THE OAKMARK INTERNATIONAL SMALL CAP FUND Report from David G. Herro and Chad M. Clark, Portfolio Managers

THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND FROM ITS INCEPTION (11/1/95) TO PRESENT (9/30/07) AS COMPARED TO THE MSCI WORLD EX U.S. INDEX14 (UNAUDITED)
	Average Annual Total Returns (as of 9/30/07)
(Unaudited)	Total Return Last 3 Months*	1-year	5-year	10-year	Since Inception (11/1/95)
Oakmark International Small Cap Fund (Class I)	-6.60%	13.35%	28.61%	15.06%	14.75%
MSCI World ex U.S.	2.71%	25.85%	24.08%	8.30%	9.05%
MSCI World ex U.S. Small Cap17	-3.73%	21.26%	27.78%	N/A	N/A
Lipper International Small Cap Index18	0.59%	31.35%	30.54%	14.38%	N/A
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.
Expense Ratio as of 9/30/07was 1.34%. 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

The Oakmark International Small Cap Fund returned -7% for the quarter ended September 30, 2007, compared to the MSCI World ex U.S. Index that returned 3% and the MSCI World ex U.S. Small Cap Index that returned -4%. For the past twelve months and since inception your Fund returned 13% and 15% versus the MSCI World ex U.S. Index, which returned 26% and 9% for the same periods, and the MSCI World ex U.S. Small Cap Index, which returned 21% for the past twelve months.

South Korea and Japan each added approximately 100 basis points to relative performance in the quarter. Our holdings in South Korea were particularly strong, advancing 14% versus the overall index’s decline of 4%. In Japan, our relative underweight position and stock selection contributed equally to the Fund’s performance. Our Japanese positions only declined 3% versus the index’s decline of almost 7%. The Fund’s German, UK, and Australian names were the largest detractors, and they accounted for approximately 3% of the underperformance relative to the benchmark.

Detractors

MLP AG, one of Germany’s largest independent financial advisors (IFAs), was the Fund’s largest detractor from performance. The stock was down 31% last quarter and about 32% year-to-date. MLP has experienced some management turnover in the past several months, including its CFO and Head of Sales. While we weren’t happy with the CFO’s departure—as we discussed in the Third Quarter Report—we are satisfied with the firing of the Head of Sales, because he never adapted to the sales-driven culture of the MLP organization. We continue to believe that MLP’s price declines are primarily a result of investors’ aversion to financial intermediaries of all types.

JJB Sports, the second-largest sporting goods retailer in the UK, was another poor performer last quarter. The company reported relatively weak first half results due to a sales decline in 2006 World Cup apparel, primarily because English shoppers—who had flocked to buy the merchandise last year—were deterred by recent flooding. Additionally, in August CEO Tom Knight stepped down and was replaced by Deputy CEO Chris Ronnie. While the new CEO is focused on improving JJB’s private label offering and brand mix, we are concerned about the rationale behind the management change and are monitoring the situation.

Rounding out the detractors was a new holding to the Fund, LSL properties, a UK appraisal company. Though LSL reported strong first half results, its shares have declined along with the UK housing market. LSL is predominantly exposed to mortgage appraisals, rather than real estate brokerage, which should yield a far more stable earnings stream than its competitors can offer. Thus, we continue buying shares here as well.

Contributors

South Korean Lotte Confectionery rose 31% in the quarter. The company reported strong first half results due to strong sales and operating profit growth spurred by market share gains. In addition, Lotte benefited from speculation that the company may adopt a holding company structure, which should increase transparency to minority shareholders, insure that the company won’t invest outside its core operations, and provide greater dividend payouts to shareholders.

Square Enix, a Japanese software developer and publisher, was up 32% last quarter. The company has reported good results from increasing sales and successful software launches. The group has also realized the margin improvement on its recently acquired arcade business, which appears to have been a positive move.

MDS Inc. is a leading Canadian provider of products and services to the global life sciences market and returned 6% this quarter. A new management team continues to make progress resolving FDA issues within its pharma services business. The division is restructuring in order to improve profitability by aligning its cost structure with business levels. MDS is also benefiting from strong demand from the pharmaceutical sector for its mass spectrometry equipment.

Portfolio Composition

It was another active quarter for trading, and the Fund sold our entire positions in Ansell, Lectra Systems, Mabuchi Motor Co., Taiyo Ink, Baron de Ley, Intrum Justitia, Schindler Holding and Croda International as each reached its respective sell price. New additions to the portfolio included Sperian, a French manufacturer of equipment designed to provide protection to people in hazardous work environments; Beter Bed, the leading mid-market bedroom furniture store in the Netherlands; Trigano, the leading French manufacturer in the European Recreation Vehicle (RV) market; Aegis Group, the largest independent media buyer worldwide, headquartered in the UK; Britvic, a UK soft drinks and juices bottler; and LSL Property Services, the second largest appraisal company in the UK.

Geographically, our portfolio weightings remain quite similar to prior quarters. Europe and the UK represent 65% of investments, North America is approximately 4%, Latin America is around 2%, and the majority of the balance excluding cash is invested in the Pacific Rim.

As long-term value investors, we will continue to focus on finding attractive, under-valued foreign companies with management teams focused on building shareholder value. We continue to believe we’re well positioned to benefit from any rebound in the underlying equity markets. We thank you for your continued support.

International Diversification—September 30, 2007 (Unaudited)

Schedule of Investments—September 30, 2007

See accompanying Notes to Financial Statements.