The Oakmark International Fund Report from David G. Herro and Michael J. Welsh, Portfolio Managers

THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL FUND FROM ITS INCEPTION (9/30/92) TO PRESENT (3/31/98) COMPARED TO THE MORGAN STANLEY WORLD EX U.S. INDEX
3/31/98 NAV $14.68	Total Return Last 3 mos.	Average Annual Total Return* Through 3/31/98 From Fund Inception 9/30/92
The Oakmark International Fund	14.4%	16.3%
Morgan Stanley World ex U.S. w/inc.**	14.7%	12.5%
Morgan Stanley EAFE w/inc**	14.7%	12.3%
Lipper Analytical International Fund Index**	14.9%	14.6%
*Total return includes change in share prices and in each case includes reinvestment of any dividends and capital gain distributions.
** Each of the three indexes or averages is an unmanaged group of stocks whose composition is different from the Fund. The Morgan Stanley World ex U.S. Index includes 19 country sub-indexes. The Morgan Stanley EAFE Free Index refers to Europe, Asia and the Far East and includes 18 country sub-indexes. The Lipper International Fund Index includes 30 mutual funds that invest in securities whose primary markets are outside the United States. Past performance is no guarantee of future results.

FELLOW SHAREHOLDERS:

The quarter ended March 31, 1998 has been one marked by a rebound in international markets. This resulted in a strong gain of 14.4% for your Fund. More important, your Fund has generated an average annual rate of return of 16.3% since its inception. This compares quite favorably with returns for this same period of 12.3% and 14.6% for the EAFE and Lipper International indices, respectively. It is important to point out that our returns since inception confirm the benefits of maintaining a long-term value approach in overseas markets. Going forward, we continue to believe that the foreign markets are attractively priced and we are extremely comfortable with how your portfolio is positioned in terms of future appreciation potential.

CHINA WILL TAKE ASIA HIGHER

Though the world has been exclusively preoccupied with recent events in greater East Asia, it has missed the historical change that is occurring in China. Progressive reformer Zhu Rongji has now replaced party hardliner Li Peng as Prime Minister. Head of State is still Jiang Zemin. Zhu has been in the government as economic czar and was formerly mayor of Shanghai. He is known for his stands against corruption and bureaucracy as well as his adherence to free market economic policies.

Though he has only recently been elected to his new position, he has entered the scene in dramatic fashion, promising to slice the bureaucracy in half, representing four million jobs. He has also vowed to reform and privatize the state-owned industries that have been holding China back and to implement new plans to stabilize and strengthen the banking system. More positive yet, listening to his economic philosophy, he sounds more like Adam Smith than even some Western leaders.

The importance of sound leadership in China cannot be overestimated. China is a nation of nearly 1.3 billion people and has potential to be one of the world's largest economies. On the microeconomic side, its people have a strong work ethic and entrepreneurial drive. They are educated and have a strong family structure. Unencumbered, there is no telling what they will be able to accomplish in terms of economic advancement. We believe the current government will facilitate rather than impede this advancement.

The strength of China will assist the rest of Asia. Given recent very positive political developments throughout the region, we are convinced that the stage is set for a strong recovery. With the exception of political laggards Indonesia and Japan, Asia is ready to resume growth on a more healthy and sustainable basis.

CURRENCY CONCERNS

One of the biggest areas of concern about China for many Wall Street strategists is the currency. They argue that because much of Asia has devalued, the renminbi and the Hong Kong dollar are next. While a devaluation is possible, we believe it is unlikely and also believe at current prices investors are more than compensated for devaluation risk by the extremely cheap valuations of companies in Hong Kong.

The strength of a nation's currency is ultimately dependent on supply and demand. From the supply side, China's responsible monetary policy (as designed by new Prime Minister Zhu Rongji when he was Finance Minister) is keeping money supply growth at a reasonable rate. On the demand side, China is still running a sizeable trade surplus and is still attracting a great deal of foreign direct investment. While the growth of both have slowed, they are still hugely positive and mean continuing demand for the renminbi. Finally, China has over $140 billion in foreign reserves, an amount which ranks second in the world behind only Japan.

AND NOW FOR THE STOCKS....

Your Fund is extremely well positioned to take advantage of what we see are improving conditions in East Asia, especially given the weakness in share prices since the summer of 1997. We are finding very reasonably priced, well-run businesses that will benefit over time from economic events. Examples in our portfolio include: hotel companies Mandarin and Hong Kong and Shanghai Hotel Corp (Peninsula), airline and aero engine maintenance company HAECO, and pan Asian clothing retailer Giordano. Each are leaders in their respective fields, have sound managements and are attractively priced. All are down substantially from their highs. Along with our investments in Malaysia and Korea, we firmly believe these companies in Asia will be strong contributors to the growth in the Fund's net asset value over the next five years.

AND, A WORD ABOUT A BLAST FROM THE PAST

A few years back, there was a change in the board chairman at Saatchi & Saatchi Plc. Though this change caused some initial instability and weakness in the share price, things have dramatically changed for the better over the past few years. First, the holding company was renamed Cordiant Plc. Secondly, new management was put in place that is very focused on building the value of the business rather than just the size. Then, in December last year, in a move designed to unlock shareholder value, the holding company split into its two major advertising groups, Saatchi & Saatchi Advertising and Bates Worldwide. Bates has kept the name Cordiant while Saatchi & Saatchi was relisted as such. Both have been doing extremely well from a business perspective and their share prices on the stock exchange have reflected the change as well. In fact, Saatchi & Saatchi is up year-to-date a stunning 45%! We feel that the share prices of both (which remain large positions in the Fund) have a long way to go.

DAVID HERRO
Portfolio Manager
72242.772@compuserve.com

MICHAEL J. WELSH
Co-Portfolio Manager
102521.2142@compuserve.com
April 2, 1998

% of Fund Net Assets				% of Fund Net Assets
	Europe	52.2%			Pacific Rim	25.4%
	Great Britain	25.5%			Hong Kong	6.8%
	France	8.7%			New Zealand	6.7%
	Italy	5.7%			Japan	3.6%
	Switzerland	3.9%			Korea	3.0%
	Sweden	3.7%			Malaysia	1.9%
	Netherlands	3.1%			Singapore	1.7%
	Finland	1.2%			Australia	1.3%
	Germany	0.2%			Thailand	0.4%
	Spain	0.2%
	Latin America	17.4%
	Brazil	10.2%
	Argentina	4.1%
	Panama	3.1%

(a) Non-income producing security.

(b) Represents an American Depository Receipt.

(c) Represents a Global Depository Receipt.

(d) Includes portfolio and transaction hedges.

(d) See footnote number five in the Notes to Financial Statements regarding transactions in affiliated issuers.

(e) At March 31, 1998, net unrealized depreciation of $59,198,928, for federal income tax purposes consisted of gross unrealized appreciation of $217,932,134 and gross depreciation of $158,733,206.