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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No.___)
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THE YACKTMAN FUNDS, INC.
-----------------------
(Name of Registrant as Specified in its Charter)
YACKTMAN ASSET MANAGEMENT CO.
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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YACKTMAN LETTERHEAD
October 19, 1998
DEAR FELLOW SHAREHOLDER:
The Funds Third Quarter Report will be mailed to you without input from
Yacktman Asset Management Co., which continues as investment advisor to the
Funds. Therefore, I've decided to pay the cost of mailing you my own views on
the Funds' performance and outlook.
FOR INVESTORS WHO PURCHASED SHARES AT THE YACKTMAN FUND'S INCEPTION IN
JULY, 1992 AT $10.00 PER SHARE, YOUR INITIAL INVESTMENT, ADJUSTED FOR DIVIDENDS
AND CAPITAL GAINS, WOULD HAVE GROWN TO $17.40 BY THE END OF THE THIRD QUARTER OF
1998 -- REPRESENTING AN AVERAGE ANNUAL RETURN OF ABOUT 9.8%.
FOR INVESTORS WHO PURCHASED SHARES AT THE YACKTMAN FOCUSED FUND'S INCEPTION
ON MAY 1, 1997 AT $10.00 PER SHARE, YOUR INITIAL INVESTMENT, ADJUSTED FOR
DIVIDENDS AND CAPITAL GAINS, WOULD HAVE GROWN TO $10.36 BY THE END OF THE THIRD
QUARTER OF 1998 -- REPRESENTING AN AVERAGE ANNUAL RETURN OF ABOUT 3.2%.
<TABLE>
<CAPTION>
THE YACKTMAN FUND THE YACKTMAN FOCUSED FUND
TIME PERIOD AVERAGE ANNUAL RETURNS AVERAGE ANNUAL RETURNS
<S> <C> <C>
One Year (10/1/97 - 9/30/98) (15.7%) (12.2%)
Three Years (10/1/95 - 9/30/98) 10.8% N/A
Five Years (10/1/93 - 9/30/98) 14.7% N/A
Since Inception (7/6/92 and 5/1/97,
respectively) 9.8% 3.2%
</TABLE>
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.
The market as measured by the S&P 500 had a sizable decline in the third
quarter of 1998. However, the overall market has been in a decline for some time
and value investors, whether in large, mid, or small capitalization stocks, have
struggled. Normally, value investors would have "dug in" by now and shown better
relative returns, but the "Nifty 50" market we have referred to in recent
letters has continued.
The largest capitalization stocks in the market generally remain the most
expensive as measured by P/E ratios, so we have continued to invest more of the
Funds' assets in excellent, very inexpensive companies with somewhat smaller
capitalizations. We believe it is the size of the moat (how protected a business
franchise is) not the size of the market capitalization that is most important
in the long run. However, if the prices of two excellent businesses are the
same, we do favor the larger one.
Listed below are the P/E ratios for the Funds for both 1998 and 1999
compared to the S&P 500. As you can see, the gap is enormous, having risen from
26% at the end of June. Given the quality of our investments, I believe it is
doubtful the gap will be sustained indefinitely. With most of the companies we
are invested in having rising earnings, we believe our investments are like
inflated beach balls being pushed under water with the water level rising.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1998 RELATIVE 1999 RELATIVE
PRICE/EARNINGS TO THE PRICE/EARNINGS TO THE
(P/E) RATIOS S&P 500 P/E (P/E) RATIOS S&P 500 P/E
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
The Yacktman Fund 13.6 (39%) 11.8 (37%)
- ---------------------------------------------------------------------------------------------------------
The Yacktman Focused Fund 13.3 (40%) 11.6 (38%)
- ---------------------------------------------------------------------------------------------------------
S&P 500 22.2 -- 18.7 --
- ---------------------------------------------------------------------------------------------------------
The above P/E ratios are weighted by market capitalization and based upon estimated 1998 and 1999
earnings. The
estimated earnings for the above P/E ratios are provided by Zacks Investment Research, if available, or
by internal estimates. The S&P 500 earnings are First Call Consensus Economic Forecasts.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-- SEE REVERSE SIDE --
<PAGE> 3
We remain confident that our investment strategy, which we have used for
many, many years, will be rewarding to patient investors. We personally added
more of our family money to the Funds recently and continue to "eat our own
cooking."
STATUS OF THE SPECIAL MEETING
Separately, I wanted to update you on the status of our proxy solicitation
to remove the Carlson/ Maliszewski Directors, to reduce the size of the Funds'
board of directors by one seat and to elect three new independent directors
nominated by Yacktman.
As you know, soon after I called the special meeting, I was dismissed by
the Carlson/Maliszewski Directors from my post as president of your Funds. The
Carlson/Maliszewski Directors then appointed one of their own members as
president of the Funds and together they tried to rescind the call of the
special meeting, thereby attempting to deprive you of the opportunity to vote on
who should be the directors of your Funds.
In response, we sued the Carlson/Maliszewski Directors, seeking a court
order to affirm the special meeting date of November 24. We thought this was
necessary to protect the rights of the Funds' stockholders.
COURT ENJOINS CARLSON/MALISZEWSKI DIRECTORS
ON FRIDAY, OCTOBER 16, 1998, THE CIRCUIT COURT FOR BALTIMORE CITY, WHICH IS
WHERE THE LAWSUIT WAS FILED, ISSUED A TEMPORARY RESTRAINING ORDER, PROHIBITING
THE CARLSON/MALISZEWSKI DIRECTORS FROM TAKING ANY "ACTION TO IMPEDE THE CONDUCT
OF THE SPECIAL MEETING," which is to be held as originally scheduled on November
24, 1998, and ordering the Carlson/Maliszewski Directors "to provide Yacktman
immediately with a record date list of all stockholders entitled to notice of
said meeting."
Obviously, we are pleased by the ruling, which will be followed by a final
hearing on the relief which we are seeking. To us, it is a significant step in
the right direction.
PLEASE VOTE TODAY
IF YOU HAVE NOT ALREADY DONE SO, I URGE YOU TO JOIN WITH ME IN SIGNING,
DATING AND PROMPTLY RETURNING THE BLUE PROXY CARD, USING THE POSTAGE-PAID
ENVELOPE PREVIOUSLY FORWARDED TO YOU.* I also urge you not to sign or return any
of the WHITE proxy cards sent to you by the Carlson/Maliszewski Directors or
their agents.
I appreciate your continuing support and encouragement and promise to keep
you informed of our progress.
Sincerely,
DONALD A. YACKTMAN
Donald A. Yacktman
* If you have misplaced your BLUE proxy card or need assistance in voting your
shares, please call D. F. King & Co., Inc., which is assisting Yacktman with
its solicitation of your proxy, toll free at 1-800-769-5414.
