Recently, we received several questions from shareholders concerning the Funds’ cash holdings and securities lending. Below is a Q&A discussing these topics.
Where do the Funds keep their securities, cash and cash equivalents?
State Street Bank and Trust Company is the Funds’ custodian. It holds the Funds’ securities, cash and cash equivalents in segregated accounts for the benefit of each Fund.
How is the Funds’ short-term cash invested? Is the cash invested in money market funds?
The Funds’ cash management strategy is generally to invest only in short–term U.S. Treasury securities, U.S. agencies and overnight repurchase agreements secured by U.S. Treasury or agencies securities.
Currently, the Funds are not invested in any money market funds, and historically, we have not done so.
What is securities lending?
Securities lending is the temporary loan of a security from an institutional investor’s portfolio to a broker/dealer or dealer bank. Except for the right to vote proxies, the lender retains entitlement to all the benefits of owning the original securities, including the receipt of income. Additionally, the lender receives a fee for the loan. For more information about securities lending, see the Funds’ Statement of Additional Information.
Can the Funds lend their portfolio securities?
Yes. Each Fund, except The Oakmark Fund, is permitted to lend its portfolio securities to broker/dealers and banks. A lending Fund receives collateral equal to 102% to 105% of the current market value of the securities on loan, and the borrower is required to maintain collateral at that coverage level in relation to the day-to-day market value of the loaned securities. The Funds take a conservative approach to securities lending by only accepting U.S. Treasury securities as collateral for their loaned securities.
Do the Funds have any securities out on loan?
As of October 3, 2008, no portfolio securities were out on loan. Historically, the Funds have loaned securities on a very selective and relatively infrequent basis.
Over the last twelve months have any of the Funds suffered a loss due to a securities lending transaction?
No.
