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 (6/30/02) COMPARED TO THE MSCI WORLD EX U.S. INDEX19 | ||||
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| Average
Annual Total Returns3 (as of 6/30/02) |
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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 | -2.23% | 2.98% | 5.95% | 12.04% |
| MSCI World ex. U.S. | -2.24% | -9.42% | -1.33% | 5.54% |
| MSCI EAFE23 | -2.12% | -9.49% | -1.55% | 5.37% |
| Lipper International Fund Index20 |
-1.89% | -7.29% | 0.21% | 7.25% |
| 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 International Fund finished the quarter ending June 30, 2002 down 2%, in line with the 2% decline for the MSCI World ex-US Index, and the 2% decline in the Lipper International Average.
The first half of 2002 was marked by price volatility and market skittishness. As mentioned in The Oakmark Global Fund letter, what we try to accomplish as portfolio managers in times of extraordinary share price volatility is to upgrade the quality of the portfolio while maintaining the same degree of discount to intrinsic value. Looking at the portfolio as it stands today we believe we have accomplished this objective.
Portfolio Update
After looking expensive to us for a number of years, the prices of some European "Blue Chip" companies have finally become interesting. Two in particular are now your Fund's largest positions, LM Ericsson and GlaxoSmithKline. Both are quality businesses with global leadership positions, and each have had significant share price weakness in the past quarter.
We write in detail on Ericsson in this quarter's Oakmark Global Fund letter. We have searched diligently through the rubble of the tech-media-telecom implosion, and we believe this is one of the few legitimate investment opportunities that has emerged. The share price two and a half years ago implied massive growth into perpetuity whereas today's price implies very little future growth. The truth is somewhere in between. At less than 1 times revenue, we think it is very attractive.
GlaxoSmithKline has one of the best records of organic growth and cash flow returns of any of the world's blue chip pharmaceutical firms and has traditionally been priced as such. Luckily, recent share price weakness has caused its valuation to fall to that of far inferior businesses, giving us the opportunity to make GlaxoSmithKline one of the largest positions in The Oakmark International Fund.
Looking Forward
We remain optimistic based on current valuations around the world. We want to thank you for your continued confidence.
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| David G. Herro, CFA Portfolio Manager dherro@oakmark.com |
Michael J. Welsh,
CFA, CPA |
July 8, 2002
| THE OAKMARK INTERNATIONAL FUND |
Global Diversification—June 30, 2002
| THE OAKMARK INTERNATIONAL FUND |
Schedule of Investments—June 30, 2002 (Unaudited)
| Name | Description | Shares Held | Market Value |
| Common Stocks—94.7% | |||
| Food & Beverage—7.3% | |||
| Lotte Chilsung Beverage | Soft Drinks, Juices & | ||
| Co., Ltd. (Korea) | Sports Drinks Manufacturer | 49,700 | $34,290,108 |
| Pernod-Ricard SA | Manufactures Wines, | ||
| (France) | Spirits, & Fruit Juices | 340,500 | 33,292,891 |
| Diageo plc | Beverages, Wines, & | ||
| (Great Britain) | Spirits Manufacturer | 2,410,000 | 31,255,952 |
| Fomento Economico | Soft Drink & Beer | ||
| Mexicano S.A. de C.V. | Manufacturer | ||
| (Mexico) (a) | 549,400 | 21,547,468 | |
| 120,386,419 | |||
| Household Products—3.0% | |||
| Henkel KGaA | Consumer Chemical | ||
| (Germany) | Products Manufacturer | 755,000 | $48,221,941 |
| Other Consumer Goods & Services—0.3% | |||
| Shimano, Inc. (Japan) | Bicycle Components Manufacturer | 350,600 | $4,756,973 |
| Apparel—0.7% | |||
| Fila Holdings S.p.A. | Athletic Footwear | ||
| (Italy) (a) | & Apparel | 5,894,760 | $11,789,520 |
| Automotive—3.5% | |||
| Autoliv Inc | Automotive Safety | ||
| (Sweden) (b) | Systems Manufacturer | 1,248,000 | $30,344,199 |
| Compagnie Generale des | Tire Manufacturer | ||
| Etablissements Michelin | |||
| (France) | 632,000 | 25,558,851 | |
| 55,903,050 | |||
| Broadcasting & Cable TV—3.6% | |||
| Tokyo Broadcasting | Television & | ||
| System, Inc. (Japan) | Radio Broadcasting | 1,511,000 | $33,853,763 |
| Grupo Televisa S.A. | Television Production & | ||
| (Mexico) (a) | Broadcasting | 650,200 | 24,304,476 |
| 58,158,239 | |||
| Building Materials & Construction—1.1% | |||
| Kumkang Korea Chemical | Building Materials | ||
| Co., Ltd. (Korea) | 180,140 | $17,370,108 | |
| Home Furnishings—3.0% | |||
| Hunter Douglas N.V. | Window Coverings | ||
| (Netherlands) | Manufacturer | 1,580,284 | $48,597,336 |
| Human Resources—2.1% | |||
| Michael Page International | Recruitment Consultancy | ||
| plc (Great Britain) | Services | 14,255,900 | $34,782,115 |
| Marketing Services—3.4% | |||
| Aegis Group plc | Media Services | ||
| (Great Britain) | 20,105,500 | $27,669,636 | |
| Cordiant Communications | Advertising & Media | ||
| Group plc | Services | ||
| (Great Britain) (c) | 23,659,270 | 27,599,686 | |
| 55,269,322 | |||
| Publishing—7.4% | |||
| John Fairfax Holdings | Newspaper Publisher | ||
| Limited (Australia) | 22,427,800 | $41,791,166 | |
| Wolters Kluwer NV | Reference Material | ||
| (Netherlands) | Publisher | 2,128,900 | 40,330,292 |
| Independent News & | Newspaper Publisher | ||
| Media PLC (Ireland) | 18,735,373 | 36,933,041 | |
| 119,054,499 | |||
| Retail—3.6% | |||
| Giordano International | Pacific Rim Clothing | ||
| Limited (Hong Kong) | Retailer & Manufacturer | 50,401,000 | $31,016,994 |
| Somerfield plc | Food Retailer | ||
| (Great Britain) (c) | 15,128,500 | 27,337,298 | |
| 58,354,292 | |||
| Bank & Thrifts—9.3% | |||
| Banco Popolare di | Commercial Banking | ||
| Verona e Novara Scrl | |||
| (Italy) | 3,493,000 | $45,204,955 | |
| BNP Paribas SA (France) | Commercial Banking | 631,700 | 34,867,566 |
| Uniao de Bancos | Commercial Banking | ||
| Brasileiros S.A. | |||
| (Brazil) (d) | 1,658,700 | 27,368,550 | |
| Kookmin Bank (Korea) | Commercial Banking | 269,968 | 13,105,678 |
| United Overseas Bank | Commercial Banking | ||
| Limited, Foreign Shares | |||
| (Singapore) | 1,426,968 | 10,260,435 | |
| Svenska Handelsbanken | Commercial Banking | ||
| AB (Sweden) | 508,000 | 7,747,349 | |
| Banco Latinoamericano de | Latin American | ||
| Exportaciones, S.A., | Trade Bank | ||
| Class E (Panama) (a) | 515,400 | 6,468,270 | |
| DePfa Bank plc | Mortgage Bank | ||
| (Ireland) (c) | 83,000 | 4,540,397 | |
| Aareal Bank AG | Mortgage Bank | ||
| (Germany) (c) | 83,000 | 1,330,214 | |
| 150,893,414 | |||
| Other Financial—4.7% | |||
| Daiwa Securities | Stock Broker | ||
| Group Inc. (Japan) | 5,939,000 | $38,506,367 | |
| Euronext (Netherlands) | Stock Exchange | 1,968,900 | 36,872,279 |
| 75,378,646 | |||
| Medical Products—2.1% | |||
| Gambro AB, Class A | Manufacturer of | ||
| (Sweden) | Dialysis Products | 5,191,000 | $34,089,409 |
| Pharmaceuticals—8.8% | |||
| GlaxoSmithKline plc | Pharmaceuticals | ||
| (Great Britain) | 3,321,800 | $71,878,208 | |
| Takeda Chemical | Pharmaceuticals & Food | ||
| Industries, Ltd. (Japan) | Supplements | 739,000 | 32,436,081 |
| Aventis S.A. (France) | Pharmaceuticals | 370,300 | 26,187,759 |
| Novartis AG (Switzerland) | Pharmaceuticals | 298,500 | 13,097,898 |
| 143,599,946 | |||
| Telecommunications—3.3% | |||
| Panafon Hellenic | Mobile | ||
| Telecom S.A. (Greece) | Telecommunications | 6,717,900 | $33,902,070 |
| SK Telecom Co., Ltd. | Mobile | ||
| (Korea) | Telecommunications | 64,860 | 14,530,150 |
| Telemig Celular | Mobile | ||
| Participacoes S.A. | Telecommunications | ||
| (Brazil) | 2,273,095,600 | 4,419,239 | |
| 52,851,459 | |||
| Telecommunications Equipment—3.7% | |||
| Telefonaktiebolaget LM | Mobile & Wired | ||
| Ericsson, Class B | Telecommunications | ||
| (Sweden) (c) | Products | 39,571,500 | $59,704,956 |
| Computer Services—2.8% | |||
| Meitec Corporation | Software Engineering | ||
| (Japan) | Services | 1,387,100 | $45,835,414 |
| Aerospace—2.6% | |||
| Rolls-Royce plc | Aviation & | ||
| (Great Britain) | Marine Power | 17,225,595 | $42,356,037 |
| Airport Maintenance—0.2% | |||
| Grupo Aeroportuario del | Airport Operator | ||
| Sureste S.A. de C.V. | |||
| (Mexico) (a) | 242,000 | $3,121,800 | |
| Diversified Conglomerates—1.3% | |||
| Vivendi Universal SA | Multimedia | ||
| (France) | 1,007,100 | $21,719,141 | |
| Instruments—2.3% | |||
| Orbotech, Ltd. (Israel) (c) | Optical Inspection Systems | 1,646,100 | $37,366,469 |
| Machinery & Industrial Processing—2.5% | |||
| Metso Corporation | Paper & Pulp Machinery | ||
| (Finland) | 3,187,400 | $41,155,757 | |
| Other Industrial Goods & Services—4.9% | |||
| Enodis plc | Food Processing | ||
| (Great Britain) (c) | Equipment | 29,924,920 | $36,277,846 |
| Chargeurs SA | Wool, Textile | ||
| (France) | Production & Trading | 1,050,201 | 27,948,527 |
| Kone Corporation | Elevators | ||
| (Finland) | 477,080 | 14,107,017 | |
| FKI plc (Great Britain) | Industrial Manufacturing | 1,020,000 | 2,387,536 |
| 80,720,926 | |||
| Transportation Services—2.1% | |||
| Associated British Ports | Port Operator | ||
| Holdings Plc | |||
| (Great Britain) | 4,966,629 | $33,986,586 | |
| Chemicals—5.1% | |||
| Akzo Nobel N.V. | Chemical Producer | ||
| (Netherlands) | 957,900 | $41,627,756 | |
| Givaudan (Switzerland) | Fragrance & Flavor Compound | ||
| Manufacturer | 100,100 | 40,265,487 | |
| 81,893,243 | |||
| Total Common Stocks (Cost: $1,497,720,174) | 1,537,317,017 | ||
Par Value |
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| Short Term Investments—5.2% | |||
| U.S. Government Bills—2.4% | |||
| United States Treasury Bills, 1.60% - 1.695% due 7/5/2002 - 7/25/2002 | $40,000,000 | $39,971,269 | |
| Total U.S. Government Bills (Cost: $39,971,269) | 39,971,269 | ||
| Repurchase Agreements—2.8% | |||
| IBT Repurchase Agreement, 1.85% due | |||
7/1/2002, repurchase price $44,506,860 |
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| collateralized by U.S. Government | |||
| Agency Securities | $44,500,000 | 44,500,000 | |
| Total Repurchase Agreement (Cost: $44,500,000) | 44,500,000 | ||
| Total Short Term Investments (Cost: $84,471,269) | 84,471,269 | ||
| Total Investments (Cost $1,582,191,443)—99.9% | $1,621,788,286 | ||
| Foreign Currencies (Proceeds $4,258,976)—0.3% | $4,374,769 | ||
| Other Liabilities In Excess Of Other Assets—(0.2%) | (2,507,380) | ||
| Total Net Assets—100% | $1,623,655,675 | ||
| (a) | Represents an American Depository Receipt. |
| (b) | Represents a Swedish Depository Receipt. |
| (c) | Non-income producing security. |
| (d) | Represents a Global Depository Receipt. |
