(LOGO)
YACKTMAN
FUNDS
SEMI-ANNUAL REPORT
JUNE 30, 2000
<PAGE>
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.
<PAGE>
THE YACKTMAN FUNDS, INC.
MESSAGE TO SHAREHOLDERS
-------------------------------------------------------------------------------
(PHOTO)
Dear Fellow Shareholder:
The first half of the year was like a roller coaster ride for the technology
stocks - going up in the first quarter and down in the second quarter, while the
Funds did just the opposite - going down in the first quarter and up in the
second quarter, thus beating the S&P 500 nicely in the second quarter.
While we are still not up for the year, we are certainly in an excellent
position statistically as shown by the following:
--------------------------------------------------------------------------------
THE DISCOUNT
YACKTMAN FROM THE
S&P 500 FUND S&P 500
TIME PRICE/ PRICE/ PRICE/
PERIOD EARNINGS EARNINGS EARNINGS
--------------------------------------------------------------------------------
June, 1998 22.7 16.9 26%
June, 1999 32.0 14.8 54%
June, 2000 25.5 11.2 57%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THE DISCOUNT
YACKTMAN FROM THE
S&P 500 FOCUSED FUND S&P 500
TIME PRICE/ PRICE/ PRICE/
PERIOD EARNINGS EARNINGS EARNINGS
--------------------------------------------------------------------------------
June, 1998 22.7 16.6 27%
June, 1999 32.0 13.9 57%
June, 2000 25.5 10.2 60%
--------------------------------------------------------------------------------
The estimated earnings used to create the above P/E ratios were provided by
commercial estimates when available, or by internal estimates.
Our strategy remains as it has in the past - to buy inexpensive, solid, very
profitable businesses that have consistently rising cash earnings and thus the
ability to pay steadily rising dividends or to make investments that accelerate
rising cash earnings.
--------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUNDS, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Our batting average of buying good businesses that fit this model remains
high, yet the overall market has remained overly excited about technology issues
even with the recent decline in their prices. Historically, buying technology
stocks has proven quite risky and buying expensive (high P/E) stocks has proven
even more risky. For these reasons we feel confident in our strategy.
Our largest holdings seem poised to do well. Philip Morris and Dentsply have
moved up sharply this year and both companies continue to grow revenues and
earnings. The recent decision by Philip Morris to sell part of Kraft General
Foods and purchase Nabisco sets the stage for a possible separation of the food
and tobacco businesses sometime in the future. Both Department 56 and Franklin
Covey seem to have their problems behind them and both managements appear
focused on building shareholder wealth. Jostens was taken private earlier this
year and both Jenny Craig and United Asset Management have tender offers
outstanding that are expected to be completed before year-end. I would like to
see higher prices paid for these companies, but I think these buyouts show that
we have done a good job of investing in companies trading below what prudent
investors would pay for the whole enterprise.
We believe that the businesses we have invested in are very profitable with
strong cash flows, are selling at low prices and have excellent futures. Our
performance in the second quarter leaves us very optimistic about the prospects
for our strategy as the market returns to realistic valuations.
Sincerely,
/s/ Donald A. Yacktman
Donald A. Yacktman
President
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
P.S. In an effort to hold down expenses for our shareholders we have made two
changes. First, we will only send out a semi-annual and annual report to
shareholders. Since no one called asking about the first quarter report, we
can fairly easily assume it was not missed. Given my literary skills, I can
understand the lack of interest in my letter.
Second, we will only pay an annual dividend at the end of the year in
conjunction with the capital gain dividend. With dividend payout rates
down and the overall market yield on common stocks quite low, we believe
this move makes sense.
THE YACKTMAN FUND
--------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Percentage of
Net Assets
--------------------------------------------------------------------------------
Dentsply International, Inc. 14.9%
Philip Morris Cos., Inc. 13.5%
Department 56, Inc. 12.7%
Franklin Covey Co. 6.9%
Block H&R, Inc. 4.5%
Tupperware Corp. 4.4%
First Data Corp. 4.2%
Clorox Co. 4.1%
United Asset Management Corp. 4.0%
K-Swiss, Inc., Class A 3.9%
-----
TOTAL 73.1%
--------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUND
--------------------------------------------------------------------------------
EQUITY PURCHASES & SALES
For the Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NET SHARES CURRENT
PURCHASE PURCHASED SHARES HELD
--------------------------------------------------------------------------------
K-Swiss, Inc., Class A 36,100 160,000
--------------------------------------------------------------------------------
NET SHARES CURRENT
SALES SOLD SHARES HELD
--------------------------------------------------------------------------------
Bandag, Inc., Class A 40,000 110,000
Block H&R, Inc. 20,000 90,000
Clorox Co. 20,000 60,000
Dentsply International, Inc. 315,000 315,000
Department 56, Inc. 90,000 750,000
First Data Corp. 45,000 55,000
First Health Group Corp. 120,000 70,000
Franklin Covey Co. 250,000 650,000
Gartner Group Inc., Class B 20,000 120,000
Intimate Brands, Inc.<F1> 50,000 80,000
Jenny Craig, Inc. 132,000 550,000
Jostens, Inc. 195,000 _
Luxottica Group ADR 100,000 _
Philip Morris Cos., Inc. 250,000 330,000
Tupperware Corp. 100,000 130,000
United Asset Management Corp. 160,000 110,000
Valassis Communications, Inc. 10,000 60,000
<F1> Adjusted for a 2 for 1 split on 5/31/00
--------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS - 92.1%
APPAREL/SHOES - 3.9%
K-Swiss, Inc., Class A 160,000 $2,550,000
----------
EDUCATIONAL SERVICES - 6.9%
Franklin Covey Co.<F1> 650,000 4,509,375
----------
FINANCIAL SERVICES - 8.2%
First Data Corp. 55,000 2,729,375
United Asset Management Corp. 110,000 2,571,250
----------
5,300,625
----------
FOOD/TOBACCO - 13.5%
Philip Morris Cos., Inc. 330,000 8,765,625
----------
HOME FURNISHINGS - 12.7%
Department 56, Inc.<F1><F2> 750,000 8,250,000
----------
HOUSEHOLD PRODUCTS - 8.6%
Clorox Co. 60,000 2,688,750
Tupperware Corp. 130,000 2,860,000
----------
5,548,750
----------
MEDICAL SERVICES - 3.5%
First Health Group Corp.<F1> 70,000 2,296,875
----------
MEDICAL SUPPLIES - 14.9%
Dentsply International, Inc. 315,000 9,705,937
----------
RETAILING - 2.4%
Intimate Brands, Inc. 80,000 1,580,000
----------
SERVICES - 13.6%
Block H&R, Inc. 90,000 2,913,750
Gartner Group, Inc., Class B<F1> 120,000 1,185,000
Jenny Craig, Inc.<F1> 550,000 1,890,625
Servicemaster Co. 50,000 568,750
Valassis Communications, Inc.<F1> 60,000 2,287,500
----------
8,845,625
----------
--------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Cont'd.)
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
TIRES AND RUBBER - 3.9%
Bandag, Inc., Class A 110,000 $ 2,530,000
------------
Total Common Stocks
(cost $62,520,486) 59,882,812
------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
DEMAND NOTES
(VARIABLE RATE) - 7.0%
American Family Financial Services $1,165,785 1,165,785
Firstar Corp. 1,884,158 1,884,158
General Mills, Inc. 195,000 195,000
Sara Lee Corp. 759,200 759,200
Wisconsin Corp. Central Credit Union 319,457 319,457
Wisconsin Electric Power Co. 217,292 217,292
-----------
Total Demand Notes
(cost $4,540,892) 4,540,892
-----------
Total Investments - 99.1%
(cost $67,061,378) 64,423,704
Other Assets less Liabilities - 0.9% 558,275
-----------
Net Assets - 100.0% (equivalent
to $9.01 per share based on
7,208,403 shares outstanding) $64,981,979
===========
<F1> Non-income producing
<F2> Affiliated company - See Note 6
See notes to financial statements
--------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FOCUSED FUND
--------------------------------------------------------------------------------
EQUITY PURCHASES & SALES
For the Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NET SHARES CURRENT
NEW PURCHASE PURCHASED SHARES HELD
--------------------------------------------------------------------------------
Bandag, Inc., Class A 3,700 3,700
--------------------------------------------------------------------------------
NET SHARES CURRENT
PURCHASE PURCHASED SHARES HELD
--------------------------------------------------------------------------------
K-Swiss, Inc., Class A 8,000 20,000
--------------------------------------------------------------------------------
NET SHARES CURRENT
SALES SOLD SHARES HELD
--------------------------------------------------------------------------------
Dentsply International, Inc. 6,500 11,500
First Data Corp. 2,000 6,000
First Health Group Corp. 7,000 8,000
Franklin Covey Co. 81,900 80,000
Gartner Group, Inc., Class B 3,000 22,000
Jostens, Inc. 17,500 _
Philip Morris Cos., Inc. 4,000 35,000
United Asset Management Corp. 12,000 10,000
--------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FOCUSED FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS - 75.6%
APPAREL/SHOES - 4.8%
K-Swiss, Inc., Class A 20,000 $ 318,750
-----------
EDUCATIONAL SERVICES - 8.4%
Franklin Covey Co.<F1> 80,000 555,000
-----------
FINANCIAL SERVICES - 8.0%
First Data Corp. 6,000 297,750
United Asset Management Corp. 10,000 233,750
-----------
531,500
-----------
FOOD/TOBACCO - 14.0%
Philip Morris Cos., Inc. 35,000 929,687
-----------
HOME FURNISHINGS - 15.4%
Department 56, Inc.<F1> 93,000 1,023,000
-----------
MEDICAL SERVICES - 4.0%
First Health Group Corp.<F1> 8,000 262,500
-----------
MEDICAL SUPPLIES - 5.3%
Dentsply International, Inc. 11,500 354,344
-----------
RETAILING - 4.2%
Intimate Brands, Inc. 14,000 276,500
-----------
SERVICES - 10.2%
Block H&R, Inc. 9,000 291,375
Gartner Group, Inc., Class B<F1> 22,000 217,250
Servicemaster Co. 15,000 170,625
----------
679,250
----------
TIRES & RUBBER - 1.3%
Bandag, Inc., Class A 3,700 85,100
----------
Total Common Stocks
(cost $6,278,810) 5,015,631
----------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
PREFERRED STOCK - 3.4%
Franklin Covey Co., Series A 2,250 $ 225,000
-----------
Total Preferred Stock
(cost $225,000) 225,000
-----------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
DEMAND NOTES
(VARIABLE RATE) - 19.9%
American Family Financial Services $216,083 216,083
Firstar Corp. 288,971 288,971
Sara Lee Corp. 292,775 292,775
Wisconsin Corp. Central
Credit Union 252,975 252,975
Wisconsin Electric Power Co. 269,622 269,622
---------
Total Demand Notes
(cost $1,320,426) 1,320,426
---------
Total Investments - 98.9%
(cost $7,824,236) 6,561,057
Other Assets less Liabilities - 1.1% 71,007
---------
Net Assets - 100.0% (equivalent
to $8.01 per share based on
828,311 shares outstanding) $6,632,064
==========
<F1> Non-income producing
See notes to financial statements
--------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUNDS, INC.
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
--------------------------------------------------------------------------------
ASSETS:
Investments at value
Nonaffiliated issuers
(cost $52,598,378, and
$7,824,236, respectively) $56,173,704 $6,561,057
Affiliated issuers
(cost $14,463,000, and
$0, respectively) 8,250,000 -
Short-term investments of
collateral received for
securities loaned 5,927,700 1,236,000
Receivable for securities sold - 49,938
Receivable for fund shares issued 516,188 -
Dividends and interest receivable 286,943 29,492
Prepaid expenses 13,934 9,021
Receivable from Adviser - 2,081
----------- ----------
Total Assets 71,168,469 7,887,589
----------- ----------
LIABILITIES:
Collateral for securities loaned 5,927,700 1,236,000
Payable for fund shares redeemed 130,461 -
Accrued investment advisory fees 34,288 -
Other accrued expenses 94,041 19,525
----------- -----------
Total Liabilities 6,186,490 1,255,525
----------- -----------
NET ASSETS $64,981,979 $6,632,064
=========== ===========
NET ASSETS CONSIST OF:
Capital stock $63,668,183 $12,358,270
Undistributed net investment
income 162,735 29,861
Undistributed net realized
gains (losses) 3,788,735 (4,492,888)
Net unrealized depreciation
on investments (2,637,674) (1,263,179)
----------- -----------
Total Net Assets $64,981,979 $6,632,064
=========== ===========
CAPITAL STOCK, $.0001 par value
Authorized 500,000,000 500,000,000
Issued and outstanding 7,208,403 828,311
NET ASSET VALUE,
REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $9.01 $8.01
===== =====
See notes to financial statements
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income $ 732,650 $ 67,309
Interest income 68,698 33,540
Securities lending income
(See Note 7) 1,350 72
------------ ------------
802,698 100,921
------------ ------------
EXPENSES:
Investment advisory fees 238,072 35,802
Shareholder servicing fees 121,457 11,641
Administration and
accounting fees 50,501 24,864
Professional fees 27,411 9,114
Reports to shareholders 17,522 1,460
Federal and state
registration fees 13,658 11,550
Directors' fees and expenses 13,088 1,087
Custody fees 9,906 1,492
Miscellaneous costs 6,336 668
----------- -----------
Total expenses before
reimbursements 497,951 97,678
Expense reimbursements
(See Note 4) - (52,927)
----------- -----------
Net expenses 497,951 44,751
----------- -----------
NET INVESTMENT INCOME 304,747 56,170
----------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain (loss) on
investments (See Note 6) 3,788,494 (1,033,782)
Change in unrealized appreciation
(depreciation) on investments (9,806,764) 239,649
Net realized and unrealized loss ------------ -----------
on investments (6,018,270) (794,133)
------------ -----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(5,713,523) $ (737,963)
============ =============
See notes to financial statements
--------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUNDS, INC.
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
THE YACKTMAN
THE YACKTMAN FUND FOCUSED FUND
----------------------------- --------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
JUNE 30, 2000 ENDED JUNE 30, 2000 ENDED
(UNAUDITED) DEC. 31, 1999 (UNAUDITED) DEC. 31, 1999
------------------------------ --------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 304,747 $ 1,788,469 $ 56,170 $ 120,871
Net realized gain (loss)
on investments 3,788,494 2,125,339 (1,033,782) (2,736,086)
Change in unrealized
appreciation (depreciation)
on investments (9,806,764) (39,430,731) 239,649 (1,694,652)
------------- ------------- ----------- -------------
Net decrease in net assets
resulting from operations (5,713,523) (35,516,923) (737,963) (4,309,867)
------------- ------------- ----------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 11,542,894 41,386,878 2,196,893 1,864,934
Proceeds from reinvestment
of dividends 152,257 3,231,289 24,582 140,403
------------- ------------- ----------- ------------
11,695,151 44,618,167 2,221,475 2,005,337
Payments for shares redeemed (50,271,769) (203,767,926) (3,833,592) (15,948,264)
------------- ------------- ----------- ------------
Net decrease (38,576,618) (159,149,759) (1,612,117) (13,942,927)
------------- ------------- ----------- ------------
DIVIDENDS PAID FROM:
Net investment income (157,980) (1,544,769) (26,346) (125,562)
Net realized gains - (1,788,789) - (20,480)
------------- ------------- ----------- ------------
TOTAL DECREASE IN NET ASSETS (157,980) (3,333,558) (26,346) (146,042)
------------- ------------- ----------- -----------
(44,448,121) (198,000,240) (2,376,426) (18,398,836)
NET ASSETS:
Beginning of period 109,430,100 307,430,340 9,008,490 27,407,326
------------- ------------- ----------- -----------
End of period (including
undistributed net investment income
of $162,735, $15,968, $29,861
and $37, respectively) $64,981,979 $109,430,100 $6,632,064 $9,008,490
============ ============= =========== ==========
TRANSACTIONS IN SHARES:
Shares sold 1,326,349 3,769,743 281,332 172,657
Issued in reinvestment of dividends 17,787 327,409 3,073 14,381
Shares redeemed (5,771,456) (18,951,365) (461,716) (1,540,854)
------------- ------------ ---------- ------------
Net decrease (4,427,320) (14,854,213) (177,311) (1,353,816)
============= ============ ========== ============
</TABLE>
See notes to financial statements
--------------------------------------------------------------------------------
<PAGE>
-------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUNDS, INC.
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THE YACKTMAN FUND THE YACKTMAN FUND
---------------------------------------------------------------- -----------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
For a Fund share outstanding JUNE 30, 2000 ENDED ENDED ENDED ENDED ENDED
throughout each period (UNAUDITED) DEC. 31, 1999 DEC. 31, 1998 DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1995
---------------------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $9.40 $11.61 $14.05 $13.34 $12.09 $10.05
Income from investment
operations:
Net investment income 0.04 0.12 0.11 0.22 0.24 0.22
Net realized and unrealized
gains (losses) on investments (0.41) (2.07) (0.04) 2.21 2.90 2.81
Total from investment -------- -------- -------- --------- --------- --------
operations (0.37) (1.95) 0.07 2.43 3.14 3.03
-------- -------- -------- --------- --------- --------
Less distributions:
Dividends from net
investment income (0.02) (0.10) (0.11) (0.22) (0.24) (0.22)
Distributions from net
realized gains - (0.16) (2.40) (1.50) (1.65) (0.77)
-------- -------- -------- --------- --------- --------
Total distributions (0.02) (0.26) (2.51) (1.72) (1.89) (0.99)
-------- -------- -------- --------- --------- --------
Net asset value, end of
period $9.01 $9.40 $11.61 $14.05 $13.34 $12.09
========= ======== ======== ========== ========= ========
Total Return (3.92)%<F1> (16.90)% 0.64% 18.28% 26.02% 30.42%
========= ======== ======== ========== ========= ========
Supplemental data and ratios:
Net assets, end of period (000s) $64,982 $109,430 $307,430 $1,082,139 $ 755,617 $566,723
Ratio of expenses before expense ========= ======== ======== ========== ========= ========
reductions to average net assets
(See Note 5) 1.36%<F2> 0.72% 1.16% 0.90% 0.96% 0.99%
Ratio of net expenses to average ========= ======== ======== ========== ========= ========
net assets 1.36%<F2> 0.71% 1.14% 0.86% 0.90% 0.91%
Ratio of net investment income to ========= ======== ======== ========== ========= ========
average net assets 0.83%<F2> 0.95% 0.87% 1.54% 1.80% 2.02%
========= ======== ======== ========== ========= ========
Portfolio turnover rate 1.69% 4.80% 14.32% 69.13% 58.54% 55.37%
======== ======== ======== ========== ========= ========
<F1> Not annualized
<F2> Annualized
</TABLE>
See notes to financial statements
-------------------------------------------------------------------------------
<PAGE>
-------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUNDS, INC.
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Cont'd.)
THE YACKTMAN THE YACKTMAN
FOCUSED FUND FOCUSED FUND
--------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR MAY 1, 1997<F1>
For a Fund share ENDED ENDED ENDED THROUGH
outstanding throughout JUNE 30, 2000 DEC. 31, DEC. 31, DEC. 31,
each period (UNAUDITED) 1999 1998 1997
--------------------------------------------------------------------------------
Net asset value,
beginning of period $8.96 $11.62 $11.21 $10.00
Income from investment
operations:
Net investment income 0.07 0.09 0.05 0.07
Net realized and
unrealized gains (losses)
on investments (0.99) (2.64) 0.46 1.47
Total from investment ------ ------ ------ ------
operations (0.92) (2.55) 0.51 1.54
------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.03) (0.09) (0.05) (0.07)
Distributions from net
realized gains - (0.02) (0.05) (0.26)
------ ------ ------ ------
Total distributions (0.03) (0.11) (0.10) (0.33)
------ ------ ------ ------
Net asset value, end
of period $8.01 $8.96 $11.62 $11.21
======= ======== ====== ======
Total Return (10.27)%<F2> (22.02)% 4.58% 15.38%<F2>
======= ======== ====== ======
Supplemental data and ratios:
Net assets, end of
period (000s) $6,632 $9,008 $27,407 $58,446
Ratio of expenses before ======= ======== ======= =======
expense reimbursements
to average net assets
(See Note 4) 2.72%<F3> 1.19% 1.81% 1.71%<F3>
Ratio of net expenses to ======= ======== ======= ========
average net assets 1.25%<F3> 1.19% 1.25% 1.25%<F3>
Ratio of net investment ======= ======== ======= ========
income to average
net assets 1.56%<F3> 0.74% 0.48% 1.02%<F3>
======= ======== ======= ========
Portfolio turnover rate 5.53% 25.36% 49.26% 60.43%
======= ======== ======= =======
<F1> Commencement of operations
<F2> Not annualized
<F3> Annualized
See notes to financial statements
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUNDS, INC.
-------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
-------------------------------------------------------------------------------
1. ORGANIZATION
The Yacktman Funds, Inc. (the "Funds") is registered as an open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act").
The Funds consist of two investment portfolios: The Yacktman Fund is a
diversified fund that 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 capital appreciation 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. 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, 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.
-------------------------------------------------------------------------------
<PAGE>
-------------------------------------------------------------------------------
b) OPTIONS - Premiums received by The Yacktman Focused Fund upon writing
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, is exercised, or is closed, the Fund realizes a gain or loss, and the
liability is eliminated. The Fund continues to bear the risk of adverse
movements in the price of the underlying security during the period of the
option, although any potential loss would be reduced by the amount of the option
premium received. The Yacktman Focused Fund had no activity in written options
for the six months ended June 30, 2000.
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 annually. 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 character of distributions made
during the year from net investment income or net realized gains may differ from
the characterization for federal income tax purposes due to differences in the
recognition of income, expense and gain items for financial statement and tax
purposes. Where appropriate, reclassifications between capital accounts are
made for such differences that are permanent in nature.
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.
-------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUNDS, INC.
-------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
June 30, 2000 (Unaudited)
-------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
For the six months ended June 30, 2000, the aggregate purchases and sales of
securities, excluding short-term securities, were $1,215,343 and $41,036,153 for
The Yacktman Fund and $333,847 and $2,252,052 for The Yacktman Focused Fund,
respectively. There were no purchases or sales of U.S. Government securities for
the six months ended June 30, 2000.
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 may direct certain of the Funds' portfolio trades to brokers at best
price and execution and may generate 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, 2000, there were no expenses reduced by
utilizing directed brokerage credits for The Yacktman Fund and The Yacktman
Focused Fund. In accordance with Securities and Exchange Commission
requirements, such amount is required to be shown as an expense and would be
included in shareholder servicing fees in the Statement of Operations.
-------------------------------------------------------------------------------
<PAGE>
6. TRANSACTIONS WITH AFFILIATES
The following is an analysis of transactions for the six months ended June 30,
2000 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
Amount of
of Gain
Dividends (Loss)
Share Activity Credited Realized
------------------------------------ to on Sale
Security Balance Balance Income of Shares
Name 12/31/99 Purchases Sales 6/30/00 in 2000 in 2000
-------- -------- --------- ----- ------- ------- ----------
Department 56, Inc. 840,000 - 90,000 750,000 - $(246,786)
7. SECURITIES LENDING
The Funds have entered into a securities lending arrangement with the custodian.
Under the terms of the agreement, the custodian is authorized to loan securities
on behalf of the Funds to approved brokers against the receipt of cash
collateral at least equal to the value of the securities loaned. The cash
collateral is invested by the custodian in a money market pooled account
approved by the Adviser. Although risk is mitigated by the collateral, the Funds
could experience a delay in recovering their securities and possible loss of
income or value if the borrower fails to return them. The agreement provides
that after predetermined rebates to the brokers, the income generated from
lending transactions is allocated 60% to the Funds and 40% to the custodian. As
of June 30, 2000, The Yacktman Fund had on loan securities valued at $5,710,269
and collateral of $5,927,700 and The Yacktman Focused Fund had on loan
securities valued at $1,139,875 and collateral of $1,236,000.
-------------------------------------------------------------------------------
<PAGE>
THE YACKTMAN FUNDS, INC.
-------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
June 30, 2000 (Unaudited)
-------------------------------------------------------------------------------
8. TAX INFORMATION
At June 30, 2000, gross unrealized appreciation and depreciation on investments
on a tax basis were as follows:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
Appreciation $ 15,957,119 $ 567,698
Depreciation (18,594,793) (1,881,163)
------------- -------------
Net appreciation on investments $ (2,637,674) $ (1,313,465)
============= =============
Tax cost basis $ 67,061,378 $ 7,874,522
============= =============
At December 31, 1999, The Yacktman Focused Fund had accumulated capital loss
carryforwards of $1,333,190 expiring in the year 2007. To the extent that the
Fund realizes future net capital gains, those gains will be offset by any unused
capital loss carryforward.
-------------------------------------------------------------------------------
<PAGE>
This page intentionally left blank.
-------------------------------------------------------------------------------
<PAGE>
This page intentionally left blank.
-------------------------------------------------------------------------------
<PAGE>
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-410-0800
<PAGE>