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 The Yacktman Funds, Inc. 1110 Lake Cook Road Suite 385 Buffalo Grove, IL 60089 --------------------------------------------- (Address of principal executive offices) 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 -------------- Date of fiscal year end: December 31 ----------- Date of reporting period: June 30, 2005 ------------- 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 ---------------------------------------------------------------------- SEMI-ANNUAL REPORT ---------------------------------------------------------------------- JUNE 30, 2005 - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- MESSAGE TO SHAREHOLDERS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 126.88% and The Yacktman Focused Fund is up 128.51% while the S&P 500(R) Index is down 11.32%. If someone invested $100 in each Fund five years ago it would now be $226.88 and $228.51, respectively, compared to $88.68 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 - -------------------------------------------------------------------------------- THE THE THE YACKTMAN S&P 500/R YACKTMAN S&P 500/R PERIOD FUND(1) INDEX FOCUSED FUND(2) INDEX ENDED ANNUALIZED ANNUALIZED ANNUALIZED ANNUALIZED JUNE 30, 2005 RETURNS RETURNS RETURNS RETURNS - -------------------------------------------------------------------------------- One Year 6.89% 6.32% 7.37% 6.32% Three Years 15.16% 8.28% 14.52% 8.28% Five Years 17.80% (2.37)% 17.97% (2.37)% Ten Years 11.86% 9.94% N/A 9.94% Since Inception 10.76% 10.58% 8.38% 6.59% (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. - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The first half of this year has remained an environment where many equities have been fully valued and few stocks have experienced meaningful temporary declines to allow us to add new positions to the portfolios. During times like this we find it prudent to remain patient and keep our "powder dry" while waiting for negative events to trigger better investment opportunities. Patience is important; however, it must be combined with a constant search for opportunities and an aggressive approach to purchasing them when they are available. Finding and buying bargains at the right price/time can help to deliver strong returns over longer periods (like the last five years) even though the market may go nowhere. Early 2002 was a period that was similar to the first half of this year, where we patiently held dry powder. By mid-year, there were deals everywhere and we were fully invested, feeling confident that we owned a portfolio which would be able to deliver strong returns going forward. Another benefit of our strategy is the low "beta" (or volatility) of our portfolios. According to this measure, our volatility has generally been 60% to 70% of the S&P 500(R) Index over the last 10 years. More importantly, during this period, we have outperformed the market with this lower than average volatility. However, we would like to emphasize our long-term goal is to make money not lose less. Our strong absolute results of the last five years should bring emphasis to that point. Coca-Cola is a current investment we find promising, and is an example that shows patiently waiting for the right entry point is important. In 1998, Coca-Cola traded to just under $90 at a time when the earnings power of the business was less than $1.40. Today, the company sells in the low $40's and should generate more than $2.00 per share in free cash. What changed? In our opinion, very little has changed. We believe Coca-Cola is a money machine that needs a little oiling. The short term problems it has had can be fixed with minor repairs rather than a complete rebuild of any major components. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- During the balance of the year we will continue to diligently search for investment opportunities. Sincerely, /s/ Donald A. Yacktman /s/ Stephen A. Yacktman Donald A. Yacktman Stephen A. Yacktman President & Co-Portfolio Manager Co-Portfolio Manager - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXPENSE EXAMPLE For the Six Months Ended June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- 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 January 1, 2005 to June 30, 2005. 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 1/1/05- 1/1/05 6/30/05 6/30/05(1) - -------------------------------------------------------------------------------- Actual $1,000.00 $987.00 $4.42 Hypothetical (5% return before expenses) 1,000.00 1,020.55 4.49 THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- Expenses Beginning Ending paid during account account period value value 1/1/05- 1/1/05 6/30/05 6/30/05(1) - -------------------------------------------------------------------------------- Actual $1,000.00 $985.50 $6.15 Hypothetical (5% return before expenses) 1,000.00 1,018.80 6.26 (1) Expenses are equal to the Funds' annualized expense ratios (0.90% for The Yacktman Fund and 1.25% for The Yacktman Focused Fund), multiplied by the average account value over the period, and multiplied by 0.4959 (to reflect the one-half year period). - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN EQUITY HOLDINGS (UNAUDITED) June 30, 2005 - -------------------------------------------------------------------------------- PERCENTAGE OF NET ASSETS - -------------------------------------------------------------------------------- Coca-Cola Co. 7.1% Liberty Media Corp. 5.5 Henkel KGaA 4.6 Kraft Foods, Inc. 4.6 Lancaster Colony Corp. 3.9 AmeriCredit Corp. 3.9 Pfizer, Inc. 2.4 Tyco International Ltd. 2.1 Bristol-Myers Squibb Co. 2.0 Unilever N.V. 1.9 ----- Total 38.0% SECTOR BREAKDOWN (UNAUDITED) June 30, 2005 - -------------------------------------------------------------------------------- [CHART] Banks.......................................................................1.3% Commercial Services & Supplies..............................................1.1% Diversified Financials......................................................6.6% Food Products..............................................................10.0% Health Care Providers & Services............................................1.2% Household Products..........................................................8.5% Industrial Conglomerates....................................................2.1% Insurance...................................................................1.5% IT Consulting & Services....................................................2.5% Media.......................................................................7.9% Pharmaceuticals.............................................................6.3% Real Estate.................................................................1.3% Software....................................................................0.7% Specialty Retail............................................................1.0% Telecommunication Services..................................................1.3% Tobacco.....................................................................1.2% Short-Term Investments less Other Assets...................................36.5% - -------------------------------------------------------------------------------- THE YACKTMAN FUND EQUITY PURCHASES & SALES (UNAUDITED) For the Six Months Ended June 30, 2005 - -------------------------------------------------------------------------------- NET SHARES CURRENT NEW PURCHASES PURCHASED SHARES HELD - -------------------------------------------------------------------------------- ANHEUSER-BUSCH COS., INC. Produces and distributes beer under brand names such as Budweiser, Michelob and Busch. 100,000 100,000 VIACOM, INC. A worldwide entertainment and publishing company whose operations include Blockbuster Video and music, MTV Networks, Showtime Networks, Paramount Pictures and Television, Simon & Schuster, television stations, and movie screens in various countries. 180,000 180,000 WAL-MART STORES, INC. Operates discount stores and Supercenters, as well as Sam's Clubs. 85,000 85,000 - -------------------------------------------------------------------------------- NET SHARES CURRENT PURCHASES PURCHASED SHARES HELD - -------------------------------------------------------------------------------- Coca-Cola Co. 170,000 820,000 Federal Home Loan Mortgage Corp. 10,000 110,000 Federal National Mortgage Association 30,000 100,000 First Data Corp. 30,000 160,000 Kraft Foods, Inc. 210,000 700,000 Lancaster Colony Corp. 46,588 436,588 Liberty Media Corp. 160,000 2,600,000 Microsoft Corp. 40,000 140,000 - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EQUITY PURCHASES & SALES (UNAUDITED) (CONT'D.) For the Six Months Ended June 30, 2005 - -------------------------------------------------------------------------------- NET SHARES CURRENT SALES SOLD SHARES HELD - -------------------------------------------------------------------------------- AmeriCredit Corp. 20,000 730,000 Trizec Properties, Inc. 20,000 310,000 - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS - 61.2% BANKS - 1.3% U.S. Bancorp 150,000 $4,380,000 Washington Mutual, Inc. 40,000 1,627,600 ------------ 6,007,600 ------------ BEVERAGES - 9.0% Anheuser-Busch Cos., Inc. 100,000 4,575,000 Coca-Cola Co. 820,000 34,235,000 PepsiCo, Inc. 90,000 4,853,700 ------------ 43,663,700 ------------ COMMERCIAL SERVICES & SUPPLIES - 1.1% Block H&R, Inc. 90,000 5,251,500 ------------ DIVERSIFIED FINANCIALS - 6.6% AmeriCredit Corp.* 730,000 18,615,000 Federal Home Loan Mortgage Corp. 110,000 7,175,300 Federal National Mortgage Association 100,000 5,840,000 ------------ 31,630,300 ------------ FOOD PRODUCTS - 10.0% Cadbury Schweppes plc 180,000 6,899,400 Interstate Bakeries Corp.* 80,000 560,800 Kraft Foods, Inc. 700,000 22,267,000 Lancaster Colony Corp. 436,588 18,738,357 ------------ 48,465,557 ------------ HEALTH CARE PROVIDERS & SERVICES - 1.2% Cardinal Health, Inc. 100,000 5,758,000 ------------ HOUSEHOLD PRODUCTS - 8.5% Clorox Co. 110,000 6,129,200 Colgate-Palmolive Co. 75,000 3,743,250 Henkel KGaA 265,000 22,319,678 Unilever N.V. 140,000 9,076,200 ------------ 41,268,328 ------------ INDUSTRIAL CONGLOMERATES - 2.1% Tyco International Ltd. 350,000 10,220,000 ------------ - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONT'D) June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- INSURANCE - 1.5% Marsh & McLennan Cos., Inc. 103,500 $2,866,950 MBIA, Inc. 40,000 2,372,400 MGIC Investment Corp. 30,000 1,956,600 ------------ 7,195,950 ------------ IT CONSULTING & SERVICES - 2.5% Electronic Data Systems Corp. 300,000 5,775,000 First Data Corp. 160,000 6,422,400 ------------ 12,197,400 ------------ MEDIA - 7.9% Interpublic Group of Cos., Inc.* 480,000 5,846,400 Liberty Media Corp.* 2,600,000 26,494,000 Viacom, Inc. Class B 180,000 5,763,600 ------------ 38,104,000 ------------ PHARMACEUTICALS - 5.3% Bristol-Myers Squibb Co. 380,000 9,492,400 Johnson & Johnson 70,000 4,550,000 Pfizer, Inc. 420,000 11,583,600 ------------ 25,626,000 ------------ REAL ESTATE - 1.3% Trizec Properties, Inc. 310,000 6,376,700 ------------ SOFTWARE - 0.7% Microsoft Corp. 140,000 3,477,600 ------------ SPECIALTY RETAIL - 1.0% Friedman's, Inc., Class A* 465,000 474,300 Wal-Mart Stores, Inc. 85,000 4,097,000 ------------ 4,571,300 ------------ TOBACCO - 1.2% Altria Group, Inc. 90,000 5,819,400 ------------ Total Common Stocks (cost $219,831,118) 295,633,335 ------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- CORPORATE BONDS - 2.3% Athena Nuero Financial, LLC, 7.25%, 2/21/08 $ 5,000,000 $ 4,675,000 Utstarcom, 0.88%, 3/1/08 9,300,000 6,579,750 ------------ Total Corporate Bonds (cost $10,550,558) 11,254,750 ------------ SHORT-TERM INVESTMENTS - 56.3% COMMERCIAL PAPER - 36.0% American Express, 3.05%, 7/6/05 21,600,000 21,590,850 Chesham Financial, 3.14%, 7/1/05 22,000,000 22,000,000 CitiGroup Global, 3.13%, 7/6/05 21,600,000 21,590,610 GE Capital Corp., 3.15%, 7/6/05 21,600,000 21,590,550 Prudential Funding, 3.10%, 7/6/05 21,600,000 21,590,700 Rabo Bank, 3.12%, 7/1/05 22,000,000 22,000,000 Total Capital, 3.10%, 7/6/05 21,600,000 21,590,700 Toyota Motor Corp., 3.05%, 7/6/05 21,600,000 21,590,850 ------------ Total Commercial Paper (cost $173,544,260) 173,544,260 ------------ DEMAND NOTE (VARIABLE RATE) - 0.1% U.S. Bancorp, 3.08% 633,331 633,331 ------------ Total Demand Note (cost $633,331) 633,331 ------------ - -------------------------------------------------------------------------------- THE YACKTMAN FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONT'D) June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- VALUE - -------------------------------------------------------------------------------- OTHER SHORT-TERM INVESTMENT - 20.2% Securities Lending Investment Account (cost $97,352,476) $ 97,352,476 ------------ Total Short-Term Investments (cost $210,227,782) 271,530,067 Total Investments - 119.8% (cost $501,911,743) 578,418,152 Other Assets less Liabilities - 0.4% 1,713,202 Less Liability for Collateral on Securities Loaned - (20.2)% (97,352,476) Net Assets - 100% (equivalent to $15.14 per share based on 31,895,688 shares outstanding) $482,778,878 ============ *Non-income producing See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECTOR BREAKDOWN (UNAUDITED) June 30, 2005 - -------------------------------------------------------------------------------- [CHART] Beverages...................................................................7.7% Commercial Services & Supplies..............................................2.0% Diversified Financials.....................................................11.0% Food Products...............................................................9.7% Health Care Providers & Services............................................1.4% Household Products.........................................................12.4% Industrial Conglomerates....................................................2.6% Insurance...................................................................0.7% IT Consulting & Services....................................................1.5% Media.......................................................................9.2% Pharmaceuticals.............................................................6.3% Real Estate.................................................................1.9% Specialty Retail............................................................0.3% Telecommunication Services..................................................1.3% Tobacco.....................................................................1.6% Short-Term Investments less Other Assets...................................30.4% - -------------------------------------------------------------------------------- THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EQUITY PURCHASES & SALES (UNAUDITED) For the Six Months Ended June 30, 2005 - -------------------------------------------------------------------------------- NET SHARES CURRENT PURCHASES PURCHASED SHARES HELD - -------------------------------------------------------------------------------- Kraft Foods, Inc. 10,000 160,000 - -------------------------------------------------------------------------------- NET SHARES CURRENT SALES SOLD SHARES HELD - -------------------------------------------------------------------------------- AmeriCredit Corp. 20,000 280,000 Cardinal Health, Inc. 5,000 25,000 - -------------------------------------------------------------------------------- THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS - 68.3% BEVERAGES - 7.7% Coca-Cola Co. 185,000 $7,723,750 ------------ COMMERCIAL SERVICES & SUPPLIES - 2.0% Block H&R, Inc. 35,000 2,042,250 ------------ Diversified Financials - 11.0% AmeriCredit Corp.* 280,000 7,140,000 Federal Home Loan Mortgage Corp. 60,000 3,913,800 ------------ 11,053,800 ------------ FOOD PRODUCTS - 9.7% Interstate Bakeries Corp.* 50,000 350,500 Kraft Foods, Inc. 160,000 5,089,600 Lancaster Colony Corp. 100,000 4,292,000 ------------ 9,732,100 ------------ HEALTH CARE PROVIDERS & SERVICES - 1.4% Cardinal Health, Inc. 25,000 1,439,500 ------------ HOUSEHOLD PRODUCTS - 12.4% Clorox Co. 30,000 1,671,600 Colgate-Palmolive Co. 20,000 998,200 Henkel KGaA 85,000 7,159,142 Unilever N.V. 40,000 2,593,200 ------------ 12,422,142 ------------ INDUSTRIAL CONGLOMERATES - 2.6% Tyco International Ltd. 90,000 2,628,000 ------------ INSURANCE - 0.7% Marsh & McLennan Cos., Inc. 26,200 725,740 ------------ IT CONSULTING & SERVICES - 1.5% Electronic Data Systems Corp. 80,000 1,540,000 ------------ - -------------------------------------------------------------------------------- THE YACKTMAN FOCUSED FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONT'D) June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- MEDIA - 9.2% Interpublic Group of Cos., Inc.* 193,100 $2,351,958 Liberty Media Corp.* 670,000 6,827,300 ------------ 9,179,258 ------------ PHARMACEUTICALS - 6.3% Bristol-Myers Squibb Co. 130,000 3,247,400 Pfizer, Inc. 110,000 3,033,800 ------------ 6,281,200 ------------ REAL ESTATE - 1.9% Trizec Properties, Inc. 90,000 1,851,300 ------------ SPECIALTY RETAIL - 0.3% Friedman's, Inc., Class A* 260,000 265,200 ------------ TOBACCO - 1.6% Altria Group, Inc. 25,000 1,616,500 ------------ Total Common Stocks (cost $51,906,042) 68,500,740 ------------ - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- CORPORATE BONDS - 1.3% Utstarcom, 0.88%, 3/1/08 $1,850,000 1,308,875 ------------ Total Corporate Bonds (cost $1,188,869) 1,308,875 ------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 47.4% COMMERCIAL PAPER - 28.9% Chesham Financial, 3.14%, 7/1/05 $4,900,000 $4,900,000 CitiGroup Global, 3.13%, 7/6/05 4,800,000 4,797,913 GE Capital Corp., 3.15%, 7/6/05 4,800,000 4,797,900 Prudential Funding, 3.10%, 7/6/05 4,800,000 4,797,933 Rabo Bank Disc CP, 3.12%, 7/1/05 4,900,000 4,900,000 Toyota Disc CP, 3.05%, 7/6/05 4,800,000 4,797,967 ------------ Total Commercial Paper (cost $28,991,713) 28,991,713 ------------ DEMAND NOTE (VARIABLE RATE) - 1.0% U.S. Bancorp, 2.17% 952,326 952,326 ------------ Total Demand Note (cost $952,326) 952,326 ------------ OTHER SHORT-TERM INVESTMENT - 17.5% Securities Lending Investment Account (cost $17,520,099) 17,520,099 ------------ Total Short-Term Investments (cost $47,464,138) 47,464,138 ------------ Total Investments - 117.0% (cost $100,559,049) 117,273,753 Other Assets less Liabilities - 0.5% 507,338 Less Liability for Collateral on Securities Loaned - (17.5)% (17,520,099) ------------ Net Assets - 100% (equivalent to $15.60 per share based on 6,427,412 shares outstanding) $100,260,992 ============ *Non-income producing See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS & LIABILITIES June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND - -------------------------------------------------------------------------------- ASSETS: Investments at value (cost $501,911,743 and $100,559,049, respectively) $578,418,152 $117,273,753 Receivable for fund shares sold 2,784,509 623,259 Dividends and interest receivable 890,299 187,800 Prepaid expenses 37,863 17,395 ------------ ------------ Total Assets 582,130,823 118,102,207 ------------ ------------ LIABILITIES: Collateral for securities loaned 97,352,476 17,520,099 Payable for securities purchased 834,985 -- Payable for fund shares redeemed 792,179 188,443 Accrued investment advisory fees 255,803 74,605 Other accrued expenses 116,502 58,068 ------------ ------------ Total Liabilities 99,351,945 17,841,215 ------------ ------------ NET ASSETS $482,778,878 $100,260,992 ============ ============ NET ASSETS CONSIST OF: Capital stock $402,454,898 $83,387,064 Undistributed net investment income 3,220,701 515,240 Undistributed net realized gains (losses) 595,885 (356,017) Net unrealized appreciation on investments 76,507,394 16,714,705 ------------ ------------ Total Net Assets $482,778,878 $100,260,992 ============ ============ CAPITAL STOCK, $.0001 par value Authorized 500,000,000 500,000,000 Issued and Outstanding 31,895,688 6,427,412 NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $15.14 $15.60 ====== ====== See notes to financial statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividend income $2,932,077(1) $731,015(2) Interest income 2,117,518 372,751 Securities lending income (See Note 5) 26,698 7,584 Other 149 -- ----------- ----------- 5,076,442 1,111,350 ----------- ----------- EXPENSES: Investment advisory fees 1,344,081 475,751 Shareholder servicing fees 250,110 70,416 Administration and accounting fees 109,143 24,795 Federal and state registration fees 48,881 27,203 Custody fees 30,405 9,917 Reports to shareholders 24,031 8,431 Professional Fees 22,107 6,976 Directors' fees and expenses 12,505 4,464 Miscellaneous costs 13,485 10,760 ----------- ----------- Total expenses before reimbursements 1,854,748 638,713 ----------- ----------- Expense reimbursements (See Note 4) -- (44,023) ----------- ----------- Net expenses 1,854,748 594,690 ----------- ----------- NET INVESTMENT INCOME 3,221,694 516,660 ----------- ----------- REALIZED AND UNREALIZED GAIN: Net realized gain (loss) on investments 614,566 (79,126) Change in unrealized depreciation on investments (8,828,536) (1,934,631) ----------- ----------- Net realized and unrealized loss on investments (8,213,970) (2,013,757) ----------- ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(4,992,276) $(1,497,097) =========== =========== (1) Net of $129,421 in foreign withholding taxes (2) Net of $40,320 in foreign withholding taxes See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- THE YACKTMAN FUND THE YACKTMAN FOCUSED FUND SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2005 YEAR ENDED JUNE 30, 2005 YEAR ENDED (UNAUDITED) DEC. 31, 2004 (UNAUDITED) DEC. 31, 2004 OPERATIONS: Net investment income $3,221,694 $2,516,328 $516,660 $163,603 Net realized gain (loss) on investments 614,566 28,595,140 (79,126) 10,091,812 Change in unrealized appreciation on investments (8,828,536) 1,096,699 (1,934,631) (2,699,839) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (4,992,276) 32,208,167 (1,497,097) 7,555,576 CAPITAL SHARE TRANSACTIONS: ------------- ------------- ------------- ------------- Proceeds from shares sold 189,076,512 161,689,854 34,445,360 67,230,026 Proceeds from reinvestment of distributions -- 27,685,525 -- 10,357,231 Redemption fees 68 -- -- -- ------------- ------------- ------------- ------------- 189,076,580 189,375,379 34,445,360 77,587,257 Payments for shares redeemed (66,613,077) (150,792,024) (29,950,289) (103,982,061) ------------- ------------- ------------- ------------- Net increase (decrease) 122,463,503 38,583,355 4,495,071 (26,394,804) ------------- ------------- ------------- ------------- DISTRIBUTIONS PAID FROM: Net investment income -- (2,514,053) -- (163,233) Net realized gains -- (28,398,069) -- (11,089,138) Total distributions -- (30,912,122) -- (11,252,371) TOTAL INCREASE (DECREASE) IN NET ASSETS 117,471,227 39,879,400 2,997,974 (30,091,599) NET ASSETS: Beginning of period 365,307,651 325,428,251 97,263,018 127,354,617 ------------- ------------- ------------- ------------- End of period (including undistributed net investment income of $3,220,701, $2,131, $515,240 and $305, respectively) $482,778,878 $365,307,651 $100,260,992 $97,263,018 ============= ============= ============= ============= TRANSACTIONS IN SHARES: Shares sold 12,499,942 10,503,672 2,213,334 4,071,851 Issued in reinvestment of distributions -- 1,802,438 -- 653,453 Shares redeemed (4,411,063) (9,858,635) (1,942,458) (6,406,640) ------------- ------------- ------------- ------------- Net increase (decrease) 8,088,879 2,447,475 270,876 (1,681,336) ============= ============= ============= ============= See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS THE YACKTMAN FUND THE YACKTMAN FUND - ------------------------------------------------------------ ----------------------------------------------------------------------- SIX MONTHS ENDED For a Fund share outstanding JUNE 30, 2005 YEAR ENDED DECEMBER 31, throughout each period (UNAUDITED) 2004 2003 2002 2001 2000 - ------------------------------------------------------------ ----------------------------------------------------------------------- Net asset value, beginning of period $15.34 $15.24 $12.33 $11.16 $9.80 $9.40 Income from investment operations: Net investment income 0.10 0.12 0.23 0.13 0.08 0.11 Net realized and unrealized gain (loss) on investments (0.30) 1.40 3.84 1.14 1.83 1.16 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations (0.20) 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 period $15.14 $15.34 $15.24 $12.33 $11.16 $9.80 =========== =========== =========== =========== =========== =========== Total Return (1.30)%(1) 9.93% 33.03% 11.41% 19.47% 13.46% =========== =========== =========== =========== =========== =========== Supplemental data and ratios: Net assets, end of period (000s) $482,779 $365,308 $325,428 $421,292 $113,199 $69,800 =========== =========== =========== =========== =========== =========== Ratio of net expenses to average net assets 0.90%(2) 0.95% 0.94% 0.99% 1.17% 1.23% =========== =========== =========== =========== =========== =========== Ratio of net investment income to average net assets 2.45%(2) 0.73% 1.25% 2.01% 1.06% 1.03% =========== =========== =========== =========== =========== =========== Portfolio turnover rate 0.31%(1) 23.82% 40.01% 39.19% 42.79% 19.00% =========== =========== =========== =========== =========== =========== (1) Not annualized (2) Annualized See notes to financial statements - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (CONT'D.) THE YACKTMAN FOCUSED FUND THE YACKTMAN FOCUSED FUND - ------------------------------------------------------------ ----------------------------------------------------------------------- SIX MONTHS ENDED For a Fund share outstanding JUNE 30, 2005 YEAR ENDED DECEMBER 31, throughout each period (UNAUDITED) 2004 2003 2002 2001 2000 - ------------------------------------------------------------ ----------------------------------------------------------------------- Net asset value, beginning of period $15.83 $16.28 $12.48 $10.92 $9.40 $8.96 Income from investment operations Net investment income 0.08 0.03 0.07 0.08 0.09 0.14 Net realized and unrealized gain (loss) on investments (0.31) 1.59 3.90 1.56 1.52 0.45 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations (0.23) 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 period $15.60 $15.83 $16.28 $12.48 $10.92 $9.40 =========== =========== =========== =========== =========== =========== Total Return (1.45)%(1) 9.96% 31.79% 14.99% 17.14% 6.60% =========== =========== =========== =========== =========== =========== Supplemental data and ratios: Net assets, end of period (000s) $100,261 $97,263 $127,355 $115,250 $9,356 $7,606 =========== =========== =========== =========== =========== =========== Ratio of expenses before expense reimbursements to average net assets (See Note 4) 1.34%(2) 1.33% 1.36%(3) 1.45% 2.32% 2.50% =========== =========== =========== =========== =========== =========== Ratio of net expenses to average net assets 1.25%(2) 1.25% 1.26%(4) 1.25% 1.25% 1.25% =========== =========== =========== =========== =========== =========== Ratio of net investment income to average net assets 2.34%(2) 0.16% 0.51% 1.68% 1.06% 1.56% =========== =========== =========== =========== =========== =========== Portfolio turnover rate 1.92%(1) 19.26% 71.38% 49.95% 51.33% 37.84% =========== =========== =========== =========== =========== =========== (1) Not annualized (2) Annualized (3) The ratio of expenses before expense reimbursements to average net assets, excluding interest expense, was 1.35% (4) 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 June 30, 2005 (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 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 six months ended June 30, 2005. C) FEDERAL INCOME TAXES - It is each Fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all investment company net taxable income and net capital gains to its shareholders in a manner which results in no tax cost to the Fund. Therefore, no federal income tax provision is required. D) DISTRIBUTIONS TO SHAREHOLDERS - Dividends from net investment income 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. 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 - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (CONT'D) June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- 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 period ended June 30, 2005, the aggregate purchases and sales of securities, excluding short-term securities, were $46,972,857 and $862,216 for The Yacktman Fund and $1,464,483 and $970,046 for The Yacktman Focused Fund, respectively. For the period ended June 30, 2005, there were no purchases or sales of U.S. Government securities for The Yacktman Fund and The Yacktman Focused Fund. 4. INVESTMENT ADVISORY AGREEMENT On February 18, 2005, the Board of Directors of The Yacktman Funds, Inc. approved the continuation of each Fund's investment advisory agreement with Yacktman Asset Management Co. (the "Adviser"). Prior to approving the continuation of the agreements, the Board considered: o the nature, extent and quality of the services provided by the Adviser o the investment performance of the Funds o the costs of the services to be provided and profits to be realized by the Adviser from its relationship with the Funds o the extent to which economies of scale would be realized as the Funds grow and whether fee levels reflect those economies of scale o the expense ratios of the Funds In considering the nature, extent and quality of the services provided by the Adviser, the Board considered an oral presentation by the Adviser describing the portfolio management, shareholder communication, and regulatory compliance services provided by the Adviser to the Funds. The Directors concluded that the Adviser was providing essential services to the Funds. The Directors compared the performance of the Funds to benchmark indices over various periods of time and concluded that the performance of the Funds warranted the continuation of the advisory agreements. The Directors noted that in addition to the absolute performance of the Funds, they also noted that the Funds adhered to their investment style. In concluding that the advisory fees payable by the Funds were reasonable, the Directors reviewed a report of the costs of services provided by, and the profits realized by the Adviser, from its relationship with the Funds and concluded that such profits were reasonable and not excessive. As part of its analysis, the Board considered the value of the research the Adviser received from broker-dealers executing securities transactions for the Funds. The Directors also reviewed reports comparing the expense ratios and advisory fees paid by the Funds to those paid by other comparable mutual funds and concluded that the advisory fees paid by the Funds and the expense ratios of the Funds were in the range of comparable mutual funds. The Directors also considered whether the investment advisory agreement fee schedules should be adjusted for an increase in assets under management. They concluded that "breakpoints" embodied in the investment advisory agreement for The Yacktman Fund were appropriate, and breakpoints for The Yacktman Focused Fund were not warranted at this time given the anticipated growth of that Fund in the next year and the other factors considered. 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 - -------------------------------------------------------------------------------- THE YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (CONT'D) June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- from lending transactions is allocated 60% to the Funds and 40% to the custodian. As of June 30, 2005, The Yacktman Fund had on loan securities valued at $97,352,476 and collateral of $101,260,236 and The Yacktman Focused Fund had on loan securities valued at $17,520,099 and collateral of $18,300,000. The cash collateral received by the Funds was pooled and at June 30, 2005, was pooled and invested in the following: SECURITY TYPE SECURITY NAME MARKET VALUE - -------------------------------------------------------------------------------- Repurchase Agreement Credit Suisse First Boston $25,000,000 Repurchase Agreement Credit Suisse First Boston 46,000,000 Commercial Paper Thornburg Management 4,987,000 Commercial Paper Lakeside FDG LLC 5,000,000 Commercial Paper Morgan Stanley 5,000,000 Commercial Paper CCN Orchard Park 4,574,530 Commercial Paper CCN Independent 4,000,000 Commercial Paper Leafs LLC 4,000,000 Commercial Paper 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. 465 Cash 6 MATURITY MATURITY SECURITY TYPE SECURITY NAME RATE DATE - -------------------------------------------------------------------------------- Repurchase Agreement Credit Suisse First Boston 3.50% 07/01/05 Repurchase Agreement Credit Suisse First Boston 3.43% 07/01/05 Commercial Paper Thornburg Management 3.13% 07/06/05 Commercial Paper Lakeside FDG LLC 3.22% 07/08/05 Commercial Paper Morgan Stanley 3.51% 04/06/06 Commercial Paper CCN Orchard Park 3.25% 04/06/06 Commercial Paper CCN Independent 3.29% 04/17/06 Commercial Paper Leafs LLC 3.26% 04/20/06 Commercial Paper Premium Asset Trust 3.18% 06/01/07 Corporate Note Natexis Banque NY 3.52% 07/12/05 Corporate Note Bayer Land Bank NY 3.32% 11/23/05 Corporate Note Metlife Global FDO 3.39% 04/28/08 Money Markets Merrill Lynch Premier Inst. 3.04% 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 June 30, 2005, 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 June 30, 2005: THE YACKTMAN THE YACKTMAN FUND FOCUSED FUND Tax cost of investments $501,935,297 $100,839,415 ============ ============ Gross unrealized appreciation $ 82,365,439 $ 18,818,959 Gross unrealized depreciation (5,882,584) (2,384,621) ------------ ------------ Net tax unrealized appreciation $ 76,482,855 $ 16,434,338 ============ ============ 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 YACKTMAN FUNDS, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (CONT'D) June 30, 2005 (Unaudited) - -------------------------------------------------------------------------------- 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 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, 2005, 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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-410-0805 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. 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 the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the Registrant's second fiscal quarter of the period covered by this report that the materially affected, or were reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS (a)(1) Code of Ethics. Not applicable for semi-annual reports. (a)(2) Certifications required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed herewith. (a)(3) Not applicable to open-end investment companies. (b) Certifications required pursuant to Sections 906 of the Sarbanes-Oxley Act of 2002 are filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The Yacktman Funds, Inc. - ------------------------------ /s/Donald A. Yacktman - ------------------------------ Donald A. Yacktman Principal Executive Officer September 2, 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 - ------------------------------ Donald A. Yacktman Principal Executive Officer September 2, 2005 /s/Donald A. Yacktma - ------------------------------ Donald A. Yacktman Principal Financial Officer September 2, 2005