THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL FUND FROM ITS INCEPTION (9/30/92) TO PRESENT (6/30/01) COMPARED TO THE MSCI WORLD EX U.S. INDEX17
6/30/01 NAV4 $15.52	Total Return Last 3 months*	Average Annual Total Return1 Through 6/30/01 From Fund Inception 9/30/92
The Oakmark International Fund	9.99%	13.13%
MSCI World ex U.S. Index w/inc.	-1.04%	7.37%
MSCI EAFE Index w/inc.18	-1.32%	7.18%
Lipper International Fund Index19	0.59%	9.05%
*Not annualized.

Fellow Shareholders,

Your fund achieved an outstanding 10% return in the 2nd calendar quarter of this year. This compares very favorably with the MSCI World ex U.S. Index, which lost 1% and the Lipper International Fund Index, which was up 1%.

Since its inception almost 9 years ago, your fund has achieved an annual rate of return of 13%. This compares to a 7% return for MSCI World ex U.S. Index and a 9% return for the Lipper International Fund Index. Since inception, the Fund's 13% return put it in the top 5% of all international funds in the Lipper Universe ranking 4th of 89 funds.²⁰

Patience and Discipline Do Pay Off!

The results you have just read about are derived from what we think are our two strongest attributes as managers: our very sound value investment philosophy and the disciplined execution of that same philosophy. A clear example of this is embodied in our investment in Somerfield plc, the UK based grocery store chain. We have been involved in this company twice over the last 4 years. The first time we bought it at a low price, and sold it at a healthy profit less than 2 years later as the share hit its sell price.

We started to repurchase the shares on price weakness at around 200p after management disappointed the market with a poorly executed acquisition. The stock continued to plummet as a result of problems related to this acquisition. When the dust finally settled in April of 2000, the market was valuing the company at just 50p. Even though the market hated the business, we were firmly convinced, given the company's competitive advantages, financial strength and new, proven management, that the underlying value of Somerfield was worth several multiples of its 50p price. While the "street" in London was talking bankruptcy, we saw firm financial footing based on the low debt levels and the intrinsic value of the company's owned real estate. We also recognized the natural advantage of their urban locations as well as the strength of the new management team, which had a long track record of retail success. As a result of the unrealistic market price, we substantially increased our holdings making it one of your fund's largest positions.

Over the last year, Somerfield's share price has risen over 145%! In this last quarter alone, almost two percentage points of return to the Fund are attributable to this stock. More importantly, the company is growing business value again, is turning around the division that caused the original troubles and has maintained its pristine balance sheet. And, like clockwork, the "street" now loves the stock. The same sell-side analyst who said the company was going under just over one year ago, presently says its worth over 200p. Now we actually agree with him!

This illustrates the strength of our independent thinking and the adherence to our value philosophy. These elements are the source of our success. Certainly, every stock we own does not always give us the excitement of Somerfield, but we hope this example has provided insight into how we think and behave as investors.

And Here is One That Has Not Worked So Well

For a long time, we have held shares in the Italian athletic footwear and apparel maker, Fila. We originally bought the company when it was first floated, more than doubled our money and sold as the shares hit fair value. At that point we should have moved on. However, on rising market share and sales momentum, the stock soared from the $30's (where we sold it) to over $120 dollars! We thought the stock was grossly overpriced until it fell back into the low $40's. The company's sales and profits were much higher than before, but growth had slowed. We began to rebuild a position, although we later realized we overestimated the quality of the management and underestimated the weakness of the brand in the USA.

The operating situation of Fila got worse before finally stabilizing. Management was replaced with more astute people and sales continued to grow outside of the USA.

These factors as well as the financial security of a major Italian company being the majority shareholder, let us to believe the company had bottomed. However, the hidden mistakes of the old management kept surfacing. Sadly, costs grew as fast as revenues in the glory years and when revenues dropped, costs did not. This presented the new management with problems that distracted them from brand building. Excess warehouse space, the ludicrous Grant Hill endorsement contract, and poorly managed foreign subsidiaries represented assets that were not carrying their weight.

The vast value destruction caused by previous management, much of which appeared in the form of delayed "landmines," has taken its toll. Today, we still think the company has merits, especially since much has been done to repair the mistakes of the past. Fila had the biggest negative impact for the quarter costing the Fund almost one-half percent.

Today, the Fila brand is gaining strength, albeit slowly, and is more visible in the US. Fila is a major global brand that has unique attributes tied to its Italian heritage. Fila remains undervalued but is, unfortunately, worth only a fraction of our original appraisal. The lessons learned from this investment were painful but we hope to put them to good use in our research process in the future.

Looking Ahead

We continue to find many companies across countries and industries that fit our strict investment criteria. We also believe foreign currencies such as the Euro and some of those in emerging markets are substantially under priced. Though our investment decisions are not predicated on currency movements, we believe that owning some of these currencies at these prices will enhance return going forward. Finally, we thank our loyal shareholders that continue to place their trust and hard earned savings with us. We will continue to work hard to deliver strong results.

David G. Herro, CFA

Portfolio Manager
dherro@compuserve.com

Michael J. Welsh, CFA, CPA

Portfolio Manager
102521.2142@compuserve.com

July 11, 2001