Dear Fellow Shareholders,

World stock markets produced mixed results in the first quarter, with most of the broad market indexes showing small single-digit declines. Our Funds also produced mixed returns for the quarter, with some gains and some losses. At the same time, however, every one of our Funds performed in line with or better than their benchmark indexes.

As several of our Fund managers highlight in their letters this quarter, worldwide corporate profit growth continues at a robust pace, extending the multi-year world economic expansion. While market levels are higher over the past two years, we believe that economic growth has kept valuations at reasonable levels for disciplined long-term investors.

Trading and Soft Dollar Practices

At The Oakmark Funds, we have always been mindful of how to best serve our shareholders—and how to do so fairly. We have recently given a significant amount of thought and attention to our trading practices, as the equity trading and execution landscape has changed tremendously over the past few years. The traditional institutional stock brokerage arrangement—where trade execution is bundled with research and other services into one commission charge—is beginning to unravel under the pressure of market forces. These trends have caused us to reassess our approach to the use of "soft dollar" commissions to pay for third-party research and services.

Our soft dollar practices have always been well within the scope of SEC-sanctioned practices, which explicitly permit the use of brokerage commissions to pay for such services. We believe that we have been small users of third-party research and services compared to most mutual fund managers, and we don't believe that our use of soft dollars has increased trading costs. However, as the brokerage industry moves toward unbundling trading from research and other services, we are less confident that this will be true in the future.

For this reason, we have discontinued the use of soft dollars to pay for third-party research and services, effective April 1. In the future, the cost of these services will be paid entirely by the Funds' adviser, Harris Associates L.P. Our primary trading focus, as always, will be to obtain best execution for our shareholders and you can be assured that we will continue to monitor industry developments.

Personal Investment in the Funds

One of the key components of our investment process at The Oakmark Funds has been to invest in companies where management interests are closely aligned with ours. We find that this alignment is most frequently and most effectively created by significant management stock ownership. When management has a meaningful sum invested alongside other shareholders, the focus on performance and shareholder value is intensified.

We believe that this same approach is also wise for mutual fund investors. Significant ownership of fund shares—not just by portfolio managers, but by all levels of employees at the fund and its adviser (including analysts, senior management, trustees and others)—reinforces a higher standard of integrity, focus, and commitment to maximizing long-term returns.

At The Oakmark Funds, a commitment to the share ownership is an integral part of our business philosophy. We encourage employee ownership of the Funds and are committed to reporting on our ownership on a regular basis. In this regard, we are pleased to announce that as of December 31, 2004, the employees of the Funds' adviser, Harris Associates L.P., and the Funds' officers and trustees have over $180 million invested in The Oakmark Funds. This compares to an investment of $145 million in December 2003, when we last reported holdings. This increase represents a combination of price appreciation and additional purchases.

Thank you for your continued investment and confidence in The Oakmark Funds. We welcome your comments and questions. You can reach us via e-mail at ContactOakmark@oakmark.com.

John R. Raitt
President of The Oakmark Funds
President and CEO of Harris Associates L.P.

THE OAKMARK FUNDS

Summary Information

The performance data quoted represents past performance. The above performance information for the Funds 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.

* Not annualized

FUND EXPENSES

A shareholder of each Fund incurs two types of costs: (1) transaction costs, such as redemption fees, and (2) ongoing costs, including investment advisory fees, transfer agent fees, and other fund expenses. The examples below are intended to help shareholders understand the ongoing cost (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other funds.

Actual Expenses

The following table provides information about actual account values and actual fund expenses for Class I of each Fund. The table shows the expenses a Class I shareholder would have paid on a $1,000 investment in each Fund from October 1, 2004 to March 31, 2005 as well as how much a $1,000 investment would be worth at the close of the period, assuming actual fund returns and expenses. A Class I shareholder can estimate expenses incurred for the period by dividing the account value at March 31, 2005 by $1,000 and multiplying the result by the number in the Expenses Paid During Period row as shown below.

Certain accounts invested for 90 days or less may be charged a 2% redemption fee. Please consult the Funds' prospectus at www.oakmark.com for more information.

Hypothetical Example for Comparison Purposes

The following table provides information about hypothetical account values and hypothetical expenses for Class I of each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which are not the Funds' actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses shareholders paid for the period. Shareholders may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees. Therefore, the third line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.