THE OAKMARK INTERNATIONAL SMALL CAP FUND
Report from David G. Herro and
Michael J. Welsh, Portfolio Managers
THE OAKMARK INTERNATIONAL SMALL CAP FUNDReport from David G. Herro and
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| THE VALUE OF A $10,000 INVESTMENT IN THE OAKMARK INTERNATIONAL SMALL CAP FUND FROM ITS INCEPTION (11/1/95) TO PRESENT (6/30/03) AS COMPARED TO THE MSCI WORLD EX U.S. INDEX19 | ||||
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| Average Annual Total Returns1 | ||||
| (as of 6/30/03) | ||||
| Total Return Last 3 Months* |
1-year | 5-year | Since Inception (11/1/95) |
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| Oakmark International Small Cap Fund | 29.18% | -4.77% | 12.63% | 7.91% |
| MSCI World ex. U.S. | 19.22% | -5.58% | -3.64% | 1.51% |
| Lipper International Small Cap Average22 | 22.65% | -1.82% | 1.71% | 7.84% |
| 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 Small Cap Fund had a strong quarter, gaining 29%, more than the relevant indices. Markets around the world rebounded from pervasive investor fear which drove prices to a short-term bottom in March.
Strong positive share price performance was widespread in the portfolio. It is a testament to the roller-coaster volatility we have experienced so far in 2003 that the three worst performers of last quarter—Van der Moolen Holding of the Netherlands, Baycorp Advantage in Australia, and Vontobel Holding in Switzerland—were among the best in this one.
As we mentioned last quarter, the long-term fundamentals of each of these businesses remained sound, the gap between price and business value expanded, and we viewed the price declines as an opportunity to increase our position sizes.
Other big positive contributors to the Fund's NAV for the quarter include: Neopost, the French mailing and shipping machinery manufacturer; Pfeiffer Vacuum Technology, the German-based engineering company; Italian luxury goods company Bulgari S.P.A.; and, Swiss private bank and asset manager Julius Baer Holding.
Even with the strong quarter we still feel excited by the values in the portfolio and the overall quality of the companies we own.
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 mwelsh@oakmark.com |
| THE OAKMARK INTERNATIONAL SMALL CAP FUND |
International Diversification—June 30, 2003 (Unaudited)
| THE OAKMARK INTERNATIONAL SMALL CAP FUND |
Schedule of Investments—June 30, 2003 (Unaudited)
| Name | Description | Shares Held | Market Value |
| Common Stocks—96.2% | |||
| Food & Beverage—5.9% | |||
| Campari Group (Italy) | Soft Drinks, Wines, & Spirits Producer | 232,200 | $8,908,548 |
| Baron De Ley, S.A. (Spain), (a) | Wines & Spirits Manufacturer | 150,985 | 5,365,381 |
| Hite Brewery Co., Ltd. (Korea) | Brewer | 68,000 | 3,649,058 |
| Alaska Milk Corporation (Philippines) | Milk Producer | 49,394,000 | 2,494,413 |
| Grupo Continental, S.A. (Mexico) | Soft Drink Manufacturer | 1,302,100 | 2,036,575 |
| Kook Soon Dang Brewery Co., Ltd. (Korea) | Wine & Spirits Manufacturer | 61,400 | 1,629,452 |
| 24,083,427 | |||
| Household Products—0.6% | |||
| Societe BIC SA (France) | Consumer & Office Supplies | 64,800 | $2,527,107 |
| Other Consumer Goods & Services—0.3% | |||
| Royal Doulton plc (Great Britain), (a) | Tableware & Giftware | 22,373,000 | $1,155,810 |
| Automobiles—0.9% | |||
| Ducati Motor Holding S.p.A. (Italy), (a) | Motorcycle Manufacturer | 2,452,900 | $3,696,579 |
| Broadcasting & Publishing—2.7% | |||
| Tamedia AG (Switzerland) | TV Broadcasting & Publishing | 184,151 | $11,169,335 |
| Building Materials & Construction—0.8% | |||
| Fletcher Building Limited (New Zealand) | Building Materials Manufacturer | 1,489,800 | $3,207,821 |
| Human Resources—1.6% | |||
| DIS Deutscher Industrie Service AG (Germany) | Recruitment Consultancy Services | 368,972 | $6,366,981 |
| Information Services—3.5% | |||
| Baycorp Advantage Limited (Australia) | Credit Reference Services | 15,140,800 | $14,436,132 |
| Marketing Services—1.9% | |||
| Asatsu-DK, Inc. (Japan) | Advertising Services Provider | 426,700 | $7,652,056 |
| Publishing—2.1% | |||
| Recoletos Grupo de Comunicacion, S.A. (Spain) | Publisher | 880,000 | $5,365,466 |
| Matichon Public Company Limited, Foreign Shares (Thailand) | Newspaper Publisher | 2,039,500 | 3,296,553 |
| 8,662,019 | |||
| Recreation & Entertainment—0.2% | |||
| Square Enix Co., Ltd. (Japan) | Entertainment Software | 30,400 | $518,542 |
| Konami Sports Corporation (Japan) | Fitness Centers | 21,500 | 313,291 |
| 831,833 | |||
| Retail—10.4% | |||
| Bulgari S.p.A. (Italy) | Jewelry Manufacturer & Retailer | 3,173,700 | $17,707,469 |
| Carpetright plc (Great Britain) | Carpet Retailer | 1,261,500 | 12,669,101 |
| D.F.S. Furniture Company plc (Great Britain) | Furniture Retailer & Manufacturer | 1,743,600 | 11,890,033 |
| 42,266,603 | |||
| Bank & Thrifts—5.7% | |||
| Jyske Bank A/S (Denmark), (a) | Commercial Banking | 293,700 | $11,872,088 |
| Vontobel Holding AG (Switzerland) | Commercial Banking | 713,224 | 11,579,768 |
| 23,451,856 | |||
| Financial Services—6.4% | |||
| Van der Moolen Holding N.V. (Netherlands) | International Trading Firm | 974,500 | $13,598,516 |
| Julius Baer Holding Ltd., Zurich (Switzerland) | Asset Management | 50,990 | 12,521,676 |
| 26,120,192 | |||
| Other Financial—2.4% | |||
| Ichiyoshi Securities Co., Ltd. (Japan) | Stock Broker | 2,480,000 | $7,529,569 |
| TSX Group Inc. (Canada) | Stock Exchanges | 101,500 | 2,059,963 |
| 9,589,532 | |||
| Medical Products—3.7% | |||
| Ansell Limited (Australia), (a) | Protective Rubber & Plastics Products | 3,407,850 | $13,385,975 |
| Coloplast A/S, Class B (Denmark) | Healthcare Products & Services Provider | 23,100 | 1,788,812 |
| 15,174,787 | |||
| Telecommunications—0.4% | |||
| Asia Satellite Telecommunications Holdings Limited (Hong Kong) | Satellite Operator | 1,066,000 | $1,756,583 |
| Computer Services—4.7% | |||
| Morse Plc (Great Britain) | Business & Technology Solutions | 5,734,300 | $12,370,954 |
| Sopra Group (France) | Computer Engineering | 128,430 | 3,900,491 |
| Alten (France), (a) | Systems Consulting & Engineering | 298,141 | 2,623,808 |
| 18,895,253 | |||
| Computer Systems—2.4% | |||
| Lectra (France), (a) | Manufacturing Process Systems | 1,718,500 | $9,687,116 |
| Office Equipment—4.6% | |||
| Neopost SA (France), (a) | Mailroom Equipment Supplier | 435,600 | $18,541,227 |
| Airport Maintenance—7.1% | |||
| Grupo Aeroportuario del Sureste S.A. de C.V. (Mexico), (b) | Airport Operator | 1,064,000 | $15,566,320 |
| Kobenhavns Lufthavne A/S (Copenhagen Airports A/S) (Denmark) | Airport Management & Operations | 162,700 | 13,229,076 |
| 28,795,396 | |||
| Diversified Conglomerates—6.3% | |||
| Pargesa Holding AG (Switzerland) | Diversified Operations | 5,374 | $10,974,973 |
| Financiere Marc de Lacharriere SA (Fimalac) (France) | Diversified Operations | 318,270 | 8,787,307 |
| Tae Young Corp. (Korea) | Heavy Construction | 169,500 | 5,832,106 |
| Financiere Marc de Lacharriere SA (Fimalac), Warrants (France) | Diversified Operations | 31,866 | 77,350 |
| 25,671,736 | |||
| Instruments—1.6% | |||
| Vaisala Oyj, Class A (Finland) | Atmospheric Observation Equipment | 329,700 | $6,675,449 |
| Machinery & Industrial Processing—7.7% | |||
| Pfeiffer Vacuum Technology AG (Germany) | Vacuum Pump Manufacturer | 498,140 | $13,466,916 |
| Alfa Laval (Sweden) | Filtration & Separation Equipment | 1,133,100 | 10,844,622 |
| Carbone Lorraine SA (France) | Electrical Systems Manufacturer | 258,582 | 7,035,230 |
| 31,346,768 | |||
| Other Industrial Goods & Services—4.7% | |||
| Schindler Holding AG (Switzerland), (a) | Elevator & Escalator Manufacturer | 71,900 | $12,657,421 |
| LISI (France) | Industrial Fastener Manufacturer | 241,813 | 6,487,197 |
| 19,144,618 | |||
| Production Equipment—2.9% | |||
| Interpump Group S.p.A. (Italy) | Pump & Piston Manufacturer | 2,688,500 | $10,917,762 |
| NSC Groupe (France) | Textile Equipment Manufacturer | 12,316 | 970,530 |
| 11,888,292 | |||
| Transportation Services—1.5% | |||
| Mainfreight Limited (New Zealand) | Logistics Services | 7,765,726 | $6,105,243 |
| Chemicals—3.2% | |||
| Gurit-Heberlein AG (Switzerland) | Chemical Producer | 26,404 | $13,085,306 |
| Total Common Stocks (Cost: $380,434,570) | 391,985,057 | ||
| Par Value | |||
| Short Term Investments—3.8% | |||
| U.S. Government Bills—1.2% | |||
| United States Treasury Bills, 0.95% due 7/3/2003 | $5,000,000 | $4,999,736 | |
| Total U.S. Government Bills (Cost: $4,999,736) | 4,999,736 | ||
| Repurchase Agreements—2.6% | |||
| IBT Repurchase Agreement, 1.00% due 7/1/2003, repurchase price $9,000,250 collateralized by U.S. Government Agency Securities | $9,000,000 | $9,000,000 | |
| IBT Repurchase Agreement, 0.75% due 7/1/2003, repurchase price $1,427,427 collateralized by a U.S. Government Agency Security | 1,427,397 | 1,427,397 | |
| Total Repurchase Agreement (Cost: $10,427,397) | 10,427,397 | ||
| Total Short Term Investments (Cost: $15,427,133) | 15,427,133 | ||
| Total Investments (Cost $395,861,703)—100.0% | $407,412,190 | ||
| Foreign Currencies (Cost $231,440)—0.1% | $232,517 | ||
| Other Liabilities In Excess Of Other Assets—(0.1%) | (263,871) | ||
| Total Net Assets—100% | $407,380,836 | ||
| (a) | Non-income producing security. |
| (b) | Represents an American Depository Receipt. |