(LOGO) THE YACKTMAN FUNDS
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3RD QUARTER REPORT
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September 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.
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THE YACKTMAN FUNDS, INC.
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MESSAGE TO SHAREHOLDERS
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Dear Fellow Shareholder: (PHOTO)
Listed below are the results of the Funds over various time periods.
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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 (10/1/98 - 9/30/99) (1.6)% (6.8)%
Three Years (10/1/96 - 9/30/99) 4.0% N/A
Five Years (10/1/94 - 9/30/99) 10.8% N/A
Since Inception (7/6/92
and 5/1/97, respectively) 8.2% (1.1)%
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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Value investing has indeed been out of favor over the last couple of years.
The performance of value investors has suffered as most of the stock market's
gains have been attributable to the very large popular technology stocks. The
median U.S. stock is actually down about 20% since April, 1998. The current
stock market is very similar to the 1972_73 "Nifty Fifty" phenomenon as shown by
the following interesting statistics based on trailing earnings (estimated
earnings would cause very little relative change in these numbers):
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P/E RATIO
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S&P 500 Index Average 28
S&P 500 Index Median 21
Largest 25 in Market Cap 38
Other 475 in Market Cap 20.5
The Yacktman Fund 14
The Yacktman Focused Fund 13
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THE YACKTMAN FUNDS, INC.
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The powerful growth companies fell in both absolute and relative terms in
1974. We could see a similar pattern ahead. While Microsoft, Intel, Cisco, etc.
have made many millionaires, it is also important to remember how many popular
stocks, particularly technology oriented ones, don't work out as planned. I have
witnessed many "roman candles" and disappointments in growth investments over
the years.
I recently received a post card in the mail which said, "If you had invested
$1,001 in Iridium (the satellite cellular telephone company) at the end of its
first day's trading, June 10, 1997, how much would you have today?" When I
turned it over it said, "Absolutely nothing." When I took my first investment
course in college, the "can't miss," most popular stock was Zenith Electronics.
They made color TV sets and dominated the market. They are now bankrupt, too.
When I was in graduate school the "got to own" stock was Avon Products. It was
the most popular consumer growth stock of the time. Since September, 1966, Avon
is up 2.6 times while the S&P is up 17.6 times. On the other hand, two of the
most unloved stocks in 1966 were Disney and Philip Morris. However, Disney is up
290 times and Philip Morris 253 times over the same time period.
When I joined a large investment counseling firm for my first full-time
investment job in 1968, the three "must own" technology stocks were Burroughs
(now Unisys), IBM and Xerox. Since then, they are up 2.8, 6.5, and 3.1 times,
respectively, while the S&P is up 13.5 times. Thus, popularity does not
guarantee a stock will be a successful investment.
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While growth stock investing focuses on earnings growth and/or its companions,
revenue growth and stock price momentum, value investing focuses on low prices
relative to normalized earnings and/or its companions, low price to revenues and
book value. We continue to believe in a strategy which encompasses buying
growing businesses, but only if value techniques support the purchase price. We
are able to purchase growing companies at value prices for a number of reasons.
Sometimes their earnings have temporarily declined or they are subject to
unpopular events or lawsuits. However, we continue to have a long term
perspective, remain objective in all of our decisions, and continue to have a
lot of our own money in the Funds.
Sincerely,
/s/Donald A. Yacktman
Donald A. Yacktman
President
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THE YACKTMAN FUND
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TOP TEN EQUITY HOLDINGS
September 30, 1999 (Unaudited)
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PERCENTAGE OF
NET ASSETS
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Department 56, Inc. 14.8%
Philip Morris Cos., Inc. 14.2%
Dentsply International, Inc. 12.4%
First Data Corp. 11.6%
Franklin Covey Co. 5.7%
United Asset Management Corp. 5.2%
First Health Group Corp. 4.4%
Block H&R, Inc. 3.7%
Jostens, Inc. 3.6%
Bandag, Inc., Class A 3.5%
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TOTAL 79.1%
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PURCHASES & SALES
For the Quarter Ended September 30, 1999 (Unaudited)
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NET SHARES CURRENT
NEW PURCHASES PURCHASED SHARES HELD
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SERVICEMASTER CO.
A network of service companies
providing lawn care, pest control,
residential and commercial
cleaning, home inspection and
facilities management services. 50,000 50,000
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NET SHARES CURRENT
PURCHASES PURCHASED SHARES HELD
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Gartner Group, Inc., Class B 107,500 107,500
Reebok International Ltd. 20,000 390,000
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NET SHARES CURRENT
SALES SOLD SHARES HELD
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Bandag, Inc., Class A 82,700 191,300
Block H&R, Inc. 50,000 120,000
Dentsply International, Inc. 10,000 759,000
Department 56, Inc. 5,000 865,000
First Data Corp. 70,000 370,000
First Health Group Corp. 165,000 275,000
Franklin Covey Co. 276,500 1,030,000
Fruit of the Loom, Inc. 65,900 384,100
Gartner Group, Inc., Class A 107,500 -
Jostens, Inc. 136,300 263,700
Luxottica Group ADR 250,000 100,000
Rollins, Inc. 145,000 -
Tupperware Corp. 40,000 230,000
United Asset Management Corp. 40,000 380,000
Valassis Communications, Inc. 70,000 80,000
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
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NUMBER
OF SHARES VALUE
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COMMON STOCKS - 99.0%
APPAREL/SHOES - 3.9%
Fruit of the Loom, Inc.<F1> 384,100 $ 1,272,331
Reebok International Ltd.<F1> 390,000 4,168,125
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5,440,456
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CONSUMER GOODS - 1.4%
Luxottica Group ADR 100,000 1,906,250
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EDUCATIONAL SERVICES - 9.3%
Franklin Covey Co.<F1> 1,030,000 7,918,125
Jostens, Inc. 263,700 5,043,263
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12,961,388
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FINANCIAL SERVICES - 16.8%
First Data Corp. 370,000 16,233,750
United Asset Management Corp. 380,000 7,315,000
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23,548,750
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FOOD/TOBACCO - 14.2%
Philip Morris Cos., Inc. 580,000 19,828,750
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HOME FURNISHINGS - 14.8%
Department 56, Inc.<F1> 865,000 20,705,937
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HOUSEHOLD PRODUCTS - 6.1%
Clorox Co. 100,000 3,825,000
Tupperware Corp. 230,000 4,657,500
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8,482,500
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MEDICAL SERVICES - 4.4%
First Health Group Corp.<F1> 275,000 6,170,313
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NUMBER
OF SHARES VALUE
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MEDICAL SUPPLIES - 12.4%
Dentsply International, Inc. 759,000 $17,267,250
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RETAILING - 2.9%
Intimate Brands, Inc. 105,000 4,088,438
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SERVICES - 9.3%
Block H&R, Inc. 120,000 5,212,500
Gartner Group, Inc., Class B<F1> 107,500 1,793,906
Jenny Craig, Inc.<F1> 750,000 1,734,375
Servicemaster Co. 50,000 803,125
Valassis Communications, Inc.<F1> 80,000 3,515,000
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13,058,906
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TIRES AND RUBBER - 3.5%
Bandag, Inc., Class A 191,300 4,830,325
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Total Common Stocks
(cost $135,453,501) 138,289,263
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<F1> Non-income producing
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS (Cont'd.)
September 30, 1999 (Unaudited)
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PRINCIPAL
AMOUNT VALUE
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DEMAND NOTES
(VARIABLE RATE) - 1.2%
General Mills, Inc. $1,441,261 $1,441,261
Pitney Bowes Credit Corp. 284,728 284,728
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Total Demand Notes
(cost $1,725,989) 1,725,989
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Total Investments - 100.2%
(cost $137,179,490) 140,015,252
Liabilities less Other Assets - (0.2)% (237,864)
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Net Assets - 100% (equivalent
to $9.78 per share based on
14,286,432 shares outstanding) $139,777,388
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THE YACKTMAN FOCUSED FUND
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PURCHASES & SALES
For the Quarter Ended September 30, 1999 (Unaudited)
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NET SHARES CURRENT
PURCHASES PURCHASED SHARES HELD
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Block H&R, Inc. 10,000 10,000
Gartner Group, Inc., Class B 25,000 25,000
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NET SHARES CURRENT
SALES SOLD SHARES HELD
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Dentsply International, Inc. 2,000 26,000
First Health Group Corp. 10,000 25,000
Franklin Covey Co. 8,100 96,900
Gartner Group, Inc., Class A 32,500 -
Jostens, Inc. 5,000 30,000
Rollins, Inc. 30,000 -
United Asset Management Corp. 5,000 30,000
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THE YACKTMAN FOCUSED FUND
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PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
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NUMBER
OF SHARES VALUE
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COMMON STOCKS - 95.6%
APPAREL/SHOES - 4.1%
Fruit of the Loom, Inc.<F1> 50,000 $165,625
Reebok International Ltd.<F1> 30,000 320,625
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486,250
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EDUCATIONAL SERVICES - 11.1%
Franklin Covey Co.<F1> 96,900 744,919
Jostens, Inc. 30,000 573,750
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1,318,669
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FINANCIAL SERVICES - 19.6%
First Data Corp. 40,000 1,755,000
United Asset Management Corp. 30,000 577,500
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2,332,500
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FOOD/TOBACCO - 14.3%
Philip Morris Cos., Inc. 50,000 1,709,375
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HOME FURNISHINGS - 26.2%
Department 56, Inc.<F1> 130,000 3,111,875
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MEDICAL SERVICES - 4.7%
First Health Group Corp.<F1> 25,000 560,937
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MEDICAL SUPPLIES - 5.0%
Dentsply International, Inc. 26,000 591,500
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RETAILING - 3.4%
Intimate Brands, Inc. 10,500 408,844
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SERVICES - 7.2%
Block H&R, Inc. 10,000 434,375
Gartner Group, Inc., Class B<F1> 25,000 417,188
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851,563
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Total Common Stocks
(cost $13,639,047) 11,371,513
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PRINCIPAL
AMOUNT VALUE
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DEMAND NOTES
(VARIABLE RATE) - 3.5%
General Mills, Inc. $10,691 $10,691
Wisconsin Corp. Central
Credit Union 383,189 383,189
Wisconsin Electric Power Co. 25,478 25,478
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Total Demand Notes
(cost $419,358) 419,358
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NUMBER
OF CONTRACTS VALUE
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PUT OPTIONS PURCHASED - 0.2%
Philip Morris Cos., Inc.
Expiring Jan. 2000 @ $30.00 200 $18,750
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Total Put Options Purchased
(cost $40,500) 18,750
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Total Investments - 99.3%
(cost $14,098,905) 11,809,621
Other Assets less Liabilities - 0.7% 77,972
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Net Assets - 100% (equivalent
to $9.32 per share based on
1,275,032 shares outstanding) $11,887,593
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<F1> Non-income producing
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FOR FUND INFORMATION,
CALL 1-800-525-8258
FOR SHAREHOLDER SERVIES,
CALL 1-800-457-6033
WEB SITE: WWW.YACKTMAN.COM
THE YACKTMAN FUNDs, INC.
Shareholder Services Center
615 East Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53202
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YA-412-1099
