Harris Associates/Oakmark Funds

Letter from the Chairman and President...

Dear Fellow Shareholders:

We are pleased to present our first quarter report for the period ended December 31, 1997. For the Oakmark Family as a whole this quarter contained the full range of investment emotions. We were "elated" at the strong returns generated by Select and Oakmark, "content" with Small Cap and Equity and Income, and "frustrated" by the Asian contagion's effect on the International and International Small Cap Funds.

We are often asked the question, "Which Oakmark fund should I invest in now?" or, "Which fund will perform the best this year?" Now that we have a well-rounded family of six funds, our answer invariably is that there is some combination of Oakmark funds which can be selected to meet almost all investors' requirements regarding risk tolerance and volatility. It is very difficult to try to hit a home run every time at bat. For those investors that like simplicity and are particularly risk and volatility sensitive, we would highlight The Oakmark Equity and Income Fund. In this quarter's report, Clyde McGregor reviews and differentiates the Fund's asset allocation philosophy.

IRA season is approaching and those of you with existing IRA accounts will receive a "Summary Sheet" and "IRA Disclosure Statement Supplement" which review the changes in the 1997 law, including the new Roth IRA. We welcome new accounts and our IRA Information Kits are available to all.

Thank you for your continued support.

Very truly yours,

VICTOR MORGENSTERN
Chairman

 

ROBERT M. LEVY
President

The Oakmark Family of Funds

Summary Information

Performance for Period Ended
December 31, 1997
The Oakmark
Fund
The Oakmark Select
Fund
The Oakmark
Small Cap
Fund
3 Months
4.1%
8.3%
-0.3%
6 Months
10.7%
24.9%
14.9%
1 Year
32.6%
55.0%
40.5%
Average Annual Total Return for:
3 Year
27.4%
N/A
N/A
5 Year
22.8%
N/A
N/A
Since inception
30.1%
63.1%
38.6%
Value of $10,000
from inception date
$54,132
(8/5/91)
$17,704
(11/1/96)
$20,290
(11/1/95)
Top Five Holdings
as of December 31, 1997

Company and % of Total Net Assets

 Philip Morris Companies, Inc. 6.9% U.S. Industries, Inc. 10.4% People's Bank of Bridgeport, CT 7.6%
Banc One Corporation 6.2% USG Corporation 10.0% U.S. Industries, Inc. 7.1%
Lockheed Martin Corporation 4.9% Tele-Communications, Liberty Media, Class A 9.4% Catellus Development Corporation 5.4%
Tele-Communications,
Inc., Class A		 4.8% PartnerRe Ltd. 8.3% Cablevision Systems Corporation 5.4%
Mellon Bank Corporation 4.5% Cablevision Systems Corporation 5.6% RenaissanceRe Holdings Ltd 4.9%
Top Five Industries
as of December 31, 1997

Industries and % of Total Net Assets

 Other Consumer
Goods & Services		 17.6% Other Consumer
Goods & Services		 13.0% Insurance 13.5%
Food & Beverage 16.8% Diversified Conglomerates 10.4% Other Industrial
Goods & Services		 13.4%
Banks 10.6% Building Materials & Construction 10.0% Banks 10.3%
Publishing 8.4% TV Programming 9.4% Other Consumer
Goods & Services		 9.7%
Aerospace & Defense 6.9% Broadcasting & Cable TV 8.6% Commercial Real Estate 7.6%


Performance for Period Ended
December 31, 1997
The Oakmark
Equity and
Income Fund
The Oakmark
International
Fund
The Oakmark
International
Small Cap Fund
3 Months
0.9%
-13.7%
-23.9%
6 Months
11.3%
-11.5%
-26.9%
1 Year
26.6%
3.3%
-19.9%
Average Annual Total Return for:
3 Year
N/A
12.7%
N/A
5 Year
N/A
14.9%
N/A
Since inception
20.3%
14.2%
-1.7%
Value of $10,000
from inception date
$14,941
(11/1/95)
$20,097
(9/30/92)
$9,642
(11/1/95)
Top Five Holdings
as of December 31, 1997

Company and % of Total Net Assets

 Electronic Data Systems Corp 4.1% Quilmes
Industrial SA		 5.4% Lambert Fenchurch Group plc 5.6%
Catellus Development Corporation 3.8% Sedgewick Group plc 5.3% Enix Corporation 5.0%
Chrysler Corporation 3.5% Tomkins plc 4.8% JCG Holdings Ltd. 4.8%
Tele-Communications, Liberty Media, Class A 3.2% Tate & Lyle PLC 4.7% Elevadores Atlas, SA 4.6%
U.S. Industries, Inc. 3.1% AB Volvo 3.9% Solution 6 Holdings Ltd 4.2%
Top Five Industries
as of December 31, 1997

Industries and % of Total Net Assets

 U.S. Government Bonds 23.1% Food & Beverage 21.7% Other Industrial
Goods & Services		 15.5%
Banks 10.6% Banks 8.3% Other Financial 12.1%
Automotive 7.2% Consumer Non-Durables 7.8% Household Products 11.2%
Other Consumer
Goods & Services		 6.7% Other Industrial
Goods & Services		 6.6% Other Consumer
Goods & Services		 8.5%
Insurance 5.6% Marketing Services 5.9% Production
Equipment		 6.6%