OAKMARK FUNDS'
BILL NYGREN & HENRY BERGHOEF

Bill Nygren says the genesis of Oakmark Select Fund was his desire to invest his own money in a more concentrated way than he would be able to do otherwise. However, he could hardly be accused of overselling the idea to his partners at Harris Associates. In 1996, he told them that in the first five years, they should probably expect one exceptional year, that there hopefully wouldn't be a horrible year and that the rest would probably be mediocre.

Thankfully for himself and his shareholders, Nygren has proven thus far to be a far better money manager than prognosticator. From the fund's inception on November 1, 1996 through its first five calendar years, Select was up an amazing 29.0% per year versus 11.5% per year for the S&P 500 and 16.8% per year for the S&P MidCap 400.

Despite having been rather ordinary in 2002 - having suffered a decline of 12.5% through December 31st - Select has run circles around just about any index that you might want to choose since its inception. For example, for the five years ended December 31st, Select's performance puts it in the top 1% of all funds and makes it the top mid-cap value fund according to Morningstar.

Of course, we wouldn't ordinarily put much weight on a five-year track record - no matter how impressive it might be. However, having read his letters and listened to him explain his rationale first hand, we're convinced that he and Select co-manager Henry Berghoef are the real deal. As you may recall from our interview with them (in our Year End 2000 Edition), before joining Harris Associates, Berghoef worked with very highly regarded Lou Simpson - chief investment officer of Berkshire Hathaway's GEICO insurance unit - one of the very few people to whom Warren Buffett and Charlie Munger have ever been willing to delegate their investment decision-making authority. And coincidentally (or not), in that same interview, Berghoef presented an extremely compelling case for Office Depot right before Berkshire and GEICO began establishing their own position (in the first quarter of 2001).

And it appears that his talents have not gone unnoticed. Berghoef, currently Harris' Assistant Director of Research, will be promoted to Director of Research in 2003.

As we've said before, in our experience, Nygren's investment performance has been matched only by his keen insights.… The excerpts which follow were selected from the prepared remarks of Bill Nygren and Henry Berghoef and their answers to attendee questions at an Oakmark Funds Breakfast which occurred December 12th in Manhattan. Incidentally, the by-invitation-only press event was an unusually intimate affair with only about six attendees (not counting our correspondent and Oakmark representatives). However, one of those attending and participating was the much-admired Carol Loomis - Fortune's uber-editor and assistant editor of Warren Buffett's annual letters to shareholders of Berkshire Hathaway.

We hope that you'll find their comments as valuable as we do.

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