wer : Burretr PARTNsR6HIK, LTD. oto einwiy PLATA OAWALIEMRLAKA OBt0t = ; MAY 15 199) arenes. Qnnanal Pantnan soetaaa Seer January 18, 1066 Our Performance in 1964 Although our bet we had an overall gain of $4,846,312. 37 in 1964, tt was not one of yeara es judged by our fundamental yardetick, the Dow-Jones In- lustrial Average (hereinafter called the "Dow"). The overall regult for BPL sas plus 27.8% compared to an overall plus 18.7% for the Dow, The overall result for limited partners was plus 22.3%. Both the advantage of 8.1 per- centage points on a partnerohip basis and 3.6 points by the lmited partners sere Uke poorest since 1959, which wae a year of roughly comparable gains foe the Dow Nevertheless, Lam not depressed. It was a strong year for the general mar- let, and it is alwaya tougher for us to outshine the Dow in such a year. We are certain to have years when the Dow gives ue a drubbing and, in some respacts, I feel rather fortunate that 1964 wasn't the year. Because of the problems that gatlupiug wiarkets puse for us, a Dow repeat in 1965 of 1964 resvils we'd make it most difficult for us to match tte performance, let Alone surpass it by a decent margin, ‘Vo being the record up to date, the following summarizes the year-by-year perfarmanee of the Dow, the performance of thé Partnership before allocation to the general partner, and the limited partner's results: Overall Results Partnership Limited Partners! From Dow () Results (2) Results (3) 997 - BAG +10.4% + 9.3% 1958 438.5 +40.8 432.2 1959 +20.0 425.9 +20.9 L960 - 6.2 422.8 418.6 19h 422.4 #45.9 435.8 1962 71.6 413.8 +11.9 196% +20.6 438.7 430.5 1964 410.7 427.8 422.3 (1) Raded on yearly chanz+6 nth value of the Dow plus dividends that would have been received’ | igh rehip of the Dow during that year. The lable includes al! c....plet’ -are of partnership activity. (2) Por 1957-61 consists + sombined results of all predecessor limited part- herships operating tt cho st the entire year after all expenses, but beforedletributions to partners or allocations to the general partner, '3) For 1957-61 computed on the basis of the preceding column of partner- ship results allowing for allocation to the general partner based upon the present partnership agreement, but before monthly withdrawals by limited partners. «ma cumulative or compounded basis, the results are: Overall Results Partnership Limited Partners! Near From Dow Results Resulte - + 10.4% + 9.3% 8 + + 65.6 + 44.5 157-9 + + 95.9 + 74,4 =60 + +140.6 4107.2 “61 + 4251.0 +181.6 1957-62 + 4299.8 #215.1 3957-63 + 4454.5 + 43at2 1987-64 * +608.7 +402.8 Avaual Com- founded Rate wed 21.7 22,3 Investment Companies We regularly compare our results with the two largest open-end inveatment coinpanies (mutual funds) that follow a polley of being typically 95 - 100% invested in common stock, and the two largest diversified closed-end invest- tacnt companies, ‘These four companies, Massachusetts Investors Trust, lavestors Stock Fund, Tri-Continental Corporation, and Lehman Corporation, rannage about $4 1/2 billion, are owned by about 550,000 shareholders, and are probably typical of most of the $30 billion investment company industry. ‘My opinion ie that their results roughly parallel those of the overwhelming roajortty of other investment advisory organizations which handle, in aggre- pate, vastly greater suine, The purpose of this tabulation, which is shown below, is to illuatrate that Sir Dow is no pushover as an index of investment achlevement, The advi- rory talent managing just the four companies shown commande annual fees (Cover $0 inillion, and this represents a very small fraction of the profee- sional Investment management industry. The public batting average of this hisily-paid and widely reepected talent indicates performance a shade be- tow that of the Dow, an unmanaged index.YEARLY RESULTS Mass. Inv, Investore Lint Year Trust (1) Stock (1) Lehman (2) Tri-Cont.(2) Dow Parts 1987 -11. 4% 12.4% HAL. 4% = 2.4% = 8.4% ‘ 1958 442.7 +475 440.8 +33.2 +98.5 cs) 1959 +9.0 $10.3 + 8.1 +8.4 +20.0 "2 1960 - 1.0 - 0.6 + 2.6 + 2.8 - 6.2 ft 1961 425.6 424.8 423.6 422.5 422.4 "3 1962 + 9.8 213.4 214.4 710.0 + 1.6 “ 1963 +20.0 +16.5 #23.7 +18.3 420.6 “2 1964 +15.9 414.3 #13.6 412.6 418.7 12 (1) Computed fram changes in asset value plus any distributions to balder of record during year. (2) From 1964 Moody's Bank & Finance Manual for 1957-63. Eatimated for 1964. COMPOUNDED Mags. Inv. Inveators Lit Year Trust Stock Lehman Tri-Cont. Dow Pa 1957 - ALG = 12.4% = 1A = 24% = Bt 1987-8 + 26.4 + 29.2 + 24.7 + 30.0 + 26. ‘ 1957-8 + 37.8 + 42.5 + 94.8 + 40.9 + ‘ 4957-60 + 36.4 + 41.6 + 38.2 + 44.8 + ' 1957-61 +7109 + 16.9 + 20.8 +74 + 14.9 1957-62 + 84,5 + 53.2 + 46,2 + 59.7 + 61.6 1957-63 + 85.4 + 78.5 + 80.8 + 88.9 + 94.9 1957-64 4114.8 4104.0 +105.4 4112.7 4131.3 Annual Com+ pounded Rate 10.0 9.3 9.4 9.9 Lt The repetition of these tables has caused partners to ask: "Why in the w does this happen to very intelligent managements working with (1) bright energetic staff people, (2) virtually unlimited resources, (3) the most e> sive business contacts, and (4) literally centuries of aggregate invest ms experience ?" (The latter qualification brings to mind the fellow who a) for a job and atated he had twenty years of experience — which wus cor’ by the former employer to read “one year's experience —twenty times. ‘This question is of enormous importance, and you would expect it to be subject of considerable study by investment managers and substential Ir After all, each percentage point on $30 billion ts $300 million per year.