THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND FROM ITS INCEPTION (11/1/95) TO PRESENT (12/31/00) AS COMPARED TO THE MSCI WORLD EX U.S. INDEX26
12/31/00 NAV9 $10.55	Total Return Last 3 mos.*	Average Annual Total Return10 Through 12/31/00 From Fund Inception 11/1/95
The Oakmark International Small Cap Fund	-1.01%	7.81%
MSCI World ex U.S. Index w/inc.	-3.38%	8.66%
Lipper International Small Cap Fund Average29	-12.59%	15.09%
Micropal Equity International Small Cap Index30	-12.25%	14.56%
*Not annualized.

Fellow Shareholders,

The Oakmark International Small Cap Fund made it through a tough quarter in overseas markets relatively unscathed, posting a 1.01% decline in our NAV. This compares favorably to the -3.38% decline in the MSCI World ex U.S. Index, and the 12.59% loss for the Lipper International Small Cap Average.

Performance for the calendar year ending December 31, 2000, down 8.85%, also compares favorably to the performance of international indices and our peers: The MSCI World ex U.S. Index lost 13.37% for 2000, while the return for the Lipper International Small Cap Average was -14.82%.

Value investors should view volatility as opportunity as it creates greater mispricing of underlying business value. Needless to say the current market environment is presenting us with many exciting opportunities.

Proceed with Caution—One Year Later

We'd like to remind shareholders of a few points we made exactly one year ago, at, in retrospect, the zenith of global momentum investing. We do this in the hope that it reinforces your confidence that in a medium-to-long term time frame, price and value do converge, sometimes with dramatic speed. These are excerpts from our December letter last year:

"This is not sustainable! A number of these companies make little or no money and will not become reasonably profitable within the next 5 years, if ever. Many of these shares are driven by hype and illiquidity, and, specifically in overseas markets, scarcity. It is truly greater fool speculating at its best....The point we'd like to make is that for an investment to make sense to us, there must be a reasonably estimated flow of cash tied to the assets of a company together with a share price that allows us to buy below the intrinsic value of those future cashflows."

After sticking to our guns throughout this bubble you can be assured that we will never abandon our discipline or our philosophy, no matter how out of date or painful they may appear in the short-run.

The Big Movers of 2000

As always, at the end of the year we think it is important to detail the specific ideas which had the greatest impact on your Fund's NAV. For calendar year 2000, the top performers were an eclectic bunch, from a variety of regions and industries. The stock with the single largest positive impact on NAV was Brazilian cellular provider Telemig Celular Participacoe, which more than doubled. Telemig is one of the "Baby Bras" spun out of Telebras last year. Along with large share price appreciation the company also possesses one of our favorite attributes: it still trades at a significant discount to intrinsic value.

IPC Holdings, a Bermuda-based provider of reinsurance, also had a large positive impact. Management has done a nice job of earning good returns on the business over the cycle, not an easy thing to accomplish in this industry. With reinsurance rates moving significantly higher this year, IPC should show outstanding earnings growth in the near future.

With its strong share performance in the face of a very difficult local market Hite Brewery got the hat-trick this year. 2000 was the third straight year that this Korean brewer made one of the most significant positive impacts on your Fund's performance.

Jardine Strategic, the Singapore-listed Asian conglomerate, appreciated nearly 60% for the Fund. Management, in response to minority shareholder concerns, did the right thing by announcing a massive share repurchase program. This helped to erase some of the holding company's large discount to the underlying value of its individual businesses. Rounding out this year's big winners are Recordati, the Italian pharmacutical firm, which more than doubled before hitting our sell target earlier in the year; and Cairn Energy, the UK-based independent oil exploration and production company.

The biggest single negative impact on NAV this year came from our investments in Australia and New Zealand, which combined for a negative impact of over seven percent. The Fund was hurt both by declines in share prices but most notably by the underlying currencies. The New Zealand and Australian dollar both lost nearly 15% of their value relative to the US dollar. Thankfully, both currencies have rallied strongly from their lows of October and November and given their undervaluation, we expect this to continue in 2001.

We retain conviction in our estimates of business value for our two largest New Zealand investments, Fletcher Building and Mainfreight Limited. The Fund's second largest position, Fletcher Building, has a dominant market share in several tremendous cash flow businesses, is run by a well-incentivized, shareholder-oriented management team, and should benefit from declining interest rates. The company trades at 10x our estimate of 2000 earnings (which are below trend) and yields a whopping 8%.

Two of the year's under-performers came from emerging Asia, Matichon in Thailand and Alaska Milk in the Philippines. Current share prices for small caps in both of these markets continue to bear no relationship to underlying business value. Both of these companies trade at around 4x this year's earnings, absurd given the quality of their franchises. They have continued to build business value in the midst of poor macroeconomic conditions. We are convinced we will eventually be rewarded for our patience on both of these fine companies.

The share performance of Royal Doulton also negatively impacted NAV in calendar 2000. The market continues to ignore the dramatic restructuring which is occurring underneath most sell-side analysts' radar. We believe the market will be positively surprised by the strength of the profitability this business can generate under this management team.

Looking Forward

We remain very optimistic about achieving good results going forward, given the quality and the value of the investments currently in the Fund. We want to thank you for your continued confidence.

David G. Herro, CFA

Portfolio Manager
dherro@compuserve.com

Michael J. Welsh, CFA, CPA

Portfolio Manager
102521.2142@compuserve.com

January 9, 2001