THE OAKMARK INTERNATIONAL SMALL CAP FUND Report from David G. Herro and Michael J. Welsh, Portfolio Managers

THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND FROM ITS INCEPTION (11/1/95) TO PRESENT (12/31/02) AS COMPARED TO THE MSCI WORLD EX U.S. INDEX26
	Average Annual Total Returns5
	(as of 12/31/02)
	Total Return Last 3 Months*	1-year	5-year	Since Inception (11/1/95)
Oakmark International Small Cap Fund	8.04%	-5.12%	10.40%	6.60%
MSCI World ex. U.S.	6.54%	-15.80%	-2.72%	0.24%
Lipper International Small Cap Average25	2.92%	-12.13%	2.61%	6.27%
The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
Past performance is no guarantee of future results. Investment return and principal value vary, and you may have a gain or loss when you sell shares. Average annual total return measures annualized change, while total return measures aggregate change.
* Not annualized

The Oakmark International Small Cap Fund was up 8% for the quarter, compared with gains in the MSCI World ex-US Index and the Lipper International Small Cap Average, of 7%, and 3%, respectively.

Over the past twelve month's your Fund generated a loss of 5%, relative to the larger declines of 16% in the MSCI World ex-US Index and 12% in the Lipper International Small Cap Average.

Impact Players for 2002

Restructuring stories were some of the strongest performers for the Fund in 2002. Australiasia was home to the Fund's two biggest positive contributors to performance. Ansell, the legacy company of restructured conglomerate Pacific Dunlop, provided the biggest single positive contribution to the Fund's NAV.²² The process of transforming Pacific Dunlop into Ansell was misunderstood and/or ignored by the market, and our analyst Rob Taylor deserves a lot of credit for bringing clarity to a convoluted situation to the Fund's benefit. Fletcher Building of New Zealand was also a very strong performer, as the fruits of a restructuring program instituted by new management became apparent to the market.

Other significant positive contributors were Jarvis Hotels (UK), where management unlocked value hidden in the company's real estate, and Schindler Holding (Switzerland) as the market welcomed moves by the new management including a return of capital.

The stock with the largest single negative impact on Fund performance this year was Bladex, the leader in Latin American trade financing. The share price was devastated by a number of issues including Brazilian worries, the debt crisis in Argentina and a subsequent rights offering needed to preserve the company's credit rating. In short, we underestimated credit risk and overestimated the company's flexibility.

Solvus, the Belgium temporary services provider, was also a very poor performer. A tough competitive environment confirmed that we had overestimated the quality of their business franchise and we have subsequently sold all our shares.

Three European manufacturers had significant, though we believe temporary, negative impacts on the Fund: Gurit-Heberlien, Pfeiffer Vacuum Technology, and Natuzzi. Swiss-based Gurit-Heberlien is in the midst of a restructuring that should eventually highlight the share's undervaluation. Pfeiffer is suffering from the malaise that infects German manufacturing at present, though, unlike most of their peers, the company remains extremely profitable. The share price of Natuzzi, the Italian furniture manufacturer, is suffering from worries about the overall economy and consumer confidence.

Looking Forward

Given the quality of the holdings and the attractive valuation of the portfolio, we remain quite optimistic regarding long-term appreciation potential. We want to thank you for your continued confidence.

David G. Herro, CFA Portfolio Manager dherro@oakmark.com	Michael J. Welsh, CFA, CPA Portfolio Manager mwelsh@oakmark.com

January 6, 2003

Global Diversification—December 31, 2002 (Unaudited)

Schedule of Investments—December 31, 2002 (Unaudited)