Fellow Shareholders,

Your funds have ended the year on a positive note. Though they both generated negative returns for the calendar year, the 4th calendar quarter showed a nice turnaround generating gains for The Oakmark International and Oakmark International Small Cap Funds of 9% and 8%, respectively. This compares favorably to the lessor gains in the various indices, as noted in each Funds' respective letter. More importantly, our medium and long-term performance has been outstanding. The Oakmark International Fund is up 10% per annum since its inception in 1992. Oakmark International Small Cap is up 7% per annum since its inception in 1995. Both compare very favorably to the relative indices and peer groups.

It's been a very unique time….

Please consider for a moment what has happened over the last few years:

• a massive implosion of equity market values around the world, with most major markets touching multi-year lows in the Third Quarter 2002, and with the Japanese market hitting the level of the early 1980's;

• a terrorist attack that has cost the economy and the global insurance industry billions of dollars,

• the persistent threat of war;

• an extremely contentious presidential election in The United States;

• a number of corporate chieftains around the globe fired or forced to resigned because of poor corporate performance; and,

• corporate governance and fraud scandals that were instrumental in the bankruptcies of major US firms in the tech, telecom and energy sectors.

…. And yet…

The Global economy actually grew in 2002 and at an acceptable rate. The United States ended the year growing at 3-4%, and Asia is growing 5% plus. Though Germany and Japan are still sick, the rest of Europe is doing better. While we all feared the outcome of the Brazilian election, Luiz Inacio Lula da Silva ("Lula"), Brazil's newly elected leader, seems at this point to be very pragmatic and in a good position to solve some of Brazil's problems. Brazil is Latin America's largest and most important economy. A possibility of a turnaround could spur growth for the entire region.

The point is that the economic resilience we are seeing is setting the stage for corporate earnings and share prices to recover around the globe. The world has sustained some major shocks and has handled them exceptionally well. We believe that the large increases in productivity spurred on by new technology, low interest rates and sound monetary policy as well as the continued development of the world's largest country, China, are partly behind this resilience. With share prices at attractive valuations all over the globe we cannot help being anything but enthusiastic about international equity prospects in the next few years.

Our stocks…..

As we do every December, we will discuss the individual stocks that had the greatest impact on each of the Funds' NAVs²² during the past twelve months. Please see the specific fund write-up for details.

Going forward

We remain focused on identifying strong absolute return opportunities currently being created by short-term volatility in the markets. We continue to find lots of companies, across countries and industries, that meet our strict investment criteria.

Finally, we thank our loyal shareholders who 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@oakmark.com	Michael J. Welsh, CFA, CPA Portfolio Manager mwelsh@oakmark.com

January 6, 2003