THE OAKMARK FUND
Report from Bill Nygren and Kevin Grant,
Portfolio Managers
THE OAKMARK FUNDReport from Bill Nygren and Kevin Grant,
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| THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK FUND FROM ITS INCEPTION (8/5/91) TO PRESENT (3/31/03) AS COMPARED TO THE STANDARD & POOR'S 500 INDEX4 | |||||
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| Average Annual Total Returns1 | |||||
| (as of 3/31/03) | |||||
| Total Return Last 3 Months* |
1-year | 5-year | 10-year | Since Inception (8/5/91) |
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| Oakmark Fund | -4.09% | -21.19% | -1.72% | 10.05% | 15.67% |
| S&P 500 | -3.15% | -24.76% | -3.77% | 8.53% | 9.16% |
| Dow Jones Average11 | -3.46% | -21.39% | -0.14% | 11.10% | 11.14% |
| Lipper Large Cap Value Index12 | -4.88% | -25.04% | -3.50% | 7.63% | 8.62% |
| 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 Fund decreased in value by 4% last quarter. That loss was more than the 3% decline in the S&P 500 but less than most large-cap value funds. While the cumulative loss in the S&P 500 over the last three years is 41%, over those same three years, The Oakmark Fund has increased in value by 19%. Strict adherence to our business value based investment philosophy kept us from owning stocks hit hardest in this decline. Instead, we mostly owned stocks that benefited from a renewed focus on intrinsic value. Three years ago, the market was paying unusually large premiums for large-cap companies and for above-average growth companies. Today, after large price declines, those premiums have fallen sharply. For that reason, our new purchases have been concentrated in above-average growth large-cap stocks. Last quarter we added five new names—Anheuser-Busch is discussed below. Amerisource Bergen, Bank of New York, Baxter, and Diageo are discussed on our website (www.oakmark.com).
This Bud's for you—again!
We believe Anheuser-Busch (BUD-$47) is a great company! Over the past twenty years, BUD had only one down EPS13 year (and that was down 2%!) and compounded EPS growth at 12% per year. It has consistently gained share, and as the world's largest brewer, it enjoys the economies of scale that come from supplying 50% of the beer consumed in the United States. (Not to mention the credit deserved for producing such entertaining commercials!) Since late 2000, BUD's EPS have grown 30% and interest rates have come down; yet BUD's stock price has been flat. We own this great company—now selling below seventeen times next year's expected earnings—at about a market multiple. Long term holders may recall that this is BUD's second appearance in The Oakmark Fund, having previously been held in the mid-nineties. It was a very good holding then, but in hindsight, we should have never sold it! We feel fortunate to have the opportunity to now repurchase BUD.
Best wishes,
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| William C. Nygren, CFA Portfolio Manager bnygren@oakmark.com |
Kevin Grant, CFA Portfolio Manager kgrant@oakmark.com |
| THE OAKMARK FUND |
Schedule of Investments—March 31, 2003 (Unaudited)
| Name | Shares Held | Market Value |
| Common Stocks—92.3% | ||
| Food & Beverage—8.2% | ||
| General Mills, Inc. | 1,605,000 | $73,107,750 |
| Kraft Foods Inc. | 2,495,000 | 70,359,000 |
| H.J. Heinz Company | 2,310,000 | 67,452,000 |
| Anheuser-Busch Companies, Inc. | 1,000,000 | 46,610,000 |
| Diageo plc (b) | 1,100,000 | 45,232,000 |
| 302,760,750 | ||
| Household Products—1.7% | ||
| The Clorox Company | 1,390,200 | $64,185,534 |
| Other Consumer Goods & Services—7.1% | ||
| H&R Block, Inc. | 3,029,300 | $129,320,817 |
| Fortune Brands, Inc. | 1,745,600 | 74,833,872 |
| Mattel, Inc. | 2,599,800 | 58,495,500 |
| 262,650,189 | ||
| Broadcasting & Programming—2.8% | ||
| Liberty Media Corporation, Class A (a) | 7,849,400 | $76,374,662 |
| The Walt Disney Company | 1,500,000 | 25,530,000 |
| 101,904,662 | ||
| Building Materials & Construction—1.9% | ||
| Masco Corporation | 3,733,000 | $69,508,460 |
| Cable Systems & Satellite TV—6.5% | ||
| AOL Time Warner Inc. (a) | 6,867,700 | $74,583,222 |
| General Motors Corporation, Class H | ||
| (Hughes Electronics Corporation) (a) | 6,100,000 | 68,320,000 |
| EchoStar Communications Corporation (a) | 2,275,000 | 65,702,000 |
| Comcast Corporation, Special Class A (a) | 1,050,000 | 28,864,500 |
| 237,469,722 | ||
| Hardware—1.8% | ||
| The Black & Decker Corporation | 1,922,200 | $67,007,892 |
| Publishing—3.1% | ||
| Gannett Co., Inc. | 884,500 | $62,295,335 |
| Knight-Ridder, Inc. | 916,000 | 53,586,000 |
| 115,881,335 | ||
| Recreation & Entertainment—1.1% | ||
| Carnival Corporation | 1,678,300 | $40,463,813 |
| Restaurants—4.3% | ||
| Yum! Brands, Inc (a) | 3,509,000 | $85,373,970 |
| McDonald's Corporation | 5,000,000 | 72,300,000 |
| 157,673,970 | ||
| Retail—10.3% | ||
| The Home Depot, Inc. | 3,581,500 | $87,245,340 |
| J.C. Penney Company, Inc. | 4,052,900 | 79,598,956 |
| The Kroger Co. (a) | 5,290,000 | 69,563,500 |
| Safeway Inc. (a) | 3,327,000 | 62,980,110 |
| The Gap, Inc. | 3,576,700 | 51,826,383 |
| Toys ‘R ' Us, Inc. (a) | 3,125,000 | 26,156,250 |
| 377,370,539 | ||
| Bank & Thrifts—6.8% | ||
| Washington Mutual, Inc. | 3,937,300 | $138,868,571 |
| U.S. Bancorp | 3,700,000 | 70,226,000 |
| The Bank of New York Company, Inc. | 2,100,000 | 43,050,000 |
| 252,144,571 | ||
| Insurance—2.1% | ||
| MGIC Investment Corporation | 1,937,900 | $76,101,333 |
| Other Financial—2.4% | ||
| Fannie Mae | 1,370,000 | $89,529,500 |
| Health Care Services—1.0% | ||
| AmerisourceBergen Corp | 700,000 | $36,750,000 |
| Medical Products—3.1% | ||
| Guidant Corporation (a) | 1,571,700 | $56,895,540 |
| Baxter International Inc. | 3,000,000 | 55,920,000 |
| 112,815,540 | ||
| Pharmaceuticals—9.3% | ||
| Abbott Laboratories | 2,050,000 | $77,100,500 |
| Merck & Co., Inc. | 1,350,000 | 73,953,000 |
| Bristol-Myers Squibb Company | 3,450,000 | 72,898,500 |
| Schering-Plough Corporation | 3,925,000 | 69,982,750 |
| Chiron Corporation (a) | 1,299,000 | 48,712,500 |
| 342,647,250 | ||
| Telecommunications—1.3% | ||
| Sprint Corporation | 4,200,800 | $49,359,400 |
| Computer Services—3.7% | ||
| First Data Corporation | 2,200,000 | $81,422,000 |
| SunGard Data Systems, Inc. (a) | 2,601,600 | 55,414,080 |
| 136,836,080 | ||
| Computer Systems—1.1% | ||
| Sun Microsystems, Inc. (a) | 12,500,000 | $40,750,000 |
| Office Equipment—1.5% | ||
| Xerox Corporation (a) | 6,267,400 | $54,526,380 |
| Aerospace & Defense—2.6% | ||
| Honeywell International, Inc. | 3,050,000 | $65,148,000 |
| The Boeing Company | 1,152,800 | 28,889,168 |
| 94,037,168 | ||
| Other Industrial Goods & Services—1.0% | ||
| Illinois Tool Works Inc. | 604,200 | $35,134,230 |
| Waste Disposal—1.9% | ||
| Waste Management, Inc. | 3,274,300 | $69,349,674 |
| Oil & Natural Gas—4.1% | ||
| ConocoPhillips | 1,435,335 | $76,933,956 |
| Burlington Resources Inc. | 1,571,100 | 74,957,181 |
| 151,891,137 | ||
| Electric Utilities—1.6% | ||
| Duke Energy Corporation | 3,997,700 | $58,126,558 |
| Total Common Stocks (Cost: $3,500,853,706) | 3,396,875,687 | |
| Par Value | ||
| Short Term Investments—7.5% | ||
| U.S. Government Bills—4.2% | ||
| United States Treasury Bills, 1.15% - 1.18% | ||
| due 4/10/2003 - 6/19/2003 | $155,000,000 | $154,779,993 |
| Total U.S. Government Bills (Cost: $154,770,715) | 154,779,993 | |
| Repurchase Agreements—3.3% | ||
| IBT Repurchase Agreement, 1.25% due 4/1/2003, | ||
| repurchase price $117,004,063 collateralized by | ||
| U.S. Government Agency Securities | $117,000,000 | $117,000,000 |
| IBT Repurchase Agreement, 1.01% due 4/1/2003, | ||
| repurchase price $2,825,328 collateralized by a | ||
| U.S. Government Agency Security | 2,825,249 | 2,825,249 |
| Total Repurchase Agreement (Cost: $119,825,249) | 119,825,249 | |
| Total Short Term Investments (Cost: $274,595,964) | 274,605,242 | |
| Total Investments (Cost $3,775,449,670)—99.8% | $3,671,480,929 | |
| Other Assets In Excess Of Other Liabilities—0.2% | 7,432,939 | |
| Total Net Assets—100% | $3,678,913,868 | |
| (a) | Non-income producing security. |
| (b) | Represents an American Depository Receipt. |
See accompanying notes to financial statements.