Fellow Shareholders:
We are pleased to present the Annual Report for The Oakmark Family of Funds. The past year has been a difficult period and we draw small comfort from the fact that previous letters have encouraged all shareholders to be realistic in their return expectations and asset mix. More importantly, as shareholders and investment managers, we are confident that the current market volatility will not prove to be a long-term deterrent to meeting our investment goals.
Our confidence is based on several factors. Harris Associates, investment adviser to The Oakmark Family of Funds, was founded in 1976. The investment professionals of our firm have implemented the same risk-averse value approach from the inception of the firm. In other difficult periods, our reaction has been straightforward and successful. Our people, process and philosophy remain constant and portfolio changes are made carefully and not emotionally. Our long-term results and experience reinforce our belief that this is the appropriate course of action to meet our financial goals.
The broad market weakness of the last several months has presented significant investment opportunities to each of our Funds. Our optimism is strengthened by the quality and upside potential of the securities that we hold and have added to our Funds. It is encouraging that our internal buy list is longer than it has been in several years. The attractiveness of the stocks in our universe is further confirmed by our decision to re-open our Small Cap Fund to new investors.
The final source of our confidence is a result of the atmosphere at our firm. In our internal meetings, we note an edginess that reflects our competitive spirit. Complacency is the biggest threat to investment success—it is not tolerated at our firm. We are well positioned to benefit from the inevitable rebound in stock prices and we appreciate your continued confidence in our efforts.
As the millennium approaches, we have received a number of questions about our readiness. Our internal Y2K committee has been active for an extended period.
We are on schedule in determining that our internal systems and outside vendors are Y2K compliant. At this time, we expect no business disruptions to occur when we enter the next century.
In addition, we are well prepared for the Euro conversion in the international markets. Though less publicized, this currency change also requires substantial internal planning and vendor contact. We similarly expect that conversion to a common currency in Europe will not cause operational problems for our international funds.
We look forward to better times ahead.
VICTOR MORGENSTERN
Chairman
ROBERT M. LEVY
President
