Harris Associates/Oakmark Funds

Letter from the President...

Dear Fellow Shareholders,

I am pleased to present the third quarter report, for the period ending July 31, 1997, for The Oakmark Family of Funds. In general terms our four domestic funds, Oakmark, Select, Small Cap and Equity and Income (formerly the Balanced Fund) enjoyed quarterly returns that would be quite respectable as annual returns! The Oakmark International and International Small Cap Funds' quarterly performance was also robust and generally matched half-year expectations. To give further perspective to the recent overall market advances, a 20 percent decline from current levels (The S & P 500 at 960 as of this writing) would only take us back to the market levels in May of this year!

Obviously, it is not realistic to expect a continuation of this rapid rate of appreciation. As we have cautioned in the past, equities can and will decline in value in any short-term period, and in owning stocks one should be prepared to accept a potential significant decline at some point. Mirroring the recent run-up, a rational expectation might be a 20 percent decline in equity prices and one should periodically review one's risk tolerance against this benchmark.

In this regard, I would like to highlight the name change for The Oakmark Equity and Income Fund (formerly The Oakmark Balanced Fund). This is our most conservative equity fund and with its holdings of U. S. Treasury Notes, it should be the least volatile of our Funds.

And, another change, effective this September we are changing the Funds' fiscal year to September 30th from October 31st. This change will align our fiscal quarters with the calendar quarters with which most fund investors are familiar. This will facilitate comparing our results with the standard benchmarks while still allowing us the cost savings and other efficiencies associated with non-calendar year audits.

Thanks for your support and confidence in us.

Very truly yours,

Victor A. Morgenstern

Summary Information*

Performance for Period Ended
July 31, 1997
The Oakmark
Fund
The Oakmark Select
Fund
The Oakmark
Small Cap
Fund
3 Months
16.8%
24.8%
23.5%
6 Months
19.7%
22.3%
23.4%
Performance for:
1 Year
45.1%
N/A
58.3%
3 Years
26.8%**
N/A
N/A
5 Years
26.5%**
N/A
N/A
Since inception
Value of $10,000
from inception date
31.5%**
$51,606
08/05/91
52.9%
$15,290
11/01/96
43.1%**
$18,730
11/01/95
Top Five Holdings
as of July 31, 1997

Company and % of Total Net Assets

Banc One
Corporation
7.4% 		Tele-Communications,
Liberty Media,
Class A

15.1% 		U.S. Industries, Inc. 6.5%
Philip Morris
Companies Inc.
7.4%		 U.S. Industries, Inc. 14.7% People's Bank of
Bridgeport, CT
6.0%
Mellon Bank Corp. 5.8% USG Corporation 8.8% Catellus Dev. Corp. 5.2%
The Black & Decker
Corp.
4.7%		 PartnerRe Ltd. 7.1% Ralcorp Holdings, Inc. 4.6%
Polaroid Corporation 4.0% Cablevision Systems
Corp.
4.5%		 RenaissanceRe
Holdings Ltd. 		4.2%
Top Five Industries
as of July 31, 1997

Industries and % of Total Net Assets

Food & Beverage 17.9% TV Programming 15.1% Other Industrial
Goods & Services
15.4%
Other Consumer
Goods & Services
13.9%		 Diversified
Conglomerates
14.7%		 Insurance 11.2%
Broadcasting &
Publishing
13.5%		 Broadcasting &
Cable TV
10.1%		 Banks 8.1%
Banks 13.2% Building Materials
& Construction
8.8%		 Machinery &
Metal Processing
7.8%
Foreign Securities 5.4% Other Consumer
Goods & Services
7.9%		 Broadcasting &
Publishing
7.3%


Performance for Period Ended
July 31, 1997
The Oakmark
Equity & Income
Fund
The Oakmark
International
Fund
The Oakmark
Int'l Small Cap
Fund
3 Months
15.0%
8.6%
9.1%
6 Months
16.6%
15.3%
9.2%
Performance for:
1 Year
34.0%
30.2%
20.1%
3 Years
N/A
14.7%**
N/A
5 Years
N/A
N/A
N/A
Since inception
Value of $10,000
from inception date
22.6%**
$14,289
11/01/95
18.8%**
$22,960
09/30/92
17.5%**
$13,253
11/01/95
Top Five Holdings
as of July 31, 1997

Company and % of Total Net Assets

Premark International,
Inc.
3.4%		 Cordiant plc 4.7% Lambert Fenchurch
Group plc
5.5%
U.S. Industries, Inc. 3.3% Tomkins plc 4.3% Enix Corporation 4.6%
Catellus Dev. Corp. 3.3% AB Volvo 3.6% JCG Holdings Ltd. 3.9%
Banc One
Corporation 		3.3% Sedgewick Group plc 3.6% Solution 6
Holdings Ltd.
3.3%
PartnerRe Ltd. 3.3% Usiminas 3.5% Recordati 3.2%
Top Five Industries
as of July 31, 1997

Industries and % of Total Net Assets

U.S. Government
Bonds
25.1%		 Food & Beverage 18.7% Other Industrial
Goods & Services
13.4%
Other Consumer Goods
& Services
17.8%		 Banks 9.8% Other Consumer
Goods & Services
11.5%
Broadcasting &
Publishing
8.8%		 Telecommunications 9.8% Food & Beverage 10.1%
Other Industrial
Goods & Services		 8.7% Consumer
Non-Durables 		6.6% Other Financial 9.4%
Banks 8.2% Other Industrial
Goods & Services
6.4%		 Household Products 9.0%


*The Oakmark Fund's average annual total returns for the twelve months ended June 30, 1997 and for the period August 5, 1991 (inception) through June 30, 1997 were 29.9% and 30.8%, respectively. The Oakmark Select Fund's total return for November 1, 1996 (inception) through June 30, 1997 was 41.8%. The Oakmark Small Cap Fund's average annual total returns for the twelve months ended June 30, 1997 and for the period November 1, 1995 (inception) through June 30, 1997 were 41.6% and 40.7%, respectively. The Oakmark Equity & Income Fund's average annual total returns for the twelve months ended June 30, 1997 and for the period November 1, 1995 (inception) through June 30, 1997 were 21.7% and 19.4%, respectively.

The Oakmark International Fund's average annual total returns for the twelve months ended June 30, 1997 and for the period September 30, 1992 (inception) through June 30, 1997 were 23.5% and 18.8%, respectively. The Oakmark International Small Cap Fund's average annual total returns for the twelve months ended June 30, 1997 and for the period November 1, 1995 (inception) through June 30, 1997 were 13.9% and 18.0%, respectively. The Funds' past performances are no guarantee of future results. Share prices and investment returns will vary, so you may have a gain or loss when you sell shares.

**Annualized.