THE OAKMARK FUND
Report from Bill Nygren and Kevin Grant,
Portfolio Managers
THE OAKMARK FUNDReport from Bill Nygren and Kevin Grant,
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THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM ITS INCEPTION (8/5/91) TO PRESENT (3/31/02) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX5 |
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Average
Annual Total Returns2 |
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| Total Return Last 3 Months* |
1-year | 5-year | 10-year | Since Inception (8/5/91) |
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| Oakmark Fund | 4.17% | 14.76% | 10.27% | 16.76% | 19.90% |
| S&P 500 | 0.27% | 0.24% | 10.17% | 13.25% | 13.04% |
| Dow Jones Average6 | 4.32% | 7.17% | 11.44% | 14.85% | 14.81% |
| Lipper Large Cap Value Index7 | 1.92% | 1.02% | 9.43% | 12.39% | 12.46% |
| 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 Fund increased in value by 4% last quarter, allowing the Fund to achieve a new all-time high price. We are pleased with that performance based on absolute returns, relative to market indices and relative to the other large-cap value funds with which we compete. We added only one new holding last quarter—Schering Plough. It is another in our growing list of large-cap, growth-stock, fallen angels.
Schering Plough (SGP—$31)
Schering Plough is a worldwide manufacturer of prescription and over-the-counter drugs. In 1999, Schering reached a stock price of $61 as their earnings hit an all-time high of $1.42 per share. Despite higher earnings—EPS are estimated to be $1.75 this year—the analysis of Schering is now focused on the upcoming expiration of some of the U.S. patent protection on their largest selling drug, Claritin. Claritin's U.S. sales account for less than 30% of revenues, and generic competition will certainly reduce Claritin's profitability. However, we believe a 50% reduction in the stock price has more than compensated for this loss. With the stock now selling at about eighteen times next year's estimated earnings, we believe Schering is selling at a large discount to its intrinsic value. Perhaps the market view of Schering will change as attention shifts to next year's expected launch of a new anti-cholesterol compound. If not, we believe Schering could be an attractive acquisition candidate for other large pharmaceutical companies.
Finally, an update on the Fund's tax position. The Oakmark Fund has produced a cumulative return of 38% since the beginning of calendar year 2000. Despite that gain, we have made no taxable capital gain distributions because of the loss-carry forward the Fund enjoys. The Fund continues to have a loss-carry forward of over 75¢ per share, so it is our expectation that there will be no capital gains distribution again this year.
William C. Nygren, CFA
Portfolio Manager
bnygren@oakmark.com
Kevin Grant, CFA
Portfolio Manager
kgrant@oakmark.com
| THE OAKMARK FUND |
Schedule of Investments—March 31, 2002 (Unaudited)
| Name | Shares Held | Market Value |
| Common Stocks—90.5% | ||
| Food & Beverage—6.3% | ||
| General Mills, Inc. | 1,805,000 | $88,174,250 |
| Kraft Foods Inc. | 2,195,000 | 84,836,750 |
| H.J. Heinz Company | 2,010,000 | 83,415,000 |
| 256,426,000 | ||
| Retail—14.9% | ||
| The Kroger Co. (a) | 4,640,000 | $102,822,400 |
| Tricon Global Restaurants, Inc. (a) | 1,450,000 | 85,231,000 |
| J.C. Penney Company, Inc. | 4,027,900 | 83,417,809 |
| The Gap, Inc. | 5,425,000 | 81,592,000 |
| Safeway Inc. (a) | 1,627,000 | 73,247,540 |
| McDonald's Corporation | 2,300,000 | 63,825,000 |
| CVS Corporation | 1,805,000 | 61,965,650 |
| Toys ‘R' Us, Inc. (a) | 3,125,000 | 56,125,000 |
| 608,226,399 | ||
| Household Products—3.3% | ||
| Newell Rubbermaid Inc. | 2,275,000 | $72,709,000 |
| The Clorox Company | 1,440,200 | 62,835,926 |
| 135,544,926 | ||
| Office Equipment—1.8% | ||
| Xerox Corporation | 6,664,900 | $71,647,675 |
| Hardware—1.8% | ||
| The Black & Decker Corporation | 1,622,200 | $75,497,188 |
| Other Consumer Goods & Services—7.8% | ||
| H&R Block, Inc. | 2,541,700 | $112,978,565 |
| Fortune Brands, Inc. | 1,745,600 | 86,180,272 |
| Mattel, Inc. | 3,465,000 | 72,210,600 |
| Cendant Corporation (a) | 2,395,100 | 45,985,920 |
| 317,355,357 | ||
| Bank & Thrifts—6.0% | ||
| Washington Mutual, Inc. | 4,587,300 | $151,977,249 |
| U.S. Bancorp | 4,200,000 | 94,794,000 |
| 246,771,249 | ||
| Insurance—1.9% | ||
| MGIC Investment Corporation | 1,137,900 | $77,866,497 |
| Other Financial—2.2% | ||
| Fannie Mae | 1,135,000 | $90,663,800 |
| Hotels & Motels—0.2% | ||
| Starwood Hotels & Resorts Worldwide, Inc. | 235,000 | $8,838,350 |
| Marketing Services—1.8% | ||
| The Interpublic Group of Companies, Inc. | 2,200,000 | $75,416,000 |
| Computer Services—5.5% | ||
| Electronic Data Systems Corporation | 1,544,500 | $89,565,555 |
| First Data Corporation | 840,000 | 73,290,000 |
| SunGard Data Systems Inc. (a) | 1,931,600 | 63,684,852 |
| 226,540,407 | ||
| Telecommunications—4.2% | ||
| AT&T Corp. | 6,635,000 | $104,169,500 |
| Sprint Corporation | 4,496,000 | 68,743,840 |
| 172,913,340 | ||
| Telecommunications Equipment—3.4% | ||
| General Motors Corporation, Class H (Hughes | ||
| Electronics Corporation) (a) | $75,670,000 | |
| Motorola, Inc. | 4,475,000 | 63,545,000 |
| 139,215,000 | ||
| TV Programming—1.9% | ||
| Liberty Media Corporation, Class A (a) | 6,300,000 | $79,632,000 |
| Publishing—3.3% | ||
| Gannett Co., Inc. | 934,500 | $71,115,450 |
| Knight-Ridder, Inc. | 916,000 | 62,920,040 |
| 134,035,490 | ||
| Pharmaceuticals—4.5% | ||
| Merck & Co., Inc. | 1,400,000 | $80,612,000 |
| Chiron Corporation (a) | 1,172,000 | 53,783,080 |
| Schering-Plough Corporation | 1,525,000 | 47,732,500 |
| 182,127,580 | ||
| Medical Products—2.3% | ||
| Guidant Corporation (a) | 2,158,000 | $93,484,560 |
| Automobiles—1.4% | ||
| Ford Motor Company | 3,575,000 | $58,951,750 |
| Aerospace & Defense—1.9% | ||
| Honeywell International Inc. | 1,550,000 | $59,318,500 |
| Rockwell Collins | 681,100 | 17,177,342 |
| 76,495,842 | ||
| Waste Disposal—2.1% | ||
| Waste Management, Inc. | 3,135,300 | $85,436,925 |
| Building Materials & Construction—1.9% | ||
| Masco Corporation | 2,833,000 | $77,765,850 |
| Utilities—2.4% | ||
| TXU Corp. | 1,765,000 | $96,210,150 |
| Oil & Natural Gas—5.2% | ||
| Phillips Petroleum Company | 1,192,700 | $74,901,560 |
| Conoco Inc. | 2,550,000 | 74,409,000 |
| Burlington Resources Inc. | 1,550,500 | 62,159,545 |
| 211,470,105 | ||
| Other Industrial Goods & Services—0.7% | ||
| Illinois Tool Works Inc. | 404,200 | $29,243,870 |
| Recreation & Entertainment—1.8% | ||
| Carnival Corporation | 1,500,000 | $48,975,000 |
| Brunswick Corporation | 826,700 | 22,585,444 |
| 71,560,444 | ||
| Total Common Stocks (Cost: $3,104,376,638) | 3,699,336,754 | |
Par Value |
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| Short Term Investments—9.5% | ||
| U.S. Government Bills—3.9% | ||
| United States Treasury Bills, 1.71% - 1.99% | ||
| due 4/4/2002 - 9/5/2002 | $160,000,000 | $159,433,220 |
| Total U.S. Government Bills (Cost: $159,452,679) | 159,433,220 | |
| Commercial Paper—2.9% | ||
| ChevronTexaco Corporation, 1.75% - 1.79% | ||
| due 4/5/2002 - 4/22/2002 | $40,000,000 | $40,000,000 |
| Citicorp, 1.80% due 4/4/2002 | 20,000,000 | 20,000,000 |
| American Express Credit Corporation, 1.72% - 1.80% | ||
| due 4/2/2002 - 4/8/2002 | 60,000,000 | 60,000,000 |
| Total Commercial Paper (Cost: $120,000,000) | 120,000,000 | |
| Repurchase Agreements—2.7% | ||
| State Street Repurchase Agreement, 1.75% due 4/1/2002, | ||
| repurchase price $109,875,361 collateralized by | ||
| U.S. Treasury Bonds | $109,854,000 | $109,854,000 |
| Total Repurchase Agreements (Cost: $109,854,000) | 109,854,000 | |
| Total Short Term Investments (Cost: $389,306,679) | 389,287,220 | |
| Total Investments (Cost $3,493,683,317)—100.0% (b) | $4,088,623,974 | |
| Other Assets In Excess Of Other Liabilities—0.0% | 581,881 | |
| Total Net Assets—100% | $4,089,205,855 | |
| (a) | Non-income producing security. |
| (b) | At March 31, 2002, net unrealized appreciation of $594,940,657, for federal income tax purposes, consisted of gross unrealized appreciation of $680,504,385 and gross unrealized depreciation of $85,563,728. |
See accompanying notes to financial statements.
