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 (9/30/04) AS COMPARED TO THE MSCI WORLD EX U.S. INDEX14
	Annual Average Total Returns
	(as of 09/30/04)
	Total Return Last 3 Months *	1-year	5-year	Since Inception (11/1/95)
Oakmark International Small Cap Fund(Class I)	3.69%	33.94%	12.15%	11.96%
MSCI World ex. U.S.	0.19%	22.32%	-0.42%	4.51%
Lipper International Small Cap Average18	-0.06%	23.81%	7.16%	10.08%
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.
The performance data quoted represents past performance. The above performance information for the Fund does not reflect the imposition of a 2% redemption fee on shares held for 90 days or less to deter market timers. If reflected, the fee would reduce the performance quoted. Past performance does not guarantee future results. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Average annual total return measures annualized change, while total return measures aggregate change. To obtain current month end performance data, call 1-800-OAKMARK or visit www.oakmark.com.
* Not annualized

The Oakmark International Small Cap Fund gained 4% for the quarter, outperforming our benchmark indices. For the past twelve months, your Fund is up 34%.

Strong performers for the quarter were Mexican airport operator Grupo Aeroportuario del Sureste ("Asur") and three of our Australasian holdings: latex manufacturer Ansell Ltd., and credit services company Baycorp Advantage—both headquartered in Australia—and Fletcher Building in New Zealand. Asur enjoyed significant profit growth because of strong, double-digit passenger volume growth and increased per-passenger fees. Ansell shares reacted favorably to strong half-year results that exceeded management's guidance and authorization of an additional 10% share repurchase. Both Baycorp and Fletcher Building reported very strong half-year results during the period.

The most significant detractor from quarterly performance was Swiss specialty materials producer Gurit-Heberlein. While Gurit-Heberlein showed solid organic growth, competition and currency hurt its margins for the period. However, we remain optimistic about Gurit's opportunities during an aerospace recovery, and the recently renewed tax credits for windfarms should bolster demand for Gurit's specialty materials, which are used in the blades of wind turbines.

Portfolio Composition

New positions initiated during the quarter include Swiss textile machinery manufacturer Saurer AG, two Korean regional banks Pusan Bank and Daegu Bank, and the Turkish holding company Dogan Sirketler. Long-time shareholders of Oakmark International Fund also possessing a superb memory may recognize Saurer, as it was a successful investment for us over seven years ago.

Also during the quarter we sold our position in DFS Furniture at a substantial profit. The company is to be taken private in a buyout led by founder and current chairman Graham Kirkham.

Geographically, our portfolio weightings remain very similar to last quarter with Europe and the UK representing around 70% of investments, 26% in the Pacific Rim, and 4% in Latin America.

We continue to like the quality and price attractiveness of the portfolio. 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—September 30, 2004

Schedule of Investments—September 30, 2004

See accompanying notes to financial statements.