巴菲特1992年致股东的信（英文版）

Our per - share book value increased 20.3% during 1992. Over the last 28 years (that is, since present management took over), book value has grown from $19 to $7,745, or at a rate of 23.6% compounded annually. During the year, Berkshire's net worth increased by $1.52 billion. More than 98% of this gain came from earnings and appreciation of portfolio securities, with the remainder coming from the issuance of new stock. These shares were issued as a result of our calling our convertible debentures for redemption on January 4, 1993, and of some holders electing to receive common shares rather than the cash that was their alternative. Most holders of the debentures who converted into common waited until January to do it, but a few made the move in December and therefore received shares in 1992. To sum up what happened to the $476 million of bonds we had outstanding: $25 million were converted into shares before year end; $46 million were converted in January; and $405 million were redeemed for cash. The conversions were made at $11,719 per share, so altogether we issued 6,106 shares. Berkshire now has 1,152,547 shares outstanding. That compares, you will be interested to know, to 1,137,778 shares outstanding on October 1, 1964, the beginning of the fiscal year during which Buffett Partnership, Ltd. acquired control of the company.

We have a firm policy about issuing shares of Berkshire, doing so only when we receive as much value as we give. Equal value, however, has not been easy to obtain, since we have always valued our shares highly. So be it: we wish to increase Berkshire's size only when doing that also increases the wealth of its owners. Those two objectives do not necessarily go hand - in - hand as an amusing but value - destroying experience in our past illustrates.

On that occasion, we had a significant investment in a bank whose management was hell - bent on expansion. (Aren't they all?) When our bank wooed a smaller bank, its owner demanded a stock swap on a basis that valued the acquiree's net worth and earning power at over twice that of the acquirer's. Our management - visibly in heat - quickly capitulated. The owner of the acquiree then insisted on one other condition: "You must promise me," he said in effect, "that once our merger is done and I have become a major shareholder, you'll never again make a deal this dumb."

You will remember that our goal is to increase our per - share intrinsic value - for which our book value is a conservative, but useful, proxy - at a 15% annual rate. This objective, however, cannot be attained in a smooth manner. Smoothness is particularly elusive because of the accounting rules that apply to the common stocks owned by our insurance companies, whose portfolios represent a high proportion of Berkshire's net worth. Since 1979, generally accepted accounting principles (GAAP) have required that these securities be valued at their market prices (less an adjustment for tax on any net unrealized appreciation) rather than at the lower of cost or market. Run - of - the - mill fluctuations in equity prices therefore cause our annual results to gyrate, especially in comparison to those of the typical industrial company.

To illustrate just how volatile our progress has been - and to indicate the impact that market movements have on short - term results - we show on the facing page our annual change in per - share net worth and compare it with the annual results (including dividends) of the S&P 500. You should keep at least three points in mind as you evaluate this data.

The first point concerns the many businesses we operate whose annual earnings are unaffected by changes in stock market valuations. The impact of these businesses on both our absolute and relative performance has changed over the years. Early on, returns from our textile operation, which then represented a significant portion of our net worth, were a major drag on performance, averaging far less than would have been the case if the money invested in that business had instead been invested in the S&P 500. In more recent years, as we assembled our collection of exceptional businesses run by equally exceptional managers, the returns from our operating businesses have been high - usually well in excess of the returns achieved by the S&P.

A second important factor to consider - and one that significantly hurts our relative performance - is that both the income and capital gains from our securities are burdened by a substantial corporate tax liability whereas the S&P returns are pre - tax. To comprehend the damage, imagine that Berkshire had owned nothing other than the S&P index during the 28 - year period covered. In that case, the tax bite would have caused our corporate performance to be appreciably below the record shown in the table for the S&P. Under present tax laws, a gain for the S&P of 18% delivers a corporate holder of that index a return well short of 13%. And this problem would be intensified if corporate tax rates were to rise. This is a structural disadvantage we simply have to live with; there is no antidote for it.

The third point incorporates two predictions: Charlie Munger, Berkshire's vice chairman and my partner, and I are virtually certain that the return over the next decade from an investment in the S&P index will be far less than that of the past decade, and we are dead certain that the drag exerted by Berkshire's expanding capital base will substantially reduce our historical advantage relative to the index. Making the first prediction is easy. The market was extremely overvalued at the end of 1991, as measured by several yardsticks, and those same yardsticks now suggest that valuations are more reasonable. But that's far different from saying that stocks are undervalued. We have no idea whether stocks will be higher or lower a year or two from now, but we do know that the most likely range of returns from equities over the next decade or so is well below the 17.8% annual return realized by the S&P over the past ten years.

As for the second prediction, Berkshire's capital base has ballooned in recent years, and this growth will make it much more difficult for us to outperform the market in the future. We were helped in the past by the fact that Berkshire's resources were concentrated in a small number of undervalued equities. As our capital has grown, however, we have been forced to spread our funds over many more companies. We now own portions of scores of businesses, none of which dominates our results. This spreading of our investments means that our overall performance is bound to be closer to that of the market than was the case in the past.

Last June, after ten months of service, I stepped down as interim chairman of the board of Salomon Inc. As you can tell from Berkshire's operating performance in 1991 and 1992, the company didn't miss a beat during my absence. I, on the other hand, missed Berkshire and was glad to get back to full - time work here. There is no job in the world that I would rather have than running Berkshire. I'm lucky to be in this position.

The Salomon assignment, though not always pleasant, was interesting and worthwhile. In last September's annual survey by Fortune of the nation's most - admired corporations, Salomon ranked second in the "Improvement" category among all 311 companies surveyed. In addition, Salomon Brothers, the firm's securities subsidiary, set a new pre - tax earnings record, achieving a 34% return on equity.

I should also mention that Berkshire's annual meeting this year will be held on Monday, May 3, rather than on a Saturday as in the past. The change was made to accommodate shareholders who have difficulty traveling to Omaha on a weekend. We will hold the meeting at the Orpheum Theater, which seats about 2,800. Doors will open at 7 a.m., and a short movie will be shown at 8:30. The formal meeting will begin at 9:30, and we will take a break around noon for lunch. Charlie and I will answer questions until 3:30 or so, with a short break in the afternoon.

We hope you will come. There is no other annual meeting like ours, and it's always fun. In 1991, about 1,500 people attended, and we expect an even larger crowd this year. If you want to stay at the Radisson Redick Tower, our "headquarters" hotel, be sure to make your reservation early. The phone number is (402) 346 - 3333. The Ramada Inn and the Holiday Inn Downtown are also convenient.

Berkshire's stock price crossed $10,000 late last year. Several shareholders have mentioned to me that the high price causes them problems: They like to give shares away each year and find themselves impeded by the tax rule that draws a distinction between annual gifts of $10,000 or under to a single individual and those above $10,000. That is, those gifts no greater than $10,000 are completely tax - free; those above $10,000 require the donor to use up a portion of his or her lifetime exemption from gift and estate taxes, or, if that exemption has been exhausted, to pay gift taxes.

For this problem, I offer three solutions. First, married shareholders can use the $20,000 - a - year gift - tax exclusion available to a couple by filing a joint gift - tax return. Second, shareholders can give shares at a price below market. For example, if Berkshire stock is selling at $12,000, a shareholder can give shares at $2,000 each, with the $10,000 - a - share difference being considered a gift. (However, you should be aware that if the cumulative value of such gifts exceeds your available exemption, you will have to pay gift taxes.) Finally, you can consider forming a partnership with the person to whom you want to give shares, contributing Berkshire shares to the partnership, and then giving that person a partnership interest each year. As long as the annual gift of the partnership interest is no more than $10,000, it will be tax - free.

As usual, we must issue a warning: Before engaging in transactions more complex than those described above, it's a good idea to consult your tax advisor.

In 1983, we stated in our annual report that we were leery of stock splits. We continue to believe that our policy of acting in the best interests of shareholders, which includes not splitting the stock, has helped us assemble one of the finest shareholder groups in corporate America. Our shareholders think and act like long - term investors, and they identify with the company as Charlie and I do. As a result, Berkshire's stock price has tended to remain in line with the company's intrinsic value.

In addition, I believe that the turnover rate of Berkshire's shares is much lower than that of other publicly - traded companies. The frictional costs of trading - what we call the "tax" on stock ownership - are virtually nonexistent at Berkshire. (The market - making skills of Jim Maguire, our New York Stock Exchange specialist, have helped keep these costs low.) A split would not change this situation dramatically, but we see no way that the quality of our shareholder group would be enhanced by the new shareholders attracted by a split. Instead, we believe there would be some deterioration.

We are often asked why Berkshire does not issue dividends. The short answer is that we want to maximize the long - term value of your investment in Berkshire, and retaining earnings is the best way to do that. We have no interest in paying dividends simply for the sake of paying them; our goal is to use the money in ways that will increase the value of your shares.

Over the years, we have used the earnings of Berkshire's subsidiaries to invest in a wide variety of businesses, some of which have been extremely profitable. We have also used the money to buy shares in other companies that we believe have good long - term prospects. By retaining earnings and reinvesting them in these ways, we have been able to grow Berkshire's net worth and increase the value of our shareholders' investments.

Of course, there is no guarantee that our reinvestment of earnings will always pay off. But we are confident that, over the long term, it will be more beneficial to shareholders than paying dividends. If we ever reach a point where we believe that retaining earnings is no longer in the best interests of shareholders, we will change our policy. But that time has not come.

Let me now turn to a review of Berkshire's operating results for 1992. Our consolidated net earnings were $424 million, or $368 per share. This compares to $342 million, or $302 per share, in 1991. The increase in earnings was due primarily to higher profits at our insurance subsidiaries and to the performance of our equity investments.

Our insurance business had a good year in 1992. The combined ratio (the ratio of losses and expenses to premiums) for our property - casualty insurance operations was 98.2%, down from 100.7% in 1991. This improvement was due to a combination of factors, including better underwriting results, lower loss ratios, and a decline in the cost of reinsurance.

We continue to be pleased with the performance of our super - catastrophe insurance business, although the results for 1991 and 1992 were close to break - even. As I mentioned in last year's report, this business is highly volatile, and we expect large swings in profitability from year to year. We believe that, over the long term, our super - catastrophe insurance operations will be very profitable.

Our other insurance operations also performed well in 1992. GEICO, our largest insurance subsidiary, continued to grow its market share and reported record - high earnings. The company's success is due to its low - cost structure, its excellent customer service, and its effective marketing. We are very proud of GEICO and its management team.

In addition to our insurance business, Berkshire owns a number of other businesses that contributed to our overall results in 1992. Our textile operation, which we have been phasing out over the past several years, continued to lose money in 1992. However, the losses were smaller than in previous years, and we expect the operation to be closed down completely in 1993.

Our other non - insurance businesses had a good year. See's Candies, for example, reported record - high sales and earnings. The company's success is due to its high - quality products, its strong brand name, and its excellent management. We are very pleased with the performance of See's and its management team.

Another of our non - insurance businesses that did well in 1992 was Scott Fetzer. Ralph Schey, the company's president, had a great year, generating $110 million in pre - tax earnings on only $116 million in capital. This is an outstanding return on capital, especially considering that the company has no significant financial leverage. Scott Fetzer has been a great addition to Berkshire, and we are very grateful to Ralph and his team for their hard work and dedication.

Finally, I want to mention that Berkshire's operating expenses were relatively low in 1992. Our after - tax expenses as a percentage of reported after - tax earnings were less than 1%, and our expenses as a percentage of annual "look - through" earnings were less than 0.5%. We have no legal, personnel, public relations, or corporate planning departments, and we have very few employees at corporate headquarters. We believe that a simple, low - cost organization is more efficient than a large, bureaucratic one, and we strive to keep Berkshire's costs as low as possible.

In conclusion, I want to thank all of Berkshire's shareholders for their continued support. We are committed to increasing the value of your investment in Berkshire over the long term, and we will continue to work hard to achieve that goal. Charlie and I look forward to seeing many of you at the annual meeting in May.

Sincerely,

Warren E. Buffett

Chairman of the Board