UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-6628
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The Yacktman Funds, Inc.
1110 Lake Cook Road
Suite 385
Buffalo Grove, IL 60089
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(Address of principal executive offices)
Yacktman Asset Management Co.
1110 Lake Cook Road
Suite 385
Buffalo Grove, IL 60089
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(Name and address of agent for service)
Registrant's telephone number, including area code: (847) 325-0707
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2003
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ITEM 1. REPORTS TO STOCKHOLDERS
The following is a copy of the report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1)
[LOGO]
THE YACKTMAN FUNDS
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SEMI-ANNUAL REPORT
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June 30, 2003
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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:
The Funds continue to do very well and are selling very close to their all
time highs when adjusted for distributions of income and capital gains. For the
past three years, the cumulative return for The Yacktman Fund is up 77.84% and
The Yacktman Focused Fund is up 81.56%, while the S&P 500/R is down 29.98%. $100
invested in each Fund three years ago would now be $177.84 and $181.56,
respectively, compared to $70.02 in the S&P 500/R.
We made two significant changes in our equity holdings during the first half
of the year. First, Kraft moved up to our second largest holding from our tenth
largest holding. The company is very profitable and, while slow growing, we felt
the market over-reacted to some mildly disappointing news about the company so
we took the opportunity to dramatically increase our position.
[PHOTO]
Donald A. Yacktman
[PHOTO]
Stephen Yacktman
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THE THE
YACKTMAN YACKTMAN
FUND(1) S&P 500/R FOCUSED FUND(2) S&P 500/R
TIME ANNUALIZED ANNUALIZED ANNUALIZED ANNUALIZED
PERIOD RETURNS RETURNS RETURNS RETURNS
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One Year 19.72% 0.25% 19.32% 0.25%
Three Years 21.15% (11.20)% 21.99% (11.20)%
Five Years 6.62% (1.61)% 4.19% (1.61)%
Ten Years 12.17% 10.04% N/A 10.04%
Since Inception 10.37% 10.23% 7.17% 4.73%
(1) The Yacktman Fund Inception (7/6/92)
(2) The Yacktman Focused Fund Inception (5/1/97)
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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THE YACKTMAN FUNDS, INC.
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Second, we purchased AmeriCredit, a company which makes secured loans to sub-
prime borrowers who purchase used automobiles. While the financial structure of
the company is somewhat complicated, we studied the company closely and felt
comfortable purchasing stock at a very distressed price. It has rewarded us
handsomely and risen dramatically in value.
Listed below are the portfolio P/E's over the past few years. As we said at
year-end, our P/E's are somewhat elevated because Liberty Media has so many
investments in both public and private companies as opposed to operating units
and thus has an elevated P/E.
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THE DISCOUNT
YACKTMAN FROM THE
S&P 500/R FUND S&P 500/R
TIME PRICE/ PRICE/ PRICE/
PERIOD EARNINGS EARNINGS EARNINGS
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June, 1999 32.0 14.8 54%
June, 2000 25.5 11.2 56%
June, 2001 22.5 13.2 41%
June, 2002 19.4 13.7 29%
June, 2003 17.8 16.9 5%
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THE DISCOUNT
YACKTMAN FROM THE
S&P 500/R FOCUSED FUND S&P 500/R
TIME PRICE/ PRICE/ PRICE/
PERIOD EARNINGS EARNINGS EARNINGS
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June, 1999 32.0 13.9 57%
June, 2000 25.5 10.2 60%
June, 2001 22.5 12.9 43%
June, 2002 19.4 13.8 29%
June, 2003 17.8 16.5 7%
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The estimated earnings used to create the above P/E ratios were provided by
commercial estimates when available, or by internal estimates.
The economy remains sluggish and it is clear the Fed is trying to stimulate
it with lower interest rates to encourage consumer spending. We feel we may be
starting to see signs of a mini-bubble in technology stocks as the NASDAQ 100
has more than
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doubled the performance of the S&P 500/R so far this year. While the technology
bubble is probably not justified, we feel it is noteworthy that our Funds, which
have almost no investment in technology companies have outperformed the S&P
500/R, which is composed of about 20% technology companies.
We will continue to follow our disciplined strategy of purchasing inexpensive
business properties (stocks) which we feel are good businesses and hopefully run
by managers who do a good job of capital allocation.
We welcome all our new shareholders and hope you have a good summer.
Sincerely,
/s/Donald A. Yacktman /s/Stephen Yacktman
Donald A. Yacktman Stephen Yacktman
President & Co-Portfolio Manager Co-Portfolio Manager
THE YACKTMAN FUND
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TOP TEN EQUITY HOLDINGS
June 30, 2003 (Unaudited)
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PERCENTAGE OF
NET ASSETS
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Tyco International Ltd. 8.7%
Kraft Foods, Inc. 7.1
Liberty Media Corp. 7.0
Lancaster Colony Corp. 3.5
Henkel KGaA 3.4
Bristol-Myers Squibb Co. 3.1
Electronic Data Systems Corp. 2.7
Interpublic Group of Cos., Inc. 2.5
AmeriCredit Corp. 2.4
Apogent Technologies, Inc. 2.0
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TOTAL 42.4%
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THE YACKTMAN FUND
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EQUITY PURCHASES & SALES
For the Six Months Ended June 30, 2003 (Unaudited)
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NET SHARES CURRENT
NEW PURCHASES PURCHASED SHARES HELD
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AMERICREDIT CORP.
A national consumer finance
company specializing in purchasing,
securitizing and servicing
automobile loans. 1,300,000 1,300,000
LUBRIZOL CORP.
Supplies performance chemicals to
diverse markets worldwide. 100,000 100,000
MICROSOFT CORP.
Develops, manufactures, licenses,
sells and supports software products. 100,000 100,000
PFIZER, INC.
Discovers, develops, manufactures
and markets medicines for humans
and animals. 100,000 100,000
TOOTSIE ROLL INDUSTRIES, INC.*
Manufactures and sells candy. 24,720 24,720
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NET SHARES CURRENT
PURCHASES PURCHASED SHARES HELD
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Altria Group, Inc. 23,000 125,000
Apogent Technologies, Inc. 180,000 450,000
Cadbury Schweppes plc 160,000 280,000
Clorox Co. 40,000 160,000
Coca-Cola Co. 95,000 130,000
Federal Home Loan Mortgage Corp. 20,000 130,000
Henkel KGaA 53,175 275,000
Interpublic Group of Cos., Inc. 540,000 850,000
Interstate Bakeries Corp. 210,000 360,000
Kraft Foods, Inc. 830,000 1,000,000
* Adjusted for a stock dividend on 2/28/03.
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NET SHARES CURRENT
PURCHASES (CONT'D.) PURCHASED SHARES HELD
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MBIA, Inc. 5,000 95,000
MGIC Investment Corp. 10,000 70,000
ServiceMaster Co. 35,300 195,300
Tupperware Corp. 150,000 300,000
Tyco International Ltd. 70,000 2,100,000
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NET SHARES CURRENT
SALES SOLD SHARES HELD
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AOL Time Warner, Inc. 400,000 -
AVX Corp. 100,000 -
Bristol-Myers Squibb Co. 80,000 520,000
Comcast Corp., Special Class A 40,000 -
Electronic Data Systems Corp. 70,000 570,000
Federal National Mortgage Association 10,000 90,000
Franklin Covey Co. 212,600 -
Gemstar-TV Guide International, Inc. 1,030,000 870,000
Golden West Financial Corp. 10,000 -
Great Lakes REIT, Inc. 50,000 -
Hewlett-Packard Co. 70,000 -
Home Depot, Inc. 30,000 60,000
Hunter Douglas NV 300,000 -
Instinet Group, Inc. 200,000 -
Kimberly-Clark Corp. 30,000 -
Lancaster Colony Corp. 50,000 420,000
Liberty Media Corp. 260,000 2,800,000
McDonald's Corp. 20,000 90,000
Merck & Co., Inc. 30,000 -
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THE YACKTMAN FUND
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EQUITY PURCHASES & SALES (Cont'd.)
For the Six Months Ended June 30, 2003 (Unaudited)
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NET SHARES CURRENT
SALES (CONT'D.) SOLD SHARES HELD
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Nicor, Inc. 35,000 200,000
Prudential Financial, Inc. 50,000 -
Safeway, Inc. 200,000 -
Sealed Air Corp., Class A 40,000 -
Sherwin-Williams Corp. 25,000 -
Trizec Properties, Inc. 74,600 750,000
Unilever NV 60,000 100,000
Washington Mutual, Inc. 30,000 120,000
Waste Management, Inc. 50,000 -
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS
June 30, 2003 (Unaudited)
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NUMBER
OF SHARES VALUE
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COMMON STOCKS - 75.1%
AEROSPACE & DEFENSE - 0.5%
United Technologies Corp. 35,000 $ 2,479,050
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AUTO COMPONENTS - 0.6%
Bandag, Inc., Class A 80,000 2,808,000
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BANKS - 2.4%
U.S. Bancorp 250,000 6,125,000
Washington Mutual, Inc. 120,000 4,956,000
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11,081,000
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BEVERAGES - 2.5%
Coca-Cola Co. 130,000 6,033,300
PepsiCo, Inc. 120,000 5,340,000
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11,373,300
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CHEMICALS - 0.7%
Lubrizol Corp. 100,000 3,099,000
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COMMERCIAL SERVICES & SUPPLIES - 3.9%
Block H&R, Inc. 130,000 5,622,500
First Data Corp. 170,000 7,044,800
IMS Health, Inc. 170,000 3,058,300
ServiceMaster Co. 195,300 2,089,710
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17,815,310
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DIVERSIFIED FINANCIALS - 5.6%
American Express Co. 40,000 1,672,400
AmeriCredit Corp.* 1,300,000 11,115,000
Federal Home Loan Mortgage Corp. 130,000 6,600,100
Federal National Mortgage Association 90,000 6,069,600
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25,457,100
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FOOD & DRUG RETAIL - 0.3%
Kroger Co.* 90,000 1,501,200
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FOOD PRODUCTS - 13.3%
Cadbury Schweppes plc 280,000 6,770,400
Interstate Bakeries Corp. 360,000 4,572,000
Kraft Foods, Inc. 1,000,000 32,550,000
Lancaster Colony Corp. 420,000 16,237,200
Tootsie Roll Industries, Inc. 24,720 753,713
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60,883,313
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS (Cont'd.)
June 30, 2003 (Unaudited)
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NUMBER
OF SHARES VALUE
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GAS UTILITIES - 1.6%
Nicor, Inc. 200,000 $ 7,422,000
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HEALTH CARE EQUIPMENT & SUPPLIES - 2.0%
Apogent Technologies, Inc.* 450,000 9,000,000
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HEALTH CARE PROVIDERS & SERVICES - 1.6%
First Health Group Corp.* 260,000 7,176,000
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HOTELS, RESTAURANTS & LEISURE - 0.4%
McDonald's Corp. 90,000 1,985,400
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HOUSEHOLD DURABLES - 1.7%
Russ Berrie & Co., Inc. 100,000 3,651,000
Tupperware Corp. 300,000 4,308,000
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7,959,000
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HOUSEHOLD PRODUCTS - 6.1%
Clorox Co. 160,000 6,824,000
Henkel KGaA 275,000 15,569,015
Unilever NV 100,000 5,400,000
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27,793,015
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INDUSTRIAL CONGLOMERATES - 8.7%
Tyco International Ltd. 2,100,000 39,858,000
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INSURANCE - 1.7%
MBIA, Inc. 95,000 4,631,250
MGIC Investment Corp. 70,000 3,264,800
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7,896,050
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INTERNET & CATALOG RETAIL - 0.2%
Blair Corp. 40,000 888,000
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IT CONSULTING & SERVICES - 2.7%
Electronic Data Systems Corp. 570,000 12,226,500
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MEDIA - 10.5%
Gemstar-TV Guide International, Inc.* 870,000 4,428,300
Interpublic Group of Cos., Inc. 850,000 11,373,000
Liberty Media Corp.* 2,800,000 32,368,000
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48,169,300
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NUMBER
OF SHARES VALUE
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PHARMACEUTICALS - 3.8%
Bristol-Myers Squibb Co. 520,000 $ 14,118,000
Pfizer, Inc. 100,000 3,415,000
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17,533,000
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REAL ESTATE - 1.9%
Trizec Properties, Inc. 750,000 8,527,500
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SOFTWARE - 0.6%
Microsoft Corp. 100,000 2,561,000
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SPECIALTY RETAIL - 0.4%
Home Depot, Inc. 60,000 1,987,200
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TEXTILES & APPAREL - 0.2%
Saucony, Inc., Class B 90,000 1,087,200
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TOBACCO - 1.2%
Altria Group, Inc. 125,000 5,680,000
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Total Common Stocks
(cost $269,474,699) 344,246,438
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS (Cont'd.)
June 30, 2003 (Unaudited)
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PRINCIPAL
AMOUNT VALUE
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CORPORATE BONDS - 4.0%
Fleming Cos., Inc., 10.125%, 4/1/08 $29,750,000 $ 4,611,250
Fleming Cos., Inc., 9.25%, 6/15/10 2,000,000 310,000
Qwest Capital, 7.90%, 8/15/10 16,500,000 13,612,500
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Total Corporate Bonds
(cost $25,507,148) 18,533,750
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SHORT-TERM INVESTMENTS - 49.0%
COMMERCIAL PAPER - 11.6%
Galaxy Funding, Inc., 1.10%, 7/1/03 17,700,000 17,700,000
GE Capital, 1.10%, 7/1/03 17,700,000 17,700,000
Stellar Funding Group,
1.05%, 7/1/03 17,700,000 17,700,000
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Total Commercial Paper
(cost $53,100,000) 53,100,000
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DEMAND NOTE (VARIABLE RATE) - 0.1%
U.S. Bancorp, 0.78% 705,075 705,075
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Total Demand Note
(cost $705,075) 705,075
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U.S. GOVERNMENT OBLIGATION - 4.5%
U.S. Treasury Bill, 0.40%, 7/10/03 20,500,000 20,497,950
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Total U.S. Government Obligation
(cost $20,497,950) 20,497,950
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VALUE
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OTHER SHORT-TERM INVESTMENT - 32.8%
Securities Lending Investment Account
(cost $150,614,712) $150,614,712
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Total Short-Term Investments
(cost $224,917,737) 224,917,737
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Total Investments - 128.1%
(cost $519,899,584) 587,697,925
Less Liability for Collateral on Securities
Loaned - (32.8)% (150,614,712)
Other Assets less Other Liabilities - 4.7% 21,457,987
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Net Assets - 100% (equivalent to $13.95
per share based on shares outstanding) $458,541,200
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* Non-income producing
See notes to financial statements
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THE YACKTMAN FOCUSED FUND
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EQUITY PURCHASES & SALES
For the Six Months Ended June 30, 2003 (Unaudited)
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NET SHARES CURRENT
NEW PURCHASES PURCHASED SHARES HELD
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AmeriCredit Corp. 450,000 450,000
Interstate Bakeries Corp. 120,000 120,000
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NET SHARES CURRENT
PURCHASES PURCHASED SHARES HELD
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Altria Group, Inc. 19,000 50,000
Apogent Technologies, Inc. 41,600 155,000
Clorox Co. 60,000 80,000
Federal Home Loan Mortgage Corp. 10,000 95,000
Interpublic Group of Cos., Inc. 23,000 278,000
Kraft Foods, Inc. 290,000 350,000
MGIC Investment Corp. 15,000 30,000
Tyco International Ltd. 20,000 640,000
Unilever NV 23,000 50,000
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NET SHARES CURRENT
SALES SOLD SHARES HELD
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AOL Time Warner, Inc. 115,000 -
Block H&R, Inc. 4,000 35,000
Bristol-Myers Squibb Co. 20,000 160,000
Electronic Data Systems Corp. 40,000 130,000
First Data Corp. 15,000 30,000
First Health Group Corp. 10,000 60,000
Franklin Covey Co., Series A 2,423 -
Gemstar-TV Guide International, Inc. 160,000 310,000
Henkel KGaA 15,000 85,000
Lancaster Colony Corp. 14,000 136,000
Liberty Media Corp. 250,000 650,000
Nicor, Inc. 61,000 -
PepsiCo, Inc. 15,000 25,000
Safeway, Inc. 70,000 -
Saucony, Inc., Class B 4,400 35,000
Trizec Properties, Inc. 35,000 200,000
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THE YACKTMAN FOCUSED FUND
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PORTFOLIO OF INVESTMENTS
June 30, 2003 (Unaudited)
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NUMBER
OF SHARES VALUE
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COMMON STOCKS - 63.7%
BEVERAGES - 0.8%
PepsiCo, Inc. 25,000 $ 1,112,500
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COMMERCIAL SERVICES & SUPPLIES - 2.0%
Block H&R, Inc. 35,000 1,513,750
First Data Corp. 30,000 1,243,200
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2,756,950
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DIVERSIFIED FINANCIALS - 6.3%
AmeriCredit Corp.* 450,000 3,847,500
Federal Home Loan Mortgage Corp. 95,000 4,823,150
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8,670,650
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FOOD PRODUCTS - 13.3%
Interstate Bakeries Corp. 120,000 1,524,000
Kraft Foods, Inc. 350,000 11,392,500
Lancaster Colony Corp. 136,000 5,257,760
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18,174,260
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HEALTH CARE EQUIPMENT & SUPPLIES - 2.3%
Apogent Technologies, Inc.* 155,000 3,100,000
--------------
HEALTH CARE PROVIDERS & SERVICES - 1.2%
First Health Group Corp.* 60,000 1,656,000
--------------
HOUSEHOLD DURABLES - 0.3%
Russ Berrie & Co., Inc. 13,500 492,885
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HOUSEHOLD PRODUCTS - 8.0%
Clorox Co. 80,000 3,412,000
Henkel KGaA 85,000 4,812,241
Unilever NV 50,000 2,700,000
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10,924,241
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INDUSTRIAL CONGLOMERATES - 8.9%
Tyco International Ltd. 640,000 12,147,200
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INSURANCE - 2.3%
MBIA, Inc. 35,000 1,706,250
MGIC Investment Corp. 30,000 1,399,200
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3,105,450
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IT CONSULTING & SERVICES - 2.0%
Electronic Data Systems Corp. 130,000 2,788,500
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NUMBER
OF SHARES VALUE
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MEDIA - 9.4%
Gemstar-TV Guide International, Inc.* 310,000 $ 1,577,900
Interpublic Group of Cos., Inc. 278,000 3,719,640
Liberty Media Corp.* 650,000 7,514,000
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12,811,540
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PHARMACEUTICALS - 3.2%
Bristol-Myers Squibb Co. 160,000 4,344,000
--------------
REAL ESTATE - 1.7%
Trizec Properties, Inc. 200,000 2,274,000
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TEXTILES & APPAREL - 0.3%
Saucony, Inc., Class B 35,000 422,800
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TOBACCO - 1.7%
Altria Group, Inc. 50,000 2,272,000
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Total Common Stocks
(cost $74,397,634) 87,052,976
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THE YACKTMAN FOCUSED FUND
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PORTFOLIO OF INVESTMENTS (Cont'd.)
June 30, 2003 (Unaudited)
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PRINCIPAL
AMOUNT VALUE
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CORPORATE BONDS - 2.3%
Fleming Cos., Inc., 10.125%, 4/1/08 $ 7,000,000 $ 1,085,000
Qwest Capital, 7.90%, 8/15/10 2,500,000 2,062,500
--------------
Total Corporate Bonds
(cost $5,134,795) 3,147,500
--------------
SHORT-TERM INVESTMENTS - 58.8%
COMMERCIAL PAPER - 20.9%
Federal National Mortgage
Association, 0.85%, 7/1/03 6,500,000 6,500,000
Galaxy Funding, Inc., 1.10%, 7/1/03 5,500,000 5,500,000
GE Capital, 1.10%, 7/1/03 5,500,000 5,500,000
Prudential Funding, 1.10%, 7/1/03 5,500,000 5,500,000
Stellar Funding Group, 1.05%, 7/1/03 5,500,000 5,500,000
--------------
Total Commercial Paper
(cost $28,500,000) 28,500,000
--------------
DEMAND NOTE (VARIABLE RATE) - 3.5%
U.S. Bancorp, 0.78% 4,782,701 4,782,701
--------------
Total Demand Note
(cost $4,782,701) 4,782,701
--------------
U.S. GOVERNMENT OBLIGATION - 9.5%
U.S. Treasury Bill, 0.40%, 7/10/03 13,000,000 12,998,700
--------------
Total U.S. Government Obligation
(cost $12,998,700) 12,998,700
--------------
OTHER SHORT-TERM INVESTMENT - 24.9%
Securities Lending Investment Account
(cost $33,960,225) 33,960,225
--------------
Total Short-Term Investments
(cost $80,241,626) 80,241,626
--------------
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NUMBER
OF CONTRACTS VALUE
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PUT OPTION PURCHASED - 0.5%
Omnicom Group, Inc.
Expiring Jan. 2005 at $100.00 250 $ 762,500
--------------
Total Put Option Purchased
(cost $1,003,500) 762,500
--------------
Total Investments - 125.3%
(cost $160,777,555) 171,204,602
Less Liability for Collateral on Securities
Loaned - (24.9)% (33,960,225)
Other Liabilities less Other Assets - (0.4)% (599,060)
--------------
Net Assets - 100% (equivalent to $14.16
per share based on shares outstanding) $136,645,317
==============
* 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, 2003 (Unaudited)
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THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
- --------------------------------------------------------------------------------
ASSETS:
Investments at value
(cost $519,899,584 and
$160,777,555, respectively) $587,697,925 $171,204,602
Cash 20,508,971 -
Receivable for fund shares sold 3,047,391 1,044,231
Receivable for securities sold 1,135,741 -
Dividends and interest receivable 1,249,216 232,630
Prepaid expenses 56,840 61,048
-------------- --------------
Total Assets 613,696,084 172,542,511
-------------- --------------
LIABILITIES:
Collateral for securities loaned 150,614,712 33,960,225
Payable for fund shares
redeemed 3,117,054 725,238
Payable for securities purchased 1,075,476 1,075,476
Accrued investment
advisory fees 245,102 96,579
Other accrued expenses 102,540 39,676
-------------- --------------
Total Liabilities 155,154,884 35,897,194
-------------- --------------
NET ASSETS $458,541,200 $136,645,317
============== ==============
NET ASSETS CONSIST OF:
Capital stock $389,673,519 $128,872,801
Undistributed net investment
income 3,203,158 426,839
Undistributed net realized losses (2,133,818) (3,081,370)
Net unrealized appreciation
on investments 67,798,341 10,427,047
-------------- --------------
Total Net Assets $458,541,200 $136,645,317
============== ==============
CAPITAL STOCK, $.0001 par value
Authorized 500,000,000 500,000,000
Issued and outstanding 32,878,134 9,651,136
NET ASSET VALUE,
REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $13.95 $14.16
====== ======
See notes to financial statements
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STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income $ 3,126,276(1) $ 604,404(2)
Interest income 1,795,119 450,090
Securities lending income
(See Note 5) 42,666 4,797
-------------- --------------
4,964,061 1,059,291
-------------- --------------
EXPENSES:
Investment advisory fees 1,292,031 506,679
Shareholder servicing fees 260,479 67,543
Administration and
accounting fees 106,743 25,333
Professional fees 38,890 19,267
Custody fees 37,263 11,374
Federal and state
registration fees 25,418 19,272
Reports to shareholders 23,126 13,486
Directors' fees and expenses 13,699 5,364
Miscellaneous costs 7,064 829
-------------- --------------
Total expenses before interest
expense and reimbursements 1,804,713 669,147
Interest expense (See Note 6) - 6,924
-------------- --------------
Total expenses before
reimbursements 1,804,713 676,071
Expense reimbursements
(See Note 4) - (35,798)
-------------- --------------
Net expenses 1,804,713 640,273
-------------- --------------
NET INVESTMENT INCOME 3,159,348 419,018
-------------- --------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 1,149,653 1,214,479
Change in unrealized appreciation
on investments 36,637,252 5,342,934
-------------- --------------
Net realized and unrealized gain
on investments 37,786,905 6,557,413
-------------- --------------
NET INCREASEIN NET ASSETS
RESULTING FROM OPERATIONS $40,946,253 $6,976,431
============== ==============
(1) Net of $57,687 in foreign withholding taxes
(2) Net of $14,738 in foreign withholding taxes
See notes to financial statements
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
THE YACKTMAN
THE YACKTMAN FUND FOCUSED FUND
----------------------------- -----------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DEC. 31, 2002 (UNAUDITED) DEC. 31, 2002
----------------------------- -----------------------------
OPERATIONS:
Net investment income $ 3,159,348 $ 4,385,306 $ 419,018 $ 710,014
Net realized gain (loss) on investments 1,149,653 (3,306,371) 1,214,479 661,611
Change in unrealized appreciation
on investments 36,637,252 22,914,495 5,342,934 3,637,913
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations 40,946,253 23,993,430 6,976,431 5,009,538
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 356,341,511 811,136,747 145,651,352 217,426,498
Proceeds from reinvestment of distributions - 3,293,940 - 685,524
------------- ------------- ------------- -------------
356,341,511 814,430,687 145,651,352 218,112,022
Payments for shares redeemed (360,038,375) (526,903,472) (131,232,541) (116,526,675)
------------- ------------- ------------- -------------
Net increase (decrease) (3,696,864) 287,527,215 14,418,811 101,585,347
------------- ------------- ------------- -------------
DISTRIBUTIONS PAIDFROM:
Net investment income - (3,427,806) - (701,196)
Net realized gains - - - -
------------- ------------- ------------- -------------
Total distributions - (3,427,806) - (701,196)
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS 37,249,389 308,092,839 21,395,242 105,893,689
NET ASSETS:
Beginning of period 421,291,811 113,198,972 115,250,075 9,356,386
------------- ------------- ------------- -------------
End of period (including undistributed net investment income of
$3,203,158, $43,810, $426,839 and $7,818, respectively) $458,541,200 $421,291,811 $136,645,317 $115,250,075
============= ============= ============= =============
TRANSACTIONS IN SHARES:
Shares sold 28,709,738 68,681,132 11,034,641 18,239,860
Issued in reinvestment of distributions - 270,661 - 55,734
Shares redeemed (30,004,652) (44,921,410) (10,619,825) (9,916,158)
------------- ------------- ------------- -------------
Net increase (decrease) (1,294,914) 24,030,383 414,816 8,379,436
============= ============= ============= =============
See notes to financial statements
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE YACKTMAN FUND THE YACKTMAN FUND
- -------------------------------------------------------------------------- ---------------------------------------------------
SIX MONTHS ENDED
For a Fund share outstanding JUNE 30, 2003 YEAR ENDED YEAR ENDED DECEMBER 31,
throughout each period (UNAUDITED) DEC. 31, 2002 2001 2000 1999 1998
- -------------------------------------------------------------------------- ---------------------------------------------------
Net asset value, beginning
of period $12.33 $11.16 $9.80 $9.40 $11.61 $14.05
Income from investment
operations:
Net investment income 0.10 0.13 0.08 0.11 0.12 0.11
Net realized and unrealized
gain (loss) on investments 1.52 1.14 1.83 1.16 (2.07) (0.04)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations 1.62 1.27 1.91 1.27 (1.95) 0.07
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income - (0.10) (0.05) (0.06) (0.10) (0.11)
From net realized gains - - (0.50) (0.81) (0.16) (2.40)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions - (0.10) (0.55) (0.87) (0.26) (2.51)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end
of period $13.95 $12.33 $11.16 $9.80 $9.40 $11.61
=========== =========== =========== =========== =========== ===========
Total Return 13.14%(1) 11.41% 19.47% 13.46% (16.90)% 0.64%
=========== =========== =========== =========== =========== ===========
Supplemental data and ratios:
Net assets, end of period (000s) $458,541 $421,292 $113,199 $69,800 $109,430 $307,430
=========== =========== =========== =========== =========== ===========
Ratio of expenses before expense
reimbursements to average net
assets (See Note 4) 0.91%(2) 0.99% 1.17% 1.23% 0.72% 1.16%
=========== =========== =========== =========== =========== ===========
Ratio of net expenses to average
net assets 0.91%(2) 0.99% 1.17% 1.23% 0.71% 1.14%
=========== =========== =========== =========== =========== ===========
Ratio of net investment income to
average net assets 1.59%(2) 2.01% 1.06% 1.03% 0.95% 0.87%
=========== =========== =========== =========== =========== ===========
Portfolio turnover rate 26.76%(1) 39.19% 42.79% 19.00% 4.80% 14.32%
=========== =========== =========== =========== =========== ===========
(1) Not annualized
(2) Annualized
See notes to financial statements
THE YACKTMAN FUNDS, INC.
FINANCIAL HIGHLIGHTS (Cont'd.)
- --------------------------------------------------------------------------------
THE YACKTMAN FOCUSED FUND THE YACKTMAN FOCUSED FUND
- -------------------------------------------------------------------------- ---------------------------------------------------
SIX MONTHS ENDED
For a Fund share outstanding JUNE 30, 2003 YEAR ENDED YEAR ENDED DECEMBER 31,
throughout each period (UNAUDITED) DEC. 31, 2002 2001 2000 1999 1998
- -------------------------------------------------------------------------- ---------------------------------------------------
Net asset value, beginning
of period $12.48 $10.92 $9.40 $8.96 $11.62 $11.21
Income from investment
operations:
Net investment income 0.04 0.08 0.09 0.14 0.09 0.05
Net realized and unrealized
gain (loss) on investments 1.64 1.56 1.52 0.45 (2.64) 0.46
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations 1.68 1.64 1.61 0.59 (2.55) 0.51
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income - (0.08) (0.09) (0.14) (0.09) (0.05)
From net realized gains - - - - (0.02) (0.05)
Return of capital - - - (0.01) - -
----------- ----------- ----------- ----------- ----------- -----------
Total distributions - (0.08) (0.09) (0.15) (0.11) (0.10)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end
of period $14.16 $12.48 $10.92 $9.40 $8.96 $11.62
=========== =========== =========== =========== =========== ===========
Total Return 13.46%(1) 14.99% 17.14% 6.60% (22.02)% 4.58%
=========== =========== =========== =========== =========== ===========
Supplemental data and ratios:
Net assets, end of period (000s) $136,645 $115,250 $9,356 $7,606 $9,008 $27,407
=========== =========== =========== =========== =========== ===========
Ratio of expenses before expense
reimbursements to average net
assets (See Note 4) 1.33%(2),(3) 1.45% 2.32% 2.50% 1.19% 1.81%
=========== =========== =========== =========== =========== ===========
Ratio of net expenses to average
net assets 1.26%(2),(4) 1.25% 1.25% 1.25% 1.19% 1.25%
=========== =========== =========== =========== =========== ===========
Ratio of net investment income to
average net assets 0.83%(2) 1.68% 1.06% 1.56% 0.74% 0.48%
=========== =========== =========== =========== =========== ===========
Portfolio turnover rate 50.21%(1) 49.95% 51.33% 37.84% 25.36% 49.26%
=========== =========== =========== =========== =========== ===========
(1) Not annualized
(2) Annualized
(3) The ratio of expenses before expense reimbursements to average net assets,
excluding interest expense, is 1.32%
(4) The ratio of expenses to average net assets, excluding interest expense, is
1.25%
See notes to financial statements
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Yacktman Funds, Inc. (comprised of The Yacktman Fund and The Yacktman
Focused Fund, hereafter referred to as 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 Manage ment 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 accounting principles
generally accepted in the United States of America, which require management to
make certain estimates and assumptions during the reporting period. 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. Securities that are traded on the Nasdaq
National Market or the Nasdaq Smallcap Market are valued at the Nasdaq Official
Closing Price. 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, which approximates fair 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. Changes between
the initial premiums received and the current value of the options are recorded
in unrealized gains and losses. 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 option premium received. The Yacktman Focused
Fund had no activity in written options for the six months ended June 30, 2003.
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 recorded.
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. Additionally, the Funds may utilize earnings and profits distributed
to shareholders on redemption of shares as part of the dividends paid deduction
for income 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 the gain or loss realized from investment transactions by
comparing the original cost of the
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
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
For the six months ended June 30, 2003, the aggregate purchases and sales of
securities, excluding short-term securities, were $99,981,871 and $91,382,431
for The Yacktman Fund and $41,956,868 and $40,270,092 for The Yacktman Focused
Fund, respectively. For the six months ended June 30, 2003, the aggregate
purchases and sales of U.S. Government securities were $20,497,722 and $0 for
The Yacktman Fund and $12,998,556 and $0 for The Yacktman Focused Fund,
respectively.
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 Adviser has voluntarily agreed to
reimburse The Yacktman Focused Fund for all expenses exceeding 1.25% of its
average daily net assets (exclusive of interest, taxes, brokerage commissions
and extraordinary expenses).
5. 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, 2003, The Yacktman Fund had
on loan securities valued at $144,364,145 and collateral of $150,614,712 and The
Yacktman Focused Fund had on loan securities valued at $32,489,759 and
collateral of $33,960,225.
6. LINE OF CREDIT
The Yacktman Fund and The Yacktman Focused Fund have established a line of
credit ("LOC") with U.S. Bank N.A. to be used for temporary or emergency
purposes, primarily for financing redemption payments. For The Yacktman Fund,
borrowing under the LOC is limited to the lesser of $15,000,000, 10% of the pre-
borrowing net assets of the Fund, 10% of the market value of the assets of the
Fund, or 10% of the sum of the fair market value of certain assets of the Fund.
For The Yacktman Focused Fund, borrowing under the LOC is limited to the lesser
of $35,000,000, 50% of the pre-borrowing net assets of the Fund, 50% of the
market value of the assets of the Fund, or 50% of the sum of the fair market
value of certain assets of the Fund. At June 30, 2003, The Yacktman Fund and The
Yacktman Focused Fund had no outstanding borrowings under the LOC. During the
six months ended June 30, 2003, The Yacktman Fund and The Yacktman Focused Fund
had outstanding average daily balances of $0 and $367,254 under the LOC,
respectively. The maximum amount outstanding for The Yacktman Fund and The
Yacktman Focused Fund during the period was $0 and $18,397,000. Interest expense
for The Yacktman Focused Fund amounted to $6,924 for the six months ended June
30, 2003.
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
7. TAX INFORMATION
The following information for the Funds is presented on an income tax basis as
of June 30, 2003:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
Cost of investments $369,233,550 $126,859,034
============== ==============
Gross unrealized appreciation $ 85,525,636 $ 15,084,991
Gross unrealized depreciation (17,675,973) (4,699,648)
-------------- --------------
Net unrealized appreciation
on investments $ 67,849,663 $ 10,385,343
============== ==============
The difference between cost amounts for financial statement and federal income
tax purposes is due primarily to timing differences in recognizing certain gains
and losses in security transactions.
The tax character of distributions paid during the fiscal years ended December
31, 2002 and 2001 were as follows:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
2002
Ordinary income $3,427,806 $701,196
Long-term capital gains - -
2001
Ordinary income $ 999,941 $ 81,983
Long-term capital gains $4,314,738 -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
As of December 31, 2002, the components of accumulated earnings on a tax basis
were as follows:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
Undistributed ordinary income $ 43,810 $ 7,818
Undistributed long-term
capital gains - -
-------------- --------------
Accumulated earnings 43,810 7,818
Accumulated capital and
other losses (3,218,408) (4,093,270)
Net unrealized appreciation
on investments 31,096,026 4,881,537
-------------- --------------
Total accumulated earnings $27,921,428 $ 796,085
============== ==============
As of December 31, 2002, The Yacktman Fund and The Yacktman Focused Fund had
accumulated federal income tax capital loss carryforwards of $3,218,408 and
$3,653,039. The entire federal income tax capital loss carryforward for The
Yacktman Fund expires in 2010. Federal income tax capital loss carryforwards for
The Yacktman Focused Fund expire as follows: $232,948 in 2007, $3,025,700 in
2008, and $394,391 in 2009. To the extent that the Funds realize future net
capital gains, those gains will be offset by any unused capital loss
carryforward.
The Yacktman Focused Fund realized post-October capital losses in 2002 of
$440,231, which for tax purposes, are deferred and will be recognized in the
following year.
- --------------------------------------------------------------------------------
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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 53202-5207
YA-410-0803
- --------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS
Not applicable to semi-annual reports for the period ended June 30, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable to semi-annual reports for the period ended June 30, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to semi-annual reports for the period ended June 30, 2003.
ITEMS 5-6. RESERVED
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. RESERVED
ITEM 9. CONTROLS AND PROCEDURES
(a)The Principal Executive and Financial Officer concluded that the
Registrant's Disclosure Controls and Procedures are effective based on their
evaluation of the Disclosure Controls and Procedures as of a date within 90
days of the filing date of this report.
(b)There were no significant changes in Registrant's internal controls or in
other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS
(a)Code of Ethics. Not applicable to semi-annual reports for the period ended
June 30, 2003.
(b)Certifications required pursuant to Section 302 and Section 906 of the
Sarbanes-Oxley Act of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
The Yacktman Funds, Inc.
- ------------------------
/s/ Donald A. Yacktman
- ----------------------
Donald A. Yacktman
Principal Executive Officer
September 2, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Donald A. Yacktman
- ----------------------
Donald A. Yacktman
Principal Executive Officer
September 2, 2003
/s/ Donald A. Yacktman
- ----------------------
Donald A. Yacktman
Principal Financial Officer
September 2, 2003