After a volatile and emotional 2001, we continue to remain focused
on our primary task: generating investment returns that help our shareholders meet their
long-term investment goals.Dear Fellow Shareholders:
After a volatile and emotional 2001, we continue to remain focused
on our primary task: generating investment returns that help our shareholders meet their
long-term investment goals.
The Global Economy
It appears that a global recovery is developing, and while valuation levels are still high, markets in general are not dramatically overvalued. Unfortunately, a general lack of pricing power and rising cost pressures raise questions about the magnitude of the profit rebound in a recovery. Thus, we expect the rest of 2002 to be a challenging investment environment, but one where we believe the strength of our value philosophy and process can provide satisfactory results.
Realistic Expectations
When assessing how we have done for our investors, we hold ourselves to two standards. First, are we generating positive rates of return? Second, what are our returns versus the benchmarks over time? As you can see from the performance charts in the subsequent pages, we continue to generate positive answers to both questions. We use two standards to help us keep the proper perspective in managing your funds.
We are confident that common stocks over the long term will be excellent vehicles for meeting financial goals. However, the important lesson of the last 2 years is that risk assessment has to be part of the investment process. Because of the very strong market of the 1990's, many investors were mesmerized by the potential for large gains without considering possible risks. They forgot that the only true impediment to long-term wealth accumulation is loss of capital: one or two down years negates the benefits of compounding. Capital preservation is a focus of our philosophy and process and our shareholders have and will benefit from this emphasis.
Avoiding Enrons
The complex situation with Enron raised numerous questions about corporate integrity. We do not believe this event is symptomatic of system-wide problems. It does highlight, among other things, the importance of thorough analysis to investment success. At Oakmark, we have always performed extensive analysis of all three financial statements: the balance sheet, the income statement, and the cash flow statement — not simply a cursory look at a summary statistic like earnings-per-share (EPS). Our firm is driven by its analytical strength, and issues relating to accounting and the goals of company management have always been critical to our process.
Morningstar Manager of the Year
In early January, Bill Nygren, portfolio manager of The Oakmark and Oakmark Select Funds, received Morningtar's1 Domestic-Equity Manager of the Year award. This is a well deserved honor for Bill, and as Bill himself acknowledges, this also reflects on the strength of our analyst team. Our investment analyst group is talented and experienced. We continue to believe our key strength — in addition to a strict adherence to value investing — is the depth and quality of the people in our firm.
Thank you for your continued investment with The Oakmark Family of Funds.
Robert M. Levy
President and CEO
April 5, 2002
| Performance for Period2 Ended March 31, 2002 |
The
Oakmark Fund |
The
Oakmark Select Fund |
The
Oakmark Small Cap Fund |
The
Oakmark Equity and Income Fund |
||||
| 3 Months* | 4.17% | 2.53% | 12.26% | 4.19% | ||||
| 6 Months* | 15.44% | 11.04% | 33.22% | 12.45% | ||||
| 1 Year | 14.76% | 16.69% | 34.79% | 18.07% | ||||
| Average Annual Total Return for: 3 Year |
7.40% | 18.92% | 14.32% | 16.71% | ||||
| 5 Year | 10.27% | 25.82% | 9.54% | 17.05% | ||||
| 10 Year | 16.76% | N/A | N/A | N/A | ||||
| Since inception | 19.90% | 28.14% | 14.62% | 16.54% | ||||
| Value of $10,000 from inception date |
$69,250 (8/5/91) |
$38,306 (11/1/96) |
$24,014 (11/1/95) |
$26,708 (11/1/95) |
||||
| Top Five
Holdings3 as of March 31, 2002
Company and % of Total |
Washington Mutual, Inc. |
3.7% | Washington Mutual, Inc. |
15.8% | MSC.Software Corp. |
3.7% | First Health Group Corp. |
3.2% |
| H&R Block, Inc. | 2.8% | H&R Block, Inc. |
7.0% | eFunds Corp. |
3.5% |
UST Inc. | 2.9% | |
| AT&T Corp. | 2.6% | Tricon Global Restaurants Restaurants, Inc. |
4.8% |
ITT Educational Services, Inc. |
3.5% |
IMS Health Incorporated |
2.8% | |
| The Kroger Co. | 2.5% |
Electronic Data Systems Corporation |
4.8% | ShopKo Stores, Inc. | 3.3% | SAFECO Corporation | 2.6% | |
| TXU Corp. | 2.4% | IMS Health Incorporated |
4.6% |
IDEXX Laboratories, |
3.2% | Century Tel, Inc. | 2.6% | |
| Top Five
Industries as of March 31, 2002
Industries and % of Total |
Retail | 14.9% | Retail | 18.1% | Computer Software | 7.0% | U.S. Government Notes |
30.2% |
Other Consumer Goods |
7.8% | Banks and Thrifts | 15.8% | Banks and Thrifts | 6.7% | Oil and Natural Gas | 5.9% | |
| Food and Beverage | 6.3% | Other Consumer Goods |
11.4% | Food and Beverage | 5.7% | Health Care Services | 5.6% | |
| Banks and Thrifts | 6.0% | Computer Services | 8.9% | Medical Products | 4.8% | Retail | 5.3% | |
| Computer Services | 5.5% | Telecommunications | 8.5% | Real Estate | 4.2% | Telecommunications | 4.7% | |
| Performance for Period2 Ended March 31, 2002 |
The
Oakmark Global Fund |
The
Oakmark International Fund |
The
Oakmark International Small Cap Fund |
|||
| 3 Months* | 10.86% | 11.46% | 10.19% | |||
| 6 Months* | 38.99% | 30.67% | 31.34% | |||
| 1 Year | 34.04% | 15.85% | 20.60% | |||
| Average Annual Total Return for: 3 Year |
N/A | 13.39% | 11.87% | |||
| 5 Year | N/A | 8.14% | 8.74% | |||
| 10 Year | N/A | N/A | N/A | |||
| Since inception | 17.53% | 12.64% | 9.94% | |||
| Value of $10,000 from inception date |
$15,387 (8/4/99) |
$31,006 (9/30/92) |
$18,370 (11/1/95) |
|||
| Top Five
Holdings3 as of March 31, 2002
Company and % of Total |
Synopsys, Inc. | 5.1% | Hunter Douglas N.V. | 3.4% | Gurit-Heberlien AG | 4.3% |
| Novell, Inc. | 5.0% | Banca Popolare di Verona |
3.2% |
Pacific Dunlop Limited |
3.9% | |
eFunds Corporation |
4.4% | Cordiant Communications Group plc |
3.2% | Grupo Aeroportuario |
3.8% | |
| Hunter Douglas N.V. | 4.0% | Somerfield plc | 2.9% | Kobenhavns Lufthavne A/S |
3.6% | |
| Michael Page International plc |
4.0% |
Meitec Corporation | 2.9% | Solvus S.A. | 3.2% | |
| Top Five
Industries as of March 31, 2002
Industries and % of Total |
Computer Software | 10.1% | Banks and Thrifts | 10.2% | Food and Beverage | 8.6% |
| Banks and Thrifts | 7.8% | Food and Beverage | 8.9% | Diversified Conglomerates |
8.2% | |
| Information Services | 7.5% | Other Industrial Goods |
7.4% | Airport Maintenance | 7.4% | |
| Retail | 7.3% | Publishing | 7.1% | Retail | 6.6% | |
| Marketing Services | 4.9% | Chemicals | 5.9% | Human Resources | 5.6% | |
| 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 |