Dear Fellow Shareholders,Letter from the President
Dear Fellow Shareholders,
The prolonged market decline continued in the first quarter of 2003, and most equity funds, ours included, again suffered negative returns. While our relative results through quarter end are generally satisfactory, they are not in line with our goal to produce positive long-term returns. We believe that the current emotional swings in the stock markets are likely reflective of the impending end of the bear market. The attractiveness of our portfolios enhances our optimism.
A constant theme in these letters is how the consistent application of our value philosophy and process contributes to our success. This discipline limits the effect of emotion on our process. Today, most investors are focused on macroeconomic and geopolitical issues, which are difficult to forecast, hard to quantify, and indicative of emotional decision making. In contrast, our investment philosophy involves a constant and calculated focus on intrinsic business value. Time has shown that business value is much more stable than market emotions and stock prices. We believe that our philosophy and process give us a true advantage in volatile times and should highlight attractive opportunities—even in this environment.
While the current issues are significant and troublesome, they are not secular problems affecting the long-term attractiveness of stocks. Our economy and our nation are still fundamentally strong. The valuation excesses of the late 90s are gone, and we feel that common stocks offer more attractive return opportunities than other competing asset classes. Our confidence grows as we extend our time horizon. We are long-term investors not short-term traders. This is a mark of distinction in the current environment, which reinforces our conviction. An outside analytical contact recently agreed that we are in the minority in this regard, as we are one of few investment companies willing to think about individual stocks beyond a one-year horizon.
These are difficult times and frustrating for all investors. We hope for a rapid resolution of the current war and the safe return of our troops. Our professional activities continue to be focused on carefully managing our shareholders' assets. We are proud that this extended period of worldwide weakness has not pressured our returns to the point of limiting the achievement of our clients' long-term goals. Looking ahead, the critical decision will be to maintain or increase one's equity exposure. The market has shown that disciplined, analytical investing—such as Oakmark practices—and not emotional decisions prove rewarding over time.
We welcome your comments and questions; you can reach us via e-mail at ContactOakmark@oakmark.com. We appreciate your continued investment in and commitment to The Oakmark Family of Funds.
Robert M. Levy
President
| Performance for Period Ended March 31, 20031 |
The
Oakmark Fund (OAKMX) |
The
Oakmark Select Fund (OAKLX) |
The Oakmark |
The
Oakmark Equity and Income Fund (OAKBX) |
||||
| 3 Months* | –4.09% | –0.50% |
–7.58% |
–2.28% | ||||
| 6 Months* | 3.12% | 9.47% | –1.49% | 3.70% | ||||
| 1 Year | –21.19% | –15.07% | –28.44% | –8.21% | ||||
| Average Annual Total Return for: 3 Year |
6.04% |
8.22% |
2.47% |
9.01% |
||||
| 5 Year | –1.72% | 10.13% |
–4.58% | 8.59% | ||||
| 10 Year | 10.05% | N/A | N/A | N/A | ||||
| Since inception | 15.67% (8/5/91) |
20.18% (11/1/96) |
7.57% (11/1/95) |
12.85% (11/1/95) |
||||
| Value of $10,000 from inception date |
$54,576 | $32,535 | $17,185 | $24,515 | ||||
| Top Five Holdings as of March 31, 20032
Company and % of Total |
Washington Mutual, Inc. |
3.8% | Washington Mutual, Inc. |
18.0% | Pharmaceutical Resources Inc. | 5.4% | Laboratory Corporation of America Holdings | 3.5% |
| H&R Block, Inc. | 3.5% | H&R Block, Inc. | 9.1% | Ralcorp Holdings, Inc. | 4.8% | Burlington Resources, Inc. | 3.2% | |
| Fannie Mae | 2.4% | Yum! Brands, Inc. | 5.0% | SureBeam Corporation, Cl A | 4.5% | Synopsys, Inc. | 3.1% | |
| The Home Depot, Inc. | 2.4% | First Data Corporation | 4.8% | Tupperware Corporation | 3.8% | Guidant Corporation | 3.0% | |
| Yum! Brands, Inc. | 2.3% | Xerox Corporation | 4.4% | Hanger Orthopedic Group, Inc. | 3.5% | SAFECO Corporation | 2.7% | |
| Top Five Industries as of March 31, 2003
Industries and % of Total Net Assets |
Retail | 10.3% | Banks & Thrifts | 18.0% | Computer Software | 8.2% | U.S. Government Notes |
33.2% |
| Pharmaceuticals | 9.3% | Other Consumer Goods & Services | 13.2% | Food & Beverage | 7.7% | Oil & Natural Gas | 6.7% | |
| Food & Beverage | 8.2% | Retail | 9.7% | Medical Products | 7.7% | Medical Products | 5.3% | |
| Other Consumer Goods & Services | 7.1% | Information Services | 7.7% | Banks & Thrifts | 7.3% | Retail | 4.5% | |
| Banks & Thrifts | 6.8% | Pharmaceuticals | 5.8% | Oil & Natural Gas | 5.9% | Computer Software | 3.9% | |
| Performance for Period Ended March 31, 20031 |
The
Oakmark Global Fund (OAKGX) |
The
Oakmark International Fund (OAKIX) |
The
Oakmark International Small Cap Fund (OAKEX) |
|||
| 3 Months* | –10.55% |
–11.72% |
–12.24% |
|||
| 6 Months* | 2.74% |
–3.78% |
–5.19% |
|||
| 1 Year | –21.02% | –27.50% |
–24.43% |
|||
| Average Annual Total Return for: 3 Year |
6.50% |
–4.75% |
–3.37% |
|||
| 5 Year | N/A | –0.45% | 3.96% | |||
| 10 Year | N/A | 6.57% | N/A | |||
| Since inception | 5.48%3 (8/4/99) |
8.02% (9/30/92) |
4.52% (11/1/95) |
|||
| Value of $10,000 from inception date |
$12,153 | $22,481 | $13,882 | |||
| Top Five
Holdings as of March 31, 20032
Company and % of Total |
eFunds Corporation |
5.9% |
Akzo Nobel N.V. |
3.7% |
Bulgari S.p.A. |
4.3% |
| Synopsis, Inc. | 5.6% | Telefonaktiebolaget LM Ericcson, Cl B |
3.5% |
Neopost SA | 4.1% | |
| The Interpublic Group of Companies, Inc. | 5.6% | GlaxoSmithKline plc | 3.4% | Gurit-Heberlein AG | 4.1% | |
| Ceridian Corporation | 4.7% | Diageo plc | 3.4% | Grupo Aeroportuario del Sureste S.A. de C.V. | 3.9% | |
| Vivendi Universal SA | 4.3% | Vivendi Universal SA | 3.3% | Bayport Advantage Ltd. | 3.8% | |
| Top Five
Industries as of March 31, 2003
Industries and % of Total |
Information Services | 10.6% | Food & Beverage | 11.1% | Retail | 10.7% |
| Computer Software | 9.1% | Banks & Thrifts | 9.9% | Machinery & Industrial Processing | 7.4% | |
| Computer Services | 7.9% | Pharmaceuticals | 9.3% | Airport Maintenance | 7.2% | |
| Broadcasting & Programming | 7.0% | Chemicals | 6.2% | Food & Beverage | 6.2% | |
| Marketing Services | 5.6% | Other Financial | 6.0% | Banks & Thrifts | 5.8% | |
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