SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _____)
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Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE YACKTMAN FUNDS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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<PAGE>
Explanatory Note: Donald Yacktman, as former President of The Yacktman Funds,
Inc. (the "Funds"), has sought to call a special stockholders meeting to remove
the Funds' Independent Directors. The Funds' Board of Directors subsequently
revoked Donald Yacktman's attempted call of the meeting. Yacktman Asset
Management Co. and Donald Yacktman have filed suit against the Funds and the
Independent Directors, seeking to have the Maryland state courts force the Funds
to hold the meeting.
The Funds are filing this preliminary proxy statement to respond to the
preliminary proxy statements filed by Yacktman Asset Management Co. on
September 18 and September 28, 1998 and the definitive proxy statement filed by
Yacktman Asset Management Co. on October 6, 1998 even though the meeting has
not been validly called and the Funds are continuing to object to such
purported call.
<PAGE>
IMPORTANT NEWS!
OCTOBER 1998
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QUESTIONS AND ANSWERS ABOUT THE YACKTMAN FUNDS, INC.
Over the last six years, the Independent Directors of The Yacktman
Funds, Inc. (the "Funds") have served in their "watchdog" role to protect your
interests as an investor in the Funds. Now, after asking the "tough" questions
for over a year and after the investment performance of your Funds has
deteriorated dramatically, Yacktman Asset Management Co. ("Yacktman"), the
investment adviser to your Funds, wants to replace your Independent Directors
with a slate of directors that it has "hand-picked."
QUESTION 1: What is the disagreement between the Independent Directors and
Yacktman?
ANSWER 1: Yacktman has not been willing to accept the oversight of the
Independent Directors, as required by law, and wants to remove them because they
have raised the following issues:
. UNACCEPTABLY POOR INVESTMENT PERFORMANCE RESULTING
FROM A CHANGE IN THE "YACKTMAN STYLE" OF INVESTMENT.
Yacktman has shifted away from investing
primarily in large companies and now focuses
on much smaller companies. We believe this
change has led to steadily worsening
relative investment performance, greater
risk, less liquidity, and more volatility.
. YACKTMAN'S FAILURE TO HIRE AN ADEQUATE INVESTMENT
STAFF.
Yacktman has only three experienced
professionals on its investment staff to
manage more than 100 investment accounts and
over $900 million in assets. We believe
Yacktman's staff is inadequate in terms of
experience and expertise.
. THE DAY-TO-DAY MANAGEMENT OF THE PORTFOLIO BY PEOPLE
OTHER THAN DONALD YACKTMAN.
We believe Donald Yacktman has delegated
day-to-day portfolio management to
less-qualified, less-experienced members of
his staff, most notably his 28-year-old son,
Steve.
. DONALD YACKTMAN'S DISREGARD FOR YOUR FUNDS' CODE OF
ETHICS.
Donald Yacktman is flaunting your Funds'
Code of Ethics by continuing to serve on the
board of a publicly-held company without the
permission of your Funds' Board in violation
of your Funds' Code of Ethics and the
federal securities laws.
QUESTION 2: What is Yacktman's investment performance?
ANSWER 2: Very disappointing. In none of the following measurement periods
have either of the Funds matched the total return of the Standard & Poor's 500
or done well versus its peer group, as defined by Lipper:
<PAGE>
<TABLE>
<CAPTION>
THE YACKTMAN STANDARD & POOR'S
THE YACKTMAN FOCUSED FUND COMPOSITE INDEX THE YACKTMAN THE YACKTMAN
FUND AVERAGE AVERAGE ANNUAL OF 500 STOCKS FUND LIPPER FOCUSED FUND
TIME PERIOD ANNUAL RETURNS RETURNS ANNUAL RETURNS RANKING* LIPPER RANKING*
----------- -------------- ------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Three Months Ended 9/30/98 -16.4% -16.3% -9.9% 707 out of 827 702 out of 827
Year-to-Date (1/1/98-9/30/98) -13.3% -9.4% 6.0% 717 out of 763 665 out of 763
One Year (10/1/97-9/30/98) -15.7% -12.2% 9.0% 676 out of 714 651 out of 714
Three Years (10/1/95-9/30/98) 10.8% N/A 22.6% 417 out of 449 N/A
Five Years (10/1/93-9/30/98) 14.7% N/A 19.9% 186 out of 289 N/A
Since Inception (7/6/92) 9.8% N/A 18.3% N/A N/A
Since Inception (5/1/97) N/A 3.2% 20.3% N/A N/A
</TABLE>
*Lipper rankings are out of the total number of funds in the Lipper Growth and
Income fund category for the time periods specified.
THE RESPECTED INDUSTRY PUBLICATION, FUND WATCH, LAST MONTH SAID IT ALL: THE
"ONCE HIGH-FLYING [YACKTMAN] FUNDS HAVE BEEN PERFORMING ABOMINABLY OF LATE."
(Fund Watch, Sept. 30, 1998).
QUESTION 3: Have the Independent Directors tried to micro-manage the
investments of your Funds?
ANSWER 3: The Independent Directors have never told Yacktman what investments to
make and they don't intend to start now. They have, though, raised questions
about investments that were not consistent with the "Yacktman Style," especially
the growing movement away from stocks of large companies to stocks of smaller,
more risky ones and have questioned whether sufficient resources are being
applied to the Funds.
QUESTION 4: Are the Independent Directors simply trying to perpetuate
themselves in office?
ANSWER 4: No. The Independent Directors are acting in a manner dictated by their
fiduciary duties. They earn $8,000 per year in fees for their service. Compare
that to Yacktman, which earned more than $6.5 MILLION from your Funds in 1997,
and you can judge for yourself who is simply trying to perpetuate their
continued position.
QUESTION 5: Have you fired Donald Yacktman?
ANSWER 5: Yacktman is still investment adviser to your Funds. Donald Yacktman
has been removed as President of your Funds, due to his inability to work
constructively with the Independent Directors.
QUESTION 6: What happens if I vote to keep the Independent Directors?
Will you fire Yacktman then?
ANSWER 6: Yacktman said in its proxy statement that it might quit if you do not
remove the Independent Directors. In light of that, the Independent Directors
are considering a number of alternative courses of action, including hiring
another investment adviser.
QUESTION 7: Who are the Independent Directors? What is their role?
ANSWER 7: Your Independent Directors are distinguished businesspersons who are
not affiliated with Yacktman. The Supreme Court of the United States has
stressed that the Investment Company Act, which regulates mutual funds, "was
designed to place the unaffiliated directors in the role of independent
watchdogs, who would furnish an independent check upon the management of
investment companies . . . . Congress entrusted to the independent directors of
<PAGE>
investment companies . . . the primary responsibility for looking after the
interests of the funds' shareholders." (Burks v. Lasker, 441 U.S. 471, 484-85
(1979).)
QUESTION 8: What do I have to do to keep the Independent Directors in office?
ANSWER 8: To keep the Independent Directors, VOTE "AGAINST" ALL OF YACKTMAN'S
PROPOSALS ON THE ENCLOSED WHITE PROXY CARD.
QUESTION 9: I received one proxy card from Yacktman and one from you.
Which one do I send back?
ANSWER 9: To keep the Independent Directors, SIGN, DATE, VOTE "AGAINST" ALL OF
YACKTMAN'S PROPOSALS, AND RETURN THE WHITE PROXY CARD that is enclosed. You may
throw out the blue proxy card that you received from Yacktman. If you have
already voted the blue Yacktman card, sending in our WHITE card will replace it.
QUESTION 10: Will I receive more proxy cards in the future? What do I do with
them?
ANSWER 10: Yes, please sign, date, vote "AGAINST" all of Yacktman's proposals,
and return all of the WHITE proxy cards you receive. You may throw out any
additional blue proxy cards.
QUESTION 11: Whom do I call for more information?
ANSWER 11: Please call Shareholder Communications at 1-800 __________.
<PAGE>
THE YACKTMAN FUNDS, INC.
THE YACKTMAN FUNDS, INC.
1-800-____________ OCTOBER __, 1998
Dear Stockholder:
Your Board of Directors is sending you this proxy statement to respond to
Yacktman Assets Management Co.'s ("Yacktman") proxy statement. Yacktman wants to
replace your Independent Directors with people that it has handpicked. We urge
you to vote to keep your Funds' current Independent Directors.
WE THINK YOU SHOULD CONSIDER THE FOLLOWING:
o SEC Chairman Levitt has said "Board independence is crucial."
As Directors, we take seriously the responsibility placed upon
us by Congress, by the SEC, and, most importantly, by you, the
stockholders. As your "watchdog" representatives, the
Independent Directors have asked Yacktman questions that we
believe you would have asked if you had the chance. The
Independent Directors have also asked questions that the SEC
and Fund counsel have suggested be asked to protect your
interests. Unfortunately, Yacktman has consistently refused to
address the issues that have been raised, issues that we think
have a direct bearing on your investment in the Funds.
o Yacktman's actions have caused your Funds to depart from the
investment style you expected when you invested in the Funds.
This, we believe, has magnified the poor performance of your
Funds. We are sorry to report that Yacktman has thumbed its
nose at the protections that investors like you count on when
purchasing shares of a mutual fund.
o Yacktman has been unwilling to accept oversight from your
Independent Directors that questions how your investment is
managed. In retaliation for the Independent Directors' efforts
to protect your investment, Donald Yacktman, in a flagrant
abuse of power of the office of president, wants to oust all
of the current Independent Directors and replace them with a
new group of people that Yacktman has selected.
o We view Yacktman's unprecedented attempt to silence the
Independent Directors, your "watchdogs," as a desperate effort
to preserve its lucrative fees from your Fund in the face of
worsening investment performance. In 1997, Yacktman took in
more than $6.5 million in management fees from your Funds.
Each of the then three Independent Directors earned $8,000.
Think about it. Who really, to use Donald Yacktman's term, is
motivated to "perpetuate" their current position?
FOR THE REASONS EXPLAINED IN THIS PROXY STATEMENT, WE URGE YOU TO VOTE
TO KEEP YOUR INDEPENDENT DIRECTORS.
Sincerely,
The Board of Directors
The Yacktman Funds, Inc.
<PAGE>
THE YACKTMAN FUNDS, INC.
PROXY STATEMENT
OCTOBER __, 1998
1. YACKTMAN'S PROPOSAL TO REMOVE YOUR FUNDS' INDEPENDENT DIRECTORS
You should ask yourself the following questions:
o What is the role of independent directors?
o Why have the Independent Directors questioned
Yacktman?
o Who are the Independent Directors?
o What happens if the Independent Directors are not
removed?
WHAT IS THE ROLE OF INDEPENDENT DIRECTORS?
As in all corporations, the directors of mutual funds are the
representatives of stockholders and the supervisors of management. However,
because of the special structure of mutual funds and the great power investment
advisers have, Congress and the SEC have placed special responsibility on those
directors who are not affiliated with the investment adviser to represent the
stockholders and to oversee the investment adviser. Some decisions, such as the
approval of the investment advisory contract, must be approved by the
non-interested directors separately and in addition to the entire board of
directors.
Arthur Levitt, Chairman of the SEC, has stressed the overall importance
of the role of the Independent Directors:
"Legions of people already look after the interests of
management, of the industry, of the capital markets, of
employees, and others. [Independent Directors] are charged
with the responsibility to represent the interests of
investors . . . . Men and women who as directors are passive;
who view their roles as mere advisors; who are pliant and
pleasant, but who do not insist upon a real monitor's role do
small service to anyone and deserve little respect."
The Investment Company Institute, the mutual fund industry's largest
trade group, states:
"A primary responsibility of the directors is to evaluate the
investment performance of the fund's portfolio. That
responsibility does not entail second-guessing of specific
portfolio management decisions, but rather a continuing
evaluation of the fund's performance as a whole in light of
its investment objectives and shareholder expectations as to
portfolio strategy and risk." (The Investment Company
Institute, Introductory Guide for Investment Company Directors
10 (1995).)
In short, the role of independent director is that of "watchdog" for
the stockholder, providing an independent check upon the investment adviser and
other service providers.
The Independent Directors understand that, as watchdog for the
stockholders, it is their responsibility to ensure that Yacktman acts properly,
not only as investment adviser, but as a fiduciary to your Funds. The
Independent Directors have simply been doing what the law requires them to do
when they inquired about Yacktman's investment techniques and its professional
resources as an investment adviser.
<PAGE>
Unfortunately, Yacktman repeatedly has been unwilling to accept the
oversight of independent directors upon which investors have come to depend when
investing in mutual funds. When the Independent Directors raised
reasonable concerns, Donald Yacktman was evasive or confrontational. When the
Independent Directors asked for the information necessary to perform their
duties, Donald Yacktman was secretive. Finally, as the Independent Directors
became increasingly concerned about the overall management of your Funds, Donald
Yacktman became combative. Rather than respond to the legitimate oversight of
the Independent Directors, Yacktman wants to jettison them.
WHY HAVE THE INDEPENDENT DIRECTORS QUESTIONED YACKTMAN?
Over the last year, four issues have especially concerned the
Independent Directors:
o Worsening investment performance resulting from
Yacktman's departure from the "Yacktman Style;"
o Donald Yacktman's lack of day-to-day management of
your Funds' portfolios;
o Yacktman's lack of professional resources; and
o Violations of the Funds' Code of Ethics.
o DEPARTURE FROM THE "YACKTMAN STYLE," RESULTING IN WORSENING
PERFORMANCE
Over the years, Yacktman developed an investment process that has been
characterized as the "Yacktman Style." The Yacktman Style has been described as
"Buy[ing] big, growing, boring companies when they're beaten down in price and
sell[ing] them when prices approach peak valuations . . . the quintessential
large-company growth fund." (Fred W. Frailey, "Donald Yacktman: Insider
Interview," Kiplinger's Personal Finance Magazine, Aug. 1995, at 81-83).
The original 1992 prospectus of The Yacktman Fund stated: "The Fund invests
primarily in companies with large capitalization ($1 billion or more) with long
records of earnings growth and dividends."
In recent years, the Independent Directors have become concerned that
Yacktman has departed from its large capitalization style. While the average
market capitalization of the Fortune 500 increased from $3.5 billion in 1992 to
$16.2 billion as of April 2, 1998 (an increase of 360%), the average
market capitalization of The Yacktman Fund decreased from $5.2 billion to $2.0
billion (a decrease of 62%). The Independent Directors are concerned that
your Funds are no longer focusing their investments on large capitalization
stocks. In addition, the Independent Directors questioned how the use of
"derivatives" (writing put options) for The Yacktman Focused Fund was consistent
with the equity growth philosophy that Yacktman had previously espoused.
At no time did the Independent Directors tell Yacktman to buy or sell a
particular security, although they did ask why particular securities were
appropriate Fund investments. They did not try to "micro-manage" your Funds'
portfolios, but merely tried to ensure that stockholders' expectations as to
strategy and risk were being fulfilled.
We believe Yacktman's departure from the Yacktman Style has led to your
Funds' dismal performance. In none of the following measurement periods have
either of the Funds matched the total return of the Standard & Poor's 500 or
done well versus its peer group, as defined by Lipper:
2
<PAGE>
<TABLE>
<CAPTION>
THE YACKTMAN STANDARD & POOR'S
THE YACKTMAN FOCUSED FUND COMPOSITE INDEX THE YACKTMAN THE YACKTMAN
FUND AVERAGE AVERAGE ANNUAL OF 500 STOCKS FUND LIPPER FOCUSED FUND
TIME PERIOD ANNUAL RETURNS RETURNS ANNUAL RETURNS RANKING* LIPPER RANKING*
----------- -------------- ------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Three Months Ended 9/30/98 -16.4% -16.3% -9.9% 707 out of 827 702 out of 827
Year-to-Date (1/1/98-9/30/98) -13.3% -9.4% 6.0% 717 out of 763 665 out of 763
One Year (10/1/97-9/30/98) -15.7% -12.2% 9.0% 676 out of 714 651 out of 714
Three Years (10/1/95-9/30/98) 10.8% N/A 22.6% 417 out of 449 N/A
Five Years (10/1/93-9/30/98) 14.7% N/A 19.9% 186 out of 289 N/A
Since Inception (7/6/92) 9.8% N/A 18.3% N/A N/A
Since Inception (5/1/97) N/A 3.2% 20.3% N/A N/A
</TABLE>
*Lipper rankings are out of the total number of funds in the Lipper Growth and
Income fund category for the time periods specified.
o MANAGEMENT OF YOUR FUNDS' PORTFOLIOS
The Funds' prospectus states that Donald Yacktman is the Funds'
portfolio manager. However, the Independent Directors have become concerned that
your Funds are actually being managed by less-qualified, less-experienced
members of Yacktman's staff, notably, Donald Yacktman's 28-year-old son, Steve
Yacktman. In addition, this concern is rooted in the Independent Directors'
perception that a change in the investment style of your Funds has taken place
and in the inability of Donald Yacktman to respond with a convincing degree of
knowledge to questions about your Funds' investments and investment techniques,
particularly the use of "derivatives" by The Yacktman Focused Fund. We believe
Donald Yacktman has delegated much of his responsibility for the day-to-day
management of your Funds to his son, Steve.
o PROFESSIONAL RESOURCES OF YACKTMAN
The Independent Directors have repeatedly expressed concern that
Yacktman's staff is inadequate, both in terms of experience and expertise. The
Independent Directors believe Yacktman employs only three experienced investment
professionals. Donald Yacktman and Ronald Ball are the only Yacktman investment
professionals who have more than six years' experience. Mr. Ball has advised the
Independent Directors that he has not been involved in the investment of your
Funds' assets. Other investment advisers with similar amounts of assets under
management typically have much larger, more experienced staffs of investment
professionals. In addition, Steve Yacktman's brother-in-law, Russell Wilkins,
who had no prior investment experience, was hired in the wake of the departure
of a more experienced investment professional, who left Yacktman in June 1998 to
work for a competitor.
o VIOLATIONS OF YOUR FUNDS' CODE OF ETHICS
The SEC requires every mutual fund to have a code of ethics with which
all employees of the fund and its adviser must comply. Its purpose is to ensure
that the personnel of funds and their advisers do not take advantage of their
positions with the fund for their own personal gain.
Your Funds adopted a Code of Ethics, which prohibits Yacktman's
employees from being on the board of directors of a publicly-held company
without prior Board approval. This prevents a conflict between the loyalty of
these persons to your Funds and their loyalty as directors of the publicly-held
companies. It also helps prevent a misuse of inside information. Donald Yacktman
agreed with this when he recently told the Board that the principles underlying
this provision are sound.
3
<PAGE>
In 1996, Steve Yacktman and another Yacktman investment professional
unsuccessfully tried to push their way onto the boards of two publicly-held
companies without getting prior authorization from the Board of Directors of
your Funds. When the Independent Directors learned of this situation (from
somebody other than Yacktman), the Board held an extensive discussion of this
provision of the Code of Ethics with Yacktman. During this conversation, Donald
Yacktman admitted that there were supervisory and management control lapses
within the Yacktman organization.
In February 1998, the Board AGAIN learned from an inadvertent comment
by Yacktman personnel that Donald and Steve Yacktman actually were directors of
a company that had recently gone public, a clear Code of Ethics violation.
Yacktman had neither notified the Board of this situation nor had Donald or
Steve sought prior Board authorization. After consulting with counsel, the
Independent Directors asked Donald to resign his board position with the
publicly-held company, and asked Steve to submit a letter agreeing to resign
from his board position in certain circumstances. The Board also instructed
Steve to review periodically with the Board of Directors his continued
participation on the board of the publicly-held company. As of today, neither
Donald nor Steve has complied with these instructions. In fact, at an August 14,
1998 Board meeting, Donald Yacktman told the Board that he had resigned from the
board of the publicly-held company. More than a full month later, the Board
learned that Donald had not resigned and remains a director of the company.
WHO ARE THE INDEPENDENT DIRECTORS?
The proxy statement solicited by Yacktman makes disparaging remarks
about the Independent Directors. These remarks are clearly intended to give you
the impression that the current Independent Directors are inexperienced and
undistinguished. We disagree, but you be the judge. Each of them has been a
Director of your Funds since inception in 1992. Indeed, Yacktman itself on its
web site has claimed that the Funds have "an outstanding Board of Directors."
Moreover, they each have substantially more experience in investment
management--and the oversight of investment advisers--than the candidates that
Yacktman has selected.
To acquaint you with your Independent Directors, below is a summary of
their background and qualifications:
Jon D. Carlson--Mr. Carlson, 57, was the Executive Vice President of
Yacktman Asset Management Co. from May, 1992, until July, 1998. Before
that, he was a Senior Vice President of Kemper Securities Group, Inc.,
which he joined in March, 1989. Before joining Kemper, he had been an
account and marketing officer for Chase Manhattan and Manufacturers
Hanover Investment Corporation and a securities broker for
institutional investors with Kidder, Peabody & Co. A graduate of The
University of Michigan and the Michigan Law School, Mr. Carlson has
been admitted to the practice of law in Michigan, New York and
Illinois. Mr. Carlson currently serves as Chairman of the Board of
Directors of The Career Development Institute, a Chicago area
organization that provides programs and assistance to individuals who
are at critical crossroads in their personal and career lives. From
1988 to 1992, Mr. Carlson served as a member of the Hinsdale, Illinois
Area United Way Board and on The Budget and Allocation Board of the
DuPage County, Illinois United Way. From 1972 to 1978, Mr. Carlson
served on the Employee Benefits Committee of the Taxation Section of
the American Bar Association and on the Subcommittee for Fiduciary
Responsibility. In 1976, Mr. Carlson authored a narrative outline
published by the Practicing Law Institute, New York, entitled,
"Structuring Plans to Comply with the Fiduciary Responsibility
Provisions of ERISA." Jon Carlson, by virtue of his serving as
President, Treasurer and Secretary of the Funds is an interested person
of the Funds as defined by the Investment Company Act of 1940. He is
not, however, currently affiliated with Yacktman.
Thomas R. Hanson--Mr. Hanson, 60, is a Partner of Fleming/Hanson Sales,
a manufacturers representative firm in the commercial and industrial
air conditioning industry. Prior to establishing this firm in 1991, Mr.
Hanson was President of Thermal Air Systems, Inc., Bensenville,
Illinois. He also serves on the Corporate Member Board of Advocate
Health Care, Inc., Oak Brook, Illinois, on the Development Board of the
Good Samaritan Hospital, Downers Grove, a major hospital in
4
<PAGE>
suburban Chicago, and on the Advisory Board for the College of
Engineering of the University of Iowa from which he earned a B.S. in
Mechanical Engineering. Mr. Hanson served from 1983 to 1989 on the
DuPage County Easter Seal Board, which he chaired from 1988 to 1989 and
as a member ofthe Board of Directors of Evangelical Health Systems
Healthcare, a major hospital corporation in suburban Chicago, and
served as a member of EHS's Compensation and Executive Committees and
chaired its Strategic Planning Committee.
Stanislaw Maliszewski--Mr. Maliszewski, 54, has over 27 years of
investment management, investment banking, and real estate experience.
Over the last sixteen years, he has been responsible for business
development and client relations in the investment management industry,
primarily in domestic equity, fixed income, and real estate. His direct
responsibilities have been in business development, client relations,
product development, portfolio management, and reporting. Since 1993,
he has been involved in private investing, consulting, and representing
investment advisors to major institutional investors including
corporate, public, Taft-Hartley, endowments, and foundations.
Previously, Mr. Maliszewski was a partner of Rosenberg Real Estate
Equity Funds and a Senior Vice President of LaSalle Partners. He is a
former member of the National Council of Real Estate Investment
Fiduciaries and a former board member of the Pension Real Estate
Association. He has been a frequent speaker on a variety of issues
impacting real estate investment management: diversification strategy,
performance measurement, and reporting. Mr. Maliszewski was a member of
the Investment Banking Services Department at Goldman Sachs Co.,
responsible for maintaining and developing client relationships. He
advised senior management of client and prospective client companies on
the formulation and execution of financial policies and strategies. He
developed and supervised the execution of numerous types of
transactions, including public offerings of common stock, currency
swaps, industrial development revenue bonds, real estate sales, lease
financing, mergers and acquisitions, restricted stock transactions,
commercial paper transactions, and general financial advisory
transactions. Mr. Maliszewski graduated from the Harvard Business
School with and MBA and has an AB degree from Princeton University.
Stephen E. Upton--Mr. Upton, 74, is the retired President of the
Whirlpool Foundation, Benton Harbor, Michigan, a position he held until
1993. He retired in 1988 as a Senior Vice President for Whirlpool
Corporation, a manufacturer of major household appliances. Mr. Upton
had been an officer and employee of Whirlpool since 1955. Mr. Upton is
a member of the Board of Interlochen Center for the Arts, Michigan, a
Trustee of the Michigan Colleges Foundation, and is the Chairman of the
Board of Trustees of the Frederick S. Upton Foundation, which was
established in 1954 by his father, the co-founder of Whirlpool
Corporation. He has served as Chairman of the Board of Trustees of
Olivet College in Michigan and continues to serve as a member of the
Board of Trustees and as Chairman Emeritus. He is former Chairman of
the Association of Home Appliance Manufacturers, a former member of the
Board of Directors of the National Association of Manufacturers, a
former member of the Board of the Irving S. Gilmore International
Keyboard Festival, a former member of the Council of Better Business
Bureaus, a former Board Member of the Michigan Chamber of Commerce, a
former Board Member of the Board of United Way of Southwest Michigan
and former Chairman of the Consumer Affairs Committee for the United
States Chamber of Commerce. Mr. Upton holds a B.B.A. degree from The
University of Michigan and received an honorary doctor of humane
letters degree from Olivet Colleges.
We believe these individuals are eminently qualified to continue as
your Independent Directors.
WHAT HAPPENS IF I VOTE TO KEEP THE INDEPENDENT DIRECTORS?
Yacktman has stated that, if the Independent Directors are not removed,
it believes "your Funds' investment advisory agreements with [Yacktman] will be
terminated, possibly either by [the Independent Directors] or by [Yacktman] as
our disagreements with [the Independent Directors] have become intolerable." In
view of this statement and of Yacktman's past resistance to address the concerns
of the Independent Directors, the Independent Directors are
5
<PAGE>
considering a number of alternative courses of action, including the selection
of a successor to Yacktman as investment adviser of your Funds.
2. YACKTMAN'S PROPOSAL TO AMEND YOUR FUNDS' BYLAWS
Yacktman has asked you to amend your Funds' bylaws to reduce the number
of directors from six to five. Currently, four of your Funds' directors are
Independent Directors. If you vote to amend your Funds' bylaws to decrease the
number of directors, your Funds will have only three independent directors. Your
Independent Directors represent your interests as investors in the Funds. Your
Independent Directors continually evaluate your Funds' performance in light of
your Funds' investment objectives to make sure that Yacktman manages your money
in a way that matches your expectations and that is consistent with your
understanding of your Funds' investment strategy and risk.
We believe Yacktman's actions have caused your Funds to depart from the
"Yacktman Style," the investment style that you expected when you invested in
the Funds. We also believe Yacktman has blatantly disregarded the legal
protections upon which you rely as an investor. The Independent Directors are
required by law to do their best to prevent these sorts of things from
happening. By reducing the number of Independent Directors, you will have one
less person looking out for your interests. We urge you to vote "AGAINST"
Yacktman's proposal to prevent Yacktman from decreasing the number of
independent directors who are protecting your interests.
3. YACKTMAN'S PROPOSAL TO ELECT NEW INDEPENDENT DIRECTORS FOR YOUR FUNDS
Yacktman also has asked you to vote to elect the three people that it
has nominated to serve as new directors for your Funds. Your Funds' Independent
Directors have done their best to fulfill their role as your representatives.
However, we believe Yacktman has been unwilling to accept any oversight that
questions its decisions about how to manage your money. Yacktman now seeks to
replace your current Independent Directors with a new group of nominees that it
has selected. As an investor in the Funds, you should question to what extent a
group of people selected by Yacktman will really be looking out for your
interests. Your Independent Directors have diligently served your Funds since
their inception. We believe replacing your Funds' current Independent Directors
with a new group of directors that Yacktman hand-picked will enable Yacktman to
continue to abuse its position and to disregard the laws under which mutual
funds are supposed to operate. We urge you to vote "AGAINST" Yacktman's proposal
to replace your Funds' Independent Directors with its nominees.
4. [YACKTMAN'S PROPOSAL TO ADJOURN THE SPECIAL MEETING
Yacktman said in its proxy statement that it intends to seek an
adjournment of the special meeting to a later date if it does not have a
sufficient number of votes to adopt its proposals on the date that the meeting
is scheduled (Proposal 4). Donald Yacktman's purported call of the meeting,
however, stated it was for the purpose of voting upon Proposals 1, 2, and 3, but
not Proposal 4. Although the Funds believe Proposal 4 is not a proper item for
the meeting, PLEASE VOTE "AGAINST" THIS PROPOSAL ON THE ENCLOSED WHITE PROXY
CARD.
5. YACKTMAN'S PROPOSAL TO OPPOSE ADJOURNMENT OF THE SPECIAL MEETING
Yacktman also said in its proxy statement that if someone other than
Yacktman seeks an adjournment of the special meeting, then you should vote
against such a proposal (Proposal 5). Again, Donald Yacktman's purported call of
the meeting stated that it was for the purpose of voting on Proposals 1,2, and
3, but not Proposal 5. Although the Funds believe that Proposal 5 is not a
proper item for the meeting, PLEASE VOTE "FOR" THIS PROPOSAL ON THE ENCLOSED
WHITE PROXY CARD.]
6
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6. MISCELLANEOUS
INFORMATION ABOUT THE CALLING OF THE MEETING
When he was President of your Funds, Donald Yacktman tried to call a
meeting of stockholders to remove your Independent Directors. We believe Donald
Yacktman took this action for his own benefit, and not for your benefit. Because
of this, the Board of Directors revoked the call for a meeting. We have been
advised by your Funds' lawyers that this revocation was effective and that the
meeting has not been validly called. However, if the meeting is held, we are
sending you this proxy statement and asking you to VOTE THE WHITE CARD TO RETAIN
YOUR INDEPENDENT DIRECTORS.
On October 5, 1998, Yacktman and Donald Yacktman filed a lawsuit
against the Funds and the Independent Directors in Baltimore, Maryland. The
lawsuit seeks to force the Funds to hold the stockholder meeting that Donald
Yacktman allegedly called. The Funds have been forced to retain Maryland lawyers
to defend this lawsuit.
DATE, TIME, AND PLACE OF THE MEETING
If the meeting is held, it will be held at the Goodman Room of the
Allegro Hotel, 171 West Randolph Street, Chicago, Illinois, on Tuesday, November
24, 1998, at 10:00 a.m., Chicago time.
STOCKHOLDER PROPOSALS
As a Maryland corporation, your Funds are not required to hold annual
stockholders meetings in any year when the election of directors is not required
to be acted upon under the Investment Company Act of 1940. Your Funds hold
special meetings as required or deemed desirable. Since your Funds do not hold
regular stockholders meetings, we cannot provide you with the date when we next
expect to hold a stockholders meeting. To submit a proposal to be included in
your Funds' proxy solicitation material for a special stockholders meeting, your
Funds must receive your proposal within a reasonable time before your Funds
begin soliciting proxies for the meeting. Your proposal also must meet the legal
requirements for stockholder proposals under the SEC's proxy rules.
PROXY SOLICITATION
The costs of preparing, printing, and mailing this proxy statement and
all other costs in connection with the solicitation of proxies will be paid by
your Funds, including any additional solicitation made by letter, telephone, or
telegraph. We estimate that $_________________ will be spent on the
solicitation. As of [October ______, 1998], your Funds have spent about
$__________________.
Your Funds have also retained Shareholder Communications Corporation
("SCC") to solicit proxies on behalf of your Funds' Board of Directors, the fee
for which will be paid by your Funds. We anticipate that SCC will be paid a fee
ranging from $_____________ to $______________ and will reimburse SCC for its
reasonable expenses. Your Funds have also agreed to indemnify SCC against
certain liabilities and expenses, including liabilities and expenses under the
federal securities laws. We expect that SCC will employ approximately _____
people to solicit proxies in connection with the meeting.
VOTING, QUORUM
If you own shares of the Funds at the close of business on October ___,
1998, the Funds' record date for this solicitation, you are entitled to vote at
the special meeting. You do not have cumulative voting rights, which means that
you are entitled to one vote for each share of the Funds that you own on each
matter submitted to a vote at the meeting. Your proxy will be voted in
accordance with your instructions. If other business is to be voted on at the
meeting, the people who are named as your proxies on the enclosed proxy card
will decide how to vote your shares. They will vote your shares in a way that
they decide is in your best interests as a stockholder of the Funds. Your Funds
are currently not aware of any other business that will be voted on at the
meeting.
7
<PAGE>
Proposal 1 (removal of the current Independent Directors of your Funds)
and proposal 3 (election of new Independent Directors for your Funds) each
require a "FOR" vote by the holders of a majority of the votes entitled to be
cast. Proposal 2 (approval of an amendment to your Funds' bylaws to reduce the
number of directors of your Funds from six to five), [proposal 4 (adjournment of
the meeting by Yacktman), and proposal 5 (adjournment of the meeting by someone
other than Yacktman)] each require a "FOR" vote by not less than a majority of
the shares present or represented by proxy at the meeting.
If you do not mark on your proxy card how you want to vote on one or
more of Yacktman's proposals, your proxy will be voted against proposals 1, 2,
and [4,] your vote will be withheld on proposal 3, [and your proxy will be voted
for proposal 5.] If you send in a signed proxy card, you can revoke it at any
time before it is voted at the meeting, either by writing to your Funds or in
person at the meeting. Proxies given by telephone or electronically transmitted
instruments count as long as certain steps are taken to make sure that the
person giving the proxy has the power to do so. TO KEEP YOUR FUNDS' CURRENT
INDEPENDENT DIRECTORS, VOTE "AGAINST" ALL OF YACKTMAN'S PROPOSALS ON THE
ENCLOSED WHITE PROXY CARD.
The presence in person or by proxy at the meeting of stockholders
entitled to cast a majority of the votes at the meeting constitutes a quorum.
Thus, the meeting could not take place on its scheduled date if less than a
majority of the stockholders entitled to cast votes at the meeting were
represented. If a quorum is not present or represented by proxy
at the meeting, the meeting may be adjourned until a later date by the chairman
or by the holders of a majority of the shares present or represented without
notice other than an announcement at the meeting. The meeting may be reconvened
from time to time until a quorum is present. At that time, any business may be
transacted that might have been transacted at the meeting as originally called.
However, in the event that a quorum cannot be attained within 120 days after the
original record date, any matters that were to have been voted on at the meeting
will be treated as if rejected by stockholders.
In tallying stockholder votes, abstentions and "broker non-votes"
(i.e., shares held by brokers or nominees as to which (i) instructions have not
been received from the beneficial owners or persons entitled to vote and (ii)
the broker or nominee does not have discretionary voting power on a particular
matter) will count for purposes of determining whether a quorum is present to
convene the meeting. On each proposal, abstentions and broker non-votes will
count as "AGAINST" votes.
SHARE OWNERSHIP INFORMATION
On [September 14, 1998, there were 550,473,300 shares of The Yacktman
Fund issued and outstanding and 55,536,495 shares of The Yacktman Focused Fund
issued and outstanding.] We are not aware of any person who beneficially owns 5
percent or more of the outstanding shares of The Yacktman Fund or of the
Yacktman Focused Fund. [As of [September 14, 1998], all directors and officers
of The Yacktman Fund as a group beneficially owned less than one percent of the
outstanding shares of The Yacktman Fund.]
YOUR FUNDS' SERVICE PROVIDERS
INVESTMENT ADVISER. Your Funds' investment adviser, Yacktman Asset
Management Co., is located at 303 West Madison Street, Chicago, Illinois 60606.
ADMINISTRATOR. Sunstone Financial Group, Inc., 207 East Buffalo Street,
Suite 400, Milwaukee, Wisconsin 53202, is your Funds' administrator.
YOUR FUNDS' PRINCIPAL EXECUTIVE OFFICE
Your Funds' principal executive office is at [_______________________].
8
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STOCKHOLDER REPORTS
TO GET A FREE COPY OF YOUR FUNDS' ANNUAL AND MOST RECENT SEMI-ANNUAL
REPORT, WRITE TO YOUR FUNDS IN CARE OF FIRSTAR TRUST COMPANY, 615 EAST MICHIGAN
STREET, MILWAUKEE, WISCONSIN 53202 OR CALL YOUR FUNDS AT 1-800-457-6033.
FOR THE REASONS EXPLAINED IN THIS RESPONSE TO YACKTMAN'S PROXY
STATEMENT, WE URGE YOU TO VOTE TO RETAIN YOUR FUNDS' CURRENT INDEPENDENT
DIRECTORS.
By order of the Board of Directors
Jon D. Carlson
Secretary
9
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EXHIBIT A
INFORMATION REGARDING YOUR FUNDS' INDEPENDENT DIRECTORS
<TABLE>
<CAPTION>
PURCHASES/SALES OF
BENEFICIAL AND/OR RECORD SHARES OF THE FUNDS
OWNERSHIP OF SHARES OF THE FUNDS DURING THE
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT (AS OF [9/30/98])* PAST TWO YEARS
- ---------------- ---------------------------------- ------------------ --------------
<S> <C> <C> <C>
Jon D. Carlson Private Investor The Yacktman Fund
515 Acorn Hill Lane The Yacktman Focused Fund
Oak Brook, Illinois 60523
Thomas R. Hanson Partner, Fleming/Hanson Sales The Yacktman Fund
3010 Woodcreek Drive (manufacturers' representative firm) The Yacktman Focused Fund
Downers Grove, IL 60515
Stanislaw Maliszewski Managing Director, Gateway Asset The Yacktman Fund
Suite 1420 Management, Inc. (institutional investment The Yacktman Focused Fund
180 North LaSalle Street management and marketing company)
Chicago, IL 60601
Stephen E. Upton Retired Business Executive The Yacktman Fund
100 Ridgeway Road The Yacktman Focused Fund
St. Joseph, MI 49085
</TABLE>
10
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[Front of Proxy Card]
PROXY
The Yacktman Funds, Inc.
Special Meetings of Stockholders
To be held on November 24, 1998
The undersigned appoints Jon D. Carlson, Thomas R. Hanson, Stanislaw
Maliszewski, and Stephen E. Upton, and each of them, each with full power to act
without the other, and each with full power of substitution, proxies for the
undersigned, to represent and vote, as designated below, all shares of The
Yacktman Fund and The Yacktman Focused Fund (the "Funds") that the undersigned
is entitled to vote at the special meeting of stockholders of the Funds if held,
in the Goodman Room of the Allegro Hotel, 171 West Randolph Street, Chicago,
Illinois, on Tuesday, November 24, 1998, at 10:00 a.m., Chicago time, and at any
adjournments of such meeting.
This proxy, when properly executed, will be voted in the manner
directed by the stockholder signing below. If no direction is given, this proxy
will be voted "AGAINST" proposals 1, 2, and 4, to "WITHHOLD" voting authority on
proposal 3, and voted "FOR" proposal 5.
THIS PROXY IS SOLICITED BY YOUR FUNDS' BOARD OF DIRECTORS.
PLEASE SIGN, DATE, AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPES.
<PAGE>
[Back of Proxy Card]
The Funds recommend that you vote "AGAINST" proposals 1, 2 and 4,
"WITHHOLD" your voting authority on proposal 3, and vote "FOR" proposal 5.
1. To remove Jon D. Carlson, Thomas R. Hanson, Stanislaw Maliszewski, and
Stephen E. Upton as directors of your Funds.
|_| AGAINST |_| ABSTAIN |_| FOR
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST."
2. To amend your Funds' bylaws to reduce the number of directors of your
Funds from six to five.
|_| AGAINST |_| ABSTAIN |_| FOR
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST."
3. To elect three nominees as new directors of your Funds.
|_| WITHHOLD authority to vote |_| FOR all nominees listed below
for all nominees listed below (except as marked to the
contrary below)
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU "WITHHOLD" AUTHORITY.
Bruce B. Bingham, Albert J. Malwitz, and George J. Stevenson III
To withhold authority to vote for any individual nominee,
write that nominee's name in the space below:
---------------------------------------------
---------------------------------------------
[4. To adjourn the special meeting to a later date that is proposed or
recommended by Yacktman Asset Management Co. ("Yacktman")
|_| AGAINST |_| ABSTAIN |_| FOR
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST."
5. To adjourn the special meeting to a later date that is not proposed by
Yacktman.
|_| FOR |_| AGAINST |_| ABSTAIN
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR."]
6. To transact such other business as may properly come before the meeting
or any adjournments of the meeting.
Please sign your name exactly as it appears on this
card. If you own shares of the Funds jointly with
someone else, each owner must sign this card. If you
are signing as executor, administrator, attorney,
trustee, guardian, or custodian for a minor, please
include the capacity in which you are signing. If you
are signing for a corporation, please sign the full
corporate name and give your office address. If you
are signing as a partner, sign in the partnership
name.
------------------------------ ---------
Stockholder's Signature Date
