THE YACKTMAN FUNDS, INC.
THE YACKTMAN SMOKESCREEN
November 5, 1998
Dear Fellow Shareholder,
Notwithstanding the SMOKESCREEN TACTICS of Yacktman, this conflict is
in reality about a non-performing service provider -- Yacktman -- and the
efforts of the Independent Directors to address serious management issues.
Unacceptably poor performance and the outflow of assets from the funds are the
SYMPTOMS; shortage of professional resources coupled with entrenched and growing
nepotism at Yacktman (see enclosed chart), prospective portfolio risk, lack of
respect for rules as embodied in the Code of Ethics, and investment style shift
are the DISEASE. As evidenced by HIS PROXY STATEMENT AND PUBLIC STATEMENTS,
Donald Yacktman's display of personal animosity is a sad and complicating
factor.
DISREGARD ANY BLUE YACKTMAN PROXY CARD YOU RECEIVE AND SUPPORT THE
TRULY INDEPENDENT DIRECTORS BY VOTING AGAINST PROPOSALS 1, 2 AND 4, TO WITHHOLD
YOUR VOTING AUTHORITY ON PROPOSAL 3, AND VOTE FOR PROPOSAL 5 ON YOUR FUNDS'
WHITE PROXY CARD AND RETURN IT IN THE ENCLOSED PRE-PAID ENVELOPE.
HISTORY MAY BE REPEATING ITSELF. In an October 10, 1998 CHICAGO TRIBUNE
article, Donald Yacktman's boss at his former fund, Gerald Cole, is quoted --
"WE HAD THE SAME CONCERNS, PROBLEMS, AND DISCUSSIONS WITH DON WHEN HE MANAGED
SELECTED AMERICAN SHARES. THE SHAREHOLDERS WERE NOT GETTING WHAT THEY BOUGHT
WHEN THEY INVESTED WITH THE FUND, AND IT IMPACTED HIS PERFORMANCE WITHIN HIS
PEER GROUP."
YACKTMAN HAS THE CHRONOLOGY OF EVENTS ABSOLUTELY BACKWARDS
o The Independent Directors have for MORE THAN A YEAR questioned YACKTMAN
about STYLE SHIFT, DETERIORATING PERFORMANCE, ETHICS CODE VIOLATIONS,
AND PROFESSIONAL STAFF INADEQUACIES. As a director and officer of The
Funds, Jon Carlson supported the ongoing efforts of the Independent
Directors to resolve these problems, and tried to encourage the
Yacktman organization to respond to these legitimate concerns. MR.
CARLSON, IN EFFECT, PUT HIS JOB ON THE LINE TO DEFEND THE INTERESTS OF
THE SHAREHOLDERS, AND HE LOST HIS JOB IN JUNE BECAUSE HE HAD DONE SO.
o The Independent Directors continued THEIR TOUGH QUESTIONING OF YACKTMAN
OVER THIS PAST SUMMER. In response, in an unprecedented move in the
mutual funds industry, Donald Yacktman asked for their resignations on
September 16, 1998. His reasoning apparently is: IF I CAN TERMINATE JON
CARLSON, AN EMPLOYEE, FOR SPEAKING UP FOR SHAREHOLDERS, WHY NOT ALSO
ATTEMPT TO "FIRE" THE INDEPENDENT DIRECTORS FOR PERFORMING THEIR
"WATCHDOG" DUTIES?
o The Yacktman description of the possible marketing relationship with
the Lead Director, Stanislaw ("Stas") Maliszewski, is not only
BACKWARDS BUT ALSO TOTALLY MISLEADING AND INACCURATE. Mr. Maliszewski
is an independent marketing representive for institutional investment
firms, and the Yacktman organization APPROACHED HIM IN LATE 1996 FOR
ASSISTANCE IN MARKETING TO LARGE PENSION AND ENDOWMENT FUNDS AND THE
CONSULTANTS TO THESE FUNDS. Unfortunately, the Yacktman performance and
professional staffing problems and ethics violations began to surface
in 1997 and Mr. Maliszewski, as graciously as possible, withdrew from
his marketing representative discussions with Yacktman. The discussions
finally broke off in March of this year.
U.S. DISTRICT COURT AND SECURITIES AND EXCHANGE COMMISSION (SEC)
BACK THE INDEPENDENT DIRECTORS
o On October 23, 1998 the United States District Court for The District
of Maryland OVERTURNED a decision of a Maryland State Court that had
been rendered one week earlier. This reversal agreed with a letter from
the office of the General Counsel of the Securities and Exchange
Commission, dated October 16, 1998.
o In its letter, the SEC stated that requiring directors to pay out of
their own pockets legal expenses and proxy costs incurred in the
performance of their "WATCHDOG" RESPONSIBILITIES "COULD UNDERMINE THE
IMPORTANT ROLE OF INDEPENDENT DIRECTORS OF REGISTERED COMPANIES (MUTUAL
FUNDS) UNDER THE ACT." If the law were otherwise, as the Maryland court
had erroneously ruled, who would ever serve as an independent director
for a mutual fund?
o Yacktman INITIATED BOTH THIS PROXY FIGHT AND THE LAWSUIT in Maryland
state court. As fiduciaries representing the interests of shareholders,
the Independent Directors MUST OBVIOUSLY BE ABLE TO CHALLENGE SUCH
SELF-SERVING ACTIONS INITIATED BY NON-PERFORMING SERVICE PROVIDERS,
INCLUDING YACKTMAN.
YACKTMAN IS ONLY ONE OF MANY SERVICE PROVIDERS FOR THE FUNDS
AND CAN BE REPLACED WITHOUT CHANGING OTHER VENDORS
o Your board of Directors has outsourced the key functions below to
highly qualified, but most importantly, different service providers.
These independent vendors:
1) Invest your money (Yacktman's job).
2) Maintain shareholder records.
3) Respond to existing and prospective shareholder questions.
4) Maintain custody of The Funds' assets and account for the assets.
5) File necessary regulatory reports, including those to the Internal
Revenue Service and the Securities and Exchange Commission.
IF CIRCUMSTANCES REQUIRE A SUCCESSOR TO YACKTMAN, YOUR BOARD WILL HIRE
AN INVESTMENT ADVISER WITH A HIGHLY COMPETITIVE PERFORMANCE RECORD, A
DEEP AND EXPERIENCED PROFESSIONAL STAFF, AND AN INVESTMENT APPROACH
THAT MEETS YOUR EXPECTATIONS.
Please vote AGAINST proposals 1, 2 and 4, to WITHHOLD your voting
authority on proposal 3, and vote FOR proposal 5, on the enclosed WHITE proxy
card. Sign, date and return it to The Yacktman Funds as soon as possible. For
more information, call 1-800-248-5976.
The Board of Directors*
The Yacktman Funds, Inc.
*Messrs. Yacktman and Ball dissenting
THE ENTIRE YACKTMAN ORGANIZATION
WHICH MANAGES
$800 MILLION PLUS IN ASSETS
100 PLUS SEPARATE PRIVATE ACCOUNTS
2 OPEN-END MUTUAL FUNDS
|---------------------------------------------------|
| Don Yacktman |
| CIO & portfolio manager for 80 private accounts |
| mutual funds' director |
| age 57 |
|--------------------------|------------------------|
|
|----------------------------|---------------------------|
| |
|--------------------|------------------------| |---------------------|----------------------|
| Steve Yacktman | | Ron Ball |
| analyst/trader/portfolio manager/ | | portfolio manager for 25 private accounts | |------------------------|
| research/systems | | not involved in funds' investments | | Support Staff |
| YACKTMAN FAMILY | | (assumed marketing function as of 8/98) | | ------------- |
| age 28 | | mutual funds' director | | |
| | | age 57 | |administrative assistant|
|--------------------|------------------------| |---------------------|----------------------| | |
| | |
| | | account reconciler |
| | YACKTMAN FAMILY |
|--------------------|------------------------| |---------------------|----------------------| | BY MARRIAGE |
| | | | | |
| trading/research/portfolio | | marketing & service provider coordinator | | |
| management/marketing trainee | | maternity leave Nov 98-Feb 99 | | receptionist/ |
| (hired 8/98 with no investment experience) | | age 34 | | secretary |
| YACKTMAN FAMILY BY MARRIAGE | | | |------------------------|
| age 26 | | |
|---------------------------------------------| |--------------------------------------------|
AN ORGANIZATION WITH THIS MANY ACCOUNTS WOULD TYPICALLY HAVE MANY TIMES THE NUMBER OF
INVESTMENT PROFESSIONALS AS EMPLOYED BY YACKTMAN AS OF 10/23/98.