Sunstone Financial Group, Inc.
Suite 400
207 East Buffalo Street
Milwaukee, Wisconsin 53202
April 25, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: The Yacktman Fund, Inc. Quarterly Report
Filing Pursuant to Rule 30b2-1
SEC File No. 811-6628, 33-47044
Gentlemen:
On behalf of The Yacktman Fund, Inc. (the "Fund"), transmitted herewith for
filing pursuant to Rule 30b2-1 and Section 24(b) under the Investment Company
Act of 1940, as amended, is the Fund's Quarterly Report to the Shareholders for
the quarter ended March 31, 1996.
Questions regarding this filing should be directed to the undersigned.
Sincerely,
/S/ Jon Kiekhofer
Jon Kiekhofer
Financial Analyst
JK/kg
Encl.
THE YACKTMAN FUND
1ST QUARTER REPORT
March 31, 1996
THE YACKTMAN FUND, INC.
MESSAGE TO SHAREHOLDERS
Dear Shareholder:
The Fund outperformed the S&P 500 for the first quarter of 1996 enabling us to
narrow the gap between our performance and that of the S&P 500. In fact, the
Fund has a cumulative return of 69.5% compared to 54.0% for the S&P 500 since
the low price for the Fund on August 12, 1993. Moreover, for investors who
purchased shares at the Fund's inception in July, 1992 at $10.00 per share,
their initial investment, adjusted for dividends and capital gains, would have
grown to $14.71 by the end of the first quarter of 1996.
First One Annualized
Quarter Year Since Inception
1/1/96-3/31/96 4/1/95-3/31/96 7/6/92-3/31/96
-------------- -------------- --------------
The Yacktman Fund 6.0% 26.4% 10.9%
S&P 500 5.4% 32.1% 15.7%
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 stock market, as measured by the S&P 500, was again unusually strong in
the first quarter. While we view predicting the direction or level of the
overall market as a fruitless exercise, we do believe gains of 5-6% per quarter
are unsustainable and, consequently, have increased our position in cash
equivalent investments over the past several months. Our objective is, of
course, to purchase the pieces (a.k.a., shares of common stock) of outstanding
businesses at bargain prices. This has become more difficult in the current
market environment.
We continue to focus our efforts on finding those companies whose "free"
operating cash flow (i.e., cash flow from operations less maintenance capital
expenditures) is increasing due to high returns on tangible assets and an
efficient capital allocation process. Business economists and journalists have
coined the phrase, "Economic Value Added," or EVA, to describe this process. We
view the concept of EVA as nothing more than "Business 101," and our analytical
process resembles the sing-a-longs in movie theaters years ago. The audience
would sing the words to the music by following a white ball across the screen as
it bounced from word to word. In investing, the little white ball follows the
"free" operating cash flow of a business allowing us to determine the EVA.
For this reason, we concentrated our holdings further during the quarter in
Philip Morris and decreased our holdings in RJR Nabisco while also reducing the
combined position in these two companies. Of the highly profitable, large
companies, Philip Morris is now the least expensive. Its management continues to
move capital into profitable business areas and to repurchase its shares. In our
opinion, the stock market has already discounted significantly the price of
Philip Morris stock because of perceived uncertainties surrounding the
litigation and concerns over the possibility of increased governmental
regulation.
We will continue to make rational investment decisions based on the best
information available to us. These decisions may at times be at odds with the
conventional wisdom of the market, but they will always be consistent with our
longer term goal of achieving the highest possible returns with relatively
minimal risk of a permanent loss of capital.
Sincerely,
/s/ Donald A. Yacktman
Donald A. Yacktman
TOP TWELVE EQUITY HOLDINGS
59.0% of the Fund
Percentage of
Portfolio
---------
Philip Morris Cos., Inc. 10.3%
United Asset Management. Corp. 6.0%
Reebok International Ltd. 5.2%
Fruit of the Loom, Inc. 4.9%
Clorox Co. 4.9%
UST, Inc. 4.7%
Bristol-Myers Squibb Co. 4.5%
Salomon, Inc. 4.0%
Toys `R' Us, Inc. 4.0%
Torchmark Corp. 3.8%
Bandag, Inc., Class A 3.4%
Dow Jones & Co., Inc. 3.3%
-----
Total 59.0%
PURCHASES & SALES
For the Quarter Ended March 31, 1996
Net Shares Current
NEW PURCHASES Purchased Shares Held
- ------------- --------- -----------
ABBOTT LABORATORIES
Makes health-care products
including drugs, diagnostic
tests, intravenous solutions,
laboratory instruments, and
infant formulas. 100,000 100,000
STANHOME, INC.
Designs, imports and sells
porcelain figurines and other
giftware through its Enesco
division. Principal product
line is Precious Moments. 90,000 90,000
Net Shares Current
OTHER PURCHASES Purchased Shares Held
- --------------- --------- -----------
American Media, Inc., Class A 91,000 1,250,000
Bandag, Inc., Class A 220,700 400,000
Barefoot, Inc. 415,000 1,190,000
Franklin Quest Co. 65,000 695,000
Philip Morris Cos., Inc. 165,000 715,000
Torchmark Corp. 15,000 515,000
UST, Inc. 30,000 890,000
United Asset Management Corp. 15,000 795,000
Net Shares Current
SALES Sold Shares Held
- ----- ---------- -----------
Avon Products, Inc. 100,000 -
Bristol-Myers Squibb Co. 10,000 320,000
Clorox Co. 60,000 345,000
First Brands, Corp. 50,000 -
Fruit of the Loom, Inc. 18,000 1,150,000
Johnson & Johnson 39,800 -
Liz Claiborne, Inc. 80,000 520,000
Merck & Co., Inc. 80,000 130,000
Pfizer, Inc. 20,000 210,000
RJR Nabisco Holdings Corp. 740,000 210,000
Ralston Purina Group 70,000 130,000
Reebok International Ltd. 90,000 1,140,000
Rollins, Inc. 30,000 270,000
Student Loan Marketing Assn. 158,000 -
Toys `R' Us, Inc. 20,000 900,000
PORTFOLIO OF INVESTMENTS
March 31, 1996 (Unaudited)
Number
of Shares Value
--------- -----
COMMON STOCKS - 88.4%
Apparel/Shoes - 13.4%
Fruit of the Loom, Inc.<F1> 1,150,000 $29,756,250
Liz Claiborne, Inc. 520,000 17,810,000
Reebok International Ltd. 1,140,000 31,492,500
Stride Rite Corp. 300,000 2,737,500
-----------
81,796,250
-----------
Conglomerates - 2.4%
Whitman Corp. 600,000 14,550,000
-----------
Consumer Goods - 4.0%
Franklin Quest Co.<F1> 695,000 18,765,000
Stanhome, Inc. 90,000 2,868,750
Topps Co. (The) 500,000 2,750,000
-----------
24,383,750
-----------
Drugs and Medical - 8.8%
Abbott Laboratories 100,000 4,075,000
Bristol-Myers Squibb Co. 320,000 27,400,000
Merck & Co., Inc. 130,000 8,092,500
Pfizer, Inc. 210,000 14,070,000
-----------
53,637,500
-----------
Financial Services - 10.0%
Salomon, Inc. 650,000 24,375,000
United Asset Management Corp. 795,000 36,868,125
-----------
61,243,125
-----------
Food/Beverage - 3.9%
Quaker Oats Co. 444,000 14,818,500
Ralston Purina Group 130,000 8,693,750
-----------
23,512,250
-----------
Food/Tobacco - 16.0%
Philip Morris Cos., Inc. 715,000 62,741,250
RJR Nabisco Holdings Corp. 210,000 6,352,500
UST, Inc. 890,000 28,368,750
-----------
97,462,500
-----------
Household Products - 6.5%
Clorox Co. 345,000 $29,713,125
Newell Co. 100,000 2,675,000
Tambrands, Inc. 160,000 7,480,000
-----------
39,868,125
-----------
Insurance - 3.8%
Torchmark Corp. 515,000 23,175,000
-----------
Media - 4.0%
American Media, Inc., Class A 1,250,000 4,531,250
Dow Jones & Co., Inc. 520,000 20,020,000
-----------
24,551,250
-----------
Retailing - 4.8%
International Dairy Queen, Inc.<F1> 240,000 5,283,750
Toys `R' Us, Inc.<F1> 900,000 24,300,000
-----------
29,583,750
-----------
Services - 7.4%
Barefoot, Inc. 1,190,000 12,792,500
Interpublic Group of Cos., Inc. 190,000 8,977,500
Jenny Craig, Inc.<F1> 290,000 2,791,250
Rollins, Inc. 270,000 6,311,250
Valassis Communications, Inc.<F1> 840,500 13,973,313
-----------
44,845,813
-----------
Tires and Rubber - 3.4%
Bandag, Inc., Class A 400,000 20,700,000
-----------
Total Common Stocks
(cost $445,037,115) 539,309,313
-----------
Principal
Amount Value
------ -----
SHORT-TERM INVESTMENTS - 11.7%
Commercial Paper - 10.5%
Allomon Funding Corp.,
5.42%, 4/11/96 $ 5,000,000 $ 4,992,472
Amcor LTD.,
5.52%, 4/16/96 898,000 895,935
Banco Nat De Mexico S.A.,
5.40%, 4/11/96 10,000,000 9,985,000
Bank of Tokyo,
5.24%, 4/1/96 4,000,000 4,000,000
Blue Hawk Funding Corp.,
5.34%, 4/3/96 2,000,000 1,999,407
Diamond Lease USA, Inc.,
5.25%, 4/12/96 2,000,000 1,996,792
Enterprise Funding Corp.,
5.51%, 4/4/96 1,000,000 999,541
Fleetwood Credit Corp.,
5.42%, 4/18/96 3,220,000 3,211,758
Florida Power & Light Co.,
5.45%, 4/3/96 4,241,000 4,239,716
GE Capital Corp.,
5.32%, 4/3/96 7,800,000 7,800,000
Greenwich Funding Corp.,
5.45%, 4/8/96 919,000 918,026
Iris Partners LP,
5.24%, 4/4/96 1,700,000 1,699,258
Konica Financial USA Corp.,
5.48%, 4/10/96 2,000,000 1,997,260
Prudential Funding Corp.,
5.36%, 4/8/96 1,000,000 1,000,000
Strategic Asset Funding Corp.,
5.24%, 4/8/96 15,300,000 15,284,729
Triple A Funding Corp.,
5.36%, 4/19/96 3,000,000 2,991,960
----------
Total Commercial Paper
(cost $64,011,854) 64,011,854
----------
Principal
Amount Value
------ -----
Demand Notes
(variable rate) - 1.2%
American Family Financial Services $ 225,618 $ 225,618
General Mills Corp. 506,361 506,361
Pitney Bowes Corp. 162,179 162,179
Sara Lee Corp. 4,263,884 4,263,884
Southwestern Bell Corp. 1,229,916 1,229,916
Warner-Lambert Corp. 848,218 848,218
-----------
Total Demand Notes
(cost $7,236,176) 7,236,176
-----------
Total Short-Term Investments
(cost $71,248,030) 71,248,030
-----------
Total Investments - 100.1%
(cost $516,285,145) 610,557,343
Liabilities less Other Assets - (0.1)% (452,197)
-----------
Net Assets - 100% (equivalent
to $12.76 per share based on
47,805,732 shares outstanding) $610,105,146
============
<F1> Non-income producing
For Fund information and shareholders services, call 1-800/525-8258.
THE YACKTMAN FUND, INC.
Shareholder Services Center
615 East Michigan Street
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
