THE OAKMARK GLOBAL FUND Report from Clyde S. McGregor and Robert A. Taylor, Portfolio Managers

THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK GLOBAL FUND FROM ITS INCEPTION (8/4/99) TO PRESENT (12/31/06) AS COMPARED TO THE MSCI WORLD INDEX11
	Average Annual Total Returns (as of 12/31/06)
	Total Return Last 3 Months*	1-year	5-year	Since Inception (8/4/99)
Oakmark Global Fund (Class I)	9.19%	24.18%	18.85%	17.44%
MSCI World	8.37%	20.07%	9.97%	4.20%
Lipper Global Fund Index12	8.47%	19.30%	10.39%	6.15%
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 most recent month-end performance data, visit oakmark.com.
* Not annualized

Quarter Review
The Oakmark Global Fund increased 9% for the quarter ended December 31, 2006, versus 8% for the Lipper Global Fund Index and the MSCI World. More importantly the Fund is up 17% annualized since inception, outperforming the Lipper Global Fund Index and the MSCI World, which were up 6% and 4%, annualized over the same time period.

A Comment on Volatility
Twelve months ago, most stock market prognosticators forecasted that 2006 would be a quiet year with returns likely coming in between 5 and 10%. Not only have these forecasts proved conservative, but the recent quarter's return on its own exceeded these forecasts. We do not find these outcomes surprising, however. Although academics have documented that the historical average return of equities has been around 10%, the distribution of returns around that average is not symmetrical. Security prices, either individually or collectively, are volatile and are more likely to rise 11-20% than 1-10% in any given year. Quarterly results are even more volatile on a proportional basis. Nevertheless, prognosticators continue to print out forecasts for moderate rates of return. Why do they do this? Institutional incentives simply demand it. First, the potential punishments for being wrong substantially outweigh the possible rewards for being correct with an aggressive forecast. In addition, a moderate forecast is easier on clients' emotions, even if making such forecasts may be intellectually disingenuous.

We do not make market forecasts. Nor do we have incentives to embrace or reject volatility. Instead we attempt to position our portfolios to capture upside volatility and to resist downside volatility. We do this by only owning securities selling at a substantial discount to their intrinsic value. We recognize (and our investors should as well) that our portfolios will occasionally suffer bouts of downward volatility. For example, 2002 was a terrible year for global equity markets (and the worst year of performance for the Fund) because average corporate earnings fell, corporate scandals were prevalent, and valuations were still stretched from the 1999-2000 bubble years. Despite these negatives, many companies' earnings power—and thus their intrinsic value—did not materially change. The opportunities created in this market decline laid the foundation for the strong years that followed.

In any event, in the seven-year history of the Oakmark Global Fund, the Fund has never generated an annual return in the 5-10% range. In six years, including 2006, the Fund returned greater than 10%, and in 2002 the Fund experienced a 2% loss. We often mention our compound annual return of 17% in these reports. We are proud of this record, but ask you to remember that, just as with stock market statistics, a wide range of annual returns produced this compounded annualized rate.

Activity
During the December quarter we added three new U.S. names and one international name. The selection of Live Nation provides a good example of how our teams of international and domestic analysts interact. The company is a large venue operator for live entertainment events, and it also produces and promotes events. Clear Channel Communications purchased Live Nation's former parent company in the 1990s and chose to spin the company off to shareholders late in 2005. Our international analysts' experience with a German competitor caused them to suggest that our domestic team analyze Live Nation. With a newly refocused management team as well as prospective benefits from the expiration of an expensive contract, we believe that Live Nation offers an interesting opportunity.

Medtronic is one of the largest medical device companies. Its products address problems in cardiac rhythm management, neurology, diabetes, and spinal therapies, and they also manufacture heart valves and stents. The company's products benefit from aging populations across the developed world. The balance sheet is strong, and management has demonstrated excellent capital allocation. Our opportunity to own this "best-in-class" company developed, as is often the case, when the company pre-announced a small earnings shortfall. After the announcement, investors who crave predictability rather than value fled the stock, causing a substantial fall in the share price. The shares now trade at prices first reached in 2000 despite the fact that earnings have more than doubled over that period.

Union Pacific (UNP) owns and operates the largest freight railroad in North America, serving the western United States (west of the Mississippi). Given its location and business mix, UNP should have the highest margins in the industry. Yet it currently has the worst operating margins among the Class 1 railroads (20%) versus its peers that have 23-30%. We believe that higher consumer pricing and more efficient operations will allow UNP's margins to at least reach industry norms over the medium term.

DaimlerChrysler (DCX) is a leading automobile and commercial vehicles manufacturer. Mercedes is one of the world's top luxury automobile brands that had fallen on tough times and actually lost money last year. This year the difficult U.S. market is negatively affecting Chrysler. Dealer incentives, an expected massive new model roll-out, and union negotiations are all weighing on Chrysler. These negatives created a big opportunity. Mercedes profits are improving, and the brand sells roughly the same volume as BMW and should earn similar profits. When we started buying DCX we were paying for the Mercedes brand and the net cash on the balance sheet, and in the process, we got Chrysler, the commercial division, the finance business, and other industrial holdings for free.

We sold the positions Akzo Nobel, Henkel, and TJX Cos. due to relative attractiveness versus other names in the portfolio. Despite these sales we continue to find value throughout the world. We thank you for your continued support.

Global Diversification—December 31, 2006 (Unaudited)

Schedule of Investments—December 31, 2006 (Unaudited)