I finally got around to reading the 2004 Berkshire Hathaway Annual Report. My fellow-bloggers have already posted about the report here and here. Like always, the report provides clear insight into the performance of the Berkshire empire, the outlook for its subsidiaries and is liberally interspersed with Buffettisms aimed at the ordinary investor.

Right off the bat, Mr. Buffett reminds investors the virtue of low-cost index funds and warns that expenses and frequent trading are the enemy of long-term success. He then provides insightful commentary on the main business activities of Berkshire.

It was widely reported that Mr. Buffett is bearish on the US dollar and has purchased foreign exchange contracts to benefit from any slide in the dollar. Mr. Buffett’s actions pose a dilemma for foreign investors: We can buy dynamic, fast growing American companies, but see the gains evaporate in foreign exchange losses.

In an era when corporate insiders feather their nest at the expense of minority shareholders, Berkshire’s treatment of shareholders as fellow-owners is refreshing. All public companies should follow Berkshire’s example and align the interests of board members with that of shareholders. Mr. Buffett writes: “In our view, based on our considerable boardroom experience, the least independent directors are likely to be those who receive an important fraction of their annual income from the fees they receive for board service (and who hope as well to be recommended for election to other boards and thereby to boost their income further)” and goes on to provide an example where such conflict of interest hurts shareholders.