-----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, BTPqkjontz4eYxmTQzAAVs69BR/7qN3HjxYWpj5aQ0fZ2+E1vt53fKF92bDznrf+ HF5FpHx4CyptjwwAqEtekA== 0000948221-98-000123.txt : 19980430 0000948221-98-000123.hdr.sgml : 19980430 ACCESSION NUMBER: 0000948221-98-000123 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980428 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: YACKTMAN FUND INC CENTRAL INDEX KEY: 0000885980 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-06628 FILM NUMBER: 98602647 BUSINESS ADDRESS: STREET 1: 303 W MADISON ST CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126412400 MAIL ADDRESS: STREET 1: 207 E BUFFALO ST STREET 2: STE 400 CITY: MILWAUKEE STATE: WI ZIP: 53202 N-30B-2 1 (logo) THE YACKTMAN FUNDS - -------------------------------------------------------------------------------- 1ST QUARTER REPORT - -------------------------------------------------------------------------------- MARCH 31, 1998 - -------------------------------------------------------------------------------- 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. Please read the Prospectus carefully. THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- MESSAGE TO SHAREHOLDERS - -------------------------------------------------------------------------------- (photo) 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 $22.37 by the end of the first quarter. The Yacktman Fund had a 8.1% return for the first quarter of 1998 as compared to a 14.0% 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 $12.89 by the end of the first quarter. This represents a cumulative return of 28.9%, which compares to a 39.7% cumulative return for the S&P 500 for the same period. The Yacktman Focused Fund had an 11.7% return for the first quarter of 1998. - -------------------------------------------------------------------------------- THE S&P 500 YACKTMAN FUND ANNUALIZED TIME PERIOD ANNUALIZED RETURNS RETURNS - -------------------------------------------------------------------------------- One Year (4/30/97 - 3/31/98) 23.6% 48.0% Since low price for Fund (8/12/93 - 3/31/98) 22.7% 24.2% Five Years (4/30/93 - 3/31/98) 17.3% 22.4% Since Inception (7/6/92 - 3/31/98) 15.1% 21.5% 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. - -------------------------------------------------------------------------------- The first quarter was a good year for the market. The first quarter return of 14% for the market, as measured by the S&P 500, exceeds the historical compound ANNUAL rate since 1926 of 11% for the stocks of larger companies. We are clearly in unchartered waters with the traditional valuation ratios of price to earnings, to dividends, to book, and to sales at all-time highs. Likewise, we are also at an all-time high on corporate returns on equity. - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- Last summer my son-in-law worked with some mentally handicapped young men in Indianapolis. Since it had rained on both the Sunday before Memorial Day and Memorial Day, many ticket holders of the Indy 500 left town, and he was able to take these young men, free of charge, on Tuesday to the race and sit in the front row. They enjoyed the race, but as they left, they noticed their clothes had been sprayed with oil because they had been too close to the cars. In a way, many investors are acting like the drivers at the Indy 500 holding their right foot to the floor. The speed is unsustainable, but each driver is afraid to take his foot off the gas pedal for fear he will fall behind the other cars. Even though the fans are cheering the drivers on to even greater speeds, the spectators too close to the fast cars are likely to find themselves oil stained after the race is over (i.e., holding stocks with drastically reduced prices). Will Rogers once said, "Return on capital is not as important as return of capital." Our goals continue to be to first protect our shareholders' capital and secondly to make money by buying profitable, well-managed businesses when their shares are selling at depressed prices. As is the case with our largest holding, Philip Morris, some of our stocks may not be popular at this point, but they are still very profitable businesses whose share prices we believe will ultimately reflect their underlying profitability. Right now there is a significant difference in market valuations between the very popular stocks and the very unpopular ones. For example, the marketplace values Microsoft at twice what it values Philip Morris, yet Philip Morris generates more operating cash flow than Microsoft's REVENUES. Pfizer sells at over $100 a share versus $32 for First Data. However, if the non-cash item of goodwill is added to First Data's earnings, it would have a higher earnings per share than Pfizer. Such disparities remind me of other "Nifty 50" time periods, which eventually came to dramatic ends with substantial declines in stock prices. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Overall the weighted price/earnings (P/E) ratios for the Funds are: - -------------------------------------------------------------------------------- PRICE/EARNINGS DISCOUNT FROM (P/E) RATIOS S&P 500 P/E - -------------------------------------------------------------------------------- The Yacktman Fund 16.6 23.1% The Yacktman Focused Fund 16.4 24.1% S&P 500 21.6 - The above P/E ratios are weighted by market capitalization and based upon estimated 1998 earnings. The estimated earnings for the above P/E ratios are the consensus forecasts of the institutional analysts as reported each week in the New York and NASDAQ/American Stock Exchange Daily Graphs booklets. - -------------------------------------------------------------------------------- We continue to earn good absolute returns, and someday our pace car approach will catch the formula race cars (i.e., high P/E and earnings momentum investors), which frequently succumb to the excesses and stress of high speed driving. While admittedly our pace car approach is less glamorous and exciting, we believe we have our direction and strategy clearly in place. Sincerely, /s/Donald A. Yacktman Donald A. Yacktman - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- TOP TWELVE EQUITY HOLDINGS March 31, 1998 - -------------------------------------------------------------------------------- PERCENTAGE OF NET ASSETS - -------------------------------------------------------------------------------- Philip Morris Cos., Inc. 14.3% First Data Corp. 10.1% Department 56, Inc. 5.5% Franklin Covey Co. 5.1% Reebok International Ltd. 4.7% Fruit of the Loom, Inc. 4.6% United Asset Management Corp. 4.6% First Health Group Corp. 4.1% Intimate Brands, Inc. 4.1% Dentsply International, Inc. 4.0% Clorox Co. 4.0% Bandag, Inc., Class A 3.9% ----- TOTAL 69.0% THE YACKTMAN FUND - -------------------------------------------------------------------------------- PURCHASES & SALES For the Quarter Ended March 31, 1998 - -------------------------------------------------------------------------------- NET SHARES CURRENT PURCHASES PURCHASED SHARES HELD - -------------------------------------------------------------------------------- Dentsply International, Inc. 898,000 1,285,000 First Health Group Corp. 115,700 750,000 Jostens, Inc. 505,000 1,010,000 Reuters Holdings ADS 200,000 344,500 Rollins, Inc. 130,100 1,255,000 - -------------------------------------------------------------------------------- NET SHARES CURRENT SALES SOLD SHARES HELD - -------------------------------------------------------------------------------- A.C. Nielsen Corp. 698,000 632,000 AnnTaylor Stores Corp. 486,000 375,000 - -------------------------------------------------------------------------------- NET SHARES CURRENT SALES (CONT'D.) SOLD SHARES HELD - -------------------------------------------------------------------------------- Clorox Co. 110,000 460,000 Columbia/HCA Healthcare Corp. 1,000,000 _ De Beers Consolidated Mines 495,300 _ Limited ADR Department 56, Inc. 360,000 1,430,000 First Data Corp. 93,900 3,100,000 Franklin Covey Co. 192,100 2,077,900 Fruit of the Loom, Inc. 425,000 1,500,000 Hussmann International, Inc.* 687,500 250,000 International Dairy Queen, Inc. 795,000 _ Intimate Brands, Inc. 570,000 1,495,000 Liz Claiborne, Inc. 236,000 _ Luxottica Group ADR 66,200 _ Midas, Inc.* 312,500 _ The PMI Group, Inc. 100,000 _ Reebok International Ltd. 245,000 1,515,000 Reynolds & Reynolds, Class A 95,000 _ United Asset Management Corp. 340,000 1,660,000 Valassis Communications, Inc. 369,000 381,000 Whitman Corp. 125,000 1,875,000 * Spin-off from Whitman Corp. on 1/30/98. - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS March 31, 1998 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS - 92.2% APPAREL/SHOES - 9.3% Fruit of the Loom, Inc.* 1,500,000 $45,937,500 Reebok International Ltd.* 1,515,000 46,207,500 ----------- 92,145,000 ----------- CONGLOMERATES - 3.7% Whitman Corp. 1,875,000 37,031,250 ----------- CONSUMER GOODS - 8.0% Department 56, Inc.* 1,430,000 54,340,000 Jostens, Inc. 1,010,000 24,240,000 Topps Co. (The)* 500,000 1,281,250 ----------- 79,861,250 ----------- FINANCIAL SERVICES - 14.7% First Data Corp. 3,100,000 100,750,000 United Asset Management Corp. 1,660,000 45,235,000 ----------- 145,985,000 ----------- FOOD/TOBACCO - 14.3% Philip Morris Cos., Inc. 3,400,000 141,737,500 ----------- HOUSEHOLD PRODUCTS - 5.3% Clorox Co. 460,000 39,416,250 Tupperware Corp. 480,000 12,780,000 ----------- 52,196,250 ----------- INSURANCE - 1.6% Selective Insurance Group 570,000 15,318,750 ----------- MANUFACTURING - 0.5% Hussmann International, Inc. 250,000 4,687,500 ----------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- MEDIA - 6.0% A.C. Nielsen Corp.* 632,000 $16,708,500 American Media, Inc., Class A* 1,200,000 9,450,000 King World Productions, Inc.* 400,000 11,700,000 Reuters Holdings ADS 344,500 22,241,781 ----------- 60,100,281 ----------- MEDICAL SERVICES - 4.1% First Health Group Corp.* 750,000 40,687,500 ----------- MEDICAL SUPPLIES - 4.0% Dentsply International, Inc. 1,285,000 40,075,937 ----------- RETAILING - 4.7% AnnTaylor Stores Corp.* 375,000 6,164,062 Intimate Brands, Inc. 1,495,000 40,458,438 ----------- 46,622,500 ----------- SERVICES - 12.1% Block H&R, Inc. 483,400 22,991,713 Franklin Covey Co.* 2,077,900 50,518,944 Jenny Craig, Inc.* 843,800 4,904,588 Rollins, Inc. 1,255,000 26,198,125 Valassis Communications, Inc.* 381,000 15,621,000 ----------- 120,234,370 ----------- TIRES AND RUBBER - 3.9% Bandag, Inc., Class A 734,700 39,168,693 ----------- TOTAL COMMON STOCKS (cost $708,660,439) 915,851,781 ----------- - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONT'D.) March 31, 1998 (Unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- COMMERCIAL PAPER - 7.1% American Express 5.58%, 4/2/98 $10,000,000 $10,000,000 5.69%, 4/3/98 6,000,000 6,000,000 Ford Motor Credit Co. 5.54%, 4/1/98 10,000,000 10,000,000 5.65%, 4/6/98 12,000,000 12,000,000 General Electric Capital Corp. 5.57%, 4/2/98 10,000,000 10,000,000 5.57%, 4/3/98 12,000,000 12,000,000 5.59%, 4/3/98 10,000,000 10,000,000 ----------- Total Commercial Paper (cost $70,000,000) 70,000,000 ----------- DEMAND NOTES (VARIABLE RATE) - 0.7% General Mills, Inc. 373,184 373,184 Johnson Controls, Inc. 1,648,760 1,648,760 Pitney Bowes Credit Corp. 1,474,171 1,474,171 Sara Lee Corp. 869,462 869,462 Warner-Lambert, Inc. 3,014,251 3,014,251 ----------- Total Demand Notes (cost $7,379,828) 7,379,828 ----------- Total Investments - 100.0% (cost $786,040,267) 993,231,609 ----------- Other Assets less Liabilities - 0.0% 203,211 ----------- Net Assets - 100% (equivalent to $15.11 per share based on 65,747,484 shares outstanding) $993,434,820 ============ * Non-income producing - -------------------------------------------------------------------------------- THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- PURCHASES & SALES For the Quarter Ended March 31, 1998 - -------------------------------------------------------------------------------- NET SHARES CURRENT NEW PURCHASES PURCHASED SHARES HELD - -------------------------------------------------------------------------------- Dentsply International, Inc. 80,000 80,000 First Health Group Corp. 63,000 63,000 Jostens, Inc. 100,000 100,000 - -------------------------------------------------------------------------------- NET SHARES CURRENT OTHER PURCHASES PURCHASED SHARES HELD - -------------------------------------------------------------------------------- Franklin Covey Co. 48,700 220,000 First Data Corp. 20,000 200,000 Philip Morris Cos., Inc. 40,000 200,000 Reebok International Ltd. 8,700 100,000 Rollins, Inc. 54,000 160,000 United Asset Management Corp. 20,000 120,000 - -------------------------------------------------------------------------------- NET SHARES CURRENT SALES SOLD SHARES HELD - -------------------------------------------------------------------------------- AnnTaylor Stores Corp. 110,000 25,000 Columbia/HCA Healthcare Corp. 25,000 _ Department 56, Inc. 25,000 375,000 Intimate Brands, Inc. 10,000 100,000 The PMI Group, Inc. 32,600 _ - -------------------------------------------------------------------------------- THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS March 31, 1998 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS - 84.1% APPAREL/SHOES - 8.5% Fruit of the Loom, Inc.* 100,000 $3,062,500 Reebok International Ltd.* 100,000 3,050,000 ----------- 6,112,500 ----------- CONGLOMERATES - 2.7% Whitman Corp.+ 100,000 1,975,000 ----------- CONSUMER GOODS - 23.1% Department 56, Inc.*+ 375,000 14,250,000 Jostens, Inc. 100,000 2,400,000 ----------- 16,650,000 ----------- FINANCIAL SERVICES - 13.6% First Data Corp. 200,000 6,500,000 United Asset Management Corp. 120,000 3,270,000 ----------- 9,770,000 ----------- FOOD/TOBACCO - 11.6% Philip Morris Cos., Inc.+ 200,000 8,337,500 ----------- MEDICAL SERVICES - 4.7% First Health Group Corp.* 63,000 3,417,750 ----------- MEDICAL SUPPLIES - 3.5% Dentsply International, Inc. 80,000 2,495,000 ----------- RETAILING - 4.3% AnnTaylor Stores Corp.* 25,000 410,938 Intimate Brands, Inc. 100,000 2,706,250 ----------- 3,117,188 ----------- SERVICES - 12.1% Franklin Covey Co.* 220,000 5,348,750 Rollins, Inc. 160,000 3,340,000 ----------- 8,688,750 ----------- Total Common Stocks (cost $54,347,404) 60,563,688 ----------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- COMMERCIAL PAPER - 2.8% Ford Motor Credit Co., 5.76%, 4/1/98 $2,000,000 $2,000,000 ----------- Total Commercial Paper (cost $2,000,000) 2,000,000 ----------- DEMAND NOTES (VARIABLE RATE) - 12.7% American Family Financial Services 781,661 781,661 General Mills, Inc. 1,517,789 1,517,789 Johnson Controls, Inc. 2,184,719 2,184,719 Pitney Bowes Credit Corp. 2,023,682 2,023,682 Sara Lee Corp. 563,198 563,198 Warner-Lambert, Inc. 825,331 825,331 Wisconsin Electric Power Company 1,292,175 1,292,175 ----------- Total Demand Notes (cost $9,188,555) 9,188,555 ----------- - -------------------------------------------------------------------------------- THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONT'D.) March 31, 1998 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF CONTRACTS VALUE - -------------------------------------------------------------------------------- PUT OPTIONS PURCHASED - 0.3% Philip Morris Cos., Inc. Expiring Jan. 1999 @ $26.625 320 $ 8,000 Expiring Jan. 1999 @ $33.375 1,080 118,130 Expiring Jan. 2000 @ $35.00 200 62,500 ----------- Total Put Options Purchased (cost $354,586) 188,630 ----------- Total Investments - 99.9% (cost $65,890,545) 71,940,873 ----------- PUT OPTIONS WRITTEN - (0.4)% First Data Corp. Expiring Aug. 1998 @ $30.00 500 (81,250) NIKE, Inc., Class B Expiring Jan. 1999 @ $37.50 850 (196,562) ----------- Total Put Options Written (premiums received $272,241 (277,812) ----------- Other Assets less Other Liabilities - 0.5% 337,072 ----------- Net Assets - 100% (equivalent to $12.51 per share based on 5,755,301 shares outstanding) $72,000,133 =========== * Non-income producing + All or a portion of security pledged as collateral to cover written put options. - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- YA-412-0498 -----END PRIVACY-ENHANCED MESSAGE-----