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.<F1> 33,000 835,313
-----------
CONSUMER GOODS - 19.6%
Department 56, Inc.*+<F1> 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.<F1> 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
<F1> 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<F1>
- - -------------------------------------------------------------------------------
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
============ ============
<F1> Commenced operations May 1, 1997
See notes to financial statements
<TABLE>
THE YACKTMAN FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
THE YACKTMAN
THE YACKTMAN FUND FOCUSED FUND
--------------------------------- ---------------
SIX MONTHS MAY 1, 1997<F1>
ENDED YEAR THROUGH
JUNE 30, 1997 ENDED JUNE 30, 1997
(UNAUDITED) DEC. 31, 1996 (UNAUDITED)
------------------------------------- -------------
<S> <C> <C> <C>
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
============== ============= ============
<FN>
<F1> Commencement of operations
See notes to financial statements
</TABLE>
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%<F2> 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%<F3> 0.96%
======== ========
Ratio of net expenses to average
net assets after expense reductions 0.85%<F3> 0.90%
======== ========
Ratio of net income to
average net assets 1.90%<F3> 1.80%
======== ========
Portfolio turnover rate 37.23% 58.54%
======== ========
Average commission rate paid
per share $0.0535 $0.0550
======== ========
<TABLE>
THE YACKTMAN FUNDS, INC.
FINANCIAL HIGHLIGHTS (cont'd)
<CAPTION>
THE YACKTMAN
THE YACKTMAN FUND FOCUSED FUND
---------------------------------------------------------------- --------------
MAY 1, 1997<F1>
YEAR YEAR YEAR JULY 6, 1992<F1> THROUGH
ENDED ENDED ENDED THROUGH JUNE 30, 1997
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 DEC. 31, 1992 (UNAUDITED)
------------------------------------------------------------------ -------------
<S> <C> <C> <C> <C> <C>
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%<F2> 9.20%<F2>
======== ======== ======== ======== ========
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%<F3> -%
======== ======== ======== ======== ========
Ratio of net expenses to average
net assets after expense reductions 0.91% 1.07% 1.18% 1.18%<F3> 1.25%<F3><F4>
======== ======== ======== ======== ========
Ratio of net income to
average net assets 2.02% 2.49% 1.61% 1.49%<F3> 2.70%<F3><F4>
======== ======== ======== ======== ========
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
======== ======== ======== ======== ========
<FN>
<F1> Commencement of operations
<F2> Not annualized
<F3> Annualized
<F4> 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
</TABLE>
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):
<TABLE>
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
- - -------------- --------- --------- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
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 - -
</TABLE>
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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
