
(1-800-625-6275)
or 617-449-6274
WEBSITE
www.oakmark.com
TO OBTAIN A PROSPECTUS, AN APPLICATION OR PERIODIC REPORTS, ACCESS OUR WEB SITE
AT www.oakmark.com, OR CALL 1-800-OAKMARK (1-800-625-6275) OR (617) 449-6274.
A description of the policies and procedures the Funds use to determine how to
vote proxies relating to portfolio securities is available without charge, upon
request, by calling toll-free 1-800-625-6275; on the Funds website at
www.oakmark.com; and on the Securities and Exchange Commissions website at
www.sec.gov.
This report is submitted for the general information of the shareholders of the
Funds.The report is not authorized for distribution to prospective investors in
the Funds unless it is accompanied or preceded by a currently effective
prospectus of the Funds.
No sales charge to the shareholder or to the new investor is made in offering
the shares of the Funds, however, a shareholder may incur a 2% redemption fee on
an exchange or redemption of Class I shares held for 90 days or less from any
Fund.
<Page>
P.O. Box 219558
Kansas City, MO 64121-9558
[OAKMARK LOGO]
FAMILY OF FUNDS
1-800-OAKMARK The Oakmark Funds are distributed by Harris Associates
www.oakmark.com Securities L.P., member NASD. Date of first use: May 2004.
<Page>
THE OAKMARK FUND CLASS II
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM ITS INCEPTION
(4/5/01) TO PRESENT (3/31/04) AS COMPARED TO THE
STANDARD & POOR'S 500 INDEX
[CHART]
<Table>
<Caption>
THE OAKMARK FUND CLASS II S & P 500
4/5/2001 $ 10,000 $ 10,000
6/30/2001 $ 10,954 $ 10,585
9/30/2001 $ 9,963 $ 9,032
12/31/2001 $ 11,040 $ 9,997
3/31/2002 $ 11,497 $ 10,024
6/30/2002 $ 10,533 $ 8,681
9/30/2002 $ 8,782 $ 7,181
12/31/2002 $ 9,434 $ 7,787
3/31/2003 $ 9,041 $ 7,542
6/30/2003 $ 10,562 $ 8,703
9/30/2003 $ 10,584 $ 8,933
12/31/2003 $ 11,773 $ 10,021
3/31/2004 $ 11,933 $ 10,191
</Table>
AVERAGE ANNUAL TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
INCEPTION
1-YEAR (4/5/01)
------------------------------------------------------------------------
OAKMARK FUND CLASS II 31.99% 6.09%
S&P 500 35.12% 0.89%
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data, call 1-800-OAKMARK or visit www.oakmark.com.
Harris Associates Securities L.P., member NASD, May 2004
<Page>
THE OAKMARK SELECT FUND CLASS II
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK SELECT FUND FROM ITS INCEPTION
(12/31/99) TO PRESENT (3/31/04) AS COMPARED TO THE
STANDARD & POOR'S 500 INDEX
[CHART]
<Table>
<Caption>
THE OAKMARK SELECT FUND CLASS II S & P 500
12/31/1999 $ 10,000 $ 10,000
3/31/2000 $ 10,885 $ 9,867
6/30/2000 $ 10,309 $ 10,290
9/30/2000 $ 11,618 $ 11,024
12/31/2000 $ 12,542 $ 9,578
3/31/2001 $ 13,876 $ 9,058
6/30/2001 $ 15,146 $ 9,204
9/30/2001 $ 14,554 $ 7,662
12/31/2001 $ 15,755 $ 8,481
3/31/2002 $ 16,137 $ 8,504
6/30/2002 $ 14,821 $ 7,365
9/30/2002 $ 12,502 $ 6,835
12/31/2002 $ 13,748 $ 7,019
3/31/2003 $ 13,673 $ 6,337
6/30/2003 $ 15,871 $ 7,290
9/3/2003 $ 15,871 $ 7,660
12/31/2003 $ 17,689 $ 8,078
3/31/2004 $ 18,113 $ 8,778
</Table>
AVERAGE ANNUAL TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
INCEPTION
1-YEAR (12/31/99)
-------------------------------------------------------------------------
Oakmark Select Fund Class II 32.47% 14.99%
S&P 500 35.12% -4.66%
</Table>
The graph and table do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data, call 1-800-OAKMARK or visit www.oakmark.com.
Harris Associates Securities L.P., member NASD, May 2004
<Page>
THE OAKMARK SMALL CAP FUND CLASS II
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK SMALL CAP FUND FROM ITS
INCEPTION (4/10/02) TO PRESENT (3/31/04) AS COMPARED TO
THE RUSSELL 2000 INDEX
[CHART]
<Table>
<Caption>
THE OAKMARK SMALL CAP FUND CLASS II RUSSELL 2000
4/10/2002 $ 10,000 $ 10,000
6/30/2002 $ 9,163 $ 9,165
9/30/2002 $ 7,149 $ 7,203
12/31/2002 $ 7,615 $ 7,647
3/31/2003 $ 7,027 $ 7,304
6/30/2003 $ 8,209 $ 9,014
9/30/2003 $ 8,676 $ 9,833
12/31/2003 $ 9,609 $ 11,261
3/30/2004 $ 10,279 $ 11,966
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
INCEPTION
1-YEAR (4/10/02)
------------------------------------------------------------------------
OAKMARK SMALL CAP FUND CLASS II 46.28% 1.40%
Russell 2000 63.83% 8.97%
</Table>
The graph and table do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data, call 1-800-OAKMARK or visit www.oakmark.com.
Harris Associates Securities L.P., member NASD, May 2004
<Page>
THE OAKMARK EQUITY AND INCOME FUND CLASS II
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK EQUITY AND INCOME FUND FROM ITS
INCEPTION (7/13/00) TO PRESENT (3/31/04) AS COMPARED TO
THE LIPPER BALANCED FUND INDEX
[CHART]
<Table>
<Caption>
THE OAKMARK EQUITY AND INCOME FUND CLASS II LIPPER BALANCED FUND INDEX
7/13/2000 $ 10,000 $ 10,000
9/30/2000 $ 10,632 $ 10,199
12/31/2000 $ 11,117 $ 10,064
3/31/2001 $ 11,563 $ 9,559
6/30/2001 $ 12,497 $ 9,895
9/30/2001 $ 12,128 $ 9,145
12/31/2001 $ 13,089 $ 9,738
3/31/2002 $ 13,637 $ 9,797
6/30/2002 $ 13,187 $ 9,149
9/30/2002 $ 12,056 $ 8,246
12/31/2002 $ 12,786 $ 8,697
3/31/2003 $ 12,487 $ 8,537
6/30/2003 $ 14,123 $ 9,469
9/30/2003 $ 14,401 $ 9,663
12/31/2003 $ 15,710 $ 10,431
3/31/2004 $ 16,354 $ 10,680
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
INCEPTION
1-YEAR (7/13/00)
------------------------------------------------------------------------
OAKMARK EQUITY & INCOME FUND CLASS II 30.97% 14.15%
Lipper Balanced Fund Index 25.10% 1.19%
</Table>
The graph and table do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Average annual total return measures annualized change,
while total return measures aggregate change. To obtain current month end
performance data, call 1-800-OAKMARK or visit www.oakmark.com.
Harris Associates Securities L.P., member NASD, May 2004
<Page>
THE OAKMARK GLOBAL FUND CLASS II
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK GLOBAL FUND FROM ITS INCEPTION
(10/10/01) TO PRESENT (3/31/04) AS COMPARED TO THE
MSCI WORLD INDEX
[CHART]
<Table>
<Caption>
THE OAKMARK GLOBAL FUND CLASS II MSCI WORLD INDEX
10/10/2001 $ 10,000 $ 10,000
12/31/2001 $ 12,060 $ 10,859
3/31/2002 $ 13,362 $ 10,896
6/30/2002 $ 12,451 $ 9,902
9/30/2002 $ 10,231 $ 8,082
12/31/2002 $ 11,760 $ 8,700
3/31/2003 $ 10,494 $ 8,260
6/30/2003 $ 14,008 $ 9,667
9/30/2003 $ 15,328 $ 10,134
12/31/2003 $ 17,454 $ 11,580
3/31/2004 $ 18,111 $ 11,883
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
INCEPTION
1-YEAR (10/10/01)
-------------------------------------------------------------------------
OAKMARK GLOBAL FUND CLASS II 72.58% 27.14%
MSCI World 43.87% 5.78%
</Table>
The graph and table do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The fund's high performance may not be repeated.
The investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Current performance may be lower or higher than the performance data quoted.
Average annual total return measures annualized change, while total return
measures aggregate change. To obtain current month end performance data, call
1-800-OAKMARK or visit www.oakmark.com.
Harris Associates Securities L.P., member NASD, May 2004
<Page>
THE OAKMARK INTERNATIONAL FUND CLASS II
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL FUND FROM ITS
INCEPTION (11/4/99) TO PRESENT (3/31/04) AS COMPARED TO THE
MSCI WORLD EX U.S. INDEX
[CHART]
<Table>
<Caption>
THE OAKMARK INTERNATIONAL MSCI WORLD
FUND CLASS II EX U.S. INDEX
11/4/99 $ 10,000 $ 10,000
12/31/99 $ 10,596 $ 11,291
3/31/2000 $ 10,567 $ 11,353
6/30/2000 $ 11,303 $ 10,977
9/30/2000 $ 11,079 $ 10,139
12/31/2000 $ 11,890 $ 9,781
3/31/2001 $ 10,836 $ 8,412
6/30/2001 $ 11,905 $ 8,346
9/30/2001 $ 9,590 $ 7,175
12/31/2001 $ 11,245 $ 7,688
3/31/2002 $ 12,525 $ 7,732
6/30/2002 $ 12,230 $ 7,559
9/30/2002 $ 9,413 $ 6,076
12/31/2002 $ 10,259 $ 6,474
3/31/2003 $ 9,046 $ 5,987
6/30/2003 $ 11,331 $ 7,137
9/30/2003 $ 12,192 $ 7,714
12/31/2003 $ 14,093 $ 9,026
3/31/2004 $ 14,595 $ 9,409
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
INCEPTION
1-YEAR (11/4/99)
------------------------------------------------------------------------
OAKMARK INTERNATIONAL FUND CLASS II 61.34% 8.96%
MSCI World ex. U.S. 57.16% -1.60%
</Table>
The graph and table do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The fund's high performance may not be repeated.
The investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Current performance may be lower or higher than the performance data quoted.
Average annual total return measures annualized change, while total return
measures aggregate change. To obtain current month end performance data, call
1-800-OAKMARK or visit www.oakmark.com.
Harris Associates Securities L.P., member NASD, May 2004
<Page>
THE OAKMARK INTERNATIONAL SMALL CAP FUND CLASS II
THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND
FROM ITS INCEPTION (1/8/01) TO PRESENT (3/31/04) AS COMPARED TO THE
MSCI WORLD EX U.S. INDEX
[CHART]
<Table>
<Caption>
THE OAKMARK INTERNATIONAL MSCI WORLD
SMALL CAP FUND CLASS II EX U.S. INDEX
1/8/2001 $ 10,000 $ 10,000
3/31/2001 $ 10,140 $ 8,599
6/30/2001 $ 10,494 $ 8,532
9/30/2001 $ 9,292 $ 7,335
12/31/2001 $ 11,062 $ 7,860
3/31/2002 $ 12,180 $ 7,905
6/30/2002 $ 12,466 $ 7,728
9/30/2002 $ 9,686 $ 6,212
12/31/2002 $ 10,454 $ 6,618
3/31/2003 $ 9,172 $ 6,120
6/30/2003 $ 11,845 $ 7,297
9/30/2003 $ 13,501 $ 7,886
12/31/2003 $ 15,915 $ 9,227
3/31/2004 $ 16,946 $ 9,619
</Table>
ANNUAL AVERAGE TOTAL RETURNS
(as of 03/31/04)
<Table>
<Caption>
SINCE
INCEPTION
1-YEAR (1/8/01)
------------------------------------------------------------------------
OAKMARK INTERNATIONAL SMALL CAP FUND CLASS II 84.77% 17.76%
MSCI World ex. U.S. 57.16% -1.06%
</Table>
The graph and table do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares.
The performance data quoted represents past performance. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. The fund's high performance may not be repeated.
The investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Current performance may be lower or higher than the performance data quoted.
Average annual total return measures annualized change, while total return
measures aggregate change. To obtain current month end performance data, call
1-800-OAKMARK or visit www.oakmark.com.
Harris Associates Securities L.P., member NASD, May 2004
<Page>
ITEM 2. CODE OF ETHICS.
Not required in this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required in this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required in this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not required in this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, the "Disclosure
Controls"), the Disclosure Controls are effectively designed to ensure that
information required to be disclosed by the Registrant in this report is
recorded, processed, summarized and reported within 90 days prior to the filing
of this report, including ensuring that information required to be disclosed in
this report is accumulated and communicated to the
<Page>
Registrant's management, including the Registrant's principal executive officer
and principal financial officer, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the Registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the Registrant's most recent fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a) (1) Certifications of John R. Raitt, Principal Executive Officer, and
Kristi L. Rowsell, Principal Financial Officer, pursuant to Rule 30a-2
under the Investment Company Act of 1940 (17 CFR 270.30a-2), attached
hereto as Exhibits (a)(1)(i) and (a)(1)(ii)
(2) Certification of John R. Raitt, Principal Executive Officer and Kristi
L. Rowsell, Principal Financial Officer, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, attached hereto as Exhibit (a)(2)
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Harris Associates Investment Trust
By: /s/ John R. Raitt
---------------------------------
John R. Raitt
Principal Executive Officer
Date: May 14, 2004
---------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ John R. Raitt
---------------------------------
John R. Raitt
Principal Executive Officer
Date: May 14, 2004
---------------------------------
By: /s/ Kristi L. Rowsell
---------------------------------
Kristi L. Rowsell
Principal Financial Officer
Date: May 14, 2004
---------------------------------