UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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The Yacktman Funds, Inc.
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THE YACKTMAN FUNDS, INC.
BULLETIN
THE POLLS ARE STILL OPEN
November 27, 1998
Dear Fellow Shareholders,
The Yacktman Funds Special Shareholders' Meeting held on November 24, 1998
has been conditionally adjourned until December 15, 1998. This means that you
still have time to support your Independent Directors.
If you have NOT voted The Funds' WHITE proxy card, please do so as follows:
Vote AGAINST Proposals 1, 2, and 4, WITHHOLD your voting authority on
Proposal 3, and vote FOR Proposal 5. Please sign, date and return the proxy card
to The Yacktman Funds as soon as possible in the enclosed postage paid envelope.
If you previously voted on Yacktman's BLUE proxy card, you can
automatically change your vote by completing the enclosed WHITE proxy card and
returning it TODAY.
In considering which proxy to return, Yacktman's BLUE or your Independent
Directors' WHITE proxy card, we would like to bring to your attention ADDITIONAL
INFORMATION THAT MAY MAKE YOUR DECISION EASIER.
INSTITUTIONAL SHAREHOLDER SERVICES (ISS) SUPPORTS
THE INDEPENDENT DIRECTORS
o Institutional Shareholder Services (ISS), the foremost analyst of proxy
statements for institutional investors, after having interviewed Yacktman
and your Independent Directors and after having reviewed Yacktman's and
your Funds' proxy materials, advised their institutional clients to
support The Funds' Independent Directors by voting AGAINST Proposal 1 on
the WHITE proxy card.
BARRON'S ARTICLE
o Attached you will find a recent article from BARRON'S November 23, 1998
issue about The Yacktman Funds, Don Yacktman, and the proxy contest HE
initiated. This article is additional, strong, unbiased support for the
position of your Independent Directors.
Thank you for your time and consideration of this matter. If you need any
assistance in filling out your proxy, we encourage you to call The Yacktman
Funds at 1-800-248-5976.
The Board of Directors*
The Yacktman Funds, Inc.
*Messrs. Ball and Yacktman dissenting.
<PAGE>
REPRINTED FROM BARRON'S
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November 23, 1998 (C) 1998 Dow Jones & Company, Inc. All Rights Reserved.
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FUND OF INFORMATION
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by Sandra Ward
YACKTMAN AGONISTES
First poor performance, now a nasty proxy fight
(the following has been excerpted:)
As hundreds of financial Advisers patrolled the football-field-size
exhibition hall at a recent Charles Schwab conference catering to them, Donald
Yacktman sat alone amid the hubbub, the picture of desolation among a throng of
former devotees too busy hobnobbing with other fund managers or snatching gift
give aways to stop by his booth.
Once the toast of the planning set -- introduced as a "legend among
large-cap managers" and "one of the premier investors of our time" at last
year's Schwab conference -- the 15-year veteran of the money-management business
has become a pariah. He made his name managing SELECTED AMERICAN SHARES from
1988 to 1992, building a record that No Load Fund Investor editor Sheldon Jacobs
calls "fantastic." Later in 1992, Yacktman started his own YACKTMAN Fund. He
added the YACKTMAN FOCUSED Fund in 1997. Despite enjoying a few good years, the
Yacktman funds have proved disappointing overall. Jacobs notes that from a
long-term perspective, the Yacktman Fund ranks in the fifth quintile of
growth-and-income funds and that its Sharpe ratio, a measure of how much reward
is generated for the risk assumed, also scores low.
Interestingly, it's not so much the prolonged poor investment performance
of the Yacktman Fund that has caused such disaffection, though that hasn't
helped. Planners, it seems, were willing to forgive a spell of underperformance
as a matter of Yacktman's value style being out of sync with a market that
favored a growth bent. They could even understand that he was focusing his hunt
for bargains on companies with smaller capitalizations as long as he remained
consistent with his value bias. But what's led longtime loyalists to distance
themselves from Yacktman and his funds is a messy, protracted, very public and
very expensive spat with a former employee and his board of directors. Assets
have shrunk from $1.5 billion at its peak to about $400 million. Manhattan-based
investment adviser Bridgewater Advisors yanked its entire $4 million investment
out of the fund in early October, albeit reluctantly.
"It was clearly disappointing," says Leo Marzen, of Bridgewater. "We had
been an investor since 1994. We think he has a very good track record. He had
earned our respect and we were going to stick with him. We initially decided we
wanted to stay with him. Obviously, we were concerned with his recent
performance but there have been periods in the past where he's been out of sync
with the market. The last straw was once we heard about the proxy fight. It was
at a time
<PAGE>
when the markets were volatile, the outlook for investors was not encouraging
and we wanted to be with a manager devoting full attention to investing. We were
less concerned about style drift."
Says Jacobs of the No Load Fund Investor: "We certainly recommended him for
a long time. But we deleted the recommendation earlier this year."
While it's not entirely clear why Yacktman fell out with his friend and
associate of close to a decade, Jon Carlson, who is also a director -- each
offers different explanations -- it is clear that shareholder interests are not
being well served.
A proxy vote, initiated by Yacktman, is scheduled for Tuesday. He is
seeking to remove the outside directors, including Carlson, from the board for
interfering with the investment decisions of the fund. The independent
directors, in turn, are seeking to remove Yacktman as the manager, saying he has
strayed from his investment objectives and violated a code of ethics. They
discovered that for the past two years Yacktman has served as a director of a
contact-lens seller, 1-800-CONTACTS, which went public in February, though he
never disclosed his involvement with the firm. (He doesn't own the company in
either fund's portfolio.) Yacktman resigned his board seat on 1-800-Contacts
early this month.
Despite cracks that surfaced in the relationship between the management
company and the investment company as early as 1996, the gulf widened in 1997
when Yacktman's style started to drift from large-caps into smaller issues and
the directors pressed him to remain within the prospectus' investment
guidelines. The board says it discussed these issues in board meetings and in
private conversations with Yacktman, to no avail. Indeed, Yacktman alluded to a
strain in his relationship with his directors at the Schwab conference in 1997.
"The directors asked me if we'd changed our stripes at all because we
seemed to have a lot of companies that have smaller caps," Yacktman told an
audience attending a panel on large-cap investing. "That tells me the bargains
are in smaller-caps. Being a bottom-up investor, I have a hard time categorizing
things like this, small-cap, large-cap and so on. I see it as a market of stocks
rather than a stock market. As a 'GALP' buyer -- growth at a low price -- I'm
having a difficult time finding a lot of bargains in the very large companies."
For his part, Yacktman claims bad blood developed because Carlson was
angling for an ownership stake in his company, which was rejected. Moreover, he
says, clients had complained about Carlson's temperament, which he described as
"difficult." He fired Carlson and thus set into motion the events that would
lead to this nasty proxy fight. He dismisses concerns that such a battle,
regardless of who's right and who's wrong, is a distraction from managing the
portfolio, noting that the funds are concentrated with the biggest containing
only about 25 names.
"THE REAL STORY HERE IS ABOUT CORPORATE GOVERNANCE," SAYS YACKTMAN.
<PAGE>
IF THAT'S THE CASE, THEN MAYBE THOSE INVESTORS WHO ARE STILL IN THE FUND
SHOULD CAST THEIR BALLOTS IN SUPPORT OF INDEPENDENT BOARD OVERSIGHT AND VOTE
AGAINST THE PROPOSALS. THAT'S WHAT INSTITUTIONAL SHAREHOLDER SERVICES SUGGESTS.
"ISS believes that investors are entitled to measure their fund's
performance, and when a fund does not provide a basis from which to measure its
progress, it becomes less attractive to prospective investors," wrote Laura
Kuperman, an analyst at ISS. "The fund's assets have shrunk significantly as a
result of recent events, up to and including the proxy contest, and as a fund's
assets shrink, its costs per share rise. The fund has suffered primarily because
of these events, not because of the board's inquiries into Mr. Yacktman's
style."
In the end, there are too many better performing alternatives offered in
the world of mutual funds for investors to remain content with the Yacktman
fund, which has at this point become something of an unknown quantity.
Muses the No Load Fund Investor's Jacobs, "All this is for me is an
argument for indexing."
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DOWJONES
