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 (3/31/03) AS COMPARED TO THE MSCI WORLD EX U.S. INDEX31
	Average Annual Total Returns1
	(as of 3/31/03)
	Total Return Last 3 Months*	1-year	5-year	Since Inception (11/1/95)
Oakmark International Small Cap Fund	-12.24%	-24.43%	3.96%	4.52%
MSCI World ex. U.S.	-7.52%	-22.57%	-6.82%	-0.82%
Lipper International Small Cap Average34	-4.95%	-20.02%	-1.79%	5.21%
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 had a poor quarter, declining 12%, and underperforming the relevant indices. Short-term performance was hurt by particularly poor stock performers in the Netherlands, Australia, and Switzerland.

Netherlands-based NYSE specialist Van der Moolen Holding, N.V. is experiencing a difficult period due to low volatility and low volume in the securities markets on top of depressed underlying security prices. The current poor operational performance masks what we believe is the company's significant earnings power, which we expect to see once a level of normalcy returns.

The market has reacted negatively to the current teething pains of Australian credit reference provider, Baycorp Advantage Limited, as they integrate a significant merger. This has resulted in slower than expected short-term growth. We think the market's overreaction has created a significant gap between price and business value. Along with most of the European asset management industry, Swiss private bank Vontobel Holding AG is experiencing short-term declines in revenue due to the depressed market value of its asset base. Nevertheless, we feel it is an attractive franchise with good secular growth, high returns, and excess capital (not a bad thing in this environment).

For all of these stocks, we believe the long-term fundamentals of each business remain relatively unscathed by the presently adverse market conditions, and the gap between price and value expanded. We increased the Fund's ownership in both Van der Moolen and Baycorp during the period.

Positions sold during the quarter include Italian furniture retailer Natuzzi SpA, whose U.S. market share has been eroded by cheaper Mexican imports. Management's plan to combat this by putting significant capital behind a new brand-name (which is very similar to its existing brand) left us unconvinced of their competitive response. Also, New Zealand construction company Fletcher Building Ltd., a significant performer for us over the past few years, was sold during the period as it approached its target sell price.

Given the quality of the holdings and the attractive valuation of the portfolio, we remain optimistic about potential price appreciation. 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

International Diversification—March 31, 2003 (Unaudited)

Schedule of Investments—March 31, 2003 (Unaudited)

See accompanying notes to financial statements.