THE OAKMARK FUND Report from Bill Nygren and Kevin Grant, Portfolio Managers

THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM ITS INCEPTION (8/5/91) TO PRESENT (12/31/02) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX2
	Average Annual Total Returns5
	(as of 12/31/02)
	Total Return Last 3 Months*	1-year	5-year	10-year	Since Inception (8/5/91)
Oakmark Fund	7.51%	-14.41%	1.00%	11.36%	16.46%
S&P 500	8.44%	-22.10%	-0.59%	9.34%	9.67%
Dow Jones Average1	10.38%	-15.13%	2.82%	12.02%	11.74%
Lipper Large Cap Value Index9	8.64%	-19.68%	-0.39%	8.71%	9.29%
The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
Past performance is no guarantee of future results. Investment return and principal value vary, and you may have a gain or loss when you sell shares. Average annual total return measures annualized change, while total return measures aggregate change.
* Not annualized

The Oakmark Fund increased in value by 8% last quarter, reducing the loss for the year to 14%. Despite suffering our largest calendar year loss since the fund's inception in 1991, our performance was strong relative to other equity investors. With the S&P 500 down 22% for the year, achieving positive returns was nearly impossible. The Oakmark Fund lost less money than did 86% of the 827 funds Morningstar¹⁰ classifies as Large Cap Value funds, and according to a recent Wall Street Journal article the average equity mutual fund lost 22% which is 50% more than we lost. In the most recent Berkshire Hathaway annual report, Warren Buffett stated: "Some people disagree with our focus on relative figures, arguing that ‘you can't eat relative performance!' But, if you expect that owning the S&P 500 will produce reasonably satisfactory results over time, it follows that, for long-term investors, gaining small advantages annually over that index must prove rewarding." Another great investor, Peter Lynch, was asked about his "poor" performance which occurred in a very weak equity market. Lynch responded "Let's say you play golf. You shoot 72 and everybody else shoots in the 80s. The next day, the winds are blowing twenty miles an hour and it's raining. You shoot a 78 and everybody else shoots in the 90s. Do people say ‘What happened to your golf game?"

Losing less than other investors never feels as satisfying as does making money, but it is just as important as we work toward our goal of producing excellent long-term returns. Over the past three years, we are up while the market has seriously declined. Over the past decade, The Oakmark Fund has achieved a 11% annualized return. Not only has that beaten the market and most of our peers, but compounding that return for a decade more than tripled our investors' capital.

During the quarter, we did not add any new positions, and we eliminated two—Newell Rubbermaid and CVS. We made money on our Newell investment over two years when most stocks fell dramatically. With CVS, we lost some of our original investment (though far less than either the market or the average retail stock), as an increasingly competitive environment proved our projections to be too optimistic. In both cases, we used the proceeds to add to existing holdings that we feel are high-quality businesses that now sell at lower multiples.

Best wishes,

William C. Nygren, CFA Portfolio Manager bnygren@oakmark.com	Kevin Grant, CFA Portfolio Manager kgrant@oakmark.com

January 6, 2003

Schedule of Investments—December 31, 2002 (Unaudited)