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

THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL FUND FROM ITS INCEPTION (9/30/92) 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	10-year	Since Inception (9/30/92)
Oakmark International Fund(Class I)	-0.16%	21.92%	9.14%	9.25%	11.52%
MSCI World ex. U.S.	0.19%	22.32%	-0.42%	4.32%	6.43%
MSCI EAFE15	-0.28%	22.08%	-0.88%	4.01%	6.19%
Lipper International Fund Index16	-0.17%	19.69%	0.84%	5.31%	7.53%
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 Fund had a loss of less than 1% for the quarter, slightly worse than the relevant indices. For the past twelve months, the Fund is up 22%.

Individual securities that contributed significantly to performance during the quarter were Mexican media company Grupo Televisa and South Korean beverage company Lotte Chilsung. The most significant detractors from quarterly performance were Swiss food company Nestle and UK food company Cadbury Schweppes. Televisa experienced higher-than-expected growth in profits and free cash flow during the quarter, on top of exceptional election-year earnings in 2003, and management has raised its guidance for the year. Management has also begun to return substantial amounts of free cash flow to its shareholders. Lotte Chilsung saw exceptional revenue growth and margin expansion during the first half of the year, despite a very sluggish consumer environment in Korea, and it has continued to gain market share.

Nestle's price decline for the quarter was prompted by the release of first half 2004 sales results, which were hurt by decreased ice cream and beverage demand caused by colder than usual weather in the U.S. and Europe. Despite this one-off effect, organic growth was still strong at almost 5%, outperforming the competition. We continue to be impressed with management's focus on efficiency, and we continue to believe Nestle is an excellent franchise at a very cheap price. Both Nestle and Cadbury have been affected by commodity price volatility. At the start of the year inflation occurred in raw material inputs, and now the pressure has shifted to packaging materials. In our view, these temporary fluctuations will not harm either company's long-term intrinsic value.

Recent new positions added to the Fund include UK bank Lloyds TSB and UK-based mobile operator Vodafone. With approximately 20% of the market share, Lloyds is the largest UK retail bank, which we were able to buy for less than 10x estimated 2005 net earnings. In addition, we purchased Vodafone, the world's largest cellular operator, at less than 8x estimated 2005 EBIT.¹⁷

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