Letter from the Chairman and President...

Fellow Shareholders:
We are pleased to present the First Quarter Report for The Oakmark Family of Funds. In our last report, we highlighted the significant investment opportunities that were created by the broad market weakness in the late summer of 1998. While the fundamental attractiveness of these holdings was easy to document, the timing of their price improvement was uncertain. We were somewhat surprised by the immediate dramatic improvement in stock prices in the latest quarter and are pleased to report that all Oakmark funds were strongly positive for the period. There are two basic ways to measure investment performance: absolute and relative. Our industry is generally focused on relative performance, that is, how did we do versus other funds and relevant indices? To some extent, this is appropriate and our investment professionals are collectively energized by this competitive environment. On the other hand, as risk averse long-term investors, not only do we look at relative performance but we also focus on absolute returns. Our fellow shareholders have entrusted us with assets to be managed effectively and to be grown to meet their long-term goals. In the equity markets, short-term periods of negative returns are inevitable. We adhere to an investment philosophy and style that should minimize the effects of these periods. We are never satisfied by negative returns even if they are good in relative terms. The first quarter of the current fiscal year was characterized by strong absolute returns for all of our funds. We will continue to work hard to maintain this trend. We believe effective shareholder communication is part of our responsibility to our fellow investors. Late last quarter, we rolled out our newly designed website (www.oakmark.com). We added several new features such as Fund Performance and Fund Overviews. Additionally, we have added up-to-date comments from the Fund managers especially relating to unusual events or volatility in portfolio holdings. These comments are available on our audio response system. To listen, call 1-800-OAKMARK, press 1 then press 5. Lastly, we are hosting a Shareholder Information Meeting on Thursday, April 29, 1999 at the Hotel Inter-Continental located in Chicago from 5 to 9 PM. Our Fund Managers and staff will present portfolio updates and investment strategies and be available for questions. Attendance will be by registration. We hope to see you there. As always, we enter 1999 focused on providing superior performance and service. Your continued confidence is appreciated.
VICTOR MORGENSTERN Chairman   ROBERT M. LEVY President

The Oakmark Family of Funds

Summary Information

Performance for Period Ended December 31, 1998	The Oakmark Fund		The Oakmark Select Fund		The Oakmark Small Cap Fund
3 Months	12.5%		21.5%		17.7%
6 Months	-3.0%		0.6%		-13.9%
Performance for: 1 Year	3.7%		16.2%		-13.2%
3 Year	16.9%		N/A		19.5%
5 Year	17.3%		N/A		N/A
Since inception	26.2%		39.5%		19.6%
Value of $10,000 from inception date	$56,155 (8/5/91)		$20,575 (11/1/96)		$17,620 (11/1/95)
Top Five Holdings as of December 31, 1998 Company and % of Total Net Assets	Phillip Morris Companies, Inc.	10.1%	Cablevision Systems Corporation	11.9%	People’s Bank of Bridgeport, CT	5.7%
	Nike, Inc., C1 B	6.4%	U.S. Industries, Inc.	9.8%	U.S. Industries, Inc.	5.4%
	The Black & Decker Corporation	6.3%	USG Corporation	8.9%	Symantec Corporation	4.6%
	Banc One Corporation	6.1%	PartnerRe Ltd.	8.3%	Catellus Development Corporation	4.6%
	Washington Mutual, Inc.	5.5%	Gucci Group	8.0%	Department 56, Inc.	4.0%
Top Five Industries as of December 31, 1998 Industries and % of Total Net Assets	Food & Beverage	15.3%	Broadcasting & Cable TV	11.9%	Other Industrial Goods & Services	12.9%
	Other Consumer Goods & Services	13.7%	Diversified Conglomerates	9.8%	Food & Beverage	10.2%
	Banks & Thrifts	12.6%	Computer Services	9.0%	Banks & Thrifts	8.9%
	Aerospace & Defense	8.0%	Building Materials & Construction	8.9%	Automotive	8.8%
	Hardware	7.1%	Banks & Thrifts	8.5%	Other Consumer Goods & Services	7.8%

Performance for Period Ended December 31, 1998	The Oakmark Equity and Income Fund		The Oakmark International Fund		The Oakmark International Small Cap Fund
3 Months	10.5%		14.5%		28.2%
6 Months	2.9%		-7.7%		6.4%
Performance for: 1 Year	12.4%		-7.0%		9.2%
3 Year	17.9%		7.1%		3.0%
5 Year	N/A		3.9%		N/A
Since inception	17.8%		10.5%		1.6%
Value of $10,000 from inception date	$16,792 (11/1/95)		$18,688 (9/30/92)		$10,529 (11/1/95)
Top Five Holdings as of December 31, 1998 Company and % of Total Net Assets	Lexmark International Group, Inc.	4.0%	Tomkins plc	5.3%	Haw Par Corporation, Ltd.	5.4%
	DaimlerChrysler AG	3.8%	Cordiant Communications Group plc	5.3%	Solution 6 Holdings Limited	4.9%
	Tele-Communications, Liberty Media	3.7%	Saatchi & Saatchi plc	5.2%	JCG Holdings Ltd.	4.7%
	Electronic Data Systems Corporation	3.4%	Quilmes Industrial SA	4.9%	Enix Corporation	4.7%
	Sybron International Corporation	3.4%	Fernz Corporation Limited	4.8%	Steel & Tube Holdings Ltd.	4.3%
Top Five Industries as of December 31, 1998 Industries and % of Total Net Assets	U.S. Government Bonds	24.9%	Other Industrial Goods & Services	15.3%	Retail	15.3%
	Automotive	7.1%	Marketing Services	10.5%	Other Financial	11.1%
	Computer Services	6.8%	Banks	10.1%	Other Industrial Goods & Services	10.8%
	Banks & Thrifts	6.1%	Other Consumer Goods & Services	8.4%	Other Consumer Goods & Services	7.1%
	Real Estate	5.8%	Food & Beverage	8.0%	Computer Software	7.1%