Fellow Shareholders,

The Oakmark Global Fund continued its strong performance this quarter, gaining 11% for the three-month period ending March 31, 2002. The Fund's performance compares favorably with that of the MSCI World and the Lipper Global Fund indices, which were up 0.3% and 1%, respectively.

Over the past twelve months ending March 31, 2002, The Oakmark Global Fund returned a positive 34% compared to declines of 4% and 3%, respectively, for the MSCI World Index and the Lipper Global Fund Index. We believe this significant out-performance of your Fund amidst turbulent global markets is a reflection of our focus on downside protection in the portfolio as well as capital appreciation.

We are also pleased to report that as of quarter-end, your Fund was ranked the #1 global fund in the Lipper¹⁸ Universe (219 Funds) since our inception in August, 1999.

Investment Environment

As we write this letter we are in the midst of a global bear market, a notion that would have been considered quaint when this Fund was launched at the height of the internet bubble in August, 1999. As long-term investors however, we are not overly concerned about the market's decline to date. On the contrary, we consider much of what has happened and what is currently happening in the markets as rational behavior. It is a natural and healthy process when speculation and excesses are wrung out of the market.

Last year we wrote about the bursting of the global bubble in technology, media and telecom companies. While the bubble continues to burst, the market has also found new issues to obsess over. For example, share prices of companies using aggressive accounting are falling. In addition, the credit markets refuse to lend to companies with excessive debt or to companies that fail to generate free cash flow. Further, outside of bankruptcy proceedings, capital intensive telecommunications businesses with commodity—like products are having difficulty attracting capital. One should not be surprised at the market's reaction. It is rational to apply a risk premium where risk exists. As value investors, we have of course always critically assessed each business we invest in, attempting to avoid exactly these issues. Those employing momentum strategies and investors unwilling to take the time to read through boring annual reports, regulatory filings and industry analysis are caught holding the bag.

There is no doubt however, that in addition to continued problems in those industries, the current market is reflecting a decline in corporate profitability. On a macro level, the U.S. and European economies have slowed to a growth rate of just above 1% in 2001. The world's second largest economy, Japan, fell into recession. The impact on profits, especially in the U.S., has been dramatic. Profits have also declined in Europe but at a much lower rate. Based on our micro view, part of the decline in profits is permanent, as excess or even artificial levels of demand for certain products and services will likely not be seen again. Another part of the decline has to do with snap reactions such as inventory and personnel reductions in expectation of lower demand. We would expect the latter part of the reduction to accrue back to corporate income statements. Either way, return on equity for the markets as a whole have declined and the market has reacted by selling.

That said, a snapshot of the U.S. economy—if you can remove yourself from the psychology of the last two years—looks relatively healthy. The unemployment rate at 5.6% is what just a few years ago would have been considered to be the long-term frictional rate. Consumer spending continues to grow evidenced by strong retail sales and housing figures. Further, business inventories and payrolls are lean while the banking system is showing close to record levels of common equity to loans outstanding. Considering the terrorist attacks and the war in Afghanistan, the economy to date has held up remarkably well.

Portfolio Update

The Oakmark Global Fund is managed using a value philosophy. We search for companies that are priced at a substantial discount to their true business value and are run by managers who think and act as owners. We base our investment decisions on our own intensive, fundamental research. The portfolio is focused, and is constructed and monitored with strict buy and sell disciplines. Investments are made with a long-term horizon. This approach has successfully preserved capital, and should generate superior investment returns over the market cycle.

We have made significant changes in the Fund's holdings over the past six months. Although significant changes in portfolio composition over a short period is not what we would expect in a normal environment, the overall decline in the markets has allowed a significant upgrade in the quality of the companies held in the portfolio.

Over the past two quarters we have added some terrific new situations to the Fund's holdings. In the U.S., for example, we have added First Health and IMS Health in the health-care industry, as well as blue-chips Waste Management, Kroger, and Gap. Overseas we have added three very high quality European blue-chips: Wolters Kluwer (Netherlands), Henkel (Germany), and LM Ericsson (Sweden).

Our value strategy dictates two main reasons for selling a stock. First, when a stock hits its target price, our sell discipline requires that it be sold. Over the last few quarters, especially within the U.S., market volatility pushed up the price of several holdings which were subsequently disposed (e.g. NOVA Corporation). Second, when there are substantially more attractive alternatives than the current holdings we take the opportunity to sell an existing position and purchase the shares of the more attractive company.

We feel very fortunate to have the flexibility to be able to pick from the best ideas throughout Harris Associates, be they small, medium, or large caps, or foreign or domestic. When we see short-term market volatility provide new long-term opportunities we won't hesitate to switch out of companies that are either at higher valuations or lower quality than new alternatives.

Looking Forward

We will continue to manage the portfolio using the same value discipline described above. Although we would not expect to achieve the same exceptional level of relative out-performance, we remain excited about the values in the portfolio and expect that over the long-term we could provide superior investment returns. We thank you for your continued support.

Gregory L. Jackson

Portfolio Manager
gjackson@oakmark.com

Michael J. Welsh, CFA, CPA

Portfolio Manager
102521.2142@compuserve.com

April 4, 2002

Global Diversification—March 31, 2002

Schedule of Investments—March 31, 2002 (Unaudited)

See accompanying notes to financial statements.