YACKTMAN FUNDS
SEMI-ANNUAL REPORT
June 30, 1999
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This report is submitted for the general information of shareholders of The
Yacktman Funds. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective Prospectus for the Funds, which
contains more information concerning the Funds' investment policies, as well as
fees and expenses and other pertinent information. Read the Prospectus
carefully.
THE YACKTMAN FUNDS, INC.
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MESSAGE TO SHAREHOLDERS
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Dear Fellow Shareholder:
(PHOTO)
For investors who purchased shares at THE YACKTMAN FUND'S inception in July
1992 at $10.00 per share, your initial investment, adjusted for dividends and
capital gains, would have grown to $20.31 by the end of the second quarter of
1999 - representing an average annual return of about 10.7%.
For investors who purchased shares at THE YACKTMAN FOCUSED FUND'S inception on
May 1, 1997 at $10.00 per share, your initial investment, adjusted for dividends
and capital gains, would have grown to $11.14 by the end of the second quarter
of 1999 - representing an average annual return of about 5.1%.
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THE YACKTMAN THE YACKTMAN
FUND AVERAGE FOCUSED FUND AVERAGE
TIME PERIOD ANNUAL RETURNS ANNUAL RETURNS
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One Year (7/1/98 - 6/30/99) (5.3)% (10.8)%
Three Years (7/1/96 - 6/30/99) 9.1% N/A
Five Years (7/1/94 - 6/30/99) 16.0% N/A
Since Inception (7/6/92
and 5/1/97, respectively) 10.7% 5.1%
The above past performance is not predictive of future results. The investment
return and principal value of the Funds will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
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While we and other value investors had better performance during the second
quarter, it was still not where we would like it to be. The marketplace
continues to put a huge premium on rapidly growing businesses - whether they
have a profit or not. We simply find their prices way too high.
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THE YACKTMAN FUNDS, INC.
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The overall market continues to put a higher price/earnings (P/E) ratio on
corporate earnings, even in the face of rising long-term U.S. Treasury interest
rates which recently crossed 6%. Normally, rising long-term rates will
eventually lead to both lower bond and lower stock prices. The P/E of the S&P
500, at its current valuation, is much higher than it historically has been when
interest rates were at this level, leaving a huge valuation gap. At some point
this gap will likely disappear either by a market decline, interest rate
decline, earnings rise or a combination of these factors. In the short term, the
fastest way to correct this gap is through a market decline, but such declines
are usually triggered by an unanticipated shock to the financial system.
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DISCOUNT
FROM THE
S&P 500 OUR S&P 500
TIME PRICE/ PRICE/ PRICE/
PERIOD EARNINGS EARNINGS EARNINGS
- ------ --------- -------- --------
December 1997 19.0 14.2 25%
December 1998 26.4 13.1 50%
June 1999 32.0 14.8 54%
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December 1997 price/earnings ratios are based on estimates for 1998. December
1998 and June 1999 price/earnings ratios are based on estimates for 1999. The
estimated earnings for the above price/earnings ratios are provided by Zacks
Investment Research and other external and internal sources.
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We have historically found the better way to invest is to buy undervalued
individual common stocks rather than predict the direction of the market.
Normally we find opportunities to buy excellent businesses when: (1) there is a
market decline and some businesses come way down in price; (2) a business is
doing well but there is an outside threat to the company; or (3) the business
has a short-term problem which can be corrected and change the "ugly duckling"
back to a "swan." The challenge is to then have the patience to wait for the
market to change its perception of the business and re-value it at a much higher
price. While the valuation of these stocks can be held down for
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long time periods (like beach balls under water), they will eventually be
recognized by the market and prove to be rewarding.
Sincerely,
/s/ Donald A. Yacktman
Donald A. Yacktman
President
THE YACKTMAN FUND
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TOP TEN EQUITY HOLDINGS
June 30, 1999 (Unaudited)
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PERCENTAGE OF
NET ASSETS
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Department 56, Inc. 12.2%
Philip Morris Cos., Inc. 12.2%
First Data Corp. 11.2%
Dentsply International, Inc. 11.2%
Franklin Covey Co. 5.0%
United Asset Management Corp. 5.0%
First Health Group Corp. 5.0%
Block H&R, Inc. 4.4%
Jostens, Inc. 4.4%
Bandag, Inc., Class A 4.0%
-----
TOTAL 74.6%
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THE YACKTMAN FUND
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PURCHASES & SALES
For the Quarter Ended June 30, 1999 (Unaudited)
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NET SHARES CURRENT
NEW PURCHASE PURCHASED SHARES HELD
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GARTNER GROUP, INC.
Provides clients with products
and services in the areas of
information technology advisory
services, measurement, research,
decision support, analysis and
consulting. 107,500 107,500
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NET SHARES CURRENT
SALES SOLD SHARES HELD
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American Media, Inc., Class A 600,000 -
Bandag, Inc., Class A 56,000 274,000
Block H&R, Inc. 40,000 170,000
Dentsply International, Inc. 161,000 769,000
First Data Corp. 75,000 440,000
First Health Group Corp. 260,000 440,000
Franklin Covey Co. 91,500 1,306,500
Intimate Brands, Inc. 30,000 105,000
Jostens, Inc. 50,000 400,000
King World Productions, Inc. 130,000 -
Luxottica Group ADR 50,000 350,000
Philip Morris Cos., Inc. 50,000 580,000
Reebok International Ltd. 130,000 370,000
Rollins, Inc. 105,000 145,000
Tupperware Corp. 30,000 270,000
United Asset Management Corp. 48,000 420,000
Valassis Communications, Inc. 55,000 150,000
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
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NUMBER
OF SHARES VALUE
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COMMON STOCKS - 98.9%
APPAREL/SHOES - 5.9%
Fruit of the Loom, Inc.<F1> 450,000 $ 4,387,500
Reebok International Ltd.<F1> 370,000 6,891,250
-----------
11,278,750
-----------
CONSUMER GOODS - 2.8%
Luxottica Group ADR 350,000 5,446,875
-----------
EDUCATIONAL SERVICES - 9.4%
Franklin Covey Co.<F1><F2> 1,306,500 9,635,438
Jostens, Inc. 400,000 8,425,000
-----------
18,060,438
-----------
FINANCIAL SERVICES - 16.2%
First Data Corp. 440,000 21,532,500
United Asset Management Corp. 420,000 9,555,000
-----------
31,087,500
-----------
FOOD/TOBACCO - 12.2%
Philip Morris Cos., Inc. 580,000 23,308,750
-----------
HOME FURNISHINGS - 12.2%
Department 56, Inc.<F1> 870,000 23,381,250
-----------
HOUSEHOLD PRODUCTS - 6.4%
Clorox Co. 50,000 5,340,625
Tupperware Corp. 270,000 6,885,000
-----------
12,225,625
-----------
MEDICAL SERVICES - 5.0%
First Health Group Corp.<F1> 440,000 9,487,500
-----------
MEDICAL SUPPLIES - 11.2%
Dentsply International, Inc. 769,000 21,532,000
-----------
RETAILING - 2.6%
Intimate Brands, Inc. 105,000 4,974,375
-----------
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The Yacktman Fund
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PORTFOLIO OF INVESTMENTS (Cont'd.)
June 30, 1999 (Unaudited)
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NUMBER
OF SHARES VALUE
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SERVICES - 11.0%
Block H&R, Inc. 170,000 $8,500,000
Gartner Group, Inc.<F1> 107,500 2,203,750
Jenny Craig, Inc.<F1> 750,000 2,625,000
Rollins, Inc. 145,000 2,310,937
Valassis Communications, Inc.<F1> 150,000 5,493,750
-----------
21,133,437
-----------
TIRES AND RUBBER - 4.0%
Bandag, Inc., Class A 274,000 7,706,250
-----------
Total Common Stocks
(cost $162,685,958) 189,622,750
-----------
Other Assets less Liabilities - 1.1% 2,154,808
-----------
Net Assets - 100% (equivalent
to $11.27 per share based on
17,020,636 shares outstanding) $191,777,558
============
<F1> Non-income producing
<F2> Affiliated company - See Note 6
See notes to financial statements
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THE YACKTMAN FOCUSED FUND
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PURCHASES & SALES
For the Quarter Ended June 30, 1999 (Unaudited)
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NET SHARES CURRENT
NEW PURCHASE PURCHASED SHARES HELD
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GARTNER GROUP, INC.
Provides clients with products and
services in the areas of information
technology advisory services,
measurement, research, decision support,
analysis and consulting. 32,500 32,500
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NET SHARES CURRENT
SALES SOLD SHARES HELD
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Dentsply International, Inc. 12,000 28,000
Department 56, Inc. 15,000 130,000
First Health Group Corp. 28,000 35,000
Franklin Covey Co. 25,000 105,000
Jostens, Inc. 5,000 35,000
Philip Morris Cos., Inc. 5,000 50,000
Reebok International Ltd. 20,000 30,000
Rollins, Inc. 10,000 30,000
United Asset Management Corp. 5,000 35,000
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THE YACKTMAN FOCUSED FUND
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PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
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NUMBER
OF SHARES VALUE
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COMMON STOCKS - 87.7%
APPAREL/SHOES - 6.5%
Fruit of the Loom, Inc.<F1> 50,000 $487,500
Reebok International Ltd.<F1> 30,000 558,750
----------
1,046,250
----------
EDUCATIONAL SERVICES - 9.5%
Franklin Covey Co.<F1> 105,000 774,375
Jostens, Inc. 35,000 737,188
----------
1,511,563
----------
FINANCIAL SERVICES - 17.3%
First Data Corp. 40,000 1,957,500
United Asset Management Corp. 35,000 796,250
----------
2,753,750
----------
FOOD/TOBACCO - 12.6%
Philip Morris Cos., Inc. 50,000 2,009,375
----------
HOME FURNISHINGS - 21.9%
Department 56, Inc.<F1> 130,000 3,493,750
----------
MEDICAL SERVICES - 4.7%
First Health Group Corp.<F1> 35,000 754,688
----------
MEDICAL SUPPLIES - 4.9%
Dentsply International, Inc. 28,000 784,000
----------
RETAILING - 3.1%
Intimate Brands, Inc. 10,500 497,437
----------
SERVICES - 7.2%
Gartner Group, Inc.<F1> 32,500 666,250
Rollins, Inc. 30,000 478,125
----------
1,144,375
----------
Total Common Stocks
(cost $14,557,561) 13,995,188
----------
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PRINCIPAL
AMOUNT VALUE
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DEMAND NOTES
(VARIABLE RATE) - 11.0%
American Family Financial Services $26,325 $26,325
General Mills, Inc. 142,732 142,732
Pitney Bowes Credit Corp. 165,413 165,413
Sara Lee Corp. 208,070 208,070
Warner-Lambert, Inc. 517,472 517,472
Wisconsin Corp. Central Credit Union 383,189 383,189
Wisconsin Electric Power Co. 321,776 321,776
----------
Total Demand Notes
(cost $1,764,977) 1,764,977
----------
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NUMBER
OF CONTRACTS VALUE
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PUT OPTIONS PURCHASED - 0.3%
Philip Morris Cos., Inc.
Expiring Jan. 2000 @ $30.00 200 13,750
Expiring Jan. 2000 @ $35.00 200 36,250
----------
Total Put Options Purchased
(cost $93,550) 50,000
----------
Total Investments - 99.0%
(cost $16,416,089) 15,810,165
Other Assets less Liabilities - 1.0% 153,393
----------
Net Assets - 100% (equivalent
to $10.69 per share based on
1,493,162 shares outstanding) $15,963,558
===========
<F1> Non-income producing
See notes to financial statements
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THE YACKTMAN FUNDS, INC.
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STATEMENTS OF ASSETS & LIABILITIES
June 30, 1999 (Unaudited)
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THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
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ASSETS:
Investments at value
Nonaffiliated issuers
(cost $136,976,847 and
$16,416,089, respectively) $179,987,312 $15,810,165
Affiliated issuers
(cost $25,709,111 and
$0, respectively) 9,635,438 -
Receivable for securities sold 3,061,390 200,782
Dividends and interest receivable 602,383 38,017
Prepaid expenses 42,363 26,156
Receivable for fund shares issued 11,610 -
----------- -----------
Total Assets 193,340,496 16,075,120
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LIABILITIES:
Shareholder distributions payable 525,111 21,666
Payable for fund shares redeemed 394,185 21,331
Payable to custodian 238,544 -
Accrued investment advisory fees 105,263 13,561
Other accrued expenses 299,835 55,004
----------- -----------
Total Liabilities 1,562,938 111,562
----------- -----------
NET ASSETS $191,777,558 $15,963,558
============ ===========
NET ASSETS CONSIST OF:
Capital stock $154,534,747 $18,502,744
Undistributed net realized gains
(losses) 10,306,019 (1,933,262)
Net unrealized appreciation
(depreciation) on investments 26,936,792 (605,924)
----------- -----------
Total Net Assets $191,777,558 $15,963,558
============ ===========
CAPITAL STOCK, $.0001 par value
Authorized 500,000,000 500,000,000
Issued and outstanding 17,020,636 1,493,162
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $11.27 $10.69
====== ======
See notes to financial statements
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STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1999 (Unaudited)
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THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
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INVESTMENT INCOME:
Dividend income $ 1,529,623 $ 92,210
Interest income 100,862 73,612
Other income 3,669 334
----------- -----------
1,634,154 166,156
----------- -----------
EXPENSES:
Investment advisory fees 748,590 102,193
Shareholder servicing fees 316,999 14,634
Administration and accounting fees 81,640 24,795
Custody fees 52,740 7,194
Federal and state registration fees 24,387 14,794
Directors' fees and expenses 12,226 276
Professional fees (See Note 7) (244,866) (34,743)
Reports to shareholders
(See Note 7) (267,064) (37,197)
Miscellaneous costs 6,625 2,739
----------- -----------
Total expenses before reductions 731,277 94,685
Expense reductions (See Note 5) (25,049) (250)
----------- -----------
Net expenses 706,228 94,435
----------- -----------
NET INVESTMENT INCOME 927,926 71,721
----------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain (loss) on
investments 9,496,140 (1,230,722)
Change in unrealized
appreciation (depreciation)
on investments (19,663,029) (797,748)
----------- -----------
Net realized and unrealized loss
on investments (10,166,889) (2,028,470)
----------- -----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(9,238,963) $(1,956,749)
============ ============
See notes to financial statements
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THE YACKTMAN FUNDS, INC.
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STATEMENTS OF CHANGES IN NET ASSETS
THE YACKTMAN
THE YACKTMAN FUND FOCUSED FUND
- -------------------------- -------------------------- --------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
JUNE 30, 1999 ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DEC. 31, 1998 (UNAUDITED) DEC. 31, 1998
- -------------------------- -------------------------- --------------------------
OPERATIONS:
Net investment income $927,926 $6,385,540 $71,721 $281,534
Net realized gain (loss)
on investments 9,496,140 117,189,782 (1,230,722) (453,371)
Change in net unrealized
appreciation
(depreciation)on
investments (19,663,029) (140,832,711) (797,748) (150,767)
------------ ------------ ------------ ------------
Net decrease in net
assets resulting
from operations (9,238,963) (17,257,389) (1,956,749) (322,604)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 36,327,677 86,130,974 1,662,034 32,292,848
Proceeds from
reinvestment of
dividends 403,055 56,952,842 52,802 326,022
------------ ------------ ------------ ------------
36,730,732 143,083,816 1,714,836 32,618,870
Payments for shares
redeemed (142,213,973) (839,635,901) (11,125,306) (62,964,728)
------------ ------------ ------------ ------------
Net decrease (105,483,241) (696,552,085) (9,410,470) (30,345,858)
------------ ------------ ------------ ------------
DIVIDENDS PAID FROM:
Net investment income (930,578) (6,409,477) (76,549) (249,256)
Net realized gains - (54,490,030) - (121,017)
------------ ------------ ------------ ------------
(930,578) (60,899,507) (76,549) (370,273)
------------ ------------ ------------ ------------
TOTAL DECREASE IN
NET ASSETS (115,652,782) (774,708,981) (11,443,768) (31,038,735)
NET ASSETS:
Beginning of period 307,430,340 1,082,139,321 27,407,326 58,446,061
------------ ------------ ------------ ------------
End of period (including
undistributed net
investment income
of $0, $0, $0 and
$4,341, respectively) $191,777,558 $307,430,340 $15,963,558 $27,407,326
============ ============ ============ ============
TRANSACTIONS IN SHARES:
Shares sold 3,263,985 6,142,954 150,781 2,782,296
Issued in reinvestment
of dividends 38,443 4,821,905 5,029 28,033
Shares redeemed (12,771,728) (61,477,171) (1,022,086) (5,663,019)
------------ ------------ ------------ ------------
Net decrease (9,469,300) (50,512,312) (866,276) (2,852,690)
============ ============ ============ ============
See notes to financial statements
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THE YACKTMAN FUNDS, INC.
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FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THE YACKTMAN FUND THE YACKTMAN FUND
- ------------------------------------------------------------------- -----------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR YEAR
For a Fund share outstanding ENDED ENDED ENDED ENDED ENDED ENDED
throughtout each period JUNE 30, 1999 DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
(UNAUDITED) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------- -----------------------------------------------------
<C> <C> <C>
Net asset value, beginning
of period $11.61 $14.05 $13.34 $12.09 $10.05 $9.56
Income from investment
operations:
Net investment income 0.05 0.11 0.22 0.24 0.22 0.22
Net realized and unrealized
gains (losses) on investments (0.34) (0.04) 2.21 2.90 2.81 0.61
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations (0.29) 0.07 2.43 3.14 3.03 0.83
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from net
investment income (0.05) (0.11) (0.22) (0.24) (0.22) (0.22)
Distributions from net
realized gains - (2.40) (1.50) (1.65) (0.77) (0.12)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.05) (2.51) (1.72) (1.89) (0.99) (0.34)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of
period $11.27 $11.61 $14.05 $13.34 $12.09 $10.05
=========== =========== =========== =========== =========== ==========
Total Return (2.48)%<F1> 0.64% 18.28% 26.02% 30.42% 8.80%
=========== =========== =========== =========== =========== ==========
Supplemental data and ratios:
Net assets, end of period (000s) $191,778 $307,430 $1,082,139 $755,617 $566,723 $295,133
=========== =========== =========== =========== =========== ==========
Ratio of expenses before expense
reductions to average net assets
(See Note 5) 0.64%<F2> 1.16% 0.90% 0.96% 0.99% 1.07%
=========== =========== =========== =========== =========== ==========
Ratio of net expenses to average
net assets 0.61%<F2> 1.14% 0.86% 0.90% 0.91% 1.07%
=========== =========== =========== =========== =========== ==========
Ratio of net investment income
to average net assets 0.81%<F2> 0.87% 1.54% 1.80% 2.02% 2.49%
=========== =========== =========== =========== =========== ==========
Portfolio turnover rate 1.22% 14.32% 69.13% 58.54% 55.37% 49.44%
=========== =========== =========== =========== =========== ==========
<F1> Not annualized
<F2> Annualized
See notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE YACKTMAN FUNDS, INC.
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FINANCIAL HIGHLIGHTS (Cont'd.)
THE YACKTMAN
FOCUSED FUND
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SIX MONTHS
For a Fund share ENDED YEAR MAY 1, 1997 <F1>
outstanding throughout JUNE 30, 1999 ENDED THROUGH
each period (UNAUDITED) DEC. 31, 1998 DEC. 31, 1997
- --------------------------------------------------------------------------------
Net asset value,
beginning of period $11.62 $11.21 $10.00
Income from investment
operations:
Net investment income 0.04 0.05 0.07
Net realized and
unrealized gains (losses)
on investments (0.93) 0.46 1.47
---------- ---------- ----------
Total from investment
operations (0.89) 0.51 1.54
---------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.04) (0.05) (0.07)
Distributions from net
realized gains - (0.05) (0.26)
---------- ---------- ----------
Total distributions (0.04) (0.10) (0.33)
---------- ---------- ----------
Net asset value, end
of period $10.69 $11.62 $11.21
Total Return (7.65)%<F2> 4.58% 15.38%<F2>
=========== =========== ===========
Supplemental data and ratios:
Net assets, end of
period (000s) $15,964 $27,407 $58,446
=========== =========== ===========
Ratio of expenses before
expense reductions to
average net assets
(See Note 5) 0.93%<F3> 1.81% 1.71%<F3>
=========== =========== ===========
Ratio of net expenses to
average net assets 0.92%<F3> 1.25% 1.25%<F3>
=========== =========== ===========
Ratio of net investment
income to average
net assets 0.70%<F3> 0.48% 1.02%<F3>
=========== =========== ===========
Portfolio turnover rate 6.53% 49.26% 60.43%
=========== =========== ===========
<F1> Commencement of operations
<F2> Not Annualized
<F3> Annualized
See notes to financial statements
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THE YACKTMAN FUNDS, INC.
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NOTES TO THE FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
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1. ORGANIZATION
The Yacktman Funds, Inc. (the "Funds") is registered as an open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act").
The Funds consist of two investment portfolios: The Yacktman Fund is a
diversified fund and commenced operations July 6, 1992 and The Yacktman Focused
Fund is a non-diversified fund that commenced operations May 1, 1997. The
objective of each of the Funds is to produce long-term growth of capital with
current income as a secondary objective. Yacktman Asset Management Co. is the
Funds' investment adviser (the "Adviser").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
financial statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain estimates and
assumptions at the date of the financial statements. Actual results could
differ from those estimates.
A) INVESTMENT VALUATION - Securities which are traded on a recognized stock
exchange are valued at the last sale price on the securities exchange on which
such securities are primarily traded or at the last sale price on the national
securities market. Exchange-traded securities for which there were no
transactions are valued at the current bid prices. Securities traded on only
over-the-counter markets are valued on the basis of closing over-the-counter bid
prices. Short-term debt instruments maturing within 60 days are valued by the
amortized cost method. Variable rate demand notes are valued at cost which
approximates market value. Put options written or purchased by The Yacktman
Focused Fund are valued at the last sales price if such last sales price is
between the current bid and asked prices. Otherwise, put options are valued at
the mean between the current bid and asked prices. Any securities for which
market quotations are not readily available are valued at their fair value as
determined in good faith by the Board of Directors.
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THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
B) PUT OPTIONS - Premiums received by The Yacktman Focused Fund upon writing
put options are recorded as an asset with a corresponding liability which is
subsequently adjusted to the current market value of the option. When an option
expires or is closed, the Fund realizes a gain or loss, and the liability is
eliminated. When an option is exercised, the premium originally received
decreases the cost basis of the security acquired. The Fund continues to bear
the risk of adverse movements in the price of the underlying asset during the
period of the option, although any potential loss, which is limited to the
strike price of the option, would be reduced by the amount of the option premium
received. The Yacktman Focused Fund had no activity in written put options for
the six months ended June 30, 1999.
C) FEDERAL INCOME TAXES - It is each Fund's policy to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all investment company net taxable income and net
capital gains to its shareholders in a manner which results in no tax cost to
the Fund. Therefore, no federal income tax provision is required.
D) DISTRIBUTIONS TO SHAREHOLDERS - Dividends from net investment income are
declared and paid quarterly. Distributions of net realized capital gains, if
any, are declared and paid at least annually. Distributions to shareholders are
recorded on the ex-dividend date. The Funds periodically make reclassifications
among certain of its capital accounts as a result of the recognition and
characterization of certain income and capital gain distributions determined
annually in accordance with federal tax regulations which may differ from
generally accepted accounting principles. The Funds also utilize earnings and
profits distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes. Accordingly, at June 30, 1999
reclassifications were recorded to increase undistributed net investment income
by $2,652 and $487 and decrease capital stock by $2,652 and $487 for The
Yacktman Fund and The Yacktman Focused Fund, respectively.
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E) OTHER - Investment transactions are accounted for on the trade date. The
Funds determine gain or loss realized from investment transactions by comparing
the original cost of the security lot sold with the net sale proceeds. Dividend
income is recognized on the ex-dividend date and interest income is recognized
on an accrual basis.
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
securities, for the Funds for the six months ended June 30, 1999 were as
follows:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
Purchases
U.S. Government - -
Other $2,806,650 $1,150,350
Sales
U.S. Government - -
Other 105,510,911 7,973,967
At June 30, 1999 gross unrealized appreciation and depreciation on investments
on a tax basis were as follows:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
Appreciation $57,624,041 $2,107,273
Depreciation (30,687,249) (3,041,510)
------------ ------------
Net appreciation on investments $26,936,792 $ (934,237)
============ ============
The cost of investments for federal income tax purposes was $162,685,958 and
$16,744,402 for The Yacktman Fund and The Yacktman Focused Fund, respectively.
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THE YACKTMAN FUNDS, INC.
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NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
June 30, 1999 (Unaudited)
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4. INVESTMENT ADVISORY AGREEMENT
The Funds have agreements with the Adviser, with whom certain officers and
directors of the Funds are affiliated, to furnish investment advisory services
to the Funds. Under the terms of these agreements, The Yacktman Fund will pay
the Adviser a monthly fee at the annual rate of 0.65% on the first $500,000,000
of average daily net assets, 0.60% on the next $500,000,000 of average daily net
assets and 0.55% on average daily net assets in excess of $1,000,000,000, and
The Yacktman Focused Fund will pay the Adviser a monthly fee at the annual rate
of 1% of its average daily net assets. The agreements further stipulate that
the Adviser will reimburse the Funds for annual expenses exceeding certain
specified levels. In addition to the reimbursements required under the
agreements, the Adviser has voluntarily agreed to reimburse The Yacktman Focused
Fund for all expenses exceeding 1.25% of its average daily net assets.
5. EXPENSE REDUCTIONS
The Adviser has directed certain of the Funds' portfolio trades to brokers at
best price and execution and has generated directed brokerage credits to be used
against sub-transfer agency fees. Shareholders benefit under this arrangement
as the net expenses of the Funds do not include such sub-transfer agency fees.
For the six months ended June 30, 1999, The Yacktman Fund's expenses were
reduced $25,049 by utilizing directed brokerage credits resulting in an expense
ratio of 0.61% being charged to shareholders. For the six months ended June 30,
1999, The Yacktman Focused Fund's expenses were reduced $250 by utilizing
directed brokerage credits resulting in an expense ratio of 0.92% being charged
to shareholders. In accordance with Securities and Exchange Commission
requirements, such amount is required to be shown as an expense and has been
included in shareholder servicing fees in the Statements of Operations.
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6. TRANSACTIONS WITH AFFILIATES
The following is an analysis of transactions for the period ended June 30, 1999
for The Yacktman Fund with "affiliated companies" (an affiliated company is
defined by the 1940 Act as a company in which a Fund owns 5% or more of that
company's outstanding voting shares):
Amount of
Amount of Loss
Dividends Realized
Share Activity Credited on Sale
-------------------------------------- to Income of Shares
Balance Balance in Fiscal in Fiscal
Security Name 12/31/98 Purchases Sales 6/30/99 1999 1999
- -------------- -------- --------- ------ -------- --------- ---------
Franklin Covey Co. 1,429,500 - 123,000 1,306,500 - $(1,371,348)
7. PROXY-RELATED EXPENSES
As a result of negotiated reductions in fees and costs, together with vendor
reimbursements and other adjustments, certain expenses estimated and accrued in
1998 related to the 1998 proxy solicitation have been reduced in 1999.
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For Fund information and
shareholder services, call
1-800-525-8258
Web site: www.yacktman.com
The Yacktman Funds, Inc.
Shareholder Services Center
615 East Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53201-5207
YA-410-0999
