THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND FROM ITS INCEPTION (11/1/95) TO PRESENT (3/31/00) AS COMPARED TO THE MSCI WORLD EX U.S. INDEX
3/31/00 NAV $11.88	Total Return Last 3 mos.	Average Annual Total Return* Through 3/31/00 From Fund Inception 11/1/95
The Oakmark International Small Cap Fund	–5.0%	10.2%
MSCI World ex U.S. Index w/inc.**	0.6%	14.0%
Lipper International Small Cap Fund Average**	13.1%	23.7%
Micropal Equity International Small Cap Index**	13.8%	25.3%
*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 indexes or funds whose composition is different from the Fund. The MSCI World ex U.S. Index includes 21 country sub-indexes. The Lipper International Small Cap Fund Average includes 76 mutual funds that invest in securities whose primary markets are outside the United States. The Micropal Equity International Small Cap Index is an unweighted index comprised of all funds within the international small company fund sector. Past performance is no guarantee of future results.

Fellow Shareholders,

For the first calendar quarter of the year, your fund achieved a return of -5.0%. This compares to the MCSI World ex-U.S. Index which returned .6% and a 13.1% return for the Lipper International Small Cap average.

Though your Fund has achieved a negative return, please keep in mind that your fund was up over 53% last year so some pull back is natural. The current market prices of our portfolio of companies is extremely attractive, several examples of which we will describe below.

On Manias...

A lot has been said and written on the technology stock mania that has swept the globe. As managers who feel a tremendous sense of responsibility and duty to our shareholders we feel we must continue to warn you on the dangers of participating in this absurdity. Again, we are not saying that technology should be ignored or that the Internet in not a potent force to be reckoned with. We have experienced in our travels and in the normal course of business how technology and telecommunications have shrunk the world and changed the way the way it operates. As mentioned last quarter, we have owned certain technology and software stocks over the life of the Fund that have greatly contributed to returns. These truths, however, do not mean that companies involved in technology or telecommunications are always good investments. Price always must be considered. This is no different from buying a house, car, insurance policy or even a pound of hamburger. Rarely does any rational person buy something regardless of price.

Today, at time of writing, this is not true in the global equity markets. A wall of money has piled into a small group of technology and telecom stocks no matter what the price. This buying hysteria has made for a two-headed market: one priced highly and the rest of the investment universe on sale. For long-term investors like us, these times are glorious. The mis-pricing of assets in the short-term makes our job easier as long-term investors. The availability of sound, well-managed companies with great growth prospects selling at low prices is huge. In fact, this highlights that the choice an investor faces is not between growth stocks and value stocks, for they are now one in the same, but between growth and momentum. And as we have always stated, buying something because of anticipated price movement is not investing, but, speculating.

Yes, these times often cause one to second-guess common sense. But, in the end, fundamentals always assert themselves. Always remember Nobel Prize winning economist Milton Friedman's famous quote: "there is no such thing as a free lunch."

...And Real Opportunity

Two years ago, we raved about values available to us in the Pacific Rim specifically and in the emerging markets in general. In a disciplined fashion we took advantage of these opportunities and performed very well. Today, the situation is more expansive as the enormous gap between "old economy" and "new economy" has created great opportunity in the developed markets as well. Why are these stocks so undervalued? For one reason and one reason only: they are not directly related to technology. Consider your fund's largest holding, a German company called Krones. Krones is the world-leading manufacturer of bottling equipment. The company has great growth prospects as global soft drink and beer consumption increases, it is a technological leader, has net cash on its balance sheet and sells for about 4x's its cashflow. Management has made great strides to improve transparency and treatment of minority shareholders. And, the company itself thinks it's so undervalued that it is buying back its own stock!

Another large position in your Fund is Fletcher Building in New Zealand. It sells at depressed valuation levels, is the dominant force in New Zealand construction materials including cement and concrete and operates in a market that is coming out of a lengthy recession in building activity. On top of all of this, they have divested themselves of underperforming assets and are about to be spun-out of a larger group thereby making themselves a focused, independent entity (and, perhaps, a takeover target). This stock yields close to 10% and trades at 7x's expanding earnings. Fletcher and Krones are just two examples of why we are so excited about the portfolio going forward.

Stick with Common Sense

In closing this letter, we as managers of your Fund urge you to think carefully about your investment choices. Never before in recent memory has there been two distinct choices in the field of common stock investment. We are quite confident of our approach and remain extremely enthusiastic about this Fund's prospects. We hope you share our enthusiasm.

David G. Herro

Portfolio Manager
dherro@cs.com

Michael J. Welsh

Portfolio Manager
102521.2142@compuserve.com

April 5, 2000