THE OAKMARK INTERNATIONAL FUND
Report from David G. Herro and
Michael J. Welsh, Portfolio Managers
THE OAKMARK INTERNATIONAL FUNDReport from David G. Herro and
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| THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL FUND FROM ITS INCEPTION (9/30/92) TO PRESENT (12/31/01) COMPARED TO THE MSCI WORLD EX U.S. INDEX19 | ||||
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| Average
Annual Total Returns1 (as of 12/31/01) |
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| Total Return Last 3 Months* |
1-year | 5-year | Since Inception (9/30/92) |
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| Oakmark International Fund | 17.24% | -5.13% | 7.42% | 11.69% |
| MSCI World ex U.S. | 7.16% | -21.40% | 1.13% | 6.04% |
| MSCI EAFE23 | 6.97% | -21.44% | 0.89% | 5.86% |
| Lipper International Fund Index20 | 8.44% | -19.33% | 2.76% | 7.59% |
| 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
Two Korean stocks provided outsized positive contribution to the performance of The Oakmark International Fund in 2001, adding over 5% to the Fund's NAV.24 Shares of Lotte Chilsung Beverage nearly tripled in price over the year, as investors woke up (all at once!) to the tremendous value management has created since the crisis of late 1998. Profitability and returns have increased dramatically due to market dominance of the company's non-alcoholic beverage brands. Even after their tremendous run, we believe the shares are still not expensive at around five times our estimate of 2002 operating profit.
Our other Korean star was Kumkang Korea Chemical, up 150% for the year. We have liked this company for years as an investment because of its ability to generate tremendous free cash flow, well in excess of their very conservative accounting earnings numbers. The market had been disinterested in the company earlier as the merger integration process (the company is the result of a merger between Kumkang and Korea Chemical) produced some confusing accounting results. Throughout, we focused not on the stock price but on the growth in business value that was occurring, and in 2001 other investors started to do the same.
We had a few poor performers as well, with Enodis, Fila, and Daiwa Securities generating the most significant negative contributions. Investors sold Enodis this year as worries that a global slowdown would hurt their market-leading food service equipment business. Daiwa Securities fell out of favor as investors tired of waiting for an event that always seems to be on the horizon but never quite happens - the return of investors to Japanese investment markets. We continue to believe that both are very attractive at current prices.
Fila, unfortunately, makes a return appearance from last year to the poor performers list. We examined in detail our Fila investment in our Third Quarter, 2001 report. The latest news is that controlling shareholder HdP has decided to put the company up for sale and is currently reviewing offers.
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 FUND |
International Diversification—December 31, 2001
| THE OAKMARK INTERNATIONAL FUND |
Schedule of Investments—December 31, 2001
| Name | Description | Shares Held | Market Value |
| Common Stocks—95.4% | |||
| Food & Beverage—9.1% | |||
| Lotte Chilsung Beverage Co., Ltd. (Korea) |
Soft Drinks, Juices, & Sport Drinks Manufacturer |
93,000 | $35,465,800 |
| Diageo plc (Great Britain) | Beverages, Wines, & Spirits Manufacturer |
2,410,000 | 27,451,142 |
| Fomento Economico Mexicano, S.A. de C.V. (Mexico), (b) |
Soft Drink & Beer Manufacturer | 549,400 | 18,981,770 |
| Pernod-Ricard SA (France) | Manufactures Wines, Spirits, & Fruit Juices |
80,500 | 6,234,166 |
| 88,132,878 | |||
| Apparel—1.9% | |||
| Fila Holding S.p.A. (Italy), (a)(b) |
Athletic Footwear & Apparel | 5,976,960 | $18,468,806 |
| Retail—4.8% | |||
| Somerfield plc (Great Britain) |
Food Retailer | 22,714,000 | $27,820,690 |
| Giordano International Limited (Hong Kong) |
Pacific Rim Clothing Retailer & Manufacturer |
42,467,000 | 18,788,901 |
| 46,609,591 | |||
| Home Furnishings—3.7% | |||
| Hunter Douglas N.V. (Netherlands) |
Window Coverings Manufacturer | 1,341,484 | $35,978,901 |
| Other Consumer Goods & Services—0.2% | |||
| Shimano Inc. (Japan) | Bicycle Components Manufacturer | 182,800 | $2,079,017 |
| Bank & Thrifts—12.2% | |||
| Banca Popolare di Verona (Italy) |
Commercial Banking | 3,485,000 | $34,123,905 |
| Uniao de Bancos Brasileiros S.A. (Brazil), (c) |
Commercial Banking | 939,300 | 20,946,390 |
| BNP Paribas SA (France) | Commercial Banking | 177,000 | 15,834,436 |
| Banco Latinoamericano de Exportaciones, S.A., Class E (Panama), (b) |
Latin American Trade Bank | 515,400 | 14,456,970 |
| Kookmin Bank (Korea) | Commercial Banking | 269,968 | 10,274,671 |
| United Overseas Bank Limited, Foreign Shares (Singapore) |
Commercial Banking | 1,426,968 | 9,814,510 |
| Svenska Handelsbanken AB (Sweden) |
Commercial Banking | 508,000 | 7,484,167 |
| Bank of Ireland (Ireland) | Commercial Banking | 461,035 | 4,276,268 |
| 117,211,317 | |||
| Other Financial—3.3% | |||
| Daiwa Securities Group Inc. (Japan) |
Stock Broker | 4,638,000 | $24,391,894 |
| Euronext (Netherlands) | Stock Exchange | 414,713 | 7,844,583 |
| 32,236,477 | |||
| Hotels & Motels—1.4% | |||
| Mandarin Oriental International Limited (Singapore) |
Hotel Management | 32,381,400 | $13,276,374 |
| Human Resources—3.1% | |||
| Michael Page International plc (Great Britain) |
Recruitment Consultancy Services |
13,024,000 | $29,537,474 |
| Marketing Services—4.6% | |||
| Cordiant Communications Group plc (Great Britain) |
Advertising & Media Services | 16,720,070 | $23,092,240 |
| Aegis Group plc (Great Britain) |
Media Services | 15,448,000 | 20,773,915 |
| 43,866,155 | |||
| Computer Services—2.2% | |||
| Meitec Corporation (Japan) |
Software Engineering Services | 860,500 | $21,018,244 |
| Telecommunications—2.2% | |||
| SK Telecom Co., Ltd. (Korea) |
Mobile Telecommunications | 39,620 | $8,114,757 |
| Panafon Hellenic Telecom S.A. (Greece) |
Mobile Telecommunications | 1,263,000 | 6,520,706 |
| Telemig Celular Participacoes S.A. (Brazil) |
Mobile Telecommunications | 2,282,395,600 | 6,519,719 |
| 21,155,182 | |||
| Broadcasting & Cable TV—3.5% | |||
| Grupo Televisa S.A. (Mexico), (a)(b) |
Television Production & Broadcasting |
504,000 | $21,762,720 |
| Tokyo Broadcasting System, Inc. (Japan) |
Television & Radio Broadcasting | 815,000 | 12,379,590 |
| 34,142,310 | |||
| Publishing—7.8% | |||
| Independent News & Media PLC (Ireland) |
Newspaper Publisher | 14,160,273 | $26,470,015 |
| Wolters Kluwer NV (Netherlands) |
Reference Material Publisher | 1,145,500 | 26,103,474 |
| John Fairfax Holdings Limited (Australia) |
Newspaper Publisher | 11,561,500 | 22,741,932 |
| 75,315,421 | |||
| Pharmaceuticals—1.6% | |||
| GlaxoSmithKline plc (Great Britain) |
Pharmaceuticals | 550,500 | $13,733,429 |
| Aventis S.A. (France) | Pharmaceuticals | 22,300 | 1,583,065 |
| 15,316,494 | |||
| Medical Products—2.3% | |||
| Gambro AB, Class A (Sweden) |
Manufacturer of Dialysis Products | 3,478,000 | $21,793,648 |
| Automotive—4.6% | |||
| Autoliv, Inc (Sweden) | Automotive Safety Systems Manufacturer |
1,163,000 | $23,364,584 |
| Compagnie Generale des Establissements Michelin (France) |
Tire Manufacturer | 632,000 | 20,843,400 |
| 44,207,984 | |||
| Aerospace—2.2% | |||
| Rolls-Royce plc (Great Britain) |
Aviation & Marine Power | 9,036,702 | $21,479,891 |
| Airport Maintenance—0.4% | |||
| Grupo Aeroportuario del Sureste S.A. de C.V. (Mexico), (a)(b) |
Airport Operator | 242,000 | $3,726,800 |
| Instruments—2.6% | |||
| Orbotech, Ltd. (Israel), (a) | Optical Inspection Systems | 813,000 | $25,324,950 |
| Machinery & Industrial Processing—3.8% | |||
| Metso Corporation (Finland) |
Paper & Pulp Machinery | 3,458,100 | $36,323,093 |
| Building Materials & Construction—3.1% | |||
| Kumkang Korea Chemical Co., Ltd. (Korea) |
Building Materials | 357,630 | $29,791,112 |
| Chemicals—5.3% | |||
| Givaudan (Switzerland), (a) | Fragrance & Flavor Compound Manufacturer |
73,200 | $22,318,149 |
| Akzo Nobel N.V. (Netherlands) |
Chemical Producer | 402,500 | 17,968,014 |
| Henkel KGaA (Germany) |
Chemical Products Manufacturer | 204,700 | 10,440,847 |
| 50,727,010 | |||
| Oil & Natural Gas—0.9% | |||
| Repsol YPF, S.A. (Spain) | Oil Producer | 442,000 | $6,444,651 |
| Enterprise Oil plc (Great Britain) |
Oil Producer | 366,000 | 2,471,560 |
| 8,916,211 | |||
| Other Industrial Goods & Services—8.5% | |||
| Enodis plc (Great Britain) |
Food Processing Equipment | 21,483,200 | $29,826,803 |
| Kone Corporation, Class B (Finland) |
Elevators | 350,980 | 25,931,266 |
| Chargeurs SA (France) | Wool, Textile Production & Trading | 350,067 | 23,355,333 |
| FKI plc (Great Britain) | Industrial Manufacturing | 1,020,000 | 2,717,369 |
| 81,830,771 | |||
| Diversified Conglomerates—0.1% | |||
| First Pacific Company Ltd. (Hong Kong) |
Diversified Operations | 9,891,999 | $1,217,828 |
| Total Common Stocks (Cost: $928,384,323) | 919,683,939 | ||
| Par Value | |||
| Short Term Investments—4.7% | |||
| Commercial Paper—2.6% | |||
| Citicorp, 1.92% due 1/2/2002 | 5,000,000 | $5,000,000 | |
| General Electric Capital Corporation, 1.75% due 1/2/2002 | 20,000,000 | 20,000,000 | |
| Total Commercial Paper (Cost: $25,000,000) | 25,000,000 | ||
| Repurchase Agreements—2.1% | |||
| State Street Repurchase Agreement, 1.57% due 1/2/2002 | 20,992,000 | $20,992,000 | |
| Total Repurchase Agreements (Cost: $20,992,000) | 20,992,000 | ||
| Total Short Term Investments (Cost: $45,992,000) | 45,992,000 | ||
| Total Investments (Cost $974,376,323)—100.2% | $965,675,939 | ||
| Foreign Currencies (Proceeds $291,423)—0.0% | $296,529 | ||
| Other Liabilities In Excess Of Other Assets—(0.2)% (d) | (1,703,867) | ||
| Total Net Assets—100% | $964,268,601 | ||
| (a) | Non-income producing security. |
| (b) | Represents an American Depository Receipt. |
| (c) | Represents a Global Depository Receipt. |
| (d) | Includes transaction hedges. |
