TO MY PARTNERS:
In the past, partners have commented that a once-a-year letter was “a long time between drinks,” and that a semi-annual letter would be a good idea. It really shouldn’t be too difficult to find something to say twice a year; at least it isn’t this year. Hence, this letter which will be continued in future years.
During the first half of 1961, the overall gain of the Dow-Jones Industrial Average was about 13%, including dividends. Although this is the type of period when we should have the most difficulty in exceeding this standard, all partnerships that operated throughout the six months did moderately better then the Average. Partnerships formed during 1961 either equaled or exceeded results of the Average from the time of formation, depending primarily on how long they were in operation.
Let me, however, emphasize two points. First, one year is far too short a period to form any kind of an opinion as to investment performance, and measurements based upon six months become even more unreliable. One factor that has caused some reluctance on my part to write semi-annual letters is the fear that partners may begin to think in terms of short-term performance which can be most misleading. My own thinking is much more geared to five year performance, preferably with tests of relative results in both strong and weak markets.
The second point I want everyone to understand is that if we continue in a market which advances at the pace of the first half of 1961, not only do I doubt that we will continue to exceed the results of the DJIA, but it is very likely that our performance will fall behind the Average.
Our holdings, which I always believe to be on the conservative side compared to general portfolios, tend to grow more conservative as the general market level rises. At all times, I attempt to have a portion of our portfolio in securities as least partially insulated from the behavior of the market, and this portion should increase as the market rises. However appetizing results for even the amateur cook (and perhaps particularly the amateur), we find that more of our portfolio is not on the stove.
We have also begun open market acquisition of a potentially major commitment which I, of course, hope does nothing marketwise for at least a year. Such a commitment may be a deterrent to short range performance, but it gives strong promise of superior results over a several year period combined with substantial defensive characteristics.
Progress has been made toward combining all partners at yearend. I have talked with all partners joining during this past year or so about this goal, and have also gone over the plans with representative partners of all earlier partnerships
Some of the provisions will be:
(A) A merger of all partnerships, based on market value at yearend, with provisions for proper allocation among partners of future tax liability due to unrealized gains at yearend. The merger itself will be taxfree, and will result in no acceleration of realization of profits;
(B) A division of profits between the limited partners and general partner, with the first 6% per year to partners based upon beginning capital at market, and any excess divided one-fourth to the general partner and three-fourths to all partners proportional to their capital. Any deficiencies in earnings below the 6% would be carried forward against future earnings, but would not be carried back. Presently, there are three profit arrangements which have been optional to incoming partners:
| Interest Provision | Excess to Gen. Partner | Excess to Ltd. Partners | |
| (1) | 6% | 1/3 | 2/3 |
| (2) | 4% | 1/4 | 3/4 |
| (3) | None | 1/6 | 5/6 |
In the event of profits, the new division will obviously have to be better for limited partners than the first two arrangements. Regarding the third, the new arrangement will be superior up to 18% per year; but above this rate the limited partners would do better under the present agreement. About 80% of total partnership assets have selected the first two arrangements, and I am hopeful, should we average better than 18% yearly, partners presently under the third arrangement will not feel short-changed under the new agreement;
(C) In the event of losses, there will be no carry back against amounts previously credited to me as general partner. Although there will be a carry-forward against future excess earnings. However, my wife and I will have the largest single investment in the new partnership, probably about one-sixth of total partnership assets, and thereby a greater dollar stake in losses than any other partner of family group, I am inserting a provision in the partnership agreement which will prohibit the purchase by me or my family of any marketable securities. In other words, the new partnership will represent my entire investment operation in marketable securities, so that my results will have to be directly proportional to yours, subject to the advantage I obtain if we do better than 6%;
(D) A provision for monthly payments at the rate of 6% yearly, based on beginning of the year capital valued at market. Partners not wishing to withdraw money currently can have this credited back to them automatically as an advance payment, drawing 6%, to purchase an additional equity interest in the partnership at yearend. This will solve one stumbling block that has heretofore existed in the path of consolidation, since many partners desire regular withdrawals and others wish to plow everything back;
(E) The right to borrow during the year, up to 20% of the value of your partnership interest, at 6%, such loans to be liquidated at yearend or earlier. This will add a degree of liquidity to an investment which can now only be disposed of at yearend. It is not intended that anything but relatively permanent funds be invested in the partnership, and we have no desire to turn it into a bank. Rather, I expect this to be a relatively unused provision, which is available when something unexpected turns up and a wait until yearend to liquidate part of all of a partner’s interest would cause hardship;
(F) An arrangement whereby any relatively small tax adjustment, made in later years on the partnership’s return will be assessed directly to me. This way, we will not be faced with the problem of asking eighty people, or more, to amend their earlier return over some small matter. As it stands now, a small change, such as a decision that a dividend received by the partnership has 63% a return of capital instead of 68%, could cause a multitude of paper work. To prevent this, any change amounting to less than \$1,000 of tax will be charged directly to me.
We have submitted the proposed agreement to Washington for a ruling that the merger would be taxfree, and that the partnership would be treated as a partnership under the tax laws. While all of this is a lot of work, it will make things enormously easier in the future. You might save this letter as a reference to read in conjunction with the agreement which you will receive later in the year.
The minimum investment for new partners is currently \$25,000, but, of course, this does not apply to present partners. Our method of operation will enable the partners to add or withdraw amounts of any size (in round \$100) at yearend. Estimated total assets of the partnership will be in the neighborhood of \$4 million, which enables us to consider investments such as the one mentioned earlier in this letter, which we would have had to pass several years ago.
This has turned out to be more of a production than my annual letter. If you have any questions, particularly regarding anything that isn’t clear in my discussion of the new partnership agreement, be sure to let me know. If there are a large number of questions, I will write a supplemental letter to all partners giving the questions that arise and the answers to them.
Warren E. Buffett
Vlb
July 22, 1961
致我的合伙人：
过去，有合伙人曾表示，一年一封信“间隔太长，不过瘾”，半年一封信会是个好主意。一年说两次话，应该不会太难——至少今年不难。因此，这封信将延续到未来年份。
1961年上半年，道琼斯工业平均指数（含股息）的整体涨幅约为13%。虽然这种市况本应是我们最难超越该基准的时期，但所有运行满六个月的合伙企业都取得了略高于指数的成绩。1961年期间成立的合伙企业，自成立之日起的成绩要么与指数持平，要么超越指数，主要取决于它们运行了多久。
不过，请允许我强调两点。第一，一年时间太短，不足以对投资业绩形成任何判断；基于六个月的衡量则更加不可靠。我某种程度上不太愿意写半年信的原因之一，就是担心合伙人们可能开始用短期表现来思考问题——这最容易产生误导。我自己的思路更倾向于以五年为周期来评估，最好能同时在牛市和熊市中都检验相对业绩。
第二点，我希望每个人都明白：如果市场继续以1961年上半年的速度上涨，我不仅怀疑我们能否继续超越道指的表现，而且很有可能我们的业绩会落后于指数。
我们的持仓，我一直认为相比一般投资组合是偏保守的，而且随着整体市场水平上升，它们会变得更加保守。在任何时候，我都试图让投资组合中的一部分证券至少部分地隔离于市场行为的影响，这部分应该随着市场上涨而增加。尽管结果对于哪怕是业余厨师（或许尤其是业余厨师）来说也很诱人，但我们发现，投资组合中更多的东西并没有放在炉子上。
我们还开始在公开市场收购一个潜在的重大仓位——我自然希望它在至少一年内不要在市场上有什么动静。这样的仓位可能会拖累短期表现，但在几年期内有望带来优异业绩，同时具备强大的防御特征。
在年底将所有合伙企业合并的工作已经取得进展。我已经与过去一年左右加入的所有合伙人讨论过这个目标，也和所有早期合伙企业的合伙人代表一起审查了方案。
一些条款如下：
（A）将所有合伙企业合并，按年底市值作价，并就因年底未实现收益而产生的未来税负在各合伙人之间进行适当分配。合并本身免税，且不会加速利润的实现；
（B）有限合伙人与普通合伙人之间的利润分配方式：每年向合伙人分配基于年初市值（按市场价值）计算的6%收益，超出部分四分之一归普通合伙人，四分之三按资本比例分配给所有合伙人。若收益低于6%，不足部分将向后结转至未来收益，但不向前追溯。目前，新加入的合伙人可选择三种利润分配方案：
| 利息条款 | 超出部分归普通合伙人 | 超出部分归有限合伙人 | |
| (1) | 6% | 1/3 | 2/3 |
| (2) | 4% | 1/4 | 3/4 |
| (3) | 无 | 1/6 | 5/6 |
若盈利，新的分配方案对有限合伙人来说显然比前两种安排更好。至于第三种方案，新方案在年收益率18%以下时更优；但超过这一比例，有限合伙人在现有协议下会更好。约80%的合伙企业总资产选择了前两种安排，我希望——如果我们年均收益率超过18%——目前选择第三种方案的合伙人在新协议下不会觉得吃亏；
（C）若出现亏损，不会向前追溯抵扣此前已计入我（作为普通合伙人）名下的金额。但会向后结转以抵扣未来超额收益。不过，我和我太太将成为新合伙企业中最大的单一投资者，约占合伙企业总资产的六分之一，因此在亏损时承担的实际美元金额比任何其他合伙人或家族群体都要大。我将在合伙协议中加入一条条款，禁止我或我的家族购买任何有价证券。换句话说，新合伙企业将代表我在有价证券上的全部投资操作，因此我的业绩将与你们直接成正比——但如果我们做得超过6%，我仍然享有优势；
（D）按月支付条款：按年初市值的6%年利率支付。不希望当期提款的合伙人可以自动按6%利率将其作为预付款贷记，在年底购买额外的合伙人权益。这将解决合并道路上此前存在的一个障碍，因为许多合伙人希望定期提取资金，而另一些希望将所有收益再投资；
（E）年内借款权：以6%利率借入不超过你合伙权益价值20%的金额，该贷款在年底或之前清偿。这将为目前只能在年底处置的投资增加一定流动性。当然，我们并不希望合伙人将非相对永久的资金投入合伙企业，也不想把它变成银行。相反，我预计这是一项相对少用的条款，当出现意外情况而等到年底才能变现部分或全部合伙权益会造成困难时，它可以派上用场；
（F）安排：合伙企业申报表在后续年份产生的任何较小税负调整，将直接向我本人征收。这样，我们就不必为一些小事要求八十多个人修改他们之前的申报表。目前，一个小变动——比如认定合伙企业收到的股息中63%是资本返还而非68%——就会导致大量文书工作。为防止这种情况，任何导致税额变动低于1000美元的调整都将直接由我承担。
我们已经将拟议的协议提交华盛顿，请求裁定合并免税，以及合伙企业根据税法被视为合伙企业。虽然这工作不少，但未来事情会轻松很多。您可以保存这封信，作为参考，与年底稍后收到的协议一同阅读。
目前新合伙人的最低投资额为25,000美元，当然这不适用于现有合伙人。我们的操作方式将使合伙人能够在年底以任意整数金额（以100美元为单位）增加或提取资金。预计合伙企业总资产将达到约400万美元，这使我们能够考虑诸如本信前面提到的投资机会——而几年前我们只能放弃。
这封信比我每年的年度信篇幅还长。如果您有任何问题，特别是关于我对新合伙协议讨论中任何不清楚之处，请务必告诉我。如果问题较多，我将撰写一封补充信给所有合伙人，列出提出的问题及回答。
沃伦·E·巴菲特
Vlb
1961年7月22日