Securities Act Registration No. 33-47044
Investment Company Act Reg. No. 811-6628
__________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. 9 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [X]
(Check appropriate box or boxes.)
______________________
THE YACKTMAN FUNDS, INC.
(Exact name of Registrant as Specified in Charter)
303 West Madison Street
Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
(312) 201-1200
(Registrant's Telephone Number, including Area Code)
Copy to:
Donald A. Yacktman Richard L. Teigen
Yacktman Asset Management Co. Foley & Lardner
303 West Madison Street 777 East Wisconsin Avenue
Chicago, Illinois 60606 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
It is proposed that this filing become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[X] on April 30, 1998 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
THE YACKTMAN FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in
Prospectus or Statement of
Item No. on Form N-1A Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Summary
3. Condensed Financial Financial Highlights
Information
4. General Description of The Funds; Objective and
Registrant Investment Approach
5. Management of the Fund Objective and Investment
Approach; Management of the
Funds; Distributor; Capital
Structure
5A. Management's Discussion of Included in Annual Report
Fund Performance to Shareholders
6. Capital Stock and Other Dividends and
Securities Distributions; Taxes;
Capital Structure;
Stockholder Reports
7. Purchase of Securities Being Purchase of Shares;
Offered Determination of Net Asset
Value; Retirement Plans;
Dividends and Distributions
8. Redemption or Repurchase Exchange Privilege;
Redemption of Shares;
Systematic Withdrawal Plan
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT
OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and *
History
13. Investment Objectives and Investment Restrictions and
Policies Considerations
14. Management of the Fund Directors and Officers of
the Company
15. Control Persons and Directors and Officers of
Principal Holders of the Company; Investment
Securities Adviser and Administrator
16. Investment Advisory and Investment Adviser and
Other Services Administrator; Custodian;
Independent Accountants;
Distribution Plan
17. Brokerage Allocation Allocation of Portfolio
Brokerage
18. Capital Stock and Other Included in Prospectus
Securities under "Capital Structure"
19. Purchase, Redemption and Included in Prospectus
Pricing of Securities Being under "Determination of Net
Offered Asset Value";"Purchase of
Shares"; "Retirement
Plans"; "Dividends and
Distributions";
Determination of Net Asset
Value; Systematic
Withdrawal Plan
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Performance Performance Information
Data
23. Financial Statements Financial Statements
_______________________
* Answer negative or inapplicable
<PAGE>
PROSPECTUS
APRIL 30, 1998
THE YACKTMAN FUNDS, INC.
303 West Madison Street
Chicago, Illinois 60606-3308
1-800-525-8258
The Yacktman Funds, Inc. (the "Company") is an open-end management investment
company, commonly known as a mutual fund. The Company presently consists of two
investment portfolios designed to offer investors a choice of equity-oriented
investment opportunities. Each investment portfolio is individually referred to
as a "Fund" and collectively as the "Funds."
THE YACKTMAN FUND seeks long-term growth of capital, with current income as a
secondary objective. The Yacktman Fund is diversified and invests primarily in
equity securities of companies with market capitalizations of $1 billion or
more.
THE YACKTMAN FOCUSED FUND seeks long-term growth of capital, with current income
as a secondary objective. The Yacktman Focused Fund is non-diversified and
invests primarily in equity securities of companies with market capitalizations
of $1 billion or more. At any time The Yacktman Focused Fund may be invested in
a relatively limited number of securities.
This Prospectus sets forth concisely the information about the Funds that
prospective investors should know before investing. Investors are advised to
read this Prospectus and retain it for future reference. This Prospectus does
not set forth all of the information included in the Registration Statement and
Exhibits thereto which the Funds have filed with the Securities and Exchange
Commission.
A Statement of Additional Information, dated April 30, 1998, which is a part of
such Registration Statement, is incorporated herein by reference. A copy of the
Statement of Additional Information may be obtained, without charge, by writing
to the address, or calling the telephone number, stated above. The Securities
and Exchange Commission maintains a web site (http://www.sec.gov) that contains
the Funds' Prospectus, Statement of Additional Information, material
incorporated by reference, and other information regarding registrants that file
electronically with the Securities and Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE STATEMENT
OF ADDITIONAL INFORMATION DATED APRIL 30, 1998 AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE YACKTMAN FUNDS, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
SECURITIES IN ANY STATE OR JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
TABLE OF CONTENTS
Summary . . . . . . . . . . . . . . . . . . . . . . . 3
Expense Summary . . . . . . . . . . . . . . . . . . . 3
Shareholder and Fund Expenses . . . . . . . . . . . . 4
Financial Highlights. . . . . . . . . . . . . . . . . 5
The Funds . . . . . . . . . . . . . . . . . . . . . . 6
Objective and Investment Approach . . . . . . . . . . 6
Management of the Funds . . . . . . . . . . . . . . .11
Purchase of Shares. . . . . . . . . . . . . . . . . .12
Retirement Plans. . . . . . . . . . . . . . . . . . .15
Exchange Privilege. . . . . . . . . . . . . . . . . .16
Redemption of Shares. . . . . . . . . . . . . . . . .17
Systematic Withdrawal Plan. . . . . . . . . . . . . .20
Determination of Net Asset Value. . . . . . . . . . .20
Dividends and Distributions . . . . . . . . . . . . .21
Taxes . . . . . . . . . . . . . . . . . . . . . . . .22
Capital Structure . . . . . . . . . . . . . . . . . .22
Shareholder Reports . . . . . . . . . . . . . . . . .23
Fund Performance. . . . . . . . . . . . . . . . . . .24
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S U M M A R Y
INVESTMENT OBJECTIVE
The investment objective of each Fund is to produce long-term growth of
capital, with current income as a secondary objective. Each Fund seeks to obtain
its primary investment objective by investing in common stocks, convertible
securities, American Depositary Receipts, and fixed income securities. The
Yacktman Focused Fund may also purchase put options on specific stocks in its
portfolio to hedge against loss. Each Fund seeks to obtain its secondary
investment objective by investing in dividend paying common stocks, convertible
securities, fixed income securities, and short-term money market instruments.
Each Fund may lend its portfolio securities and The Yacktman Focused Fund may
write put options. In periods when management believes the markets are favorable
for common stocks, the greater portion of each Fund's investments will usually
be in that type of security. A Fund's investments are subject to market risk and
the value of its shares will fluctuate with changing market valuations of its
portfolio holdings. The Yacktman Focused Fund may leverage its investments and
is non-diversified. See "OBJECTIVE AND INVESTMENT APPROACH."
INVESTMENT ADVISER
Yacktman Asset Management Co. is the investment adviser (the "Adviser") of
the Funds. The Adviser was organized in April 1992 and acts as the investment
adviser to individuals and institutional clients with investment portfolios of
approximately $1.6 billion. See "MANAGEMENT OF THE FUNDS."
PURCHASES AND REDEMPTIONS
Shares of the Funds are sold and redeemed at net asset value, without the
imposition of any sales or redemption charges. The minimum initial investment is
$2,500 (except for Individual Retirement Accounts and Automatic Investment
Plans, where the minimum is $500). The minimum subsequent investment is $100.
These minimums may be waived in the case of qualified retirement plans. See
"PURCHASE OF SHARES" and "RETIREMENT PLANS." Shares of the Funds may be
exchanged for shares of the Firstar Money Market Fund, the Firstar U.S.
Government Money Market Fund, and the Firstar Tax-Exempt Money Market Fund, at
their relative net asset values. See "EXCHANGE PRIVILEGE."
SHAREHOLDER SERVICES
Questions regarding the Funds may be directed to the Fund at 1-800-525-8258.
Inquiries regarding an investor's account should be directed to the Funds'
Transfer Agent at 1-800-457-6033.
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E X P E N S E S U M M A R Y
The following table is intended to assist you in understanding the various
expenses that an investor bears, directly or indirectly, by being a shareholder
of the Funds. They should not be considered to be a representation of past or
future expenses. Actual expenses may be greater or less than those shown. For an
explanation of management and 12b-1 fees, see "MANAGEMENT OF THE FUNDS" and
"PURCHASE OF SHARES." The example assumes a 5% annual rate of return pursuant to
the requirement of the Securities and Exchange Commission. This hypothetical
rate of return is not intended to be representative of past or future
performance of the Funds.
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S H A R E H O L D E R A N D F U N D E X P E N S E S
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases None None
Maximum Sales Load Imposed on
Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees<F1> None None
Exchange Fee<F2> None None
ANNUAL OPERATING EXPENSES<F3>
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.62% 1.00%
12b-1 Fees 0.05%<F4> None
Other Expenses (net of reimbursement) 0.23% 0.25%<F5>
Total Fund Operating Expenses before
Expense Reductions
(net of reimbursement) 0.90%<F5><F6> 1.25%<F5>
Total Fund Operating Expenses AFTER
Expense Reductions
(net of reimbursement) 0.86%<F5><F6> 1.25%<F5>
EXAMPLE:
You would pay the following expenses on a $1,000
investment, assuming (i) 5% annual return and
(ii) redemption at the end of each time period
1 year $ 9 $ 13
3 years 29 40
5 years 50 69
10 years 111 151
<F1> A fee of $12.00 is charged for each wire redemption.
<F2> A fee of $5.00 is charged for each telephone exchange.
<F3> For the year ended December 31, 1997 for The Yacktman Fund. For The
Yacktman Focused Fund, Other Expenses are estimated as The Yacktman Focused
Fund did not commence operations until April 30, 1997.
<F4> In any year, 12b-1 Fees will not exceed 0.25%. Payments under the 12b-1
Plan may be made only with respect to shares beneficially owned by eligible
distributors' brokerage clients who became shareholders PRIOR TO DECEMBER
31, 1992.
<F5> Total Fund Operating Expenses INCLUDE Management Fees, 12b-1 Fees and Other
Expenses. The Adviser will waive its management fees to the extent
necessary to insure that Total Fund Operating Expenses before Expense
Reductions for THE YACKTMAN FOCUSED FUND DO NOT EXCEED 1.25% OF AVERAGE NET
ASSETS. Prior to reimbursement from the Adviser, Other Expenses for The
Yacktman Focused Fund are estimated to be 0.30% of average net assets and
Total Fund Operating Expenses before Expense Reductions are estimated to be
1.30% of average net assets.
<F6> The Adviser has directed certain portfolio trades of The Yacktman Fund to a
broker at best price and execution and has generated directed brokerage
credits to be used against sub-transfer agency fees.
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F I N A N C I A L H I G H L I G H T S
The following financial highlights of each Fund are derived from each Fund's
financial records and should be read together with each Fund's financial
statements and related notes, which have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified and is included in
the Annual Report to Shareholders. Further information about the performance of
the Funds is also contained in the Annual Report to Shareholders, copies of
which may be obtained without charge upon request.
<TABLE>
<CAPTION>
The Yacktman
The Yacktman Fund Focused Fund
---------------------------------------------------------- ---------------
July 6, 1992<F1> May 1, 1997<F1>
through through
Year Ended December 31, Dec. 31, Dec. 31,
------------------------------------------
1997 1996 1995 1994 1993 1992 1997
- ------------------------------------------------------------------------------------------------------------------ ---------------
<C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.34 $ 12.09 $ 10.05 $ 9.56 $ 10.39 $ 10.00 $ 10.00
Income from investment operations:
Net investment income 0.22 0.24 0.22 0.22 0.14 0.05 0.07
Net realized and unrealized gains
(losses) on investments 2.21 2.90 2.81 0.61 (0.83) 0.42 1.47
-------- ------- -------- ------- -------- -------- --------
Total from investment operations 2.43 3.14 3.03 0.83 (0.69) 0.47 1.54
-------- ------- -------- ------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.22) (0.24) (0.22) (0.22) (0.14) (0.05) (0.07)
Distributions from net realized gains (1.50) (1.65) (0.77) (0.12) ---- (0.03) (0.26)
-------- ------- -------- ------- -------- -------- --------
Total distributions (1.72) (1.89) (0.99) (0.34) (0.14) (0.08) (0.33)
-------- ------- -------- ------- -------- -------- --------
Net asset value, end of period $ 14.05 $ 13.34 $ 12.09 $ 10.05 $ 9.56 $ 10.39 $ 11.21
======== ======== ======== ======== ======== ======== ========
Total Return 18.28% 26.02% 30.42% 8.80% (6.58)% 4.72%<F2> 15.38%<F2>
======== ======== ======== ======== ======== ======== ========
Supplemental data and ratios:
Net assets, end of period (000s) $1,082,139 $755,617 $566,723 $295,133 $143,024 $74,666 $58,446
========= ======== ======== ========= ======== ======== ========
Ratio of expenses to average net assets<F5>. 0.90% 0.96% 0.99% 1.07% 1.18% 1.18%<F3><F4> 1.25%<F3><F4>
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets
after expense reductions<F5>. 0.86% 0.90% 0.91% 1.07% 1.18% 1.18%<F3><F4> 1.25%<F3><F4>
======== ======== ======== ======== ======== ======== ========
Ratio of net income to average
net assets<F5>. 1.54% 1.80% 2.02% 2.49% 1.61% 1.49%<F3><F4> 1.02%<F3><F4>
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 69.13% 58.54% 55.37% 49.44% 61.14% 30.94% 60.43%
======== ======== ======== ======== ======== ======== ========
Average commission rate paid per share $ 0.0549 $ 0.0550 N/A N/A N/A N/A $0.0553
======== ======== ======== ======== ======== ======== ========
N/A-Not Available. This information was not required to be reported prior
to 1996.
<F1> Commencement of operations.
<F2> Not annualized.
<F3> Annualized.
<F4> Net of reimbursements. Without the fee waiver, The Yacktman Fund's ratio of
expenses to average net assets for the period July 6, 1992 through December 31,
1992 would have been 1.55% and the ratio of net investment income to average net
assets for the same period would have been 1.12%. Without the fee waiver, The
Yacktman Focused Fund's ratio of expenses to average net assets would have been
1.71% and the ratio of net investment income to average net assets would have
been 0.56%.
<F5> The Adviser has directed certain portfolio trades of The Yacktman Fund to a
broker at best price and execution and has generated directed brokerage credits
to be used against sub-transfer agency fees. Shareholders benefited under this
arrangement as the net expenses of The Yacktman Fund do not include such sub-
transfer agency fees.
</TABLE>
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T H E F U N D S
The Yacktman Funds, Inc. (the "Company"), a Maryland corporation, was
organized on April 6, 1992. The Company is an open-end, management investment
company registered under the Invest-ment Company Act of 1940 (the "Act"). The
Company presently consists of two portfolios: The Yacktman Fund (diversified)
and The Yacktman Focused Fund (non-diversified). Each investment portfolio is
individually referred to as a "Fund" and collectively as the "Funds." The Funds
offer a choice of equity-oriented investment opportunities.
Each Fund obtains its assets by continuously selling its shares to the
public. Proceeds from such sales are invested by the Funds in securities of
other companies. The resources of many investors are thus combined and each
individual investor has an interest in every one of the securities owned,
thereby providing diversification in a variety of industries. The Adviser
furnishes experienced management to select and watch over the investments of the
Funds. Each Fund will redeem any of its outstanding shares on demand of the
owner at the next determined net asset value. Registration of the Funds under
the Act does not involve supervision of the Funds' management or policies by the
Securities and Exchange Commission.
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O B J E C T I V E A N D
I N V E S T M E N T A P P R O A C H
GENERAL
The investment objective of each of the Funds is to produce long-term growth
of capital, with current income as a secondary objective. Each Fund pursues its
primary investment objective by investing primarily in common stocks,
convertible securities, American Depositary Receipts, and fixed income
securities. The Yacktman Focused Fund may also purchase put options on specific
stocks in its portfolio to hedge against loss. Each Fund pursues its secondary
investment objective by investing in dividend paying common stocks, convertible
securities, fixed income securities, and short-term money market instruments.
Each Fund may lend its portfolio securities and The Yacktman Focused Fund may
write put options.
Because shares of each Fund represent an investment in securities with
fluctuating market prices, the net asset value per share of each Fund will vary
as the aggregate value of the Fund's portfolio securities increases or
decreases. An investment in the Funds should be considered a long-term
investment. The Funds are not designed to meet investors' short-term financial
needs, nor is any single Fund or a combination of the Funds intended to provide
a complete or balanced investment program.
The investment objectives, policies and practices of each Fund, unless
otherwise stated, are not fundamental and may be changed by the Board of
Directors without shareholder approval. Because of the risks inherent in all
investments, there can be no assurance that the objectives of the Funds will be
met. The descriptions that follow are designed to help choose the Fund that best
fits an investor's investment objectives.
THE YACKTMAN FUND
The investment objective of The Yacktman Fund is long-term growth of
capital, with current income as a secondary objective. The Yacktman Fund invests
primarily in companies with large capitalization ($1 billion or more) with long
records of earnings growth and dividends. In managing the investment portfolio
for The Yacktman Fund, the Adviser will diversify The Yacktman Fund's holdings
among many companies and industries.
THE YACKTMAN FOCUSED FUND
The investment objective of The Yacktman Focused Fund is long-term growth of
capital, with current income as a secondary objective. The Yacktman Focused Fund
also invests primarily in companies with large capitalization ($1 billion or
more) with long records of earnings growth and dividends. However, in managing
the investment portfolio for The Yacktman Focused Fund, the Adviser may focus on
a relatively limited number of securities (i.e., generally 20 or less, other
than money market instruments). The Adviser believes that this focused
investment strategy has the potential for higher total returns than an
investment strategy calling for investment in a larger number of securities.
However, the use of this focused investment strategy may increase the volatility
of The Yacktman Focused Fund's investment performance. If the securities in
which The Yacktman Focused Fund invests perform poorly, this Fund could incur
greater losses than it would have had it invested in a greater number of
securities.
OTHER INVESTMENT POLICIES AND RISKS
In addition to the investment policies described above (and subject to
certain restrictions described below), each of the Funds (unless indicated to
the contrary) may invest in the following securities and employ the following
investment techniques, some of which may present special risks as described
below. A more complete discussion of certain of these securities and investment
techniques and the associated risks is contained in the Statement of Additional
Information. Unless indicated to the contrary, there is no limitation on the
percentage of assets which may be invested in any particular type of security.
MONEY MARKET INSTRUMENTS
In times when the Adviser believes that adverse economic or market
conditions justify such action, substantial portions of a Fund's assets may be
held in money market instruments such as United States Treasury bills,
certificates of deposit of U.S. banks, commercial paper, and commercial paper
master notes, which are demand instruments without a fixed maturity bearing
interest at rates that are fixed to known lending rates and automatically
adjusted when such lending rates change, rated A-2 or better by Standard &
Poor's Corporation ("Standard & Poor's"), or Prime-2 by Moody's Investors
Service, Inc. ("Moody's"). The Yacktman Focused Fund may also invest in
securities issued by other investment companies that invest in high-quality,
short-term debt securities (i.e., money market funds). In addition to the
advisory fees and other expenses The Yacktman Focused Fund bears directly in
connection with its own operations, as a shareholder of another investment
company, The Yacktman Focused Fund would bear its pro rata portion of the other
investment company's advisory fees and other expenses and such fees and other
expenses will be borne indirectly by The Yacktman Focused Fund's shareholders. A
Fund may also invest in money market instruments in amounts as the Adviser
believes are reasonable to satisfy anticipated redemption requests and to
generate current income.
FIXED INCOME SECURITIES
Both Funds may invest in U.S. government securities and publicly distributed
corporate bonds and debentures to generate current income and possible capital
gains at those times when the Adviser believes such securities offer
opportunities for long-term growth of capital, such as during periods of
declining interest rates when the market value of such securities generally
rises. The Yacktman Fund will limit its investments in non-convertible bonds and
debentures to those which have been assigned one of the two highest ratings of
either Standard & Poor's (AAA and AA) or Moody's (Aaa and Aa). In the event a
bond or debenture is downgraded after investment, The Yacktman Fund may retain
such security unless it is rated less than investment grade (i.e., less than BBB
by Standard & Poor's or Baa by Moody's). The Yacktman Focused Fund will limit
its investments in non-convertible bonds and debentures to those which have been
assigned a rating of at least investment grade. Securities rated BBB by Standard
& Poor's or Baa by Moody's, although investment grade, exhibit speculative
characteristics and are more sensitive than higher rated securities to changes
in economic conditions. If a bond or debenture is downgraded below investment
grade, both Funds will promptly dispose of such bond or debenture, unless the
Adviser believes it disadvantageous to the Fund and its shareholders to do so. A
description of the foregoing ratings is set forth in the Statement of Additional
Information. Both Funds may invest in fixed income securities of any length
maturity. The value of fixed income securities will tend to decrease when
interest rates rise and increase when interest rates fall. Fixed income
securities with shorter maturities, while generally offering lower yields,
generally provide greater price stability than longer-term securities and are
less affected by changes in interest rates.
CONVERTIBLE SECURITIES
The Funds may also invest in convertible securities (debt securities or
preferred stocks of corporations which are convertible into or exchangeable for
common stocks). The Adviser will select only those convertible securities for
which it believes (a) the underlying common stock is a suitable investment for
each Fund using the criteria described above and (b) a greater potential for
total return exists by purchasing the convertible security because of its higher
yield and/or favorable market valuation. Each Fund may invest up to 5% of its
net assets in convertible debt securities rated less than investment grade. Debt
securities rated less than investment grade are commonly referred to as "junk
bonds."
FOREIGN SECURITIES
The Funds may also invest in U.S. dollar-denominated securities of foreign
issuers in the form of American Depositary Receipts ("ADRs") that are
regularly traded on recognized U.S. exchanges or in the U.S. over-the-counter
("OTC") market. Investments in securities of foreign issuers may involve risks
which are in addition to the usual risks inherent in domestic investments. In
many countries, there is less publicly available information about issuers than
is available in the reports and ratings published about companies in the United
States. Additionally, foreign companies may not be subject to uniform
accounting, auditing and financial reporting standards.
OPTIONS ON SECURITIES
The Yacktman Fund may not purchase or write (sell) put or call options, but
The Yacktman Focused Fund may purchase and write put (but not call) options on
stocks. The Yacktman Focused Fund may purchase put options on specific stocks to
hedge against losses caused by declines in the prices of stocks in its
portfolio. The Yacktman Focused Fund may write (sell) put options on stocks to
generate income. The Yacktman Focused Fund will only write put options if it is
willing to purchase the stock at the exercise price.
When writing a put option and receiving a premium payment, The Yacktman
Focused Fund may become obligated during the term of the option to purchase the
securities underlying the option at a specific price (exercise price). This
event is unlikely to occur unless the market price of such securities is less
than the exercise price. To cover its obligation, The Yacktman Focused Fund will
maintain with its custodian in a segregated account cash or liquid securities
equal in value to the exercise price. When purchasing a put option, The Yacktman
Focused Fund has the right, in return for a premium paid, during the term of the
option, to sell the securities underlying the option at the exercise price. If a
put option which The Yacktman Focused Fund has purchased is not exercised, the
option will become worthless on the expiration date, and The Yacktman Focused
Fund will realize a loss in the amount of the premium paid, plus commission
costs. The stocks underlying put options purchased by The Yacktman Focused Fund
need not be stocks in The Yacktman Focused Fund's portfolio if the Adviser
believes that the put options purchased can provide an effective hedge for
stocks held by The Yacktman Focused Fund. However in such situations, there may
be an imperfect correlation between movements in the prices of the stocks
underlying the put options and movements in the prices of the stocks held by The
Yacktman Focused Fund. It is possible that The Yacktman Focused Fund could
suffer losses on both the put options it purchases and on the stocks held in its
portfolio. No assurances can be given that a market will exist at all times for
all outstanding put options purchased or sold by The Yacktman Focused Fund. If
no such market exists, The Yacktman Focused Fund would be unable to realize its
profits or limit its losses until it could exercise the put options it holds and
it would remain obligated until the put options it wrote were exercised or had
expired.
PORTFOLIO TURNOVER
The Funds do not trade actively for short-term profits. However, if the
objectives of the Funds would be better served, short-term profits or losses may
be realized from time to time. For the fiscal year ended December 31, 1997, the
portfolio turnover rate was approximately 70% for The Yacktman Fund and
approximately 60% for The Yacktman Focused Fund. The annual portfolio turnover
rate indicates changes in a Fund's portfolio and is calculated by dividing the
lesser of purchases or sales of portfolio securities (excluding securities
having maturities at acquisition of one year or less) for the fiscal year by the
monthly average of the value of the portfolio securities (excluding securities
having maturities at acquisition of one year or less) owned by the Fund during
the fiscal year. The annual portfolio turnover rate may vary widely from year to
year depending upon market conditions and prospects. Increased portfolio
turnover necessarily results in correspondingly heavier brokerage costs which
the Fund must pay and increased realized gains (or losses) to investors.
Distributions to shareholders of realized gains, to the extent that they consist
of net short-term capital gains, will be considered ordinary income for federal
income tax purposes.
LENDING SECURITIES
For income purposes, a Fund may lend its portfolio securities. The Funds'
investment restrictions provide that no such loan may be made if thereafter more
than 30% of the value of a Fund's total assets would be subject to such loans.
Income may be earned on collateral received to secure the loans. Cash
collateral would be invested in money market instruments. U.S. government
securities collateral would yield interest or earn discount. Part of this
income might be shared with the borrower. Alternatively, a Fund could allow the
borrower to receive the income from the collateral and charge the borrower a
fee. In either event, the Fund would receive the amount of dividends or
interest paid on the loaned securities.
Usually these loans would be made to brokers, dealers or financial
institutions. Loans would be fully secured by collateral deposited with the
Funds' custodian in the form of cash and/or securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities. This collateral must be
increased within one business day in the event that its value shall become less
than the market value of the loaned securities. Because there may be delays in
recovery or even loss of rights in the collateral should the borrower fail
financially, the loans will be made only to firms deemed by the Adviser to be of
good standing. Loans will not be made unless, in the judgment of the Adviser,
the consideration which can be earned from such loans justifies the risk.
The borrower, upon notice, must redeliver the loaned securities within three
business days. In the event that voting rights with respect to the loaned
securities pass to the borrower and a material proposal affecting the securities
arises, the loan may be called or the Fund will otherwise secure or be granted a
valid proxy in time for it to vote on the proposal. In making such loans, a
Fund may utilize the services of a loan broker and pay a fee for these services.
A Fund may incur additional custodian fees for services in connection with the
lending of securities.
BORROWING
Both Funds may borrow money from banks for temporary or emergency purposes
such as to meet redemption requests when liquidation of portfolio instruments
would be inconvenient or disadvantageous. The Yacktman Fund will borrow only for
such purposes and in an amount not exceeding 10% of the value of its total
assets. The Yacktman Fund will not purchase portfolio securities while any
borrowed amounts remain outstanding. The Yacktman Focused Fund may also borrow
money for investment purposes. Borrowing for investment purposes is known as
leveraging. Leveraging investments, by purchasing securities with borrowed
money, is a speculative technique which increases investment risk, but also
increases investment opportunity. Since substantially all of The Yacktman
Focused Fund's assets will fluctuate in value, whereas the interest obligations
on borrowings may be fixed, the net asset value per share of The Yacktman
Focused Fund when it leverages its investments will increase more when The
Yacktman Focused Fund's assets increase in value and decrease more when the
portfolio assets decrease in value than would otherwise be the case. Interest
costs on borrowings may partially offset or exceed the returns on the borrowed
funds. Under adverse conditions, The Yacktman Focused Fund might have to sell
portfolio securities to meet interest or principal payments at a time investment
considerations would not favor such sales. As required by the Act, The Yacktman
Focused Fund must maintain continuous asset coverage (total assets, including
assets acquired with borrowed funds, less liabilities exclusive of borrowings)
of 300% of all amounts borrowed. If, at any time, the value of The Yacktman
Focused Fund's assets should fail to meet this 300% coverage test, The Yacktman
Focused Fund within three business days, will reduce the amount of The Yacktman
Focused Fund's borrowings to the extent necessary to meet this 300% coverage.
Maintenance of this percentage limitation may result in the sale of portfolio
securities at a time when investment considerations otherwise indicate that it
would be disadvantageous to do so.
BROKER PRACTICES
Subject to an overall policy to seek to place portfolio transactions as
efficiently as possible and at a favorable price, research services, payment of
Fund expenses, and placement of orders by securities firms for the Fund's shares
may be taken into account as a factor in placing portfolio transactions.
INVESTMENT LIMITATIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of a Fund's outstanding shares.
A list of the Funds' policies and restrictions, both fundamental and
nonfundamental, is set forth in the Statement of Additional Information. In
order to provide a degree of flexibility, the Funds' investment objectives, as
well as other policies which are not deemed fundamental, may be modified by the
Board of Directors without shareholder approval. Any change in a Fund's
investment objective may result in the Fund having investment objectives
different from the objectives which the shareholder considered appropriate at
the time of investment in the Fund.
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M A N A G E M E N T
O F T H E F U N D S
As a Maryland corporation, the business and affairs of the Company are
managed by its Board of Directors. The Company, on behalf of each of the Funds,
has entered into Investment Advisory Agreements (the "Advisory Agreements") with
Yacktman Asset Management Co., 303 West Madison Street, Chicago, Illinois 60606.
Pursuant to such Advisory Agreements, the Adviser furnishes continuous
investment advisory services to each of the Funds. The Adviser does not advise
any other mutual funds, but does act as the investment adviser to individuals
and institutional clients with investment portfolios of approximately $1.6
billion. The Adviser was organized in April 1992. Mr. Donald A. Yacktman, the
president and sole stockholder of the Adviser, is the portfolio manager for each
of the Funds and, as such, is responsible for the day-to-day management of their
portfolios. Mr. Yacktman has managed each of the Funds' portfolios since
inception and was an officer and portfolio manager from April 1982 through March
11, 1992 with Selected Financial Services, Inc.; and a portfolio manager from
1968 to 1982 with Stein Roe & Farnham, where he was also a partner from 1974 to
1982.
The Adviser supervises and manages the investment portfolios of the Funds
and, subject to such policies as the Board of Directors of the Company may
determine, directs the purchase or sale of investment securities in the day-to-
day management of the Funds' investment portfolios. Under the Advisory
Agreements, the Adviser, at its own expense and without reimbursement from the
Funds, furnishes office space and all necessary office facilities, equipment and
executive personnel for managing the investments of the Funds and pays the
salaries and fees of all officers and directors of the Funds (except the fees
paid to directors who are not interested persons of the Adviser). For the
foregoing, the Adviser receives a monthly fee from The Yacktman Fund based on
The Yacktman Fund's average daily net assets at the annual rate of .65 of 1% on
the first $500,000,000 of average daily net assets, .60 of 1% on the next
$500,000,000 of average daily net assets and .55 of 1% on average daily net
assets in excess of $1,000,000,000 and a monthly fee from The Yacktman Focused
Fund based on The Yacktman Focused Fund's average daily net assets at the annual
rate of 1% on average daily net assets. The Adviser will waive all or a portion
of the advisory fee otherwise payable by The Yacktman Focused Fund to the extent
necessary to insure that aggregate annual operating expenses, excluding
interest, taxes, brokerage commissions and extraordinary items, do not exceed
1.25% of average net assets.
Pursuant to an Administration and Fund Accounting Agreement (the
"Administration Agreement"), Sunstone Financial Group, Inc. (the
"Administrator"), 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin
53202-5712, acts as administrator and fund accountant. As administrator, the
Administrator provides clerical, compliance, regulatory and other administrative
services. As fund accountant, the Administrator calculates each Fund's net asset
value. For administrative services, the Administrator receives from The Yacktman
Fund a fee, computed daily and payable monthly, based on The Yacktman Fund's
average daily net assets at the annual rate of .15 of 1% on the first
$50,000,000 of average daily net assets, .05 of 1% on the next $50,000,000 of
average daily net assets and .025 of 1% on average daily net assets in excess of
$100,000,000. And for fund accounting services, the Administrator receives from
The Yacktman Fund a fee, computed daily and payable monthly, based on The
Yacktman Fund's average daily net assets at the annual rate of $20,000 on the
first $100,000,000 of average daily net assets, .010% on the next $100,000,000
of average daily net assets, and .005% of average daily net assets in excess of
$200,000,000.
For administrative and fund accounting services, The Yacktman Focused Fund
pays the Administrator a fee, computed daily and payable monthly, at the annual
rate of .05% of The Yacktman Focused Fund's average daily net assets, subject to
a minimum annual fee of $50,000.
The Funds pay all of their own expenses, including, without limitation, the
cost of preparing and printing the registration statement required under the
Securities Act of 1933 and any amendments thereto, the expense of registering
shares with the Securities and Exchange Commission and in the various states,
the printing and distribution costs of prospectuses mailed to existing
investors, reports to investors, reports to government authorities and proxy
statements, fees paid to directors who are not interested persons of the
Adviser, interest charges, taxes, legal expenses, association membership dues,
auditing services, insurance premiums, brokerage commissions and expenses in
connection with portfolio transactions, fees and expenses of the custodian of
the Funds' assets, printing and mailing expenses and charges and expenses of
dividend disbursing agents, accounting services agents, registrars and stock
transfer agents.
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P U R C H A S E O F S H A R E S
INITIAL INVESTMENT
Shares of the Funds are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order. The Board of Directors of the
Company has established $2,500 as the minimum initial purchase and $100 as the
minimum for any subsequent purchase (except for Individual Retirement Accounts
("IRAs") and Automatic Investment Plans, where the initial minimum is $500,
and through dividend reinvestment). Investors will receive written notification
at least 30 days in advance of any changes in such minimum amounts.
Shares may also be purchased through broker-dealers, financial institutions
or other investment service providers, who may have different initial minimum
purchase requirements. Investors should consult directly with these firms with
respect to these initial minimum purchase requirements.
BY MAIL
Share purchase applications may be obtained from the Funds. (Please note
that investors must use different forms if investing through an IRA or prototype
retirement plan. See "RETIREMENT PLANS.") Completed share purchase applications
should be mailed directly to:
The Yacktman Funds, Inc.
Shareholder Services Center
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
To purchase shares by OVERNIGHT OR EXPRESS MAIL, please use the following street
address:
The Yacktman Funds, Inc.
Shareholder Services Center
615 East Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53202-5207
The U.S. Postal Service or other independent delivery services are not agents of
the Funds. Therefore, deposit in the mail or with such services, does not
constitute receipt by Firstar Trust Company or the Funds. DO NOT mail letters
by overnight courier to the Post Office Box address.
All applications must be accompanied by payment in the form of a check made
payable to "The Yacktman Funds, Inc." All purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks. No cash will be accepted.
Firstar Trust Company will charge a $20 fee against an investor's account for
any payment check returned to the custodian for insufficient funds. The investor
will also be responsible for any losses suffered by the Funds as a result. When
a purchase is made by check and a redemption is made shortly thereafter, Firstar
Trust Company, the Funds' transfer agent (the "Transfer Agent"), may delay the
mailing of a redemption check until it is satisfied that the check has cleared.
(It will normally take up to 3 business days to clear local personal or
corporate checks and up to 7 business days to clear other personal and corporate
checks.)
BY WIRE
To avoid redemption delays as described above, purchases may be made by
direct wire transfers. The establishment of a new account by wire transfer
should be preceded by a telephone call to the Transfer Agent at 1-800-457-6033
or 1-414-765-4124. The investor will be asked to provide his or her name,
address, Social Security or taxpayer identification number, the amount of his or
her investment and the name and address of the bank that will be wiring the
investment. The Transfer Agent will inform the investor of his or her assigned
investor account number at that time. Funds should be wired through the Federal
Reserve System as follows:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA Number 0750-00022
For credit to Firstar Trust Company
Account Number 112-952-137
For further credit to The Yacktman Funds, Inc.
(name of Fund to be purchased)
(investor account number)
(name or account registration)
After wiring funds, the investor will receive in the mail from the Transfer
Agent a share purchase application. Upon receipt, the investor must complete the
application and return it to the Transfer Agent.
Inquiries concerning the Funds or the share purchase application may be
directed to the Transfer Agent. For telephone assistance call toll-free, 1-800-
457-6033.
SUBSEQUENT INVESTMENTS (MINIMUM $100)
Additions to an investor's account may be made BY MAIL ($100 MINIMUM) or BY
WIRE ($1,000 MINIMUM). When adding to an account by mail, the investor should
send to the Transfer Agent his or her remittance, together with the detachable
form sent with the most recent statement from the Transfer Agent. If this form
is unavailable, the investor should send a note giving the full name of the
account and the account number. For additional investments made by wire
transfer, the investor should use the aforementioned wiring instructions. The
investor should notify the Transfer Agent at 1-800-457-6033 prior to wiring
funds. The required minimum investments may be waived in the case of qualified
retirement plans.
BY TELEPHONE
Additions to an investor's account may also be made BY TELEPHONE ($100
MINIMUM) using the investor's bank account to clear the purchase transaction via
electronic funds transfer (EFT). Only bank accounts held at domestic financial
institutions that are Automated Clearing House (ACH) members can be used for
telephone transactions. Telephone transactions may not be used for initial
purchases of shares of the Funds. Fund shares will be purchased at the net asset
value determined as of the close of trading on the date that the Transfer Agent
receives payment for shares purchased by EFT through the ACH system. Most
transfers are completed within three business days. No fee is currently charged
for this service. To establish the telephone purchase option, please complete
the appropriate section of the purchase application. Inquiries concerning this
option may be directed to the Transfer Agent at 1-800-457-6033.
GENERAL INFORMATION
All applications to purchase shares of the Funds are subject to acceptance
by the Funds and are not binding until so accepted. The Funds do not, except as
indicated in the following sentence, accept telephone orders for the initial
purchase of shares, and they reserve the right to reject applications in whole
or in part. The Funds may accept telephone orders from broker-dealers who have
been previously approved by the Funds. It is the responsibility of such broker-
dealers promptly to forward purchase or redemption orders to the Funds. Although
there is no sales charge levied directly by the Funds, broker-dealers may charge
the investor a transaction-based fee or other fee for their services at either
the time of purchase or the time of redemption. Such charges may vary among
broker-dealers but in all cases will be retained by the broker-dealer and not
remitted to the Funds or the Adviser.
The Funds may authorize one or more broker-dealers, financial institutions
or other service providers ("Processing Intermediaries"), who may designate
other Processing Intermediaries, to accept purchase and redemption orders on the
Funds' behalf. In such event, a Fund will be deemed to have received a purchase
or redemption order when accepted by the Processing Intermediary and the order
will be priced at the Fund's net asset value next determined after the order is
accepted by the Processing Intermediary.
In order to relieve the investor of responsibility for safekeeping and
delivery of stock certificates, the Funds do not issue certificates unless the
investor requests a certificate each time a purchase is made. Instead, shares
purchased are automatically credited to an account maintained for the investor
on the books of the Funds by the Transfer Agent. The investor will receive a
statement showing the details of each transaction. No charge will be imposed
for the issuance of stock certificates.
AUTOMATIC INVESTMENT PLAN
The Funds offer an Automatic Investment Plan whereby an investor may
automatically make purchases of shares of the Funds on a regular, convenient
basis ($100 minimum per transaction). A $500 MINIMUM INITIAL INVESTMENT must be
met before the Automatic Investment Plan may be established. Under the Automatic
Investment Plan, an investor's designated bank or other financial institution
debits a preauthorized amount on the investor's account each month and applies
the amount to the purchase of shares of the Funds. The Automatic Investment Plan
must be implemented with a financial institution that is a member of the
Automated Clearing House ("ACH"). In addition, the Funds must have a currently
effective registration in those states in which it is required. No service fee
is currently charged by the Funds for participating in the Automatic Investment
Plan. A $20 fee will be imposed by the Transfer Agent if sufficient funds are
not available in the investor's account at the time of the automatic
transaction. Applications to establish the Automatic Investment Plan are
available from the Funds. Investors who wish to make a change in investments
made through an automatic investment plan may do so by calling the Transfer
Agent at 1-800-457-6033.
DISTRIBUTION PLAN
There are no sales loads on purchases of shares of the Funds nor redemption
charges on redemptions of shares. The Yacktman Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. THE EFFECTIVE 12B-1
FEE FOR THE YACKTMAN FUND WAS 0.05% FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
THE YACKTMAN FOCUSED FUND HAS NOT ADOPTED A DISTRIBUTION PLAN. Payments under
the Plan in any year are limited to 0.25% of the average daily net assets of The
Yacktman Fund. The Plan permits The Yacktman Fund to employ one or more
distributors of its shares. PAYMENTS UNDER THE PLAN, HOWEVER, MAY BE MADE ONLY
TO DISTRIBUTORS EMPLOYED BY THE YACKTMAN FUND WITH RESPECT TO SHARES
BENEFICIALLY OWNED BY EACH SUCH DISTRIBUTOR'S BROKERAGE CLIENTS WHO ESTABLISHED
THEIR YACKTMAN FUND ACCOUNTS PRIOR TO DECEMBER 31, 1992. Such fees may decline
as a percentage of net assets as assets of The Yacktman Fund increase and/or as
the clients of distributors employed by The Yacktman Fund who established their
accounts prior to December 31, 1992 redeem their shares. The Yacktman Fund pays
to each distributor a monthly fee for distribution of The Yacktman Fund's shares
at the rate of 0.65% per annum of the aggregate average daily net asset value of
the shares in the distributor's accounts. These distribution fees can be
characterized as trail fees. Such fees may be spent by a distributor on any
activities or expenses primarily intended to result in the sale of The Yacktman
Fund's shares, including but not limited to compensation paid to, and expenses
(including overhead and telephone expenses) of, employees of the distributor who
engage in or support the distribution of shares of The Yacktman Fund.
See''DISTRIBUTION PLAN'' in the Statement of Additional Information for a more
complete description of the Plan. Shareholders of The Yacktman Fund who hold
shares for a very long time (e.g., in excess of 100 years) may pay more through
the imposition of the distribution fee over time than the economic equivalent of
the maximum front-end sales charge permitted to be charged by brokers if The
Yacktman Fund were to have a front-end sales charge.
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R E T I R E M E N T P L A N S
The Funds offer the following retirement plans that may be funded with
purchases of shares of the Funds and may allow investors to shelter some of
their income from taxes:
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
Individual shareholders may establish their own tax-sheltered Individual
Retirement Accounts ("IRA"). The minimum initial investment for an IRA is $500.
The Funds currently offer a PROTOTYPE IRA plan and a prototype ROTH IRA plan.
There is currently no charge for establishing an account, although there is an
annual maintenance fee. (See the applicable IRA Custodial Agreement and
Disclosure Statement for a discussion of the annual maintenance fee, other fees
associated with the account, eligibility requirements and related tax
consequences.)
SIMPLIFIED EMPLOYEE PENSION PLAN
("SEP-IRA")
The Funds also offer a Simplified Employee Pension (SEP) plan for employers,
including self-employed individuals, who wish to purchase shares of the Funds
with tax-deductible contributions. Under the SEP plan, employer contributions
are made directly to the IRA accounts of eligible participants.
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES OF SMALL EMPLOYERS
("SIMPLE")
The Funds also offer a SIMPLE plan for employers, including self-employed
individuals, with 100 or fewer employees who wish to purchase shares of the
Funds with tax-deductible contributions. A SIMPLE plan allows employees to elect
to reduce their compensation and have such amounts contributed to the plan.
Under the SIMPLE plan, employer and employee contributions are made directly to
the SIMPLE IRA accounts of eligible participants.
DEFINED CONTRIBUTION RETIREMENT PLAN (KEOGH OR CORPORATE PROFIT-SHARING AND
MONEY-PURCHASE PLANS)
A prototype defined contribution retirement plan is available for employers,
including self-employed individuals, who wish to purchase shares of the Funds
with tax-deductible contributions.
CASH OR DEFERRED 401(k) PLAN
A prototype cash or deferred 401(k) arrange-ment is also available as part
of the Defined Contribution Retirement Plan for employers who wish to allow
employees to elect to reduce their compensation and have such amounts
contributed to the plan.
MODEL 403(b)(7) PLAN
A model 403(b)(7) plan is available for employees of certain charitable,
educational and governmental entities.
A description of applicable service fees and certain limitations on
contributions and withdrawals, as well as application forms, are available from
the Funds upon request. The IRA documents contain a disclosure statement which
the Internal Revenue Service requires to be furnished to individuals who are
considering adopting the IRA. Because a retirement program involves commitments
covering future years, it is important that the investment objectives of the
Funds be consistent with the participant's retirement objectives. Premature
withdrawals from a retirement plan will result in adverse tax consequences.
Consultation with a competent financial and tax adviser regarding the foregoing
retirement plans is recommended.
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E X C H A N G E P R I V I L E G E
The Company generally permits shareholders to exchange shares of The
Yacktman Fund for shares of The Yacktman Focused Fund. Additionally all or part
of the shares of the Funds owned by an investor may be exchanged for shares of
the Firstar Money Market Fund, the Firstar U.S. Government Money Market Fund and
the Firstar Tax-Exempt Money Market Fund (collectively the "Firstar Money
Funds"). The Firstar Money Funds are described in a separate prospectus
available from the Funds. Firstar Investment Research & Management Company, an
affiliate of Firstar Trust Company, serves as the investment adviser to each of
the Firstar Money Funds. Investors may subsequently exchange such shares and
shares purchased with reinvested dividends for shares of the Funds. Use of the
exchange privilege is subject to the minimum purchase and redemption amounts set
forth in this Prospectus and in the prospectus for the applicable Firstar Money
Fund, and is available only if shares of the applicable Firstar Money Fund are
registered for sale in the state of residence of the investor. Investors may
obtain a copy of the prospectuses for any Firstar Money Fund from the Funds and
are advised to read it carefully before authorizing any investment in shares of
such fund.
Exchange requests are subject to a $1,000 MINIMUM. Exchange requests may be
subject to other limitations, including those relating to frequency, that may be
established from time to time to ensure that the exchanges do not disadvantage
the Funds or their investors. Investors will be notified at least 60 days in
advance of any changes in such limitations and may obtain the terms of any such
limitations by writing to The Yacktman Funds, Inc., Shareholder Services Center,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. Except as stated above, the Funds
currently do not impose any limitations on exchanges. There will be a $5.00 FEE
charged to the investor's account FOR EACH TELEPHONE EXCHANGE transacted by the
investor. This fee will be charged to the account from which the funds are being
withdrawn prior to effecting the exchange. There is NO FEE FOR A WRITTEN
EXCHANGE REQUEST.
An exchange involves a redemption of all or a portion of the shares in one
Fund and the investment of the redemption proceeds in shares of the other Fund
or the applicable Firstar Money Fund. The redemption will be made at the per
share net asset value of the shares to be redeemed next determined after the
exchange request is received as described above. The shares of the Fund or the
Firstar Money Fund to be acquired will be purchased at the per share net asset
value of those shares next determined coincident with or after the time of
redemption. For federal income tax purposes, an exchange of shares is a taxable
event and, accordingly, the investor may realize a capital gain or loss. Before
making an exchange request, the investor should consult a tax or other financial
adviser to determine the tax consequences of a particular exchange. For further
information regarding the exchange privilege, see "EXCHANGE PRIVILEGE" in the
Funds' Statement of Additional Information.
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R E D E M P T I O N OF S H A R E S
REDEMPTION BY TELEPHONE
Investors may redeem shares of the Funds by telephone. To redeem shares by
telephone, an investor must check the appropriate box on the share purchase
application as the Funds do not make this feature available to shareholders
automatically. Once this feature has been requested, shares may be redeemed by
phoning the Transfer Agent at 1-800-457-6033 or 1-414-765-4124 and giving:
- the account name,
- the account number, and
- either the number of shares or the
dollar amount to be redeemed.
Proceeds redeemed by telephone will be mailed or wired only to an investor's
address or bank of record as shown on the records of the Transfer Agent.
TELEPHONE REDEMPTIONS MUST BE IN AMOUNTS OF $1,000 OR MORE. Any written
redemption request received within 10 business days after an address change made
by telephone, must be accompanied by a signature guarantee and no telephone
redemption will be allowed within 10 business days of such a change.
Redemption proceeds may also be deposited, via EFT through the ACH system,
to an investor's bank account if the investor has completed the appropriate
section of the purchase application. Most transfers are completed within three
business days. No fee is currently charged for this service. Inquiries
concerning this option may be directed to the Transfer Agent at 1-800-457-6033.
Payment of the redemption proceeds for shares of the Funds redeemed by
telephone where an investor requests wire payment will normally be made in
federal funds on the next business day. As stated above, the Transfer Agent
will wire redemption proceeds only to the bank and account designated on the
share purchase application or in written instructions subsequently received
by the Transfer Agent, and only if the bank is a commercial bank located
within the United States. The Transfer Agent currently charges a $12.00 FEE
for each payment made by wire of redemption proceeds and a $12.00 FEE for
overnight delivery. These fees will be deducted from the investor's account.
In order to arrange for telephone redemptions after a Fund account has been
opened or to change the bank, account or address designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent. The
request must be signed by each registered holder of the account with the
signatures guaranteed by a commercial bank or trust company in the United
States, a member firm of the New York Stock Exchange or other eligible guarantor
institution. Further documentation may be requested from corporations,
executors, administrators, trustees and guardians.
The Funds reserve the right to refuse a telephone redemption if they believe
it is advisable to do so. Procedures for redeeming shares of the Funds by
telephone may be modified or terminated by the Funds at any time. Neither the
Funds nor the Transfer Agent will be liable for following instructions for
telephone redemption transactions which they reasonably believe to be genuine
even if such instructions prove to be unauthorized or fraudulent. They will
employ reasonable procedures to confirm that instructions received by telephone
are genuine, including requiring the shareholder to provide the shareholder's
account number to verify ownership, tape recording all instructions and
providing written confirmation of such instructions, and if they do not, they
may be liable for losses due to unauthorized or fraudulent instructions.
REDEMPTION BY MAIL
Investors may request redemption of part or all of their shares by mail
whenever they wish. For most redemption requests, an investor need only deliver
to the Transfer Agent a written, unconditional request to redeem his or her
shares at net asset value. A request for redemption must include:
- the name of the Fund (i.e., The Yacktman
Fund, The Yacktman Focused Fund or a Firstar money market fund);
- the account number;
- the dollar amount or number of shares
being redeemed;
- the name(s) on the account registration;
- the signatures of all registered account
owners; and
- a daytime telephone number.
If stock certificates have been issued, the investor must also deliver the
certificate or certificates in transferable form, duly endorsed or accompanied
by a separate stock power. In certain situations, such as where corporations,
executors, administrators, trustees and guardians are involved, additional
documentation and signature guarantees may be required. Redemptions are effected
only by the Transfer Agent. In case of any questions concerning the nature of
such additional requirements, the Transfer Agent should be contacted in advance.
Redemption requests may be submitted directly to the Transfer Agent at no
cost to the investor. They may also be submitted through securities dealers, in
which case a service fee may be charged by such dealer. If a redemption request
is not sent directly to the Transfer Agent, it will be forwarded to the Transfer
Agent, and the effective date of redemption will be delayed until the request is
received by the Transfer Agent.
THUS, TO AVOID DELAY, PLEASE SUBMIT REDEMPTION REQUESTS DIRECTLY TO THE TRANSFER
AGENT AT:
The Yacktman Funds, Inc.
Shareholder Services Center
P.O. Box 701
Milwaukee, Wisconsin 53202-0701
The U.S. Postal Service or other independent delivery services are not agents of
the Funds. Therefore, deposit in the mail or with such services, does not
constitute receipt by Firstar Trust Company or the Funds. DO NOT mail letters by
overnight courier to the Post Office Box address. Correspondence mailed by
OVERNIGHT COURIER should be sent to Firstar Trust Company, Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202-5207.
SIGNATURE GUARANTEE
Except in certain situations, such as where corporations, executors,
administrators, trustees and guardians are involved, signatures need not be
guaranteed unless:
- the redemption request exceeds $25,000;
- the proceeds of the redemption are requested to be sent by wire transfer
to a person other than the registered holder(s) of the shares to be
redeemed;
- the proceeds of the redemption are to be mailed to other than the address
of record; or
- a change of address request has been received by the Funds or the
Transfer Agent within the last 10 business days.
In such cases, each signature on any stock certificate, stock power or
redemption request must be guaranteed by a commercial bank or trust company in
the United States, a member firm of the New York Stock Exchange or other
eligible guarantor institution.
REDEMPTION PRICE
The redemption price per share is the next determined net asset value per
share for each Fund after receipt by the Transfer Agent of the written request
containing the information set forth above, accompanied by all required
documentation. The amount received will depend on the market value of the
investments in such Fund's portfolio at the time of determination of net asset
value and may be more or less than the cost of the shares redeemed. A check in
payment for shares redeemed will be mailed to the holder or, if requested by the
investor, an EFT will be made, typically within one or two days, but no later
than the seventh day after receipt of the redemption request in proper form and
of all required documentation (except as indicated above for certain redemptions
of shares purchased by check).
Investors should be aware that during periods of substantial economic or
market change, telephone or wire redemptions may be difficult to implement. If
an investor is unable to contact the Transfer Agent by telephone, shares may
also be redeemed by delivering the redemption request to the Transfer Agent by
mail as described above.
When redemption is requested shortly after shares have been purchased by
personal check, the redemption proceeds will be delayed until the Funds can
verify that the check has cleared. (It will normally take up to 3 days to clear
local personal or corporate checks and up to 7 days to clear other personal and
corporate checks.) Investors may not use a wire transfer to a predesignated
account until the shares being redeemed have been issued for at least 10
business days. To reduce such delay, the Funds recommend that all purchases be
made by direct wire transfer.
To relieve the Funds of the cost of maintaining uneconomical accounts, the
Funds reserve the right to redeem the shares held in any account if, at the time
of any redemption of shares in the account, the net asset value of the remaining
shares in the account falls below $1,000. Before such involuntary redemption
would occur, the investor would be given at least 60 days' written notice and,
during that period, the investor could make an additional investment to restore
the account to at least the minimum amount, in which case there would be no such
redemption. Involuntary redemptions will not be made because the value of shares
in an account falls below the minimum amount solely because of a decline in any
Fund's net asset value. Any such involuntary redemption would be at net asset
value.
The right to redeem shares of the Funds will be suspended for any period
during which the New York Stock Exchange is closed because of financial
conditions or any other extraordinary reason and may be suspended for any period
during which (a) trading on the New York Stock Exchange is restricted pursuant
to rules and regulations of the Securities and Exchange Commission, (b) the
Securities and Exchange Commission has by order permitted such suspension or (c)
an emergency, as defined by rules and regulations of the Securities and Exchange
Commission, exists as a result of which it is not reasonably practicable for a
Fund to dispose of its securities or fairly to determine the value of its net
assets.
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S Y S T E M A T I C
W I T H D R A W A L P L A N
To accommodate the current cash needs of investors, the Funds offer a
Systematic Withdrawal Plan, pursuant to which an investor may provide that a
fixed sum be distributed to him or her at regular intervals. AN INVESTOR MUST
OWN SHARES OF THE FUNDS WORTH AT LEAST $10,000 AT CURRENT NET ASSET VALUE IN
ORDER TO PARTICIPATE IN THE PLAN. In electing to participate in the Systematic
Withdrawal Plan, an investor should realize that within any given period the
appreciation of his or her investment in the Funds may not be as great as the
amount withdrawn. A more complete discussion of the Systematic Withdrawal Plan
is included in the Funds' Statement of Additional Information. The Systematic
Withdrawal Plan does not apply to shares of the Funds held in IRAs or other
retirement plans. An application for participation in the Systematic Withdrawal
Plan can be obtained from the Funds. Investors who wish to make a change in
their Systematic Withdrawal Plan may do so by calling the Transfer Agent at
1-800-457-6033.
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D E T E R M I N A T I O N O F
N E T A S S E T V A L U E
The price investors pay when buying shares of the Funds, and the price
investors receive when redeeming shares of the Funds, is the net asset value of
the shares. No sales charge or commission of any kind is added by the Funds upon
a purchase and no charge is deducted upon a redemption.
The per share net asset value of a Fund is determined by dividing the total
value of its net assets (meaning its assets less its liabilities excluding
capital and surplus) by the total number of its shares outstanding at that time.
The net asset value is determined as of the close of regular trading (currently
4:00 p.m. Eastern time) on the New York Stock Exchange on each day the New York
Stock Exchange is open for trading. This determination is applicable to all
transactions in shares of the Funds prior to that time and after the previous
time as of which net asset value was determined. Accordingly, purchase orders
accepted or shares tendered for redemption prior to the close of regular trading
on a day the New York Stock Exchange is open for trading will be valued as of
the close of trading, and purchase orders accepted or shares tendered for
redemption after that time will be valued as of the close of the next trading
day.
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. Put options are
valued at the last sales price on the valuation date if the last sales price is
between the closing bid and asked prices. Otherwise put options are valued at
the mean of the closing bid and asked prices. Debt securities (other than short-
term instruments) are valued at prices furnished by a national pricing service,
subject to review by the Adviser and determination of the appropriate price
whenever a furnished price is significantly different from the previous day's
furnished price. Debt instruments maturing within 60 days are valued by the
amortized cost method. 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.
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D I V I D E N D S A N D
D I S T R I B U T I O N S
THE FUNDS PAY DIVIDENDS QUARTERLY from net investment income. Any NET
REALIZED CAPITAL GAIN not offset by capital loss carryovers is distributed
ANNUALLY. Investors may elect to have all income dividends and capital gains
distributions reinvested in the Funds or paid in cash. See the share purchase
application for further information. If an investor does not specify an
election, all income dividends and capital gains distributions will
automatically be reinvested in full and fractional shares of the Funds,
calculated to the nearest 1,000th of a share. Shares will be purchased at the
net asset value in effect on the business day after the dividend record date and
will be credited to the investor's account on such date. As in the case of other
purchases, stock certificates will not be issued unless requested. Investors
will be advised of the number of shares purchased and the price following each
reinvestment. An election to reinvest or receive dividends and distributions in
cash will apply to all shares of the Funds registered in the same name,
including those previously purchased. Reinvested dividends and distributions
receive the same tax treatment as those paid in cash.
An investor may change his or her election at any time by notifying the
Funds in writing. If such a notice is received between a dividend declaration
date and payment date, it will become effective on the day following the payment
date. The Funds may modify or terminate the dividend reinvestment program at any
time on 30 days' notice to participants.
The Transfer Agent will accept a request to change the dividend payment
election from cash to reinvest. The Transfer Agent will also accept a request
to change the dividend payment election from reinvest to cash as long as the
proceeds are sent to the address of record or to a preauthorized wire/EFT
payment address already established on the account. A request to begin EFT of
dividends to a bank not already on the account or to have the check sent to
another address must be received with a signature guarantee.
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T A X E S
Each Fund intends to qualify annually for and elect tax treatment applicable
to a "regulated investment company" under Subchapter M of the Code. Each Fund
intends to distribute all of its taxable net income and realized net gains to
investors so that each Fund will not be required to pay any income taxes. Such
distributions are taxable to investors unless their income is not subject to
income tax. Investors may also be subject to state and local taxes on such
distributions. Investors are informed annually of the amount and nature of such
income or gain.
If a Fund distributes less than the amount it is required to distribute
during any year, such Fund will be subject to a 4% excise tax on the under-
distributed amount. Each Fund intends to declare and distribute dividends during
each year sufficient to prevent imposition of the excise tax.
A FUND WILL BE REQUIRED TO WITHHOLD FEDERAL INCOME TAX AT A RATE OF 31%
("backup withholding") from dividend payments and redemption and exchange
proceeds IF AN INVESTOR FAILS TO FURNISH SUCH FUND WITH A SOCIAL SECURITY NUMBER
OR OTHER TAXPAYER IDENTIFICATION NUMBER OR FAILS TO CERTIFY UNDER PENALTY OF
PERJURY THAT SUCH NUMBER IS CORRECT OR THAT THE INVESTOR IS NOT SUBJECT TO
BACKUP WITHHOLDING DUE TO THE UNDERREPORTING OF INCOME. This certification is
included as part of the share purchase application and should be completed when
the account is opened.
Investors should consult their tax advisers for a complete review of the tax
ramifications of an investment in the Funds.
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C A P I T A L S T R U C T U R E
The Company's authorized capital consists of 1,000,000,000 shares of Common
Stock, $0.0001 par value. The common stock is divisible into an unlimited number
of "series," each of which is a separate Fund. Shareholders are entitled: (i) to
one vote per full share of Common Stock; (ii) to such distributions as may be
declared by the Company's Board of Directors out of funds legally available; and
(iii) upon liquidation, to participate ratably in the assets available for
distribution. There are no conversion or sinking fund provisions applicable to
the shares, and the holders have no preemptive rights and may not cumulate their
votes in the election of directors. Consequently the holders of more than 50% of
the shares of Common Stock voting for the election of directors can elect the
entire Board of Directors and, in such event, the holders of the remaining
shares voting for the election of directors will not be able to elect any person
or persons to the Board of Directors. The Maryland General Corporation Law
permits registered investment companies, such as the Company, to operate without
an annual meeting of shareholders under specified circumstances if an annual
meeting is not required by the Act. The Company has adopted the appropriate
provisions in its Bylaws and does not anticipate holding an annual meeting in
any year in which the election of directors is not required to be acted on by
shareholders under the Act. The Company also has adopted provisions in its
Bylaws for the removal of directors by the shareholders.
Shares of Common Stock are redeemable and are transferable. All shares
issued and sold by the Funds will be fully paid and nonassessable. Fractional
shares of Common Stock entitle the holder to the same rights as whole shares of
Common Stock. The Funds will not issue certificates evidencing shares of Common
Stock purchased unless so requested in writing. Where certificates are not
issued, the investor's account will be credited with the number of shares
purchased, relieving investors of responsibility for safekeeping of certificates
and the need to deliver them upon redemption. Written confirmations are issued
for all purchases of Common Stock. Any investor may deliver certificates to
Firstar Trust Company and direct that his or her account be credited with the
shares. Any investor may direct Firstar Trust Company at any time to issue a
certificate for his or her shares of Common Stock without charge. In addition to
serving as the Fund's Transfer Agent, Firstar Trust Company, 615 East Michigan
Street, Milwaukee, Wisconsin 53202-5207, is the custodian for all securities and
cash of the Funds and acts as the Funds' dividend disbursing agent.
Pursuant to the Company's Articles of Incorporation, the Board of Directors
may classify or reclassify any unissued shares of the Funds and may designate or
redesignate the name of any outstanding class of shares of the Funds. As a
general matter, shares are voted in the aggregate and not by class, except where
class voting is required by Maryland law or the Act (e.g., a change in
investment policy or approval of an investment advisory agreement). All
consideration received from the sale of shares of any class of the Funds'
shares, together with all income, earnings, profits and proceeds thereof, belong
to that class and are charged with the liabilities in respect of that class and
of that class' share of the general liabilities of the Funds in the proportion
that the total net assets of the class bear to the total net assets of all
classes of the Funds' shares. The net asset value of a share of any class is
based on the assets belonging to that class less the liabilities charged to that
class, and dividends may be paid on shares of any class of Common Stock only out
of lawfully available assets belonging to that class. In the event of
liquidation or dissolution of the Funds, the holders of each class would be
entitled, out of the assets of the Funds available for distribution, to the
assets belonging to that class.
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S H A R E H O L D E R R E P O R T S
Investors will be provided at least semi-annually with a report showing each
Fund's portfolio and other information and annually after the close of the
Funds' fiscal year, which ends December 31, with an annual report containing
audited financial statements. An individual account statement will be sent to
the investor by Firstar Trust Company after each purchase, including
reinvestment of dividends, or redemption of shares of the Funds. Each investor
will also receive an annual statement after the end of the calendar year listing
all transactions in shares of the Funds during such year.
Investors who have questions about their respective accounts should call
Firstar Trust Company at 1-800-457-6033 or 1-414-765-4124. In addition,
investors who wish to make a change in their address of record, a change in
investments made through an automatic investment plan or a change in the manner
in which dividends are received may also do so by calling the Transfer Agent at
1-800-457-6033. Investors who have questions regarding the investment strategy
and historical performance of the Funds should call Yacktman Asset Management
Co. at 1-800-525-8258 and ask to speak to a member of the portfolio management
group. Alternatively, investors may also write to The Yacktman Funds, Inc., 303
West Madison Street, Suite 1925, Chicago, Illinois 60606.
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F U N D P E R F O R M A N C E
Each Fund may provide from time to time in advertisements, reports to
investors and other communications with investors its average annual compounded
rate of return. An average annual compounded rate of return refers to the rate
of return which, if applied to an initial investment at the beginning of a
stated period and compounded over the period, would result in the redeemable
value of the investment at the end of the stated period assuming reinvestment of
all dividends and distributions and reflecting the effect of all recurring fees.
An investor's principal in each Fund and the Fund's return are not guaranteed
and will fluctuate according to market conditions.
In reports or other communications to investors and in advertising material,
a Fund may compare its performance to the Consumer Price Index, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index and to the performance
of mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA") or Morningstar, Inc.
("Morningstar"), three widely recognized independent mutual fund reporting
services. Lipper, CDA and Morningstar performance calculations include
reinvestment of all capital gain and income dividends for the periods covered by
the calculations. The Consumer Price Index is generally considered to be a
measure of inflation. The Dow Jones Industrial Average and the Standard & Poor's
500 Stock Index are unmanaged indices of common stocks which are considered to
be generally representative of the United States stock market. The market prices
and yields of these stocks will fluctuate. A Fund also may quote performance
information from publications such as The Wall Street Journal, Kiplinger's
Personal Finance Magazine, Money Magazine, Forbes, Smart Money, Barron's, Worth
Magazine, USA Today, and local newspapers.
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D I R E C T O R S
*RONALD W. BALL-Director. Senior Vice President of Yacktman Asset Management Co.
*JON D. CARLSON-Director. Executive Vice President of Yacktman Asset Management
Co.
THOMAS R. HANSON-Director. Partner of Fleming/Hanson Sales, a manufacturers
representative firm in the commercial and industrial air conditioning industry.
STANISLAW MALISZEWSKI-Director. Managing
Director of Gateway Asset Management, Inc., an investment management and
marketing company for large institutional investors.
STEPHEN E. UPTON-Director. Retired President of the Whirlpool Foundation.
*DONALD A. YACKTMAN-Director. President of Yacktman Asset Management Co.
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P R I N C I P A L O F F I C E R S
DONALD A. YACKTMAN-President and Treasurer.
JON D. CARLSON-Vice President and Secretary.
RONALD W. BALL-Vice President.
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I N V E S T M E N T A D V I S E R
YACKTMAN ASSET MANAGEMENT CO.
303 West Madison Street, Suite 1925
Chicago, Illinois 60606-3308
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A D M I N I S T R A T O R
SUNSTONE FINANCIAL GROUP, INC.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202-5712
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C U S T O D I A N , T R A N S F E R
A G E N T A N D D I V I D E N D
D I S B U R S I N G A G E N T
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202-5207
1-800-457-6033
1-414-765-4124
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I N D E P E N D E N T
A C C O U N T A N T S
PRICE WATERHOUSE LLP
200 East Randolph Drive
Chicago, Illinois 60601
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L E G A L C O U N S E L
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
* Director who is an "interested" person of the Fund (as defined in the
Investment Company Act of 1940).
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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 53202-5207
(LOGO)
THE YACKTMAN FUNDS
PROSPECTUS
APRIL 30, 1998
YA-402-0498
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION April 30, 1998
THE YACKTMAN FUNDS, INC.
303 West Madison Street
Chicago, Illinois 60606
Call Toll-Free 1-800-525-8258
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of The Yacktman Funds,
Inc. (the "Company") dated April 30, 1998 (the "Prospectus"), for The
Yacktman Fund and The Yacktman Focused Fund (each referred to individually
as a "Fund" and collectively as the "Funds"). Requests for copies of the
Prospectus should be made by writing to The Yacktman Funds, Inc., 303 West
Madison Street, Chicago, Illinois 60606, Attention: Corporate Secretary,
or by calling 1-800-525-8258.
<PAGE>
THE YACKTMAN FUNDS, INC.
TABLE OF CONTENTS
Page
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . 7
DIRECTORS AND OFFICERS OF THE COMPANY . . . . . . . . . . . . . . . . . 7
INVESTMENT ADVISER AND ADMINISTRATOR . . . . . . . . . . . . . . . . . 11
EXCHANGE PRIVILEGE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
REDEMPTIONS IN KIND . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . . . . 13
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . . 16
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
STOCKHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 19
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 20
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 21
DESCRIPTION OF SECURITIES RATINGS . . . . . . . . . . . . . . . . . . . 22
<PAGE>
INVESTMENT RESTRICTIONS AND CONSIDERATIONS
THE YACKTMAN FUND
As set forth in the Prospectus under the caption "OBJECTIVE AND
INVESTMENT APPROACH," the investment objective of The Yacktman Fund is to
produce long-term growth of capital, with current income as a secondary
objective. Consistent with this investment objective, The Yacktman Fund
has adopted the following investment restrictions which are matters of
fundamental policy and cannot be changed without approval of the holders
of the lesser of: (i) 67% of The Yacktman Fund's shares present or
represented at a stockholder's meeting at which the holders of more than
50% of such shares are present or represented; or (ii) more than 50% of
the outstanding shares of The Yacktman Fund.
1. The Yacktman Fund will diversify its assets in
different companies and will not purchase securities of any
issuer if, as a result of such purchase, The Yacktman Fund would
own more than 10% of the outstanding voting securities of such
issuer or more than 5% of The Yacktman Fund's assets would be
invested in securities of such issuer (except that up to 25% of
the value of The Yacktman Fund's total assets may be invested
without regard to this limitation). This restriction does not
apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities.
2. The Yacktman Fund will not sell securities short, buy
securities on margin, purchase warrants, participate in a joint-
trading account, or deal in options.
3. The Yacktman Fund will not borrow money, except for
temporary or emergency purposes, and then only from banks, in an
amount not exceeding 10% of the value of The Yacktman Fund's
total assets. The Yacktman Fund will not borrow money for the
purpose of investing in securities, and The Yacktman Fund will
not purchase any portfolio securities for so long as any
borrowed amounts remain outstanding.
4. The Yacktman Fund will not pledge or hypothecate its
assets, except to secure borrowings for temporary or emergency
purposes.
5. The Yacktman Fund will not invest more than 5% of The
Yacktman Fund's total assets in securities of any issuer which
has a record of less than three (3) years of continuous
operation, including the operation of any predecessor business
of a company which came into existence as a result of a merger,
consolidation, reorganization or purchase of substantially all
of the assets of such predecessor business.
6. The Yacktman Fund will not purchase securities of
other investment companies (as defined in the Investment Company
Act of 1940 (the "Act")), except as part of a plan of merger,
consolidation, reorganization or acquisition of assets.
7. The Yacktman Fund will not act as an underwriter or
distributor of securities other than shares of The Yacktman Fund
(except to the extent that The Yacktman Fund may be deemed to be
an underwriter within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), in the disposition of
restricted securities).
8. The Yacktman Fund will not purchase securities for
which there is no established market if, as a result of such
purchase, more than 5% of the total value of its total assets
would be invested in such securities.
9. The Yacktman Fund will not make loans, except it may
acquire debt securities from the issuer or others which are
publicly distributed or are of a type normally acquired by
institutional investors and except that it may make loans of
portfolio securities if any such loans are secured continuously
by collateral at least equal to the market value of the
securities loaned in the form of cash and/or securities issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities and provided that no such loan will be made if
upon the making of that loan more than 30% of the value of The
Yacktman Fund's total assets would be the subject of such loans.
10. The Yacktman Fund will not concentrate 25% or more of
its total assets in securities of any one industry. This
restriction does not apply to obligations issued or guaranteed
by the United States Government, its agencies or
instrumentalities.
11. The Yacktman Fund will not make investments for the
purpose of exercising control or management of any company.
12. The Yacktman Fund will not purchase or sell real
estate or real estate mortgage loans and will not make any
investments in real estate limited partnerships.
13. The Yacktman Fund will not purchase or sell
commodities or commodity contracts, including futures contracts.
14. The Yacktman Fund will not purchase or sell any
interest in any oil, gas or other mineral exploration or
development program, including any oil, gas or mineral leases.
The Yacktman Fund has adopted certain other investment
restrictions which are not fundamental policies and which may be changed
by the Company's Board of Directors without stockholder approval. These
additional restrictions are as follows:
1. The Yacktman Fund will not acquire or retain any
security issued by a company, an officer or director of which is
an officer or director of The Yacktman Fund or an officer,
director or other affiliated person of The Yacktman Fund's
investment adviser, without authorization of the Board of
Directors of the Company.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is
made. If these restrictions are adhered to at the time an investment is
made, and such percentage subsequently changes as a result of changing
market values or some similar event, no violation of The Yacktman Fund's
fundamental restrictions will be deemed to have occurred. Any changes in
The Yacktman Fund's investment restrictions made by the Board of Directors
will be communicated to stockholders prior to their implementation, which
communication may be made in an amendment to the Statement of Additional
Information incorporated by reference into the Prospectus.
THE YACKTMAN FOCUSED FUND
As set forth in the Prospectus under the caption "OBJECTIVE AND
INVESTMENT APPROACH," the investment objective of The Yacktman Focused
Fund is to produce long-term growth of capital, with current income as a
secondary objective. Consistent with this investment objective, The
Yacktman Focused Fund has adopted the following investment restrictions
which are matters of fundamental policy and cannot be changed without
approval of the holders of the lesser of: (i) 67% of The Yacktman Focused
Fund's shares present or represented at a stockholder's meeting at which
the holders of more than 50% of such shares are present or represented; or
(ii) more than 50% of the outstanding shares of The Yacktman Focused Fund.
1. The Yacktman Focused Fund may issue senior securities to
the extent permitted under the Act.
2. The Yacktman Focused Fund will not sell securities
short, buy securities on margin, purchase warrants or
participate in a joint trading account. The Yacktman Focused
Fund may invest in and commit its assets to writing and
purchasing put and call options on securities and stock indexes
to the extent permitted by the Act.
3. The Yacktman Focused Fund may borrow money to the
extent permitted by the Act. The Yacktman Focused Fund may
pledge or hypothecate its assets to secure its borrowings.
4. The Yacktman Focused Fund will not act as an
underwriter or distributor of securities other than shares of
The Yacktman Focused Fund (except to the extent that The
Yacktman Focused Fund may be deemed to be an underwriter within
the meaning of the Securities Act in the disposition of
restricted securities).
5. The Yacktman Focused Fund will not concentrate 25% or
more of its total assets in securities of any one industry.
This restriction does not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities.
6. The Yacktman Focused Fund will not purchase or sell
real estate or real estate mortgage loans and will not make any
investments in real estate limited partnerships.
7. The Yacktman Focused Fund will not purchase or sell
commodities or commodity contracts, including futures contracts.
8. The Yacktman Focused Fund will not make loans, except
it may acquire debt securities from the issuer or others which
are publicly distributed or are of a type normally acquired by
institutional investors and except that it may make loans of
portfolio securities if any such loans are secured continuously
by collateral at least equal to the market value of the
securities loaned in the form of cash and/or securities issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities and provided that no such loan will be made if
upon the making of that loan more than 30% of the value of The
Yacktman Focused Fund's total assets would be the subject of
such loans.
9. The Yacktman Focused Fund will not purchase securities
of any issuer if, as a result of such purchase, The Yacktman
Focused Fund would own more than 10% of the outstanding voting
securities of such issuer or more than 5% of The Yacktman
Focused Fund's assets would be invested in securities of such
issuer, except that up to 50% of the value of The Yacktman
Focused Fund's total assets may be invested without regard to
this limitation. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its
agencies or instrumentalities.
10. The Yacktman Focused Fund will not purchase securities
for which there is no established market if, as a result of such
purchase, more than 5% of the value of its total assets would be
invested in such securities.
11. The Yacktman Focused Fund will not make investments
for the purpose of exercising control or management of any
company.
12. The Yacktman Focused Fund will not purchase or sell
any interest in any oil, gas or other mineral exploration or
development program, including any oil, gas or mineral leases.
The Yacktman Focused Fund has adopted certain other investment
restrictions which are not fundamental policies and which may be changed
by the Company's Board of Directors without stockholder approval. These
additional restrictions are as follows:
1. The Yacktman Focused Fund will not purchase securities
of other investment companies (as defined in the Act), except:
(a) as part of a plan of merger, consolidation, reorganization
or acquisition of assets; (b) securities of registered open-end
investment companies that invest exclusively in high quality,
short-term debt securities; or (c) securities of registered
investment companies on the open market where no commission
results, other than the usual and customary broker's commission.
No purchase described in (b) and (c) will be made if as a result
of such purchases (i) The Yacktman Focused Fund and its
affiliated persons would hold more than 3% of any class of
securities, including voting securities, of any registered
investment company; (ii) more than 5% of The Yacktman Focused
Fund's net assets would be invested in shares of any one
registered investment company; and (iii) more than 10% of The
Yacktman Focused Fund's net assets would be invested in shares
of registered investment companies.
2. The Yacktman Focused Fund will not acquire or retain
any security issued by a company, an officer or director of
which is an officer or director of The Yacktman Focused Fund or
an officer, director or other affiliated person of The Yacktman
Focused Fund's investment adviser, without authorization of the
Board of Directors of the Company.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is
made. If these restrictions are adhered to at the time an investment is
made, and such percentage subsequently changes as a result of changing
market values or some similar event, no violation of The Yacktman Focused
Fund's fundamental restrictions will be deemed to have occurred. Any
changes in The Yacktman Focused Fund's investment restrictions made by the
Board of Directors will be communicated to stockholders prior to their
implementation, which communication may be made in an amendment to the
Statement of Additional Information incorporated by reference into the
Prospectus.
High Yield Convertible Securities
Each Fund may invest up to five percent of its net assets in
convertible securities rated less than investment grade. Investments in
such securities are subject to the risk factors outlined below. The
market for high yield convertible securities is subject to substantial
volatility. Issuers of high yield convertible securities may be of low
creditworthiness and the high yield convertible securities are likely to
be subordinated to the claims of senior lenders. The secondary market for
high yield convertible debt securities may at times become less liquid or
respond to adverse publicity or investor perceptions making it more
difficult for the Funds to value accurately such securities or dispose of
them.
Options on Securities
When The Yacktman Focused Fund wishes to terminate The Yacktman
Focused Fund's obligation with respect to a put option it has written, The
Yacktman Focused Fund may effect a "closing purchase transaction." The
Yacktman Focused Fund accomplishes this by buying a put option of the same
series as the put option previously written by The Yacktman Focused Fund.
The effect of the purchase is that the writer's position will be canceled.
However, a writer may not effect a closing purchase transaction after the
writer has been notified of the exercise of an option. When The Yacktman
Focused Fund is the holder of a put option, it may liquidate its position
by effecting a "closing sale transaction." The Yacktman Focused Fund
accomplishes this by selling a put option of the same series as the put
option previously purchased by The Yacktman Focused Fund. There is no
guarantee that either a closing purchase or a closing sale transaction can
be effected.
The Yacktman Focused Fund will realize a gain (or a loss) on a
closing purchase transaction with respect to a put option previously
written by it if the premium, plus commission costs, paid by The Yacktman
Focused Fund to purchase the put option is less (or greater) than the
premium, less commission costs, received by The Yacktman Focused Fund on
the sale of the put option. The Yacktman Focused Fund will realize a gain
(or a loss) on a closing sale transaction with respect to a put option
previously purchased by it if the premium, less commission costs, received
by The Yacktman Focused Fund on the sale of the put option is greater (or
less) than the premium, plus commission costs, paid by The Yacktman
Focused Fund to purchase the put option.
Exchanges generally have established limitations governing the
maximum number of call or put options on the same index which may be
bought or written (sold) by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts
or through one or more brokers). Under these limitations, options
positions of certain other accounts advised by the same investment adviser
are combined for purposes of these limits. Pursuant to these limitations,
an exchange may order the liquidation of positions and may impose other
sanctions or restrictions. These position limits may restrict the number
of listed options which The Yacktman Focused Fund may buy or sell;
however, the Adviser intends to comply with all limitations.
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the caption "DETERMINATION
OF NET ASSET VALUE," the net asset value of the Funds will be determined
as of the close of regular trading (currently 4:00 p.m. Eastern time) on
each day the New York Stock Exchange is open for trading. The New York
Stock Exchange is open for trading Monday through Friday except New Year's
Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Additionally, if any of the aforementioned holidays falls on a Saturday,
the New York Stock Exchange will not be open for trading on the succeeding
Monday, unless unusual business conditions exist, such as the ending of a
monthly or the yearly accounting period.
DIRECTORS AND OFFICERS OF THE COMPANY
The name, age, address, principal occupations during the past
five years, and other information with respect to each of the directors
and officers of the Company are as follows:
*Ronald W. Ball -- Director and Vice President. Mr. Ball, 57,
has been Senior Vice President of Yacktman Asset Management Co. (the
"Adviser") since April, 1992. Prior to that time, he was a Senior Vice
President and Portfolio Manager at Selected Financial Services, Inc., a
Chicago, Illinois investment advisory firm, (since October, 1983) and
President and Portfolio Manager of Selected Special Shares, an investment
company (since October, 1986). Mr. Ball holds a B.S. in Business
Administration from The Ohio State University. His address is c/o
Yacktman Asset Management Co., 303 West Madison Street, Chicago, Illinois
60606.
*Jon D. Carlson -- Director, Vice President and Secretary. Mr.
Carlson, 56, has been the Executive Vice President of the Adviser since
May 14, 1992. Prior to this date he was a Senior Vice President of the
Kemper Securities Group, Inc., which he joined in March, 1989 from Kidder,
Peabody and Co. A graduate of The University of Michigan and the Michigan
Law School, Mr. Carlson has been admitted to the practice of law in
Michigan, New York and Illinois and served from 1972 to 1978 on the
Employee Benefits Committee of the Taxation Section of the American Bar
Association. His address is c/o Yacktman Asset Management Co., 303 West
Madison Street, Chicago, Illinois 60606.
Thomas R. Hanson -- Director. Mr. Hanson, 60, is a Partner of
Fleming/Hanson Sales, a manufacturers representative firm in the
commercial and industrial air conditioning industry. Prior to
establishing this firm in 1991, Mr. Hanson was President of Thermal Air
Systems, Inc., Bensenville, Illinois. He also serves on the Corporate
Member Board of Advocate Health Care, Inc., Oak Brook, Illinois, and on
the Advisory Board for the College of Engineering of the University of
Iowa from which he earned a B.S. in Mechanical Engineering. His address
is c/o Fleming/Hanson Sales, 3010 Woodcreek Drive, Downers Grove, Illinois
60515.
Stanislaw Maliszewski -- Director. Mr. Maliszewski, 53, has
been a Managing Director of Gateway Asset Management, Inc., an investment
management and marketing company for large institutional investors since
August, 1993. Prior to joining Gateway Asset Management, Inc. Mr.
Maliszewski was President of Princeton Futures Management Incorporated, an
investment advisory firm for large institutional investors. Neither
Gateway Asset Management, Inc. nor Princeton Futures Management
Incorporated is affiliated with, or a service provider to, the Adviser.
Prior to establishing Princeton Futures Management Incorporated in 1991,
Mr. Maliszewski was with the Rosenberg Real Estate Equity Funds, LaSalle
Advisors Ltd., and the Investment Banking Services Group of Goldman Sachs
and Company. He holds an A.B. degree from Princeton University and an MBA
from Harvard University. His address is c/o Gateway Asset Management,
Inc., Suite 1420, 180 North LaSalle Street, Chicago, Illinois 60601.
Stephen E. Upton -- Director. Mr. Upton, 73, is the retired
President of the Whirlpool Foundation, Benton Harbor, Michigan, a position
he held until 1993. He retired in 1988 as a Senior Vice President for
Whirlpool Corporation, a manufacturer of major household appliances. Mr.
Upton had been an officer and employee of Whirlpool since 1955. He has
served as Chairman of the Board of Trustees of Olivet College in Michigan
and as Chairman of the Consumer Affairs Committee for the United States
Chamber of Commerce and is a Trustee of the Michigan Colleges Foundation.
Mr. Upton holds a B.B.A. degree from The University of Michigan. His
address is 100 Ridgeway Road, St. Joseph, Michigan 49085.
*Donald A. Yacktman -- Director, President and Treasurer. Mr.
Yacktman, 56, has been the President of the Adviser since April 24, 1992.
Prior to that time, he was Senior Vice President of Selected Asset
Management, Inc., a Chicago, Illinois investment advisory firm, and the
President and portfolio manager from January 1, 1983 through March 11,
1992 of the Selected American Shares mutual fund. Prior to joining the
predecessor firm of Selected Asset Management, Inc., Mr. Yacktman was a
partner and portfolio manager for fourteen years at Stein Roe & Farnham,
an independent investment counseling firm based in Chicago. Mr. Yacktman
has served as a Bishop in the Church of Jesus Christ of Latter-Day Saints
and is a member of the Financial Analysts Society of Chicago. He holds a
B.S. Magna Cum Laude and Phi Beta Kappa from The University of Utah and an
MBA with distinction from Harvard University. His address is c/o Yacktman
Asset Management Co., 303 West Madison Street, Chicago, Illinois 60606.
*Messrs. Ball, Carlson and Yacktman are directors who are "interested
persons" of the Funds (as defined in the Act).
The Funds' standard method of compensating directors is to pay
each disinterested director an annual fee of $8,000 for services rendered,
including attending meetings of the Board of Directors. The Funds also
may reimburse their directors for travel expenses incurred in order to
attend meetings of the Board of Directors. For the fiscal year ended
December 31, 1997 the disinterested directors received aggregate fees
(excluding $451 in reimbursements of travel expenses) of $24,000. The
table below sets forth the compensation paid by the Funds to each of the
current directors of the Company during the fiscal year ended December 31,
1997:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Total
Aggregate Pension or Retirement Estimated Annual Compensation
Name of Compensation Benefits Accrued As Benefits Upon from Company
Person from Company Part of Fund Expenses Retirement Paid to Directors
<S> <C> <C> <C> <C>
Ronald W. Ball* $0 $0 $0 $0
Jon D. Carlson $0 $0 $0 $0
Thomas R. Hanson $8,000 $0 $0 $8,000
Stanislaw Maliszewski $8,000 $0 $0 $8,000
Stephen E. Upton $8,000 $0 $0 $8,000
Donald A. Yacktman $0 $0 $0 $0
</TABLE>
*Mr. Ball was elected as a director of the Company on February
13, 1998.
As of March 31, 1998, all officers and directors of the Company
as a group beneficially owned 311,442 shares of The Yacktman Fund or 0.47%
of the then outstanding shares. At such date, Charles Schwab & Co., 101
Montgomery Street, San Francisco, California 94104, owned of record
33,049,119 shares of The Yacktman Fund, or 50.27% of the then outstanding
shares and National Financial Services Corp., c/o Fidelity Investments, 82
Devonshire Street R20A, Boston, Massachusetts 02109, owned of record
5,621,251 shares of The Yacktman Fund, or 8.55% of the then outstanding
shares. All of the shares owned by Charles Schwab & Co. and National
Financial Services Corp. were owned of record only. Other than the
foregoing, The Yacktman Fund was not aware of any person who, as of March
31, 1998, owned of record or beneficially 5% or more of the shares of The
Yacktman Fund.
As of March 31, 1998, all officers and directors of the Company
as a group beneficially owned 157,862 shares of The Yacktman Focused Fund
or 2.74% of the then outstanding shares. At such date Charles Schwab & Co.
owned of record 2,893,670 shares of The Yacktman Focused Fund or 50.28% of
the then outstanding shares, National Financial Services Corp. owned of
record 528,424 shares of The Yacktman Focused Fund or 9.18% of the then
outstanding shares, Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052, Jersey City, New Jersey 07303 owned of record 434,354
shares of The Yacktman Focused Fund, or 7.55% of the then outstanding
shares, and the City of Milwaukee, c/o Firstar Trust Company as custodian,
P.O. Box 1787, Milwaukee, Wisconsin 53201 beneficially owned 379,020
shares of The Yacktman Focused Fund, or 6.59% of the then outstanding
shares. All of the shares owned by Charles Schwab & Co., National
Financial Services Corp. and Donaldson Lufkin Jenrette Securities
Corporation Inc. were owned of record only. Other than the foregoing, The
Yacktman Focused Fund was not aware of any person who, as of March 31,
1998, owned of record or beneficially 5% or more of the shares of The
Yacktman Focused Fund.
INVESTMENT ADVISER AND ADMINISTRATOR
As set forth in the Prospectus under the caption "MANAGEMENT OF
THE FUNDS," the investment adviser to the Funds is Yacktman Asset
Management Co., 303 West Madison Street, Chicago, Illinois 60606 (the
"Adviser"). Pursuant to the investment advisory agreements entered into
between the Company, on behalf of each of the Funds, and the Adviser (the
"Advisory Agreements"), the Adviser furnishes continuous investment
advisory services to each of the Funds.
The Adviser has undertaken to reimburse each Fund to the extent
that the aggregate annual operating expenses, including the investment
advisory fee and the administration fee but excluding interest, taxes,
brokerage commissions and other costs incurred in connection with the
purchase or sale of portfolio securities, and extraordinary items, exceed
that percentage of the average net assets of such Fund for such year, as
determined by valuations made as of the close of each business day of the
year, which is the most restrictive percentage provided by the state laws
of the various states in which the shares of such Fund are qualified for
sale. As of the date of this Statement of Additional Information, no such
state law provision was applicable to the Funds. Additionally, the
Adviser has voluntarily agreed to reimburse The Yacktman Focused Fund to
the extent aggregate annual operating expenses as described above do not
exceed specified percentages of such Fund's daily net assets as set forth
in the Prospectus. For the fiscal year ended December 31, 1997 such
specified percentage was 1.25%. The Funds monitor their expense ratios on
a monthly basis. If the accrued amount of the expenses of either Fund
exceeds the expense limitation, the Fund creates an account receivable
from the Adviser for the amount of such excess. In such a situation the
monthly payment of the Adviser's fee will be reduced by the amount of such
excess (and if the amount of such excess in any month is greater than the
monthly payment of the Adviser's fee, the Adviser will pay each Fund the
amount of such difference), subject to adjustment month by month during
the balance of each Fund's fiscal year if accrued expenses thereafter fall
below this limit.
For services provided by the Adviser under the applicable
Advisory Agreement for the fiscal years ended December 31, 1997, 1996 and
1995 The Yacktman Fund paid the Adviser $6,360,037, $4,086,939 and
$3,400,202, respectively. The Adviser was not required to reimburse The
Yacktman Fund for excess expenses during such years. During the fiscal
year ended December 31, 1997 for services provided under the applicable
Advisory Agreement The Yacktman Focused Fund paid the Adviser $218,380 and
the Adviser reimbursed The Yacktman Focused Fund $101,060 for excess
expenses.
Each Advisory Agreement will remain in effect as long as its
continuance is specifically approved at least annually (i) by the Board of
Directors of the Company or by the vote of a majority (as defined in the
Act) of the outstanding shares of the applicable Fund, and (ii) by the
vote of a majority of the directors of the Company who are not parties to
the Advisory Agreement or interested persons of the Adviser, cast in
person at a meeting called for the purpose of voting on such approval.
Each Advisory Agreement provides that it may be terminated at any time
without the payment of any penalty, by the Board of Directors of the
Company or by vote of the majority of the applicable Fund's stockholders
on sixty (60) days' written notice to the Adviser, and by the Adviser on
the same notice to the applicable Fund, and that it shall be automatically
terminated if it is assigned.
As set forth in the Prospectus under the caption "MANAGEMENT OF
THE FUNDS," the administrator to the Funds is Sunstone Financial Group,
Inc. (the "Administrator"). The administration agreement entered into
between the Funds and the Administrator (the "Administration Agreement")
will remain in effect as long as its continuance is approved at least
annually by the Board of Directors of the Company and the Administrator.
The Administration Agreement may be terminated on not less than 90 days'
notice, without the payment of any penalty, by the Board of Directors of
the Company or by the Administrator. For the fiscal years ended December
31, 1997, 1996 and 1995, The Yacktman Fund paid the Administrator
$401,002, $287,053 and $252,510, respectively, pursuant to the
Administration Agreement. For the fiscal year ended December 31, 1997 The
Yacktman Focused Fund paid the Administrator $33,563 pursuant to the
Administration Agreement.
The Advisory Agreements and the Administration Agreement provide
that the Adviser and Administrator, as the case may be, shall not be
liable to the Funds or its stockholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Advisory Agreements and the Administration
Agreement also provide that the Adviser and Administrator, as the case may
be, and their officers, directors and employees may engage in other
businesses, devote time and attention to any other business whether of a
similar or dissimilar nature, and render services to others.
EXCHANGE PRIVILEGE
Investors may exchange shares of either Fund having a value of
$1,000 or more for shares of the Firstar Money Market Fund, the Firstar
U.S. Government Money Market Fund or the Firstar Tax-Exempt Money Market
Fund (collectively the "Firstar Money Funds") at their net asset value and
at a later date exchange such shares and shares purchased with reinvested
dividends for shares of the Funds at net asset value. Investors who are
interested in exercising the exchange privilege should first contact the
Funds to obtain instructions and any necessary forms. The exchange
privilege does not in any way constitute an offering of, or recommendation
on the part of the Funds or the Adviser of, an investment in any of the
Firstar Money Funds. Any investor who considers making such an investment
through the exchange privilege should obtain and review the Prospectus of
the applicable Firstar Money Fund before exercising the exchange
privilege.
The exchange privilege will not be available if (i) the proceeds
from a redemption of shares are paid directly to the investor or at his or
her discretion to any persons other than the Funds or (ii) the proceeds
from redemption of the shares of the Firstar Money Market Fund are not
immediately reinvested in shares of the Funds or another Firstar Money
Fund through a subsequent exercise of the exchange privilege. There is
currently no limitation on the number of exchanges an investor may make.
The exchange privilege may be terminated by the Funds upon at least 60
days prior notice to investors.
For federal income tax purposes, a redemption of shares of a
Fund pursuant to the exchange privilege will result in a capital gain if
the proceeds received exceed the investor's tax-cost basis of the shares
redeemed. Such a redemption may also be taxed under state and local tax
laws, which may differ from the Internal Revenue Code of 1986 (the
"Code").
REDEMPTIONS IN KIND
Each of the Funds has reserved the right to pay the redemption
price of its shares in assets other than cash. In accordance with Rule
18f-1 under the Act, the Company has filed Form N-18F-1 with the
Securities and Exchange Commission pursuant to which each Fund has
committed to pay in cash all requests for redemption by any shareholder of
record, limited in amount with respect to each shareholder during any
ninety-day period to the lesser of (i) $250,000, or (ii) 1% of the net
asset value of the Fund at the beginning of the ninety-day period.
SYSTEMATIC WITHDRAWAL PLAN
An investor who owns shares of a Fund worth at least $10,000 at
the current net asset value may, by completing an application which may be
obtained from the Funds or Firstar Trust Company, create a Systematic
Withdrawal Plan from which a fixed sum will be paid to the investor at
regular intervals through redemption of shares of such Fund. To establish
the Systematic Withdrawal Plan, the investor deposits shares of the Funds
with the Company and appoints it as agent to effect redemptions of Fund
shares held in the account for the purpose of making monthly or quarterly
withdrawal payments of a fixed amount to the investor out of the account.
Fund shares deposited by the investor in the account need not be endorsed
or accompanied by a stock power if registered in the same name as the
account; otherwise, a properly executed endorsement or stock power,
obtained from any bank, broker-dealer or the Funds is required. The
investor's signature should be guaranteed by a bank, a member firm of a
national stock exchange or other eligible guarantor.
The minimum amount of a withdrawal payment is $100. These
payments will be made from the proceeds of periodic redemptions of shares
in the account at net asset value. Redemptions can be made monthly or
quarterly on any day the investor chooses or, if that day is a weekend day
or a holiday, on the following business day. Establishment of a
Systematic Withdrawal Plan constitutes an election by the investor to
reinvest in additional shares of the Funds, at net asset value, all income
dividends and capital gains distributions payable by the applicable Fund
on shares held in such account, and shares so acquired will be added to
such account. The investor may deposit additional shares in his account
at any time.
Withdrawal payments cannot be considered as yield or income on
the investor's investment, since portions of each payment will normally
consist of a return of capital. Depending on the size or the frequency of
the disbursements requested, and the fluctuation in the value of the
applicable Fund's portfolio, redemptions for the purpose of making such
disbursements may reduce or even exhaust the investor's account.
The investor may vary the amount or frequency of withdrawal
payments, temporarily discontinue them, or change the designated payee or
payee's address, by notifying Firstar Trust Company in writing prior to
the 15th day of the month preceding the next payment.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the Funds. As such, Firstar Trust
Company holds all securities and cash of the Funds, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Company. Firstar Trust Company does not
exercise any supervisory function over the management of the Funds, the
purchase and sale of securities or the payment of distributions to
stockholders. Firstar Trust Company also acts as each Fund's transfer
agent and dividend disbursing agent.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 200 East Randolph Drive, Chicago, Illinois
60601, serves as the independent accountants for the Funds.
DISTRIBUTION PLAN
As set forth in the Prospectus under the caption "PURCHASE OF
SHARES," The Yacktman Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. The Plan permits The Yacktman Fund
to employ one or more distributors of its shares. Payments under the Plan
may be made only to distributors so employed by The Yacktman Fund.
Payments under the Plan in any year are limited to 0.25% of the average
daily net assets of The Yacktman Fund. Under the Plan, The Yacktman Fund
paid distributors fees for the fiscal year ended December 31, 1997
totaling $484,861, representing 0.05% of The Yacktman Fund's average net
assets.
The Yacktman Fund will pay to each distributor a monthly fee for
distribution of The Yacktman Fund's shares at the rate of 0.65% per annum
of the aggregate average daily net asset value of The Yacktman Fund shares
beneficially owned by such distributor's existing brokerage clients who
established their Yacktman Fund accounts prior to December 31, 1992. For
purposes of the Plan, a client shall include (a) with respect to
individuals, the individual's spouse, children, trust or retirement
accounts for the benefit of any of the foregoing, the individual's estate
and any corporation of which the individual is an affiliate, (b) with
respect to corporations, its retirement plans and its affiliates, and (c)
with respect to clients who are investment advisers, financial planners or
others who exercise investment discretion or make recommendations
concerning the purchase or sale of securities, accounts for which they
exercise investment discretion or make recommendations concerning the
purchase or sale of securities. Beneficial ownership shall not include
ownership solely as a nominee. If after December 31, 1992, a client
ceases to be a client of a distributor and thereafter becomes a client of
another distributor, such client shall continue to be considered a client
whose Yacktman Fund account was established prior to December 31, 1992 if
the client beneficially owned shares of The Yacktman Fund at all times
after ceasing to be a client of the former distributor and prior to
becoming a client of the latter distributor except as may be necessary to
affect a transfer of the account. The Yacktman Fund shares owned by a
client will be deemed to include all shares purchased and not redeemed;
provided, however, that if at any time no shares of The Yacktman Fund are
beneficially owned by a client whose Yacktman Fund account was established
prior to December 31, 1992, no distribution fees thereafter will be paid
with respect to shares beneficially owned by such client.
The Plan was adopted in anticipation that The Yacktman Fund will
benefit from the Plan through increased sales of its shares, thereby
reducing The Yacktman Fund's expense ratio and providing an asset size
that allows the Adviser greater flexibility in management. The Plan may
be terminated at any time by a vote of the directors of the Company who
are not interested persons of the Company and who have no direct or
indirect financial interest in the Plan or any agreement related thereto
(the "Rule 12b-1 Directors") or by a vote of a majority of the outstanding
shares of Common Stock. Messrs. Hanson, Maliszewski and Upton are
currently the Rule 12b-1 Directors. The Plan will be automatically
terminated upon the closing of all Fund accounts established by existing
brokerage clients of distributors prior to December 31, 1992. Any change
in the Plan that would materially increase the distribution expenses of
the Funds provided for in the Plan requires approval of the stockholders
and the Board of Directors of each Fund, including the Rule 12b-1
Directors.
While the Plan is in effect, the selection and nomination of
directors who are not interested persons of the Company will be committed
to the discretion of the directors of the Company who are not interested
persons of the Company. The Board of Directors of the Company must review
the amount and purposes of expenditures pursuant to the Plan quarterly as
reported to it by the distributors, if any, or officers of the Company.
Unless otherwise terminated, the Plan will continue in effect for as long
as its continuance is specifically approved at least annually by the Board
of Directors of the Company, including the Rule 12b-1 Directors.
ALLOCATION OF PORTFOLIO BROKERAGE
The Funds' securities trading and brokerage policies and
procedures are reviewed by and subject to the supervision of the Board of
Directors of the Company. Decisions to buy and sell securities for each
Fund are made by the Adviser subject to review by the Company's Board of
Directors. In placing purchase and sale orders for portfolio securities
for the Funds, it is the policy of the Adviser to seek the best execution
of orders at the most favorable price in light of the overall quality of
brokerage and research services provided, as described in this and the
following paragraph. Many of these transactions involve payment of a
brokerage commission by the Funds. In some cases, transactions are with
firms who act as principals of their own accounts. In selecting brokers
to effect portfolio transactions, the determination of what is expected to
result in best execution at the most favorable price involves a number of
largely judgmental considerations. Among these are the Adviser's
evaluation of the broker's efficiency in executing and clearing
transactions, block trading capability (including the broker's willingness
to position securities) and the broker's reputation, financial strength
and stability. The most favorable price to a Fund means the best net
price without regard to the mix between purchase or sale price and
commission, if any. Over-the-counter securities are generally purchased
and sold directly with principal market makers who retain the difference
in their cost in the security and its selling price. In some instances,
the Adviser feels that better prices are available from non-principal
market makers who are paid commissions directly. Although the Funds do
not initially intend to market their shares through intermediary broker-
dealers, the Funds may place portfolio orders with broker-dealers who
recommend the purchase of shares of the Funds to clients (if the Adviser
believes the commissions and transaction quality are comparable to that
available from other brokers) and may allocate portfolio brokerage on that
basis.
In allocating brokerage business for the Funds, the Adviser also
takes into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance of
its duties under the Advisory Agreements. Other clients of the Adviser
may indirectly benefit from the availability of these services to the
Adviser, and the Funds may indirectly benefit from services available to
the Adviser as a result of transactions for other clients. The Advisory
Agreements provide that the Adviser may cause the Fund to pay a broker
which provides brokerage and research services to the Adviser a commission
for effecting a securities transaction in excess of the amount another
broker would have charged for effecting the transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker viewed in terms of either the particular transaction or
the Adviser's overall responsibilities with respect to the Fund and the
other accounts as to which he exercises investment discretion. For the
fiscal years ended December 31, 1997, 1996 and 1995 The Yacktman Fund paid
brokerage commissions of $1,821,839, $998,728 and $1,170,042,
respectively, on total transactions of $1,074,679,740, $652,310,636 and
$652,217,150, respectively. During the fiscal year ended December 31,
1997 The Yacktman Fund paid brokerage commissions of $1,114,012 on
transactions of $689,339,571 to brokers who provided research services to
the Adviser. For the fiscal year ended December 31, 1997, The Yacktman
Focused Fund paid brokerage commissions of $112,677 on total transactions
of $58,538,149, including commissions of $89,583 on transactions of
$47,218,187 to brokers who provided research services to the Adviser.
In the fiscal year ended December 31, 1997, 1996 and 1995, the
Adviser allocated brokerage to a broker that provides sub-transfer agency
services to The Yacktman Fund. Pursuant to a directed brokerage
arrangement, this broker reduced its sub-transfer agency fees by $364,752,
$363,016 and $422,748, respectively, in the fiscal years ended December
31, 1997, 1996 and 1995, as a result of The Yacktman Fund brokerage
allocated to it.
TAXES
As set forth in the Prospectus under the caption "TAXES," each
Fund will endeavor to qualify annually for and elect tax treatment
applicable to a regulated investment company under Subchapter M of the
Code.
Each Fund intends to distribute all of its net investment income
and net capital gain each fiscal year. Dividends from net investment
income (including short-term capital gain) are taxable to investors as
ordinary income, while the tax treatment of distributions of net capital
gain generally will depend upon the Fund's holding period of the
underlying financial instruments or capital asset regardless of the
shareholder's holding period for the shares. Distributions from the Funds
are taxable to investors, whether received in cash or in additional shares
of the respective Funds. A portion of the Funds' income distributions may
be eligible for the 70% dividends-received deduction for domestic
corporate shareholders.
Any dividend or capital gain distribution paid shortly after a
purchase of shares of a Fund will have the effect of reducing the per
share net asset value of such shares by the amount of the dividend or
distribution. Furthermore, even if the net asset value of the shares of a
Fund immediately after a dividend or distribution is less than the cost of
such shares to the investor, the dividend or distribution will be taxable
to the investor.
Redemption of shares will generally result in a capital gain or
loss for income tax purposes. The tax treatment of such capital gain or
loss will depend upon the investor's holding period. However, if a loss
is realized on shares held for six months or less, and the investor
received a capital gain distribution during that period, then such loss is
treated as a long-term capital loss to the extent of the capital gain
distribution received.
Investors may also be subject to state and local taxes.
Each Fund will be required to withhold federal income tax at a
rate of 31% ("backup withholding") from dividend payments and redemption
and exchange proceeds if an investor fails to furnish such Fund with his
social security number or other tax identification number or fails to
certify under penalty of perjury that such number is correct or that he is
not subject to backup withholding due to the underreporting of income.
The certification form is included as part of the share purchase
application and should be completed when the account is opened.
This section is not intended to be a full discussion of present
or proposed federal income tax laws and the effect of such laws on an
investor. Investors are urged to consult with their respective tax
advisers for a complete review of the tax ramifications of an investment
in a Fund.
STOCKHOLDER MEETINGS
The Maryland General Corporation Law permits registered
investment companies, such as the Funds, to operate without an annual
meeting of stockholders under specified circumstances if an annual meeting
is not required by the Act. The Company has adopted the appropriate
provisions in its Bylaws and may, at its discretion, not hold an annual
meeting in any year in which the election of directors is not required to
be acted on by stockholders under the Act.
The Company's Bylaws also contain procedures for the removal of
directors by its stockholders. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to
not less than ten percent (10%) of all the votes entitled to be cast at
such meeting, the Secretary of the Company shall promptly call a special
meeting of stockholders for the purpose of voting upon the question of
removal of any director. Whenever ten or more stockholders of record who
have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at
least $25,000 or at least one percent (1%) of the total outstanding
shares, whichever is less, shall apply to the Company's Secretary in
writing, stating that they wish to communicate with other stockholders
with a view to obtaining signatures to a request for a meeting as
described above and accompanied by a form of communication and request
which they wish to transmit, the Secretary shall within five business days
after such application either: (1) afford to such applicants access to a
list of the names and addresses of all stockholders as recorded on the
books of the Funds; or (2) inform such applicants as to the approximate
number of stockholders of record and the approximate cost of mailing to
them the proposed communication and form of request.
If the Secretary elects to follow the course specified in clause
(2) of the last sentence of the preceding paragraph, the Secretary, upon
the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all stockholders of
record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in
the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the Board of Directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all stockholders with reasonable promptness
after the entry of such order and the renewal of such tender.
PERFORMANCE INFORMATION
Average annual total return measures both the net investment
income generated by, and the effect of any realized or unrealized
appreciation or depreciation of, the underlying investments in a Fund's
investment portfolio. A Fund's average annual total return figures are
computed in accordance with the standardized method prescribed by the
Securities and Exchange Commission by determining the average annual
compounded rates of return over the periods indicated, that would equate
the initial amount invested to the ending redeemable value, according to
the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of
the period of a hypothetical $1,000
payment made at the beginning of such
period
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value or the appropriate reinvestment dates as
described in the Prospectus, and (ii) deducts all recurring fees, such as
advisory fees, charged as expenses to all investor accounts.
Total return is the cumulative rate of investment growth which
assumes that income dividends and capital gains are reinvested. It is
determined by assuming a hypothetical investment at the net asset value at
the beginning of the period, adding in the reinvestment of all income
dividends and capital gains, calculating the ending value of the
investment at the net asset value as of the end of the specified time
period, subtracting the amount of the original investment, and dividing
this amount by the amount of the original investment. This calculated
amount is then expressed as a percentage by multiplying by 100.
The Yacktman Fund's average annual compounded returns for the
one-year period ended December 31, 1997, for the five year period ended
December 31, 1997 and for the period from the Fund's commencement of
operations (July 6, 1992) through December 31, 1997 were 18.28%, 14.59%
and 14.15%, respectively. Such performance results reflect reimbursements
made by the Adviser during the fiscal year ended December 31, 1993 and the
period from July 6, 1992 through December 31, 1992 to keep aggregate
annual operating expenses at or below 1.2% of average daily net
assets.
The Yacktman Focused Fund's total return for the period May 1,
1997 through December 31, 1997 was 28.87%. Such performance results
reflect reimbursements made by the Adviser during the period to keep
aggregate annual operating expenses at or below 1.25% (annualized) of
average daily net assets. The foregoing performance results are based on
historical earnings and should not be considered as representative of the
performance of the Funds in the future. An investment in either Fund will
fluctuate in value and at redemption its value may be more or less than
the initial investment.
FINANCIAL STATEMENTS
The following audited financial statements for each of The
Yacktman Fund and The Yacktman Focused Fund are incorporated by reference
to the Annual Report, dated December 31, 1997, of the Company (File No.
811-06628), as filed with the Securities and Exchange Commission on
February 10, 1998.
- Report of Independent Accountants
- Portfolio of Investments
- Statement of Assets & Liabilities
- Statement of Operations
- Statement of Changes in Net Assets
- Financial Highlights
- Notes to the Financial Statements
DESCRIPTION OF SECURITIES RATINGS
As set forth in the Prospectus under the caption "OBJECTIVE AND
INVESTMENT APPROACH," The Yacktman Fund may invest in non-convertible
bonds and debentures assigned one of the two highest ratings of either
Standard & Poor's Corporation ("Standard & Poor's") or Moody's Investors
Service, Inc. ("Moody's"). As also set forth therein, The Yacktman
Focused Fund may invest in non-convertible bonds and debentures assigned
at least an investment grade by Standard & Poor's or Moody's (or unrated
but deemed by the Adviser to be of comparable quality), and up to 5% of
the assets of each of The Yacktman Fund and The Yacktman Focused Fund may
be invested in convertible bonds and debentures rated below investment
grade. As also set forth therein, the Funds may invest in commercial
paper and commercial paper master notes rated A-2 or better by Standard &
Poor's or P-2 by Moody's. A brief description of the ratings symbols and
their meanings follows.
Standard & Poor's Debt Ratings. A Standard & Poor's corporate
debt rating is a current assessment of the creditworthiness of an obligor
with respect to a specific obligation. This assessment may take into
consideration obligors such as guarantors, insurers or lessees.
The debt rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform any audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes
in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment
of principal in accordance with the terms of the
obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights;
Investment Grade
AAA - Debt rated 'AAA' has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in small
degree.
A - Debt rated 'A' has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher rated categories.
BBB - Debt rated 'BBB' is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for debt in this category than in higher
rated categories.
Speculative Grade
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of
speculation and 'C' the highest. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB - Debt rated 'BB' has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments. The 'BB' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BBB-'
rating.
B - Debt rated 'B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay principal.
The 'B' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BB' or 'BB-' rating.
CCC - Debt rated 'CCC' has a currently identifiable
vulnerability to default, and is dependent upon favorable business,
financial, and economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest
and repay principal. The 'CCC' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'B' or
'B-' rating.
CC - Debt rated 'CC' typically is applied to debt subordinated
to senior debt that is assigned an actual or implied 'CCC' rating.
C - Debt rated 'C' typically is applied to debt subordinated to
senior debt which is assigned an actual or implied 'CCC-' debt rating.
The 'C' rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
CI - The rating 'CI' is reserved for income bonds on which no
interest is being paid.
D - Debt rated 'D' is in payment default. The 'D' rating
category is used when interest payments or principal payments are not made
on the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such period.
The 'D' rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
Moody's Bond Ratings.
Investment Grade
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by
a large, or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds which are Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Speculative Grade
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each of the
foregoing generic rating classifications. The modifier 1 indicates that
the company ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the company ranks in the lower end of its generic rating category.
Standard & Poor's Commercial Paper Ratings. A Standard & Poor's
commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. The three highest
categories are as follows:
A-1. This highest category indicates that the degree of safety
regarding timely payment is strong. Those issuers determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2. Capacity for timely payment on issues with this
designation is satisfactory. However the relative degree of safety is not
as high as for issuers designated "A-1".
A-3. Issues carrying this designation have adequate capacity
for timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying a higher
designation.
Moody's Commercial Paper Ratings. Among the factors considered
by Moody's in assigning ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of the issuer's industry
or industries which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of
earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet
such obligations. Relative differences in these factors determine whether
the issuer's commercial is rated P-1, P-2 or P-3.
PART C
OTHER INFORMATION
Item24. Financial Statements and Exhibits
(a.) Financial Statements
Financial Highlights included in Part A
Included in Part B are:
(i) the following audited financial statements of The Yacktman
Fund incorporated by reference to the Annual Report, dated
December 31, 1997 (File No. 811-06628), of The Yacktman Funds,
Inc. (as filed with the Securities and Exchange Commission on
February 10, 1998):
Report of Independent Accountants
Portfolio of Investments at December 31, 1997
Statement of Assets & Liabilities as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statement of Changes in Net Assets for the years ended
December 31, 1997 and December 31, 1996
Financial Highlights
Notes to Financial Statements
(ii) the following audited financial statements of The Yacktman
Focused Fund incorporated by reference to the Annual Report
dated December 31, 1997 (File No. 811-06628), of The Yacktman
Funds, Inc. (as filed with the Securities and Exchange
Commission on February 10, 1998):
Portfolio of Investments at December 31, 1997
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the period May 1, 1997 to December
31, 1997
Statement of Changes in Net Assets for the period May 1, 1997
to December 31, 1997
Financial Highlights
Notes to Financial Statements
(b.) Exhibits
(1) Registrant's Articles of Incorporation, as amended;
Exhibit 1 to Amendment No. 9 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities act
of 1933 (filed October 30, 1997).
(2) Registrant's Bylaws; Exhibit 2 to Amendment No. 9 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities act of 1933 (filed October 30, 1997).
(3) None
(4) None.
(5.1) Investment Advisory Agreement with Yacktman Asset
Management Co. on behalf of The Yacktman Fund; Exhibit
5.1 to Amendment No. 9 to Registrant's Registration
Statement on Form N-1A is incorporated by reference
pursuant to Rule 411 under the Securities act of 1933
(filed October 30, 1997).
(5.2) Investment Advisory Agreement with Yacktman Asset
Management Co. on behalf of The Yacktman Focused Fund;
Exhibit 5.2 to Amendment No. 7 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933 (filed February 13, 1997).
(6) None
(7) None
(8) Custodian Agreement with First Wisconsin Trust Company;
Exhibit 8 to Amendment No. 9 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities act
of 1933 (filed October 30, 1997).
(9.1) Amended and Restated Administration Agreement and Fund
Accounting Agreement; Exhibit 9.1 to Amendment No. 7 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933 (filed February 13, 1997).
(9.2) Transfer Agent Agreement with First Wisconsin Trust
Company; Exhibit 9.2 to Amendment No. 9 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities act
of 1933 (filed October 30, 1997).
(10) Opinion of Foley & Lardner, counsel for Registrant;
Exhibit 10 to Amendment No. 9 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities act
of 1933 (filed October 30, 1997).
(11) Consent of Price Waterhouse LLP.
(12) None
(13) Subscription Agreement; Exhibit 13 to Amendment No. 9 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities act of 1933 (filed October 30, 1997).
(14.1) Individual Retirement Custodial Accounts.
(14.2) Simplified Employee Pension Plans; Exhibit 14.2 to
Amendment No. 9 to Registrant's Registration Statement
on Form N-1A is incorporated by reference pursuant to
Rule 411 under the Securities act of 1933 (filed October
30, 1997).
(14.3) Defined Contribution Retirement Plan; Exhibit 14.3 to
Amendment No. 9 to Registrant's Registration Statement
on Form N-1A is incorporated by reference pursuant to
Rule 411 under the Securities act of 1933 (filed October
30, 1997).
(14.4) Model Section 403(b)(7) Plan.
(15) Restated Distribution Plan; Exhibit 15 to Amendment No.
9 to Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities act of 1933 (filed October 30, 1997).
(15.1) List of Distributors.
(16) Schedule for Computation of Performance Quotations;
Exhibit 16 to Amendment No. 6 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933 (filed April 30, 1996).
(17) Financial Data Schedule.
(18) None
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant is not controlled by any person. Registrant neither
controls any person nor is under common control with any other person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of March 31, 1998
Class A Common Stock (The 11,610
Yacktman Fund)
Class B Common Stock (The 879
Yacktman Focused Fund)
Item 27. Indemnification
Pursuant to the authority of the Maryland General Corporation
Law, particularly Section 2-418 thereof, Registrant's Board of Directors
has adopted the following bylaw which is in full force and effect and has
not been modified or canceled:
Article VII
GENERAL PROVISIONS
Section 7. Indemnification.
A. The Corporation shall indemnify all of its corporate
representatives against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Incorporated by reference to pages 10 through 14 of the
Statement of Additional Information pursuant to Rule 411 under the
Securities Act of 1933.
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder are in the
physical possession of Registrant and Registrant's Administrator as
follows: the documents required to be maintained by paragraphs (5), (6),
(7), (10) and (11) of Rule 31a-1(b) will be maintained by the Registrant;
and all other records will be maintained by the Registrant's
Administrator.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant undertakes to provide its Annual Report to
Shareholders upon request without charge to each person to whom a
prospectus is delivered.
With respect to stockholder meetings, Registrant undertakes to
call stockholder meetings in accordance with the provisions of Article I
of its Bylaws, which are discussed in Parts A and B of this Registration
Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Amended Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Chicago and
State of Illinois on the 29th day of April, 1998.
THE YACKTMAN FUNDS, INC.
(Registrant)
By: /s/ Donald A. Yacktman
Donald A. Yacktman,
President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Name Title Date
/s/ Donald A. Yacktman President and Treasurer April 29, 1998
Donald A. Yacktman (Principal Executive,
Financial and Accounting
Officer) and a Director
/s/ Ronald W. Ball Director April 29, 1998
Ronald W. Ball
/s/ Jon D. Carlson Director April 29, 1998
Jon D. Carlson
Director April __, 1998
Thomas R. Hanson
/s/ Stanislaw Maliszewski Director April 28, 1998
Stanislaw Maliszewski
Director April __, 1998
Stephen E. Upton
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1) Registrant's Articles of Incorporation, as
amended*
(2) Registrant's Bylaws*
(3) None
(4) None
(5.1) Investment Advisory Agreement with
Yacktman Asset Management Co.*
(5.2) Investment Advisory Agreement with
Yacktman Asset Management Co., on behalf
of The Yacktman Focused Fund*
(6) None
(7) None
(8) Custodian Agreement with First Wisconsin
Trust Company*
(9.1) Amended and Restated Administration and
Fund Accounting Agreement with Sunstone
Financial Group, Inc.*
(9.2) Transfer Agent Agreement with First
Wisconsin Trust Company*
(10) Opinion of Foley & Lardner, counsel for
Registrant*
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreement*
(14.1) Individual Retirement Custodial Accounts
(14.2) Simplified Employee Pension Plans*
(14.3) Defined Contribution Retirement Plan*
(14.4) Model Section 403(b)(7) Plan
(15) Restated Distribution Plan*
(15.1) List of Distributors
(16) Schedule for Computation of Performance
Quotations*
(17) Financial Data Schedule
(18) None
* Incorporated by reference
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-
Effective Amendment No. 9 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated January 28, 1998, relating
to the financial statements and financial highlights appearing in the
December 31, 1997 Annual Report to Shareholders of The Yacktman Funds,
Inc., which is also incorporated by reference into the Registration
Statement. We also consent to the references to us under the heading
"Financial Highlights" in the Prospectus and under the heading
"Independent Accountants" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Chicago, Illinois
April 27, 1998
YACKTMAN FUND
EDUCATION INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The depositor whose name appears above is establishing an
education individual retirement custodial account under section 530 for
the benefit of the designated beneficiary whose name appears above
exclusively to pay for the qualified higher education expenses, within the
meaning of section 530(b)(2), of such designated beneficiary.
The custodian named above has provided the depositor with a
concise statement disclosing the provisions governing section 530. This
disclosure statement must include an explanation of the statutory
requirements applicable to, and the income tax consequences of
establishing and maintaining an account under, section 530. Providing the
depositor with a copy of Notice 97-60, 1997-46 I.R.B. 8 (November 17,
1997) is considered a sufficient disclosure statement. The custodian also
will provide a copy of this form and the disclosure statement to the
responsible individual, as defined in Article VI below, if the responsible
individual is not the same person as the depositor.
The depositor assigned the custodial account
_______________________ dollars ($____________) in cash.
The depositor and the custodian make the following agreement:
ARTICLE I.
The custodian may accept additional cash contributions. These
contributions may be from the depositor, or from any other individual, for
the benefit of the designated beneficiary, provided the designated
beneficiary has not attained the age of 18 as of the date such
contributions are made. Total contributions that are not rollover
contributions described in section 530(d)(5) are limited to a maximum
amount of $500 for the taxable year.
ARTICLE II.
The maximum aggregate contribution that an individual may make
to the custodial account in any year may not exceed the $500 in total
contributions that the custodial account can receive. In addition, the
maximum aggregate contribution that an individual may make to the
custodial account in any year is phased out for unmarried individuals who
have modified adjusted gross income (AGI) between $95,000 and $110,000 for
the year of the contribution and for married individuals who file joint
returns with modified AGI between $150,000 and $160,000 for the year of
the contribution. Unmarried individuals with modified AGI above $110,000
for the year and married individuals who file joint returns and have
modified AGI above $160,000 for the year may not make a contribution for
that year. Modified AGI is defined in section 530(c)(2).
ARTICLE III.
No part of the custodial account funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common investment fund (within
the meaning of section 530(b)(1)(D)).
ARTICLE IV.
1. Any balance to the credit of the designated beneficiary on
the date on which such designated beneficiary attains age 30 shall be
distributed to the designated beneficiary within 30 days of such date.
2. Any balance to the credit of the designated beneficiary
shall be distributed to the estate of the designated beneficiary within 30
days of the date of such designated beneficiary's death.
ARTICLE V.
The depositor shall have the power to direct the custodian
regarding the investment of the above-listed amount assigned to the
custodial account (including earnings thereon) in the investment choices
offered by the custodian. The responsible individual, however, shall have
the power to redirect the custodian regarding the investment of such
amounts, as well as the power to direct the custodian regarding the
investment of all additional contributions (including earnings thereon) to
the custodial account. In the event that the responsible individual does
not direct the custodian regarding the investment of additional
contributions (including earnings thereon), the initial investment
direction of the depositor also will govern all additional contributions
made to the custodial account until such time as the responsible
individual otherwise directs the custodian. Unless otherwise provided in
this agreement, the responsible individual also shall have the power to
direct the custodian regarding the administration, management, and
distribution of the account.
ARTICLE VI.
The "responsible individual" named by the depositor shall be a
parent or guardian of the designated beneficiary. The custodial account
shall have only one responsible individual at any time. If the
responsible individual becomes incapacitated or dies while the designated
beneficiary is a minor under state law, the successor responsible
individual shall be the person named to succeed in that capacity by the
preceding responsible individual in a witnessed writing or, if no
successor is so named, the successor responsible individual shall be the
designated beneficiary's other parent or successor guardian. Unless
otherwise directed by checking the option below, at the time that the
designated beneficiary attains the age of majority under state law, the
designated beneficiary becomes the responsible individual.
______ Option (This provision is effective only if checked):
The responsible individual shall continue to serve as the responsible
individual for the custodial account after the designated beneficiary
attains the age of majority under state law and until such time as all
assets have been distributed from the custodial account and the custodial
account terminates. If the responsible individual becomes incapacitated
or dies after the designated beneficiary reaches the age of majority under
state law, the responsible individual shall be the designated beneficiary.
ARTICLE VII.
The responsible individual ____ may or ____ may not change the
beneficiary designated under this agreement to another member of the
designated beneficiary's family described in section 529(e)(2) in
accordance with the custodian's procedures.
ARTICLE VIII.
1. The depositor agrees to provide the custodian with the
information necessary for the custodian to prepare any reports required
under section 530(h).
2. The custodian agrees to submit reports to the Internal
Revenue Service and the responsible individual as prescribed by the
Internal Revenue Service.
ARTICLE IX.
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through IV will be controlling.
Any additional articles that are not consistent with section 530 and
related regulations will be invalid.
ARTICLE X.
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the depositor and the custodian whose
signatures appear below.
ARTICLE XI.
1. Investment of Account Assets. (a) All contributions to
the custodial account shall be invested in the shares of any regulated
investment company ("Investment Company") for which Yacktman Asset
Management Co. serves as investment advisor, or any other regulated
investment company designated by the investment advisor. Shares of stock
of an Investment Company shall be referred to as "Investment Company
Shares."
(b) Each contribution to the custodial account shall identify
the designated beneficiary's account number and shall be accompanied by a
signed statement directing the investment of that contribution into the
designated beneficiary's account. The custodian may return to the
contributor, without liability for interest thereon, any contribution
which is not accompanied by such information and such appropriate signed
statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in
additional like shares or in cash, the custodian shall elect to receive
such distribution in additional like Investment Company Shares.
(d) All Investment Company Shares acquired by the custodian
shall be registered in the name of the custodian or its nominee. The
designated beneficiary shall be the beneficial owner of all Investment
Company Shares held in the custodial account and the custodian shall not
vote any such shares, except upon written direction of the responsible
individual. The custodian agrees to forward to the responsible individual
each prospectus, report, notice, proxy and related proxy soliciting
materials applicable to Investment Company Shares held in the custodial
account received by the custodian.
(e) The responsible individual may, at any time, by written
notice to the custodian, redeem any number of shares held in the custodial
account and reinvest the proceeds in the shares of any other Investment
Company. Such redemptions and reinvestments shall be done at the price
and in the manner such shares are then being redeemed or offered by the
respective Investment Companies.
(f) To the extent a responsible individual for the designated
beneficiary makes or has power to make decisions as to the investment of
the designated beneficiary's account, that party acknowledges that such
decisions are binding and nonvoidable.
2. Amendment and Termination. (a) The custodian may amend
the Custodial Account (including retroactive amendments) by delivering to
the responsible individual written notice of such amendment setting forth
the substance and effective date of the amendment. The responsible
individual shall be deemed to have consented to any such amendment not
objected to in writing by the responsible individual within thirty (30)
days of receipt of the notice, provided that no amendment shall cause or
permit any part of the assets of the custodial account to be diverted to
purposes other than for the exclusive benefit of the designated
beneficiary or his or her estate.
(b) The responsible individual may terminate the custodial
account at any time by delivering to the custodian a written notice of
such termination.
(c) The custodial account shall automatically terminate upon
distribution to the designated beneficiary or his or her estate of its
entire balance.
3. Taxes and Custodial Fees. Any income taxes or other
taxes levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the custodian
in the performance of its duties, including fees for legal services
rendered to the custodian, and the custodian's compensation shall be paid
from the custodial account, unless otherwise paid by the beneficiary or
his or her estate.
The custodian's fees are set forth in a schedule provided to the
responsible individual. Extraordinary charges resulting from unusual
administrative responsibilities not contemplated by the schedule will be
subject to such additional charges as will reasonably compensate the
custodian. Fees for refund of excess contributions, transferring to a
successor trustee or custodian, or redemption/reinvestment of Investment
Company Shares will be deducted from the refund or redemption proceeds and
the remaining balance will be remitted to the designated beneficiary, or
reinvested or transferred in accordance with the responsible individual's
instructions.
4. Reports and Notices. (a) The custodian shall keep
adequate records of transactions it is required to perform hereunder.
After the close of each calendar year, the custodian shall provide to the
responsible individual a written report or reports reflecting the
transactions effected by it during such year and the assets and
liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given
upon receipt by the custodian at Yacktman Fund, c/o Firstar Trust Company,
Mutual Fund Services, 615 East Michigan Street, 3rd floor, P.O. Box 701,
Milwaukee, WI 53201-0701 or the responsible individual at his most recent
address shown in the custodian's records. The responsible individual
agrees to advise the custodian promptly, in writing, of any change of
address.
5. Monitoring of Contribution Limitations Information. The
custodian shall not be responsible for monitoring the amount of
contributions made to the designated beneficiary's account or the income
levels of any depositor or contributor for purposes of assuring compliance
with applicable state or federal tax laws.
6. Inalienability of Benefits. The benefits provided under
this custodial account shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such benefits to be so subjected shall not be recognized except to
the extent as may be required by law. However, the responsible individual
may change the designated beneficiary under the agreement to another
member of the designated beneficiary's family described in Internal
Revenue Code Section 529(e)(2) in accordance with the custodian's
procedures.
7. Rollover Contributions and Transfers. The custodian shall
have the right to receive rollover contributions and to receive direct
transfers from other custodians or trustees. All contributions must be
made in cash or check.
8. Conflict in Provisions. To the extent that any provisions
of this Article XI on the Education IRA Application shall conflict with
the provisions of Articles V through VIII or X, the provisions of this
Article XI shall govern.
9. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
<PAGE>
YACKTMAN FUND
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing an
Individual Retirement Account (under Section 408(a) of the Internal
Revenue Code) between the Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf
of the Depositor for a tax year of the Depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in Section 402(c) (but
only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described
in Section 408(k). Rollover contributions before January 1, 1993, include
rollovers described in Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3), or an employer contribution to a simplified employee
pension plan as described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account
is nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of Section 408(m)) except as otherwise
permitted by Section 408(m)(3) which provides an exception for certain
gold and silver coins and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the
contrary, the distribution of the Depositor's interest in the custodial
account shall be made in accordance with the following requirements and
shall otherwise comply with Section 408(a)(6) and Proposed Regulations
Section 1.408-8, including the incidental death benefit provisions of
Proposed Regulations Section 1.401(a)(9)-2, the provisions of which are
incorporated by reference.
2. Unless otherwise elected by the time distributions are
required to begin to the Depositor under Paragraph 3, or to the surviving
spouse under Paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account
must be, or begin to be, distributed by the Depositor's required beginning
date, (April 1 following the calendar year end in which the Depositor
reaches age 70 1/2). By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the Depositor's life
expectancy.
(e) Equal or substantially equal annual payments over a
specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her
interest has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year
containing the fifth anniversary of the Depositor's
death, or
(ii) Be distributed in equal or substantially equal
payments over the life or life expectancy of the
designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this
distribution is not required to begin before December
31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting
the requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has
been distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal
or substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
Paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designed
beneficiary as of their birthdays in the year the Depositor reaches age 70
1/2. In the case of a distribution in accordance with Paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may
use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements described above. This
method permits an individual to satisfy these requirements by taking from
one individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with
information necessary for the Custodian to prepare any reports required
under Section 408(i) and Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal
Revenue Service and the Depositor prescribed by the Internal Revenue
Service.
ARTICLE VI
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through III and this sentence
will be controlling. Any additional articles that are not consistent with
Section 408(a) and related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the persons whose signatures appear below.
ARTICLE VIII
1. Investment of Account Assets. (a) All contributions to the
custodial account shall be invested in the shares of any regulated
investment company ("Investment Company") for which Yacktman Asset
Management Co. serves as investment advisor, or any other regulated
investment company designated by the investment advisor. Shares of stock
of an Investment Company shall be referred to as Investment Company
Shares."
(b) Each contribution to the custodial account shall identify
the Depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The Custodian may return
to the Depositor, without liability for interest thereon, any contribution
which is not accompanied by adequate account identification or an
appropriate signed statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in
additional like shares or in cash or other property, the Custodian shall
elect to receive such distribution in additional like Investment Company
Shares.
(d) All Investment Company Shares acquired by the Custodian
shall be registered in the name of the Custodian or its nominee. The
Depositor shall be the beneficial owner of all Investment Company Shares
held in the custodial account and the Custodian shall not vote any such
shares, except upon written direction of the Depositor. The Custodian
agrees to forward to the Depositor each prospectus, report, notice, proxy
and related proxy soliciting materials applicable to Investment Company
Shares held in the custodial account received by the Custodian.
(e) The Depositor may, at any time, by written notice to the
Custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company. Such
redemptions and reinvestments shall be done at the price and in the manner
such shares are then being redeemed or offered by the respective
Investment Companies.
2. Amendment and Termination. (a) The Custodian may amend
the Custodial Account (including retroactive amendments) by delivering to
the Depositor written notice of such amendment setting forth the substance
and effective date of the amendment. The Depositor shall be deemed to
have consented to any such amendment not objected to in writing by the
Depositor within thirty (30) days of receipt of the notice, provided that
no amendment shall cause or permit any part of the assets of the custodial
account to be diverted to purposes other than for the exclusive benefit of
the Depositor or his or her beneficiaries.
(b) The Depositor may terminate the custodial account at any
time by delivering to the Custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the Depositor or his or her beneficiaries of its entire
balance.
3. Taxes and Custodial Fees. Any income taxes or other taxes
levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the Custodian
in the performance of its duties, including fees for legal services
rendered to the Custodian, and the Custodian's compensation shall be paid
from the custodial account, unless otherwise paid by the Depositor or his
or her beneficiaries.
The Custodian's fees are set forth in a schedule provided to the
Depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the Depositor, or reinvested or transferred in
accordance with the Depositor's instructions.
4. Reports and Notices. (a) The Custodian shall keep
adequate records of transactions it is required to perform hereunder.
After the close of each calendar year, the Custodian shall provide to the
Depositor or his or her legal representative a written report or reports
reflecting the transactions effected by it during such year and the assets
and liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given
upon receipt by the Custodian at Yacktman Fund, c/o Firstar Trust Company,
Mutual Fund Services, 615 East Michigan Street, 3rd Floor, P.O. Box 701,
Milwaukee, WI 53201-0701, or the Depositor at his most recent address
shown in the Custodian's records. The Depositor agrees to advise the
Custodian promptly, in writing, of any change of address.
5. Designation of Beneficiary. The Depositor may designate a
beneficiary or beneficiaries to receive benefits from the custodial
account in the event of the Depositor's death. In the event the Depositor
has not designated a beneficiary, or if all beneficiaries shall predecease
the Depositor, the following persons shall take in the order named:
(a) The spouse of the Depositor;
(b) If the spouse shall predecease the Depositor or if the
Depositor does not have a spouse, then to the personal representative of
the Depositor's estate.
6. Multiple Individual Retirement Accounts. In the event the
Depositor maintains more than one individual retirement account (as
defined in Section 408(a)) and elects to satisfy his or her minimum
distribution requirements described in Article IV above by making a
distribution for another individual retirement account in accordance with
Paragraph 6 thereof, the Depositor shall be deemed to have elected to
calculate the amount of his or her minimum distribution under this
custodial account in the same manner as under the individual retirement
account from which the distribution is made.
7. Inalienability of Benefits. The benefits provided under
this custodial account shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such benefits to be so subjected shall not be recognized except to
the extent as may be required by law.
8. Rollover Contributions and Transfers. The Custodian shall
have the right to receive rollover contributions and to receive direct
transfers from other custodians or trustees. All contributions must be
made in cash or check.
9. Conflict in Provisions. To the extent that any provisions
of this Article VIII shall conflict with the provisions of Articles IV, V
and/or VII, the provisions of this Article VIII shall govern.
10. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
<PAGE>
YACKTMAN FUND
ROTH INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing a Roth IRA
(under Section 408A of the Internal Revenue Code) between the depositor
and the custodian.
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion
IRA, then, except in the case of a rollover contribution described in
section 408A(e), the custodian will accept only cash contributions and
only up to a maximum amount of $2,000 for any tax year of the depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same
tax year will be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to
$0 between certain levels of adjusted gross income (AGI). For a single
depositor, the $2,000 annual contribution is phased out between AGI of
$95,000 and $110,000; for a married depositor who files jointly, between
AGI of $150,000 and $160,000; and for a married depositor who files
separately, between $0 and $10,000. In the case of a conversion, the
custodian will not accept IRA Conversion Contributions in a tax year if
the depositor's AGI for that tax year exceeds $100,000 or if the depositor
is married and files a separate return. Adjusted gross income is defined
in section 408A(c)(3) and does not include IRA Conversion Contributions.
ARTICLE III
The depositor's interest in the balance in the custodial account
if nonforfeitable.
ARTICLE IV
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of section 408(m) except as otherwise
permitted by section 408(m)(3), which provides an exception for certain
gold, silver, and platinum coins, coins issued under the laws of any
state, and certain bullion.
ARTCILE V
1. If the depositor dies before his or her entire interest is
distributed to him or her and the grantor's surviving spouse is not the
sole beneficiary, the entire remaining interest will, at the election of
the depositor or, if the depositor has not so elected, at the election of
the beneficiary or beneficiaries, either.
(a) Be distributed by December 31 of the year containing the
fifth anniversary of the depositor's death, or
(b) Be distributed over the life expectancy of the designated
beneficiary starting no later than December 31 of the year following the
year of the depositor's death.
If distributions do not begin by the date described in (b),
distribution method (a) will apply.
2. In the case of distribution method 1.(b) above, to
determine the minimum annual payment for each year, divide the grantor's
entire interest in the trust as of the close of business on December 31 of
the preceding year by the life expectancy of the designated beneficiary
using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence
and subtract 1 for each subsequent year.
3. If the depositor's spouse is the sole beneficiary on the
depositor's date of death, such spouse will then be treated as the
depositor.
1. The depositor agrees to provide the custodian with
information necessary for the custodian to prepare any reports required
under section 408(i) and 408A(d)(3)(E), regulations sections 1.408-5 and
1.408-6, and under guidance published by the Internal Revenue Service.
2. The custodian agrees to submit reports to the Internal
Revenue Service and the depositor prescribed by the Internal Revenue
Service.
ARTICLE VII
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through IV and this sentence
will be controlling. Any additional articles that are not consistent with
section 408A, the related regulations, and other published guidance will
be invalid.
ARTICLE VIII
This Agreement will be amended from time to time to comply with
the provisions of the Code, related regulations, and other published
guidance. Other amendments may be made with the consent of the persons
whose signatures appear below.
ARTICLE IX
1. Investment of Account Assets. a. All contributions to the
custodial account shall be invested in the shares of any regulated
investment company ("Investment Company") for which Yacktman Asset
Management Co. serves as investment advisor, or any other regulated
investment company designated by the investment advisor. Shares of stock
of an Investment Company shall be referred to as "Investment Company
Shares."
(b) Each contribution to the custodial account shall identify
the depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The custodian may return
to the depositor, without liability for interest thereon, any contribution
which is not accompanied by adequate account identification or an
appropriate signed statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in
additional like shares or in cash or other property, the custodian shall
elect to receive such distribution in additional like Investment Company
Shares.
(d) All Investment Company Shares acquired by the custodian
shall be registered in the name of the custodian or its nominee. The
depositor shall be the beneficial owner of all Investment Company Shares
held in the custodial account and the custodian shall not vote any such
shares, except upon written direction of the depositor. The custodian
agrees to forward to the depositor each prospectus, report, notice, proxy
and related proxy soliciting materials applicable to Investment Company
Shares held in the custodial account received by the custodian.
(e) The depositor may, at any time, by written notice to the
custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company. Such
redemptions and reinvestments shall be done at the price and in the manner
such shares are then being redeemed or offered by the respective
Investment Companies.
(2) Amendment and Termination. (a) The custodian may amend
the Custodial Account (including retroactive amendments) by delivering to
the depositor written notice of such amendment setting forth the substance
and effective date of the amendment. The depositor shall be deemed to
have consented to any such amendment not objected to in writing by the
depositor within thirty (30) days of receipt of the notice, provided that
no amendment shall cause or permit any part of the assets of the custodial
account to be diverted to purposes other than for the exclusive benefit of
the depositor or his or her beneficiaries.
(b) The depositor may terminate the custodial account at any
time by delivering to the custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the depositor or his or her beneficiaries of its entire
balance.
3. Taxes and Custodial Fees. Any income taxes or other taxes
levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the custodian
in the performance of its duties, including fees for legal services
rendered to the custodian, and the custodian's compensation shall be paid
from the custodial account, unless otherwise paid by the depositor or his
or her beneficiaries.
The custodian's fees are set forth in a schedule provided to the
depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the depositor, or reinvested or transferred in
accordance with the depositor's instructions.
4. Reports and Notices. (a) The custodian shall keep
adequate records of transactions it is required to perform hereunder.
After the close of each calendar year, the custodian shall provide to the
depositor or his or her legal representative a written report or reports
reflecting the transactions effected by it during such year and the assets
and liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given
upon receipt by the custodian atYacktman Fund, c/o Firstar Trust Company,
Mutual Fund Services, 615 East Michigan Street, 3rd Floor, P.O. Box 701,
Milwaukee, WI 53201-0701, or the depositor at his most recent address
shown in the custodian's records. The depositor agrees to advise the
custodian promptly, in writing, of any change of address.
5. Designation of Beneficiary. The depositor may designate a
beneficiary or beneficiaries to receive benefits from the custodial
account in the event of the depositor's death. In the event the depositor
has not designated a beneficiary, or if all beneficiaries shall predecease
the depositor, the following persons shall take in the order named:
(a) The spouse of the depositor;
(b) If the spouse shall predecease the depositor or if the
depositor does not have a spouse, then to the personal representative of
the depositor's estate.
6. Inalienability of Benefits. The benefits provided under
this custodial account shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such benefits to be so subjected shall not be recognized except to
the extent as may be required by law.
7. Rollover Contributions and Transfers. Subject to the
restrictions in Article I, the custodian shall have the right to receive
rollover contributions and to receive direct transfers from other
custodians or trustees. All contributions must be made in cash or check.
8. Conflict in Provisions. To the extent that any provisions
of this Article VIII shall conflict with the provisions of Articles V, VI
and/or VIII, the provisions of this Article IX shall govern.
9. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
YACKTMAN FUND
SECTION 403(b)(7) CUSTODIAL ACCOUNT
<PAGE>
YACKTMAN FUND
SECTION 403(b)(7) CUSTODIAL ACCOUNT
<PAGE>
YACKTMAN FUND
SECTION 403(b)(7) CUSTODIAL ACCOUNT
Table of Contents
Page
ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 7
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
THE INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . 17
AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . 18
PROHIBITED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 19
LEGAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ERISA RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ADMINISTRATIVE INFORMATION . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
YACKTMAN FUND
SECTION 403(b)(7) CUSTODIAL ACCOUNT
CUSTODIAL ACCOUNT DOCUMENT
Employees of certain exempt organizations and schools may have a
portion of their compensation set aside for their retirement years in a
mutual fund custodial account. The employee is not taxed on the amount
set aside or the earnings thereon until the accumulated funds are
withdrawn, normally at retirement.
Under the Yacktman Fund Section 403(b)(7) Custodial Account,
contributions are held by the authorized custodian (the "Custodian") and
are invested in the shares of the regulated investment company managed by
Yacktman Asset Management Co., the Investment Advisor. The Yacktman Fund
403(b)(7) Custodial Account (the "Custodial Account") is designed to allow
eligible employers described in Article I to make employer contributions
to the Custodial Account and to allow eligible employees to elect to have
their employer make contributions to the Custodial Account on their behalf
pursuant to a salary reduction agreement. For purposes of this document,
the term "Plan" is used to refer to an arrangement or program sponsored by
an employer which meets the requirements of Section 403(b) of the Internal
Revenue Code. This Custodial Account is intended to comply with the
provisions of the Employee Retirement Income Security Act of 1974 (the
"Act") and the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE I
ELIGIBILITY
A. Any person who performs services as an employee for an
employer which is an organization described in Section 501(c)(3) of the
Code and is exempt from tax under Section 501(a) of the Code, or who
performs services for an educational institution (as defined in Section
170(b)(1)(A)(ii) of the Code) if the educational organization is
maintained by a State or political subdivision of a State or an agency or
instrumentality of either, and who obtains the consent of such employer to
participate herein, is eligible to adopt this Custodial Account.
B. Any employer which is an organization described in Section
501(c)(3) of the Code and is exempt from tax under Section 501(a) of the
Code, or is an educational institution (as defined in Section
170(b)(1)(A)(ii) of the Code) if the educational organization is
maintained by a State or a political subdivision of a State or an agency
or instrumentality of either (the "Employer") may, but is not required to,
adopt this Custodial Account for some or all of its eligible employees in
accordance with Article I, paragraph D below. It is, however, necessary
for the Employer if it does not adopt this Custodial Account to cooperate
to the extent of executing the proper documents allowing the employee to
establish a custodial account and to reduce the employee's salary and
apply the amount of the reduction to contributions for the employee under
the Plan.
C. An eligible individual shall not be entitled to elect to
have his Employer make contributions to the Custodial Account pursuant to
a salary reduction agreement unless the Employer has established a Plan
which allows all employees of the Employer (except as otherwise permitted
by the Code) the opportunity to have contributions made pursuant to such
an agreement. An Employer may exclude from participation employees who
are participants in an eligible deferred compensation plan under Section
457 of the Code, a qualified cash or deferred arrangement under Section
401(k) of the Code or another Section 403(b) annuity contract, and
nonresident aliens and certain students.
D. In lieu of or in addition to a salary reduction
arrangement, an Employer may make contributions on behalf of its
employees, but an Employer is not obligated to do so. If an Employer
makes contributions (other than contributions made pursuant to a salary
reduction agreement), any Plan as adopted by such Employer must satisfy
the nondiscrimination requirements as set forth in Section 403(b)(12) of
the Code (to the extent they apply), including the limitation under
Section 401(a)(17) of the Code on the amount of compensation that may be
taken into account.
E. An eligible individual is not disqualified from
participation by reason of the fact that his Employer provides any other
retirement plan for its employees. However, the contributions under the
Plan or any other Section 403(b) plan will be affected by the Employer's
contributions to such other retirement plan.
ARTICLE II
PARTICIPATION
An eligible employee who wishes to establish this Custodial
Account (the "Individual") may do so by completing the Section 403(b)(7)
Application and Salary Reduction Agreement or Transfer Form (as
applicable), obtaining the Employer's signature and returning all
necessary forms to Yacktman Fund. An eligible Employer may adopt this
Custodial Account by either having the Individual follow the procedure
described in the preceding sentence or by obtaining the Individual's
signature on the Application and following the procedure itself
thereafter.
The Application and the Salary Reduction Agreement, if
applicable, are incorporated herein by reference as part of the Custodial
Account. The Custodial Account will be effective upon written acceptance
by or on behalf of the Custodian of the Application. The terms and
conditions of the Plan shall take precedence over the provisions of this
Custodial Account to the extent such provisions are inconsistent.
ARTICLE III
CONTRIBUTIONS
A. An Employer may contribute cash to the Custodial Account in
accordance with the terms of the Plan in any taxable year in any amount
which (a) is not an "excess contribution" as defined in Section 4973(c) of
the Code and (b) if such contribution is made pursuant to a Salary
Reduction Agreement between the Employer and the Individual, does not
exceed the limitation on "elective deferrals" contained in Section 402(g)
of the Code. Neither the Investment Advisor nor the Custodian shall be
responsible for determining the amount an Employer may contribute on
behalf of the Individual, nor shall either be responsible to recommend or
compel Employer contributions to the Custodial Account in accordance with
the terms of the Plan.
If during any taxable year the Employer contributes an amount
which is an "excess contribution", such excess contribution (plus any
income attributable thereto) shall, upon written request, be paid to the
Individual by the Custodian or applied towards a contribution for the next
subsequent year. In the event that an amount contributed during a
calendar year exceeds the limitation on "elective deferrals" contained in
Section 402(g) of the Code and the Individual notifies the Custodian, in
writing, of such excess amount no later than March 1 of the following
calendar year, the Custodian will distribute such excess amount (plus any
income attributable thereto) to the Individual not later than the
following April 15. Neither the Investment Advisor nor the Custodian
shall have any responsibility for determining that an excess contribution
or excess elective deferral has been made or for distributing such excess
amount except in accordance with the specific written instructions of the
Individual.
In calculating the amount of Employer contributions (including
contributions made pursuant to a Salary Reduction Agreement) made on
behalf of an Individual for any Plan year beginning on or after January 1,
1994, the annual compensation of the Individual taken into account under
the plan shall not exceed $150,000 as adjusted by the Commissioner of the
Internal Revenue Service for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost of
living adjustment in effect for any calendar year applies to any Plan year
or other determination period not exceeding 12 months that begins in such
calendar year and over which Plan contributions are determined. If a Plan
year or other determination period consists of fewer than 12 months, the
annual compensation limit for such period is the limit that would
otherwise be in effect multiplied by a fraction, the numerator of which is
the number of months in the Plan year or other determination period, and
the denominator of which is 12.
B. In addition, the Individual or the Employer may (a)
transfer or cause to be transferred to the Custodial Account in accordance
with the terms of the Plan the cash surrender or redemption value of a
Section 403(b) annuity or variable annuity or the assets of another
Section 403(b)(7) custodial account for which contributions were
previously made on the Individual's behalf or (b) contribute to the
Custodial Account in accordance with the terms of the Plan any amount
distributed from a Section 403(b) annuity or custodial account which
qualifies as a "rollover contribution" within the meaning of Section
403(b)(8) of the Code. Neither the Investment Advisor nor the Custodian
shall be responsible for the tax treatment to the Individual of any
transfer or rollover contribution or for losses resulting from any acts,
omissions or delays of any party transferring or rolling over assets to
the Individual's account.
C. Employer contributions to the Custodial Account in
accordance with the terms of the Plan (including permissible salary
reduction contributions) are not taxable income in the taxable year
contributed. The maximum amount which may be contributed to the Custodial
Account in accordance with the terms of the Plan on an Individual's behalf
may not exceed the lesser of:
(1) 25% of compensation (as defined in Section 415(c) of the
Code) or $30,000 whichever is less. For this purpose, "compensation"
generally means amounts included in the Individual's taxable income,
but does not include Section 403(b) contributions.
(2) The Individual's "exclusion allowance" under Section
403(b)(2) of the Code, which is calculated as 20% of Includible
Compensation times the number of years of service minus the aggregate
amount previously contributed by the Employer (including salary
reduction contributions), under a Section 403(b) plan and excluded
from the Individual's gross income for prior tax years. "Includible
Compensation" (as defined in Section 403(b)(3) of the Code) is
current taxable compensation from a school or other eligible
employer, including amounts contributed to a Code Section 125
"cafeteria plan" salary deferrals contributed to an employer
sponsored retirement plan and amounts excluded from income under Code
Section 457. "Includible Compensation" does not include other
employer contributions to a retirement plan which were not currently
taxed to the employee. (A special minimum exclusion allowance
applies to certain church employees whose adjusted gross income is
$17,000 or less under Section 403(b)(2)(D) of the Code.)
(3) For amounts contributed pursuant to a Salary Reduction
Agreement, $10,000, as adjusted for cost-of-living increases in
accordance with Sections 402(g)(5) and 415 of the Code, less any
salary reduction contributions made during the year under a qualified
cash or deferred arrangement under Section 401(k) of the Code, a
simplified employee pension under Section 408(k) of the Code or any
other Section 403(b) annuity or custodial account.
If employed by an educational institution, hospital, home health
service agency, health and welfare service agency or a church or
convention or association of churches, the Individual may elect to be
governed by one of three alternate limitations: (a) in lieu of the
limitation described in (1) above, an amount equal to the lesser of 25% of
Includible Compensation plus $4,000, or $15,000; (b) that the limitation
described in (2) above not apply; or (c) for the year in which the
Individual's employment terminates, replace the 25% of compensation (but
not the $30,000) limitation described in (1) above with an amount which is
equal to the contributions which could have been made, but were not, under
Code Section 403(b), during a ten-year period ending on the date of
termination. The final "catch-up" contribution in (c) cannot exceed
$30,000 and may only be used once. The alternate limitations available to
employees of educational institutions, hospitals, home health service
agencies, health and welfare service agencies or churches or conventions
or associations of churches are mutually exclusive and an election of one
of the alternatives is irrevocable.
In addition, any employee of such an employer who has completed
at least 15 years of service, may increase the amount described in (3)
above by the lesser of:
(a) $3,000;
(b) $15,000, less amounts excluded in prior
years under this special catch up election;
or
(c) the excess of $5,000 multiplied by the
number of years of service minus any salary
reduction contributions under a Section
403(b) annuity, a Section 401(k) plan or a
simplified employee pension made by the
employer on behalf of the employee for prior
taxable years.
D. The interest of the Individual in the Plan and the assets
in his custodial account shall be nonforfeitable at all times, may not be
assigned, and shall not be subject to alienation, assignment, trustee
process, garnishment, attachment, execution or levy of any kind, except
with regard to payment of the expenses of the Custodian as authorized by
the provisions of this Custodial Account. Notwithstanding the foregoing
or any other provision herein to the contrary, the Custodian may recognize
a qualified domestic relations order with respect to child support,
alimony payments or marital property rights if such order contains
sufficient information for the Employer to determine that it meets the
applicable requirements of Section 414(p) of the Code. If any such order
so directs, distribution of benefits to the alternate payee may be made at
any time even if the Individual is not then entitled to a distribution.
ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
All contributions made to the Custodial Account shall be used by
the Custodian to purchase shares of the regulated investment company
managed by the Investment Advisor. Such regulated investment company will
be referred to as the "Investment Company," and the shares of the
Investment Company will be referred to as "Investment Company Shares".
Unless otherwise directed by the Employer, contributions shall be
allocated to a separate custodial account ("Custodial Account")
established for the Individual. The Individual (or the Individual's
beneficiary) may direct the Custodian to invest his Custodial Account in
the shares of the Investment Company or other regulated investment
companies as may be made available by the Investment Advisor in the
future. The Individual (or the Individual's beneficiary) may direct the
Custodian to transfer all or any part of his Custodial Account assets from
one Investment Company to another at any time. In directing the Custodian
to invest contributions and/or Custodial Account assets, the Individual
(or the Individual's beneficiary) shall designate a percentage allocation
to any or all of the then available Investment Companies. Any changes in
the allocation of future contributions or current Custodial Account assets
will be effective only when the Custodian receives written authorization
from the Individual (or the Individual's beneficiary). All dividends and
capital gains shall be reinvested in additional Investment Company Shares.
ARTICLE V
DISTRIBUTIONS
A. The Individual, or his beneficiary or estate in the event
of his death, shall be entitled to distribution of the assets in his
Custodial Account upon the occurrence of one of the following events:
(a) The Individual's attainment of age 59-1/2.
(b) The Individual terminates his employment.
(c) The Individual becomes disabled.
(d) The Individual's death.
Note that distributions prior to age 59-1/2 may be subject to a 10%
additional tax under the Code.
For purposes of the Plan, the Individual shall be considered
disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which
can be expected to result in death or to be of long continued and
indefinite duration.
B. In addition, an Individual may request distribution of the
assets in his Custodial Account (to the extent attributable to
contributions made pursuant to a Salary Reduction Agreement, not including
any earnings thereon) upon incurring a substantial financial hardship. A
substantial financial hardship shall exist if the Individual incurs
immediate and heavy financial need and that need cannot be met by other
resources reasonably available to the Individual.
The Individual shall be eligible to receive a hardship
distribution from his Custodial Account after the Custodian's receipt of
written notification from the Employer indicating: (a) that the
Individual has incurred a substantial financial hardship and (b) the
specific amount needed to meet the substantial financial hardship. The
amount distributed from the Custodial Account shall not exceed the amount
specified in the notification.
For purposes of this Plan, a substantial financial hardship
shall mean medical expenses incurred by the Individual, his spouse or a
dependent, purchase (excluding mortgage payments) of a principal residence
for the Individual, payment of tuition and related educational expenses
for the next 12 months of post-secondary education for the Individual, his
spouse or a dependent, the need to prevent the eviction of the Individual
from his principal residence or foreclosure on the mortgage of the
Individual's principal residence, or such other events as may be approved
by the Commissioner of Internal Revenue in rulings, notices or other
published documents.
In determining whether the need cannot be met by other resources
reasonably available to the Individual, the Employer may rely on the
Individual's certification, executed in a form and manner specified by the
Employer, that the need cannot be relieved:
(a) through reimbursement or compensation by
insurance or otherwise;
(b) by reasonable liquidation of the Individual's
assets, to the extent such liquidation would not
itself cause an immediate and heavy financial
need;
(c) by cessation of elective deferrals under the
Plan; and
(d) by other distributions or nontaxable [at the time
of the loan] loans from plans maintained by the
Employer or by any other employer, or by
borrowing from commercial sources on reasonable
commercial terms.
In the event the Individual is unwilling or unable to provide
the certification described above, or in the event the Employer determines
that it cannot reasonably rely on the certification provided by an
Individual, then the requirements of this Paragraph B shall be deemed
satisfied only if all of the following conditions are satisfied:
(a) the distribution is not in excess of the amount
of the immediate and heavy financial need of the
Individual;
(b) the Individual has obtained all distributions,
other than hardship distributions, and all
nontaxable (at the time of the loan) loans from
plans maintained by the Employer;
(c) the Individual's elective deferrals under the
Plan and all other plans maintained by the
Employer shall be suspended for at least 12
months after receipt of the hardship
distribution; and
(d) under the Plan and all other plans maintained by
the Employer, the Individual may not make
elective deferrals for the Individual's taxable
year immediately following the taxable year of
the hardship distribution in excess of the
limitation on elective deferrals in effect for
such next taxable year under Section 402(g) of
the Code less the amount of such Individual's
elective deferrals for the taxable year of the
hardship distribution.
The Employer shall be responsible for:
(a) determining that a substantial financial
hardship exists;
(b) designating the amount necessary to meet such a
substantial financial hardship; and
(c) notifying the Custodian in writing of its
decisions.
If the Employer does not process hardship distributions in
accordance with the standards set forth under the Plan and applicable law,
the hardship distribution provisions under this Paragraph B shall be
ineffective. Neither the Custodian nor the Investment Advisor shall be
responsible for determining that a substantial financial hardship exists
or the amount necessary to satisfy such hardship and may rely on any
written notification from the Employer certifying the existence and the
amount of a substantial financial hardship.
Any determination under this Paragraph B is to be made in
accordance with uniform and nondiscriminatory standards established by the
Employer. The Individual has the responsibility of providing the Employer
with any and all documents, financial data or other information which the
Employer deems necessary in order to make the determination.
C. The Individual may elect a form of distribution from among
the following alternatives:
(a) A single sum payment in cash;
(b) Equal or substantially equal monthly, quarterly,
or annual payments over a period not extending
beyond the life expectancy of the Individual; or
(c) Equal or substantially equal monthly, quarterly,
or annual payments over a period not extending
beyond the joint and last survivor life
expectancy of the Individual and his beneficiary.
Such election shall be made in writing in such form as shall be
acceptable to the Custodian. After the later to occur of the Individual's
retirement or attainment of age 70 1/2 (the "Required Beginning Date"),
certain restrictions may apply to Individual's ability to change the
period over which payments are made. In no event shall the Custodian or
the Investment Advisor have any responsibility for determining, or giving
advice with respect to, life expectancies or minimum distribution
requirements.
If the Individual fails to elect any of the methods of
distribution described above within the time specified for such election,
the Custodian may distribute the Individual's Custodial Account in the
form of a single sum cash payment by the April 1 following the calendar
year in which occurs the Required Beginning Date. If the Individual
elects a mode of distribution under subparagraphs (b) or (c) of this
Paragraph C, except as otherwise required by Section 403(b)(10) of the
Code, the amount of the monthly, quarterly or annual payments shall be
determined by dividing the entire interest of the Individual in the
Custodial Account at the close of the prior year by the number of years
remaining in the period specified by the Individual's election.
D. Unless the Individual (or his spouse) elects not to have
life expectancy recalculated, the Individual's life expectancy (and the
life expectancy of the Individual's spouse, if applicable) will be
recalculated annually using their attained ages as of their birthdays in
the year for which the minimum annual payment is being determined. The
life expectancy of the designated beneficiary (other than the spouse) will
not be recalculated. The minimum annual payment may be made in a series
of installments (e.g., monthly, quarterly, etc.) as long as the total
payments for the year made by the date required are not less than the
minimum amounts required.
E. The Individual must receive distributions from the Plan in
accordance with Regulations prescribed by the Secretary of the Treasury
pursuant to Section 403(b)(10) of the Code which are hereby incorporated
by reference, or in the absence of such regulations, in accordance with
Section 401(a)(9) of the Code. In general, these provisions require that
certain minimum distributions must commence not later than the April 1
following the calendar year in which the Individual has both retired and
attained age 70-1/2. However, certain accounts in existence prior to
January 1, 1987, may be subject to special treatment.
F. If the Individual dies before his entire interest in the
Custodial Account is distributed to him, the remaining undistributed
balance of such interest shall be distributed to the beneficiary or
beneficiaries, if any, designated by the Individual. If no designation of
a beneficiary shall have been made, distribution shall be made to the
Individual's surviving spouse, or the Individual's estate, in that order.
If the Individual dies after installment payments have
commenced, the beneficiary shall continue to receive distributions in
accordance with the payment method specified by the Individual or may
elect, in writing, to receive a lump sum distribution.
If the Individual dies prior to the commencement of benefits,
the beneficiary may elect, in writing, to receive the distribution in one
of the following forms:
(a) A single sum payment in cash made by the
December 31 of the year containing the fifth
anniversary of the Individual's death; or
(b) Equal or substantially equal monthly,
quarterly, or annual payments commencing not
later than the December 31 following the
year of the Individual's death over a period
not to exceed the life expectancy of the
beneficiary.
Notwithstanding the foregoing, if the beneficiary is the Individual's
spouse, distributions may be delayed until the December 31 of the year in
which the Individual would have attained age 70-1/2. A beneficiary must
receive distributions from the Plan in accordance with the regulations
prescribed by the Secretary of the Treasury pursuant to Section 403(b)(10)
of the Code, including the incidental death benefit requirements, which
are hereby incorporated by reference, or in the absence of such
Regulations, in accordance with Section 401(a)(9) of the Code.
G. The Individual may designate a beneficiary or
beneficiaries, and may, in addition, name a contingent beneficiary. Such
designation shall be made in writing in a form acceptable to the
Custodian. The Individual may, at any time, revoke his or her designation
of a beneficiary or change the beneficiary by filing notice of such
revocation or change with the Custodian. Notwithstanding the foregoing,
in the event the Individual is married at the time of his death, the
beneficiary shall be the Individual's surviving spouse unless such spouse
consented in writing to the designation of an alternative beneficiary
after notice of the spouse's rights and such consent was witnessed by a
notary public or representative of the Employer. In the event no valid
designation of beneficiary is on file with the Employer or the Custodian
at the date of death or no designated beneficiary survives him, the
Individual's spouse shall be deemed the beneficiary; in the further event
the Individual is unmarried or his spouse does not survive him, the
Individual's estate shall be deemed to be his beneficiary.
H. In the case of any distribution which constitutes an
"eligible rollover distribution" as defined in Section 402(c)(4) of the
Code, the Custodian shall provide the Individual or spousal beneficiary
with the option of (a) receiving the distribution directly, (b) having the
distribution transferred to an individual retirement account or eligible
403(b) program that accepts such "direct rollovers", or (c) to the extent
required under regulations issued by the Secretary of the Treasury, a
combination of (a) and (b).
If the Individual or spousal beneficiary timely elects the
transfer option and provides the Custodian with such information as the
Custodian may prescribe regarding the transferee plan or account,
including the name of the transferee plan or account and identity of the
trustee or custodian, the distribution amount shall be transferred to the
successor trustee or custodian in a "direct rollover" in accordance with
Sections 403(b)(10) and 401(a)(31) of the Code. The Custodian may elect
to accomplish the "direct rollover" by delivering to the Individual or
spousal beneficiary a check, for the full amount of the distribution, but
made payable to the trustee or custodian of the transferee plan or
account. The Individual or spousal beneficiary shall then be responsible
for delivering the check to the trustee or custodian or the transferee
plan.
If the Individual or spousal beneficiary elects payments made
directly to the Individual or spousal beneficiary, distribution shall be
accomplished by delivering to the Individual or spousal beneficiary a
check, for the amount of the distribution less applicable required
withholding, made payable to the Individual or spousal beneficiary.
If the Individual or spousal beneficiary fails to make a timely
election, or if the Individual or spousal beneficiary elects the transfer
option but fails to provide the Custodian with appropriate information to
enable the Custodian to implement the transfer, the Custodian shall,
subject to applicable consent requirements, cause the Individual's or
spousal beneficiary's distribution to be paid directly to the Individual
or spousal beneficiary, less applicable required withholding.
The Custodian need not offer the "direct rollover" option in the
case of any distribution that has been exempted from the "direct rollover"
requirements under rules and regulations issued (whether in proposed,
temporary or final form) by the Secretary of the Treasury. In addition,
the Custodian may promulgate additional rules and regulations, including
rules and regulations governing the time by which elections must be made,
that it determines to be necessary or desirable to the administer this
provision.
The Custodian shall not be responsible for the tax consequences
resulting from an Individual's or spousal beneficiary's election between
receiving a distribution directly or having the distribution transferred
to an individual retirement account or eligible 403(b) program in a
"direct rollover."
ARTICLE VI
ADMINISTRATION
Except as otherwise provided in this Custodial Account, the
Custodian shall perform solely the duties assigned to the Custodian
hereunder as agent on behalf of the Individual and any beneficiary. The
Custodian shall not be deemed to be a fiduciary in carrying out the
following duties:
(a) Receiving contributions pursuant to the
provisions of the Plan.
(b) Holding, investing and reinvesting the
contributions in Investment Company Shares.
(c) Registering any property held by the Custodian in
its own name, or in nominee or bearer form that
will pass delivery.
(d) Making distributions from the Custodial Account
in cash.
The Custodian shall mail to the Individual all proxies, proxy
soliciting materials, and periodic reports or other communications that
may come into the Custodian's possession by reason of its custody of
Investment Company Shares. The Individual shall vote the proxy,
notwithstanding the fact that the Custodian may be the registered owner of
the Investment Company Shares, and the Custodian shall have no further
liability or responsibility with respect to the voting of such shares.
The Custodian shall keep accurate and detailed account of its
receipts, investments and disbursements. As soon as practicable after
December 31st each year, and whenever required by Regulations adopted by
the Internal Revenue Service under the Code, the Custodian shall file with
the Individual a written report of the Custodian's transactions relating
to the Custodial Account during the period from the last previous
accounting, and shall file such other reports with the Internal Revenue
Service as may be required by its Regulations.
Unless the Individual sends the Custodian written objection to a
report within sixty (60) days after its receipt, the Individual shall be
deemed to have approved such report, and, in such case the Custodian shall
be forever released and discharged with respect to all matters and things
included therein. The Custodian may seek a judicial settlement of its
accounts. In any such proceeding the only necessary party thereto in
addition to the Custodian shall be the Individual.
All written notices or communications to the Individual or the
Employer shall be effective when sent by first class mail to the last
known address of the Individual or the Employer on the Custodian's
records. All written notices or communications to the Custodian shall be
mailed or delivered to the Custodian at its designated mailing address,
and no such written notice of communications shall be effective until the
Custodian's actual receipt thereof. The Custodian shall be entitled to
rely conclusively upon, and shall be fully protected in any action taken
by it in good faith in reliance upon the authenticity of signatures
contained in all written notices or other communications which it receives
and which appear to have been sent by the Individual, the Employer, or any
other person.
The Custodian shall make payments from the Custodial Account in
accordance with written directions received from the Individual, and it
need not make inquiry as to the rightfulness of such distribution. If the
Custodian has reason to believe that a distribution may be due, it may,
but shall not be required to make the distribution at the request of any
beneficiary who appears to be entitled thereto. The Custodian shall
properly withhold from any payment to the Individual or beneficiary such
amounts as may be required to satisfy any income or other tax withholding
requirements.
The Custodian shall use ordinary care and reasonable diligence
in the performance of its duties as Custodian. The Custodian shall have
no responsibilities other than those provided for herein or in the Act or
Code and shall not be liable for a mistake in judgment, for any action
taken in good faith, or for any loss that is not a result of its gross
negligence, except as provided for herein or in the Act or Code and shall
not be liable for a mistake in judgment, for any action taken in good
faith, or for any loss that is not a result of its gross negligence,
except as provided by the Act or regulations promulgated thereunder.
The Individual and the Employer agree to indemnify and hold the
Custodian harmless from and against any liability that the Custodian may
incur in the administration of the Custodial Account, unless arising from
the Custodian's own negligence or willful misconduct or from a violation
of the provisions of the Act or Regulations promulgated thereunder.
The Custodian shall be under no duty to question any direction
of the Individual with respect to the investment of contributions, or to
make suggestions to the Individual with respect to the investment,
retention or disposition of any contributions or assets held in the
Custodial Account.
The Custodian shall be paid out of the Custodial Account for
expenses of administration, including the fees of counsel employed by the
Custodian, taxes, and its fees for maintaining the Custodial Account which
are set forth in the Application or in accordance with any schedule of
fees subsequently adopted by the Custodian. The Custodian may make
changes in the fee schedule at any time. The Custodian may sell
Investment Company Shares and use the proceeds of sale to pay the
foregoing expenses.
The Custodian will send account statements periodically, and
after all transactions. Statements will include any information as the
law may require, and in particular the amount of contributions, earnings,
distributions, and total account valuation at the end of the year. The
Custodian will also send a statement to the Internal Revenue Service as
required by law.
The Custodian may resign as Custodian of any Individual's
Custodial Account upon sixty (60) days' prior notice to the Investment
Advisor and thirty (30) days' prior notice to each Individual who will be
affected by such resignation.
ARTICLE VII
THE INVESTMENT ADVISOR
The Individual and the Employer delegate to the Investment
Advisor the following powers with respect to the Custodial Account: to
remove the Custodian and select a successor Custodian; and to amend this
Custodial Account as provided in Article VIII hereof.
The powers herein delegated to the Investment Advisor shall be
exercised by such officer thereof as the Investment Advisor may designate
from time to time, and shall be exercised only when similarly exercised
with respect to all other Individuals adopting the Custodial Account.
Neither an Investment Company, the Investment Advisor, nor any
officer, director, board, committee, employee or member of any Investment
Company or of the Investment Advisor shall have any responsibility with
regard to the administration of the Plan or Custodial Account except as
provided in this Article VII of the Custodial Account, and none of them
shall incur any liability of any nature to the Individual or beneficiary
or other person in connection with any act done or omitted to be done in
good faith in the exercise of any power or authority herein delegated to
the Investment Advisor.
The Individual and the Employer agree to indemnify and hold the
Investment Companies and the Investment Advisor harmless from and against
any and all liabilities and expenses, including attorneys' and
accountants' fees, incurred in connection with the exercise of, or
omission to exercise, any of the powers delegated to it under this
Article, except such liabilities and expense as may arise from the
Investment Advisor's and/or Investment Company's willful misconduct.
If the Investment Advisor shall hereafter determine that it is
no longer desirable for it to continue to exercise any of the powers
hereby delegated to it, it may relieve itself of any further
responsibilities hereunder by notice in writing to the Individual at least
sixty (60) days prior to the date on which it proposes to discontinue the
exercise of the powers delegated to it.
ARTICLE VIII
AMENDMENT AND TERMINATION
The Individual and the Employer delegate to the Investment
Advisor the power to amend this Custodial Account (including retroactive
amendments).
The Individual or the Employer may amend the Application
(including retroactive amendment) by submitting to the Custodian a copy of
such amended Application, and evidence satisfactory to the Custodian that
the Custodial Account, as amended by such amended Application, will
continue to satisfy the provisions of Section 403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit:
(a) any part of the Custodial Account to be diverted to any purpose that
is not for the exclusive benefit of the Individual and his beneficiaries;
(b) the Individual to be deprived of any portion of his interest in the
Custodial Account; or (c) the imposition of an additional duty on the
Custodian without its consent.
The Employer reserves the right to terminate further
contributions to the Custodial Account. The Individual also reserve the
right to terminate his adoption of the Custodial Account in the event that
he shall be unable to secure a favorable ruling from the Internal Revenue
Service with respect to this Custodial Account. In the event of such
termination, the Custodian shall distribute the Custodial Account to the
Individual. The Individual also reserves the right to transfer the assets
of his Custodial Account to such other form of Section 403(b)(7)
retirement plan as he may determine, upon written instructions to the
Custodian in such form as the Custodian may reasonably require.
ARTICLE IX
PROHIBITED TRANSACTIONS
Except as provided in Section 408 of the Act or Section 4975 of
the Code, the Custodian:
A. Shall not cause the Plan to engage in a transaction if it
knows or should know that such transaction constitutes a direct or
indirect:
(a) Sale or exchange or leasing of any property
between the Plan and a party in interest;
(b) lending of money or other extension of
credit between the Plan and a party in
interest;
(c) furnishing of goods, services, or facilities
between the Plan and a party in interest;
(d) transfer to, or use by or for the benefit
of, a party in interest, of any assets of
the Plan;
(e) acquisition, on behalf of the Plan, of any
employer security or employer real property
in violation of Section 407(a) of the Act.
B. Shall not permit the Custodial Account to hold any employer
security or employer real property if it knows or should know that holding
such security or real property violates Section 407(a) of the Act.
C. Shall not deal with the assets of the Custodial Account in
its own interest or for its own account.
D. Shall not in any capacity act in any transaction involving
the Custodial Account on behalf of a party (or represent a party) whose
interests are adverse to the interests of the Custodial Account or the
interests of its participants or beneficiaries.
E. Shall not receive any consideration for its own account
from any party dealing with the Custodial Account in connection with a
transaction involving the assets of the Custodial Account; provided that
nothing in this Article IX shall be construed to prohibit the payment to
the Custodian of any fees otherwise authorized under the terms of this
Custodial Account.
ARTICLE X
LEGAL COMPLIANCE
Section 403(b) of the Code requires that tax sheltered custodial
account arrangements (other than arrangements maintained by a church or
convention or association of churches) satisfy certain participation and
nondiscrimination requirements.
In general, salary reduction contributions made pursuant to an
Individual's election are eligible for exclusion from income only if the
Employer has established a program that provides all employees the
opportunity to make salary reduction contributions of at least $200 per
year. For this purpose, the Employer may exclude from consideration (1)
employees who fail to satisfy minimum age and service requirements (to the
extent such requirements are adopted by the Employer in accordance with
Section 403(b)(12) and 410(b) of the Code for use in its plan); (2)
employees who are participants in an eligible deferred compensation plan
under Section 457 of the Code, qualified cash or deferred arrangement
under Section 401(k) of the Code (to the extent the Employer may maintain
such a plan) or another Section 403(b) plan or arrangement; (3) employees
normally working less than 20 hours per week; (4) employees who are non-
resident aliens; (5) certain student employees performing services
described in Section 3121(w)(3)(A) of the Code; and (6) any other
employees that may be excluded in accordance with rules and regulations
promulgated by the Secretary of the Treasury.
Non-elective contributions made by the Employer must satisfy the
nondiscrimination requirements of Section 403(b)(12) of the Code.
It should be understood that neither the Investment Advisor nor
the Custodian is in a position to render legal or tax advice and that the
information contained in and the documents furnished with this description
merely represent the Investment Advisor's understanding of the statutes
and regulations affecting the establishment and qualification of a Section
403(b)(7) plan. Accordingly, an Individual is urged to consult his
attorney or tax advisor in connection with the adoption of the Custodial
Account regarding compliance with applicable legal requirements, and the
submission of a ruling request on his behalf.
ARTICLE XI
ERISA RIGHTS
If the program as adopted by the Employer constitutes an
"employee pension benefit plan" under the Employee Retirement Income
Security Act of 1974 ("ERISA"), as a participant in the Plan, you are
entitled to certain rights and protections. This law provides that all
Plan participants shall be entitled to:
Examine, without charge, at the office of the plan
administrator (and at other specified locations, if
appropriate), all Plan documents, including copies of all
documents filed by the Plan with the U.S. Department of Labor,
such as detailed annual reports.
Obtain copies of all Plan documents and other Plan
information upon written request to the plan administrator. The
plan administrator may make a reasonable charge for the copies.
Receive a summary of the Plan's annual financial report. The
plan administrator is required by law to furnish each
Participant with a copy of this summary annual report.
Obtain a statement telling you whether you have a current
vested interest in your account and whether, under the terms of
the Plan, you will be entitled to receive a retirement benefit
if you stop working under the Plan now. If you do not have a
current vested interest or right to a benefit at normal
retirement age, the statement will tell you how many more years
you have to work to obtain these rights. This statement must be
requested in writing and is not required to be given more than
once a year. The Plan must provide the statement free of
charge.
In addition to creating rights for Plan participants, ERISA
imposes duties upon the people who are responsible for the operation of
the Plan. The people who operate your Plan, called "fiduciaries" of the
Plan, have a duty to do so prudently and in the interest of you and other
Plan participants and beneficiaries.
No one, including your employer or any other person, may fire
you or otherwise discriminate against you in any way to prevent you from
obtaining your benefits or exercising your rights under ERISA. If your
claim for your benefit is denied in whole or in part you must receive a
written explanation of the reason for the denial. You have the right to
have the plan administrator review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above
rights. For instance, if you request materials from the plan
administrator and do not receive them within 30 days, you may file suit in
a federal court. In such a case, the court may require the plan
administrator to provide the materials and pay you up to $100 a day until
you receive the materials, unless the materials were not sent because of
reasons beyond the control of the plan administrator. If you have a claim
for benefits which is denied or ignored, in whole or in part, you may file
suit in a state or federal court. If it should happen that Plan
fiduciaries misuse the Plan's money, or if you are discriminated against
for asserting your rights, you may seek assistance from the U.S.
Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are
successful, the court may order the person you have sued to pay these
costs and fees. If you lose, the court may order you to pay these costs
and fees, for example, if it finds your claim is frivolous.
If you have any questions about your Plan, you should contact
the plan administrator. If you have any questions about this statement or
about your rights under ERISA, you should contact the nearest Area Office
of the U.S. Labor-Management Services Administration, Department of Labor.
ADMINISTRATIVE INFORMATION
Plan Name: _______________________________________
Employer: _______________________________________
_______________________________________
_______________________________________
(___) _________________________________
EIN: __________________________________
Administrator: _______________________________________
_______________________________________
_______________________________________
(___) _________________________________
EIN: __________________________________
The Administrator shall be the agent for service of
legal process.
Plan Number: ____
Type of Plan: Defined Contribution, Section 403(b)(7) Plan
Funding Medium: Custodial Accounts
Plan Year: _______________________________________
EXHIBIT 15.1
The following broker-dealers have entered into Distribution
Agreements with Registrant pursuant to the Registrant's Distribution Plan
under Rule 12b-1. A copy of the form of Distribution Agreement is
included in Exhibit 15 and is incorporated by reference pursuant to Rule
411 under the Securities Act of 1933.
Advisory Financial Consultants
American Capital Corporation
Birkelbach Investment Securities, Inc.
Chicago Corporation
Charleston Securities Corporation
C.J. Lawrence, Inc.
Edward D. Jones & Co.
Fourth Street Financial Group, Inc.
I.F.S. Investors Services, Inc.
Judge & Associates, Inc.
Linsco\Private Ledger
McDonald & Company Securities, Inc.
MW Management Company
Pittsburgh Financial
Rochdale Securities Corp.
Robert W. Baird
Roney & Company
Smith Barney
Vestor Capital Management
Thomas White & Company
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<NET-CHANGE-FROM-OPS> 1,891,927
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</TABLE>
