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Affiliated Managers Group, Inc. to acquire a majority interest in Yacktman Asset Management Co.

edited April 2012 in Fund Discussions
http://www.sec.gov/Archives/edgar/data/885980/000089418912001990/yacktman_497e.htm

The Yacktman Funds, Inc.


Supplement to the Prospectus dated April 30, 2011


This Supplement provides new and additional information beyond that contained in the Prospectus and should be read in conjunction with the Prospectus.

On April 18, 2012, Affiliated Managers Group, Inc. (“AMG”) announced that it had reached a definitive agreement to acquire a majority interest in Yacktman Asset Management Co. (“Yacktman Co.”), the investment adviser to The Yacktman Focused Fund and The Yacktman Fund (collectively, the “Funds”).

In connection with the proposed acquisition, on April 4, 2012, the Funds’ Board of Directors approved and recommended submitting to shareholders the following proposals:

1. For shareholders of The Yacktman Focused Fund, to approve or disapprove a proposed Agreement and Plan of Reorganization pursuant to which Yacktman Focused Fund, a series of Managers AMG Funds (the “New Yacktman Focused Fund”), would acquire all of the assets and assume all of the liabilities of The Yacktman Focused Fund in exchange for shares of the New Yacktman Focused Fund to be distributed pro rata by The Yacktman Focused Fund to its shareholders in complete liquidation and termination of The Yacktman Focused Fund; and


2. For shareholders of The Yacktman Fund, to approve or disapprove a proposed Agreement and Plan of Reorganization pursuant to which Yacktman Fund, a series of Managers AMG Funds (the “New Yacktman Fund”), would acquire all of the assets and assume all of the liabilities of The Yacktman Fund in exchange for shares of the New Yacktman Fund to be distributed pro rata by The Yacktman Fund to its shareholders in complete liquidation and termination of The Yacktman Fund.


Shareholders of each of the Funds will vote separately on the proposal to reorganize their respective Fund (the “Proposed Reorganizations”).


The New Yacktman Focused Fund and the New Yacktman Fund have been created to continue the investment operations of The Yacktman Focused Fund and The Yacktman Fund, respectively, and will utilize the same core investment process going forward. The members of the investment team of Yacktman Co. who currently manage the investments of The Yacktman Focused Fund and The Yacktman Fund will manage the New Yacktman Focused Fund and the New Yacktman Fund if the Proposed Reorganizations are approved.

Managers AMG Funds has filed a proxy statement/prospectus on Form N-14 with the Securities and Exchange Commission in connection with the Proposed Reorganizations. The definitive proxy statement/prospectus will be sent to shareholders of the Funds to seek their approval of the reorganization of the Funds. Shareholders are urged to read the definitive proxy statement/prospectus and proxy card when they become available, because they will contain important information about the Proposed Reorganizations.

Comments

  • I hold shares of Yachtman. Should I be thinking of selling out?
    Why would they sell out as owning the management would only get more valuable in time?
    Prinx
  • Wait until you see your proxy or you can look for the N-14 on the SEC site under Managers AMG to see what the history/explanation for the majority interest purchase by Managers AMG. I believe this is the same group that bought Fremont Funds. I wouldn't do anything until you see what Managers AMG proposes to do.
  • edited April 2012
    I believe they also have a majority stake in Third Avenue and Tweedy Browne. They seem to like the focused, deep-value type funds.

    I've always wondered if AMG is a hinderance (my wife holds Tweedy Funds). Royce, for example, has changed radically since their buyout by Legg Mason.

    Next time Tweedy, Browne has a conference call I plan to submit a question on this topic.
  • My sense is that AMG has been pretty typically benign, so far as robot overlords go. Which is to say, their affiliates seem to have retained their institutional identity and teams and to function without obvious interference. It's always good to check the provisions binding existing management teams to the organization for a while. In this case, see if Mr. Yacktman has committed to remain with the funds for a specified period.

    For what it's worth,

    David
  • I will read the proxy but like many proxy material it will be dry legal stuff. I rather have my fellow Austinite Mr. Yacktman to send a shareholder letter why and how he thinks this is in best interest of shareholders. Right now, I am personally inclined to vote my few shares as against this reorganization.
  • I like that..."rather have Mr. Yacktman send a shareholder letter why and how he thinks this is in best interest of shareholders."
  • Reply to @TheShadow: From the SEC filing, I can immediately tell that expense ratio is going up with the introduction of 0.25% 12-1b.:(
  • On the other hand, one of the funds already went TF, and it's not unreasonable to expect the other one to have gone TF. With the 12b-1 fee, it is likely that both funds will be offered NTF.

    (I don't like paying that additional fee for NTF access; I merely point out that there can be value received for it.)

    In addition, there is a new service class being introduced, without the 12b-1 fee, and with "modest" minimums ($25K taxable, $10K IRA). So it may be possible to avoid the fee. Need more details before knowing one way or the other.

  • Here is an example of the fee increase that I found. Also there appears to be a waiver on management fees until May 1, 2015 or three years (based on footnotes):

    http://www.sec.gov/Archives/edgar/data/1089951/000119312512167753/d332631d485apos.htm

    From new AMG prospectus on Yacktman Focused Fund:

    Investor
    Class Service
    Class Institutional
    Class
    Management Fee
    [1.00 ]% [1.00 ]% [1.00 ]%
    Distribution and Service
    (12b-1) Fees
    [0.25 ]% [None ] [None ]
    Other Expenses1
    [0.33 ]% [0.24 %] [0.08 ]%
    Total Annual Fund Operating Expenses
    [1.58 ]%2 [1.24 %]3 [1.08 ]%2

    Footnote 2

    2 [Managers Investment Group LLC (the “Investment Manager”) has contractually agreed, through at least [ ], to waive management fees and/or reimburse Fund expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts), shareholder servicing fees, distribution and service (12b-1) fees, brokerage commissions and other transaction costs, acquired fund fees and expenses, and extraordinary expenses) of the Investor Class and Institutional Class shares of the Fund to [ ]% and [ ]% of the average daily net assets of the Investor Class and Institutional Class shares, respectively, subject to later reimbursement by the Investor Class and Institutional Class shares in certain circumstances. In general, for a period of up to 36 months from the time of any waiver, reimbursement, or payment pursuant to the Fund’s contractual expense limitation, the Investment Manager may recover from the Investor Class and Institutional Class shares fees waived and expenses paid to the extent that such repayment would not cause the Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements of the Investor Class and Institutional Class shares to exceed the contractual expense limitation amount. Under such arrangement, if the maximum amount of shareholder servicing fees and distribution and service (12b-1) fees were charged to the classes under the current applicable plans, the total annual fund operating expenses (excluding the other items noted in the parenthetical above) of the Investor Class and Institutional Class would be [ ]% and [ ]%, respectively, of the average daily net assets of such classes. The contractual expense limitation may only be terminated upon termination of the Fund’s investment advisory agreement with the Investment Manager or by mutual agreement between the Investment Manager and the Fund’s Board of Trustees.]

    Footnote 3

    [The Investment Manager has contractually agreed, through at least May 1, 2015, to waive management fees and/or reimburse Fund expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts), brokerage commissions and other transaction costs, and extraordinary expenses) of the Service Class shares of the Fund to 1.25% of the average daily net assets of the Service Class shares, subject to later reimbursement by the Service Class shares in certain circumstances. In general, for a period of up to 36 months from the time of any waiver, reimbursement, or payment pursuant to the Fund’s contractual expense limitation, the Investment Manager may recover from the Service Class shares fees waived and expenses paid to the extent that such repayment would not cause the Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements of the Service Class to exceed the contractual expense limitation amount. The contractual expense limitation may only be terminated upon termination of the Fund’s investment advisory agreement with the Investment Manager or by mutual agreement between the Investment Manager and the Fund’s Board of Trustees.]





    http://www.sec.gov/Archives/edgar/data/885980/000089853111000195/tyf-485bp.htm


    From 4/29/11 prospectus of Yacktman Focused Fund:

    Annual Fund Operating Expenses
    (expenses that you pay each year as a percentage of the value of your investment)
    Management Fees 1.00 %
    Distribution and/or Service (12b-1) Fees 0.00 %
    Other Expenses 0.27 %
    Total Annual Fund Operating Expenses 1.27 %
    Fee Waiver 0.02 %(1)
    Total Annual Fund Operating
    Expenses After Fee Waiver 1.25 %
  • You're misreading the duration of the waiver. The May 1, 2015 is for the new Service Class shares (that I alluded to in my previous post). (The contractual duration of the fee waiver for the Investor and Institutional classes is currently blank - TBD.)

    The three year period you mention (for all share classes) is a recovery period (36 months).

    A recovery period is the period of time where the management may claw back fees that it waived. For example, if there's a fee waiver in place so that a fund may not charge more than 1.50%, and the fees for the first year are 1.60%, there's a 0.10% waiver. If the fees for the next year drop to 1.40%, then the fund will still charge 1.50%, using that extra 0.10% to pay back the management company for the prior waiver. The 36 month limitation is that they may not hike fees to recover expenses that were waived more than 36 months prior. It has little to do with how long the fee waiver itself is in place.

    For all shares, the waiver may be terminated at any time "by mutual agreement between the Investment Manager and the Fund’s Board of Trustees". That's at the end of both fn 2 (Investor/Institutional shares) and fn 3 (Service class shares).
  • Reply to @msf: thank you for the explanation. So fee waiver provides only short-term cap on management fee, and the company gets to recover the fee at a later date.
  • Reply to @Sven: Yes. The theory is that the fee is high initially because the fund is so small. As it grows, the expense ratio is expected to drop so fast that the management company, even as it recovers the money waived, can keep expenses going down. (Remember also that because the fund is very small when the fees are initially waived, there's little in actual dollars that the management company will have to recover.)

    Finally, the management company is always free to not recover its lost fees. I think that's not unusual, either.

    My point wasn't so much that the fees won't drop quickly (though that's a consideration) as the fact that the 36 months didn't refer to the time the fee waiver was in place.
  • Thanks so much to Shadow and all of you who gave input on this topic. I've been getting several calls, letters, etc. from Yacktman to enter my vote over the last couple of weeks.... and am very ashamed not to have followed up as this is a responsibility I should have accepted when I invested in YACKX. Even worse, my main reason for not taking a few minutes to vote is I had no idea what this change would mean to my investment, so don't know how to vote.

    I read the above comments but am still not sure which way to vote. Is the consensus here now to agree to the change? My confidence is in Yacktman managers based on past performance, so I would vote yes if they felt this would help the fund and most people here at least felt it would do no harm.

    Cathy
    P.S. I'm so sorry I, again, haven't been able to read/participate in this Forum. After completing handling of my Mom's estate, I made the big mistake of having detailed landscaping job done at our house. They are just finishing now after 2 full months of my poor potted plants (over 1500) being crammed in corners so they could work. I've lost over 100 plants alone so far that can't be recovered, and now have at least 50 other plants whose critical id labels I so carefully made got lost out of their pots. So I've been outside all hours of night and day trying to recover the ones that have a chance of surviving. Way too much stress, especially coming so close after Mom's death. But I promised husband no more "projects" for at least a year, and my first goal will be to get back to reading and joining in here.

  • Reply to @CathyG: Hi Cathy. I've wondered about your absence. Good to have you back. By the way, you weren't the only one not to respond to the Yacktman letter and calls. I also should have but didn't.
  • Reply to @CathyG: I voted my few shares against the proposal.
  • Reply to @MikeM: Thanks, Mike. This Forum was one of my pleasures I missed most. Did you end up voting on this?
  • Reply to @Investor: Thanks, Investor. Voting against is my preference, but only because I didn't understand enough about it to vote for it... so I couldn't justify changing a good thing for unknown. The meeting is on Monday, so I'll vote online this weekend.
  • Reply to @CathyG: Yes, I voted NO, though I don't understand all the ramifications. I do undertsnd higher fees which was the reason for my no vote.
  • Reply to @MikeM: I wonder what the result was? I got two calls AFTER the meeting was supposed to be held asking for my vote by phone. I explained twice that I HAD voted online and I DID receive email confirmations of my vote over the weekend. Now I'm a little concerned about keeping this as my major large cap.
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