Dear Fellow Shareholders:
The first half of the year has proven challenging, as the S&P 5001
and the NASDAQ Composite2 posted double-digit declines. We are pleased that all
of our funds have performed well versus their benchmarks, and more importantly, 5 of 7
funds are positive year to date ended June 30. Our performance continues to benefit
from our strong analytical efforts and focus on limiting risk in our portfolios.
Investor Trust
As equity investors, a sense of trust in company management is essential. Unfortunately, recent events have shaken investors' belief in corporate management, accountants and Wall Street analysts. There have been several cases of fraud and abuse of shareholders' trust. Fortunately, we do not believe this is a long-term concern. In other cycles, the market has struggled due to weakened investor confidence; after all, greed and dishonesty are not new. Ultimately, the unethical and criminal were identified and appropriately punished. It was a cyclical, not secular, problem, and the markets subsequently improved based on fundamentals. We believe this time will be no different.
How do we protect our clients? We do our own analytical work and carefully make sure that management incentives are properly aligned with our clients. We believe the intensity of our efforts and willingness to ask the tough questions will help us limit our mistakes and protect the interest of our shareholders.
Putting Market Volatility to Work
Assessing risk is important to the investment process. Equally important is being disciplined and unemotional—capturing the benefits of volatility, not the negatives. While anticipating the market is more difficult than reacting to it, we have found that buying stocks after a troublesome period offers the greatest investment potential. Buying yesterday's winners or selling on short-term concerns is not what a disciplined value investor does. Instead unemotional decision-making and managing risk with rigor and consistency drive successful investments. We hope to continue delivering strong investment results while managing volatility and risk.
Looking Ahead
The NASDAQ percentage drop since March 2000 is approaching the magnitude of the market drop in 1929-1932, newspapers are loaded with negative news about the market, and for the first time ever, the S&P 500 has a good chance to be down for three straight years—it has been a tough time for many investors. While sources of concern remain, we believe many of the issues affecting the market are already reflected in individual stock prices. The market is not at a record high, and stock prices are closer to more accurately reflecting underlying business values. The best advice we can give is that successful investors stick with a long-term plan and never act emotionally as a result of short-term fears.
Thank you for your continued investment in The Oakmark Family of Funds
Robert M. Levy
President and CEO
July 3, 2002
| Performance for Period3 Ended June 30, 2002 |
The
Oakmark Fund (OAKMX) |
The
Oakmark Select Fund (OAKLX) |
The
Oakmark Small Cap Fund (OAKSX) |
The Oakmark |
||||
| 3 Months* | -8.36% | -8.09% | -6.85% | -3.19% | ||||
| 6 Months* | -4.54% | -5.76% | 4.57% | 0.86% | ||||
| 1 Year | -3.74% | -1.84% | 5.42% | 5.77% | ||||
| Average Annual Total Return for: 3 Year |
0.60% | 12.86% | 7.10% | 11.88% | ||||
| 5 Year | 5.34% | 19.93% | 4.84% | 13.99% | ||||
| 10 Year | 15.33% | N/A | N/A | N/A | ||||
| Since inception | 18.46% | 24.88% | 12.83% | 15.31% | ||||
| Value of $10,000 from inception date |
$63,463 (8/5/91) |
$35,206 (11/1/96) |
$22,369 (11/1/95) |
$25,855 (11/1/95) |
||||
| Top Five
Holdings4 as of June 30, 2002 Company and % of Total Net Assets |
Washington Mutual, Inc. |
3.9% | Washington Mutual, Inc. |
18.7% | Ralcorp Holdings, Inc. |
3.5% | Synopsys, Inc. | 3.0% |
| H&R Block, Inc. | 3.2% | H&R Block, Inc. |
7.8% | Mentor Graphics Corporation |
3.0% | CenturyTel, Inc. | 3.0% | |
| Fortune Brands, Inc. | 2.5% | Yum! Brands, Inc. | 5.0% | Tupperware Corporation |
3.0% | First Health Group Corp. |
2.9% | |
| Fannie Mae | 2.3% | Toys ‘R' Us, Inc. | 4.6% | NCO Group, Inc. | 3.0% | Ceridian Corporation | 2.8% | |
| The Kroger Co. | 2.3% | Mattel, Inc. | 4.4% | Del Monte Foods Company |
2.9% | Phillips Petroleum Company |
2.8% | |
| Top Five
Industries as of June 30, 2002 Industries and % of Total Net Assets |
Retail | 15.1% | Banks & Thrifts | 18.7% | Computer Software | 7.6% | U.S. Government Notes |
25.0% |
| Pharmaceuticals | 9.9% | Retail | 18.2% | Food & Beverage | 6.4% | Oil & Natural Gas | 9.6% | |
| Other Consumer Goods & Services |
8.4% | Other Consumer Goods & Services |
12.2% | Medical Products | 5.3% | Pharmaceuticals | 6.9% | |
| Banks & Thrifts | 6.2% | Information Services | 8.0% | Other Consumer Goods & Services |
5.1% | Computer Software | 5.0% | |
| Food & Beverage | 6.1% | Computer Services | 7.6% | Banks & Thrifts | 5.0% | Retail | 4.6% | |
| Performance for Period3 Ended June 30, 2002 |
The
Oakmark Global Fund (OAKGX) |
The
Oakmark International Fund (OAKIX) |
The
Oakmark International Small Cap Fund (OAKEX) |
|||
| 3 Months* | -6.60% | -2.23% | 2.51% | |||
| 6 Months* | 3.54% | 8.97% | 12.95% | |||
| 1 Year | 8.15% | 2.98% | 19.35% | |||
| Average Annual Total Return for: 3 Year |
N/A | 5.61% | 7.12% | |||
| 5 Year | N/A | 5.95% | 7.39% | |||
| 10 Year | N/A | N/A | N/A | |||
| Since inception | 13.29%5 | 12.04% | 9.96% | |||
| Value of $10,000 from inception date |
$14,372 (8/4/99) |
$30,315 (9/30/92) |
$18,831 (11/1/95) |
|||
| Top Five
Holdings4 as of June 30, 2002 Company and % of Total Net Assets |
eFunds Corporation |
5.7% | GlaxoSmithKline plc | 4.4% | Gurit-Heberlein AG | 4.5% |
| Synopsys, Inc. | 5.2% | Telefonaktiebolaget LM Ericsson, Class B |
3.7% | Kobenhavns Lufthavne A/S |
4.2% | |
| Telefonaktiebolaget LM Ericsson, Class B |
5.0% | Hunter Douglas N.V. | 3.0% | Carpetright plc | 3.8% | |
| First Health Group Corp. |
4.1% | Henkel KGaA | 3.0% | Neopost SA | 3.7% | |
| Hunter Douglas N.V. | 4.0% | Meitec Corporation | 2.8% | Ansell Limited | 3.6% | |
| Top Five
Industries as of June 30, 2002 Industries and % of Total Net Assets |
Computer Software | 8.1% | Banks & Thrifts | 9.3% | Retail | 8.8% |
| Banks & Thrifts | 7.6% | Pharmaceuticals | 8.8% | Airport Maintenance | 7.5% | |
| Information Services | 7.5% | Food & Beverage | 7.3% | Banks & Thrifts | 6.8% | |
| Medical Products | 5.9% | Publishing | 7.4% | Food & Beverage | 6.2% | |
| Telecommunications Equipment |
5.0% | Chemicals | 5.1% | Machinery & Industrial Processing |
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