Letter from the President
Dear Fellow Shareholders,
On September 11, 2001, our country suffered a horrible tragedy.
Although more than three weeks have passed since the attack, our thoughts remain with
those who were lost and the heroes who courageously came to their aid. The mutual fund
industry had very strong links to the World Trade Center since it stood at the heart of
New York’s financial district. We’ve lost friends and acquaintances, but
thankfully all of our staff is safe. In addition, because we are based in Chicago, there
was no disruption to our business.
As a firm, we collectively were horrified and fearful on September 11th. These emotions
slowly evolved into a determination to look ahead. While we will never forget this
tragedy, our leaders have reminded us that the country needs to get back to
business—the right action for our country and the memory of the people who died. We
share this view and have acted accordingly. Therefore, we were fully staffed on
September 12th and realized that our responsibilities required disciplined thoughts
and strategies, instead of an emotional response.
Market reaction to the terrorist actions was not unexpected, and it has been a
difficult quarter for all investors. As we have witnessed in the past, great uncertainty
creates short-term instability in the financial markets. However, we have also experienced
how markets recover from shock and then return stronger than before. Companies we invest
in—like retailers, consumer products firms, telecommunications businesses, medical
products companies—are priced attractively and positioned for long-term growth. In
international and domestic markets, our value investment strategy resulted in taking
advantage of lower prices by adding to our portfolio positions and establishing new
positions. There was some erosion in our portfolios, but our conviction is intact. As a
sign of our faith in the markets, we also made additional personal investments in each of
our Funds.
In the face of turbulent markets we continue to look for undervalued companies that
have strong free cash flow, solid balance sheets, and high quality
management—characteristics we believe are critical for businesses to prosper. Our
strategy, which remains unchanged regardless of market conditions, is to buy bargains,
minimize portfolio risk, and focus on long-term performance. Please take a look at the
following letters from each of our portfolio managers, as they address strategy, holdings
and our steps following the attack.
Like all Americans, the tremendous support and heroism we witnessed following the
tragedy inspired us. We are confident in the financial markets and, most importantly, in
our country’s spirit and resolve. We have quickly returned to customary business
routines—travelling around the U.S. and the globe to gain insight into businesses we
are considering and the managers who guide them.
Please keep in mind that patient investors have been rewarded for maintaining a
long-term perspective. Thank you for your support and continued investment.
Robert M. Levy
President and CEO
October 5, 2001
THE OAKMARK FAMILY OF FUNDS
Summary Information
Performance for Period
Ended September 30, 20011 |
The Oakmark
Fund |
The Oakmark
Select
Fund |
The Oakmark
Small Cap
Fund |
The Oakmark
Equity and
Income Fund |
| 3 Months* |
–9.01% |
–3.82% |
–15.04% |
–2.84% |
| 6 Months* |
–0.59% |
5.09% |
1.18% |
4.99% |
| 1 Year |
20.42% |
25.75% |
0.07% |
14.40% |
Average Annual Total
Return for:3 Year |
6.32% |
26.74% |
6.37% |
16.05% |
| 5 Year |
9.59% |
N/A |
6.35% |
16.40% |
| Since Inception |
19.28% |
28.63% |
10.46% |
15.73% |
Value of $10,000 from
inception date |
$59,986
(8/5/91) |
$34,496
(11/1/96) |
$18,026
(11/1/95) |
$23,751
(11/1/95) |
Top Five Holdings
as of September 30, 20013
Company and % of Total
Net Assets |
Washington
Mutual, Inc. |
3.5% |
Washington
Mutual, Inc. |
16.1% |
Catellus Development
Corporation |
5.0% |
PartnerRe Ltd. |
3.3% |
| H&R Block, Inc. |
3.1% |
H&R Block, Inc. |
7.5% |
The PMI Group, Inc. |
4.7% |
SAFECO Corporation |
3.2% |
| The Kroger Co. |
2.7% |
Toys ‘R’ Us, Inc. |
5.0% |
Ralcorp Holdings, Inc. |
4.3% |
UST Inc. |
3.0% |
| AT&T Corp. |
2.7% |
AT&T Corp. |
4.7% |
ITT Educational
Services, Inc. |
4.2% |
XTO Energy, Inc. |
3.0% |
| Fortune Brands, Inc. |
2.7% |
Electronic Data Systems
Corporation |
4.5% |
BankAtlantic Bancorp, Inc., Class A |
3.9% |
Watson Pharmaceuticals,
Inc. |
3.0% |
Top Five Industries
as of September 30, 2001
Industries and % of Total Net Assets |
Retail |
12.1% |
Retail |
16.9% |
Bank and Thrifts |
10.1% |
U.S. Government
Notes |
26.4% |
| Other Consumer Goods and Services |
8.9% |
Bank and Thrifts |
16.1% |
Computer Software |
7.8% |
Oil and Natural Gas |
8.4% |
| Computer Services |
6.2% |
Other Consumer Goods and Services |
11.2% |
Food and Beverage |
7.2% |
Insurance |
6.5% |
| Bank and Thrifts |
5.6% |
Information Services |
8.9% |
Real Estate |
6.8% |
Computer Software |
5.4% |
| Telecommunications |
5.5% |
Telecommunications |
8.8% |
Medical Products |
5.9% |
Pharmaceuticals |
4.9% |
Performance for Period
Ended September 30, 20011 |
The
Oakmark
Global
Fund |
The
Oakmark
International
Fund |
The
Oakmark
International
Small Cap Fund |
| 3 Months* |
–16.69% |
–19.39% |
–11.35% |
| 6 Months* |
–3.56% |
–11.34% |
–8.17% |
| 1 Year |
1.37% |
–13.10% |
–6.18% |
Average Annual Total
Return for:3 Year |
N/A |
13.27% |
19.41% |
| 5 Year |
N/A |
5.28% |
3.83% |
| Since Inception |
4.80%2 |
10.07% |
5.83% |
Value of $10,000 from
inception date |
$11,071
(8/4/99) |
$23,728
(9/30/92) |
$13,987
(11/1/95) |
Top Five Holdings
as of September 30, 20013
Company and % of Total
Net Assets |
ITT Educational
Services, Inc.
|
5.6% |
Givaudan |
4.0% |
Asatsu-DK Inc. |
4.1% |
| Novell, Inc. |
5.3% |
Diageo plc |
3.8% |
Ducati Motor
Holding S.p.A. |
3.6% |
| Synopsys, Inc. |
5.0% |
Hunter Douglas N.V. |
3.8% |
Jarvis Hotels plc |
3.5% |
Michael Page
International plc |
4.8% |
Metso Corporation |
3.8% |
Pacific Dunlop
Limited |
3.3% |
Valassis Communications,
Inc. |
4.3% |
Enodis plc |
3.6% |
Fletcher Building
Limited |
2.9% |
Top Five Industries
as of September 30, 2001
Industries and % of Total
Net Assets |
Computer Software |
14.4% |
Bank and Thrifts |
11.2% |
Food and Beverage |
12.2% |
| Educational Services |
9.0% |
Other Industrial Goods
and Services |
9.9% |
Retail |
9.2% |
| Food and Beverage |
7.4% |
Food and Beverage |
9.5% |
Diversified
Conglomerates |
7.2% |
| Information Services |
6.6% |
Publishing |
7.5% |
Building Materials and
Construction |
4.6% |
| Retail |
6.1% |
Chemicals |
7.0% |
Publishing |
4.2% |
* Not annualized