The Yacktman Fund
1ST QUARTER REPORT
March 31, 1997
This report is submitted for the general information of shareholders of The
Yacktman Fund. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective prospectus for the Fund. The
prospectus includes complete information about management fees and expenses,
investment objectives, risks and operating policies of the Fund. Read the
prospectus carefully.
THE YACKTMAN FUND, INC.
MESSAGE TO SHAREHOLDERS
Dear Shareholder:
For investors who purchased shares at the Fund's inception in July, 1992 at
$10.00 per share, your initial investment, adjusted for dividends and capital
gains, would have grown to $18.10 by the end of the first quarter of 1997.
Moreover, the Fund has a cumulative return of 108.5% compared to 84.5% for the
S&P 500 since the low price for the Fund on August 12, 1993. The Fund had a 3.5%
return for the first quarter of 1997 as compared to a 2.7% return for the S&P
500.
One Annualized Annualized
Year Three Years Since Inception
4/1/96-3/31/97 4/1/94-3/31/97 7/6/92-3/31/97
-------------- -------------- --------------
The Yacktman Fund 23.0% 23.7% 13.3%
S&P 500 19.8% 22.3% 16.6%
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.
For us in Chicago, we have been blessed with having the dominant basketball team
of the 1990's in the Chicago Bulls. They have won four NBA crowns and have a
good chance of winning at least one more. The Bulls have accomplished this feat
with both a great defense and an excellent offense. Their defense consistently
keeps them in the game, and teams with outstanding defenses usually have better
than average records and typically make the playoffs. However, to win the NBA
title, a team also must consistently score more points than its opponents.
We believe the same principles apply to investing. It is very important to play
defense (i.e., minimize risk) by buying solid businesses whose public stock
prices are well below their private market values. The private market value is
the price an intelligent businessperson would pay for the whole company. When
these business properties are not available at good prices, we temporarily
invest the money in cash equivalents, and currently more than 25% of the Fund is
so invested. Our defensive strategies alone should provide above average
investment results.
However, to achieve championship results over time, we believe it is equally
important to own businesses that have high returns on tangible assets and the
ability to sustain these returns into the distant future. Consequently, the
businesses we own tend to have low capital intensities (i.e., they have
relatively low capital requirements for given revenue and earnings levels).
Businesses burdened with heavy capital needs find it more difficult to earn high
returns. We also avoid technology companies because they may flame out like
Roman candles or shooting stars. Many of the most popular computer companies in
1983, when I first started managing a mutual fund, are virtually out of
business. Very few of them stood "the test of time."
In investing, as in coaching a basketball team, certain events can be controlled
and others cannot. We believe good coaches (and investors) focus on the
controllable and lose little sleep worrying about factors outside of our
control. If we do our homework and buy dollar bills with fifty cents (i.e.,
purchase high return businesses at big discounts), what happens to the stock
market, interest rates, inflation, or the economy should be relatively
insignificant in our decision process.
Our investment strategy is designed to earn the highest possible longer term
results consistent with minimal risk. We will strive to be like Phil Jackson,
the brilliant Bulls coach, and his staff in selecting and working with talented
players (superior businesses) to bring you championship results.
Sincerely,
/s/ Donald A. Yacktman
Donald A. Yacktman
TOP TWELVE EQUITY HOLDINGS
49.8% of the Fund
% OF
THE FUND
---------
Philip Morris Cos., Inc. 9.5%
United Asset Management Corp. 4.8%
Franklin Quest Co. 4.3%
Reebok International Ltd. 4.3%
Clorox Co. 4.2%
Whitman Corp. 4.2%
Department 56, Inc. 4.2%
Valassis Communications, Inc. 3.2%
UST, Inc. 3.1%
Intimate Brands, Inc. 3.0%
Fruit of the Loom, Inc. 2.7%
Bandag, Inc., Class A 2.3%
------
TOTAL 49.8%
PURCHASES & SALES
For the Quarter Ended March 31, 1997
NET SHARES CURRENT
NEW PURCHASES PURCHASED SHARES HELD
---------- ------------
A. C. NIELSEN CORP.
Is the worldwide leader in the
marketing-research industry.
Measures and evaluates consumer
purchases of groceries, health and
beauty aids, and other packaged
and durable goods. 803,100 803,100
FOUNDATION HEALTH CORP.
Owns and operates primary
group and network Health
Maintenance Organizations
(HMOs) and Preferred Provider
Organizations (PPOs). 185,000 185,000
PURCHASES & SALES (Cont'd.)
For the Quarter Ended March 31, 1997
NET SHARES CURRENT
NEW PURCHASES (CONT'D.) PURCHASED SHARES HELD
---------- -----------
MCGRAW HILL, INC.
Is a multimedia information
provider that publishes textbooks,
technical and popular books,
and periodicals. 50,000 50,000
TUPPERWARE CORP.
Is a global enterprise with sales in
more than 100 countries. They offer
food storage containers, food
preparation items, microwave
cookware, serving products, toys,
and many other products. 220,000 220,000
NET SHARES CURRENT
OTHER PURCHASES PURCHASED SHARES HELD
- ---------------- ---------- -----------
Department 56, Inc. 1,382,500 2,150,000
Franklin Quest Co. 273,700 1,803,700
Block H&R, Inc. 8,400 483,400
International Dairy Queen, Inc. 190,800 800,000
Intimate Brands, Inc. 225,000 1,410,000
Philip Morris Cos., Inc. 20,000 740,000
Rollins, Inc. 233,200 830,000
Selective Insurance Group 59,000 417,000
Tootsie Roll Industries <F1> 247,821 268,521
Torchmark Corp. 40,000 340,000
NET SHARES CURRENT
OTHER PURCHASES (CONT'D.) PURCHASED SHARES HELD
- ------------------------- ---------- ------------
Toys 'R' Us, Inc. 390,000 640,000
United Asset Management Corp. 70,000 1,660,000
Whitman Corp. 255,000 1,530,000
<F1> Adjusted for a 3% stock dividend on 3/7/97
NET SHARES CURRENT
SALES SOLD SHARES HELD
- ----- ----------- -----------
Abbott Laboratories 100,000 -
Barefoot, Inc. 1,312,000 -
Bristol-Myers Squibb Co. 210,000 -
Clorox Co. 35,000 335,000
Dow Jones & Co., Inc. 470,000 -
Quaker Oats Co. 24,000 325,000
Reebok International Ltd. 132,100 847,900
Salomon, Inc. 468,500 70,000
Sara Lee Corp. 126,900 179,600
Stride Rite Corp. 158,800 -
PORTFOLIO OF INVESTMENTS
March 31, 1997 (Unaudited)
NUMBER
OF SHARES VALUE
---------- ------
COMMON STOCKS - 74.5%
APPAREL/SHOES - 8.7%
Fruit of the Loom, Inc.<F2> 578,200 $ 23,995,300
Liz Claiborne, Inc. 340,000 14,832,500
Reebok International Ltd. 847,900 38,049,513
------------
76,877,313
------------
CONGLOMERATES - 4.2%
Whitman Corp. 1,530,000 37,485,000
------------
CONSUMER GOODS - 8.7%
Department 56, Inc. <F2> 2,150,000 37,356,250
Franklin Quest Co. <F2> 1,803,700 38,103,162
Topps Co. (The) <F2> 500,000 2,000,000
------------
77,459,412
------------
FINANCIAL SERVICES - 5.2%
Salomon, Inc. 70,000 3,491,250
United Asset Management Corp. 1,660,000 42,537,500
------------
46,028,750
------------
FOOD/BEVERAGE - 3.5%
Quaker Oats Co. 325,000 11,862,500
Sara Lee Corp. 179,600 7,273,800
Tootsie Roll Industries 268,521 12,049,880
------------
31,186,180
------------
FOOD/TOBACCO - 12.6%
Philip Morris Cos., Inc. 740,000 84,452,500
UST, Inc. 1,000,000 27,875,000
------------
112,327,500
------------
HOUSEHOLD PRODUCTS - 5.1%
Clorox Co. 335,000 37,561,875
Tupperware Corp. 220,000 7,370,000
------------
44,931,875
------------
NUMBER
OF SHARES VALUE
---------- ------
INSURANCE - 4.1%
Selective Insurance Group 417,000 $ 17,305,500
Torchmark Corp. 340,000 18,827,500
------------
36,133,000
------------
MEDIA - 3.6%
A. C. Nielsen Corp. <F2> 803,100 12,046,500
American Media, Inc., Class A<F2> 1,200,000 7,050,000
King World Productions, Inc. <F2> 363,500 13,267,750
------------
32,364,250
------------
MEDICAL SERVICES - 0.8%
Foundation Health Corp. <F2> 185,000 6,752,500
------------
RETAILING - 7.0%
International Dairy Queen, Inc. <F2> 800,000 17,600,000
Intimate Brands, Inc. 1,410,000 26,613,750
Toys 'R' Us, Inc. <F2> 640,000 17,920,000
------------
62,133,750
------------
SERVICES - 8.7%
Block H&R, Inc. 483,400 14,199,875
Dun & Bradstreet Corp. 180,000 4,567,500
Interpublic Group of Cos., Inc. 190,000 10,022,500
Jenny Craig, Inc. <F2> 290,000 1,957,500
McGraw Hill, Inc. 50,000 2,556,250
Rollins, Inc. 830,000 15,562,500
Valassis Communications, Inc. <F2> 1,270,000 28,416,250
------------
77,282,375
------------
TIRES AND RUBBER - 2.3%
Bandag, Inc., Class A 418,500 20,192,625
------------
Total Common Stocks
(cost $533,580,750) 661,154,530
------------
PORTFOLIO OF INVESTMENTS (Cont'd.)
March 31, 1997 (Unaudited)
PRINCIPAL
AMOUNT VALUE
---------- -----
SHORT-TERM INVESTMENTS - 26.4%
COMMERCIAL PAPER - 26.1%
Anchor Funding Corp.,
5.63%, 04/14/97 $ 2,900,000 $ 2,894,104
Atlas Funding Corp.,
5.38%, 04/30/97 10,000,000 9,956,661
Commercial Credit Co.
5.49%, 04/02/97 5,000,000 4,999,238
5.30%, 04/03/97 20,000,000 19,994,111
5.47%, 04/21/97 10,700,000 10,668,117
Creative Capital Corp.
5.45%, 04/07/97 10,000,000 9,990,917
5.54%, 04/10/97 8,828,000 8,815,773
5.38%, 04/15/97 5,054,000 5,043,426
F. P. Funding Corp.
5.36%, 04/01/97 10,000,000 10,000,000
5.42%, 04/03/97 3,500,000 3,498,946
Gotham Funding Corp.,
5.31%, 04/11/97 8,000,000 7,988,200
Halifax Building Co.,
5.60%, 04/07/97 5,000,000 4,995,333
Industrial Funding Corp.
5.36%, 04/01/97 10,000,000 10,000,000
5.37%, 04/01/97 5,000,000 5,000,000
5.36%, 04/02/97 5,000,000 4,999,255
5.37%, 04/16/97 10,000,000 9,977,625
Iris Partners - LP
5.38%, 04/04/97 7,000,000 6,996,862
5.37%, 04/07/97 5,000,000 4,995,525
5.37%, 04/15/97 3,960,000 3,951,730
5.40%, 05/05/97 3,736,000 3,716,946
Oak Funding Corp.
5.40%, 04/16/97 10,000,000 9,977,500
5.31%, 04/22/97 5,000,000 4,984,513
SRD Finance, Inc.
5.36%, 04/17/97 7,000,000 6,983,324
5.37%, 04/24/97 7,000,000 6,975,984
PRINCIPAL
AMOUNT VALUE
--------- ------
COMMERCIAL PAPER - 26.1% (CONT'D.)
Working Capital Management
5.40%, 04/01/97 8,915,000 $ 8,915,000
5.38%, 04/08/97 10,000,000 9,989,539
5.37%, 04/09/97 9,554,000 9,542,599
5.30%, 04/10/97 4,300,000 4,294,303
5.33%, 04/18/97 11,936,000 11,905,958
5.39%, 04/21/97 10,000,000 9,970,055
------------
Total Commercial Paper
(cost $232,021,544) 232,021,544
------------
DEMAND NOTES
(VARIABLE RATE) - 0.3%
American Family Financial Services 1,044,929 1,044,928
Johnson Controls Corp. 657,400 657,400
Sara Lee Corp. 700,000 700,000
------------
Total Demand Notes
(cost $2,402,328) 2,402,328
------------
Total Short-Term Investments
(cost $234,423,872) 234,423,872
------------
Total Investments - 100.9%
(cost $768,004,622) 895,578,402
Liabilities less
Other Assets - (0.9)% (7,993,469)
------------
Net Assets - 100% (equivalent
to $13.75 per share based on
64,558,418 shares outstanding) $887,584,933
============
<F2> Non-income producing
For Fund information and shareholder 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
