THE OAKMARK
INTERNATIONAL
SMALL CAP FUND
Report from David G. Herro and
Michael J. Welsh, Portfolio Managers
THE OAKMARK
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| THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND FROM ITS INCEPTION (11/1/95) TO PRESENT (12/31/01) AS COMPARED TO THE MSCI WORLD EX U.S. INDEX19 | ||||
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Average Annual
Total Returns1 |
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| Total Return Last 3 Months* |
1-year | 5-year | Since Inception (11/1/95) |
|
| Oakmark International Small Cap Fund |
19.19% | 12.98% | 6.72% | 8.63% |
| MSCI World ex. U.S. | 7.16% | -21.40% | 1.13% | 3.11% |
| Lipper International Small Cap Average25 |
10.35% | -21.82% | 6.52% | 9.33% |
| Past performance is no guarantee of future results. Investment return and principal value vary, and you may have a gain or loss when you sell shares. Average annual total return measures annualized change, while total return measures aggregate change. | ||||
| * Not annualized | ||||
Portfolio Update
A number of stocks provided solid contributions to The Oakmark International Small Cap Fund's 2001 performance. Fletcher Building of New Zealand, which started the year as one of the Fund's biggest positions, returned over 50% as the market embraced a new management team and their increased focus on improving overall group returns. Two Korean companies, Hite Brewery and Tae Young, also provided nice increases to the Fund's NAV.24 In fact, 2001 marked the fourth year in a row that Hite Brewery was one of Oakmark International Small Cap's best contributors. A dream investment for us is one where the share price outperforms but business value grows almost as quickly, and so far that has been the case with Hite.
Jusco Stores (Hong Kong), Enix (Japan), and House of Fraser (UK) also all made solid contributions. Jusco Stores, up 200% in 2001, had the biggest absolute return of any of our small cap investments. With Enix, this is the second time that we have owned this long-time favorite, in our opinion one of the best-managed companies in Japan. In 2001, our patience with House of Fraser was rewarded with a 50% total return.
Only one stock had a materially negative impact on NAV and it was Royal Doulton of the UK. Its shares lost three-quarters of their value in 2001. While management has done all the right things, we have very much overestimated the quality of the business and the industry.
David G. Herro, CFA
Portfolio Manager
DGH100@earthlink.net
Michael J. Welsh, CFA, CPA
Portfolio Manager
102521.2142@compuserve.com
January 8, 2002
| THE OAKMARK INTERNATIONAL SMALL CAP FUND |
International Diversification—December 31, 2001
| THE OAKMARK INTERNATIONAL SMALL CAP FUND |
Schedule of Investments—December 31, 2001
| Name | Description | Shares Held | Market Value |
| Common Stocks—94.7% | |||
| Food & Beverage—11.0% | |||
| Hite Brewery Co., Ltd. (Korea) |
Brewer | 114,500 | $4,707,757 |
| Baron De Ley, S.A. (Spain), (a) |
Wines & Spirits Manufacturer | 194,985 | 4,521,392 |
| Campari Group (Italy), (a) | Soft Drinks, Wines, & Spirits Producer |
182,000 | 4,293,194 |
| Mikuni Coca-Cola Bottling Co., Ltd. (Japan) |
Soft Drink Manufacturer | 436,000 | 3,823,861 |
| Grupo Continental, S.A. (Mexico) |
Soft Drink Manufacturer | 1,237,000 | 1,823,886 |
| Alaska Milk Corporation (Philippines) |
Milk Producer | 49,394,000 | 1,723,047 |
| 20,893,137 | |||
| Apparel—1.1% | |||
| Kingmaker Footwear Holdings Limited (Hong Kong) |
Athletic Footwear Manufacturer | 10,527,000 | $2,065,507 |
| Retail—6.7% | |||
| Carpetright plc (Great Britain) |
Carpet Retailer | 456,000 | $4,126,754 |
| House of Fraser Plc (Great Britain) |
Department Store | 2,360,000 | 2,907,743 |
| Dairy Farm International Holdings Limited (Singapore), (a) |
Supermarket Chain | 2,502,000 | 1,626,300 |
| Jusco Stores (Hong Kong) Co., Limited (Hong Kong) |
Department Stores | 5,486,000 | 1,600,545 |
| Harvey Nichols plc (Great Britain) |
High Fashion Clothing Retailer | 443,400 | 1,256,998 |
| Bulgari S.p.A. (Italy) | Jewelry Manufacturer & Retailer | 79,000 | 613,207 |
| Signet Group plc (Great Britain) |
Jewelry Retailer | 389,000 | 537,251 |
| 12,668,798 | |||
| Home Furnishings—2.5% | |||
| Industrie Natuzzi S.p.A. (Italy), (b) |
Home Furniture Manufacturer | 319,500 | $4,677,480 |
| Office Equipment—2.1% | |||
| Neopost SA (France), (a) | Mailroom Equipment Supplier | 139,300 | $4,057,212 |
| Other Consumer Goods & Services—1.2% | |||
| Ilshin Spinning Co., Ltd. (Korea) |
Fabric & Yarn Manufacturer | 44,550 | $1,225,678 |
| Royal Doulton plc (Great Britain), (a) |
Tableware & Giftware | 4,387,000 | 1,020,451 |
| 2,246,129 | |||
| Insurance—1.4% | |||
| IPC Holdings, Ltd. (Bermuda) |
Reinsurance Provider | 87,700 | $2,595,920 |
| Other Financial—3.2% | |||
| Ichiyoshi Securities Co., Ltd. (Japan) |
Stock Broker | 1,302,000 | $3,975,269 |
| JCG Holdings Limited (Hong Kong) |
Consumer Finance | 3,321,000 | 2,065,577 |
| 6,040,846 | |||
| Hotels & Motels—2.6% | |||
| Jarvis Hotels plc (Great Britain) |
Hotel Operator | 3,885,000 | $5,026,728 |
| Human Resources—5.7% | |||
| United Services Group NV(Netherlands) |
Temporary Staffing Services | 290,447 | $5,649,130 |
| Creyf's NV (Belgium) | Temporary Staffing Services | 286,300 | 5,147,970 |
| 10,797,100 | |||
| Marketing Services—2.4% | |||
| Asatsu-DK Inc. (Japan) | Advertising Services Provider | 237,000 | $4,631,097 |
| Computer Software—1.4% | |||
| Enix Corporation (Japan) | Entertainment Software | 146,600 | $2,691,192 |
| Computer Systems—2.8% | |||
| Lectra (France), (a) | Manufacturing Process Systems | 1,084,000 | $5,278,127 |
| Broadcasting & Cable TV—2.6% | |||
| ABS-CBN Broadcasting Corporation (Philippines) |
Television & Broadcasting Operator | 8,034,400 | $3,698,004 |
| Ulster Television plc (Great Britain) |
Television Operator | 261,000 | 1,246,465 |
| 4,944,469 | |||
| Broadcasting & Publishing—1.1% | |||
| Tamedia AG (Switzerland) |
TV Broadcasting & Publishing | 33,100 | $2,014,401 |
| Publishing—7.4% | |||
| Edipresse S.A. (Switzerland) |
Newspaper & Magazine Publisher | 13,980 | $4,885,756 |
| Recoletos Grupo de Comunicacion, S.A. (Spain), (a) |
Publisher | 634,000 | 2,759,697 |
| Hollinger International Inc. (United States) |
Newspaper Publisher | 210,000 | 2,457,000 |
| Matichon Public Company Limited, Foreign Shares (Thailand) |
Newspaper Publisher | 2,039,500 | 2,397,784 |
| VLT AB, Class B (Sweden) | Newspaper Publisher | 182,250 | 1,534,296 |
| 14,034,533 | |||
| Automobiles—3.3% | |||
| Ducati Motor Holding S.p.A. (Italy), (a) |
Motorcycle Manufacturer | 3,876,200 | $6,245,224 |
| Transportation Services—2.9% | |||
| Mainfreight Limited (New Zealand) |
Logistics Services | 3,993,551 | $2,460,523 |
| Bergesen d.y. ASA, Class A Shares (Norway) |
Tanker Operator | 95,300 | 1,688,022 |
| DelGro Corporation Limited (Singapore) |
Bus, Taxi, & Car Leasing | 1,066,000 | 1,443,271 |
| 5,591,816 | |||
| Airport Maintenance—5.6% | |||
| Kobenhavns Lufthavne A/S (Copnehagen Airports A/S) (Denmark) |
Airport Management & Operations | 98,545 | $6,383,396 |
| Grupo Aeroportuario del Sureste S.A. de C.V. (Mexico), (a)(b) |
Airport Operator | 279,500 | 4,304,300 |
| 10,687,696 | |||
| Instruments—0.1% | |||
| Vaisala Oyj, Class A (Finland) |
Atmospheric Observation Equipment | 11,200 | $272,172 |
| Machinery & Industrial Processing—4.7% | |||
| ASM Pacific Technology Limited (Hong Kong) |
Semiconductor Machinery | 2,508,500 | $4,938,024 |
| Pfeiffer Vacuum Technology AG (Germany) |
Vacuum Pump Manufacturer | 113,700 | 3,543,365 |
| Carbone Lorraine SA (France) |
Electrical Systems Manufacturer | 13,157 | 351,351 |
| 8,832,740 | |||
| Building Materials & Construction—3.2% | |||
| Fletcher Building Limited (New Zealand) |
Building Materials Manufacturer | 3,224,000 | $3,945,925 |
| Grafton Group plc (Ireland) |
Building Materials Distributor | 723,000 | 2,091,630 |
| 6,037,555 | |||
| Chemicals—4.4% | |||
| Taiyo Ink Mfg. Co., Ltd. (Japan) |
Manufacturer of Resist Inks | 150,500 | $4,480,192 |
| Gurit-Heberlien AG (Switzerland) |
Chemical Producer | 4,880 | 3,852,013 |
| 8,332,205 | |||
| Production Equipment—3.1% | |||
| Interpump Group S.p.A. (Italy) |
Pump and Piston Manufacturer | 821,500 | $3,180,974 |
| NSC Groupe (France) | Textile Equipment Manufacturer | 17,466 | 1,399,262 |
| Krones AG (Germany) | Production Machinery Manufacturer | 29,300 | 1,207,569 |
| 5,787,805 | |||
| Other Industrial Goods & Services—3.1% | |||
| GFI Industries SA (France) | Industrial Fastener Manufacturer | 177,844 | $3,956,114 |
| Coats plc (Great Britain) | Textile Manufacturer | 2,872,000 | 1,972,834 |
| 5,928,948 | |||
| Diversified Conglomerates—9.1% | |||
| Pacific Dunlop Limited (Australia) |
Diversified Manufacturer | 15,103,626 | $7,962,716 |
| Pargesa Holding AG (Switzerland) |
Diversified Operations | 1,640 | 3,241,263 |
| Haw Par Corporation Limited (Singapore) |
Healthcare & Leisure Products | 903,000 | 1,985,475 |
| Jardine Strategic Holdings Limited (Bermuda) |
Diversified Operations | 340,700 | 896,041 |
| Tae Young Corp. (Korea) | Heavy Construction | 106,600 | 3,217,960 |
| 17,303,455 | |||
| Total Common Stocks (Cost: $173,943,088) | 179,682,292 |
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Par Value |
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| Short Term Investments—5.0% | |||
| Commercial Paper—3.7% | |||
| Citicorp, 1.92% due 1/2/2002 | $3,000,000 | $3,000,000 | |
| General Electric Capital Corporation, 1.75% due 1/2/2002 | 4,000,000 | 4,000,000 | |
| Total Commercial Paper (Cost: $7,000,000) | 7,000,000 |
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| Repurchase Agreements—1.3% | |||
| State Street Repurchase Agreement, 1.57% due 1/2/2002 | $2,613,000 | $2,613,000 | |
| Total Repurchase Agreements (Cost: $2,613,000) | 2,613,000 |
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| Total Short Term Investments (Cost: $9,613,000) | 9,613,000 |
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| Total Investments (Cost $183,556,088)—99.7% | $189,295,292 | ||
| Foreign Currencies (Proceeds $481,784)—0.3% | 483,249 | ||
| Other Liabilities In Excess Of Other Assets—0.0%(c) | (3,129) | ||
| Total Net Assets—100% | $189,775,412 | ||
| (a) | Non-income producing security. |
| (b) | Represents an American Depository Receipt. |
| (c) | Includes transaction hedges. |
