Our Performance in 1963

1963年度投資表現

1963 was a good year. It was not a good year because we had an overall gain of $3,637,167 or 38.7% on our beginning net assets, pleasant as that experience may be to the pragmatists in our group. Rather it was a good year because our performance was substantially better than that of our fundamental yardstick --the Dow-Jones Industrial Average (hereinafter called the “Dow”). If we had been down 20% and the Dow had been down 30%, this letter would still have begun “1963 was a good year.” Regardless of whether we are plus or minus in a particular year, if we can maintain a satisfactory edge on the Dow over an extended period of time, our long term results will be satisfactory -- financially as well as philosophically.

1963年表現不錯。我們說它好并不是因為年底收益達到363.7萬美元或者較年初增長了38.7%，對于實用主義者來說，這些數字的確是令人愉悅的。然而，我們的好是因為表現遠超年度標桿--道瓊斯工業指數。如果我們今年市值縮水20%同時期道指縮水30%，那么信依然會是以“表現不錯”來開頭。任何特定一年的收益無論正負，只要我們能夠保持和道指的相對優勢，我們長期的收益絕不會差.

To bring the record up to date, the following summarizes the year-by-year performance of the Dow, the performance of the Partnership before allocation to the general partner, and the limited partners' results for all full years of BPL's and predecessor partnerships' activities:

更新一下數據，下表總結了道指年化收益以及合伙企業在給一般合伙人分紅前和分紅后的總體收益率：

收益對比

(1) Based on yearly changes in the value of the Dow plus dividends that would have been received through ownership of the Dow during that year.

1. 收益計算基于每年的股價變化并考慮對應的股利發放；

(2) For 1957-61 consists of combined results of all predecessor limited partnerships operating throughout the entire year after all expenses but before distributions to partners or allocations to the general partner.

2. 1957-1961年的數據包含了所有有限合伙人在扣除必要費用后的收益率，但未算入分發給合伙人的資金或者給一般合伙人的分紅；

(3) For 1957-61 computed on the basis of the preceding column of partnership results allowing for allocation to the general partner based upon the present partnership agreement.

3. 基于前表的數據且根據當前合伙人協議扣除給一般合伙人配額的部分。

One wag among the limited partners has suggested I add a fourth column showing the results of the general partner --let's just say he, too, has an edge on the Dow.

一位愛開玩笑的有限合伙人提議我應該增加第四欄把一般合伙人的收益也羅列一下。

The following table shows the cumulative or compounded results based on the preceding table:

下表展示的是復合收益率

復合收益率

In a more serious vein, I would like to emphasize that, in my judgment; our 17.7 margin over the Dow shown above is unattainable over any long period of time. A ten percentage point advantage would be a very satisfactory accomplishment and even a much more modest edge would produce impressive gains as will be touched upon later. This view (and it has to be guesswork -- informed or otherwise) carries with it the corollary that we must expect prolonged periods of much narrower margins over the Dow as well as at least occasional years when our record will be inferior (perhaps substantially so) to the Dow.

依據我的判斷，我們這種能夠超越道指17.7%的表現是無法長期維持的。超越10個點足以讓人滿意，即便是更少的優勢也能產生令人驚艷的收益。這種觀點（它必須是猜測——知情或以其他方式）伴隨著的必然結果，即我們必須預期超越道瓊斯指數的利潤率長期來看會變窄，并且至少偶爾會有幾年我們的記錄比道瓊斯指數更差（有可能遠不如道指）。

Investment Companies

其他投資公司

We regularly compare our results with the two largest open-end investment companies (mutual funds) that follow a policy of being, typically, 95 -100% invested in common stocks, and the two largest diversified closed- end investment companies. These four companies, Massachusetts Investors Trust, Investors Stock Fund, Tri- Continental Corp. and Lehman Corp. manage about 25 billion investment company industry. My opinion is that their results roughly parallel those of the vast majority or other investment advisory organizations which handle, in aggregate, vastly greater sums.

我們通常會把投資收益和兩家最大的開放式投資公司（95%-100%的資產都投資于股票市場），和兩家封閉式投資公司做比較。這四家公司分別是Massachusetts Investors Trust, Investors Stock Fund, Tri- Continental Corp. 和 Lehman Corp. 總計管理了大約40億美元的資產，并能很好地代表當前總資產為250億美元的投資信托產業。我的觀點是他們的投資表現應該與其他投資公司一致

The purpose or this tabulation, which is shown below, is to illustrate that the Dow is no pushover as an index or investment achievement. The advisory talent managing just the four companies shown commands' annual fees of over $7 million, and this represents a very small fraction of the industry. The public batting average of this highly-paid talent indicates they achieved results slightly less favorable than the Dow.

羅列下表的目的是為了告訴大家道瓊斯指數并不是一個容易超越的指標。這四家公司聰明絕頂的投資顧問每年的咨詢費高達700萬美元，這也只是整個行業的冰山一角。這些高薪人才的投資表現也只能略遜于道指。

Both our portfolio and method of operation differ substantially from the investment companies in the table. However, most partners, as an alternative to their interest in the Partnership would probably have their funds invested in media producing results comparable with investment companies, and I, therefore, feel they offer a meaningful standard of performance.

我們的投資組合或是運作方式都和這些投資公司大相徑庭。但是，大多數合伙人處于投資多樣性的考慮會把他們的一部分資金投資于媒體遴選出的投資公司，我認為他們是個很不錯的對比標尺。

年化收益

復合收益

The Dow, of course, is an unmanaged index, and it may seem strange to the reader to contemplate the high priests of Wall Street striving vainly to surpass or even equal it. However, this is demonstrably the case. Moreover, such a failure cannot be rationalized by the assumption that the investment companies et al are handling themselves in a more conservative manner than the Dow. As the table above indicates, and as more extensive studies bear out, the behavior of common stock portfolio managed by this group, on average, have declined in concert with the Dow. By such a test of behavior in declining markets, our own methods of operation have proven to be considerably more conservative than the common stock component of the investment company or investment advisor group. While this has been true in the past, there obviously can be no guarantees about the future.

道瓊斯指數，一個顯然無人管理的指數到底緣何讓各位華爾街的精英們費勁心思也無法超過甚至收益與之相近。即便原因不止，結果也是顯而易見的。此外，這種失敗并不能歸咎于投資公司使用了比道瓊斯指數更加保守的投資策略。上表體現出在熊市，各個投資公司的收益和道指一樣下跌，程度更甚。在熊市下跌程度的測試可以體現出我們的投資策略是要比道指和其他投資公司更加保守。不過這只代表過去，未來可是未知的。

The above may seem like rather strong medicine, but it is offered as a factual presentation and in no way as criticism. Within their institutional framework and handling the many billions of dollars involved, the results achieved are the only ones attainable. To behave unconventionally within this framework is extremely difficult. Therefore, the collective record of such investment media is necessarily tied to the record of corporate America. Their merits, except in the unusual case, do not lie in superior results or greater resistance to decline in value. Rather, I feel they earn their keep by the ease of handling, the freedom from decision making and the automatic diversification they provide, plus, perhaps most important, the insulation afforded from temptation to practice patently inferior techniques which seem to entice so many world-be investors.

以上的結論似乎令人吃驚但也毫無爭辯的事實。在我看來那些管理著巨量資金的龐大投資機構，這種收益率似乎已經是最好的結果了。在他們公司的框架下要做什么出格的事情是十分困難的。因此媒體所展示的各種投資公司組合實際上適合美國整體公司的情況緊密聯系的。除非是特殊情況，他們的價值不是在于超額收益或者抗通脹。在我看來，他們的價值體現在為大眾提供了一個方便，自由的，多樣化的投資途徑，并提供有效阻止了一些投資新手來股票市場試水。

The Joys of Compounding

復利的魔力

Now to the pulse-quickening portion of our essay. Last year, in order to drive home the point on compounding, I took a pot shot at Queen Isabella and her financial advisors. You will remember they were euchred into such an obviously low-compound situation as the discovery of a new hemisphere.

言歸正傳，去年為了更形象地展示復利的魔力，我拿伊麗莎白女王和她經濟顧問舉例。各位應該還記得他們在發現新大陸至今整體的復合收益率是有多低。

Since the whole subject of compounding has such a crass ring to it, I will attempt to introduce a little class into this discussion by turning to the art world. Francis I of France paid 4,000 ecus in 1540 for Leonardo da Vinci’s Mona Lisa. On the off chance that a few of you have not kept track of the fluctuations of the ecu 4,000 converted out to about $20,000.

關于復利的討論是如此粗俗，那么我們就來談談藝術界的事吧。1540 年，法國的弗朗西斯一世為達芬奇的蒙娜麗莎支付了 4,000 埃庫。 有些人大概沒有注意到當時 4,000 埃庫相當于大約 20,000 美元。

If Francis had kept his feet on the ground and he (and his trustees) had been able to find a 6% after-tax investment, the estate now would be worth something over 1,000,000,000,000,000.00. That's $1 quadrillion or over 3,000 times the present national debt, all from 6%. I trust this will end all discussion in our household about any purchase or paintings qualifying as an investment.

如果弗朗西斯一世留住這部分錢，然后找個稅后有6%收益的投資項目，那么到現在的收益應該是有 $1,000,000,000,000,000.00。這將近是有當前美國國債的3000倍的資金，還僅僅是只有6%的收益率。我相信這個統計應該能夠終結投資藝術品是否是個好的投資的爭論了。

However, as I pointed out last year, there are other morals to be drawn here. One is the wisdom of living a long time. The other impressive factor is the swing produced by relatively small changes in the rate of compound.

然而，正如我去年所指出的那樣，這其中還有一些其他的事情需要注意。第一就是要活的夠長；另一個關鍵點就是收益率的些許波動對最終結果的影響。

Below are shown the gains from $100,000 compounded at various rates:

下面就是10萬美刀在不同復合收益率下的結果：

不同收益率對比

It is obvious that a variation of merely a few percentage points has an enormous effect on the success of a compounding (investment) program. It is also obvious that this effect mushrooms as the period lengthens. If, over a meaningful period of time, Buffett Partnership can achieve an edge of even a modest number of percentage points over the major investment media, its function will be fulfilled.

很明顯收益率些許的變化對復合收益率的結果將天差地別。而且隨著時間的增長，這種影響將會越來越大。如果巴菲特合伙公司在長期能夠保持合理的超越主流投資公司的收益，這個效果將會顯現出來。

Some of you may be downcast because I have not included in the above table the rate of 22.3% mentioned on page 3. This rate, of course, is before income taxes which are paid directly by you --not the Partnership. Even excluding this factor, such a calculation would only prove the absurdity of the idea of compounding at very high rates -- even with initially modest sums. My opinion is that the Dow is quite unlikely to compound for any important length of time at the rate it has during the past seven years and, as mentioned earlier, I believe our margin over the Dow cannot be maintained at its level to date. The product of these assumptions would be a materially lower average rate of compound for BPL in the future than the rate achieved to date. Injecting a minus 30% year (which is going to happen from time to time) into our tabulation of actual results to date, with, say, a corresponding minus 40% for the Dow brings both the figures on the Dow and BPL more in line with longer range possibilities. As the compounding table above suggests, such a lowered rate can still provide highly satisfactory long term investment results.

也許有些人會因為我沒有將第三頁提到的22.3%的收益率算一遍感到失望。這個收益率是稅前金額。即便不考慮稅務因素，計算出的結果只能證明以很高的比率（收益率）來計算復利是荒謬的，即便初始金額不高。我的想法是道瓊斯指數不會像過去七年那樣有如此高的收益率，我們的合伙企業也很難維持相對道指這樣的超額收益。以上的假設意味著將來BPL的復合收益率將會低于當前所取得的結果。如果將30%的回撤（其實會時不時地發生）考慮進去，道指相應地有40%的回撤，這會使合伙公司的道指的收益預期更加符合實際。即便如此，低復合收益率仍然能帶來可喜的收益。

Our Method of Operation

我們的運營方法

At this point I always develop literary schizophrenia. On the one hand, I know that we have in the audience a number of partners to whom details of our business are interesting. We also have a number to whom this whole thing is Greek and who undoubtedly wish I would quit writing and get back to work.

寫到這里我就有點分裂了，一方面有的觀眾對我們的運作很感興趣，也有一部分合伙人希望我少說多做。

To placate both camps, I am just going to sketch briefly our three categories at this point and those who are interested in getting their doctorate can refer to the appendix for extended treatment of examples.

為了兼顧各方，在正文中我將對三個類別的投資簡要概述，對細節感興趣的讀者請參閱附錄。

Our three investment categories are not differentiated by their expected profitability over an extended period of time. We are hopeful that they will each, over a ten or fifteen year period, produce something like the ten percentage point margin over the Dow that is our goal. However, in a given year they will have violently different behavior characteristics, depending primarily on the type of year it turns out to be for the stock market generally. Briefly this is how they shape up:

這三類投資并非根據對其的預期收益率來分類。我們的目標是它們在10-15年的時間里都能完成超過道指10%的收益。同時在任意一年各自的收益率都有所不同，很大程度上取決于當年整體股票市場的情況。下面就是他們分類方法：

“Generals” - A category of generally undervalued stocks, determined primarily by quantitative standards, but with considerable attention also paid to the qualitative factor. There is often little or nothing to indicate immediate market improvement. The issues lack glamour or market sponsorship. Their main qualification is a bargain price; that is, an overall valuation on the enterprise substantially below what careful analysis indicates its value to a private owner to be. Again let me emphasize that while the quantitative comes first and is essential, the qualitative is important. We like good management - we like a decent industry - we like a certain amount of “ferment” in a previously dormant management or stockholder group. But we demand value. The general group behaves very much in sympathy with the Dow and will turn in a big minus result during a year of substantial decline by the Dow. Contrary wise, it should be the star performer in a strongly advancing market. Over the years we expect it, of course, to achieve a satisfactory margin over the Dow.

"股票投資" -- 這類投資主要是很多被低估的股票，主要是依據定量的研究，不過同時也會很注重定性分析。往往這些股票沒有漲的跡象。同時也是被市場忽略的股票。他們的主要優勢在于便宜的股價，即當前股價所代表的市值是遠遠小于公司內在價值的。但是請各位牢記，盡管定量分析很關鍵，定性分析也十分重要。我們喜歡好的管理層，不錯的行業，也喜歡在目前近乎休眠的管理層或者股東中有些活躍分子。但是其中的價值是我們最關注的。這部分股票投資的收益曲線和道指十分相似，在熊市的時候他們的收益也會很差。相反的，在大牛市里他們一定獨領風騷。不過長期我們一定希望這部分投資會領先道指。

“Workouts” - These are the securities with a timetable. They arise from corporate activity - sell-outs, mergers, reorganizations, spin-offs, etc. In this category we are not talking about rumors or "inside information" pertaining to such developments, but to publicly announced activities of this sort. We wait until we can read it in the paper. The risk pertains not primarily to general market behavior (although that is sometimes tied in to a degree), but instead to something upsetting the applecart so that the expected development does not materialize. Such killjoys could include anti-trust or other negative government action, stockholder disapproval, withholding of tax rulings, etc. The gross profits in many workouts appear quite small. A friend refers to this as getting the last nickel after the other fellow has made the first ninety-five cents. However, the predictability coupled with a short holding period produces quite decent annual rates of return. This category produces more steady absolute profits from year to year than generals do. In years of market decline, it piles up a big edge for us; during bull markets, it is a drag on performance. On a long term basis, I expect it to achieve the same sort of margin over the Dow attained by generals.

“套利投資” -- 這些股票的投資是按照時間表來操作的。他們起源于一系列公司層面的操作：出售、合并、重組、分拆等等。這類投資并不依賴于那種小道消息，而是根據公開發布的信息。我們等到可以在公開資料上看到這些消息后再出手。這類投資的風險不在于市場行為（盡管有時市場的反應會有一定影響），相反往往是政策原因讓這些案子最終擱淺。此類叫停原因可能包括反壟斷或其他負面政府行為、股東反對、扣繳稅收裁決等。大多數套利投資的利潤看起來都很少。一個朋友如此形容套利操作：在別人拿走95%利潤后，去努力拿那最后5%。不過，套利的確定性和短期效應可以讓年化收益也很可觀。這類投資可以比第一類股票投資提供更加穩定的年化收益率。在熊市期間，它撐起是我們收益的主要來源；但在牛市中，卻會對投資表現有所拖累。長期來看，我希望這類投資能收益能和股票類投資收益率持平。

“Controls” - These are rarities, but when they occur they are likely to be of significant size. Unless we start off with the purchase of a sizable block or stock, controls develop from the general category. They result from situations where a cheap security does nothing price-wise for such an extended period of time that we are able to buy a significant percentage of the company's stock. At that point we are probably in a position to assume some degree of, or perhaps complete, control of the company's activities; whether we become active or remain relatively passive at this point depends upon our assessment of the company’s future and the management's capabilities. The general we have been buying the most aggressively in recent months possesses excellent management following policies that appear to make very good sense to us. If our continued buying puts us in a controlling position at some point in the future, we will probably remain very passive regarding the operation or this business.

“控股公司“ -- 這類投資不多，但是每筆投資都會占用大量資金。一半我們是從購買部分股權開始，控股公司往往是從股票投資類別轉化過來。往往是這些低廉便宜的股票價格長期維持低位，最終我們能夠在這個價位把公司股票大部分都收入囊中。待到那時，我們就處于能夠左右或者完全控制公司運營的位置，那么我們是否積極參與公司管理或者依然保持沉默取決于我們對這家公司未來和當前管理層的評估。我們這幾個月大舉購入的公司管理層十分優秀。如果我們對這家公司持續買入，不久將來我們就會達到控制的比例。但是很可能我們對這家公司的運營不會干預。

We do not want to get active merely for the sake of being active. Everything else being equal I would much rather let others do the work. However, when an active role is necessary to optimize the employment of capital you can be sure we will not be standing in the wings.

不會只是為了參與而參與。如果別人能做的和我一樣，我寧愿讓別人代勞。當然，如果積極參與公司管理能讓我們得到更好的回報，我們不會袖手旁觀的。

Active or passive, in a control situation there should be a built-in profit. The sine qua non of this operation is an attractive purchase price. Once control is achieved, the value of our investment is determined by the value of the enterprise, not the oftentimes irrationalities of the marketplace.

無論主動參與或者被動等待，在控股有限公司中其內在的利潤已經確定。這種控股投資的行為內在價值來源于購入的價格。一旦達到控股的比例，那么我們這筆投資的利潤就取決于公司的價值，而非市場給的定價了。

Our willingness and financial ability to assume a controlling position gives us two-way stretch on many purchases in our group of generals. If the market changes its opinion for the better, the security will advance in price. If it doesn't, we will continue to acquire stock until we can look to the business itself rather than the market for vindication of our judgment.

這種既擁有經濟能力又有意愿來控制公司的能力讓我們在購買很多低估股票時有很多選擇余地。如果市場在我們購買過程中改變想法給其很高的定價，我們就售出獲利。如果不是，我們將會繼續購買股票直到我們可以自己控制而不是期待市場的修正。

Investment results in the control category have to be measured on the basis of at least several years. Proper buying takes time. If needed, strengthening management, re-directing the utilization of capital, perhaps effecting a satisfactory sale or merger, etc., are also all factors that make this a business to be measured in years rather than months. For this reason, in controls, we are looking for wide margins of profit-if it looks at all close, we pass.

最終達到控股公司級別的投資至少需要過幾年才能實現。很多次的買入，可能需要強化的管理層，優化資金流向，促成讓人滿意的出售或者并購等等，所有這些都需要以年為單位計。因此，對這類投資我們希望有不錯的利潤率，如果預期收益只是和其他的投資類別相似，我們就不會去執行。

Controls in the buying stage move largely in sympathy with the Dow. In the later stages their behavior is geared more to that of workouts.

控股類別的投資在早期的收益率很大程度上和道指相似，不過在后期的操作更像是套利所涉及的范疇。

As I have mentioned in the past, the division of our portfolio among the three categories is largely determined by the accident or availability. Therefore, in a minus year for the Dow, whether we are primarily in generals or workouts is largely a matter of luck, but it will have a great deal to do with our performance relative to the Dow. This is one or many reasons why a single year's performance is of minor importance and, good or bad, should never be taken too seriously.

正如我之前提到的，這三類投資類別的比率很大程度取決于是否有好的投資標的。因此，在道指下跌的某一年，我們主要的資金是放在股票市場還是套利中完全運氣，但是我們當年相對于道指的投資表現卻決定于此。這也是為什么我們不要太在意某一年的收益率的好壞，因為真的不重要。

If there is any trend as our assets grow, I would expect it to be toward controls which heretofore have been our smallest category. I may be wrong in this expectation - a great deal depends, of course, on the future behavior of the market on which your guess is as good as mine (I have none). At this writing, we have a majority of our capital in generals, workouts rank second, and controls are third.

隨著我們資產的增加，我可以預測的是我們第三類投資的比例會提高。也許我的估計是錯的，不過這取決于整體市場的行為。在預測市場方面各位和我不相伯仲，我完全無力預測市場。在寫這篇文章時，我們大部分投資都在股票市場，套利排第二，控股公司為末位。

Miscellaneous

雜項

We are starting off the year with net assets of 17,454,900. Our rapid increase in assets always raises the question of whether this will result in a dilution of future performance. To date, there is more of a positive than inverse correlation between size of the Partnership and its margin over the Dow. This should not be taken seriously however. Larger sums may be an advantage at some times and a disadvantage at others. My opinion is that our present portfolio could not be improved if our assets were 1 million or 5 million. Our idea inventory has always seemed to be 10% ahead of our bank account. If that should change, you can count on hearing from me.

我們今年年初凈資產達到1745.49萬美元。資產的快速增長是否對未來投資表現有負面影響？截止目前，正面的影響要大于負面。因此不需要過多擔心。大規模的資金有時候是好事有時候是壞事。我的觀點是如果資產只有100萬或者500萬，是無法改善目前的投資組合的。我們理想的收益率應該在高于銀行收益的10%。如果情況有變，我一定會寫信給大家

Susie and I have an investment of 2,392,900 in the Partnership. For the first time I had to withdraw funds in addition to my monthly payments, but it was a choice of this or disappointing the Internal Revenue Service. Susie and I have a few non-marketable (less than 300 holders) securities of nominal size left over from earlier years which in aggregate are worth perhaps 1% of our partnership interest. In addition we have one non- marketable holding of more material size of a local company purchased in 1960 which we expect to hold indefinitely. Aside from this all our eggs are in the BPL basket and they will continue to be. I can't promise results but I can promise a common destiny. In addition, that endless stream of relatives of mine consisting of my three children, mother, father, two sisters, two brothers-in-law, father-in-law, four aunts four cousins and five nieces and nephews, have interests in BPL directly or indirectly totaling $1,247,190.

Susie 和我在合伙公司總共有239.29萬美元的投資。除了每個月的工資外我第一次必須從合伙公司中提取資金，不過這個選擇也許會讓國稅局失望？。Susie和我名義上擁有一些早年獲得的非流通股票資產（股東不超過300位）價值不超過在合伙公司資產的1%。除此之外，我們還有在1960年購入的一些當地公司的不可出售的有形資產。這些資產我們準備永久擁有。我們其余所有的資產都投入在了合伙公司。而且我們還有無數的親戚在合伙公司中擁有股份，他們的份額總計達到124.719萬美元。

Bill Scott is also in with both feet, having an interest along with his wife or $237,400, the large majority or their net worth. Bill has done an excellent job and on several or our more interesting situations going into 1964, he has done the majority or the contact work. I have also shoved off on him as much as possible of the administrative work so if you need anything done or have any questions, don't hesitate to ask for Bill if I'm not around.

Bill Scott 的主要資產都在合伙公司，他和他的妻子總共擁有23.74萬美元的份額。他的工作完成的很出色，在1964年他將主要負責接待，我也盡量委任他管理的任務，所以各位如果有任何疑問而我碰巧不在，請聯系他。

Beth and Donna have kept an increasing work load flowing in an excellent manner. During December and January, I am sure they wish they had found employment elsewhere, but they always manage to keep a mountain of work ship-shape.

Beth 和 Donna 總是能在越來越多工作中顯得游刃有余。我打賭12月和1月份的大量的任務一定會使她們產生辭職的想法，不過她們總是能順利完成。

Peat, Marwick, Mitchell has done their usual excellent job of meeting a tough timetable. We have instructed them to conduct two surprise checks a year (rather than one as in past years) on our securities, cash, etc., in the future. These are relatively inexpensive, and I think make a good deal of sense in any financial organization.

Peat, Marwick, Mitchell 一如既往地準時完成苛刻的任務。今年委托他們對我們的股票現金進行兩次抽檢 （前幾年只進行一次）。這種抽檢價格不貴，而且我認為在任何金融機構需要做這種檢查。

Let me know if anything needs clarifying. As we grow, there is more chance of missing letters, a name skipped over, a figure transposition, etc., so speak up if it appears we might have erred. Our next letter will be about July 15th summarizing the first half.

隨著我們規模的成長，出現遺漏字母、跳過名稱、圖形錯位等錯位的可能性越來越大，所以如果我們可能犯了錯誤，請及時指出。下一封信將在7月15日寄出，總結我們上半年的表現。

Cordially, Warren E. Buffett

Appendix

附錄

TEXAS NATIONAL PETROLEUM

德州國家石油

This situation was a run-of-the-mill workout arising from the number one source of workouts in recent years -- the sellouts of oil and gas producing companies.

這類石油天然氣公司的整體出售案是近年來套利的主要來源。

TNP was a relatively small producer with which I had been vaguely familiar for years.

TNP是一家相對小一點的公司，很多年前我曾略微關注過。

Early in 1962 I heard rumors regarding a sellout to Union Oil of California. I never act on such information, but in this case it was correct and substantially more money would have been made if we had gone in at the rumor stage rather than the announced stage. However, that's somebody else's business, not mine.

早在1962年我就聽小道消息說它會整體出售給加利福尼亞聯合石油公司。這種小道消息我從不會給予回應，但是這個謠言目前證明是真的，而且如果在當初我們采取行動而不是在消息公示之后，賺到的錢會比現在多很多，但這不是我們做事的方法。

In early April, 1962, the general terms of the deal were announced. TNP had three classes of securities outstanding:

在1962年四月初，交易細節被公開。TNP 擁有三類已發行證券：

(1) 6 1/2% debentures callable at 104 1/4 which would bear interest until the sale transpired and at that time would be called. There were 6.5 million outstanding of which we purchased $264,000 principal amount before the sale closed.

1. 6.5% 計息的公司債券將會在104.25的價格贖回，收購發生前將繼續派息，收購之日將會被贖回。該類債券有650萬美元在外流通，我們在贖回之日前購買了26.4萬美元。

(2) About 3.7 million shares of common stock of which the officers and directors owned about 40%. The proxy statement estimated the proceeds from the liquidation would produce $7.42 per share. We purchased 64,035 shares during the six months or so between announcement and closing.

2. 大約有370萬的流通股，公司職員和管理層持有40%的股份。委托書估計清算后每股股價在7.42美元。我們在公告之日起到收購日期間購買了64,035股.

(3) 650,000 warrants to purchase common stock at 7.42 for the workout on the common resulted in $3.92 as a workout on the warrants. We were able to buy 83,200 warrants or about 13% of the entire issue in six months.

3. 650,000 份認股權證可以以每股 3.50 美元的價格購買普通股。 依據委托書估計的每股7.42 美元，那么對該權證每股套利將獲利3.92 美元。 我們在六個月內購買 83,200 份認股權證，約占整個發行量的 13%。

The risk of stockholder disapproval was nil. The deal was negotiated by the controlling stockholders, and the price was a good one. Any transaction such as this is subject to title searches, legal opinions, etc., but this risk could also be appraised at virtually nil. There were no anti-trust problems. This absence of legal or anti-trust problems is not always the case, by any means.

股東反對的風險為零。該筆并購是控股股東促成的，而且收購價很不錯。任何此類交易都需要進行產權搜索、法律意見等，但這種風險也可以評估為幾乎為零。 不存在反壟斷問題。 但是無論如何，這種沒有法律或反壟斷問題的并購案并非總能遇到。

The only fly in the ointment was the obtaining of the necessary tax ruling. Union Oil was using a standard ABC production payment method of financing. The University of Southern California was the production payment holder and there was some delay because of their eleemosynary status.

唯一美中不足的就是需要必要的稅收裁定。聯合石油的財務時使用標準的ABC 生產企業的付款方式。南加利福利亞大學是付款方，因此根據其董事會的資金狀況會造成付款的延遲。

This posed a new problem for the Internal Revenue Service, but we understood USC was willing to waive this status which still left them with a satisfactory profit after they borrowed all the money from a bank. While getting this ironed out created delay, it did not threaten the deal.

這給國稅局帶來了新的問題，但我們認為 USC 愿意跳過這個狀態，因為即便在從銀行借錢仍能獲得令人滿意的利潤。 雖然解決這個問題會造成延誤，但并沒有威脅到這筆交易。

When we talked with the company on April 23rd and 24th, their estimate was that the closing would take place in August or September. The proxy material was mailed May 9th and stated the sale "will be consummated during the summer of 1962 and that within a few months thereafter the greater part of the proceeds will be distributed to stockholders in liquidation.” As mentioned earlier, the estimate was $7.42 per share.

當我們和公司在4月23/24號交涉的時候，他們估計這筆交易應該在八九月份可以結束。公開聲明在五月九日發表，其中講到交易會在1962年夏完成，并在隨后的幾個月把現金發放到股東手里。正如之前所說，估計每股7.42 美元。

Bill Scott attended the stockholders meeting in Houston on May 29th where it was stated they still expected to close on September 1st.

Bill Scott 在5月29日出席了股東大會，會上提到交易會在9月1日結束。

The following are excerpts from some of the telephone conversations we had with company officials in ensuing months:

下面就是我們隨后幾個月和公司之間的溝通內容：

On June 18th the secretary stated "Union has been told a favorable IRS ruling has been formulated but must be passed on by additional IRS people. Still hoping for ruling in July.”

6.18. 董秘稱：工會被告知一項有利的 IRS 裁決被制定提交，但必須由其他 IRS 人員通過。 仍然希望在七月作出裁決。

On July 24th the president said that he expected the IRS ruling “early next week.”

7.24. 執行長稱IRS 裁決將在下周早期作出。

On August 13th the treasurer informed us that the TNP, Union Oil, and USC people were all in Washington attempting to thrash out a ruling.

8.13. 財務主管告訴我們，TNP、聯合石油公司和南加州大學的人都在華盛頓試圖推翻一項裁決。

On September 18th the treasurer informed us "No news, although the IRS says the ruling could be ready by next week.”

在9月18日，財務主管告訴我們沒有新消息，即便IRS說他們下周裁決會ready。

The estimate on payout was still $7.42.

預計仍將支付每股7.42美元。

The ruling was received in late September, and the sale closed October 31st. Our bonds were called November 13th. We converted our warrants to common stock shortly thereafter and received payments on the common of 3.90 February 4, 1963, and 15 cent on April 24, 1963. We will probably get another 4 cent in a year or two. On 147,235 shares (after exercise of warrants) even 4 cent per share is meaningful.

裁決在九月底正式作出，并購在十月三十一號完成。我們的的債券在10月31日被贖回。之后不久我們就講權證轉換成普通股。1962年12月14日收到每股3.5美元，1963年2月4日收到每股3.9美元，1963年4月24日收到15美分。很可能在未來一兩年收到最后的5美分。對于147,235 份股票來說即便是每股4美分也值不少錢。

This illustrates the usual pattern: (1) the deals take longer than originally projected; and (2) the payouts tend to average a little better than estimates. With TNP it took a couple of extra months, and we received a couple of extra percent.

這也側面反應了一個通常的情況，并購案拖的時間越長，越有可能比預期獲得更好的收益。TNP案子比預想的更久，不過我們也多了幾個點的收益。

The financial results of TNP were as follows:

TNP 投資收益如下：

(1) On the bonds we invested 260,773 and had an average holding period of slightly under five months. We received 6 1?2% interest on our money and realized a capital gain of 14,446. This works out to an overall rate of return of approximately 20% per annum.

1. 債券投資投入資金260773， 平均持有時間略低于5個月。我們這段時間我們收到了6.5% 的利息，實現利潤14，446美元。這筆套利年化收益達到20%。 （怎么算的，不同的資金投入時間不同？？）

(2) On the stock and warrants we have realized capital gain of 89,304, and we have stubs presently valued at 2,946. From an investment or 146,000 in April, our holdings ran to 731,000 in October. Based on the time the money was employed, the rate or return was about 22% per annum.

2. 在股票和權證的實現盈利89304，目前還有大約2946美元的剩余股份。從四月的第一筆146000美元的投資到十月總計投入731000. 根據資金投入時間來推算，年化收益率大約在22%。

In both cases, the return is computed on an all equity investment. I definitely feel some borrowed money is warranted against a portfolio of workouts, but feel it is a very dangerous practice against generals.

上面兩種情形的回報都是根據股權投資計算的。我真心覺得借錢投資這類收益保底的套利是可行的，但投資在股票上就太危險了。

We are not presenting TNP as any earth-shaking triumph. We have had workouts which were much better and some which were poorer. It is typical of our bread-and-butter type of operation. We attempt to obtain all facts possible, continue to keep abreast of developments and evaluate all of this in terms of our experience. We certainly don't go into all the deals that come along -- there is considerable variation in their attractiveness. When a workout falls through, the resulting market value shrink is substantial. Therefore, you cannot afford many errors, although we fully realize we are going to have them occasionally.

其實TNP的案子是沒什么了不起。我們有的套利操作收益更高，也有的收益要差。不過這就是我們典型的套利運作方法。我們盡可能獲取全面且確定的信息，持續跟進，并依據我們的經驗來評估當前是形勢。我們當然不能全程跟蹤所有的案子，這其中肯定會根據不同情況進行取舍。當套利失敗時，會造成市值大幅度縮水。因此，盡管常在河邊走難免不濕鞋，但是我們還是希望盡量不犯錯。

DEMPSTER MILL MFG.

DEMPSTER MILL 制造

This situation started as a general in 1956. At that time the stock was selling at 18 with about 72 in book value of which $50 per share was in current assets (Cash, receivables and inventory) less all liabilities. Dempster had earned good money in the past but was only breaking even currently.

這筆交易起源于1956年。當時股價是18美元， 而賬面價值大約72美元。其中50美元為減去負債后的流動資產（現金，應收和庫存）。Dempster 在過去賺了很多錢但目前僅維持收支平衡。

The qualitative situation was on the negative side (a fairly tough industry and unimpressive management), but the figures were extremely attractive. Experience shows you can buy 100 situations like this and have perhaps 70 or 80 work out to reasonable profits in one to three years. Just why any particular one should do so is hard to say at the time of purchase, but the group expectancy is favorable, whether the impetus is from an improved industry situation, a takeover offer, a change in investor psychology, etc.

定性來看，當時的情形是不容樂觀的（所在行業競爭激烈，管理層也不行），但是賬面算出的利潤讓人動心。經驗告訴我這比套利在一到三年類應該有7-8成概率獲得不錯的利潤。很難說當時是什么具體原因出手購入，但是整體預期是向上的，無論推動力是來自于市場環境變好，并購案或者投資者預期變化，等等。

We continued to buy the stock in small quantities for five years. During most or this period I was a director and was becoming consistently less impressed with the earnings prospects under existing management. However, I also became more familiar with the assets and operations and my evaluation of the quantitative factors remained very favorable.

我們連續五年持續地小部分購買股份。在這期間我都擔任公司董事，并漸漸對當前管理層盈利能力不滿意。然而，我也借此能熟悉公司的資產和運營，并且定量分析的結果表明收益率仍然令人心動。

By mid-1961 we owned about 30% or Dempster (we had made several tender offers with poor results), but in August and September 1961 made, several large purchases at 16-$25 range.

到了1961年，我們總共占有Dempster 股權的30%（曾經多次邀約收購股份都結果不佳），不過在1961年九月，以30.25美元購入了大量股權，并促成了之后相同價格的要約收購，從而占股比例達到了70%。我們過去5年的購入價格在16-25美元。

On assuming control, we elevated the executive vice president to president to see what he would do unfettered by the previous policies. The results were unsatisfactory and on April 23, 1962 we hired Harry Bottle as president.

在接管控制權后，我們將執行副總裁提升為總裁，看看他不受以前政策的約束情況下表現如何。 結果并不令人滿意，1962 年 4 月 23 日，我們聘請了 Harry Bottle 擔任總裁。

Harry was the perfect man for the job. I have recited his triumphs before and the accompanying comparative balance sheets speak louder than any words in demonstrating the re-employment of capital.

Harry完美地完成了他的工作。我曾經頌揚過他的事跡，不過附上資產負債表可以更加說明他在重組公司的能力是多么驚人。

61-63年資產負債表對比

Harry:

(1) took the inventory from over 1 million reducing carrying costs and obsolescence risks tremendously;

1. 將400萬美元的庫存降為100萬美元，大幅縮減了維護成本和淘汰風險；

(2) correspondingly freed up capital for marketable security purchases from which we gained over $400,000

2. 將相應的資金投資于可證券市場讓我們賺了40萬美金

(3) cut administration and selling expense from 75,000 per month;

3. 縮減管理和銷售費用，從每月15萬降到7.5萬美元。

(4) cut factory overhead burden from 4.50 per direct labor hour;

4. 將工廠管理直接工時費從6 美元減少到 4.50 美元；

(5) closed the five branches operating unprofitably (leaving us with three good ones) and replaced them with more productive distributors;

5. 關閉了5個不賺錢的分銷商（只留下三個還不錯的），同時請來了更高效的分銷商；

(6) cleaned up a headache at an auxiliary factory operation at Columbus, Nebraska;

6. 解決了內布拉斯加州哥倫布的一家輔助工廠運營中一個令人頭疼的問題；

(7) eliminated jobbed lines tying up considerable money (which could be used profitably in securities) while producing no profits;

7. 消除了占用大量資金而沒有利潤的生產線（并投資在有利潤的證券上）；

(8) adjusted prices of repair parts, thereby producing an estimated $200,000 additional profit with virtually no loss of volume; and most important;

8. 調整維修零件的價格，從而在幾乎沒有數量損失的情況下產生估計 200,000 美元的額外利潤；

(9) through these and many other steps, restored the earning capacity to a level commensurate with the capital employed.

9. 通過這些和其他的步驟，將公司的盈利能力提升到了和投入相稱的地步。

In 1963, the heavy corporate taxes we were facing (Harry surprised me by the speed with which he had earned up our tax loss carry-forward) coupled with excess liquid funds within the corporation compelled us to either in some way de-incorporate or to sell the business.

1963 年，我們面臨著沉重的公司稅（我對Harry 快速賺錢的速度感到驚訝，以至于我們若繼續經營下去將會承受很大的稅收損失）加上公司內部流動資金過剩，迫使我們以某種方式解散公司或出售業務。

We set out to do either one or the other before the end of 1963. De-incorporating had many problems but would have, in effect, doubled earnings for our partners and also eliminated the problem of corporate capital gain tax on Dempster securities.

我們會在1963年底之前采取行動。解散公司會有很多問題，但實際上會使我們的合作伙伴的收益翻倍，并且還消除了對 Dempster 證券征收公司資本利得稅的問題。

At virtually the last minute, after several earlier deals had fallen through at reasonably advanced stages, a sale of assets was made. Although there were a good many wrinkles to the sale, the net effect was to bring approximately book value. This, coupled with the gain we have in our portfolio of marketable securities, gives us a realization of about 80 per share. Dempster (now named First Beatrice Corp. - we sold the name to the new Co.) is down to almost entirely cash and marketable securities now. On BPL's yearend audit, our First Beatrice holdings were valued at asset value (with securities at market) less a 200,000 reserve for various contingencies.

在早前幾筆交易過早的夭折之后，我們在最后一分鐘將資產出售了。盡管這比出售問題多多，但是基本賬面價值的以實現。這筆交易加上股票市場上價格提升帶來的收益讓我們每股價值達到了80美元。Dempster （現在更名為 First Beatrice Corp.——我們把這個名字賣給了新公司）現在幾乎完全是現金和有價證券。在 BPL 的年終審計中，我們持有的 First Beatrice 資產按資產價值（包含市場上的證券）減去 200,000 美元的各種應急準備金進行估值。

I might mention that we think the buyers will do very well with Dempster. They impress us as people of ability and they have sound plans to expand the business and its profitability. We would have been quite happy to operate Dempster on an unincorporated basis, but we are also quite happy to sell it for a reasonable price. Our business is making excellent purchases -- not making extraordinary sales.

我們認為買家會把 Dempster 經營得很好。 他們給我們留下了深刻的印象，他們是有能力的人，也有有擴大業務和盈利能力的合理計劃。 我們很樂意以非法人形式經營 Dempster，但我們也很樂意以合理的價格出售它。 我們的業務是以出色的價格買入——而不是賣個高價。

Harry works the same way I do -- he likes big carrots. He is presently a limited partner of BPL, and the next belt-tightening operation we have, he's our man.

Harry的工作方式和我一樣——喜歡有利可圖。 他目前是 BPL 的有限合伙人，如果下次有類似的工作，我們還是會喊上他。

The Dempster saga points up several morals:

Dempster的案例體現了若干準則：

(1) Our business is one requiring patience. It has little in common with a portfolio of high-flying glamour stocks and during periods of popularity for the latter, we may appear quite stodgy. It is to our advantage to have securities do nothing price wise for months, or perhaps years, why we are buying them. This points up the need to measure our results over an adequate period of time. We suggest three years as a minimum.

1. 我們的工作需要耐心。我們和那些高高在上的股票投資組合幾乎沒有共同點，在他們高高在上的時候，我們往往顯得乏善可陳。股價在幾個月甚至幾年不動反而是我們的優勢，這也是為什么我們會持續買入的原因。因此衡量BPL投資結果最好要按照3年起步。

(2) We cannot talk about our current investment operations. Such an open-mouth policy could never improve our results and in some situations could seriously hurt us. For this reason, should anyone, including partners, ask us whether we are interested in any security, we must plead the “5th Amendment.”

2. 我們不能討論當前正在進行的投資。這種大嘴的行為對我們的投資收益百害而無一益。因此，如果任何人（包括合伙人）問及我們是否對任何股票感興趣時。我們將行使第五修正案的賦予我們的權利--沈默權。