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 (12/31/04) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX3
	Annual Average Total Returns (as of 12/31/04)
	Total Return Last 3 Months*	1-year	5-year	10-year	Since Inception (8/5/91)
Oakmark Fund (Class I)	8.44%	11.73%	9.63%	11.78%	16.73%
S&P 500	9.23%	10.88%	-2.30%	12.06%	11.08%
Dow Jones Average5	7.55%	5.27%	0.67%	13.09%	12.40%
Lipper Large Cap Value Index6	8.80%	12.00%	1.42%	11.28%	10.78%
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.
The performance data quoted represents past performance. The above performance information for the Fund does not reflect the imposition of a 2% redemption fee on shares held for 90 days or less to deter market timers. If reflected, the fee would reduce the performance quoted. Past performance does not guarantee future results. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Average annual total return measures annualized change, while total return measures aggregate change. To obtain current month end performance data, call 1-800-OAKMARK or visit www.oakmark.com.
* Not annualized

The Oakmark Fund had a very strong quarter, increasing in value by 8%. Our increase nearly mirrored the increase in the S&P 500, which gained 9%. For all of 2004, your Fund increased in value by 12% slightly bettering the 11% gain in the S&P 500. S&P 500 earnings are estimated to have grown by about 20% in 2004. Because a good part of that earnings growth is just cyclic recovery, we believe that stock price growth was consistent with business value growth in 2004. For this reason, we look to the New Year with the same optimism with which we started last year. To us, stocks look modestly undervalued and, therefore, are the asset class with the highest long-term expected return. So, unlike many value funds, our portfolio continues to be over 90% invested in equities. We also believe that growth and consistency of earnings are being undervalued, so we have continued to increase our investments in what we call growth companies at value prices. During the quarter we sold five holdings—three that met price targets (Carnival, Liberty International and Sprint) and two that were fundamentally disappointing (Chiron and Merck). Our only addition is discussed below.

Pulte Homes (PHM—$63)
PHM is the largest homebuilder in the United States. With expected earnings in 2005 of over $8 per share, its eight times P/E⁷ multiple is among the lowest in the market. PHM earnings have grown 20% per year for the last decade. The bears say that growth has been due solely to an unsustainable boom in the housing market. Though we agree that the housing market and, thus, PHM earnings are somewhat above trend, we believe PHM has become a better business due to the economies of scale enjoyed by large builders. In addition, PHM's balance sheet has benefited greatly from its strong earnings performance—book value that was just $15 per share in 2000 should be $43 per share by the end of 2005. With nearly three times the equity it had five years ago and with growing cost advantages, we believe PHM will weather a stagnant housing environment much better than many investors expect.

Best wishes,

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

Schedule of Investments—December 31, 2004 (Unaudited)