Dear
Fellow Shareholders,Presidents' Letter
Dear
Fellow Shareholders,
The stock market continued its recent gains during the third calendar quarter. While each of our funds posted a positive return for the quarter, performance relative to our benchmarks was mixed. More importantly, with most broad indices posting strong double digit gains for the full fiscal year, most of our funds outperformed their benchmarks.
Market Assessment
The economy continues its recovery, which started at the end of 2002. While interest rates have risen, they still remain near record lows. Corporate earnings appear to be gaining strength and are providing more frequent positive surprises. Good economic news and strong consumer spending are tempered though, by concerns over the Iraqi conflict, a large budget deficit, and lack of jobs growth. While the market has posted sizable gains since the first quarter, returns have varied widely across the market—often rewarding promises of growth more than delivered results. As we look at the relative performance of our holdings we believe that much of the recent quarter's performance is more reflective of emotion than business fundamentals.
While the attractive valuation discounts we saw in early spring are not as prevalent today, we believe this has become more of a "stock pickers" market—where values exist, but are tougher to find. We believe that short-term emotional valuation swings, while sometimes painful, will in the long-term play to our strengths as disciplined, bottom-up investors.
Capital Gain Distributions
We are pleased that with the exception of a small estimated capital gains distribution in The Oakmark Global Fund, we do not anticipate paying a capital gains distribution for any other funds this year. While this is not unusual for many mutual funds this year because of longer-term realized losses, it is unusual for a fund family like ours, where many of the funds fared well in the bear market and continue to reach new highs.
Fund Trading
Most of you have no doubt heard about New York Attorney General Eliot Spitzer's investigation into market timing and trading practices at certain investment firms.
We are very troubled by those allegations involving other fund companies, as they erode investor confidence in the mutual fund industry. Trust is essential to our business and once lost, it is hard to earn back. Our position on the kind of activities alleged by Mr. Spitzer is clear. We believe that market timers hurt the returns of long-term investors in our funds. Market timers are unwelcome in our funds and are not provided any special breaks. We have redemption fees in place for most of our funds to discourage market timers and we police subscription and redemption activity to catch other timers. In regard to "after-hours" trading, our position is also straightforward: we don't permit it, period. We believe we have taken proper steps to prevent this from happening in our funds. We hope for a clear and rapid solution to these issues in order to regain investor confidence in the industry. If you want to know more about our position on this subject, please visit our web site at www.oakmark.com.
Thank you for entrusting your long-term assets to The Oakmark Family of Funds. We welcome your comments and questions; you can reach us via email at ContactOakmark@oakmark.com.
 Robert M. Levy |
 John R. Raitt |
FORWARD-LOOKING STATEMENT DISCLOSURE One of our most important responsibilities as mutual fund managers is to communicate with shareholders in an open and direct manner. Some of our comments in our letters to shareholders are based on current management expectations and are considered "forward-looking statements". Actual future results, however, may prove to be different from our expectations. You can identify forward-looking statements by words such as "estimate", "may", "will", "expect", "believe", "plan" and other similar terms. We cannot promise future returns. Our opinions are a reflection of our best judgment at the time this report is compiled, and we disclaim any obligation to update or alter forward-looking statements as a result of new information, future events, or otherwise. |
| Performance for Period Ended September 30, 20031 |
The
Oakmark Fund (OAKMX) |
The
Oakmark Select Fund (OAKLX) |
The Oakmark |
The
Oakmark Equity and Income Fund (OAKBX) |
||||
| 3 Months* | 0.33% | 0.04% |
5.79% |
2.01% | ||||
| 6 Months* | 17.33% | 16.24% | 23.69% | 15.47% | ||||
| 1 Year | 20.99% | 27.25% | 21.84% | 19.75% | ||||
| Average Annual Total Return for: 3 Year |
8.73% |
11.30% |
5.67% |
10.89% |
||||
| 5 Year | 5.11% | 17.42% |
7.25% | 13.25% | ||||
| 10 Year | 10.73% | N/A | N/A | N/A | ||||
| Since inception | 16.50% (8/5/91) |
21.20% (11/1/96) |
9.99% (11/1/95) |
14.04% (11/1/95) |
||||
| Value of $10,000 from inception date |
$64,034 | $37,820 | $21,255 | $28,308 | ||||
| Top Five
Equity Holdings as of September 30, 20032
Company and % of Total |
Washington Mutual, Inc. |
3.8% | Washington Mutual, Inc. |
18.1% | eFunds Corporation | 4.7% | Synopsys, Inc. | 2.6% |
| H&R Block, Inc. | 2.7% | H&R Block, Inc. | 7.5% | Ralcorp Holdings, Inc. | 4.5% | Watson Pharmaceuticals Inc. | 2.4% | |
| Fannie Mae | 2.5% | Yum! Brands, Inc. | 5.4% | Checkpoint Systems, Inc. | 4.4% | First Health Group Corp. | 2.4% | |
| McDonald's Corporation | 2.4% | The Kroger Co. | 4.5% | Hanger Orthopedic Group, Inc. | 4.2% | SAFECO Corporation | 2.3% | |
| Yum! Brands, Inc. | 2.3% | First Data Corporation | 4.4% | BankAtlantic Bancorp, Inc., Class A | 4.1% | Diego plc | 2.3% | |
| Top Five
Industries as of September 30, 2003
Industries and % of Total Net Assets |
Retail | 10.0% | Banks & Thrifts | 18.1% | Computer Software | 8.7% | U.S. Government Notes |
27.2% |
| Pharmaceuticals | 8.5% | Other Consumer Goods & Services | 11.6% | Banks & Thrifts | 8.4% | Oil & Natural Gas | 5.8% | |
| Food & Beverage | 8.3% | Retail | 10.8% | Food & Beverage | 7.7% | Health Care Services | 4.8% | |
| Banks & Thrifts | 7.0% | Information Services | 7.1% | Medical Products | 7.3% | Food & Beverage | 4.6% | |
| Other Consumer Goods & Services | 6.3% | Pharmaceuticals | 6.8% | Oil & Natural Gas | 5.6% | Aerospace & Defense | 4.2% | |
| Performance for Period Ended September 30, 20031 |
The
Oakmark Global Fund (OAKGX) |
The
Oakmark International Fund (OAKIX) |
The
Oakmark International Small Cap Fund (OAKEX) |
|||
| 3 Months* | 9.55% |
7.70% |
14.12% |
|||
| 6 Months* | 46.25% |
35.09% |
47.42% |
|||
| 1 Year | 50.27% | 29.97% |
39.78% |
|||
| Average Annual Total Return for: 3 Year |
17.63% |
3.61% |
11.14% |
|||
| 5 Year | N/A | 13.21% | 20.03% | |||
| 10 Year | N/A | 8.53% | N/A | |||
| Since inception | 14.83%3 (8/4/99) |
10.62% (9/30/92) |
9.46% (11/1/95) |
|||
| Value of $10,000 from inception date |
$17,774 | $30,368 | $20,465 | |||
| Top Five
Equity Holdings as of September 30, 20032
Company and % of Total |
Diego plc |
5.9% |
Diego plc |
3.7% |
Baycorp Advantage Limited |
4.6% |
| Nestle SA | 4.5% | GlaxoSmithKline plc |
3.6% |
Bulgari S.p.A. | 3.7% | |
| Fannie Mae | 4.0% | Nestle SA | 3.2% | Neopost SA | 3.6% | |
| First Health Group Corp. | 3.9% | Aventis S.A. | 3.2% | Gurit-Heberlein AG | 3.6% | |
| Aventis S.A. | 3.8% | Henkel KGaA | 3.1% | Schindler Holding AG | 3.5% | |
| Top Five
Industries as of September 30, 2003
Industries and % of Total |
Food & Beverage | 11.3% | Food & Beverage | 14.2% | Retail | 9.3% |
| Pharmaceuticals | 9.8% | Pharmaceuticals | 11.4% | Machinery & Industrial Processing | 8.1% | |
| Other Financial | 9.2% | Banks & Thrifts | 11.0% | Airport Maintenance | 6.5% | |
| Information Services | 7.0% | Other Financial | 7.6% | Diversified Conglomerates | 6.3% | |
| Retail | 5.8% | Chemicals | 6.5% | Food & Beverage | 5.9% | |
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