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 (6/30/02) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX1 | ||||
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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 (11/1/96) |
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| Oakmark Select Fund | -8.09% | -1.84% | 19.93% | 24.88% |
| S&P 500 | -13.40% | -17.99% | 3.66% | 7.69% |
| S&P Mid Cap 4008 | -9.31% | -4.72% | 12.57% | 14.56% |
| Lipper Mid Cap Value Index9 | -8.69% | -2.47% | 6.92% | 9.09% |
| 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 declined by 8% last quarter, bringing the calendar year loss to 6%. The S&P 500 lost 13% for both the quarter and the year-to-date, and even the S&P Midcap Index, which was so strong in the first quarter, lost 9% in the quarter. Although losing less than the market never feels as good as making money, limiting losses in difficult periods is an even more important accomplishment toward achieving our goal of compounding capital at an above average, long-term return.
Stilwell Financial (SV—$18)
In mid-2000, Kansas City Southern spun-off to shareholders their financial services investments in a company named Stilwell Financial. These investments include the money management firms Janus and Berger as well as a minority interest in DST Systems. Stilwell stock peaked at $54 per share in late 2000 shortly after the peak in the stock market. As the market declined so did assets under management, earnings, and the stock price—now at $18.
DST Systems, the leading provider of information processing and computer software to the mutual fund industry, trades publicly under the symbol DST, and closed the quarter at $46. Stilwell owns 32% of DST—$8 of market value per Stilwell share. If that $8 is subtracted from Stilwell's market price, it leaves a price of $10 per share for the asset management business. At that price, Stilwell sells at a large discount to publicly traded asset management firms and an even larger discount to prices that have been paid in acquisitions.
Janus follows an investment approach that is at the other end of the spectrum from The Oakmark Family. However, despite losses in the last two years, Janus has produced long-term returns that are above average. Further, we admire the excellent job Janus has done on some non-investment issues of running their business, such as brand building and customer service. At a price of just twelve times expected next year EPS10, we are pleased to have the opportunity to invest in one of the leaders in our industry.
Thank you for your continued support.
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| William C. Nygren, CFA Portfolio Manager bnygren@oakmark.com |
Henry R. Berghoef, CFA Portfolio Manager berghoef@oakmark.com |
July 3, 2002
| THE OAKMARK SELECT FUND |
Schedule of Investments—June 30, 2002 (Unaudited)
| Name | Shares Held | Market Value |
| Common Stocks—93.5% | ||
| Other Consumer Goods & Services—12.2% | ||
| H&R Block, Inc. | 7,938,800 | $366,375,620 |
| Mattel, Inc. | 9,754,000 | 205,614,320 |
| 571,989,940 | ||
| Information Services—8.0% | ||
| Moody's Corporation | 3,984,000 | $198,204,000 |
| The Dun & Bradstreet Corporation (a) | 5,422,400 | 179,210,320 |
| 377,414,320 | ||
| Publishing—3.7% | ||
| Knight-Ridder, Inc. | 2,756,500 | $173,521,675 |
| Retail—18.2% | ||
| Yum! Brands, Inc (a) | 8,022,000 | $234,643,500 |
| Toys ‘ R' Us, Inc. (a) | 12,380,100 | 216,280,347 |
| Office Depot, Inc. (a) | 12,096,000 | 203,212,800 |
| The Kroger Co. (a) | 10,062,500 | 200,243,750 |
| 854,380,397 | ||
| Bank & Thrifts—18.7% | ||
| Washington Mutual, Inc. | 23,731,400 | $880,672,254 |
| Investment Management—2.7% | ||
| Stilwell Financial Inc | 7,002,200 | $127,440,040 |
| Health Care Services—4.0% | ||
| IMS Health Incorporated | 10,392,000 | $186,536,400 |
| Pharmaceuticals—4.4% | ||
| Chiron Corporation (a) | 5,811,400 | $205,432,990 |
| Telecommunications—6.8% | ||
| AT&T Corp. | 16,548,000 | $177,063,600 |
| Sprint Corporation | 13,661,500 | 144,948,515 |
| 322,012,115 | ||
| Computer Services—7.6% | ||
| First Data Corporation | 5,330,400 | $198,290,880 |
| Electronic Data Systems Corporation | 4,344,400 | 161,394,460 |
| 359,685,340 | ||
| Office Equipment—3.3% | ||
| Xerox Corporation (a) | 22,422,700 | $156,286,219 |
| Oil & Natural Gas—3.9% | ||
| Burlington Resources Inc. | 4,801,800 | $182,468,400 |
| Total Common Stocks (Cost: $3,745,750,000) | 4,397,840,090 | |
Par Value |
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| Short Term Investments—6.7% | ||
| U.S. Government Bills—5.2% | ||
| United States Treasury Bills, 1.64%-1.975% | ||
| due 7/5/2002 - 11/21/2002 | $245,000,000 | $244,304,381 |
| Total U.S. Government Bills (Cost: $244,304,381) | 244,304,381 | |
| Repurchase Agreements—1.5% | ||
| IBT Repurchase Agreement, 1.85% due 7/1/2002, | ||
| repurchase price $72,011,100 collateralized by | ||
| U.S. Government Agency Securities | $72,000,000 | $72,000,000 |
| Total Repurchase Agreement (Cost: $72,000,000) | 72,000,000 | |
| Total Short Term Investments (Cost: $316,304,381) | 316,304,381 | |
| Total Investments (Cost $4,062,054,381)—100.2% | $4,714,144,471 | |
| Other Liabilities In Excess Of Other Assets—(0.2%) | (7,427,552) | |
| Total Net Assets—100% | $4,706,716,919 | |
| (a) | Non-income producing security. |