value-investors-tts/annual-letters/bpl-1963c.txt

BUFFETT PARTNERSHIP, LTD.
810 KIEWIT PLAZA
OMAHA 31, NEBRASKA
November 6, 1963
To My Partners for 1964:
Enclosed is the usual assortment of Thanksgiving reading material:
(1) Two copies of an amended partnership agreement for 1964. The one with the General Provisions
attached is to be kept by you (exactly the same as last year) and the other single page agreement is to be
signed, notarized and returned to us. Partners in Omaha may come in and obtain the notarization at our
office.
(2) A copy of that priceless treatise, "The Ground Rules,” I would like every partner to read this at least
once a year, and it is going to be a regular item in my November package. Don't sign the partnership
agreement unless you fully understand the concepts set forth and are in accord with them -- mentally
and viscerally.
(3) Two copies of the commitment letter for 1964, one to be kept by you and one returned to us. You may
amend this commitment letter right up to midnight, December 31st, so get it back to us early, and if it
needs to be changed, just let us know by letter or phone.
Any withdrawals will be paid immediately after January 1st. You may withdraw any amount you desire from
$100 up to your entire equity. Similarly, additions can be for any amount and should reach us by January 10th.
In the event you are disposing of anything, this will give you a chance to have the transaction in 1964 if that
appears to be advantageous for tax reasons. If additions reach us in November, they take on the status of
advance payments and draw interest at the rate of 6% until yearend. This is not true of additions reaching us in
December.
Complete tax information for your 1963 return will be in your hands by January 25th. If you should need an
estimate of your tax position before that time, let me know and I will give you a rough idea. We will also send
out a short letter on taxes in late December.
At the end of October, the overall result from the Dow for 1963 was plus 18.8%. We have had a good year in all
three categories, generals, work-outs and controls. A satisfactory sale on a going concern basis of Dempster Mill
Manufacturing operating assets was made about a month ago. I will give the full treatment to the Dempster story
in the annual letter, perhaps climaxed by some lyrical burst such as “Ode to Harry Bottle.” While we always had
a built-in profit in Dempster because of our bargain purchase price, Harry accounted for several extra servings
of dessert by his extraordinary job. Harry, incidentally, has made an advance payment toward becoming a
limited partner in 1964-- we consider this the beginning, not the end.
However, 1963 has not been all Dempster. While a great deal can happen the last two months and therefore
interim results should not be taken too seriously, at the end of October the overall gain for the partnership was
about 32%. Based on the allocation embodied in our agreement, this works out to plus 25 1/2% for the limited
partners before monthly payments to those who take them. Of our approximate $3 million gain, something over
$2 million came from marketable securities and a little less than $1 million from Dempster operating assets. The
combined gain from our single best general and best work-out situation approximated the gain on the Dempster
operating assets.
You should be aware that if our final results relative to the Dow for 1963 are as favorable as on October 31st, I
will regard it as an abnormal year. I do not consider a 13.2 percentage point margin to be in the cards on a long
term basis. A considerably more moderate annual edge over the Dow will be quite satisfactory.
Cordially
Warren E. Buffett
P/S. Last year we announced there would be no prizes for the last ones to get the material back to us. This
continues to be our policy. Save us some last minute scurrying by getting your agreement and commitment letter
back pronto. Give Bill or me a call if we can be of any help. Thanks!