Fellow Shareholders,

The Oakmark Global Fund was up .8% for the three-month period ending March 31, 2000. This compares to a gain of 1.0% for the MSCI World index and 4.6% for the Lipper Global Fund Index.

The performance of share prices around the world in the first quarter ofthe new millennium continued roughly the same trend as the fourth quarter of 1999—technology and telecommunications issues soared, and everything else was ignored. Consequently, this trend did little to close the large valuation gap we spoke about in our last letter between the intrinsic value of our current portfolio of companies and the market. As we said before, and it bears repeating, while the timing may be uncertain we are as confident as ever in the attractive values and future outlooks of our companies.

Composition of Current Portfolio

The composition of the current portfolio geographically consists of 44% United States, 37% Europe (with the United Kingdom representing 20% of the Fund), 8% Asia, and 4% Latin America. As you already know, this allocation is not the reflection of some grand, top-down macroeconomic forecast but of the best opportunities we can find around the globe. In other words, geographic weighting is simply a fall-out of stock selection. Macroeconomic forecasts certainly play a part of our valuation of each individual company, but will never drive the decision of where to invest your money.

Consumer product oriented companies make up the largest weighting in the Fund, at over 19% of assets. We have found this industry group to be particularly fertile ground around the world, providing a number of businesses with good growth prospects, high financial returns, quality management, and, most importantly, bargain share prices. The multinational colossus Diageo and Korean brewer Hite Brewery are the most recent additions to the portfolio from this area. Diageo, you may remember, is the result of the merger between Guinness plc and Grand Metropolitan. Pillsbury, Burger King, and Haagen Dazs are three of their best known businesses but the real jewel is their unparalleled portfolio of distilled spirits brands. You can own all of these highly cash generative businesses at the bargain price of less than 12x earnings.

Three US-based service companies make up over 13% of the portfolio: Nova, Ceridian, and Equifax. All are benefiting greatly from the boom in technology, resulting in "New Economy" growth rates in profit, but selling in the market at attractive "Old Economy" share prices. Regarding the Internet, each to a certain extent is employing the strategy Levi Straus used during the Gold Rush days: don't try to become a successful miner—make money selling supplies to the multitudes of people who believe they will be successful miners. This strategy allows your business to thrive without having to figure out precisely where the gold is in the ground. Nova, for example, has an attractive position in credit card transaction processing, an area which will continue to grow regardless of which "e-tailer" wins the battle of the Internet.

Companies broadly defined as capital goods manufacturers make up 13% of the Fund. The four companies—Krones, Tomkins, Metso, and GFI Industries—are all European-based and all extremely out of favor. However the most important trait they all share is the large discount to intrinsic value they currently trade at in the market. Krones, as mentioned in the Oakmark International Small Cap letter, is the world-leading manufacturer of bottling equipment. An investment in Krones at four times cash flow nets you a globally dominant technological leader with attractive growth prospects, net cash on its balance sheet and a management that is eagerly buying in shares at current prices.

Financials represent just under 13% of the Fund, composed of companies with variety of specialties located on three continents. Banco Latinoamericano de Exportaciones, or Bladex as it is known, is a good example of the value we are finding in the area. The Bank is the largest trade finance institution in Latin America, and has successfully negotiated a multitude of regional and global shocks with a minimum of credit quality problems. Overcapitalized and extremely conservatively provisioned, the market is currently pricing this business at less than 5 times earnings and less than 70% of a growing and understated (given their tendency to over-provision for potential risks) book value. This is far too cheap a price for a business of this quality.

Looking Forward

At Harris Associates our primary concern as analysts and portfolio managers is to fully understand the underlying value of a business, not to predict short-term, sentiment-driven price movements in the market. If we properly ascertain the intrinsic value of a business with a reasonable level of confidence, and can purchase that business at a significant discount, we are confident we will do well over time.

Once again, we would like to thank you for your continued confidence in the newest Fund in the Oakmark Family.

Michael Welsh

Portfolio Manager
102521.2142@compuserve.com

Greg Jackson

Portfolio Manager
gjackson@oakmark.com

April 6, 2000