-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DcUGOH63Sdk3wzq+oGPbDKRnGEFGA9gKUnfosVUEr1yQmhd2AkF+Jc1cJY0xmcg2 OQcNN+VdZbrnAGMqmqYaMA== 0000948221-97-000151.txt : 19970912 0000948221-97-000151.hdr.sgml : 19970912 ACCESSION NUMBER: 0000948221-97-000151 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970806 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: YACKTMAN FUND INC CENTRAL INDEX KEY: 0000885980 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06628 FILM NUMBER: 97652388 BUSINESS ADDRESS: STREET 1: 303 W MADISON ST CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126412400 N-30D 1 SEMI-ANNUAL REPORT SEMI-ANNUAL REPORT June 30, 1997 This report is submitted for the general information of shareholders of The Yacktman Funds. It is not authorized for distribution to prospective investors unless accompanied or preceded by an effective Prospectus for the Funds, which contains more information concerning the Funds' investment policies, as well as fees and expenses and other pertinent information. Read the Prospectus carefully. THE YACKTMAN FUNDS, INC. MESSAGE TO SHAREHOLDERS Dear Shareholder: For investors who purchased shares at The Yacktman Fund's inception in July, 1992 at $10.00 per share, your initial investment, adjusted for dividends and capital gains, would have grown to $19.75 by the end of the second quarter. Moreover, the Fund has a cumulative return of 127.6% compared to 116.7% for the S&P 500 since the low price for the Fund on August 12, 1993. The Fund had a 9.2% return for the second quarter of 1997 as compared to a 17.5% return for the S&P 500. For investors who purchased shares at The Yacktman Focused Fund's inception on May 1, 1997 at $10.00 per share, your initial investment, adjusted for dividends and capital gains, would have grown to $10.92 by the end of the second quarter. This 9.2% return compares to a 10.8% return for the S&P 500 for the same two-month period. - - ------------------------------------------------------------------------------- One Annualized Annualized Year Three Years Since Inception 7/1/96-6/30/97 7/1/94-6/30/97 7/6/92-6/30/97 - - ------------------------------------------------------------------------------- The Yacktman Fund 26.5% 27.9% 14.6% S&P 500 34.7% 28.9% 19.5% The above past performance is not predictive of future results. The investment return and principal value of the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. - - ------------------------------------------------------------------------------- As noted in previous shareholder letters, our equity investment strategy for The Yacktman Fund is basically designed to earn competitive returns over the longer term while also seeking to reduce portfolio risk. To do so, we believe we must first identify truly outstanding companies from a fundamental point of view and then purchase their shares when they are trading near the bottom of their normal price range. Therefore, since we are consciously avoiding for fundamental reasons more than half of the companies in the S&P 500 Index, we know there will be periods such as the second quarter when we look like a tortoise in a race with a hare. This will be true even when our quarterly return of 9.2% looks strong in absolute terms. For only the second time since World War II, the stock market has doubled in thirty months realizing an annualized return of almost 30% compared to a historical market return of less than 10%, excluding reinvested dividends. If we assume that the market will over time move back toward its long-term rates of return, there will be future periods of sub-par returns, thus, creating good buying opportunities for the "dry powder" (i.e., cash reserves) we have accumulated. In many ways, the stock market at present levels resembles a baseball game that has gone into extra innings. We know the game will eventually end, but the exact inning in which this will occur is difficult, if not impossible, to predict. Similarly, the stock market will decline at some point to bring its short-term performance more into line with historical results. However, it is very difficult (and potentially misleading to our shareholders) to forecast the timing of this inevitable decline. Our increased cash reserves during periods of relatively high stock prices does not reflect an attempt on our part to forecast the direction of the overall market but rather the growing difficulty we have in finding highly profitable, well-managed businesses at bargain prices. The good news at this point is the "manic-depressive" nature of the stock market. This allows prepared business buyers (i.e., value oriented individual stock investors such as ourselves) to take advantage of bargains as they appear. We work diligently, therefore, to be prepared and in a position with sufficient cash reserves to relieve other investors (i.e., those panicked by declining prices) of their stress by purchasing the shares of good businesses at distressed prices and then eventually selling these shares to excited buyers at high valuations. You will note in the following financial statements that we now have two mutual funds: The Yacktman Fund and The Yacktman Focused Fund. The Yacktman Fund will normally hold between thirty and thirty-five stocks with the largest twelve positions representing more than 50% of the total assets of the Fund. In contrast, The Yacktman Focused Fund is classified as a non-diversified equity fund and will typically hold approximately fifteen stocks with the largest three positions representing more than 40% of the total value of the Fund. Since the companies in The Yacktman Focused Fund represent what we believe to be our best investment ideas, all of the stocks in this new Fund will also be held in The Yacktman Fund. Sincerely, /s/Donald A. Yacktman Donald A. Yacktman TOP TWELVE EQUITY HOLDINGS 54.2% of The Yacktman Fund - - ------------------------------------------------------------------------------- PERCENTAGE OF THE YACKTMAN FUND - - ------------------------------------------------------------------------------- Philip Morris Cos., Inc. 9.0% Reebok International Ltd. 6.0% Fruit of the Loom, Inc. 5.3% Whitman Corp. 4.6% Franklin Covey Co. 4.6% United Asset Management Corp. 4.6% Department 56, Inc. 4.4% Clorox Co. 4.1% Bandag, Inc., Class A 3.3% Intimate Brands, Inc. 3.0% HealthCare COMPARE Corp. 2.7% UST, Inc. 2.6% ----- TOTAL 54.2% THE YACKTMAN FUND PURCHASES & SALES For the Quarter Ended June 30, 1997 - - ------------------------------------------------------------------------------- NET SHARES CURRENT NEW PURCHASES PURCHASED SHARES HELD - - ------------------------------------------------------------------------------- DENTSPLY INTERNATIONAL, INC. Develops, manufactures, and markets products for the dental industry. Products include artificial teeth, root canal instruments, impression materials, sealants, and anesthetics. Equipment includes x-ray systems, intraoral cameras, computer imaging systems and related software. 10,000 10,000 FIRST DATA CORP. Provides information and transaction processing and related services, including credit/debt authorization, risk management, card embossing, electronic money transfer, document management, health care claims processing, and mutual fund services. 315,000 315,000 HEALTHCARE COMPARE CORP. Leading independent provider of medical cost management services, with the largest PPO in the nation; offers comprehensive managed care programs. 562,600 562,600 REYNOLDS & REYNOLDS CLASS A Manufactures business forms, markets computer systems, and provides financial services. Customers are chiefly in automotive and health care industries. 775,000 775,000 - - ------------------------------------------------------------------------------- NET SHARES CURRENT OTHER PURCHASES PURCHASED SHARES HELD - - ------------------------------------------------------------------------------- A.C. Nielsen Corp. 526,900 1,330,000 Bandag, Inc., Class A 316,200 734,700 Franklin Covey Co. 136,300 1,940,000 Fruit of the Loom, Inc. 1,271,800 1,850,000 International Dairy Queen, Inc. 37,500 837,500 Intimate Brands, Inc. 100,000 1,510,000 Jenny Craig, Inc. 553,800 843,800 Reebok International Ltd. 526,900 1,374,800 Rollins, Inc. 395,000 1,225,000 United Asset Management Corp. 65,000 1,725,000 Whitman Corp. 440,000 1,970,000 - - ------------------------------------------------------------------------------- NET SHARES CURRENT SALES SOLD SHARES HELD - - ------------------------------------------------------------------------------- Dun & Bradstreet Corp. 180,000 - Foundation Health Corp. 185,000 - Liz Claiborne, Inc. 55,000 285,000 McGraw Hill, Inc. 50,000 - Philip Morris Cos., Inc. 40,000 2,180,000 Quaker Oats Co. 325,000 - Salomon, Inc. 70,000 - Sara Lee Corp. 179,600 - Selective Insurance Group 92,000 325,000 Torchmark Corp. 297,200 42,800 Toys "R' Us, Inc. 540,000 100,000 Tupperware Corp. 130,000 90,000 Valassis Communications, Inc. 170,000 1,100,000 THE YACKTMAN FUND PORTFOLIO OF INVESTMENTS June 30, 1997 (Unaudited) - - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - - ------------------------------------------------------------------------------- COMMON STOCKS - 75.8% APPAREL/SHOES - 12.6% Fruit of the Loom, Inc.* 1,850,000 $ 57,350,000 Liz Claiborne, Inc. 285,000 13,288,125 Reebok International Ltd. 1,374,800 64,271,900 ------------ 134,910,025 ------------ CONGLOMERATES - 4.6% Whitman Corp. 1,970,000 49,865,625 ------------ CONSUMER GOODS - 4.7% Department 56, Inc.*+ 2,150,000 47,703,125 Topps Co. (The)* 500,000 2,093,750 ------------ 49,796,875 ------------ FINANCIAL SERVICES - 5.8% First Data Corp. 315,000 13,840,313 United Asset Management Corp. 1,725,000 48,839,063 ------------ 62,679,376 ------------ FOOD/BEVERAGE - 1.1% Tootsie Roll Industries 268,521 11,949,184 ------------ FOOD/TOBACCO - 11.6% Philip Morris Cos., Inc. 2,180,000 96,737,500 UST, Inc. 1,000,000 27,750,000 ------------ 124,487,500 ------------ HOUSEHOLD PRODUCTS - 4.4% Clorox Co. 335,000 44,220,000 Tupperware Corp. 90,000 3,285,000 ------------ 47,505,000 ------------ INSURANCE - 1.7% Selective Insurance Group 325,000 15,742,187 Torchmark Corp. 42,800 3,049,500 ------------ 18,791,687 ------------ - - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - - ------------------------------------------------------------------------------- MEDIA - 4.4% A.C. Nielsen 1,330,000 $ 26,101,250 American Media, Inc., Class A*+ 1,200,000 8,400,000 King World Productions, Inc.* 363,500 12,722,500 ------------ 47,223,750 ------------ MEDICAL SERVICES - 2.7% HealthCare COMPARE Corp.* 562,600 29,466,175 ------------ MEDICAL SUPPLIES - 0.1% Dentsply International, Inc. 10,000 490,000 ------------ RETAILING - 5.2% International Dairy Queen, Inc.*+ 837,500 20,100,000 Intimate Brands, Inc. 1,510,000 31,710,000 Toys 'R' Us, Inc.* 100,000 3,500,000 ------------ 55,310,000 ------------ SERVICES - 13.6% Block H&R, Inc. 483,400 15,589,650 Franklin Covey Co.*+ 1,940,000 49,106,250 Interpublic Group of Cos., Inc. 190,000 11,649,375 Jenny Craig, Inc.* 843,800 5,853,863 Reynolds & Reynolds Class A 775,000 12,206,250 Rollins, Inc. 1,225,000 24,653,125 Valassis Communications, Inc.* 1,100,000 26,400,000 ------------ 145,458,513 ------------ TIRES AND RUBBER - 3.3% Bandag, Inc., Class A+ 734,700 35,770,706 ------------ Total Common Stocks (cost $624,160,131) 813,704,416 ------------ THE YACKTMAN FUND PORTFOLIO OF INVESTMENTS (Cont'd.) June 30, 1997 (Unaudited) - - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 24.5% COMMERCIAL PAPER - 24.4% Associates First Capital, 6.10%, 7/1/97 $ 1,800,000 $ 1,800,000 Atlas Funding Corp. 5.56%, 7/9/97 10,000,000 9,987,644 5.57%, 7/17/97 22,032,000 21,977,459 Banner Receivables, 5.56%, 7/10/97 10,000,000 9,986,100 Bell Atlantic National Funding, 5.50%, 7/1/97 5,000,000 5,000,000 Commercial Credit Co. 5.50%, 7/10/97 10,000,000 9,986,250 5.55%, 8/4/97 10,000,000 9,947,583 FP Funding Corp. 5.59%, 7/3/97 7,572,000 7,569,648 5.58%, 7/3/97 20,000,000 19,994,213 5.60%, 7/7/97 20,000,000 19,981,333 Gotham Finance Co. 5.57%, 7/2/97 1,750,000 1,749,729 5.59%, 7/23/97 8,000,000 7,972,671 Industrial Funding 5.54%, 7/7/97 10,000,000 9,990,767 5.59%, 7/21/97 4,072,000 4,059,354 5.58%, 7/23/97 15,000,000 14,948,850 Madison Funding, 5.56%, 7/8/97 10,360,000 10,348,800 Oak Funding, 5.58%, 7/24/97 10,000,000 9,964,350 Special Purpose Funding, 5.55%, 7/2/97 8,000,000 7,998,767 SRD Finance, 5.57%, 7/10/97 11,000,000 10,984,683 Upson America, 5.57%, 7/11/97 5,986,000 5,976,738 - - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - - ------------------------------------------------------------------------------- COMMERCIAL PAPER - 24.4% (CONT'D.) Working Capital Management 5.56%, 7/7/97 $26,897,000 $ 26,872,076 5.58%, 7/9/97 20,000,000 19,975,200 5.58%, 7/15/97 15,000,000 14,967,450 ------------ Total Commercial Paper (cost $262,039,665) 262,039,665 ------------ US GOVERNMENT AGENCIES - 0.1% Federal Home Loan Bank, 6.35%, 6/17/98 1,500,000 1,500,015 ------------ Total US Government Agencies (cost $1,500,580) 1,500,015 ------------ DEMAND NOTES (VARIABLE RATE) - 0.0% Wisconsin Electric Power Company 10,694 10,694 ------------ Total Demand Notes (cost $10,694) 10,694 ------------ Total Short-Term Investments (cost $263,550,939) 263,550,374 ------------ Total Investments - 100.3% (cost $887,711,070) $1,077,254,790 Liabilities less Other Assets - (0.3)% (3,127,014) ------------ Net Assets - 100% (equivalent to $14.94 per share based on 71,886,381 shares outstanding) $1,074,127,776 ============= * Non-income producing + Affiliated company - See Note 7 See notes to financial statements THE YACKTMAN FOCUSED FUND PURCHASES & SALES For the Period Ended June 30, 1997 - - ------------------------------------------------------------------------------- NET SHARES CURRENT NEW PURCHASES PURCHASED SHARES HELD - - ------------------------------------------------------------------------------- Clorox Co. 2,500 2,500 Department 56, Inc. 160,000 160,000 Franklin Covey Co. 45,000 45,000 Fruit of the Loom, Inc. 25,500 25,500 HealthCare COMPARE Corp. 6,000 6,000 Intimate Brands, Inc. 31,000 31,000 Philip Morris Cos., Inc. 73,000 73,000 Reebok International Ltd. 15,500 15,500 Reynolds & Reynolds Class A 35,000 35,000 Rollins, Inc. 35,000 35,000 United Asset Management Corp. 31,000 31,000 Whitman Corp. 33,000 33,000 - - ------------------------------------------------------------------------------- NET SHARES CURRENT SALES SOLD SHARES HELD - - ------------------------------------------------------------------------------- No long-term equity securities were sold during the period ended June 30, 1997. THE YACKTMAN FOCUSED FUND PORTFOLIO OF INVESTMENTS June 30, 1997 (Unaudited) - - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - - ------------------------------------------------------------------------------- COMMON STOCKS - 75.5% APPAREL/SHOES - 8.3% Fruit of the Loom, Inc.* 25,500 $ 790,500 Reebok International Ltd. 15,500 724,625 ----------- 1,515,125 ----------- CONGLOMERATES - 4.6% Whitman Corp. 33,000 835,313 ----------- CONSUMER GOODS - 19.6% Department 56, Inc.*+ 160,000 3,550,000 ----------- FINANCIAL SERVICES - 4.8% United Asset Management Corp. 31,000 877,687 ----------- FOOD/TOBACCO - 17.9% Philip Morris Cos., Inc. 73,000 3,239,375 ----------- HOUSEHOLD PRODUCTS - 1.8% Clorox Co. 2,500 330,000 ----------- MEDICAL SERVICES - 1.7% HealthCare COMPARE Corp.* 6,000 314,250 ----------- RETAILING - 3.6% Intimate Brands, Inc. 31,000 651,000 ----------- SERVICES - 13.2% Franklin Covey Co.*+ 45,000 1,139,063 Reynolds & Reynolds Class A 35,000 551,250 Rollins, Inc. 35,000 704,375 ----------- 2,394,688 ----------- Total Common Stocks (cost $13,159,546) 13,707,438 ----------- THE YACKTMAN FOCUSED FUND PORTFOLIO OF INVESTMENTS (Cont'd.) June 30, 1997 (Unaudited) - - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 26.8% US TREASURY BILLS - 19.2% 4.60%, 7/10/97 $1,500,000 $ 1,498,275 4.72%, 7/24/97 1,000,000 996,985 4.81%, 7/31/97 1,000,000 996,103 ----------- Total US Treasury Bills (cost $3,491,363) 3,491,363 ----------- DEMAND NOTES (VARIABLE RATE) - 7.6% American Family Financial Services 255,235 255,235 Johnson Controls, Inc. 885,538 885,538 Wisconsin Electric Power Company 238,318 238,318 ----------- Total Demand Notes (cost $1,379,091) 1,379,091 ----------- Total Short-Term Investments (cost $4,870,454) 4,870,454 ----------- - - ------------------------------------------------------------------------------- NUMBER OF CONTRACTS VALUE - - ------------------------------------------------------------------------------- PUT OPTIONS PURCHASED - 0.7% Philip Morris Put Option Expiring Jan. 1999 @ $26.625 320 $ 24,000 Philip Morris Put Option Expiring Jan. 1999 @ $33.375 310 69,750 Proctor & Gamble Put Option Expiring Jan. 1999 @ $150.00 23 40,537 ----------- Total Put Options Purchased (cost $167,218) 134,287 ----------- Total Investments - 103.0% (cost $18,197,218) 18,712,179 PUT OPTIONS WRITTEN - (0.1)% HealthCare COMPARE Put Option Expiring Nov. 1997 @ $50.00 (26,875) (Premium received $39,749) Other Liabilities less Other Assets - (2.9)% (520,545) ----------- Net Assets - 100% (equivalent to $10.90 per share based on 1,666,677 shares outstanding) $18,164,759 =========== * Non-income producing + Affiliated company - See Note 7 All or a portion of security pledged as collateral to cover written put options See notes to financial statements THE YACKTMAN FUNDS, INC. STATEMENTS OF ASSETS & LIABILITIES June 30, 1997 (Unaudited) - - ------------------------------------------------------------------------------- THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND - - ------------------------------------------------------------------------------- ASSETS: Investments at value Nonaffiliated issuers (cost $743,751,536, and $13,733,298, respectively) $ 916,174,709 $14,023,116 Affiliated Issuers (cost $143,959,534, and $4,463,920, respectively) 161,080,081 4,689,063 Receivable for securities sold 5,431,880 - Dividends and interest receivable 1,813,773 38,193 Receivable for fund shares issued 899,512 241,205 Prepaid expenses 59,055 359 Due from adviser - 24,708 ------------- ------------ Total Assets 1,085,459,010 19,016,644 ------------- ------------ LIABILITIES: Put options written at value (Premium received $0 and $39,749, respectively) - 26,875 Payable for securities purchased 5,072,334 709,914 Shareholder distributions payable 5,032,047 33,334 Accrued investment advisory fees 555,321 14,963 Accrued expenses 392,298 20,075 Payable for fund shares redeemed 279,234 27,072 Payable to custodian - 19,652 ------------- ------------ Total Liabilities 11,331,234 851,885 ------------- ------------ NET ASSETS $1,074,127,776 $18,164,759 ============= ============ NET ASSETS CONSIST OF: Capital stock $ 825,203,349 $17,543,160 Undistributed net investment income 439,239 27,246 Undistributed net realized gains 58,941,468 66,518 Unrealized net appreciation on investments 189,543,720 527,835 ------------- ------------ Total Net Assets $1,074,127,776 $18,164,759 ============= ============ CAPITAL STOCK, $.0001 par value Authorized 500,000,000 500,000,000 Issued and outstanding 71,886,381 1,666,677 NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $14.94 $10.90 ====== ====== See notes to financial statements STATEMENTS OF OPERATIONS For the Periods Ended June 30, 1997 (Unaudited) - - ------------------------------------------------------------------------------- THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND - - ------------------------------------------------------------------------------- INVESTMENT INCOME: Dividend income $ 6,680,316 $ 33,993 Interest income 5,898,403 24,916 ------------ ------------ 12,578,719 58,909 ------------ ------------ EXPENSES: Investment advisory fees 2,868,297 14,963 Shareholder servicing fees 566,250 3,899 12b-1 plan distribution fees 255,743 - Administration and accounting fees 184,496 8,356 Federal and state registration fees 90,292 7,792 Custody fees 70,970 1,354 Reports to shareholders 58,602 836 Professional fees 30,322 5,933 Directors' fees and expenses 13,211 123 Miscellaneous costs 7,799 73 ------------ ------------ Total expenses before reductions and reimbursements 4,145,982 43,329 Expense reductions (See Note 6) (255,052) - Expense reimbursement (See Note 4) - (24,708) ------------ ------------ Net expenses 3,890,930 18,621 ------------ ------------ NET INVESTMENT INCOME 8,687,789 40,288 ------------ ------------ REALIZED AND UNREALIZED GAIN: Net realized gain on investments 59,394,719 66,518 Change in unrealized appreciation on investments 45,400,786 527,835 ------------ ------------ Net gain on investments 104,795,505 594,353 ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $113,483,294 $634,641 ============ ============ Commenced operations May 1, 1997 See notes to financial statements THE YACKTMAN FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS
THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND --------------------------------- --------------- SIX MONTHS MAY 1, 1997 ENDED YEAR THROUGH JUNE 30, 1997 ENDED JUNE 30, 1997 (UNAUDITED) DEC. 31, 1996 (UNAUDITED) ------------------------------------- ------------- OPERATIONS: Net investment income $ 8,687,789 $ 11,539,662 $ 40,288 Net realized gain on investments 59,394,719 83,892,326 66,518 Change in unrealized appreciation on investments 45,400,786 55,159,313 527,835 -------------- ------------- ------------ Net increase in net assets resulting from operations 113,483,294 150,591,301 634,641 -------------- ------------- ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 364,832,593 287,165,904 18,106,581 Proceeds from reinvestment of dividends 3,027,196 116,149,089 - -------------- ------------- ------------ 367,859,789 403,314,993 18,106,581 Payments for shares redeemed (154,568,469) (269,716,485) (543,129) -------------- ------------- ------------ Net increase 213,291,320 133,598,508 17,563,452 -------------- ------------- ------------ DIVIDENDS PAID FROM: Net investment income (8,263,451) (11,548,136) (33,334) Net realized gains (49) (83,748,151) - -------------- ------------- ------------ (8,263,500) (95,296,287) (33,334) -------------- ------------- ------------ TOTAL INCREASE IN NET ASSETS 318,511,114 188,893,522 18,164,759 NET ASSETS: Beginning of period 755,616,662 566,723,140 - -------------- ------------- ------------ End of period (including undistributed net investment income of $439,239, $14,901 and $27,246, respectively) $1,074,127,776 $755,616,662 $18,164,759 ============== ============= ============ TRANSACTIONS IN SHARES: Shares sold 25,948,739 21,423,865 1,716,219 Issued in reinvestment of dividends 220,186 8,904,831 - Shares redeemed (10,917,669) (20,586,820) (49,542) -------------- ------------- ------------ Net increase 15,251,256 9,741,876 1,666,677 ============== ============= ============ Commencement of operations See notes to financial statements
THE YACKTMAN FUNDS, INC. FINANCIAL HIGHLIGHTS THE YACKTMAN FUND ---------------------------- SIX MONTHS ENDED YEAR JUNE 30, 1997 ENDED (UNAUDITED) DEC. 31, 1996 -------------- -------------- Net asset value, beginning of period $13.34 $12.09 Income from investment operations: Net investment income 0.13 0.24 Net realized and unrealized gains (losses) on investments 1.59 2.90 -------- -------- Total from investment operations 1.72 3.14 -------- -------- Less distributions: Dividends from net investment income (0.12) (0.24) Distributions from net realized gains - (1.65) -------- -------- Total distributions (0.12) (1.89) -------- -------- Net asset value, end of period $14.94 $13.34 ======== ======== Total Return 12.93% 26.02% ======== ======== Supplemental data and ratios: Net assets, end of period (000s) $1,074,128 $755,617 ======== ======== Ratio of net expenses to average net assets (See Note 7) 0.91% 0.96% ======== ======== Ratio of net expenses to average net assets after expense reductions 0.85% 0.90% ======== ======== Ratio of net income to average net assets 1.90% 1.80% ======== ======== Portfolio turnover rate 37.23% 58.54% ======== ======== Average commission rate paid per share $0.0535 $0.0550 ======== ======== THE YACKTMAN FUNDS, INC. FINANCIAL HIGHLIGHTS (cont'd)
THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND ---------------------------------------------------------------- -------------- MAY 1, 1997 YEAR YEAR YEAR JULY 6, 1992 THROUGH ENDED ENDED ENDED THROUGH JUNE 30, 1997 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 DEC. 31, 1992 (UNAUDITED) ------------------------------------------------------------------ ------------- Net asset value, beginning of period $10.05 $9.56 $10.39 $10.00 $10.00 Income from investment operations: Net investment income 0.22 0.22 0.14 0.05 0.02 Net realized and unrealized gains (losses) on investments 2.81 0.61 (0.83) 0.42 0.90 -------- -------- -------- -------- -------- Total from investment operations 3.03 0.83 (0.69) 0.47 0.92 -------- -------- -------- -------- -------- Less distributions: Dividends from net investment income (0.22) (0.22) (0.14) (0.05) (0.02) Distributions from net realized gains (0.77) (0.12) - (0.03) - -------- -------- -------- -------- -------- Total distributions (0.99) (0.34) (0.14) (0.08) (0.02) -------- -------- -------- -------- -------- Net asset value, end of period $12.09 $10.05 $9.56 $10.39 $10.90 ======== ======== ======== ======== ======== Total Return 30.42% 8.80% (6.58)% 4.72% 9.20% ======== ======== ======== ======== ======== Supplemental data and ratios: Net assets, end of period (000s) $566,723 $295,133 $143,024 $74,666 $18,165 ======== ======== ======== ======== ======== Ratio of net expenses to average net assets (See Note 7) 0.99% 1.07% 1.18% 1.18% -% ======== ======== ======== ======== ======== Ratio of net expenses to average net assets after expense reductions 0.91% 1.07% 1.18% 1.18% 1.25% ======== ======== ======== ======== ======== Ratio of net income to average net assets 2.02% 2.49% 1.61% 1.49% 2.70% ======== ======== ======== ======== ======== Portfolio turnover rate 55.37% 49.44% 61.14% 30.94% -% ======== ======== ======== ======== ======== Average commission rate paid per share N/A N/A N/A N/A $0.0626 ======== ======== ======== ======== ======== Commencement of operations Not annualized Annualized Net of reimbursements. Without the fee waiver, the ratio of expenses to average net assets would have been 2.90% and the ratio of net investment income to average net assets would have been 1.05%. See notes to financial statements
THE YACKTMAN FUNDS, INC. NOTES TO THE FINANCIAL STATEMENTS June 30, 1997 (Unaudited) 1. ORGANIZATION The Yacktman Funds, Inc. (the "Funds") is registered as an open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"). The Funds consist of two investment portfolios: The Yacktman Fund is a diversified fund and commenced operations July 2, 1992 and The Yacktman Focused Fund is a non-diversified fund that commenced operations May 1, 1997. The objective of each of the Funds is to produce long-term growth of capital with current income as a secondary objective. Yacktman Asset Management Co. is the Funds' investment adviser (the "Adviser"). 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The financial statements have been prepared in conformity with generally accepted accounting principles which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. a) INVESTMENT VALUATION - Securities which are traded on a recognized stock exchange are valued at the last sale price on the securities exchange on which such securities are primarily traded or at last sale price on the national securities market. Exchange-traded securities for which there were no transactions are valued at the current bid prices. Securities traded on only over-the-counter markets are valued on the basis of closing over-the-counter bid prices. Short-term debt instruments maturing within 60 days are valued by the amortized cost method. Variable rate demand notes are valued at cost which approximates market value. Put options written or purchased by The Yacktman Focused Fund are valued at the last sales price if such last sales price is between the current bid and asked prices. Otherwise, put options are valued at the mean between the current bid and asked prices. Any securities for which market quotations are not readily available are valued at their fair value as determined in good faith by the Board of Directors. b) PUT OPTIONS - Premiums received by The Yacktman Focused Fund upon writing put options are recorded as an asset with a corresponding liability which is subsequently adjusted to the current market value of the option. When an option expires, is exercised, or is closed, the Fund realizes a gain or loss, and the liability is eliminated. The Fund continues to bear the risk of adverse movements in the price of the underlying asset during the period of the option, although any potential loss during the period would be reduced by the amount of the option premium received. The Yacktman Focused Fund's activity in written put options for the two months ended June 30, 1997 was as follows: NUMBER OF CONTRACTS PREMIUMS Options outstanding at 5/1/97 - - Options written 1,010 $284,990 Options closed (910) (245,241) Options exercised - - Options expired - - ----- ------- Options outstanding at 6/30/97 100 $39,749 ===== ======= c) FEDERAL INCOME TAXES - It is each Fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all investment company net taxable income and net capital gains to its shareholders in a manner which results in no tax cost to the Fund. Therefore, no federal income tax provision is required. d) DISTRIBUTIONS TO SHAREHOLDERS - Dividends from net investment income are declared and paid quarterly. Distributions of net realized capital gains, if any, are declared and paid at least annually. Distributions to shareholders are recorded on the ex-dividend date. The Funds periodically make reclassifications among certain of its capital accounts as a result of the recognition and characterization of certain income and capital gain distributions determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. Dividends differ from book net investment income due to the nondeductible tax treatment of organization costs. Accordingly, at June 30, 1997 reclassifications were recorded to undistributed net investment income to reduce capital stock by $20,292 for The Yacktman Focused Fund. e) OTHER - Investment transactions are accounted for on the trade date. The Funds determine gain or loss realized from investment transactions by comparing the original cost of the security lot sold with the net sale proceeds. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. THE YACKTMAN FUNDS, INC. NOTES TO THE FINANCIAL STATEMENTS (Cont'd.) June 30, 1997 (Unaudited) 3. INVESTMENT TRANSACTIONS The aggregate purchases and sales of securities, excluding short-term securities, for the Funds for the period ended June 30, 1997 were as follows: THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND Purchases U.S. Government $ 3,008,664 - Other 323,558,626 $13,326,764 Sales U.S. Government - - Other 259,847,861 - At June 30, 1997 gross unrealized appreciation and depreciation on investments on a tax basis were as follows: THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND Appreciation $199,208,386 $676,971 (Depreciation) (10,808,126) (162,010) ------------ -------- Net appreciation on investments $188,400,260 $514,961 ============ ======== The cost of securities for federal income tax purposes was $888,854,530 and $18,197,218 for The Yacktman Fund and The Yacktman Focused Fund, respectively. 4. INVESTMENT ADVISORY AGREEMENT The Funds have agreements with the Adviser, with whom certain officers and directors of the Fund are affiliated, to furnish investment advisory services to the Funds. Under the terms of these agreements, The Yacktman Fund will pay the Adviser a monthly fee at the annual rate of 0.65% on the first $500,000,000 of average daily net assets, 0.60% on the next $500,000,000 of average daily net assets and 0.55% on average daily net assets in excess of $1,000,000,000 and The Yacktman Focused Fund will pay the Adviser a monthly fee at the annual rate of 1% of its average daily net assets. The agreements further stipulate that the Adviser will reimburse the Funds for annual expenses exceeding certain specified levels. In addition to the reimbursements required under the agreements, the Adviser has voluntarily agreed to reimburse The Yacktman Focused Fund for all expenses exceeding 1.25% of its average daily net assets. 5. DISTRIBUTION PLAN The Yacktman Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the six months ended June 30, 1997, payments under the Plan represented 0.06% per annum of the Fund's total average net assets. Such payments may not exceed 0.25% of the average daily net assets of the Fund. Payments may be made only to distributors employed by the Fund with respect to shares beneficially owned by each such distributor's brokerage clients who established their Fund accounts PRIOR to December 31, 1992. 6. EXPENSE REDUCTIONS The Adviser has directed certain of The Yacktman Fund portfolio trades to brokers at best price and execution and has generated soft dollar credits to be used against sub-transfer agency fees. Shareholders benefit under this arrangement as the net expenses of The Yacktman Fund do not include such sub- transfer agency fees. For the six months ended June 30, 1997, The Yacktman Fund's expenses were reduced $255,052 by utilizing soft dollar credits resulting in an expense ratio of 0.85% being charged to shareholders. In accordance with Securities and Exchange Commission requirements, such amount is required to be shown as an expense and has been included in shareholder servicing fees in the Statement of Operations. 7. TRANSACTIONS WITH AFFILIATES The following is an analysis of transactions for the period ended June 30, 1997 for The Yacktman Funds, Inc. with "affiliated companies" (an affiliated company is defined by the 1940 Act as a company in which a Fund owns 5% or more of that company's outstanding voting shares): Amount of Amount of Gain (Loss) Dividends Realized Share Activity Credited on Sale -------------------------------------------------- to Income of Shares Balance Balance in Fiscal in Fiscal Security Name 12/31/96 Purchases Sales 6/30/97 1997 1997 - - -------------- --------- --------- ----- ------- ------- ------- THE YACKTMAN FUND American Media, Inc., Class A 1,200,000 - - 1,200,000 - - Bandag, Inc., Class A 418,500 316,200 - 734,700 $288,300 - Department 56, Inc. 767,500 1,382,500 - 2,150,000 - - Franklin Covey Co. 1,530,000 420,000 10,000 1,940,000 - $4,026 International Dairy Queen, Inc. 609,200 228,300 - 837,500 - - THE YACKTMAN FOCUSED FUND Department 56, Inc. - 160,000 - 160,000 - - Franklin Covey Co. - 45,000 - 45,000 - -
This page intentionally left blank. FOR FUND INFORMATION AND SHAREHOLDER SERVICES, CALL 1-800-525-8258 THE YACKTMAN FUNDS, INC. Shareholder Services Center 615 East Michigan Street, 3rd Floor Milwaukee, Wisconsin 53201-5207 -----END PRIVACY-ENHANCED MESSAGE-----