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

THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK GLOBAL FUND FROM ITS INCEPTION (8/4/99) TO PRESENT (3/31/03) AS COMPARED TO THE MSCI WORLD INDEX22
	Average Annual Total Returns1
	(as of 3/31/03)
	Total Return Last 3 Months*	1-year	3-year	Since Inception (8/4/99)
Oakmark Global Fund	-10.55%	-21.02%	6.50%	5.48%3
MSCI World	-5.06%	-24.20%	-18.38%	-11.68%
Lipper Global Fund Index23	-6.63%	-24.77%	-17.59%	-8.77%
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 was down 11% for the three-month period ending March 31, 2003. This compares to declines of 5% for the MSCI World Index and 7% for the Lipper Global Fund Index. Since inception, your Fund has generated a total positive return of 22% versus declines of 37% for the MSCI World Index and 29% for the Lipper Global Fund Index.

In past letters, we have written about the increasing volatility in the stock market—this quarter was by no means an exception to that trend. In fact, many international markets experienced one of the most volatile quarters in history. For example, through mid-March, the CAC²⁴ (French index) and FTSE²⁵ (UK index) declined 22% and 15% respectively, the DAX²⁶ (German index) declined 24% and the Amsterdam market²⁷ declined 32%. While here in the US, the S&P 500⁴ and Dow Jones Industrial Average¹¹ both experienced declines of over 8% by mid-March. This extreme volatility was driven by concerns over the weak worldwide economy and fears of the ramifications of war with Iraq. Our hearts and prayers go out to the brave men and women serving our country and we wish them a quick and safe return home.

While we personally cannot have an impact on the worldwide economy or war with Iraq, we can do our best to be wise stewards of your capital and deploy your money when we believe the potential for reward far outweighs the potential risk involved. Oftentimes war engulfs people with genuine fear, due to the uncertainty of what may lie ahead. This fear leads many investors to panic, sell stocks and move their money into bonds or money market-type instruments. This causes markets to decline as we experienced this past quarter. However, times of fear and uncertainty can provide attractive purchase opportunities for long-term investors. In the book Common Stocks and Uncommon Profits, Phil Fisher discusses buying stocks on a war scare, which we think is worth sharing.

"Common stocks are usually of greatest interest to people with imagination. Our imagination is staggered by the utter horror of modern war. The result is that every time the international stresses of our world produce either a war scare or an actual war, common stocks reflect it. This is a psychological phenomenon which makes little sense financially. ...

The results are always the same. Through the entire twentieth century, with a single exception, every time major war has broken out anywhere in the world or whenever American forces have become involved in any fighting whatever, the American stock market has always plunged sharply downward. This one exception was the outbreak of World War II in September of 1939. At that time, after an abortive rally on thoughts of fat war contracts to a neutral nation, the market soon was following the typical downward course, a course which some months later resembled panic as news of German victories began piling up. Nevertheless, at the conclusion of all actual fighting—regardless of whether it was World War I, World War II, or Korea—most stocks were selling at levels vastly higher than prevailed before there was any thought of war at all. Furthermore, at least ten times in the last twenty-two years, news has come of other international crises which gave threat of major war. In every instance, stocks dipped sharply on the fear of war and rebounded sharply as the war subsided."²⁸

We spend very little time trying to predict economic variables or trying to ascertain the consequences of war; we leave those questions to the economists and world leaders. Rather, we spend our time trying to find attractively priced companies that have real long-term growth potential and are being run by management teams that think in the long-term interests of shareholders. During the quarter we were able to find a few companies that we believe fit the above criteria. Here is a brief description of each company:

AOL Time Warner

AOL Time Warner owns one of the highest quality selections of media and entertainment assets in the world. The company is one of the top three cable operators, owns and operates many cable television networks (TBS, TNT, CNN, etc.), film entertainment (Harry Potter, Lord of the Rings, etc.), music production, publishing (Time and Fortune magazines, etc.) and owns America Online, which is the #1 internet service provider in the United States. When AOL and Time Warner merged a few years ago, the company traded for over $95 per share. During the past year, the company's stock price fell to below $10. While the $95 stock price tremendously overvalued the assets, we believe the current valuation is quite attractive, with asset values worth almost double the current stock price.

Concord EFS

Concord EFS is the #1 debit card processor in the United States via their ownership of the Star, MAC and Cash Station debit networks. The company is also the largest operator of outsourced ATM machines and a major credit card processor. Concord is a direct beneficiary of consumers migrating from paying for items via cash and checks to electronic means (debit cards, credit cards, stored value cards, etc.). Concord's stock price had fallen from a high of over $35 in 2002 to a recent price of under $9 per share due to concerns about major contract renewals occurring over the next 18 months. On April 2, 2003, Concord EFS agreed to be acquired by First Data Corporation for approximately $14 per share. Historically, we are not accustomed to seeing price and value converge so quickly in one of our investments, but we are not unhappy with the outcome.

Neopost

Neopost is the second largest supplier of mailroom equipment and services in the world. 70% of their sales are from franking machines and scales. 35% of sales are in the US, 35% in France, and the rest in the UK and other European markets. Sixty percent of their sales are recurring rental/lease income and support service revenue, with a more than 90% retention rate on their contracts.

Barriers to entry are huge, due to the highly regulated nature of franking machines. This business generates large amounts of free cash flow and has attractive secular growth (in Europe). Better yet, the Company is led by what we believe is one of the best management teams in Europe. Given their private equity backgrounds, management has an obsessive focus on returns and value per share growth. Their personal wealth is very much tied to the performance of the business and the share price. At current prices, Neopost trades at less than 8 times our estimate of this year's operating profit.

Akzo Nobel—based in the Netherlands

Akzo Nobel is a global conglomerate, with businesses in pharmaceuticals, coatings, chemicals, and fibers. We like some of their businesses and their increasing shareholder orientation. Akzo's pharmaceutical business is concentrated in ethical drugs and animal health. Their coatings business is the market leader in Europe, while the chemicals business is a mix of basics, industrial specialties, and specialties. EVA^® (Economic Value Added)²⁹ analysis has recently been implemented throughout the organization. The top 750 managers can earn up to 100% of their salary as a bonus each year and they must exceed benchmark hurdles set against the top 3 players in each industry.

We believe Akzo is an extremely cheap stock. The Company trades at less than 6 times our estimate of this year's operating profit, less than 9 times this year's earnings, and yields over 5%. At the current share price the company trades at 50% of our appraisal of business value.

These new additions to the portfolio demonstrate our continued focus on buying and holding the most attractive companies at the best prices. We continue to welcome volatility in the stock markets around the world, as it affords us the opportunity to buy good businesses at very attractive prices.

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

Global Diversification—March 31, 2003 (Unaudited)

Schedule of Investments—March 31, 2003 (Unaudited)

See accompanying notes to financial statements.