THE OAKMARK GLOBAL FUND Report from Gregory L. Jackson and Michael J. Welsh, Portfolio Managers

THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK GLOBAL FUND FROM ITS INCEPTION (8/4/99) TO PRESENT (12/31/02) AS COMPARED TO THE MSCI WORLD INDEX19
	Average Annual Total Returns5
	(as of 12/31/02)
	Total Return Last 3 Months*	1-year	3-year	Since Inception (8/4/99)
Oakmark Global Fund	14.87%	-2.11%	10.82%	9.40%7
MSCI World	7.64%	-19.89%	-16.66%	-11.13%
Lipper Global Fund Index20	6.05%	-18.65%	-14.40%	-7.54%
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

Fellow Shareholders,

The Oakmark Global Fund had a strong quarter, gaining 15% for the three-month period ending December 31, 2002. This quarter's results compare favorably with the 8% increase for the MSCI World Index and the 6% increase for the Lipper Global Fund Index.

For the calendar year 2002, The Oakmark Global Fund lost 2%, compared to the significant declines of 20% and 19% for the MSCI World Index and the Lipper Global Fund Index, respectively. Most importantly, since inception the Fund has returned 9% annualized compared to sizable declines in the above indices.

Another Interesting Year

This has been a very volatile year—has there been any other kind since the Fund's inception? This year saw wild share price swings around the globe: the US market hit lows not seen since 1996, the German and UK markets retreated to mid 1990's levels, and Japan, almost inconceivably, hit even lower lows with the Nikkei²¹ retreating to levels not seen since the early 1980's.

Investor panic reached a crescendo this September, when underlying business performance became completely irrelevant to share price performance. A number of our holdings which were negatively impacted rebounded strongly in the Fourth Quarter, most importantly Ericsson, Vivendi Universal, and Novell.

During trying times its often heartening to remember a very positive attribute of volatile markets and wild swings in investor sentiment: opportunity. Greater volatility usually creates greater gaps between share prices and underlying business value. Long-term investors, in short, should welcome short-term volatile markets for the better opportunity they create.

Where are we finding the most interesting opportunities? We have found a group of investments, formerly classified as "growth" stocks, that we think represent tremendous value. Many are blue-chip names we traditionally have not owned because the market values them so highly. These stocks include Vivendi Universal (France), LM Ericsson (Sweden), Grupo Televisa (Mexico), GlaxoSmithKline (UK), Liberty Media, First Data Corporation and Interpublic Group (all US-based). These holdings help illustrate our belief that there are not two separate and distinct buckets of growth stocks and value stocks—any company with a superior growth rate can be a value stock given the right price.

Significant Performers

For the second straight year, ITT Educational was the single biggest positive contributor to the Fund's NAV.²² As a reminder we have owned ITT Educational on three different occasions. We first began buying ITT Educational in the fall of 1999 at an average price of about $6.50 and sold the majority of the position in the spring of 2001 at an average price of about $17.50. We repurchased ITT Educational after the September 11th attack in 2001 at an average price of about $13.50 and sold the position in the spring of 2002 at an average price of roughly $27.50. Lastly, we again purchased shares in ITT Educational Services in the fall of 2002 at an average price of roughly $17 and the stock is currently trading for roughly $24 per share. Luckily, market volatility has continued to provide us opportunities to own this fine company.

The Fund's history with ITT Educational illustrates some key aspects of our philosophy and our process. First, it demonstrates our strict adherence to a buy and sell discipline based solely on our calculation of a firm's intrinsic value. Our holding period for an investment is simply the length of time it takes for price and value to converge. Another important point this stock highlights is our desire to own businesses that are growing value per share. Our target sell prices for ITT Educational have ascended over the past three years, a reflection of the superb job management has done in building business value. Finally, this example underscores that in our research process we try to always remain current on our appraisals of businesses we believe have superior attributes, hoping that at some point price weakness will allow us to own them on our price terms.

Other strong performers for the year included Hite Brewery and Lotte Chilsung Beverage (both located in Korea), Cytyc Corp and First Health Group (both US healthcare companies), Somerfield (UK supermarket chain), Ansell (global medical and consumer products company located in Australia), and Hunter Douglas (Netherlands).

The single largest negative contributor for the calendar year was Swedish telecommunications equipment giant LM Ericsson. Through the first nine-months of the year the market continued to punish the share price for the slow-down in infrastructure spending, ignoring the significant cost reduction programs implemented by management. The stock recovered strongly during the Fourth Quarter as overriding pessimism gave way to recognition of tremendous undervaluation. While we can't predict when the turn in order flow will happen, we do believe that with their tremendous mobile infrastructure franchise, Ericsson is well positioned to benefit from the increase in capital spending that will occur.

Other significant negative contributors were Gemstar-TV Guide and Efunds, both US companies. Regarding Gemstar, we clearly overestimated the quality of the business and the prior management team. The former management team has been replaced, and a new team lead by CEO Jeff Shell, formerly of News Corporation (which owns 43% of Gemstar), is now in place. Going forward, we view Jeff's job as restoring the core TV Guide franchise and expanding the Interactive Program Guide and other interactive assets such as TV Games Network. Gemstar remains a cheap company, trading for less than 8 times our estimate 2002 cashflow.

Efunds is currently the fund's largest position. While the stock price performed poorly in 2002 due to some management missteps, we believe Efunds now has a strong management team led by Paul Walsh and a solid business outlook. Efunds participates in many fast growing areas of the economy including debit card processing and security screening brought about by the new Patriot Act. We believe Efunds remains undervalued, trading at about half of our appraised value for the company. With a strong new management team and exciting secular growth prospects, we believe Efunds has a bright future.

Looking Ahead

Given the attractive prices and the quality level of the businesses currently held in the portfolio, we remain quite excited about the future prospects for The Oakmark Global Fund. Thank you for your continued confidence and support.

Gregory L. Jackson Portfolio Manager gjackson@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)