THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM ITS INCEPTION (8/5/91) TO PRESENT (3/31/01) AS COMPARED TO THE STANDARD& POOR'S 500 INDEX1
3/31/01 NAV2 $32.20	Total Return Last 3 months*	Average Annual Total Return3 Through 3/31/01 From Fund Inception 8/5/91
The Oakmark Fund	7.37%	20.45%
Standard & Poor's 500 Stock Index w/inc	-11.86%	14.45%
Dow Jones Industrial Average w/inc4	-8.00%	15.63%
Lipper Large Cap Value Fund Index5	-7.76%	13.72%
*Not annualized.

The Oakmark Fund increased 7% for the quarter ended March 31, marking four consecutive quarters during which the Fund increased in value while the S&P 500 declined. Over those four quarters, The Oakmark Fund has increased in value by 32% while the S&P 500 has declined by 22%. Also during the last quarter, The Oakmark Fund achieved a new all-time high price, adjusted for distributions. As other funds report losses of capital, we are especially pleased to report to our loyal shareholders that we reached new high ground. Some people refer to value investing as an ugly way to invest, but as Penn State's football coach, Joe Paterno, said, "I get a kick out of people saying, you're winning ugly. I think you end with the word win."

Over the past year, investors' renewed focus on business value contributed to much of our success. Corporate buyers specifically have continued to buy undervalued companies. Although we never select stocks based on acquisition possibilities, our selection criteria often overlap with merger and acquisition departments' criteria. Like us, they search out undervalued, yet growing, businesses that are led by owner-oriented management. During the last quarter, Nestle agreed to purchase one of our holdings, Ralston Purina, for $33.50 per share. Prior to that announcement, Ralston stock traded below $25. Ralston's dominant pet food brands combined with Nestle's size should increase sales while decreasing costs, creating a powerhouse. Congratulations to CEO, Pat McInnis, for finding the right partner to maximize Ralston's value.

Five of Oakmark's fifty holdings were acquired in the last twelve months: Ralston, Union Pacific Resources, Nabisco, Fort James and ACNielsen. Each transaction paid shareholders substantial premiums to pre-acquisition stock prices, thereby contributing significantly to our strong returns. Although a 10% acquisition rate is unusual, we expect acquisitions to continue to benefit the Fund over the long term. When the stock market doesn't care about undervalued companies, corporate buyers exploit the opportunity, and we benefit.

Last quarter, we added seven new holdings to the portfolio — all old-line companies, except for Motorola. We continue to find most technology companies too expensive compared to non-technology stocks. Despite the NASDAQ⁶ 100's 66% decline since its peak, the median P/E⁷ ratio on those stocks is 50x, still about two-and-a-half times the median P/E ratio of the S&P 500. Here are brief descriptions of our new names:

Burlington Resources (BR—45)
Conoco (COC'A—28)

Typically, we find opportunities when the market overreacts to negative news. However, we believe the stock prices of Burlington Resources and Conoco under-reacted to favorable news: higher energy prices. At the end of 1998, a barrel of oil sold for $18 on the long-term futures market, and a thousand cubic feet of natural gas sold at just over $2. Today, the long-term oil price has risen to $21, and the price of natural gas has doubled. Therefore, the profitability of oil and gas producers, like Burlington Resources and Conoco, is now much higher than a couple of years ago. At the end of 1998, Burlington Resources sold at $36, and Conoco sold at $21. Though both stocks have risen, we believe their stock prices still do not reflect their increased business values.

Clorox (CLX—31)

Due largely to unexpected costs from Clorox's acquisition of First Brands, its stock has fallen from $66 in early 1999. We believe Clorox is among the best managed, highest quality consumer product companies, so its current price of just over 16x estimated calendar 2001 cash earnings appears very attractive.

Motorola (MOT—14)

As Motorola lost its position as the leading cellular telephone manufacturer, its stock fell from a peak of $61 last spring. Excluding the still-valuable cellular phone business, we estimate that Motorola's other businesses alone justify its current stock price. Although fear and embarrassment aren't our favorite motivators, intense shareholder pressure has caused CEO Chris Galvin to become more focused on rebuilding Motorola's value.

Park Place Entertainment (PPE—10)

The world's largest casino company, Park Place Entertainment, was spun-off from Hilton in late 1998. It owns casinos that use the brand names Hilton, Bally's, and Caesar's World. Despite its higher earnings, its stock fell from a high last year of $15. Park Place currently trades at just over 11x estimated 2001 cash earnings.

Sprint (FON—22)

Sprint stock peaked at $76 in 1999. Their exposure to the declining consumer long distance market has caused disappointing earnings and stock performance. Aside from long distance, Sprint also supplies local service for 8.3 million lines. Local lines have recently sold for $3,000 to $4,000 per line. Using the low end of that range, we estimate the value of Sprint's local business alone equals its current stock price.

Starwood Hotels & Resorts (HOT—33)

Starwood owns, manages, and franchises luxury hotels under brands such as Westin, Sheraton, and W. Starwood stock traded as high as $63 in 1997 and as low as $18 in 1998. Starwood's ability to increase rates, occupancy, and customer satisfaction is impressive. We also like CEO Barry Sternlicht's management of their hotel portfolio. When hotel buyers have been willing to pay trophy prices for specific Starwood properties, Sternlicht has been willing to part with them. Starwood sells at less than 7x cash flow while sales of luxury hotel properties have frequently occurred at over 10x cash flow.

We are proud of the past year's results and believe our portfolio continues to be well-positioned for good absolute, as well as relative, returns. Taxable investors should note that our current undistributed realized loss is $3.95 per share. That means we are in a very favorable tax position and practically guarantees that like last year, we will have no capital gain distribution this year.

Thank you for your continuing support.

William C. Nygren, CFA

Portfolio Manager
bnygren@oakmark.com

Kevin G. Grant, CFA

Portfolio Manager
kgrant@oakmark.com

April 5, 2001