Wesco金融董事长信函，1985财年（查理·芒格）

WESCO FINANCIAL CORPORATION LETTER TO SHAREHOLDERS To Our Shareholders: Consolidater "normal" operating income (i.e., before all unusual operating income and all netigains from sales of securities) forthe calendar year 1985 decreased to $8,347,000 ($1.17 per share) from $10,060,000 ($1.42 per share) in the previous year. from sales of securities) increased to $51,541,000 ($7.24 per share) from $23,656,000 Consolidated net income (i.e., after unusual operating income and all net gains ($3.32 per share) in the previous year. General Foods stock caused most of the net income in 1985. The table below gives A highly unusual capitai gain, of a not-likely-to-recur type, from disposition of particulars. headquartered in Chicago and engaged in the steel varehousing and specialty metal Wesco has three major subsidiaries, Mutual Savings, in Pasarlena, Precision Steel, products businesses, and Wesco-Financial Insurance Company, headquartered in Omaha and currently engaged in the reinsurance husiness. Consolidated net income for the two years just ended breaks down as follows (in 000s except for per-share amounts)!!: Year Ended December 31 1985. Wesco Fer December 31, 1984 Fer Amount Share Amount Wesco Share "Mormal" net operating income (loss) of: Mutual Savings Precision Steel businesses $ 3,342 $ .47 2,010 .283 $ 3,476 $.49 Wesco financial insurance busines: 2,034 .29 Investment activity Underwriting (1,584) (.22) 1,225 - - -17 (359) (05) All other "normal" net operating incomen 3,354 -47 4,550 .64 Net gains on sales of ser urities'* Fluctuation in market valur of GNMA futures contrarl .. 8,347 i.17 1,671 .24 10,060 458 1.42 .06 41,523 5.3 13,138 1.84 Wesco consolidated net income........ $51,541 $23,656 $3.32 121 Alter decku ton et interest and colore coarde spo do o do o arne hero ades colice e benehns, primarey dessedd dos corsarte desorde andanteses and des decline ene teart e harpas atende cand no This supplementary breakdown of tarnings differs somewhat from that used in audited financial statements w hich follow standard accounting convention. The supple - mentary breakdown is furnished because it is considered useful to sherehoiders. 1

Mutual Savings Mutual Savings' "normal" net operating income of $3,3.42,000 in 1985 represented a decrease of 4% from the $3,476,000 figure the previous year. Separate balance sheets of Mutual Savings at yearend 1984 and 1985 are set forth at. the end of this annual report. They show (1) total savings accounts rising to $269 million from $228 million the year before, (2) a very high ratio of shareholders' equity to savings account liabilities (probably the highest for any mature U.S. savings and loan associa- tron), (3) a substantial portion of savings account liabilities offset by cash equivalents and marketable securities, (4) a loan portfolio (mostly real estate mortgages) of about $83 million at the end of 1985, down 12% from the $95 million at the end of 1984, and (5) favorable effects of securities gains and other unusual gains and fluctuations, which caused net worth to decline only $4 million in 1985 despite payment of a dividend of $14 million to the parent corporation. The loan portfolio at the end of 1985, although containing almost no risk of loss from defaults, bore a fixed average interest rate of only 7.60%, probably the lowest for ariy U.S. savings and loan association and far below the average interest rate which now must be paid to hold savings accounts. However, as the loan payoff pace intensified ard interest rates declined sharply in 1985, the unrealized depreciation in the loan portfolio became approximately offset by unrealized appreciation in Mutual Savings' interest- bearing; securities and preferred stocks. As pointed out in footnote 13 to the accompanying financial statements, the book value of Wesco's equity in Mutual Savings (557,6 million at December 31, 1985) over- states the amount realizable, after taxes, from sale or liquidation at book value. If all Mutual Savings' assets, net of liabilities, were to be sold, even pursuant to a plan of complete liquidation, for the $57.6 million in book value reported under applicable accounting convention, the parent corporation would receive much less than $57.6 million after substantial income laxation imposed because about $47 million of what is designated shareholders' equiry for accounting purposes is considered bad debt reserves for most tax purposes. on hand (mostly 22 largely oceanfront acres in Santa Barbara) has become worth over a There is, however, a buried plus value in Mutual Savings. The foreclosed property long holding period much more than its $1.5 million balance sheet carrying cost. Reasonable, community-sensitive development of this property has been delayed over 10 years in the rourse of administration of land-use laws. But we are optimistic that an end to ihe delay is near and that the Santa Barbara and Montecito communities will be very pleased with the development: ow likely to go forward. This development will contain 32 houses intersperser with large open areas. Mutual Savings plans to make the development first rate in every respect, and unique in the quality of its landscaping. Balancing all merits and demerits, Mutual Savings, as it has been managed under holders' point of view. Mutual Savings' good points are: (1) high asset quality and sound present conditions by the writer and others, is no jewel of a business rom the share- balance sheet; (2) a maturity match cfinterest-bearing assets and liabilities which makes risk of insolvency near zero, whatever happens to interest rates; and (3) a deserved to the inslitution in an efficient one-large office operation, as distinguished from a reputation for high quality service to account holders, achieved at below-average cost 2 many-small-branch-offices operation. Mutual Savings' bad points are: (1) all recent rowth in savings accounts, considered on an incremental effects basis, has been ios! business because interestand other costs incurred exceed income obtained by employ- ing proceeds in short-term interest-bearing assets; (2) a burdensome positien under the system to help bail out more venturesome savings and loan associations which become FSLIC account-insurance system causes payments of ever-higher umou ts into the insolvent, with the payments being required despite the fact that Mutual Savings reaching an acceptable level over recent years only with help trom securities gains anc other unusual items; (4) it would not be easy to leave the savings and loan business, should this course of action ever be desired, without a large income tax burden of a type structure of the savings and loan business creates a competitive situation in which it is not applied to corporations orher than savings and loan associations; (5) the regulatory hard to make respectable profitsthrough careful operations; and (6) management has •not yet found an acceptable remedy for any of the previously isted bad points, despite years of trying. Moreover, comparisons of post-1984 financial results for Mutual Savings with results for many other and more typical savings and loan association: in California leave Mutual Savings looking inferior, to put it mildly. As interest rates went down these other associations, which have greater financial leverage and operated less iearfully than Mutual Savings during former high-interest periods, came to have loan and investment portfolios which (1) now are worth more on average than book value and (2) now produce a high return on book value of shareholders' equity, after deduction of operating expenses and interest to account holders at presen: rates Any Wesco share- holder who thinks Mutual Savings has any expertise in predicting and profiting from interest rate changes can nok at the 1985 record and despair. Despite the fact that some othersav ngs and loan associations did much better after 1984 than Mutual Savings, and are now much better poised to report good figures for 1986, we plan to continue operating only in ways acceptable in our own judgment, anticipating as a consequence widely fluctuating and sometimes inadequate returns. In the future, however, Mutual Savings will make and purchase more loans. Now that Mutual Savings' old mortgage loans have declined in amount and increased in market value (the market value increase being caused both by a decline in generally prevailing interest rates and by a shortening of remaining loan life), new loans will be added as seems wise, with a target that 60% of assets be in housing-related loans. The first new direct loan in some time, an adjustable rate mortgage with no cap on future interest rate changes but with an extremely luw "spread" for the lender, will shortly be closed. We are not at all excited by our prospects as we now make housing loans of this type, but ive wish to get some renewal of direct mortgag: lending under way. With assets not employed in direct real-estate lending, Mutual Savings continues not only to make payments to FSLIC far in excess of fair charges for risks imposed on FSLIC but also to employ a large part of total assets in short-term loans to the Federal Home Loan Bank. These practices are pro-social but will continue to reduce profits. Mutual Savings also continues to support the Federal Home Loan Bank Board in its efforts to change the presentrules ofthe savings and loan business to augment average 3 despite some improvement in 1985 through wise efforts of the Federal Home Loan Bank soundness of FSLIC-insured associations. We retain our opinion that the present rules, financial "swingers" to grow as they gamble, through u e of account guarantees from boaro, are unsound, from the country's point of view. loo much latitude is allowec rates to attract more accounts. FSLIC, an agency of the U.S. Government, while they offer whatever it takes in interest With money being the ultimate fungible co. modity, it seems to us that the rules create a super-competitive, commodity-type business, in which (1) economic law realize very modest returns on shareholders' equity over extended time periods, yet (2) probably destines most careful associations, like other fungible-commodity dealers, to good financial results can nonetheless usually be reported in each near-term period by sures which increase risk, while: (3) the importance and rewards of managers, who managers-in-charge through aggressive deposit-expanding, lending and investing mea- usually have little downside risk as owners, are tied mostly to institutional size and recently reported numbers. With managers mostly being non-owners, a sort of tends to work with extra force as managers fear being left out of whatever activity allows Gresham's law of competitive-yet-deposit-insured banking, "bad loans drive out good," reason for assuming that ethical, intelligent managers in the savings and loan industry are competing managers to report high profits while bidding high for deposits. We see no immune from effects similar to those which caused similar managers of all major U.S. stand apart from the crowd. If our diagnosis is correct, a lot of serious trouble lies ahead banks to place significant portions of assets in now-regretted foreign loans, rather than (perhaps far ahead) for U.S. savings and loan associations. almost 100% of demand for those housing loans which are sound at the prevailing While present rules and practices have a positive side in causing satisfaction of interest rate, this accoinplishment is accompanied by much unsound housing and other lending and by much unsound investment in "junk bonds" anci other assets unsuitable for highly leveraged, federally insured, deposit-taking institutions. The system design in place would probably be a flunking design in an engineering course, where the empha. sis would be on preserving the integrity of an essential system by a margin of safety, by sound credit extension and (2; forced more conservative conduct on banks and savings being content with rules which (1) causer satisfaction of, say, only 95% of requests for and loan associations. course, where the wise practice is to remove sonie healthy cells along with cancerous ihe present desięn, we think, would probablyalso be aflunking design in a surgery cells, based on margin-ot-satety principles, yve hope we are wrong about the present ultimately reaching housing borrowers and would-be housing borrowers, whose inter- design of the savings and loan system, but we fear increased, widespread adversity. ests we consider important. Any such adversity would probably be followed by changes savings and loan industry structure and practices has helped deterus from directlonding in the rules. No doubt, our judgment as to the probable temporary nature of present of a conventional sort which otherwise would have occurred. Our attitude, right or wrong, during recent tumultuous changes in the savings and loan industry, has been Mutual Savings berause future truble in the savings and loan business may create opportunities worth soving

Precision Steel Wesco's Precision Steel subsidiary, located in the outskirts of Chicago at Franklin Park, Illinois, was acquired for approximately $15 million on February 28, 1979. The price was roughly book value for a company which carned its inventories on a con- servative LiFTy accounting basis and which contained significant cash balances. More important, the company had reached its position from a modest beginning through naintenance of sound, customer-oriented business values inculcated over a long time y a gitted tounder and his successors, Precision Steel owns a well-established stee service renter business and a subsidiary engaged in the manufacture and distribution of tool ran supplies and other specialty metal products. Precision Steel's businesses contributed $2,010,000 to "normal" net operating in 1985 riofit was achieved in spite of dec*eased sales (down 7% to $51,124,000). income in 1985, down 1% compared with $2,034,000 in 1984. Such a modest decrease Under the skilled leadership of David Hillstrom, Precision Steel's businesses are now quite satisfactory, taking into account the financial leverage put into Wesco's consolidated picture incident to their acquisition. Shortly after Wescos purchase of Precision Steel, a substantial physical expansion of steel warehousing facilities was authorized, involving a new building in Charlotte, North Culina. The new building and the whole North Carolina operation are now very surcessful, contributing $9,140,000 to 1985 sales at a profit margin higher than has prevailed in the long establis «d Chicago headquarters' facility. Precision Steel's businesses, despite their mundane nomenclature, are steps advanced on the quality scale from mere commodity-type businesses. Many customers of Precision Steel, needing dependabir supply un short notice of specialized grades of high-quality cold rolled strip steel, reasonable prices, technical excellence in cutting to order, and remembrance when supplies are short, rightly believe that they have no fully con parable alternative in Precision Steels market area. Indeed, many customers at locations remote from Chicagn and Charlotte fior instance, los Angeles) seek out Precision Sitel's service. Wesco pomains interested on logic dexpansion of Precision Steel's businesses, using available liquid a sets. Wesco-Financial Insurance Company A rey business was addled to the Was group in 1485, in do venture with Wess e's 80% owner and ultinate parent corporation, Berkshire Hothamas Ine. With the enthusstre approval of all Was cosee tors, ind luding substantial Wesco shareholder in the Peters and Casper tamili, without whose approval such action would set haveber a taken, Wese crested $-45,000, 00o cash equavalents in a newly organiard, wholly ened, Nobraske bartered insuran e empany: Wasee-Finane tal Insurance Company ("Ves FIC"). The new subsidiar Wrs FIC.then reinsured, through another Berkshire Hathaway insurane contampany subsidia enanternesday without porce depot threntire borek of insurance basiness of the long etablahed foremans fund orp deed on the Mysti. 5 and losses under a contract covering all insurance premiums earned by Fireman's Fund Wes FIC thereby assumed the benefits and burdens of Fireman's Fund's prices, costs FIC in almost exactly the position it would have been in if it, instead of Fireman's Fund, during a four-year period commencing September 1, 1985. The a rangement puts Wes- the investment side of insurance, as Wes-FIC, instead of Fireman's Fund, Invests funds had directly written 2% of the business. Differences in results should occur only from from "float" generated. Wes-FIC's share of premiums earned In 1986 is expected to be over $60 million. September 1, 1985, to December 31, 1985, are included on pages 29 and 30 of this Wes-FIC's separate firancial statements, uvering the brief period of its existence, Annual Report, and show that Wes-FIC experienced a small 1985 reduction in net worth, from $45,000,000 to $44,676,000. We do not consider this four-month result to have significant predictive value with reflected in 1985 numbers. Moreover, the financial statements are of questionable respect to the future. The price of insurance is rising, with price increases not yet fully accuracy and could be wrong in either direction. It is in the nature of even the finest casualty insurarce businesses that in keeping their accounts they must estimate and in this undertaking make financial statements more mere "best honest guesses" than is deduct all future costs and losses from premiums already earned. Uncertainties inherent typically the case with accounts of non-insurance-writing corporations. And the rein- exira links in the loss-reporting chain, usually creates more accounting uncertainty than surance portion of the casualty insurance business, because it contains one or more the non-reinsurance portion. Finally, Wes-FIC's initial financial statements have a disad- vantage in that the period covered is short, making any use of the reported past cost- price ratio extra dubious as an indicator of any probable future cost-price ratio, due to the small size of the sample forming a base for projection. a reasonable return on its investment over the four vears of the fireman's Fund rein- it is entirely forsoon to foree ast future results for Wes-fiC, but Wesco hopes for: (1) surance contract, and (2) possible future reinsurance contracts with other insurers. shareholder and stock option holder of Fireman's Fund. Mr. Byrne was an outstanding Wesco has high regard for John Byrne, newls appointed CEO and also a large insurance company manager in his previous position as CEO of GEICO CORPORA- enormously during his stewardship. Fireman's Fund insurance business is intrinsic ally TION 138% owned, but not controlled, by Berkshire Hathaway. which improved lower distribution ross prom a different. "direct writing" distribution system. Thus more eyelica and less advantaged than Gees enre insurane busness, which has Firemans funds business wall almost surely be much more castic ult to improve perma- exer utives know all this very well, and with poprovement less spay tao ular than previous nently than win the cast of Cill d), However, Mr. Borne and other Fireman's Fund improvement at Glid C. fremans fund and Wes He could both prosper Industry-wide conditions, de well as managenal exe ellen e, attent Was-Fle a porris. perts tinder the reinsurance contract with Fireman's Fund. Large premium increase now going into effect throughout the casualt insurance basingas could provide some bichwas one at the wordin busters welcome failind off te made a de head ind often to of the period jord tonder! h we are pleased with our relationship with Fireman's Fund, which has a long and distinguished record, going all the way back to superb performance after the great San Francisco earthquake and fire, and which is affiliated with the even longer established American Express Company, one of the premier corporations in the United States. surance contract, and possible short-term, industry-wide cyclical improvement, is tem- However, Wesco's optimism about quality of Fireman's Fund, quality of this rein- pered by a larger and longer view of the reinsurance business. That business has the defect of being too attractive-lonking to new entrants for its own good and therefore will aiways tend to be more or less the opposite of, say, the old business of gathering and rendering dead horses, which tended to contain few and prosperous participants. Troubles, losses, and insolvencies can come fast as the apparent attractions of the reinsurance business, including its seductive receive-pay-in-advance aspects, lure new entrants and encourage expansions by old occupants. The business was a disaster area in recent years, adversely aflected by prices which would have been too low in a stable beyond limits contemplate when policies were issued, and not-minor degradation of woria, plus inflation, new judicial notions tending to augment insurance coverage commercial behavior. No doubt recent cornercial behavior degradation, particularly noticeable in the reinsurance business on both sides of the purchase counter, was accelerated by general hardship, demonstrating unce agdin the wisdom of Poor Richard Almanac: "It is hard for an empty sack to stand upright." Insurance company subsidiaries of Wesers parent corporation, Berkshire the recent period of industry-wide problems, but financial results from reinsurance were Hathaway, long active in reinsurance, did continue proper commercial behavior during terrible. Thus Westo shareholder are bring led not only into an extra hazardous place but also by people who met severe reverses on the last trip. Is there any reasonable hope tor Wesco shareholders that its reinsurance business, one reason torlong-terns optimismis present. With recent defaults by reinsurers cousing whaleyer its short-leem marils, will prewice an advanagrous long from journey? Yes, everyone to worry more about quality in promisors, Wis-FIC and Berkshire Hathaway help creato for Wes-FIC an unusual, commercially-useful reputation ior issuing trust- expert that their alet-fashioner engineering-type attitudes and financial practices will worthy promiseson one or more markets or submarket a herein most busers will ace opt nothing less. Thus, the absener of tederal insuraned ton pensurane liabilities may create for Wife a reputation based competiton adanage which is denied to their ad a counts. Mutua Saving to All i support on all Mated Sauge sempeditor through insure All Other "Normal" Net Operating Income Allother "normal net operating in ome, net at interest paid and pea pat corporate expenses, derraned to $3,354,001 in 1985 from 54.550.000 in 1984 Sour era Were (1) rents ($3.219,000 gross, earluding rent from Mated Savings trun Wow on Posedern office bulling boond prechnical deed to easier although Motel Savings in the ground too toman and dantep d dead Mon ash entrendand marketable securities held by Precision Steel and its subsidiaries and at the parent company levei. Net Gains on Sales of Securities Wesco's aggregate net gains on sales of securities, combined, atrei income taxes, inc:eased to $41,523,000 in 1985 from $13.138,000 in 1984. The 1985 figure includes a big after-tax gain ($34,363,000) from sale of General Foods stock to Philip Morris Company. This gain contained a large amount of windfall profit. When Wesco rade its investment in General Foods stock several years ago, because General Foods' executives seemed sensible and the stock was available in the market at a conservative price relative to its value as a share of ownership in a presumn- ably ever-continuing independent enti!y, it was unprecedented and virtually incon- ceivable that a corporation the size of Genera! Foods wouid ever be "bear-hugged" into selling out at an immense premium over the then prevailing market price for its stock. and the great American takenver ge:ne swept into new areas. But that is what happened, wholly unpredicted by Wesco, in 1985 as old taboos ero ded Bowery Savings Bank In 1985 Wesco, in anether co-venture with its parent corporation, approved by Wesco's dirertors in the satae manner as the Wes-FIC co- anture, joined d group which invested $100,000,000 rash in a nowly organized, New York-chartererd sovings bank. The new bank Ihen tonk over the name, estets and liabilities of the insolvent Bowery Savings Bunk in the d ity oftoriy York. The Takrover reorived Wmu h needed assistanee from HDIC. the lederal agency, akin to ISLIC, which insun deposits in banks, and (2) the bleising of Now York bank regulators. Wesco anvested $9,000,000, other Berkshire Hathawas subsicharit s investeed S1. 384,000 andother untelaleddinvestors invested the halane e ot tito $1020,000,000. The terme of ttr FE degstanee whe hand dadde inc omer asastanc e pryments poser summarizedas tartrom adequate tenassare that the marsteir will make a protit. Thisas as many yeats fos !he newi organeed bank. are estremof c omplex hut can be fnirly i showle be when Sird mben basea hashly legeregedd residduat opusty position in,1 $5 buffon bank, abet one sth mand ack olsse. busine ssit e d' drass: pastee, ansons, e troabted c ompos d's a deensdug Any minorite pesten uenden with seh pateeme tmandal Reverage ion efter t envirenmen ea torly fns e alleed d ventare d apatel topr misp s ment dor Wesee In ond? jurymand the pospect ton panajusttedd therch ollo dhransodmentanodr, oall drenseasetiddenmsk degeneu ddes ese med arret dle bn coopl the ddes tose rrsposare• portica dalbo #oe od Nesees copse fated nee merwth Mr copsde ae tonancdalls involed i ser torluar ed handted smadd Dadde sseet io deppate dne aled sote de Hraknut eur eelulls Consolidated Balanee Shert and Related Discussion Mtar en e omegardated beetm to chated dl! totus d cdeneth brutteg ed d ommpans whoses onsoldae d rnd carth op porelarer duranda omnare to othede aldddi ledlerc daed tottetuas slest posseobotaso spocstron cot esdehtanal pog anaerost o fars pader les catr H found available, despite constant searcl:, at prices deemed rational from the standpoint of Wesco shaitholders. As indicated in Note 3 lo the accompanying financial statements, the aggregate market value of wescos marketable equity securities was nigher than their aggregate cost at December 31, 1985 by about $5 million, down sharply from about $13 million one year eárlier. Wesco's Pasadena real estate, a full block (containing (1) about 125,000 first class net rentable square feet, including Mutual Savings' space, in a moderr office building, plus (2) an additional l:et rentable 34,000.square teet or economically m'arginal space in olo buildings requiring expensive improvement), has a market value suk stantially in exces of carrying value, demonstrated by (1) mortgage debt ($5,023,00l at 9.25% fixed) against this real estate now exceeding its depreciater! carrying valut ($3,158,000) in Wesco's balance sheet at December 31, 1985, and (2) substantial current net cash flow (about $1 million per year) to Wesco after debt service on the mortgage. The modern office building is 96,% rented, despite a glut of vacant office space in Pasadena. We charge just-below-standard rents and run the building as a sort of first-class club for tenants we admire. With these practices, a prime location and superior parking facili- inflation. ties, we anticipate future increases in cash flow, but at no better rate than the rate of Wesco remains in a prudent position when total debt is compared to total share- holders' equity and total liquid assetș. Wesco's practice has beento do a certain amount oflong-term borrowing in advance of specific need, in order to have maximum financial flexibility to face both hazards and opportunities. due course be used in one or more business extensions. The extension activity, however, It is expected that the balance sheet strength of the consolidated enterprise will in requires some patience, as suitable opportunities are not always present. As indicated in ichedule | accompanying Wesco's financial statements, invest- ments, both those in the savings and loan and reinsurance subsiciaries and those held! temporarily elsewhere pending sale to fund business extension, tend to be concen- trated in very few places. Through this practice of concentration of investments, better understanding is sought with respect to the few decisions made. The ratio of Wesco's annual reported consolidated net income to reported consoli- dated shareholders' equity, about 21% in 1983-85, was dependent to a very large extent on securities gains, irregular bynature, Therecentratio is aimosi certain to decline, quite probably very sharply. Neither possible future acquisitions of other businesses nor possible future securities gains appear likely to cause the recent ratio to continue. The business acquisition game is now crowded with optimistic players who usually force prices for low-leverage acquirers like Wesco to levels where return-on-investment prospects are modest. And, as discussed earlier, the great contribution of 1985 securities gains to Wesco's recent return on shareholders equity contained a big fluke element. Such fluke gain, rare in any event, tends to come io an investor like Wesco mostly as an unanticipated by-produrt of an obviously sound investment which does not require any fluke to work out well. Because securities generally traded lower several years ago than they do now, relative to the intrinsis values of the businesses represented by the securities, creating more obviously sound investments then than now, and because 9 prospects for above-average returns tend to go down as assets managed go up, it is now easy to predict less desirable future resulis, It is also easy for any sophisticated Wesco shareholder, reviewing Wesco marketable securities disclosed in the 1985 Annual Report, to diagnose (correctly) that the decision-makers are dry of good investment Wesco is trying more to profit from always remembering the obvious than from grasping the esoteric (including much modern "strategic planning" and "portfolio theory"). Such an approach, while it has worked fairly weil on average in the past and will probably work fairiy well over the long-term future, is bound to encounter periods of dullness and disadvantage as it limits action. Moreover, the approach is being applied to no great base position. Wesco is sort of scrambling through the years without owning a single business, even a small one, with enough commercial advantage in place to prelty well assure high future returns on its capital. In contrast, Berkshire Hathaway, Wesco's parent corporation, owns three such high-return businesses. On January 23, 1986, Wesco increased its regular quarterly dividend fror 15½ as of the close of business on February cents per share to 16½ cents per share, payable March 6, 1986, to shareholders of record Exchange Commission, and includes detailed irformation about Wesco and its subsidi- This annual report contains Form 10-K, a report filed with the Securities and aries as well as audited financial statements bearing extensive footnotes. As usual, your careful attention is sought with respect to triese items. • CharlesT manger Chairman ot the Board Charles T. Munger February 13. 1986