Letter from the Chairman and President...

Dear Fellow Shareholders:
We are pleased to present the Annual Report for The Oakmark Family of Funds. The fourth quarter performance of our funds was mixed at best and left all of us frustrated. We view this quarter as a temporary setback that will be overcome by the ultimate returns generated by the compelling values that are currently held in our portfolios. Your patience and loyalty is something that we value highly.

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As our domestic investment style returns to favor, the comeback will not be smooth and straight up in terms of performance. Many of you have asked or are likely to be wondering what is behind our resolve and conviction that our performance is at or near a turning point. In both our domestic and international portfolios, several factors are the source of our confidence. In absolute and relative terms, the current valuation of our individual holdings is very attractive. Each of the stocks is selling below, and in some cases substantially below, the business value of the company in which we are invested. This gap between absolute value and business value will ultimately close as the stock price and business values converge. On a relative basis, looking at a variety of quantitative factors, our portfolios are uniformly selling at valuations well below the average for the appropriate stock market index.

Our confidence that we are closer to seeing this valuation gap close is reinforced by the substantial and broad based increase in share repurchases and insider buying in the securities that we own. The people who know these companies best are clearly making substantial tangible statements that these securities are undervalued. As we have always said, the prospects for investment success are enhanced when the shareholders and management interests are aligned.

Finally, the increase in takeover activity aimed at the companies in our portfolios is a reminder that the valuation gap can be closed either gradually or dramatically. In either case, we will ultimately benefit.

We continue to believe that superior shareholder service can build loyalty to the Funds. Thus we are always looking for ways to improve this service. To this end, we have recently changed our transfer agent. The new provider is Nvest Services Company which is committed to becoming the top provider of investor services. Please let us know if you experience unusually good or bad service from the new firm by e-mailing us at ServiceComments@oakmark.com.

As the end of the century rapidly approaches, we remain confident that we are prepared for the event.

We would also like to be the first to wish you a happy, healthy and prosperous New Year and we look forward to a successful 2000.

VICTOR MORGENSTERN
Chairman

 

ROBERT M. LEVY
President

The Oakmark Family of Funds

Summary Information

Performance for Period Ended
September 30, 1999

 The Oakmark
Fund		 The Oakmark
Select
Fund		 The Oakmark
Small Cap
Fund
3 Months -13.6% -10.0% -9.0%
6 Months -3.6% -3.2% 3.0%
1 Year 8.0% 30.1% 10.6%
Average Annual Total Return
3 Year 12.4% N/A 7.7%
5 Year 15.1% N/A N/A
Since inception 22.9% 31.1% 13.7%
Value of $10,000 from inception date $53,882
(8/5/91)		 $22,028
(11/1/96)		 $16,558
(11/1/95)
Top Five Holdings
as of September 30, 1999

Company and % of Total Net Assets

 Philip Morris Companies Inc. 7.2% USG Corporation 10.1% Symantec Corporation 6.6%
Knight Ridder, Inc. 6.6% Washington Mutual, Inc. 9.1% Duff & Phelps Credit Rating Co. 5.5%
Nike, Inc., Class B 6.3% U.S. Industries, Inc. 8.2% SPX Corporation 4.2%
H&R Block, Inc. 5.8% First Data Corporation 7.0% Catellus Development Corporation 3.8%
The Dun & Bradstreet Corporation 5.8% The Dun & Bradstreet Corporation 6.6% U.S. Industries, Inc. 3.6%
Top Five Industries
as of September 30, 1999

Industries and % of Total Net Assets

 Other Consumer Goods & Services 19.4% Computer Services 17.5% Banks & Thrifts 10.2%
Aerospace & Defense 9.2% Banks & Thrifts 12.0% Machinery & Industrial Processing 9.5%
Food & Beverage 8.9% Building Materials & Construction 10.1% Retail 8.7%
Information Services 8.1% Diversified Conglomerates 8.2% Food & Beverage 7.6%
Banks & Thrifts 7.9% Information Services 6.6% Automotive 7.4%

 

Performance for Period Ended
September 30, 1999

 The Oakmark
Equity and
Income Fund		 The Oakmark
Global
Fund		 The Oakmark
International
Fund		 The Oakmark
International
Small Cap Fund
3 Months -5.1% -8.2%
(inception 8/4/99)		 -7.1% 0.8%
6 Months 4.3% N/A 12.4% 17.7%
1 Year 15.3% N/A 46.4% 88.0%
Average Annual Total Return
3 Year 16.4% N/A 9.2% 10.0%
5 Year N/A N/A 9.4% N/A
Since inception 15.4% N/A 13.3% 11.7%
Value of $10,000 from inception date $17,518
(11/1/95)		 $9,180
(8/4/99)		 $23,896
(9/30/92)		 $15,439
(11/1/95)
Top Five Holdings
as of September 30, 1999

Company and % of Total Net Assets

 Imation Corp. 5.4% The Dun & Bradstreet Corporation 5.6% Metso Oyj 5.0% Royal Doulton plc 5.1%
Premark International, Inc. 3.9% Department 56, Inc 5.2% Chargeurs SA 4.9% Carpetright plc 4.9%
The Reynolds and Reynolds Company 3.7% NOVA Corporation 4.6% Fila Holdings S.p.A. 4.0% JCG Holdings Ltd. 4.8%
First Data Corporation 3.6% Sterling Commerce, Inc. 4.4% Cordiant Communications Group plc 4.0% House of Fraser Plc 4.7%
Amli Residential Properties Trust 3.5% Somerfield plc 4.3% Citizen Watch Co. 3.9% Krones AG 4.3%
Top Five Industries
as of September 30, 1999

Industries and % of Total Net Assets

 U.S. Government Bonds 25.4% Information Services 12.8% Other Industrial Goods & Services 16.5% Retail 12.7%
Computer Services 12.7% Retail 11.8% Banks & Thrifts 9.6% Diversified Conglomerates 10.1%
Real Estate 9.1% Banks & Thrifts 9.9% Machinery and Metal Processing 6.3% Production Equipment 9.7%
Banks & Thrifts 8.9% Computer Services 8.8% Other Consumer Goods & Services 6.3% Mining & Building Materials 9.5%
Data Storage 5.4% Other Consumer Goods & Services 8.2% Food & Beverage 6.0% Other Consumer Goods & Services 9.3%