THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND FROM ITS INCEPTION (11/1/95) TO PRESENT (6/30/01) AS COMPARED TO THE MSCI WORLD EX U.S. INDEX17
6/30/01 NAV4 $11.28	Total Return Last 3 months*	Average Annual Total Return1 Through 6/30/01 From Fund Inception 11/1/95
The Oakmark International Small Cap Fund	3.58%	8.38%
MSCI World ex U.S. Index w/inc.	-1.04%	4.84%
Lipper International Small Cap Fund Average21	0.28%	11.45%
Micropal Equity International Small Cap Index22	-0.42%	10.17%
*Not annualized.

Fellow Shareholders:

The recent quarter ending June 30, 2001, was another positive one for the Oakmark International Small Cap Fund. The portfolio gained 4% compared to a return of less than and 1% in the Lipper International Small Cap Average and a 1% decline in the MSCI World ex U.S. index.

For the first six months of 2001 your fund has returned 7% compared to a loss in the Lipper International Small Cap Average of 13% and a decline in the MSCI World ex U.S. index of 15%. The Fund's positive performance is especially heartening given the difficulties in overseas markets so far this year. It is in times like these that disciplined value investors pause to give thanks and then continue poking around for gems among the debris.

Portfolio Performance

The strength of your Fund's performance this year is due to stock selection. Geographically, the parts of the world where the out-performance has been most pronounced are the United Kingdom, Hong Kong, and Singapore.

In the United Kingdom, the market is down approximately 13% while our investments are up 10%. Two outstanding performers include House of Fraser and Jarvis Hotels, which returned 56% and 16%, respectively. We still see tremendous upside in Jarvis Hotels, so much so that it is the largest position in the Fund. Management is proactively taking action, both strategic and financial, to close the gap between the current share price and business value.

In Hong Kong, stocks are down on average around 15%. Your Fund's investments have substantially outperformed the index returning over 20% so far in 2001. Kingmaker Footware and Jusco Stores are the two standouts, with six month total returns of 40% and 117%. Our investment in Jusco Stores is a wonderful example of the virtue of patience. As the company steadily built business value over the past three years, the share price languished. Of course, it is our job as analysts to pay more attention to the former than the latter. In May, the share price shot up 70% in the two days after the company announced annual results and a massive increase in the dividend, both of which reflected the fine work management had quietly been doing. Jusco, even after this share price move, still trades for 8 times our estimate of current earnings and yields over 8%.

Our investments in Singapore returned over 20% in the last six months, compared with a ugly 20% drop in the local market. Dairy Farm International and Delgro Corporation have both been terrific. Dairy Farm has appreciated 50% from our average cost, while Delgro has returned over 20% so far this year.

Currency Impact of the Strong US Dollar

One of the reasons investment returns in overseas markets have lagged those achieved at home in recent years is the continued strength of the US Dollar ("USD"). In the first six months of this year your Fund lost approximately 6% on foreign currency.

The USD has been on a bull run since the dark nadir of the first quarter of 1995. Long time shareholders of The Oakmark International Fund will recall that at that time we thought the USD was very undervalued relative to the currencies of the rest of the developed world. You may remember all of the trend-extrapolating pundits warning that the USD was in a permanent bear market, that it was losing its reserve currency status, that it was going to parity with the Deutsche mark, et cetera, et cetera. Our belief in the under-valuation of the USD was so strong at that time that we hedged nearly 80% of our European currency exposure.

That was then; this is now. The USD has now been appreciating for over six years, with the Deutsche mark losing nearly 40% of its value over that time. The value of the Euro since its inception has been flimsy at best. Currently, the USD is at a 28-year high on a trade-weighted basis. Foreign investors cannot get enough of the mighty greenback, with portfolio and direct investment continuing to push its value higher. At the same time, there are some worrisome economic signals, most important of which appears to be the dramatic slowdown of productivity growth. While currencies are completely unpredictable in the short-term, in the end they do reflect economic fundamentals.

In this environment we are even more excited about investing your money in overseas opportunities. We believe there is a good chance that, over the medium term, part of your future return from the Fund will come from holding the underlying foreign currencies in which these investments are denominated.

Opportunity Ahead

Even with the Fund's strong recent performance, we remain extremely optimistic about investment prospects going forward. International small cap investing is starting to return to investor's radar screens as an asset class that not only can provide strong diversification to US-based investors but, more importantly, can provide strong absolute investment returns.

David G. Herro, CFA

Portfolio Manager
dherro@compuserve.com

Michael J. Welsh, CFA, CPA

Portfolio Manager
102521.2142@compuserve.com

July 11, 2001