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.
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(Exact name of Registrant as specified in charter)
1110 Lake Cook Road
Suite 385
Buffalo Grove, IL 60089
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(Address of principal executive offices) (Zip code)
Yacktman Asset Management Co.
1110 Lake Cook Road
Suite 385
Buffalo Grove, IL 60089
(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, 2004
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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, 2004
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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 are slightly positive for the year and are selling at virtually
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 69.53% and The Yacktman Focused Fund is up 76.88% while the S&P 500/R Index
is down 2.07%. If someone invested $100 in each Fund three years ago it would
now be $169.53 and $176.88, respectively, compared to $97.93 in the S&P 500/R
Index. As you can see from the chart below, the Funds' performance versus the
S&P 500/R Index has been strong since their inception. Moreover, we have
achieved these returns in what we believe is a risk-averse manner.
[PHOTO]
Donald A. Yacktman
[PHOTO]
Stephen A. Yacktman
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THE THE
PERIOD YACKTMAN S&P 500/R YACKTMAN S&P 500/R
ENDED FUND(1) INDEX FOCUSED FUND(2) INDEX
JUNE 30, ANNUALIZED ANNUALIZED ANNUALIZED ANNUALIZED
2004 RETURNS RETURNS RETURNS RETURNS
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One Year 19.36% 19.11% 17.22% 19.11%
Three Years 19.24% (0.69)% 20.94% (0.69)%
Five Years 11.69% (2.20)% 10.03% (2.20)%
Ten Years 13.82% 11.83% N/A 11.83%
Since Inception 11.09% 10.95% 8.52% 6.63%
(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.
Current performance may be higher or lower than the performance quoted. To
obtain performance current to the most recent month-end, please call 1-800-525-
8258.
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THE YACKTMAN FUNDS, INC.
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The first half of this year has been challenging because there have been few
attractive investment opportunities, with the result that our cash levels are
higher than we would like. To be clear, our desired cash level is zero. However
when we cannot find acceptable investments from a risk/reward standpoint, we are
willing to hold cash. Our goal is to produce strong returns over longer time
periods and occasionally that means playing as much defense as offense. When
cash is a significant percentage of our portfolio, it is a reflection of how
difficult it is for us to find bargains in the marketplace. Speculators may find
the current environment more fruitful than we do; however, speculation is by and
large a short-term strategy that is inconsistent with our objectives. We have
found it more beneficial to ignore the crowd and stick with a patient, logical
approach for the long-run. Both individual stocks and the market as a whole
fluctuate, and it can be expected that sometime in the future bargains will
resurface.
Generally speaking, bargains appear in one of two ways. First, a company runs
into a short-term problem for which a long-term solution is readily obtainable.
However, the marketplace views the temporary issue as a permanent problem
causing the stock of the company to plunge in price, creating an attractive
buying opportunity for the well-informed investor. For example, AmeriCredit
Corp., one of the larger positions in the Funds, became attractive due to
company-specific problems in the spring of 2003. Bargains also appear when the
overall market is confronted with an unanticipated event which shakes up
investors' confidence and leads to large scale speculative selling, such as the
precipitous market drop following 9/11.
We feel our job is to recognize these opportunities and be prepared to act
boldly when they present themselves. We are now in a position to act quickly and
will patiently wait for the truly attractive opportunities to appear. We have
learned from experience that big rewards go to those who are cautious and
patient in inflated environments and aggressive during inappropriate panics.
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Our goal is always to make money for investors in absolute terms, not to lose
less than others. We feel our record demonstrates our ability to deliver on our
long-term strategy and expect that this approach will continue to work well in
the future.
We appreciate your continued support and we will continue to work diligently
on your behalf.
Sincerely,
/s/Donald A. Yacktman /s/Stephen A. Yacktman
Donald A. Yacktman Stephen A. Yacktman
President & Co-Portfolio Manager Co-Portfolio Manager
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THE YACKTMAN FUND
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TOP TEN EQUITY HOLDINGS
June 30, 2004 (Unaudited)
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PERCENTAGE OF
NET ASSETS
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Liberty Media Corp. 6.5%
Kraft Foods, Inc. 6.2
Henkel KGaA 5.8
AmeriCredit Corp. 4.8
Lancaster Colony Corp. 4.6
Coca-Cola Co. 4.0
Clorox Co. 3.9
Tyco International Ltd. 3.9
Bristol-Myers Squibb Co. 2.6
Interpublic Group of Cos., Inc. 1.8
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TOTAL 44.1%
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THE YACKTMAN FUND
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EQUITY PURCHASES & SALES
For the Six Months Ended June 30, 2004 (Unaudited)
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NET SHARES CURRENT
PURCHASES PURCHASED SHARES HELD
Coca-Cola Co. 130,000 280,000
Friedman's, Inc., Class A 85,000 465,000
Johnson & Johnson 30,000 70,000
Liberty Media Corp. 850,000 2,600,000
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NET SHARES CURRENT
SALES SOLD SHARES HELD
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American Express Co. 25,000 -
AmeriCredit Corp. 150,000 880,000
Apogent Technologies, Inc. 260,000 -
Bandag, Inc., Class A 10,000 20,000
Cadbury Schweppes plc 20,000 180,000
Electronic Data Systems Corp. 50,000 300,000
Gemstar-TV Guide International, Inc. 300,000 -
MGIC Investment Corp. 20,000 30,000
National Beverage Corp. 39,200 -
Russ Berrie & Co., Inc. 30,000 -
Saucony, Inc., Class B 90,000 -
Tupperware Corp. 170,000 -
Tyco International Ltd. 390,000 420,000
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS
June 30, 2004 (Unaudited)
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NUMBER
OF SHARES VALUE
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COMMON STOCKS - 69.8%
AUTO COMPONENTS - 0.2%
Bandag, Inc., Class A 20,000 $832,000
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BANKS - 1.6%
U.S. Bancorp 150,000 4,134,000
Washington Mutual, Inc. 40,000 1,545,600
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5,679,600
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BEVERAGES - 5.3%
Coca-Cola Co. 280,000 14,134,400
PepsiCo, Inc. 90,000 4,849,200
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18,983,600
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CHEMICALS - 0.4%
Lubrizol Corp. 40,000 1,464,800
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COMMERCIAL SERVICES & SUPPLIES - 1.2%
Block H&R, Inc. 90,000 4,291,200
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DIVERSIFIED FINANCIALS - 8.0%
AmeriCredit Corp.* 880,000 17,186,400
Federal Home Loan Mortgage Corp. 100,000 6,330,000
Federal National Mortgage Association 70,000 4,995,200
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28,511,600
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FOOD PRODUCTS - 13.1%
Cadbury Schweppes plc 180,000 6,314,400
Interstate Bakeries Corp. 180,000 1,953,000
Kraft Foods, Inc. 700,000 22,176,000
Lancaster Colony Corp. 390,000 16,239,600
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46,683,000
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GAS UTILITIES - 1.3%
Nicor, Inc. 140,000 4,755,800
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HEALTH CARE PROVIDERS & SERVICES - 1.5%
First Health Group Corp.* 350,000 5,463,500
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HOUSEHOLD PRODUCTS - 11.0%
Clorox Co. 260,000 13,982,800
Henkel KGaA 265,000 20,650,470
Unilever NV 65,000 4,453,150
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39,086,420
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NUMBER
OF SHARES VALUE
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INDUSTRIAL CONGLOMERATES - 3.9%
Tyco International Ltd. 420,000 $13,918,800
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INSURANCE - 1.3%
MBIA, Inc. 40,000 2,284,800
MGIC Investment Corp. 30,000 2,275,800
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4,560,600
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INTERNET & CATALOG RETAIL - 0.3%
Blair Corp. 40,000 1,156,000
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IT CONSULTING & SERVICES - 3.2%
Electronic Data Systems Corp. 300,000 5,745,000
First Data Corp. 130,000 5,787,600
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11,532,600
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MEDIA - 8.4%
Interpublic Group of Cos., Inc.* 480,000 6,590,400
Liberty Media Corp.* 2,600,000 23,374,000
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29,964,400
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PHARMACEUTICALS - 4.7%
Bristol-Myers Squibb Co. 380,000 9,310,000
Johnson & Johnson 70,000 3,899,000
Pfizer, Inc. 100,000 3,428,000
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16,637,000
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REAL ESTATE - 1.8%
Trizec Properties, Inc. 400,000 6,504,000
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SOFTWARE - 0.8%
Microsoft Corp. 100,000 2,856,000
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SPECIALTY RETAIL - 0.4%
Friedman's, Inc., Class A 465,000 1,474,050
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TOBACCO - 1.4%
Altria Group, Inc. 100,000 5,005,000
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Total Common Stocks
(cost $175,327,081) 249,359,970
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS (Cont'd.)
June 30, 2004 (Unaudited)
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PRINCIPAL
AMOUNT VALUE
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CORPORATE BONDS - 1.8%
Fleming Cos., Inc.,
10.125%, 4/1/08*+ $18,400,000 $ 3,266,000
Fleming Cos., Inc.,
9.25%, 6/15/10*+ 17,175,000 3,048,562
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Total Corporate Bonds
(cost $14,128,053) 6,314,562
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SHORT-TERM INVESTMENTS - 54.9%
COMMERCIAL PAPER - 27.9%
ChevronTexaco Corp.,
1.10%, 7/7/04 16,600,000 16,596,957
GE Capital Corp.,
1.15%, 7/7/04 16,600,000 16,596,818
M.I.N.T.,
1.30%, 7/1/04 16,700,000 16,700,000
Prudential Funding,
1.15%, 7/7/04 16,600,000 16,596,818
Rabobank Financial Corp.,
1.30%, 7/1/04 16,700,000 16,700,000
UBS Financial,
1.20%, 7/7/04 16,600,000 16,596,680
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Total Commercial Paper
(cost $99,787,273) 99,787,273
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DEMAND NOTE (VARIABLE RATE) - 0.3%
U.S. Bancorp, N.A., 1.04% 908,193 908,193
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Total Demand Note
(cost $908,193) 908,193
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VALUE
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OTHER SHORT-TERM INVESTMENT - 26.7%
Securities Lending Investment Account
(cost $95,479,320) $95,479,320
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Total Short-Term Investments
(cost $196,174,786) 196,174,786
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Total Investments - 126.5%
(cost $385,629,920) 451,849,318
Other Assets less Liabilities - 0.2% 985,303
Less Liability for Collateral on Securities
Loaned - (26.7)% (95,479,320)
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Net Assets - 100% (equivalent to $15.47
per share based on 23,097,686
shares outstanding) $357,355,301
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* Non-income producing
+ Issue in default
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, 2004 (Unaudited)
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NET SHARES CURRENT
PURCHASES PURCHASED SHARES HELD
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Coca-Cola Co. 45,000 125,000
Friedman's, Inc., Class A 30,000 260,000
Liberty Media Corp. 210,000 880,000
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NET SHARES CURRENT
SALES SOLD SHARES HELD
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AmeriCredit Corp. 80,000 380,000
Apogent Technologies, Inc. 120,000 -
Clorox Co. 15,000 85,000
Kraft Foods, Inc. 50,000 250,000
MBIA, Inc. 20,000 -
MGIC Investment Corp. 30,000 -
Saucony, Inc., Class B 35,000 -
Trizec Properties, Inc. 30,000 120,000
Tyco International Ltd. 220,000 140,000
Unilever NV 10,000 30,000
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THE YACKTMAN FOCUSED FUND
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PORTFOLIO OF INVESTMENTS
June 30, 2004 (Unaudited)
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NUMBER
OF SHARES VALUE
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COMMON STOCKS - 73.5%
BEVERAGES - 6.1%
Coca-Cola Co. 125,000 $6,310,000
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COMMERCIAL SERVICES & SUPPLIES - 1.6%
Block H&R, Inc. 35,000 1,668,800
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DIVERSIFIED FINANCIALS - 12.4%
AmeriCredit Corp.* 380,000 7,421,400
Federal Home Loan Mortgage Corp. 85,000 5,380,500
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12,801,900
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FOOD PRODUCTS - 13.6%
Interstate Bakeries Corp. 110,000 1,193,500
Kraft Foods, Inc. 250,000 7,920,000
Lancaster Colony Corp. 120,000 4,996,800
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14,110,300
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HEALTH CARE PROVIDERS & SERVICES - 2.3%
First Health Group Corp.* 150,000 2,341,500
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HOUSEHOLD PRODUCTS - 12.9%
Clorox Co. 85,000 4,571,300
Henkel KGaA 85,000 6,623,736
Unilever NV 30,000 2,055,300
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13,250,336
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INDUSTRIAL CONGLOMERATES - 4.5%
Tyco International Ltd. 140,000 4,639,600
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IT CONSULTING & SERVICES - 2.0%
Electronic Data Systems Corp. 110,000 2,106,500
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MEDIA - 10.2%
Interpublic Group of Cos., Inc.* 193,100 2,651,263
Liberty Media Corp.* 880,000 7,911,200
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10,562,463
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PHARMACEUTICALS - 3.3%
Bristol-Myers Squibb Co. 140,000 3,430,000
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REAL ESTATE - 1.9%
Trizec Properties, Inc. 120,000 1,951,200
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SPECIALTY RETAIL - 0.8%
Friedman's, Inc., Class A 260,000 824,200
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THE YACKTMAN FOCUSED FUND
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PORTFOLIO OF INVESTMENTS (Cont'd.)
June 30, 2004 (Unaudited)
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NUMBER
OF SHARES VALUE
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TOBACCO - 1.9%
Altria Group, Inc. 40,000 $ 2,002,000
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Total Common Stocks
(cost $59,376,235) 75,998,799
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PRINCIPAL
AMOUNT VALUE
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CORPORATE BONDS - 2.2%
Fleming Cos., Inc.,
10.125%, 4/1/08*+ $11,825,000 2,098,937
Fleming Cos., Inc.,
9.25%, 6/15/10*+ 1,000,000 177,500
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Total Corporate Bonds
(cost $4,810,219) 2,276,437
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SHORT-TERM INVESTMENTS - 41.9%
COMMERCIAL PAPER - 22.6%
GE Capital Corp.,
1.15%, 7/7/04 4,600,000 4,599,119
M.I.N.T., 1.30%, 7/1/04 4,800,000 4,800,000
Prudential Funding,
1.15%, 7/7/04 4,600,000 4,599,118
Rabobank Financial Corp.,
1.30%, 7/1/04 4,800,000 4,800,000
UBS Financial, 1.20%, 7/7/04 4,600,000 4,599,080
Total Commercial Paper
(cost $23,397,317) 23,397,317
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DEMAND NOTE (VARIABLE RATE) - 0.9%
U.S. Bancorp, N.A., 1.04% 979,658 979,658
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Total Demand Note
(cost $979,658) 979,658
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OTHER SHORT-TERM INVESTMENT - 18.4%
Securities Lending Investment Account
(cost $19,032,300) 19,032,300
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Total Short-Term Investments
(cost $43,409,275) 43,409,275
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NUMBER
OF CONTRACTS VALUE
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PUT OPTION PURCHASED - 0.6%
Omnicom Group
Expiring Jan. 2005 @ $100.00 250 $601,250
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Total Put Option Purchased
(cost $1,003,500) 601,250
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Total Investments - 118.2%
(cost $108,599,229) 122,285,761
Other Assets less Liabilities - 0.2% 182,564
Less Liability for Collateral on Securities
Loaned - (18.4)% (19,032,300)
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Net Assets - 100% (equivalent to $16.43
per share based on 6,297,177
shares outstanding) $103,436,025
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* Non-income producing
+ Issue in default
See notes to financial statements
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THE YACKTMAN FUNDS, INC.
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STATEMENTS OF ASSETS & LIABILITIES
June 30, 2004 (Unaudited)
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THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
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ASSETS:
Investments at value
(cost $385,629,920 and
$108,599,229, respectively) $451,849,318 $122,285,761
Receivable for fund shares sold 1,282,559 226,764
Dividends and interest receivable 594,061 175,938
Prepaid expenses
and other assets 81,240 32,657
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Total Assets 453,807,178 122,721,120
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LIABILITIES:
Collateral for securities loaned 95,479,320 19,032,300
Payable for fund shares
redeemed 636,610 132,192
Accrued investment
advisory fees 186,960 71,264
Other accrued expenses 148,987 49,339
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Total Liabilities 96,451,877 19,285,095
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NET ASSETS $357,355,301 $103,436,025
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NET ASSETS CONSIST OF:
Capital stock $268,577,806 $80,781,947
Undistributed net
investment income 1,271,601 109,642
Undistributed net realized gains 21,286,496 8,857,904
Net unrealized appreciation
on investments 66,219,398 13,686,532
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Total Net Assets $357,355,301 $103,436,025
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CAPITAL STOCK, $.0001 par value
Authorized 500,000,000 500,000,000
Issued and outstanding 23,097,686 6,297,177
NET ASSET VALUE,
REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $15.47 $16.43
====== ======
See notes to financial statements
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STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2004 (Unaudited)
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THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
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INVESTMENT INCOME:
Dividend income $2,489,144(1) $697,465(2)
Interest income 400,914 141,322
Securities lending income
(See Note 5) 27,449 5,817
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2,917,507 844,604
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EXPENSES:
Investment advisory fees 1,127,699 587,997
Shareholder servicing fees 265,315 83,428
Administration and
accounting fees 99,289 29,400
Federal and state
registration fees 32,604 33,849
Reports to shareholders 32,277 11,045
Custody fees 30,752 16,084
Professional fees 29,819 15,454
Directors' fees and expenses 11,214 3,962
Miscellaneous costs 16,426 5,485
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Total expenses before
reimbursements 1,645,395 786,704
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Expense reimbursements
(See Note 4) - (51,708)
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Net expenses 1,645,395 734,996
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NET INVESTMENT INCOME 1,272,112 109,608
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REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 21,507,745 8,139,293
Change in unrealized appreciation
on investments (18,019,833) (7,662,642)
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Net realized and unrealized gain
on investments 3,487,912 476,651
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NET INCREASEIN NET ASSETS
RESULTING FROM OPERATIONS $4,760,024 $586,259
============= =============
(1) Net of $72,144 in foreign withholding taxes
(2) Net of $25,012 in foreign withholding taxes
See notes to financial statements
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THE YACKTMAN FUNDS, INC.
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STATEMENTS OF CHANGES IN NET ASSETS
THE YACKTMAN
THE YACKTMAN FUND FOCUSED FUND
----------------------------- -----------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DEC. 31, 2003 (UNAUDITED) DEC. 31, 2003
----------------------------- -----------------------------
OPERATIONS:
Net investment income $1,272,112 $4,570,375 $109,608 $550,759
Net realized gain on investments 21,507,745 28,104,195 8,139,293 5,822,252
Change in unrealized appreciation
on investments (18,019,833) 53,078,142 (7,662,642) 16,265,061
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations 4,760,024 85,752,712 586,259 22,638,072
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 108,975,592 543,144,776 45,506,005 224,697,014
Proceeds from reinvestment of distributions - 21,960,932 - 1,208,839
------------- ------------- ------------- -------------
108,975,592 565,105,708 45,506,005 225,905,853
Payments for shares redeemed (81,808,566) (723,688,508) (70,010,856) (235,154,944)
------------- ------------- ------------- -------------
Net increase (decrease) 27,167,026 (158,582,800) (24,504,851) (9,249,091)
------------- ------------- ------------- -------------
DISTRIBUTIONS PAIDFROM:
Net investment income - (3,474,105) - (505,991)
Net realized gains - (19,559,367) - (778,448)
------------- ------------- ------------- -------------
Total distributions - (23,033,472) - (1,284,439)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 31,927,050 (95,863,560) (23,918,592) 12,104,542
NET ASSETS:
Beginning of period 325,428,251 421,291,811 127,354,617 115,250,075
------------- ------------- ------------- -------------
End of period (including undistributed
net investment income of $1,271,601, $0,
$109,642 and $0, respectively) $357,355,301 $325,428,251 $103,436,025 $127,354,617
============= ============= ============= =============
TRANSACTIONS IN SHARES:
Shares sold 7,083,562 41,725,550 2,766,071 16,379,111
Issued in reinvestment of distributions - 1,441,760 - 74,344
Shares redeemed (5,345,210) (55,981,024) (4,293,515) (17,865,154
------------- ------------- ------------- -------------
Net increase (decrease) 1,738,352 (12,813,714) (1,527,444) (1,411,699)
============= ============= ============= =============
See notes to financial statements
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THE YACKTMAN FUNDS, INC.
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FINANCIAL HIGHLIGHTS
THE YACKTMAN FUND THE YACKTMAN FUND
- ------------------------------------------------------------------------------- --------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
For a Fund share outstanding JUNE 30, 2004 DEC. 31, YEAR ENDED DECEMBER 31,
throughout each period (UNAUDITED) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------- --------------------------------------------
Net asset value, beginning
of period $15.24 $12.33 $11.16 $9.80 $9.40 $11.61
Income from investment
operations:
Net investment income 0.06 0.23 0.13 0.08 0.11 0.12
Net realized and unrealized
gain (loss) on investments 0.17 3.84 1.14 1.83 1.16 (2.07)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations 0.23 4.07 1.27 1.91 1.27 (1.95)
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income - (0.17) (0.10) (0.05) (0.06) (0.10)
From net realized gains - (0.99) - (0.50) (0.81) (0.16)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions - (1.16) (0.10) (0.55) (0.87) (0.26)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $15.47 $15.24 $12.33 $11.16 $9.80 $9.40
========== ========== ========== ========== ========== ==========
Total Return 1.51%(1) 33.03% 11.41% 19.47% 13.46% (16.90)%
========== ========== ========== ========== ========== ==========
Supplemental data and ratios:
Net assets, end of period (000s) $357,355 $325,428 $421,292 $113,199 $69,800 $109,430
========== ========== ========== ========== ========== ==========
Ratio of expenses before expense
reimbursements to average net
assets (See Note 4) 0.95%(2) 0.94% 0.99% 1.17% 1.23% 0.72%
========== ========== ========== ========== ========== ==========
Ratio of net expenses to average
net assets 0.95%(2) 0.94% 0.99% 1.17% 1.23% 0.71%
========== ========== ========== ========== ========== ==========
Ratio of net investment income to
average net assets 0.73%(2) 1.25% 2.01% 1.06% 1.03% 0.95%
========== ========== ========== ========== ========== ==========
Portfolio turnover rate 7.09%(1) 40.01% 39.19% 42.79% 19.00% 4.80%
========== ========== ========== ========== ========== ==========
(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 YEAR
ENDED ENDED
For a Fund share outstanding JUNE 30, 2004 DEC. 31, YEAR ENDED DECEMBER 31,
throughout each period (UNAUDITED) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------- --------------------------------------------
Net asset value, beginning
of period $16.28 $12.48 $10.92 $9.40 $8.96 $11.62
Income from investment
operations:
Net investment income 0.02 0.07 0.08 0.09 0.14 0.09
Net realized and unrealized
gain (loss) on investments 0.13 3.90 1.56 1.52 0.45 (2.64)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations 0.15 3.97 1.64 1.61 0.59 (2.55)
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income - (0.07) (0.08) (0.09) (0.14) (0.09)
From net realized gains - (0.10) - - - (0.02)
Return of capital - - - - (0.01) -
---------- ---------- ---------- ---------- ---------- ----------
Total distributions - (0.17) (0.08) (0.09) (0.15) (0.11)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $16.43 $16.28 $12.48 $10.92 $9.40 $8.96
========== ========== ========== ========== ========== ==========
Total Return 0.92%(1) 31.79% 14.99% 17.14% 6.60% (22.02)%
========== ========== ========== ========== ========== ==========
Supplemental data and ratios:
Net assets, end of period (000s) $103,436 $127,355 $115,250 $9,356 $7,606 $9,008
========== ========== ========== ========== ========== ==========
Ratio of expenses before expense
reimbursements to average net
assets (See Note 4) 1.33%(2) 1.36%(3) 1.45% 2.32% 2.50% 1.19%
========== ========== ========== ========== ========== ==========
Ratio of net expenses to average
net assets 1.25%(2) 1.26%(4) 1.25% 1.25% 1.25% 1.19%
========== ========== ========== ========== ========== ==========
Ratio of net investment income to
average net assets 0.27%(2) 0.51% 1.68% 1.06% 1.56% 0.74%
========== ========== ========== ========== ========== ==========
Portfolio turnover rate 6.56%(1) 71.38% 49.95% 51.33% 37.84% 25.36%
========== ========== ========== ========== ========== ==========
(1) Not annualized
(2) Annualized
(3) The ratio of expenses before expense reimbursements to average net assets,
excluding interest expense, is 1.35%
(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, 2004 (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 Adviser under the direction of 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, 2004.
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 and
distributions of net realized capital gains, if any, are declared and paid at
least annually. Distri bu tions 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 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.
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
June 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
For the six months ended June 30, 2004, the aggregate purchases and sales of
securities, excluding short-term securities, were $18,624,038 and $41,190,728
for The Yacktman Fund and $5,723,722 and $21,261,768 for The Yacktman Focused
Fund, respectively. For the six months ended June 30, 2004, there were no
purchases or sales of U.S. Government securities for The Yacktman Fund and The
Yacktman Focused Fund.
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, 2004, The Yacktman Fund had on
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
loan securities valued at $91,836,990 and collateral of $95,479,320 and The
Yacktman Focused Fund had on loan securities valued at $17,932,319 and
collateral of $19,032,300.
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. The LOC will mature,
unless renewed, on March 31, 2005; the interest rate paid on borrowings is the
Prime Rate minus 1/2%. 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, 2004, The Yacktman Fund and The Yacktman Focused Fund had no
outstanding borrowings under the LOC. During the six months ended June 30, 2004,
The Yacktman Fund and The Yacktman Focused Fund had no outstanding daily
balances. Interest expense for The Yacktman Fund and The Yacktman Focused Fund
amounted to $0 and $0, respectively, for the six months ended June 30, 2004.
7. TAX INFORMATION
The following information for the Funds is presented on an income tax basis as
of June 30, 2004:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
Cost of investments $385,842,067 $109,118,892
============= =============
Gross unrealized appreciation $ 77,722,687 $ 18,500,344
Gross unrealized depreciation (11,715,436) (5,333,475)
------------- -------------
Net unrealized appreciation
on investments $ 66,007,251 $ 13,166,869
============= =============
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
June 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
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 years ended December 31, 2003
and 2002 were as follows:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
2003
Ordinary income $7,771,809 $505,991
Long-term capital gains $15,261,663 $778,448
2002
Ordinary income $3,427,806 $701,196
Long-term capital gains - -
During the year ended December 31, 2003, the Funds utilized $3,218,408 and
$3,653,039 of capital loss carryforwards, for The Yacktman Fund and The Yacktman
Focused Fund, respectively.
As of December 31, 2003, the components of accumulated earnings on a tax basis
were as follows:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
Undistributed ordinary income $- $-
Undistributed long-term
capital gains - 1,229,558
------------- -------------
Accumulated earnings - 1,229,558
Net unrealized appreciation
on investments 84,020,211 20,838,261
------------- -------------
Total accumulated earnings $84,020,211 $22,067,819
============= =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. ADDITIONAL TAX INFORMATION (UNAUDITED)
For the year ended December 31, 2003, 100% of the dividends paid from net
investment income, not including short-term capital gains (if any), for The
Yacktman Fund and The Yacktman Focused Fund qualify for the dividends received
deduction available to corporate shareholders.
For the year ended December 31, 2003, 82.59% and 100.00% of the dividends paid
from net investment income, not including short-term capital gains (if any), for
The Yacktman Fund and The Yacktman Focused Fund, respectively, are designated as
qualified dividend income.
The Funds hereby designate approximately, $19,658,253 and $847,168 as capital
gain distributions for The Yacktman Fund and The Yacktman Focused Fund,
respectively, for the purposes of the dividends paid deduction. 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.
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES
- --------------------------------------------------------------------------------
For a description of the policies and procedures that the Funds use to determine
how to vote proxies relating to portfolio securities, please call 1-800-525-8258
and request a Statement of Additional Information. One will be mailed to you
free of charge. The Statement of Additional Information is also available on the
Web site of the Securities and Exchange Commission at http://www.sec.gov. After
August 31, 2004, information on how the Funds voted proxies relating to
portfolio securities during the twelve month period ending June 30, 2004, will
be available without charge, upon request, by calling 1-800-525-8258 or by
accessing the Web site of the Securities and Exchange Commission.
This page intentionally left blank.
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-410-0804
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The Principal Executive and Financial Officers 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 of this report.
(b) There were no significant changes in the 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 11. EXHIBITS.
(1) Certifications required pursuant to Section 302 and 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.
By: /s/ Donald A. Yacktman
-------------------------
Donald A. Yacktman
Principal Executive Officer
Date: August 23, 2004
-------------------------
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.
By: /s/ Donald A. Yacktman
-------------------------
Donald A. Yacktman
Principal Executive Officer
Date: August 23, 2004
-------------------------
By: /s/ Donald A. Yacktman
-------------------------
Donald A. Yacktman
Principal Financial Officer
Date: August 23, 2004
-------------------------