Oakmark Select Fund: Second Quarter 2011

June 30, 2011

Oakmark Select Fund - Investor Class
Average Annual Total Returns 06/30/11
Since Inception 11/01/96 12.57%
10-year 4.70%
5-year 2.83%
1-year 27.87%
3-month 2.12%

Gross Expense Ratio as of 09/30/10 was 1.08%

Past performance is no guarantee of future results. The performance data quoted represents past performance. Current performance may be lower or higher than the performance data quoted. The investment return and principal value vary so that an investor’s shares when redeemed may be worth more or less than the original cost. To obtain the most recent month-end performance data, view it here.

The Oakmark Select Fund increased 2% for the quarter ended June 30, bringing its year-to-date return to 9%. Returns for both the quarter and six-month periods exceeded the S&P 500 returns, which were 0% and 6%, respectively, over those same time periods. The Fund benefited from its relatively small exposure to industrial cyclicals, which have generally underperformed this year due to concerns about the economic recovery.

The largest contributor to this past quarter’s return was recent purchase MasterCard, which increased 20%. Investors breathed a sigh of relief this quarter after regulatory attempts that would have slashed the profitability of debit cards proved less onerous than feared. We believe MasterCard will benefit as transactions around the globe continue to shift from cash to plastic. Other strong performers for the Fund included Dell, which gained 15% due to strong earnings from its non-PC businesses; Bristol Myers, which increased 11% as a result of good trial results for a new blood thinner; and Best Buy, which was up 10% after the approval of a large share repurchase plan.

Our worst performers for the quarter included Newfield Exploration, which fell 11% because of lower oil and natural gas prices, and two of our bank holdings, JPMorgan and Bank of America, down 11% and 18%, respectively. The banking industry has become less attractive due to new regulatory reforms that will force banks to hold higher capital reserves—capital that would otherwise be available for new loans, dividends or share repurchases. Unfortunately, those reforms also have likely increased the probability that banks will shift most of their investments for growth to countries other than the U.S. Despite the hostile political and regulatory environment in the U.S., we believe that many banks sell at an attractive multiple of recovery earnings and that political sentiment can only improve.

During the quarter, we neither initiated nor eliminated any portfolio positions. We believe our portfolio is priced to deliver good long-term returns compared to both the stock market and to other investment opportunities.

As of 6/30/11, Mastercard, Inc., Class A represented 4.5%, Dell Inc. 4.4%, Bristol-Myers Squibb Co. 4.3%, Best Buy Co., Inc. 3.5%, Newfield Exploration Co. 4.0%, JPMorgan Chase & Co. 3.8%, and Bank of America Corp. 2.5% of the Oakmark Select Fund’s total net assets. Portfolio holdings are subject to change without notice and are not intended as recommendations of individual stocks.

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.

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 returns more volatile than a more diversified fund.

The discussion of the Funds’ investments and investment strategy (including current investment themes, the portfolio managers’ research and investment process, and portfolio characteristics) represents the Funds’ investments and the views of the portfolio managers and Harris Associates L.P., the Funds’ investment adviser, at the time of this letter, and are subject to change without notice.