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 (9/30/02) COMPARED TO THE MSCI WORLD EX U.S. INDEX27 | ||||
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| Average Annual Total Returns4 | ||||
| (as of 9/30/02) | ||||
| Total Return Last 3 Months* |
1-year | 5-year | Since Inception (9/30/92) |
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| Oakmark International Fund | -22.93% | -1.53% | 0.07% | 8.85% |
| MSCI World ex. U.S. | -19.62% | -15.31% | -5.47% | 3.12% |
| MSCI EAFE21 | -19.73% | -15.53% | -5.65% | 2.95% |
| Lipper International Fund Index23 |
-19.61% | -12.37% | -4.43% | 4.75% |
| The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. | ||||
| 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 was down 23% for the quarter, under-performing the MSCI World ex-US and the Lipper International Fund indices, each of which declined 20%. Despite this quarter's performance, over the past 12 months the Fund is barely down (2%) relative to large declines in the aforementioned indices (down 15% and 12%, respectively).
It was an extremely rough quarter throughout the world. The major markets of Europe were especially hard hit: Germany -36%, France -27%, the Netherlands -31%, Sweden -29%. The DAX, the German version of the Dow Jones Industrials Index, has now fallen back to 1996 levels, down nearly 70% from its all-time high. From our point of view, share price declines during the quarter had less to do with underlying business performance than with widespread investor fear.
Portfolio Update
During the quarter we continued to increase our weighting in European companies, which now represent over 70 percent of the portfolio. We have continued to add to two of our worst performers for the quarter, L.M. Ericsson and Vivendi Universal. In addition to adding to our favorite names we initiated positions in four more: Publicis Groupe, the global advertising giant headquartered in France; Bayerische Motoren Werke (BMW), the German auto maker; jewelry retailer Signet Group, of the UK; and, SanPaolo IMI, a highly-profitable Italian financial institution. Each of these businesses trade at significant discounts to our estimate of intrinsic value. Under normal circumstances, these are companies we would not be able to afford because the market values them so highly. With their current share prices down significantly we can now be buyers at our prices.
Looking Forward
We remain optimistic based on the large number of attractive absolute return opportunities in the portfolio. 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 Portfolio Manager 102521.2142@compuserve.com |
| THE OAKMARK INTERNATIONAL FUND |
International Diversification—September 30, 2002
| THE OAKMARK INTERNATIONAL FUND |
Schedule of Investments—September 30, 2002
| Name | Description | Shares Held | Market Value |
| Common Stocks—95.5% | |||
| Food & Beverage—8.4% | |||
| Diageo plc (Great Britain) | Beverages, Wines, & | ||
| Spirits Manufacturer | 3,150,200 | $38,865,432 | |
| Pernod-Ricard SA (France) | Manufactures Wines, Spirits, & | ||
| Fruit Juices | 363,300 | 32,650,352 | |
| Lotte Chilsung Beverage | |||
| Co., Ltd. (Korea) | |||
| Soft Drinks, Juices & Sports | |||
| Drinks Manufacturer | 49,700 | 29,266,378 | |
| Fomento Economico | |||
| Mexicano S.A. de C.V. | |||
| (Mexico) (b) | Soft Drink & Beer Manufacturer | 600,400 | 20,293,520 |
| 121,075,682 | |||
| Household Products—2.9% | |||
| Henkel KGaA (Germany) | Consumer Chemical | ||
| Products Manufacturer | 755,000 | $42,128,547 | |
| Apparel—0.2% | |||
| Fila Holdings S.p.A. | |||
| (Italy) (a)(b)(c) | Athletic Footwear & Apparel | 5,894,760 | $3,006,328 |
| Automobiles—0.7% | |||
| Bayerische Motoren | |||
| Werke (BMW) AG | |||
| (Germany) | Luxury Automobile Manufacturer | 313,100 | $10,052,663 |
| Automotive—3.1% | |||
| Autoliv Inc (Sweden) (d) | Automotive Safety Systems | ||
| Manufacturer | 1,248,000 | $26,225,268 | |
| Compagnie Generale | |||
| des Etablissements | |||
| Michelin (France) | Tire Manufacturer | 664,500 | 18,650,915 |
| 44,876,183 | |||
| Broadcasting & Programming—3.3% | |||
| Grupo Televisa S.A. | |||
| (Mexico) (a)(b) | Television Production | ||
| & Broadcasting | 1,003,100 | $25,569,019 | |
| Tokyo Broadcasting | |||
| System, Inc. (Japan) | Television & Radio Broadcasting | 1,511,000 | 22,017,198 |
| 47,586,217 | |||
| Building Materials & Construction—1.1% | |||
| Kumkang Korea Chemical | |||
| Co., Ltd. (Korea) | Building Materials | 162,140 | $15,515,155 |
| Home Furnishings—3.0% | |||
| Hunter Douglas N.V. | |||
| (Netherlands) | Window Coverings Manufacturer | 1,638,584 | $43,693,170 |
| Human Resources—2.8% | |||
| Michael Page | |||
| International plc | |||
| (Great Britain) (c) | Recruitment Consultancy Services | 21,562,900 | $40,276,985 |
| Marketing Services—5.3% | |||
| Aegis Group plc | |||
| (Great Britain) | Media Services | 31,735,500 | $34,122,335 |
| Publicis Groupe (France) | Advertising & Media Services | 1,461,700 | 27,572,281 |
| Cordiant Communications | |||
| Group plc | |||
| (Great Britain) (a)(c) | Advertising & Media Services | 24,209,270 | 14,630,031 |
| 76,324,647 | |||
| Publishing—6.7% | |||
| Wolters Kluwer NV | |||
| (Netherlands) | Reference Material Publisher | 2,430,200 | $43,921,199 |
| John Fairfax Holdings | |||
| Limited (Australia) | Newspaper Publisher | 23,642,600 | 36,459,726 |
| Independent News & | |||
| Media PLC (Ireland) | Newspaper Publisher | 14,132,000 | 18,143,792 |
| 98,524,717 | |||
| Retail—4.0% | |||
| Somerfield plc | |||
| (Great Britain) (a) | Food Retailer | 15,128,500 | $25,468,068 |
| Giordano International | |||
| Limited (Hong Kong) | Pacific Rim Clothing Retailer & | ||
| Manufacturer | 63,102,300 | 24,676,515 | |
| Signet Group plc | |||
| (Great Britain) | Jewelry Retailer | 6,245,100 | 7,891,110 |
| 58,035,693 | |||
| Bank & Thrifts—7.5% | |||
| Banco Popolare di Verona e | |||
| Novara Scrl (Italy) | Commercial Banking | 2,742,200 | $31,279,672 |
| BNP Paribas SA (France) | Commercial Banking | 758,300 | 24,698,626 |
| Sanpaolo IMI S.p.A. (Italy) | Banking Services | 3,732,800 | 20,976,261 |
| United Overseas Bank | |||
| Limited, Foreign | |||
| Shares (Singapore) | Commercial Banking | 1,426,968 | 9,552,991 |
| Kookmin Bank (Korea) | Commercial Banking | 231,168 | 8,460,594 |
| Svenska Handelsbanken | |||
| AB (Sweden) | Commercial Banking | 508,000 | 6,322,902 |
| Uniao de Bancos | |||
| Brasileiros S.A. | |||
| (Brazil) (e) | Commercial Banking | 784,000 | $5,566,400 |
| Banco Latinoamericano de | |||
| Exportaciones, S.A., | |||
| Class E (Panama) (b) | Latin American Trade Bank | 515,400 | $1,061,724 |
| 107,919,170 | |||
| Other Financial—5.6% | |||
| Daiwa Securities | |||
| Group Inc. (Japan) | Stock Broker | 7,285,000 | $40,188,154 |
| Euronext (Netherlands) | Stock Exchange | 2,125,200 | 40,087,988 |
| 80,276,142 | |||
| Medical Products—1.7% | |||
| Gambro AB, Class A | |||
| (Sweden) | Manufacturer of Dialysis Products | 6,144,000 | $24,431,398 |
| Pharmaceuticals—9.6% | |||
| GlaxoSmithKline plc | |||
| (Great Britain) | Pharmaceuticals | 3,418,800 | $65,200,781 |
| Aventis S.A. (France) | Pharmaceuticals | 613,300 | 32,101,839 |
| Takeda Chemical | |||
| Industries, Ltd. (Japan) | Pharmaceuticals & | ||
| Food Supplements | 739,000 | 29,786,890 | |
| Novartis AG (Switzerland) | Pharmaceuticals | 298,500 | 11,777,840 |
| 138,867,350 | |||
| Telecommunications—3.1% | |||
| Panafon Hellenic | |||
| Telecom S.A. (Greece) | Mobile Telecommunications | 6,717,900 | $29,722,999 |
| SK Telecom Co., Ltd. | |||
| (Korea) | Mobile Telecommunications | 64,860 | 12,572,029 |
| Telemig Celular | |||
| Participacoes S.A. | |||
| (Brazil) | Mobile Telecommunications | 1,806,000,000 | 1,949,866 |
| 44,244,894 | |||
| Telecommunications Equipment—2.8% | |||
| Telefonaktiebolaget | |||
| LM Ericsson, Class B | |||
| (Sweden) (a) | Mobile & Wired | ||
| Telecommunications Products | 109,949,200 | $39,929,394 | |
| Computer Services—2.3% | |||
| Meitec Corporation | |||
| (Japan) | Software Engineering Services | 1,402,000 | $32,858,925 |
| Aerospace—1.4% | |||
| Rolls-Royce plc | |||
| (Great Britain) | Aviation & Marine Power | 12,558,195 | $19,711,971 |
| Airport Maintenance—0.2% | |||
| Grupo Aeroportuario del | |||
| Sureste S.A. de C.V. | |||
| (Mexico) (b) | Airport Operator | 242,000 | $2,662,000 |
| Diversified Conglomerates—3.5% | |||
| Vivendi Universal | |||
| SA (France) | Multimedia | 4,551,100 | $51,014,463 |
| Instruments—1.9% | |||
| Orbotech, Ltd. | |||
| (Israel) (a)(c) | Optical Inspection Systems | 1,841,200 | $27,157,700 |
| Machinery & Industrial Processing—2.1% | |||
| Metso Corporation | |||
| (Finland) | Paper & Pulp Machinery | 3,490,700 | $30,337,255 |
| Other Industrial Goods & Services—4.2% | |||
| Enodis plc | |||
| (Great Britain) (c) | Food Processing Equipment | 33,585,320 | $26,095,013 |
| Chargeurs SA (France) (c) | Wool, Textile | ||
| Production & Trading | 1,050,201 | 24,632,990 | |
| FKI plc (Great Britain) | Industrial Manufacturing | 8,299,300 | 10,519,299 |
| 61,247,302 | |||
| Transportation Services—2.5% | |||
| Associated British Ports | |||
| Holdings Plc | |||
| (Great Britain) | Port Operator | 5,533,899 | $35,744,061 |
| Chemicals—5.6% | |||
| Givaudan (Switzerland) | Fragrance & Flavor | ||
| Compound Manufacturer | 95,600 | $42,739,281 | |
| Akzo Nobel N.V. | |||
| (Netherlands) | Chemical Producer | 1,152,800 | 37,115,272 |
| 79,854,553 | |||
| Total Common Stocks (Cost: $1,739,391,715) | 1,377,352,565 | ||
| Par Value | |||
| Short Term Investments—5.5% | |||
| U.S. Government Bills—2.1% | |||
| United States Treasury Bills, 1.615% - 1.67% due 10/3/2002 - 10/17/2002 | $30,000,000 | $29,987,835 | |
| Total U.S. Government Bills (Cost: $29,987,835) | 29,987,835 | ||
| Repurchase Agreements—3.4% | |||
| IBT Repurchase Agreement, 1.75% due 10/1/2002, repurchase price $47,002,285 collateralized by U.S. Government Agency Securities | $47,000,000 | $47,000,000 | |
| IBT Repurchase Agreement, 1.11% due 10/1/2002, repurchase price $2,554,729 collateralized by a U.S. Government Agency Security | 2,554,650 | 2,554,650 | |
| Total Repurchase Agreement (Cost: $49,554,650) | 49,554,650 | ||
| Total Short Term Investments (Cost: $79,542,485) | 79,542,485 | ||
| Total Investments (Cost $1,818,934,200)—101.0% | $1,456,895,050 | ||
| Foreign Currencies (Cost $2,256,583)—0.2% | $2,275,134 | ||
| Other Liabilities In Excess Of Other Assets—(1.2%) | (16,906,490) | ||
| Total Net Assets—100% | $1,442,263,694 | ||
| (a) | Non-income producing security. |
| (b) | Represents an American Depository Receipt. |
| (c) | See footnote number five in the Notes to Financial Statements regarding transactions in affiliated issuers. |
| (d) | Represents a Swedish Depository Receipt. |
| (e) | Represents a Global Depository Receipt. |
See accompanying notes to financial statements.