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: December 31, 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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ANNUAL REPORT
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December 31, 2004
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 Fund shares are virtually at their all-time highs when
adjusted for distributions of income and capital gains. For the
past five years, the cumulative return for The Yacktman Fund is up
120.85% and The Yacktman Focused Fund is up 108.07% while the S&P
500/R Index is down 10.98%. If someone invested $100 in each Fund
five years ago it would now be $220.85 and $208.07, respectively,
compared to $89.02 in the S&P 500/R Index. As you can see from the
chart below, our performance versus the S&P 500/R Index has been
strong since the inception of the Funds. Moreover, we have achieved
these returns in a risk-averse manner.
[PHOTO]
Donald A. Yacktman
[PHOTO]
Stephen Yacktman
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THE THE
YACKTMAN YACKTMAN/R
FUND(1) S&P 500/R FOCUSED FUND(2) S&P 500/R
TIME ANNUALIZED ANNUALIZED ANNUALIZED Annualized
PERIOD RETURNS Returns RETURNS RETURNS
- --------------------------------------------------------------------------------
One Year 9.93% 10.88% 9.96% 10.88%
Three Years 17.67% 3.59% 18.55% 3.59%
Five Years 17.17% (2.30)% 15.78% (2.30)%
Ten Years 13.63% 12.07% N/A 12.07%
Since Inception 11.33% 11.10% 9.15% 7.15%
(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.
- --------------------------------------------------------------------------------
I recently had an interesting experience that gave me a chance to reflect on
the past five years. In early 2000, the stock market was at lofty levels and
many people thought your portfolio managers were out of touch with the new
"tech" era. Well, I have a confession to make. One of the dot-com companies made
me an offer I couldn't refuse. For purchasing well-known merchandise, they gave
me a significant discount plus free shipping. Being a value buyer, I took
advantage of their offer and one of the things bought was a large supply of
Neutrogena soap. Well, today I am now down to my last bar. Using the same
strategy, my son Steve bought a room full of toys for gifts at 80% off. The
supply has slowly depleted over the years. So, we have to admit we participated
in the tech boom, with our bargain purchases over the Internet. Simply stated,
value principles permeate our lives. The bottom line is when someone is handing
out dollar bills for 50 or 75 cents, we want to be a buyer.
While our investment results were slightly behind the S&P 500/R Index for the
year, we remain far more concerned about our longer-term performance. Our goal
is to make money not lose less than others and frankly it was difficult to find
many bargains last year. As a result, our cash position was high and it earned a
low return causing us to slightly lag the market.
Thinking about the price of businesses in today's stock market makes us yearn
for the good old days of Enron, Worldcom, Tyco, Qwest Communications, Adelphia
Communications and Global Crossings. Not every scandal is a good investment
opportunity; however, the general panic these scandals created led to numerous
opportunities.
Qwest Communications was building a multi-billion dollar long distance
telecommunications network in 2000 when they used their overpriced stock during
the technology boom to buy US West. By the middle of 2002, they were one of the
telecommunications scandals for misstating their financial statements. Their
huge long distance network was a black hole, which only added debt to their
balance sheet. We bought Qwest's debt that was created from this monstrosity and
while we were buying it, Qwest
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had its rating lowered to just above default. Backing the debt we were buying
was basically one phone line per bond. A phone line at that time generated
approximately $125 of cash per year and we were able to buy these bonds for less
than $500 a piece or less than 50% of face value. The yield-to-maturity at one
point on this debt was approximately 30 percent. The risk of capital was minimal
yet the returns were huge.
Tyco was another great opportunity. The earnings the financial community
estimated for this company were grossly overstated. However, the management at
Tyco had bought numerous public companies for which accurate financial
statements were available allowing us to recreate what Tyco value should be. We
estimated at that time the normalized earnings were approximately $2.00 per
share and free cash flow in an average year would be around $1.50 per share. On
July 25, 2002, we bought 490,000 shares at an average price of $8.41 per share
in the Funds. Steve remembers stamping the trade tickets with tears of joy in
his eyes as we ate lunch at his desk. $1.50 divided by $8.41 is a 17.8 percent
cash yield for a diversified conglomerate of above average, stable, decent
businesses. The degree of accuracy of whether the businesses were going to grow
at 1, 3, or 5 percent above inflation was not a very important question at that
time compared to the 17.8 percent cash yield.
At year-end, The Yacktman Funds owned collectively 440,000 shares of Tyco at
$35.74 with a calendar year-end earnings estimate of just over $2.00 per share
for 2005. Using a $1.60 number for free cash flow gives a free cash yield of
4.5% per year. Now the degree of accuracy of whether the business is going to
grow at 1, 3, or 5 percent above inflation is going to have a huge impact when
compared to that 4.5 percent number. Uncertainty of the return has gone way up
in our minds while the return opportunity has plummeted. Oh, how we long for
2002.
At year-end 2004, our largest position was Coca-Cola, which we estimate has an
extremely stable cash yield of approximately 5 percent, which is growing at
approximately 3 percent above inflation. We hope to achieve extremely stable 8
percent inflation
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THE YACKTMAN FUNDS, INC.
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adjusted forward returns with this investment. We wish we could find slightly
less stable investment opportunities with the 15 to 30 percent projected forward
returns that were available in 2002; unfortunately, that is not the case. The
market provides investment opportunities, we can't create them, all we can do is
wait for and find them. We are now in the same situation we found ourselves in
early 2002, which quickly reversed itself in a few months time. Now is the time
for patience and a time to build cash balances for the next big opportunities.
We welcome our new shareholders and want you to know we are also large
shareholders and will continue to utilize the same strategy we have used since
the Funds' inception.
Sincerely,
/s/ Donald A. Yacktman /s/ Stephen Yacktman
Donald A. Yacktman Stephen Yacktman
President & Co-Portfolio Manager Co-Portfolio Manager
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THE YACKTMAN FUND AVERAGE ANNUAL RETURNS
- ----------------------------------------
One Year (1/1/04 - 12/31/04) 9.93%
Five Years (1/1/99 - 12/31/04) 17.17%
Ten Years (1/1/95 - 12/31/04) 13.63%
Since Inception (7/6/92) 11.33%
The chart assumes an initial gross investment of $10,000 made on 12/31/94.
Yacktman S&P 500/R
Fund Stock Index*
---- ------------
1/1/95 10,000 10,000
12/31/95 13,042 13,758
12/31/96 16,436 16,917
12/31/97 19,440 22,560
12/31/98 19,564 29,008
12/31/99 16,258 35,111
12/31/00 18,446 31,913
12/31/01 22,036 28,118
12/31/02 24,550 21,907
12/31/03 32,659 28,190
12/31/04 35,902 31,257
THE YACKTMAN FOCUSED FUND AVERAGE ANNUAL RETURNS
- ------------------------------------------------
One Year (1/1/04 - 12/31/04) 9.96%
Five Years (1/1/99 - 12/31/04) 15.78%
Since Inception (5/1/97) 9.15%
The chart assumes an initial gross investment of $10,000 made on 5/1/97
(inception).
Yacktman S&P 500/R
Focused Fund Stock Index*
------------ ------------
5/1/97 10,000 10,000
12/31/97 11,538 12,256
12/31/98 12,067 15,759
12/31/99 9,409 19,075
12/31/00 10,031 17,338
12/31/01 11,749 15,278
12/31/02 13,511 11,901
12/31/03 17,805 15,315
12/31/04 19,578 16,981
* The S&P 500/R is an unmanaged but commonly used measure of common stock total
return performance.
Returns shown include the reinvestment of all dividends, but do not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or the
redemption of Fund shares. The above past performance is not predictive of
future results. The investment return and principal value of the Funds will
fluctuate so that your 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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EXPENSE EXAMPLE
For the Six Months Ended December 31, 2004 (Unaudited)
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As a shareholder of the Yacktman Funds (the "Funds"), you incur ongoing costs,
including management fees and other Fund expenses. If you invest through a
financial intermediary, you may also incur additional costs such as a
transaction fee charged on the purchase or sale of the Fund or an asset-based
management fee. This Example is intended to help you understand your ongoing
costs (in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from July 1, 2004 to December 31, 2004.
ACTUAL EXPENSES
The first line of the table on the next page provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses you paid over
the period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table on the next page provides information about
hypothetical account values and hypothetical expenses based on the Funds' actual
expense ratios and an assumed rate of return of 5% per year before expenses,
which is not the Funds' actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
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- --------------------------------------------------------------------------------
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any costs that may be associated with
investing in the Fund through a financial intermediary. Therefore, the second
line of the table is useful in comparing the ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if any costs associated with investing through a financial
intermediary were included, your costs would have been higher.
THE YACKTMAN FUND
- --------------------------------------------------------------------------------
Expenses
Beginning Ending paid during
account account period
value value 7/1/04-
7/1/04 12/31/04 12/31/04(1)
- --------------------------------------------------------------------------------
Actual $1,000.00 $1,083.00 $4.99
Hypothetical
(5% return
before expenses) 1,000.00 1,020.21 4.84
THE YACKTMAN FOCUSED FUND
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Expenses
Beginning Ending paid during
account account period
value value 7/1/04-
7/1/04 12/31/04 12/31/04(1)
- --------------------------------------------------------------------------------
Actual $1,000.00 $1,089.50 $6.56
Hypothetical
(5% return
before expenses) 1,000.00 1,018.72 6.34
(1)
Yacktman Fund and 1.25% for The Yacktman Focused Fund), multiplied by the
average account value over the period, and multiplied by 0.5027 (to reflect
the one-half year period).
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THE YACKTMAN FUND
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TOP TEN EQUITY HOLDINGS (Unaudited)
December 31, 2004
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PERCENTAGE OF
NET ASSETS
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Coca-Cola Co. 7.4%
Liberty Media Corp. 7.3
Henkel KGaA 6.0
AmeriCredit Corp. 5.0
Kraft Foods, Inc. 4.8
Lancaster Colony Corp. 4.6
Tyco International Ltd. 3.4
Pfizer, Inc. 3.1
Bristol-Myers Squibb Co. 2.7
Unilever N.V. 2.6
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TOTAL 46.9%
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SECTOR BREAKDOWN (Unaudited)
December 31, 2004
- --------------------------------------------------------------------------------
Banks - 1.7%
- ------------------------------------------------
Beverages - 8.7%
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Commercial Services & Supplies - 1.2%
- ------------------------------------------------
Diversified Financials - 8.4%
- ------------------------------------------------
Food Products - 11.4%
- ------------------------------------------------
Health Care Providers &Services - 1.6%
- ------------------------------------------------
Household Products - 11.4%
- ------------------------------------------------
Industrial Conglomerates - 3.4%
- ------------------------------------------------
Insurance - 2.2%
- ------------------------------------------------
IT Consulting & Services - 3.4%
- ------------------------------------------------
Media - 9.1%
- ------------------------------------------------
Pharmaceuticals - 7.0%
- ------------------------------------------------
Real Estate - 1.7%
- ------------------------------------------------
Software - 0.7%
- ------------------------------------------------
Specialty Retail - 0.2%
- ------------------------------------------------
Tobacco - 1.5%
- ------------------------------------------------
Short-Term Investments less Other Assets - 26.4%
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THE YACKTMAN FUND
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EQUITY PURCHASES & SALES (Unaudited)
For the Six Months Ended December 31, 2004
- --------------------------------------------------------------------------------
NET SHARES CURRENT
NEW PURCHASES PURCHASED SHARES HELD
- --------------------------------------------------------------------------------
CARDINAL HEALTH, INC.
Provides complementary products
and services to health care
providers and manufacturers. 100,000 100,000
COLGATE-PALMOLIVE CO.
A consumer products company
whose products include toothpaste,
shampoos, deodorants, soaps and
laundry products, among others. 75,000 75,000
MARSH & MCLENNAN COS., INC.
A global professional services firm
providing risk and insurance services,
investment management and
consulting services. 103,500 103,500
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NET SHARES CURRENT
PURCHASES PURCHASED SHARES HELD
- --------------------------------------------------------------------------------
Coca-Cola Co. 370,000 650,000
Pfizer, Inc. 320,000 420,000
Unilever N.V. 75,000 140,000
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THE YACKTMAN FUND
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EQUITY PURCHASES & SALES (Unaudited) (Cont'd.)
For the Six Months Ended December 31, 2004
- --------------------------------------------------------------------------------
NET SHARES CURRENT
SALES SOLD SHARES HELD
- --------------------------------------------------------------------------------
Altria Group, Inc. 10,000 90,000
AmeriCredit Corp. 130,000 750,000
Bandag, Inc., Class A 20,000 -
Blair Corp. 40,000 -
Clorox Co. 150,000 110,000
First Health Group Corp. 350,000 -
Interstate Bakeries Corp. 100,000 80,000
Kraft Foods, Inc. 210,000 490,000
Liberty Media Corp. 160,000 2,440,000
Lubrizol Corp. 40,000 -
Nicor, Inc. 140,000 -
Trizec Properties, Inc. 70,000 330,000
Tyco International Ltd. 70,000 350,000
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS
December 31, 2004
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 73.6%
BANKS - 1.7%
U.S. Bancorp 150,000 $4,698,000
Washington Mutual, Inc. 40,000 1,691,200
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6,389,200
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BEVERAGES - 8.7%
Coca-Cola Co. 650,000 27,059,500
PepsiCo, Inc. 90,000 4,698,000
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31,757,500
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COMMERCIAL SERVICES & SUPPLIES - 1.2%
Block H&R, Inc.(1) 90,000 4,410,000
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DIVERSIFIED FINANCIALS - 8.4%
AmeriCredit Corp.*(1) 750,000 18,337,500
Federal Home Loan Mortgage Corp. 100,000 7,370,000
Federal National Mortgage Association(1) 70,000 4,984,700
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30,692,200
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FOOD PRODUCTS - 11.4%
Cadbury Schweppes plc(1) 180,000 6,786,000
Interstate Bakeries Corp.(1) 80,000 512,000
Kraft Foods, Inc.(1) 490,000 17,448,900
Lancaster Colony Corp.(1) 390,000 16,719,300
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41,466,200
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HEALTH CARE PROVIDERS & SERVICES - 1.6%
Cardinal Health, Inc. 100,000 5,815,000
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HOUSEHOLD PRODUCTS - 11.4%
Clorox Co.(1) 110,000 6,482,300
Colgate-Palmolive Co. 75,000 3,837,000
Henkel KGaA 265,000 21,932,646
Unilever N.V. 140,000 9,339,400
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41,591,346
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INDUSTRIAL CONGLOMERATES - 3.4%
Tyco International Ltd. 350,000 12,509,000
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INSURANCE - 2.2%
Marsh & McLennan Cos., Inc. 103,500 3,405,150
MBIA, Inc.(1) 40,000 2,531,200
MGIC Investment Corp. 30,000 2,067,300
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8,003,650
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THE YACKTMAN FUND
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PORTFOLIO OF INVESTMENTS (Cont'd.)
December 31, 2004
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
IT CONSULTING & SERVICES - 3.4%
Electronic Data Systems Corp.(1) 300,000 $6,930,000
First Data Corp. 130,000 5,530,200
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12,460,200
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MEDIA - 9.1%
Interpublic Group of Cos., Inc.*(1) 480,000 6,432,000
Liberty Media Corp.* 2,440,000 26,791,200
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33,223,200
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PHARMACEUTICALS - 7.0%
Bristol-Myers Squibb Co. 380,000 9,735,600
Johnson & Johnson(1) 70,000 4,439,400
Pfizer, Inc. 420,000 11,293,800
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25,468,800
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REAL ESTATE - 1.7%
Trizec Properties, Inc. 330,000 6,243,600
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SOFTWARE - 0.7%
Microsoft Corp.(1) 100,000 2,671,000
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SPECIALTY RETAIL - 0.2%
Friedman's, Inc., Class A* 465,000 599,850
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TOBACCO - 1.5%
Altria Group, Inc. 90,000 5,499,000
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Total Common Stocks
(cost $183,463,816) 268,799,746
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PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 47.1%
COMMERCIAL PAPER - 25.7%
American Express Co.,
2.21%, 1/5/05 $16,000,000 $15,996,071
GE Capital Corp.,
2.13%, 1/5/05 16,000,000 15,996,213
Govco., Inc.,
2.09%, 1/3/05 15,000,000 14,998,258
Prudential Funding,
2.00%, 1/5/05 16,000,000 15,996,445
Rabobank Financial Corp.,
2.09%, 1/3/05 15,000,000 14,998,258
Toyota Motor Corp.,
2.19%, 1/5/05 16,000,000 15,996,107
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Total Commercial Paper
(cost $93,981,352) 93,981,352
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DEMAND NOTE (VARIABLE RATE) - 0.1%
U.S. Bancorp, 2.17% 221,133 221,133
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Total Demand Note
(cost $221,133) 221,133
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OTHER SHORT-TERM INVESTMENT - 21.3%
Securities Lending Investment Account
(cost $77,904,050) 77,904,050
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Total Short-Term Investments
(cost $172,106,535) 172,106,535
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Total Investments - 120.7%
(cost $355,570,351) 440,906,281
Liabilities less other Assets - (20.7)% (75,598,630)
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Net Assets - 100% (equivalent to $15.34 per
share based on 23,806,809 shares outstanding) $365,307,651
=============
* Non-income producing
(1) All or a portion of the securities have been committed for securities
lending (See Note 5).
See notes to financial statements
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THE YACKTMAN FOCUSED FUND
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SECTOR BREAKDOWN (Unaudited)
December 31, 2004
- --------------------------------------------------------------------------------
Beverages - 7.9%
- ------------------------------------------------
Commercial Services & Supplies - 1.8%
- ------------------------------------------------
Diversified Financials - 12.1%
- ------------------------------------------------
Food Products - 10.2%
- ------------------------------------------------
Health Care Providers &Services - 1.8%
- ------------------------------------------------
Household Products - 12.9%
- ------------------------------------------------
Industrial Conglomerates - 3.3%
- ------------------------------------------------
Insurance - 0.9%
- ------------------------------------------------
IT Consulting & Services - 1.9%
- ------------------------------------------------
Media - 10.2%
- ------------------------------------------------
Pharmaceuticals - 6.5%
- ------------------------------------------------
Real Estate - 1.9%
- ------------------------------------------------
Specialty Retail - 0.3%
- ------------------------------------------------
Tobacco - 1.6%
- ------------------------------------------------
Short-Term Investments less Other Assets - 26.7%
- ------------------------------------------------
- --------------------------------------------------------------------------------
THE YACKTMAN FOCUSED FUND
- --------------------------------------------------------------------------------
EQUITY PURCHASES & SALES (Unaudited)
For the Six Months Ended December 31, 2004
- --------------------------------------------------------------------------------
NET SHARES CURRENT
NEW PURCHASES PURCHASED SHARES HELD
- --------------------------------------------------------------------------------
Cardinal Health, Inc. 30,000 30,000
Colgate-Palmolive Co. 20,000 20,000
Marsh & McLennan Cos., Inc. 26,200 26,200
Pfizer, Inc. 110,000 110,000
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NET SHARES CURRENT
PURCHASES PURCHASED SHARES HELD
- --------------------------------------------------------------------------------
Coca-Cola Co. 60,000 185,000
Unilever N.V. 10,000 40,000
- --------------------------------------------------------------------------------
NET SHARES CURRENT
SALES SOLD SHARES HELD
- --------------------------------------------------------------------------------
Altria Group, Inc. 15,000 25,000
AmerCredit Corp. 80,000 300,000
Bristol-Myers Squibb Co. 10,000 130,000
Clorox Co. 55,000 30,000
Electronic Data Systems Corp. 30,000 80,000
First Health Group Corp. 150,000 -
Federal Home Loan Mortgage Corp. 25,000 60,000
Interstate Bakeries Corp. 60,000 50,000
Kraft Foods, Inc. 100,000 150,000
Lancaster Colony Corp. 20,000 100,000
Liberty Media Corp. 210,000 670,000
Trizec Properties, Inc. 20,000 100,000
Tyco International Ltd. 50,000 90,000
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THE YACKTMAN FOCUSED FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 2004
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 73.3%
BEVERAGES - 7.9%
Coca-Cola Co. 185,000 $7,701,550
-------------
COMMERCIAL SERVICES & SUPPLIES - 1.8%
Block H&R, Inc.(1) 35,000 1,715,000
-------------
DIVERSIFIED FINANCIALS - 12.1%
AmeriCredit Corp.*(1) 300,000 7,335,000
Federal Home Loan Mortgage Corp. 60,000 4,422,000
-------------
11,757,000
-------------
FOOD PRODUCTS - 10.2%
Interstate Bakeries Corp.(1) 50,000 320,000
Kraft Foods, Inc. 150,000 5,341,500
Lancaster Colony Corp. 100,000 4,287,000
-------------
9,948,500
-------------
HEALTH CARE PROVIDERS & SERVICES - 1.8%
Cardinal Health, Inc. 30,000 1,744,500
-------------
HOUSEHOLD PRODUCTS - 12.9%
Clorox Co.(1) 30,000 1,767,900
Colgate-Palmolive Co. 20,000 1,023,200
Henkel KGaA 85,000 7,035,000
Unilever N.V. 40,000 2,668,400
-------------
12,494,500
-------------
INDUSTRIAL CONGLOMERATES - 3.3%
Tyco International Ltd. 90,000 3,216,600
-------------
INSURANCE - 0.9%
Marsh & McLennan Cos., Inc. 26,200 861,980
-------------
IT CONSULTING & SERVICES - 1.9%
Electronic Data Systems Corp.(1) 80,000 1,848,000
-------------
MEDIA - 10.2%
Interpublic Group of Cos., Inc.*(1) 193,100 2,587,540
Liberty Media Corp.* 670,000 7,356,600
-------------
9,944,140
-------------
PHARMACEUTICALS - 6.5%
Bristol-Myers Squibb Co. 130,000 3,330,600
Pfizer, Inc. 110,000 2,957,900
-------------
6,288,500
-------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
REAL ESTATE - 1.9%
Trizec Properties, Inc. 100,000 $1,892,000
-------------
SPECIALTY RETAIL - 0.3%
Friedman's, Inc., Class A* 260,000 335,400
-------------
TOBACCO - 1.6%
Altria Group, Inc.(1) 25,000 1,527,500
-------------
Total Common Stocks
(cost $52,013,584) 71,275,170
-------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 39.6%
COMMERCIAL PAPER - 23.8%
American Express Co.,
2.21%, 1/5/05 $4,600,000 4,598,871
GE Capital Corp.,
2.13%, 1/5/05 4,600,000 4,598,911
Govco., Inc.,
2.09%, 1/3/05 4,700,000 4,699,454
Rabobank Financial Corp.,
2.09%, 1/3/05 4,700,000 4,699,454
Toyota Motor Corp.,
2.19%, 1/5/05 4,600,000 4,598,881
-------------
Total Commercial Paper
(cost $23,195,571) 23,195,571
-------------
DEMAND NOTE (VARIABLE RATE) - 1.3%
U.S. Bancorp, 2.17% 1,276,690 1,276,690
-------------
Total Demand Note
(cost $1,276,690) 1,276,690
-------------
OTHER SHORT-TERM INVESTMENT - 14.5%
Securities Lending Investment Account
(cost $14,079,922) 14,079,922
-------------
Total Short-Term Investments
(cost $38,552,183) 38,552,183
-------------
- --------------------------------------------------------------------------------
THE YACKTMAN FOCUSED FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Cont'd.)
December 31, 2004
- --------------------------------------------------------------------------------
NUMBER
OF CONTRACTS VALUE
- --------------------------------------------------------------------------------
PUT OPTION PURCHASED - 0.4%
Omnicom Group
Expiring Jan. 2005 @ $100.00 250 $391,250
-------------
Total Put Option Purchased
(cost $1,003,500) 391,250
-------------
Total Investments - 113.3%
(cost $91,569,267) 110,218,603
Liabilities less other Assets - (13.3)% (12,955,585)
-------------
Net Assets - 100% (equivalent to $15.83
per share based on 6,143,285
shares outstanding) $ 97,263,018
=============
* Non-income producing
(1) All or a portion of the securities have been committed for securities
lending (See Note 5).
See notes to financial statements
- --------------------------------------------------------------------------------
This page intentionally left blank.
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES
December 31, 2004
- --------------------------------------------------------------------------------
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
- --------------------------------------------------------------------------------
ASSETS:
Investments at value
(cost $355,570,351 and
$91,569,267, respectively) $440,906,281 $110,218,603
Receivable for fund shares sold 3,345,978 1,668,719
Dividends and interest receivable 369,300 87,389
Prepaid expenses 47,460 23,000
------------- -------------
Total Assets 444,669,019 111,997,711
------------- -------------
LIABILITIES:
Collateral for securities loaned 77,904,050 14,079,922
Payable for fund shares redeemed 1,141,023 547,987
Accrued investment advisory fees 196,085 72,561
Other accrued expenses 120,210 34,223
------------- -------------
Total Liabilities 79,361,368 14,734,693
------------- -------------
NET ASSETS $365,307,651 $97,263,018
============= =============
NET ASSETS CONSIST OF:
Capital stock $279,991,395 $78,891,993
Undistributed net
investment income 2,131 305
Accumulated net realized losses (21,805) (278,616)
Net unrealized appreciation
on investments 85,335,930 18,649,336
------------- -------------
Total Net Assets $365,307,651 $97,263,018
============= =============
CAPITAL STOCK, $.0001 par value
Authorized 500,000,000 500,000,000
Issued and outstanding 23,806,809 6,143,285
NET ASSET VALUE,
REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $15.34 $15.83
====== ======
See notes to financial statements
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2004
- --------------------------------------------------------------------------------
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income $4,653,742(1) $1,176,622(2)
Interest income 1,101,186 284,222
Securities lending income
(See Note 5) 49,150 10,990
------------- -------------
5,804,078 1,471,834
------------- -------------
EXPENSES:
Investment advisory fees 2,247,883 1,046,573
Shareholder servicing fees 531,295 156,887
Administration and
accounting fees 198,749 52,328
Professional fees 69,378 35,714
Federal and state
registration fees 69,302 47,842
Custody fees 63,122 20,429
Reports to shareholders 49,715 17,651
Directors' fees and expenses 21,240 7,496
Miscellaneous costs 37,066 11,419
------------- -------------
Total expenses
before reimbursements 3,287,750 1,396,339
Expense reimbursements
(See Note 4) - (88,108)
------------- -------------
Net expenses 3,287,750 1,308,231
------------- -------------
NET INVESTMENT INCOME 2,516,328 163,603
------------- -------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 28,595,140 10,091,812
Change in unrealized appreciation
on investments 1,096,699 (2,699,839)
------------- -------------
Net realized and unrealized gain
on investments 29,691,839 7,391,973
------------- -------------
NET INCREASEIN NET ASSETS
RESULTING FROM OPERATIONS $32,208,167 $7,555,576
============ =============
(1) Net of $81,652 in foreign withholding taxes
(2) Net of $29,949 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
- ----------------------------------------------------- ------------------------------ ----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
2004 2003 2004 2003
- ----------------------------------------------------- ------------------------------ ----------------------------------------
OPERATIONS:
Net investment income $2,516,328 $4,570,375 $163,603 $550,759
Net realized gain on investments 28,595,140 28,104,195 10,091,812 5,822,252
Change in unrealized appreciation
on investments 1,096,699 53,078,142 (2,699,839) 16,265,061
-------------- -------------- -------------- --------------
Net increase in net assets
resulting from operations 32,208,167 85,752,712 7,555,576 22,638,072
-------------- -------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 161,689,854 543,144,776 67,230,026 224,697,014
Proceeds from reinvestment of distributions 27,685,525 21,960,932 10,357,231 1,208,839
-------------- -------------- -------------- --------------
189,375,379 565,105,708 77,587,257 225,905,853
Payments for shares redeemed (150,792,024) (723,688,508) (103,982,061) (235,154,944)
-------------- -------------- -------------- --------------
Net increase (decrease) 38,583,355 (158,582,800) (26,394,804) (9,249,091)
-------------- -------------- -------------- --------------
DISTRIBUTIONS PAIDFROM:
Net investment income (2,514,053) (3,474,105) (163,233) (505,991)
Net realized gains (28,398,069) (19,559,367) (11,089,138) (778,448)
-------------- -------------- -------------- --------------
Total distributions (30,912,122) (23,033,472) (11,252,371) (1,284,439)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 39,879,400 (95,863,560) (30,091,599) 12,104,542
NET ASSETS:
Beginning of year 325,428,251 421,291,811 127,354,617 115,250,075
-------------- -------------- -------------- --------------
End of year (including undistributed
net investment income of
$2,131, $0, $305 and $0, respectively) $365,307,651 $325,428,251 $97,263,018 $127,354,617
============== =============- ============= =============
TRANSACTIONS IN SHARES:
Shares sold 10,503,672 41,725,550 4,071,851 16,379,111
Issued in reinvestment of distributions 1,802,438 1,441,760 653,453 74,344
Shares redeemed (9,858,635) (55,981,024) (6,406,640) (17,865,154)
-------------- -------------- -------------- --------------
Net increase (decrease) 2,447,475 (12,813,714) (1,681,336) (1,411,699)
============== =============- ============= =============
See notes to financial statements
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE YACKTMAN FUND THE YACKTMAN FUND
- ---------------------------------------------------------------------------------- -----------------------------------------
For a Fund share outstanding YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
throughout each year 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------- -----------------------------------------
Net asset value, beginning
of year $15.24 $12.33 $11.16 $9.80 $9.40
Income from investment
operations:
Net investment income 0.12 0.23 0.13 0.08 0.11
Net realized and unrealized
gain on investments 1.40 3.84 1.14 1.83 1.16
----------- ----------- ----------- ----------- -----------
Total from investment
operations 1.52 4.07 1.27 1.91 1.27
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income (0.12) (0.17) (0.10) (0.05) (0.06)
From net realized gains (1.30) (0.99) - (0.50) (0.81)
----------- ----------- ----------- ----------- -----------
Total distributions (1.42) (1.16) (0.10) (0.55) (0.87)
----------- ----------- ----------- ----------- -----------
Net asset value, end
of year $15.34 $15.24 $12.33 $11.16 $9.80
=========== =========== =========== =========== ===========
Total Return 9.93% 33.03% 11.41% 19.47% 13.46%
=========== =========== =========== =========== ===========
Supplemental data and ratios:
Net assets, end of year (000s) $365,308 $325,428 $421,292 $113,199 $69,800
=========== =========== =========== =========== ===========
Ratio of net expenses to average
net assets 0.95% 0.94% 0.99% 1.17% 1.23%
=========== =========== =========== =========== ===========
Ratio of net investment income to
average net assets 0.73% 1.25% 2.01% 1.06% 1.03%
=========== =========== =========== =========== ===========
Portfolio turnover rate 23.82% 40.01% 39.19% 42.79% 19.00%
=========== =========== =========== =========== ===========
See notes to financial statements
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Cont'd.)
THE YACKTMAN FOCUSED FUND THE YACKTMAN FOCUSED FUND
- ---------------------------------------------------------------------------------- -----------------------------------------
For a Fund share outstanding YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
throughout each year 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------- -----------------------------------------
Net asset value, beginning
of year $16.28 $12.48 $10.92 $9.40 $8.96
Income from investment
operations:
Net investment income 0.03 0.07 0.08 0.09 0.14
Net realized and unrealized
gain on investments 1.59 3.90 1.56 1.52 0.45
----------- ----------- ----------- ----------- -----------
Total from investment
operations 1.62 3.97 1.64 1.61 0.59
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income (0.03) (0.07) (0.08) (0.09) (0.14)
From net realized gains (2.04) (0.10) - - -
Return of capital - - - - (0.01)
----------- ----------- ----------- ----------- -----------
Total distributions (2.07) (0.17) (0.08) (0.09) (0.15)
----------- ----------- ----------- ----------- -----------
Net asset value, end
of year $15.83 $16.28 $12.48 $10.92 $9.40
=========== =========== =========== =========== ===========
Total Return 9.96% 31.79% 14.99% 17.14% 6.60%
=========== =========== =========== =========== ===========
Supplemental data and ratios:
Net assets, end of year (000s) $97,263 $127,355 $115,250 $9,356 $7,606
=========== =========== =========== =========== ===========
Ratio of expenses before expense
reimbursements to average net
assets (See Note 4) 1.33% 1.36%(1) 1.45% 2.32% 2.50%
=========== =========== =========== =========== ===========
Ratio of net expenses to average
net assets 1.25% 1.26%(2) 1.25% 1.25% 1.25%
=========== =========== =========== =========== ===========
Ratio of net investment income to
average net assets 0.16% 0.51% 1.68% 1.06% 1.56%
=========== =========== =========== =========== ===========
Portfolio turnover rate 19.26% 71.38% 49.95% 51.33% 37.84%
=========== =========== =========== =========== ===========
(1) The ratio of expenses before expense reimbursements to average net assets,
excluding interest expense, was 1.35%
(2) The ratio of expenses to average net assets, excluding interest expense,
was 1.25%
See notes to financial statements
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2004
- --------------------------------------------------------------------------------
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 Management Co. is
the Funds' investment adviser (the "Adviser").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
financial statements have been prepared in conformity with 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 national 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
there are no readily available market quotations and other assets will be valued
at their fair value as determined in good faith by the Adviser pursuant to
procedures established by and under the supervision of the Board of Directors.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The fair value of a security is the amount which a Fund might reasonably expect
to receive upon a current sale. Valuing securities at fair value involves
greater reliance on judgment than valuing securities that have readily available
market quotations. There can be no assurance that the Funds could obtain the
fair value assigned to a security if they were to sell the security at
approximately the time at which the Funds determine their net asset value per
share.
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 year ended December 31, 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. 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.
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
December 31, 2004
- --------------------------------------------------------------------------------
Accordingly, at December 31, 2004, reclassifications were recorded to increase
(decrease) undistributed net investment income by $(144) and $(65), and increase
(decrease) undistributed net realized gains (losses) by $144 and $65, for The
Yacktman Fund and The Yacktman Focused Fund, respectively.
E) GUARANTEES AND INDEMNIFICATIONS - In the normal course of business, the Funds
enter into contracts with service providers that contain general indemnification
clauses. The Funds' maximum exposure under these arrangements is unknown as this
would involve future claims against the Funds that have not yet occurred. Based
on experience, the Funds expect the risk of loss to be remote.
F) REDEMPTION FEE - Effective April 1, 2005, those who buy and sell the Funds
within five calendar days will incur a 2% redemption fee. Please see the
Prospectus for more information.
G) 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.
3. INVESTMENT TRANSACTIONS
For the year ended December 31, 2004, the aggregate purchases and sales of
securities, excluding short-term securities, were $62,047,129 and $97,692,532
for The Yacktman Fund and $15,550,000 and $45,213,436 for The Yacktman Focused
Fund, respectively. For the year ended December 31, 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. Each Fund has an individual interest of cash collateral
contributed, 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
December 31, 2004, The Yacktman Fund had on loan securities valued at
$74,752,477 and collateral of $77,904,050 and The Yacktman Focused Fund had on
loan securities valued at $13,404,522 and collateral of $14,079,922.
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (Cont'd.)
December 31, 2004
- --------------------------------------------------------------------------------
The cash collateral received by the Funds was pooled and at December 31, 2004,
was pooled and invested in the following:
SECURITY TYPE SECURITY NAME MARKET VALUE
- --------------------------------------------------------------------------------
Commercial Paper Ford Credit Floorplan $ 3,979,400
Commercial Paper Lakeside FDG LLC 5,000,000
Commercial Paper Concord MIN CPTL 5,000,000
Commercial Paper Lehman Brothers 3,000,000
Commercial Paper Morgan Stanley 6,000,000
Commercial Paper Leafs LLC 4,000,000
Commercial Paper Goldman Sachs 4,000,000
Commercial Paper Sigma Finance, Inc. 2,999,400
Corporate Note Rabobank Nederland 4,000,000
Corporate Note Premium Asset Trust 6,000,000
Corporate Note Natexis Banque NY 4,998,235
Corporate Note Bayer Land Bank NY 3,000,000
Corporate Note Metlife Global FDO 7,000,000
Money Markets Merrill Lynch Premier Inst. 6,931
Repurchase Agreement Credit Suisse First Boston 13,000,000
Repurchase Agreement Morgan Stanley 20,000,000
Cash 6
MATURITY MATURITY
SECURITY TYPE SECURITY NAME RATE DATE
- --------------------------------------------------------------------------------
Commercial Paper Ford Credit Floorplan 2.07% 01/20/05
Commercial Paper Lakeside FDG LLC 2.40% 01/20/05
Commercial Paper Concord MIN CPTL 2.38% 01/11/05
Commercial Paper Lehman Brothers 2.37% 01/19/05
Commercial Paper Morgan Stanley 2.39% 03/07/05
Commercial Paper Leafs LLC 2.42% 04/20/05
Commercial Paper Goldman Sachs 2.39% 04/22/05
Commercial Paper Sigma Finance, Inc. 2.38% 05/17/05
Corporate Note Rabobank Nederland 2.02% 03/02/05
Corporate Note Premium Asset Trust 2.35% 06/01/05
Corporate Note Natexis Banque NY 2.36% 07/12/05
Corporate Note Bayer Land Bank NY 2.41% 11/23/05
Corporate Note Metlife Global FDO 2.46% 04/28/05
Money Markets Merrill Lynch Premier Inst. 2.14% 01/03/05
Repurchase Agreement Credit Suisse First Boston 2.29% 01/03/05
Repurchase Agreement Morgan Stanley 2.34% 01/03/05
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 December 31, 2004, The Yacktman Fund and The Yacktman Focused Fund had no
outstanding borrowings under the LOC and incurred no interest expense.
7. TAX INFORMATION
The following information for the Funds is presented on an income tax basis as
of December 31, 2004:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
Cost of investments $355,592,157 $91,847,883
============= =============
Gross unrealized appreciation $ 89,591,272 $21,187,748
Gross unrealized depreciation (4,277,148) (2,817,028)
------------- -------------
Net tax unrealized appreciation $ 85,314,124 $18,370,720
============= =============
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
As of December 31, 2004, the components of accumulated
earnings were as follows:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
Undistributed ordinary income $2,131 $305
Undistributed long-term
capital gains - -
------------ ------------
Accumulated earnings 2,131 305
Net unrealized appreciation
on investments 85,314,124 18,370,720
------------ ------------
Total accumulated earnings $85,316,255 $18,371,025
============ ============
The tax character of distributions paid during the fiscal years ended December
31, 2004 and December 31, 2003 were as follows:
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
2004
Ordinary income $7,462,696 $1,722,255
Long-term capital gains $23,449,426 $9,530,116
2003
Ordinary income $7,771,809 $505,991
Long-term capital gains $15,261,663 $778,448
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
THE YACKTMAN FUNDS, INC.
In our opinion, the accompanying statements of assets and
liabilities, including the portfolios of investments, and the related statements
of operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of The Yacktman Fund
and The Yacktman Focused Fund (constituting The Yacktman Funds, Inc., hereafter
referred to as the "Funds") at December 31, 2004, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at December 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 11, 2005
- --------------------------------------------------------------------------------
THE YACKTMAN FUNDS, INC.
- --------------------------------------------------------------------------------
ADDITIONAL TAX INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2004, 100% and 100% of the dividends paid from
net investment income, including short-term capital gains, for The Yacktman Fund
and The Yacktman Focused Fund, respectively, qualify for the dividends received
deduction available to corporate shareholders.
For the year ended December 31, 2004, 59.32% and 64.47% of the dividends paid
from net investment income, including short-term capital gains, for The Yacktman
Fund and The Yacktman Focused Fund, respectively, are designated as qualified
dividend income.
The Funds hereby designate approximately, $23,449,426 and $8,300,558 as capital
gain distributions for The Yacktman Fund and The Yacktman Focused Fund,
respectively, for the purposes of the dividends paid deduction.
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.
Information on how the Funds voted proxies relating to portfolio securities
during the twelve month period ended June 30, 2004, is available without charge,
upon request, by calling 1-800-525-8258 or by accessing the Web site of the
Securities and Exchange Commission.
DISCLOSURE OF PORTFOLIO HOLDINGS
- --------------------------------------------------------------------------------
The Funds will file complete schedules of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. Each Fund's Form N-Q will be available on the Web site of the
Securities and Exchange Commission at http://www.sec.gov.
THE YACKTMAN FUNDS, INC.
DIRECTOR AND OFFICER INFORMATION (Unaudited)
INDEPENDENT DIRECTORS
NUMBER OF OTHER
PORTFOLIOS DIRECTORSHIPS
CURRENT TERM OF PRINCIPAL OVERSEEN HELD
POSITION OFFICE OCCUPATION WITHIN OUTSIDE
HELD WITH AND LENGTH OF DURING THE PAST THE FUND THE FUND
NAME AGE ADDRESS THE FUNDS TIME SERVED FIVE YEARS COMPLEX COMPLEX
Bruce B. Bingham 56 c/o Yacktman Asset Management Co. Director Indefinite, Mr. Bingham has 2 None
1110 Lake Cook Road, Suite 385 until been a partner in
Buffalo Grove, IL 60089 successor Hamilton Partners,
elected a real estate
development firm,
6 years for more than
five years
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Albert J. Malwitz 68 c/o Yacktman Asset Management Co. Director Indefinite, Mr. Malwitz has 2 None
1110 Lake Cook Road, Suite 385 until been owner and chief
Buffalo Grove, IL 60089 successor executive officer
elected of Arlington
Fastener Co.,
6 years a manufacturer and
distributor of
industrial fasteners,
for more than
five years
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- -
George J. Stevenson 65 c/o Yacktman Asset Management Co. Director Indefinite, Mr. Stevenson has 2 None
1110 Lake Cook Road, Suite 385 until been President of
Buffalo Grove, IL60089 successor Stevenson & Company,
elected a registered business
broker, and President
6 years of Healthmate
Products Co., a fruit
juice concentrate
manufacturing company,
for more than
five years
INTERESTED DIRECTOR*
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Donald A. Yacktman 63 c/o Yacktman Asset Management Co. Director Indefinite, Mr. Yacktman has 2 None
1110 Lake Cook Road, Suite 385 President until been President of
Buffalo Grove, IL60089 Treasurer successor Yacktman Asset
elected Management Co.
since April, 1992
12 years
OFFICER
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Stephen Yacktman 34 c/o Yacktman Asset Management Co. Vice Indefinite, Mr. Yacktman has N/A N/A
1110 Lake Cook Road, Suite 385 President until been Vice President
Buffalo Grove, IL60089 Secretary successor of Yacktman Asset
elected Management Co.
for more than
2 year five years
*The Interested Director serves as director and officer of The Yacktman Funds.
Additional information about the Funds' directors is available in the Statement
of Additional Information and is available, without charge, upon request, by
calling 1-800-525-8258.
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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
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YA-408-0205
ITEM 2. CODE OF ETHICS
The Registrant has adopted a code of ethics (the "Code") that applies to its
principal executive officer and principal financial officer. A copy of the Code
is filed as an exhibit to this Form N-CSR. During the period covered by this
report, there were no amendments to the provisions of the Code, nor were there
any implicit or explicit waivers to the provisions of the Code.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
(a) (1) and (a) (2) The Registrant's Board of Directors has determined that the
Registrant has at least one audit committee financial expert, Mr. George J.
Stevenson, serving on its audit committee. Mr. Stevenson is "independent" within
the meaning of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of the Registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
are listed below.
(a) Audit Fees.
Fiscal year ended December 31, 2004 $38,400
Fiscal year ended December 31, 2003 $35,700
(b) Audit-Related Fees.
None.
(c) Tax Fees.
Fiscal year ended December 31, 2004 $6,700
Fiscal year ended December 31, 2003 $6,300
(d) All Other Fees.
None.
(e)
(1) The Registrant's audit committee has adopted an Audit Committee
Charter that requires that the Audit Committee review the scope and plan of the
independent public accountants' annual and interim examinations, approve the
services (other than the annual audit) to be performed for the Registrant by the
independent public accountants and approve the fees and other compensation
payable to the independent accountants.
(2) During 2004, all of the non-audit services provided by the
Registrant's principal accountant were pre-approved by the audit committee.
(f) None.
(g) See item 4(c).
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Included as part of the report to shareholders filed under Item I of this Form
N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9. PURCHASE OF EQUITY SECURITIES OF CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 11. 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 date of this report.
(b)There were no changes in Registrant's internal control over financial
reporting that occurred during the Registrant's last fiscal half-year that
have materially affected or are reasonably likely to materially affect
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS
(a) Code of Ethics.
(b)Certifications required pursuant to Sections 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.
/s/ Donald A. Yacktman
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Donald A. Yacktman
Principal Executive Officer
March 2, 2005
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
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Donald A. Yacktman
Principal Executive Officer
March 2, 2005
/s/ Donald A. Yacktman
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Donald A. Yacktman
Principal Financial Officer
March 2, 2005