THE OAKMARK SELECT FUND
Report from Bill Nygren
and Henry Berghoef, Portfolio Managers
THE OAKMARK SELECT FUNDReport from Bill Nygren
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THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK SELECT FUND FROM ITS INCEPTION (11/1/96) TO PRESENT (3/31/02) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX5 |
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| Average Annual Total
Returns2 (as of 3/31/02) |
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| Total Return Last 3 Months* |
1-year | 5-year | Since Inception (11/1/96) |
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| Oakmark Select Fund | 2.53% | 16.69% | 25.82% | 28.14% |
| S&P 500 | 0.27% | 0.24% | 10.17% | 10.97% |
| S&P MidCap 4008 | 6.72% | 18.89% | 17.98% | 17.38% |
| Lipper Mid Cap Value Index9 |
6.23% | 17.94% | 11.51% | 11.38% |
| 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 | ||||
The Oakmark Select Fund increased in value by 3% for the quarter. That increase put the Fund's NAV10 at another new quarter-end high. Since our goal is to compound wealth at above-average returns over a long time period, it is always rewarding to report that during the quarter we reached new high prices. On a relative basis, the Fund outperformed the S&P 500 but lagged some of our value peers. The main reason for this was the continued strong performance of smaller, more cyclical companies. As you know, The Oakmark Select Fund's portfolio has been shifting away from those names as they have achieved price targets and has been reinvesting in higher quality, larger-cap companies because we believe those stocks have become undervalued.
During the quarter we completed sales of Liz Claiborne, Reynolds & Reynolds, and Ceridian. With those positions eliminated, the Fund is back down to its target of twenty or fewer positions. Your Fund's largest position continues to be Washington Mutual, the largest savings and loan in the country, which is priced at just above eight times estimated earnings. Questions were raised last quarter about the quality of Washington Mutual's earnings, the gains they have taken on financial hedges, and the vulnerability of their earnings to interest rate increases. These are all issues we had considered long before Enron put accounting analysis in the spotlight. We continue to believe that Washington Mutual uses appropriate accounting, and that hedging activity reduces their vulnerability to interest rate changes. It is our largest position because it is the single stock we are most confident is significantly undervalued.
Thank you for your support.
William C. Nygren, CFA
Portfolio Manager
bnygren@oakmark.com
Henry Berghoef, CFA
Portfolio Manager
berghoef@oakmark.com
April 4, 2002
| THE OAKMARK SELECT FUND |
Schedule of Investments—March 31, 2002 (Unaudited)
| Name | Shares Held | Market Value |
| Common Stocks—91.2% | ||
| Retail—18.1% | ||
| Tricon Global Restaurants, Inc. (a) | 4,126,800 | $242,573,304 |
| Toys ‘R' Us, Inc. (a)(b) | 12,798,500 | 229,861,060 |
| The Kroger Co. (a) | 10,262,500 | 227,417,000 |
| Office Depot, Inc. (a) | 10,471,000 | 207,849,350 |
| 907,700,714 | ||
| Household Products—1.2% | ||
| Energizer Holdings, Inc. (a) | 2,649,200 | $62,918,500 |
| Office Equipment—3.0% | ||
| Xerox Corporation | 13,854,000 | $148,930,500 |
| Other Consumer Goods & Services—11.4% | ||
| H&R Block, Inc. | 7,938,800 | $352,879,660 |
| Mattel, Inc. | 10,554,000 | 219,945,360 |
| 572,825,020 | ||
| Bank & Thrifts—15.8% | ||
| Washington Mutual, Inc. | 23,905,200 | $791,979,276 |
| Information Services—8.1% | ||
| The Dun & Bradstreet Corporation (a)(b) | 5,422,400 | $216,950,224 |
| Moody's Corporation | 4,584,000 | 188,402,400 |
| 405,352,624 | ||
| Computer Services—8.9% | ||
| Electronic Data Systems Corporation | 4,150,900 | $240,710,691 |
| First Data Corporation | 2,365,200 | 206,363,700 |
| 447,074,391 | ||
| Telecommunications—8.5% | ||
| AT&T Corp. | 14,748,000 | $231,543,600 |
| Sprint Corporation | 12,791,500 | 195,582,035 |
| 427,125,635 | ||
| Publishing—3.7% | ||
| Knight-Ridder, Inc. | 2,727,000 | $187,317,630 |
| Pharmaceuticals—4.1% | ||
| Chiron Corporation (a) | 4,504,400 | $206,706,916 |
| Health Care Services—4.6% | ||
| IMS Health Incorporated | 10,392,000 | $233,300,400 |
| Oil & Natural Gas—3.8% | ||
| Burlington Resources Inc. | 4,734,500 | $189,806,105 |
| Total Common Stocks (Cost: $3,486,921,567) | 4,581,037,711 | |
Par Value |
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| Short Term Investments—9.5% | ||
| U.S. Government Bills—3.3% | ||
| United States Treasury Bills, 1.71% - 1.99% | ||
| due 4/18/2002 - 9/5/2002 | $170,000,000 | $169,354,290 |
| Total U.S. Government Bills (Cost: $169,374,575) | 169,354,290 | |
| Commercial Paper—3.2% | ||
| ChevronTexaco Corporation, 1.78% - 1.80% | ||
| due 4/1/2002 - 4/5/2002 | $60,000,000 | 60,000,000 |
| Citicorp, 1.78% - 1.82% due 4/2/2002 - 4/4/2002 | 60,000,000 | 60,000,000 |
| American Express Credit Corporation, 1.79% - 1.80% | ||
| due 4/5/2002 - 4/22/2002 | 40,000,000 | 40,000,000 |
| Total Commercial Paper (Cost: $160,000,000) | 160,000,000 | |
| Repurchase Agreements—3.0% | ||
| State Street Repurchase Agreement, 1.75% due 4/1/2002, | ||
| repurchase price $149,348,034 collateralized by | ||
| U.S. Treasury Bonds | $149,319,000 | 149,319,000 |
| Total Repurchase Agreements (Cost: $149,319,000) | 149,319,000 | |
| Total Short Term Investments (Cost: $478,693,575) | 478,673,290 | |
| Total Investments (Cost $3,965,615,142)—100.7% (c) | $5,059,711,001 | |
| Other Liabilities In Excess Of Other Assets—(0.7)% | (33,898,772) | |
| Total Net Assets—100% | $5,025,812,229 | |
| (a) | Non-income producing security. |
| (b) | See footnote number five in the Notes to Financial Statements regarding transactions in affiliated issuers. |
| (c) | At March 31, 2002, net unrealized appreciation of $1,094,095,859, for federal income tax purposes, consisted of gross unrealized appreciation of $1,162,573,510 and gross unrealized depreciation of $68,477,651. |
See accompanying notes to financial statements.
