-----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, KfqDzrkNRsQORTjiFGas0qAEZcZJrDP+i2hDG7ZhbJp2h52zUopyqvDaPWFIamTW Jn8gMPW6Nn8fMs0ikR+nPA== 0000948221-99-000263.txt : 19990817 0000948221-99-000263.hdr.sgml : 19990817 ACCESSION NUMBER: 0000948221-99-000263 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YACKTMAN FUND INC CENTRAL INDEX KEY: 0000885980 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 363831621 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06628 FILM NUMBER: 99691969 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-30D 1 YACKTMAN FUNDS SEMI-ANNUAL REPORT June 30, 1999 - -------------------------------------------------------------------------------- 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 Fellow Shareholder: (PHOTO) 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 $20.31 by the end of the second quarter of 1999 - representing an average annual return of about 10.7%. 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 $11.14 by the end of the second quarter of 1999 - representing an average annual return of about 5.1%. - -------------------------------------------------------------------------------- THE YACKTMAN THE YACKTMAN FUND AVERAGE FOCUSED FUND AVERAGE TIME PERIOD ANNUAL RETURNS ANNUAL RETURNS - -------------------------------------------------------------------------------- One Year (7/1/98 - 6/30/99) (5.3)% (10.8)% Three Years (7/1/96 - 6/30/99) 9.1% N/A Five Years (7/1/94 - 6/30/99) 16.0% N/A Since Inception (7/6/92 and 5/1/97, respectively) 10.7% 5.1% The above past performance is not predictive of future results. The investment return and principal value of the Funds will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. - -------------------------------------------------------------------------------- While we and other value investors had better performance during the second quarter, it was still not where we would like it to be. The marketplace continues to put a huge premium on rapidly growing businesses - whether they have a profit or not. We simply find their prices way too high. - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The overall market continues to put a higher price/earnings (P/E) ratio on corporate earnings, even in the face of rising long-term U.S. Treasury interest rates which recently crossed 6%. Normally, rising long-term rates will eventually lead to both lower bond and lower stock prices. The P/E of the S&P 500, at its current valuation, is much higher than it historically has been when interest rates were at this level, leaving a huge valuation gap. At some point this gap will likely disappear either by a market decline, interest rate decline, earnings rise or a combination of these factors. In the short term, the fastest way to correct this gap is through a market decline, but such declines are usually triggered by an unanticipated shock to the financial system. - -------------------------------------------------------------------------------- DISCOUNT FROM THE S&P 500 OUR S&P 500 TIME PRICE/ PRICE/ PRICE/ PERIOD EARNINGS EARNINGS EARNINGS - ------ --------- -------- -------- December 1997 19.0 14.2 25% December 1998 26.4 13.1 50% June 1999 32.0 14.8 54% - -------------------------------------------------------------------------------- December 1997 price/earnings ratios are based on estimates for 1998. December 1998 and June 1999 price/earnings ratios are based on estimates for 1999. The estimated earnings for the above price/earnings ratios are provided by Zacks Investment Research and other external and internal sources. - -------------------------------------------------------------------------------- We have historically found the better way to invest is to buy undervalued individual common stocks rather than predict the direction of the market. Normally we find opportunities to buy excellent businesses when: (1) there is a market decline and some businesses come way down in price; (2) a business is doing well but there is an outside threat to the company; or (3) the business has a short-term problem which can be corrected and change the "ugly duckling" back to a "swan." The challenge is to then have the patience to wait for the market to change its perception of the business and re-value it at a much higher price. While the valuation of these stocks can be held down for - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- long time periods (like beach balls under water), they will eventually be recognized by the market and prove to be rewarding. Sincerely, /s/ Donald A. Yacktman Donald A. Yacktman President THE YACKTMAN FUND - -------------------------------------------------------------------------------- TOP TEN EQUITY HOLDINGS June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- PERCENTAGE OF NET ASSETS - -------------------------------------------------------------------------------- Department 56, Inc. 12.2% Philip Morris Cos., Inc. 12.2% First Data Corp. 11.2% Dentsply International, Inc. 11.2% Franklin Covey Co. 5.0% United Asset Management Corp. 5.0% First Health Group Corp. 5.0% Block H&R, Inc. 4.4% Jostens, Inc. 4.4% Bandag, Inc., Class A 4.0% ----- TOTAL 74.6% - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- PURCHASES & SALES For the Quarter Ended June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- NET SHARES CURRENT NEW PURCHASE PURCHASED SHARES HELD - -------------------------------------------------------------------------------- GARTNER GROUP, INC. Provides clients with products and services in the areas of information technology advisory services, measurement, research, decision support, analysis and consulting. 107,500 107,500 - -------------------------------------------------------------------------------- NET SHARES CURRENT SALES SOLD SHARES HELD - -------------------------------------------------------------------------------- American Media, Inc., Class A 600,000 - Bandag, Inc., Class A 56,000 274,000 Block H&R, Inc. 40,000 170,000 Dentsply International, Inc. 161,000 769,000 First Data Corp. 75,000 440,000 First Health Group Corp. 260,000 440,000 Franklin Covey Co. 91,500 1,306,500 Intimate Brands, Inc. 30,000 105,000 Jostens, Inc. 50,000 400,000 King World Productions, Inc. 130,000 - Luxottica Group ADR 50,000 350,000 Philip Morris Cos., Inc. 50,000 580,000 Reebok International Ltd. 130,000 370,000 Rollins, Inc. 105,000 145,000 Tupperware Corp. 30,000 270,000 United Asset Management Corp. 48,000 420,000 Valassis Communications, Inc. 55,000 150,000 - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS - 98.9% APPAREL/SHOES - 5.9% Fruit of the Loom, Inc. 450,000 $ 4,387,500 Reebok International Ltd. 370,000 6,891,250 ----------- 11,278,750 ----------- CONSUMER GOODS - 2.8% Luxottica Group ADR 350,000 5,446,875 ----------- EDUCATIONAL SERVICES - 9.4% Franklin Covey Co. 1,306,500 9,635,438 Jostens, Inc. 400,000 8,425,000 ----------- 18,060,438 ----------- FINANCIAL SERVICES - 16.2% First Data Corp. 440,000 21,532,500 United Asset Management Corp. 420,000 9,555,000 ----------- 31,087,500 ----------- FOOD/TOBACCO - 12.2% Philip Morris Cos., Inc. 580,000 23,308,750 ----------- HOME FURNISHINGS - 12.2% Department 56, Inc. 870,000 23,381,250 ----------- HOUSEHOLD PRODUCTS - 6.4% Clorox Co. 50,000 5,340,625 Tupperware Corp. 270,000 6,885,000 ----------- 12,225,625 ----------- MEDICAL SERVICES - 5.0% First Health Group Corp. 440,000 9,487,500 ----------- MEDICAL SUPPLIES - 11.2% Dentsply International, Inc. 769,000 21,532,000 ----------- RETAILING - 2.6% Intimate Brands, Inc. 105,000 4,974,375 ----------- - -------------------------------------------------------------------------------- The Yacktman Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (Cont'd.) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- SERVICES - 11.0% Block H&R, Inc. 170,000 $8,500,000 Gartner Group, Inc. 107,500 2,203,750 Jenny Craig, Inc. 750,000 2,625,000 Rollins, Inc. 145,000 2,310,937 Valassis Communications, Inc. 150,000 5,493,750 ----------- 21,133,437 ----------- TIRES AND RUBBER - 4.0% Bandag, Inc., Class A 274,000 7,706,250 ----------- Total Common Stocks (cost $162,685,958) 189,622,750 ----------- Other Assets less Liabilities - 1.1% 2,154,808 ----------- Net Assets - 100% (equivalent to $11.27 per share based on 17,020,636 shares outstanding) $191,777,558 ============ Non-income producing Affiliated company - See Note 6 See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- PURCHASES & SALES For the Quarter Ended June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- NET SHARES CURRENT NEW PURCHASE PURCHASED SHARES HELD - -------------------------------------------------------------------------------- GARTNER GROUP, INC. Provides clients with products and services in the areas of information technology advisory services, measurement, research, decision support, analysis and consulting. 32,500 32,500 - -------------------------------------------------------------------------------- NET SHARES CURRENT SALES SOLD SHARES HELD - -------------------------------------------------------------------------------- Dentsply International, Inc. 12,000 28,000 Department 56, Inc. 15,000 130,000 First Health Group Corp. 28,000 35,000 Franklin Covey Co. 25,000 105,000 Jostens, Inc. 5,000 35,000 Philip Morris Cos., Inc. 5,000 50,000 Reebok International Ltd. 20,000 30,000 Rollins, Inc. 10,000 30,000 United Asset Management Corp. 5,000 35,000 - -------------------------------------------------------------------------------- THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS - 87.7% APPAREL/SHOES - 6.5% Fruit of the Loom, Inc. 50,000 $487,500 Reebok International Ltd. 30,000 558,750 ---------- 1,046,250 ---------- EDUCATIONAL SERVICES - 9.5% Franklin Covey Co. 105,000 774,375 Jostens, Inc. 35,000 737,188 ---------- 1,511,563 ---------- FINANCIAL SERVICES - 17.3% First Data Corp. 40,000 1,957,500 United Asset Management Corp. 35,000 796,250 ---------- 2,753,750 ---------- FOOD/TOBACCO - 12.6% Philip Morris Cos., Inc. 50,000 2,009,375 ---------- HOME FURNISHINGS - 21.9% Department 56, Inc. 130,000 3,493,750 ---------- MEDICAL SERVICES - 4.7% First Health Group Corp. 35,000 754,688 ---------- MEDICAL SUPPLIES - 4.9% Dentsply International, Inc. 28,000 784,000 ---------- RETAILING - 3.1% Intimate Brands, Inc. 10,500 497,437 ---------- SERVICES - 7.2% Gartner Group, Inc. 32,500 666,250 Rollins, Inc. 30,000 478,125 ---------- 1,144,375 ---------- Total Common Stocks (cost $14,557,561) 13,995,188 ---------- - ---------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------- DEMAND NOTES (VARIABLE RATE) - 11.0% American Family Financial Services $26,325 $26,325 General Mills, Inc. 142,732 142,732 Pitney Bowes Credit Corp. 165,413 165,413 Sara Lee Corp. 208,070 208,070 Warner-Lambert, Inc. 517,472 517,472 Wisconsin Corp. Central Credit Union 383,189 383,189 Wisconsin Electric Power Co. 321,776 321,776 ---------- Total Demand Notes (cost $1,764,977) 1,764,977 ---------- - -------------------------------------------------------------------------------- NUMBER OF CONTRACTS VALUE - -------------------------------------------------------------------------------- PUT OPTIONS PURCHASED - 0.3% Philip Morris Cos., Inc. Expiring Jan. 2000 @ $30.00 200 13,750 Expiring Jan. 2000 @ $35.00 200 36,250 ---------- Total Put Options Purchased (cost $93,550) 50,000 ---------- Total Investments - 99.0% (cost $16,416,089) 15,810,165 Other Assets less Liabilities - 1.0% 153,393 ---------- Net Assets - 100% (equivalent to $10.69 per share based on 1,493,162 shares outstanding) $15,963,558 =========== Non-income producing See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS & LIABILITIES June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND - -------------------------------------------------------------------------------- ASSETS: Investments at value Nonaffiliated issuers (cost $136,976,847 and $16,416,089, respectively) $179,987,312 $15,810,165 Affiliated issuers (cost $25,709,111 and $0, respectively) 9,635,438 - Receivable for securities sold 3,061,390 200,782 Dividends and interest receivable 602,383 38,017 Prepaid expenses 42,363 26,156 Receivable for fund shares issued 11,610 - ----------- ----------- Total Assets 193,340,496 16,075,120 ----------- ----------- LIABILITIES: Shareholder distributions payable 525,111 21,666 Payable for fund shares redeemed 394,185 21,331 Payable to custodian 238,544 - Accrued investment advisory fees 105,263 13,561 Other accrued expenses 299,835 55,004 ----------- ----------- Total Liabilities 1,562,938 111,562 ----------- ----------- NET ASSETS $191,777,558 $15,963,558 ============ =========== NET ASSETS CONSIST OF: Capital stock $154,534,747 $18,502,744 Undistributed net realized gains (losses) 10,306,019 (1,933,262) Net unrealized appreciation (depreciation) on investments 26,936,792 (605,924) ----------- ----------- Total Net Assets $191,777,558 $15,963,558 ============ =========== CAPITAL STOCK, $.0001 par value Authorized 500,000,000 500,000,000 Issued and outstanding 17,020,636 1,493,162 NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $11.27 $10.69 ====== ====== See notes to financial statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividend income $ 1,529,623 $ 92,210 Interest income 100,862 73,612 Other income 3,669 334 ----------- ----------- 1,634,154 166,156 ----------- ----------- EXPENSES: Investment advisory fees 748,590 102,193 Shareholder servicing fees 316,999 14,634 Administration and accounting fees 81,640 24,795 Custody fees 52,740 7,194 Federal and state registration fees 24,387 14,794 Directors' fees and expenses 12,226 276 Professional fees (See Note 7) (244,866) (34,743) Reports to shareholders (See Note 7) (267,064) (37,197) Miscellaneous costs 6,625 2,739 ----------- ----------- Total expenses before reductions 731,277 94,685 Expense reductions (See Note 5) (25,049) (250) ----------- ----------- Net expenses 706,228 94,435 ----------- ----------- NET INVESTMENT INCOME 927,926 71,721 ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on investments 9,496,140 (1,230,722) Change in unrealized appreciation (depreciation) on investments (19,663,029) (797,748) ----------- ----------- Net realized and unrealized loss on investments (10,166,889) (2,028,470) ----------- ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(9,238,963) $(1,956,749) ============ ============ See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND - -------------------------- -------------------------- -------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED YEAR JUNE 30, 1999 ENDED JUNE 30, 1999 ENDED (UNAUDITED) DEC. 31, 1998 (UNAUDITED) DEC. 31, 1998 - -------------------------- -------------------------- -------------------------- OPERATIONS: Net investment income $927,926 $6,385,540 $71,721 $281,534 Net realized gain (loss) on investments 9,496,140 117,189,782 (1,230,722) (453,371) Change in net unrealized appreciation (depreciation)on investments (19,663,029) (140,832,711) (797,748) (150,767) ------------ ------------ ------------ ------------ Net decrease in net assets resulting from operations (9,238,963) (17,257,389) (1,956,749) (322,604) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 36,327,677 86,130,974 1,662,034 32,292,848 Proceeds from reinvestment of dividends 403,055 56,952,842 52,802 326,022 ------------ ------------ ------------ ------------ 36,730,732 143,083,816 1,714,836 32,618,870 Payments for shares redeemed (142,213,973) (839,635,901) (11,125,306) (62,964,728) ------------ ------------ ------------ ------------ Net decrease (105,483,241) (696,552,085) (9,410,470) (30,345,858) ------------ ------------ ------------ ------------ DIVIDENDS PAID FROM: Net investment income (930,578) (6,409,477) (76,549) (249,256) Net realized gains - (54,490,030) - (121,017) ------------ ------------ ------------ ------------ (930,578) (60,899,507) (76,549) (370,273) ------------ ------------ ------------ ------------ TOTAL DECREASE IN NET ASSETS (115,652,782) (774,708,981) (11,443,768) (31,038,735) NET ASSETS: Beginning of period 307,430,340 1,082,139,321 27,407,326 58,446,061 ------------ ------------ ------------ ------------ End of period (including undistributed net investment income of $0, $0, $0 and $4,341, respectively) $191,777,558 $307,430,340 $15,963,558 $27,407,326 ============ ============ ============ ============ TRANSACTIONS IN SHARES: Shares sold 3,263,985 6,142,954 150,781 2,782,296 Issued in reinvestment of dividends 38,443 4,821,905 5,029 28,033 Shares redeemed (12,771,728) (61,477,171) (1,022,086) (5,663,019) ------------ ------------ ------------ ------------ Net decrease (9,469,300) (50,512,312) (866,276) (2,852,690) ============ ============ ============ ============ See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
THE YACKTMAN FUND THE YACKTMAN FUND - ------------------------------------------------------------------- ----------------------------------------------------- SIX MONTHS YEAR YEAR YEAR YEAR YEAR For a Fund share outstanding ENDED ENDED ENDED ENDED ENDED ENDED throughtout each period JUNE 30, 1999 DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, (UNAUDITED) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------- ----------------------------------------------------- Net asset value, beginning of period $11.61 $14.05 $13.34 $12.09 $10.05 $9.56 Income from investment operations: Net investment income 0.05 0.11 0.22 0.24 0.22 0.22 Net realized and unrealized gains (losses) on investments (0.34) (0.04) 2.21 2.90 2.81 0.61 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations (0.29) 0.07 2.43 3.14 3.03 0.83 ----------- ----------- ----------- ----------- ----------- ----------- Less distributions: Dividends from net investment income (0.05) (0.11) (0.22) (0.24) (0.22) (0.22) Distributions from net realized gains - (2.40) (1.50) (1.65) (0.77) (0.12) ----------- ----------- ----------- ----------- ----------- ----------- Total distributions (0.05) (2.51) (1.72) (1.89) (0.99) (0.34) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $11.27 $11.61 $14.05 $13.34 $12.09 $10.05 =========== =========== =========== =========== =========== ========== Total Return (2.48)% 0.64% 18.28% 26.02% 30.42% 8.80% =========== =========== =========== =========== =========== ========== Supplemental data and ratios: Net assets, end of period (000s) $191,778 $307,430 $1,082,139 $755,617 $566,723 $295,133 =========== =========== =========== =========== =========== ========== Ratio of expenses before expense reductions to average net assets (See Note 5) 0.64% 1.16% 0.90% 0.96% 0.99% 1.07% =========== =========== =========== =========== =========== ========== Ratio of net expenses to average net assets 0.61% 1.14% 0.86% 0.90% 0.91% 1.07% =========== =========== =========== =========== =========== ========== Ratio of net investment income to average net assets 0.81% 0.87% 1.54% 1.80% 2.02% 2.49% =========== =========== =========== =========== =========== ========== Portfolio turnover rate 1.22% 14.32% 69.13% 58.54% 55.37% 49.44% =========== =========== =========== =========== =========== ========== Not annualized Annualized See notes to financial statements - ------------------------------------------------------------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (Cont'd.) THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- SIX MONTHS For a Fund share ENDED YEAR MAY 1, 1997 outstanding throughout JUNE 30, 1999 ENDED THROUGH each period (UNAUDITED) DEC. 31, 1998 DEC. 31, 1997 - -------------------------------------------------------------------------------- Net asset value, beginning of period $11.62 $11.21 $10.00 Income from investment operations: Net investment income 0.04 0.05 0.07 Net realized and unrealized gains (losses) on investments (0.93) 0.46 1.47 ---------- ---------- ---------- Total from investment operations (0.89) 0.51 1.54 ---------- ---------- ---------- Less distributions: Dividends from net investment income (0.04) (0.05) (0.07) Distributions from net realized gains - (0.05) (0.26) ---------- ---------- ---------- Total distributions (0.04) (0.10) (0.33) ---------- ---------- ---------- Net asset value, end of period $10.69 $11.62 $11.21 Total Return (7.65)% 4.58% 15.38% =========== =========== =========== Supplemental data and ratios: Net assets, end of period (000s) $15,964 $27,407 $58,446 =========== =========== =========== Ratio of expenses before expense reductions to average net assets (See Note 5) 0.93% 1.81% 1.71% =========== =========== =========== Ratio of net expenses to average net assets 0.92% 1.25% 1.25% =========== =========== =========== Ratio of net investment income to average net assets 0.70% 0.48% 1.02% =========== =========== =========== Portfolio turnover rate 6.53% 49.26% 60.43% =========== =========== =========== Commencement of operations Not Annualized Annualized See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS June 30, 1999 (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 6, 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 the 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. - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (Cont'd.) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 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 or is closed, the Fund realizes a gain or loss, and the liability is eliminated. When an option is exercised, the premium originally received decreases the cost basis of the security acquired. 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, which is limited to the strike price of the option, would be reduced by the amount of the option premium received. The Yacktman Focused Fund had no activity in written put options for the six months ended June 30, 1999. 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. The Funds also utilize earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Accordingly, at June 30, 1999 reclassifications were recorded to increase undistributed net investment income by $2,652 and $487 and decrease capital stock by $2,652 and $487 for The Yacktman Fund and The Yacktman Focused Fund, respectively. - -------------------------------------------------------------------------------- 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. 3. INVESTMENT TRANSACTIONS The aggregate purchases and sales of securities, excluding short-term securities, for the Funds for the six months ended June 30, 1999 were as follows: THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND Purchases U.S. Government - - Other $2,806,650 $1,150,350 Sales U.S. Government - - Other 105,510,911 7,973,967 At June 30, 1999 gross unrealized appreciation and depreciation on investments on a tax basis were as follows: THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND Appreciation $57,624,041 $2,107,273 Depreciation (30,687,249) (3,041,510) ------------ ------------ Net appreciation on investments $26,936,792 $ (934,237) ============ ============ The cost of investments for federal income tax purposes was $162,685,958 and $16,744,402 for The Yacktman Fund and The Yacktman Focused Fund, respectively. - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (Cont'd.) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 4. INVESTMENT ADVISORY AGREEMENT The Funds have agreements with the Adviser, with whom certain officers and directors of the Funds 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. EXPENSE REDUCTIONS The Adviser has directed certain of the Funds' portfolio trades to brokers at best price and execution and has generated directed brokerage credits to be used against sub-transfer agency fees. Shareholders benefit under this arrangement as the net expenses of the Funds do not include such sub-transfer agency fees. For the six months ended June 30, 1999, The Yacktman Fund's expenses were reduced $25,049 by utilizing directed brokerage credits resulting in an expense ratio of 0.61% being charged to shareholders. For the six months ended June 30, 1999, The Yacktman Focused Fund's expenses were reduced $250 by utilizing directed brokerage credits resulting in an expense ratio of 0.92% 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 Statements of Operations. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 6. TRANSACTIONS WITH AFFILIATES The following is an analysis of transactions for the period ended June 30, 1999 for The Yacktman Fund 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 Loss Dividends Realized Share Activity Credited on Sale -------------------------------------- to Income of Shares Balance Balance in Fiscal in Fiscal Security Name 12/31/98 Purchases Sales 6/30/99 1999 1999 - -------------- -------- --------- ------ -------- --------- --------- Franklin Covey Co. 1,429,500 - 123,000 1,306,500 - $(1,371,348) 7. PROXY-RELATED EXPENSES As a result of negotiated reductions in fees and costs, together with vendor reimbursements and other adjustments, certain expenses estimated and accrued in 1998 related to the 1998 proxy solicitation have been reduced in 1999. - -------------------------------------------------------------------------------- For Fund information and shareholder services, call 1-800-525-8258 Web site: www.yacktman.com The Yacktman Funds, Inc. Shareholder Services Center 615 East Michigan Street, 3rd Floor Milwaukee, Wisconsin 53201-5207 YA-410-0999 -----END PRIVACY-ENHANCED MESSAGE-----