BUFFETT PARTNERSHIP. LTD.610 KIEWIT PLAZAOMAHA, NEBRASKA 68131TELEPHONE 042-4110

December 5th , 1969

To My Partners:

This letter is to supply you with some published information relating to our two controlled companies (and their four principal operating components), as well as to give you my general views regarding their operations. My comments are not designed to give you loads of detailed information prospectus-style, but only my general "slant" as I see the businesses at this time.

At yearend, BPL will own 800,000 of 1,000,000 shares outstanding of Diversified Retailing Company. First Manhattan Company and Wheeler, Munger & Company will each own 100,000 shares. DRC previously owned 100% of Hochschild, Kohn & Company of Baltimore, and currently owns 100% of Associated Retail Stores (formerly named Associated Cotton Shops). On December 1st, DRC sold its entire interest in H-K to Supermarkets General Corp. for \$5,045,205 of cash plus non-interest bearing SGC notes for \$2 million due 2-1- 70, and \$4,540,000 due 2-1-71. The present value of these notes approximates \$6.0 million so, effectively, DRC received about \$11 million on the sale. Various warranties were made by DRC in connection with the sale, and, while we expect no claims pursuant to the contract, a remote contingent liability always exists while warranties are in force.

Associated Retail Stores has a net worth of about \$7.5 million. It is an excellent business with a strong financial position, good operating margins and a record of increasing sales and earnings in recent years. Last year, sales were about \$37.5 million and net income about \$1 million. This year should see new records in sales and earnings, with my guess on the latter to be in the area of \$1.1 million after full taxes.

DRC has \$6.6 million in debentures outstanding (prospectus with full description of the business as of December 18th, 1967 and the debenture terms will be sent you upon request) which have one unusual feature in that if I, or an entity controlled by me, is not the largest shareholder of DRC, the debentureholders have the right to present their debentures for payment by the company at par.

Thus, DRC has tangible net assets of about \$11.50 - \$12.00 per share, an excellent operating business and substantial funds available for reinvestment in other operating businesses. On an interim basis, such funds will be employed in marketable securities.

Berkshire Hathaway Inc. has 983,582 shares outstanding, of which BPL owns 691,441. B-H has three main operating businesses, the textile operation, the insurance operation (conducted by National Indemnity Company and National Fire & Marine Insurance Company, which will be collectively called the insurance company) and the Illinois National Bank and Trust Company of Rockford, Illinois. It also owns Sun Newspapers Inc, Blacker Printing Company and 70% of Gateway Underwriters, but these operations are not financially significant relative to the total.

The textile operation presently employs about \$16 per share in capital and, while I think it has made some progress relative to the textile industry generally, cannot be judged a satisfactory business. Its return on capital has not been sufficient to support the assets employed in the business and, realistically, an adequate return has less than an even chance of being averaged in the future. It represents the best segments of the business that existed when we purchased control four and one-half years ago. Capital from the other segments has been

successfully redeployed - first, on an interim basis into marketable securities and, now on a permanent basis into insurance and banking. I like the textile operating people - they have worked hard to improve the business under difficult conditions - and, despite the poor return, we expect to continue the textile operation as long as it produces near current levels.

The insurance operation (of which B-H owns virtually 100%) and the bank (where B-H owns 97.7%) present a much happier picture. Both are first-class businesses, earning good returns on capital and stacking up well on any absolute or comparative analysis of operating statistics. The bank has about \$17 per share of net tangible assets applicable to B-H, and the insurance company approximately \$15. I would estimate their normal current earning power to be about \$4 per share (compared to about \$3.40 from operations pro-forma in 1968), with good prospects for future growth on the combined \$32 of tangible net assets in the bank and insurance company. Adding in the textile business and miscellaneous assets, and subtracting parent company bank debt of about \$7 million, gives a tangible net asset value of about \$43 per share for B-H, or about \$45 stated book value, allowing for the premium over tangible assets paid for the bank.

One caveat - when I talk above of tangible net assets. I am valuing the \$75 million of bonds held by the insurance company and bank at amortized cost. This is in accord with standard accounting procedures used in those industries and also in accord with the realities of their business operations where it is quite unlikely that bonds will have to be sold before maturity. At today's historically low bond prices, however, our bonds have a market value substantially below carrying value, probably on the order of \$10 per share of B-H stock.

Between DRC and B-H, we have four main operating businesses with three of them in my opinion, definitely first class by any of the usual standards of evaluation. The three excellent businesses are all run by men over sixty who are largely responsible for building each operation from scratch. These men are hard working, wealthy, and good – extraordinarily good. Their age is a negative, but it is the only negative applicable to them. One of the reasons I am happy to have a large segment of my capital in B-H and DRC is because we have such excellent men in charge of the operating businesses.

We have various annual reports, audits, interim reports, proxy materials prospectuses, etc… applicable to our control holdings and we will be glad to supply you with any item you request. I also solicit your written questions and will send to all partners the questions and answers shortly before yearend. Don't hesitate to ask any question at all that comes to mind - if it isn't clear to you, it probably isn't clear to others - and there is no reason for any of you to be wondering about something that I might clear up.

DRC and B-H presently pay no dividends and will probably pay either no dividends or very modest dividends for some years to come. There are a number of reasons for this. Both parent companies have borrowed money - we want to maintain a good level of protection for depositors at the bank and policyholders at the insurance company - some of the operating companies have very satisfactory ways to utilize additional capital - and we are hopeful of finding new businesses to both diversify and augment our earning power.

My personal opinion is that the intrinsic value of DRC and B-H will grow substantially over the years. While no one knows the future, I would be disappointed if such growth wasn't at a rate of approximately 10% per annum. Market prices for stocks fluctuate at great amplitudes around intrinsic value but, over the long term, intrinsic value is virtually always reflected at some point in market price. Thus, I think both securities should be very decent long-term holdings and I am happy to have a substantial portion of my net worth invested in them. You should be unconcerned about short-term price action when you own the securities directly, just as you were unconcerned when you owned them indirectly through BPL. I think about them as businesses, not “stocks”, and if the business does all right over the long term, so will the stock.

I want to stress that I will not be in a managerial or partnership status with you regarding your future holdings of such securities. You will be free to do what you wish with your stock in the future and so, of course, will I. I

think that there is a very high probability that I will maintain my investment in DRC and B-H for a very long period, but I want no implied moral commitment to do so nor do so nor do I wish to advise others over an indefinite future period regarding their holdings. The companies, of course, will keep all shareholders advised of their activities and you will receive reports as issued by them, probably on a semi-annual basis. Should I continue to hold the securities, as I fully expect to do, my degree of involvement in their activities may vary depending upon my other interests. The odds are that I will take an important position on matters of policy, but I want no moral obligation to be other than a passive shareholder, should my interests develop elsewhere.

We presently plan to make the initial BPL cash distribution on January 5th, which will now come to at least 64% of January 1, 1969 capital less any distributions (including monthly payments) you have received from us since January 1, 1969. There is now pending a public offering, headed by Merrill, Lynch, Pierce, Fenner & Smith, of our Blue Chip Stamps holdings which, if completed this month as expected, should bring the figure to at least 70%.

If you wish Bill and me to give you our ideas regarding bonds in March, you should purchase U.S. Treasury Bills maturing in late March with the applicable portion of the January 5th distribution. Then advise us in the last week of February of the amount you wish to invest in bonds and we will let you know our thoughts.

About the middle of January (as soon as the exact amounts are figured and shares are received from the Transfer Agent after having been registered in your name) we will distribute the DRC and B-H stock applicable to your partnership interest and subsequently advise you of your tax basis and acquisition date attributable to the stock. Such shares will be "legended" as described in the enclosed letter from Monen, Seidler & Ryan. These stock certificates are valuable and should be kept in a safe place.

In past letters I had expressed the hope that BPL could supply a mechanism whereby you could, if you wished, automatically convert your DRC and B-H to cash. I have had two law firms consider extensively the status of these shares in your hands following the liquidation and the accompanying letters (which should be saved and kept with the shares) give their conclusions. As you can see, it is not an area that produces simple, clear-cut guidelines. I see no prudent way to implement the alternatives I had previously been considering. Therefore, you must follow the guidelines they set forth if you wish to dispose of your shares. As you probably realize, the restrictions on subsequent sale apply more severely to Susie and me (because of my continued "insider" position) than they probably do to you. Substantial quantities of securities often are sold via the "private sale" option described in paragraph (3) of the opinion. If the rules become clearer or more simplified in the future, I will be sure to let you know.

At the time of distribution of DRC and B-H, I will advise you of the values applied to such shares at 1969 yearend. You will receive our audit and tax letter about the end of January. It presently appears that sale of our Blue Chip shares and a substantial increase in value of DRC and B- H will bring our overall gain for the year to slightly over 6%.

My next letter will be in late December, summarizing the questions and answers regarding DRC and B-H. and also supplying a final estimate on the January 5th cash distribution.

Warren E. Buffett

WEBI glk

Enclosures:

Legal opinion. Monen, Seidler & Ryan

Concurring opinion, Munger, Tolles. Hills & Rickershauser 1968 Annual Report. Berkshire Hathaway. Inc.

1969 Semi-Annual Report. Berkshire Hathaway. Inc.

April 3. 1969 letter to Shareholders. Berkshire Hathaway. Inc. 1968 Annual Report. Diversified Retailing

Company. Inc.

Financial information regarding Associated Retail Stores. Inc. Financial information regarding Illinois National

Bank & Trust Co. 1969 Best's Report. National Indemnity Company

1969 Best's Report. National Fire & Marine Insurance Company

巴菲特合伙有限公司

610基维特广场 奥马哈，内布拉斯加州 68131
电话：042-4110

1969年12月5日

致各位合伙人：

这封信是为了向你们提供一些关于我们两家控股公司（及其四个主要运营组成部分）已公开的信息，同时也让我就它们的运营情况谈谈我的总体看法。我的评论目的不是像招股说明书那样给你们大量详细信息，而只是就我目前对这些业务的看法，给你们一个总体"视角"。

年底时，BPL将持有多元化零售公司（Diversified Retailing Company）1,000,000股流通股中的800,000股。第一曼哈顿公司（First Manhattan Company）和惠勒·芒格公司（Wheeler, Munger & Company）将各持有100,000股。DRC此前100%拥有巴尔的摩的霍希尔德·科恩公司（Hochschild, Kohn & Company），目前100%拥有联合零售商店（Associated Retail Stores，原名联合棉布商店）。12月1日，DRC将其在H-K的全部权益出售给超市总公司（Supermarkets General Corp.），获得了5,045,205美元现金，以及SGC的无息票据：200万美元于1970年2月1日到期，454万美元于1971年2月1日到期。这些票据的现值约为600万美元，因此DRC实际上从这笔出售中获得了约1,100万美元。DRC在出售中做出了各种保证，虽然我们预计不会根据合同产生索赔，但在保证有效期内，始终存在一种遥远的或有负债。

联合零售商店的净资产约为750万美元。这是一家优秀的企业，财务状况强劲，经营利润率良好，近年来销售额和收益持续增长。去年，销售额约为3,750万美元，净利润约为100万美元。今年销售额和收益将再创纪录，我猜测后者在完全纳税后大约在110万美元左右。

DRC有660万美元的未偿债券（关于1967年12月18日业务状况及债券条款的完整招股说明书可应要求提供），这些债券有一个不寻常的特点：如果我或我控制的实体不是DRC的最大股东，债券持有人有权要求公司按面值偿还其债券。

因此，DRC每股有形净资产约为11.50至12.00美元，拥有一项出色的运营业务以及可观的资金可用于再投资于其他运营业务。在过渡期间，这些资金将用于有价证券投资。

伯克希尔·哈撒韦公司（Berkshire Hathaway Inc.）有983,582股流通股，其中BPL持有691,441股。B-H有三个主要运营业务：纺织业务、保险业务（由国民 indemnity 公司（National Indemnity Company）和国民火灾与海事保险公司（National Fire & Marine Insurance Company）开展，合称保险公司）以及伊利诺伊州罗克福德伊利诺伊国民银行与信托公司（Illinois National Bank and Trust Company of Rockford, Illinois）。它还拥有太阳报业公司（Sun Newspapers Inc）、布莱克印刷公司（Blacker Printing Company）以及盖特韦承销公司（Gateway Underwriters）70%的股权，但这些业务在总量中不具财务重要性。

纺织业务目前使用的资本约为每股16美元。虽然我认为它相对于纺织行业整体取得了一些进步，但不能算是一项令人满意的业务。其资本回报率不足以支撑业务中使用的资产，而且现实地说，未来平均获得足够回报的可能性不足一半。它代表了我们四年半前买入控制权时业务中最好的部分。来自其他部分的资本已成功重新配置——最初暂时用于有价证券，现在永久性地投入了保险和银行业务。我喜欢纺织业务的员工——他们在困难条件下努力改善业务——尽管回报不佳，但只要它还能达到接近目前的水平，我们预计会继续经营纺织业务。

保险业务（B-H几乎100%拥有）和银行（B-H拥有97.7%）的情况要令人愉快得多。两者都是一流的企业，资本回报率良好，在任何绝对或相对的经营统计数据比较中都表现出色。银行对B-H适用的每股有形净资产约为17美元，保险公司约为15美元。我估计它们当前的正常盈利能力约为每股4美元（相比之下，1968年备考经营利润约为3.40美元），随着银行和保险公司的有形净资产合计32美元，未来增长前景良好。再加上纺织业务和其他杂项资产，减去约700万美元的母公司银行贷款，B-H每股有形净资产价值约为43美元，或者说列报账面价值约为45美元，其中包含了为银行支付的有形资产溢价。

一个提醒——上面我谈到有形净资产时，是将保险公司和银行持有的7,500万美元债券按摊余成本估值的。这符合这些行业使用的标准会计程序，也符合其业务运营的现实——在这些业务中，债券不太可能在到期前被出售。然而，在当今债券价格处于历史低点的情况下，我们的债券市场价值远低于账面价值，可能大约相当于B-H每股10美元。

在DRC和B-H之间，我们有四个主要运营业务，其中三个在我看来，无论用哪一项常规评判标准来看，都绝对属于一流。这三个优秀企业都由年过六十的人经营，他们基本上是白手起家建立了每个业务。这些人勤奋、富有、优秀——极其优秀。他们的年龄是一个负面因素，但这也是唯一适用于他们的负面因素。我很高兴将我的大部分资本放在B-H和DRC，其中一个原因就是我们拥有如此优秀的人负责运营业务。

我们拥有适用于我们控股持仓的各种年度报告、审计报告、中期报告、股东委托书、招股说明书等材料，我们将很乐意向你们提供你们要求的任何项目。我也希望收到你们的书面问题，并将在年底前向所有合伙人发送问题和答案。不要犹豫提出你想到的任何问题——如果对你不清楚，很可能对别人也不清楚——而你们任何人都不应该对某些我可以澄清的事情感到疑惑。

DRC和B-H目前不支付股息，并且在未来几年内可能要么不支付股息，要么只支付非常微薄的股息。原因有很多。两家母公司都借了钱——我们希望为银行的存款人和保险公司的保单持有人维持良好的保护水平——一些运营公司有非常令人满意的方式利用额外资本——我们也希望找到新企业来多元化和增强我们的盈利能力。

我个人认为，DRC和B-H的内在价值将在未来几年内大幅增长。虽然没有人知道未来，但如果这种增长率达不到每年大约10%，我会感到失望。股票价格围绕内在价值大幅波动，但长期而言，内在价值几乎总会在某个时点反映在市场价格中。因此，我认为这两种证券都应是相当不错的长期持有标的，我很高兴我的净资产的很大一部分投资于它们。当你直接持有这些证券时，你不应关心短期价格波动，就像你通过BPL间接持有时你并不关心一样。我把它们当作企业来思考，而不是"股票"，如果企业长期表现良好，那么股票也会表现良好。

我想强调，我不会以管理人或合伙人身份与你们一起处理你们未来持有这些证券的事宜。你们将来可以自由地处理你们的股票，我当然也会如此。我认为我极有可能在很长一段时间内维持对DRC和B-H的投资，但我不想有任何隐含的道德承诺，也不希望在未来无限期内就他们的持股向他人提供建议。这些公司当然会让所有股东了解其动态，你们将收到它们发布的报告，可能每半年一次。如果我继续持有这些证券（我完全预期如此），我参与其活动的程度可能会根据我的其他兴趣而有所不同。我很可能会在政策问题上持重要立场，但如果我的兴趣转移到别处，我不想有任何道德义务去扮演超越被动股东的角色。

我们目前计划在1月5日进行首次BPL现金分配，这现在将达到1969年1月1日资本的至少64%，减去你们自1969年1月1日以来从我们这里收到的任何分配（包括月度付款）。目前，由美林（Merrill, Lynch, Pierce, Fenner & Smith）牵头，我们持有的蓝色筹码印花（Blue Chip Stamps）股份正在进行公开发售，如果本月按预期完成，将使这一比例达到至少70%。

如果你们希望比尔和我在三月份就债券给出我们的想法，你们应该用1月5日分配中的相应部分购买3月底到期的美国国库券。然后在2月的最后一周告诉我们你们希望投资于债券的金额，我们将让你们知道我们的想法。

大约在一月中旬（一旦计算出确切金额，并且过户代理人将股票登记到你们名下后将股票寄达），我们将分配适用于你们合伙权益的DRC和B-H股票，随后告知你们这些股票的税基和取得日期。这些股票将带有如附信中Monen, Seidler & Ryan律师事务所所述的限制性标记。这些股票证书很有价值，应妥善保管。

在过去的信中，我曾表示希望BPL能够提供一种机制，使你们如果愿意，可以自动将你们的DRC和B-H转换为现金。我已经让两家律师事务所广泛考虑了这些股份在清算后你们手中的状态，随附的信件（应保存好并与股票放在一起）给出了它们的结论。你们可以看到，这不是一个能产生简单明确指引的领域。我看不到谨慎的方法来实施我之前考虑过的替代方案。因此，如果你们希望处置你们的股份，必须遵循他们提出的指引。你们可能意识到，后续出售的限制对苏茜（Susie）和我（因为我持续的"内部人"身份）比你们可能更严格。大量证券通常通过意见书第(3)段所述的"私募出售"选项进行交易。如果未来规则变得更清晰或更简化，我一定会让你们知道。

在分配DRC和B-H时，我会告知你们1969年底这些股票的估值。你们将在1月底左右收到我们的审计和税务信函。目前看来，出售我们的蓝色筹码股份以及DRC和B-H价值的大幅增长，将使我们的全年整体收益略超6%。

我的下一封信将在12月底，总结关于DRC和B-H的问答，并提供1月5日现金分配的最终估算。

沃伦·E·巴菲特

WEB:glk

附件：
法律意见书，Monen, Seidler & Ryan律师事务所
同意意见书，Munger, Tolles, Hills & Rickershauser律师事务所
伯克希尔·哈撒韦公司1968年年报
伯克希尔·哈撒韦公司1969年半年度报告
伯克希尔·哈撒韦公司1969年4月3日致股东信
多元化零售公司1968年年报
关于联合零售商店公司的财务信息
关于伊利诺伊国民银行与信托公司的财务信息
国民 indemnity 公司1969年贝斯特报告
国民火灾与海事保险公司1969年贝斯特报告