Yacktman Funds’ 2013 Annual Report: Cash Levels Near Normal

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Yacktman Funds’ 2013 Annual Report

In the year ending December 31, 2013, Yacktman Focused Fund (Trades,Portfolio) and Yacktman Fund (Trades, Portfolio) produced returns of 27.0% and 27.7%, respectively, while the benchmark, the S&P 500® Index, returned 32.4%. Our long-term goal is to achieve solid absolute rates of return over multi-year time periods while managing the overall level of risk in the Funds. In the current environment, where the stock market has risen significantly since 2009, and rapidly in the last two years, we are very focused on managing risk through quality security selection and portfolio positioning.

We are happy with results in the last 12 months and over the longterm. We are optimistic about the current holdings, which we think offer attractive rates of return in companies that are generally of extremely high quality. Our cash levels increased slightly during the quarter and have been a short-term drag to results, however current cash levels are only modestly higher than the long-term average in the Funds since 2000.

We think it is important to prudently manage risk for investors. As long-only fund managers, patience – combined with the willingness to hold cash – are some of our best tools to protect our Funds’ investors when we are not finding sufficient bargains. To be clear, our approach is focused on investments in individual securities, and we do not try to predict the direction of the market. We do not require market declines to put cash to work, however, it is generally more difficult to find significant new investment opportunities in a rapidly rising market.

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