President's Letter
Dear Fellow Shareholders,
Both domestic and international stock markets produced moderate gains in the first quarter, extending the worldwide recovery in stock prices that began roughly a year ago. All of our funds had positive returns and achieved new highs in net asset value during the quarter. We are pleased that our disciplined value investment style continues to reward our shareholders.
The Economy and the Market
The U.S. economy continues to grow at a healthy rate. Low interest rates and low inflation are fueling this growth. In addition, employment growth accelerated significantly in the past quarter, and corporate earnings also showed significant improvement, aided by high productivity growth. Many of these same factors are also driving strong economic growth internationally.
Despite the mostly positive economic headlines, our outlook for stock returns remains tempered by valuation. Most broad market indices are up 35% or more in the past 12 months. We believe U.S. market valuations now broadly reflect assumptions of sustained, robust economic recovery. While our analysis indicates that our holdings are priced at discounts to growing business values, finding new stock ideas that sell at deep discounts has become more difficult. We are finding more stock values internationally, but discounts to value have narrowed there, too.
We still believe that stocks' prospective returns are attractive compared to other asset classes. However, we also believe that higher share valuations make this a stock pickers' market. Values exist, but they are tougher to find. The rigors of our disciplined, bottom-up investment process, which focuses on finding undervalued stocks, help us to take advantage of market volatility and to unearth value in today's market. Our patient, long-term approach, which helps us avoid over reacting to short term events, gives us an extra edge.
Industry Governance and Regulation
Over the past quarter, the SEC and Congress have proposed several new rules and regulations for the mutual fund industry in response to abusive practices by fund companies. We believe in setting high standards for the treatment of our shareholders, but we also believe that abuses by other fund companies harm investors and their confidence in our industry. In this spirit, we support and encourage sensible new rules and regulations to protect fund investors and enhance fund governance. If you would like to learn more about our position on these issues, please visit our web site at www.oakmark.com.
Thank you for your continued investment and confidence in the Oakmark Family of Funds. We welcome your comments and questions. You can reach us via e-mail at ContactOakmark@oakmark.com.
John R. Raitt
President of The Oakmark Funds
President and CEO of Harris Associates L.P.
| Performance for
Period1 Ended March 31, 2004 |
The
Oakmark Fund-Class I (OAKMX) |
The
Oakmark Select Fund-Class I (OAKLX) |
The Oakmark |
The
Oakmark Equity and Income Fund-Class I (OAKBX) |
||||
| 3 Months* | 1.44% |
2.45% |
7.03% |
4.18% | ||||
| 6 Months* | 12.95% | 14.26% | 18.74% | 13.75% | ||||
| 1 Year | 32.53% | 32.83% | 46.87% | 31.35% | ||||
| Average Annual Total Return for: 3 Year |
6.22% |
9.59% |
12.30% |
12.48% |
||||
| 5 Year | 5.29% | 13.66% |
9.44% | 13.89% | ||||
| 10 Year | 11.54% | N/A | N/A | N/A | ||||
| Since inception | 16.91% (8/5/91) |
21.81% (11/1/96) |
11.62% (11/1/95) |
14.90% (11/1/95) |
||||
| Value of $10,000 from inception date |
$72,327 | $43,214 | $25,239 | $32,200 | ||||
| Top Five
Equity Holdings as of March 31, 20042
Company and % of Total |
Washington Mutual, Inc. |
3.4% | Washington Mutual, Inc. |
17.0% | Checkpoint Systems, Inc. | 4.6% | Burlington Resources, Inc. | 3.4% |
| First Data Corporation | 2.6% | H&R Block, Inc. | 7.3% | Ciber, Inc. | 4.5% | Caremark Rx, Inc. | 3.4% | |
| H&R Block, Inc. | 2.5% | Yum! Brands, Inc. | 6.0% | Hanger Orthopedic Group, Inc. | 4.3% | First Data Corporation | 3.2% | |
| McDonald's Corporation | 2.4% | First Data Corporation | 5.7% | Mentor Graphics Corporation | 4.3% | Cardinal Health, Inc. | 2.8% | |
| Yum! Brands, Inc. | 2.4% | Burlington Resources, Inc. | 4.7% | Ralcorp Holdings, Inc. | 3.9% | General Dynamics Corporation | 2.6% | |
| Top Five
Industries as of March 31, 2004
Industries and % of Total Net Assets |
Retail | 9.6% | Banks & Thrifts | 17.0% | Food & Beverage | 10.3% | U.S. Government Notes |
25.0% |
| Food & Beverage | 8.3% | Retail | 14.0% | Computer Software | 9.9% | Oil & Natural Gas | 6.6% | |
| Pharmaceuticals | 7.8% | Other Consumer Goods & Services | 11.2% | Medical Products | 8.3% | Health Care Services | 6.6% | |
| Banks & Thrifts | 6.4% | Information & Services | 7.4% | Computer Services | 4.9% | Retail | 6.0% | |
| Cable Systems & Satellite TV | 6.2% | Pharmaceuticals | 6.4% | Banks & Thrifts | 4.8% | Aerospace & Defense | 5.4% | |
| Performance for
Period1 Ended March 31, 2004 |
The
Oakmark Global Fund-Class I (OAKGX) |
The
Oakmark International Fund-Class I (OAKIX) |
The
Oakmark International Small Cap Fund-Class I (OAKEX) |
|||
| 3 Months* | 3.89% |
3.61% |
6.54% |
|||
| 6 Months* | 18.31% |
19.93% |
25.51% |
|||
| 1 Year | 73.04% | 62.00% |
85.03% |
|||
| Average Annual Total Return for: 3 Year |
22.33% |
10.80% |
19.01% |
|||
| 5 Year | N/A | 11.36% | 14.37% | |||
| 10 Year | N/A | 9.08% | N/A | |||
| Since inception | 17.29%3 (8/4/99) |
11.89% (9/30/92) |
11.85% (11/1/95) |
|||
| Value of $10,000 from inception date |
$21,029 | $36,419 | $25,685 | |||
| Top Five
Equity Holdings as of March 31, 20042
Company and % of Total |
Diageo plc |
4.7% |
Diageo plc |
3.5% |
Neopost SA |
4.3% |
| First Data Corporation | 4.7% | Aventis S.A. |
3.5% |
D.F.S. Furniture Company plc | 3.8% | |
| Nestle SA | 4.1% | Euronext NV | 3.4% | Schlinder Holding AG | 3.7% | |
| Euronext NV | 4.0% | GlaxoSmithKline plc | 3.3% | Kobenhavns Lufthavne A/S (Copenhagen Airports A/S CPH) |
3.6% | |
| Takeda Chemical Industries, Ltd. | 3.8% | Takeda Chemical Industries, Ltd. | 3.0% | Ansell Limited | 3.6% | |
| Top Five
Industries as of March 31, 2004
Industries and % of Total |
Food & Beverage | 11.9% | Food & Beverage | 14.4% | Retail | 9.4% |
| Pharmaceuticals | 10.5% | Pharmaceuticals | 12.1% | Airport Maintenance | 7.0% | |
| Banks & Thrifts | 7.3% | Banks & Thrifts | 11.7% | Machinery & Industrial Processing | 6.2% | |
| Other Financial | 6.6% | Chemicals | 8.1% | Diversified Conglomerates | 6.1% | |
| Computer Services | 6.3% | Other Financial | 7.4% | Medical Products | 6.0% | |
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Average annual total return measures annualized change, while total return measures aggregate change. To obtain current month end performance data call 1-800-OAKMARK.
* Not annualized