2014 ANNUAL LETTER

Know Thy Investment

1

To the Partners of Booth-Laird Investment Partnership:

I. Performance

Below is a more detailed comparison of the return on Partnership investments (separately reflecting

returns for inception-to-date and calendar year 2014) to the S&P 500, the most commonly used proxy for

the market as a whole. The S&P 500 figures include dividends issued by S&P 500 companies and assume

those dividends were reinvested. The Partnership figures reflect returns for the Partnership as a whole.

Individual partners invested at various times throughout the year and, therefore, realized different returns

based upon when the partner contributions were made. Further, qualified and non-qualified partners have

different fee structures, which also impacts the net returns realized by each partner. A separate document

detailing your specific return for the year has been provided to you.

Overall Return

Year Partnership* S&P 500 Difference

2014 12.8 % 13.7% (0.9%)

Inception-To-Date** 73.9% 71.2% 2.7%

* Partnership returns are shown net of fees and are calculated as compounded monthly returns due to varying assets under management from month to month, resulting from new partner contributions throughout the year.

** Inception-To-Date returns are calculated as compounded annual returns starting on April 16, 2008.

We are pleased to report that 2014 was another respectable year for the Partnership. Assets under

management increased over 60% as a result of both returns on investments and investor contributions.

More importantly, our return, net of fees, of 12.8% nearly equaled our target annual return (our primary

focus after preservation of capital) of 15%.

We began the year with approximately 34% of our portfolio in cash, which dipped to 5% by the

end of June before rising again to 36% at year end due to new contributions and to selling or downsizing a

number of investments as discussed below. In January 2015, we put over half of our cash to use in both

existing and new investments.

II. Reflection

As we near the 7-year anniversary of the founding of Booth-Laird Investment Partnership, given

the significance of the number 7 in numerous cultures, now is a good time to look back over our brief

history. We started the Partnership at the ages of 24 and 25 on April 16, 2008, with $10,000 of our own

money, while both were still working full time as auditors for KPMG. It took nearly a year before we had

our first external investor. By the end of 2009, we had a total of 3 external investors, ~$70,000 in assets

under management, and were both still running the Partnership part time. We came to the conclusion that

at least one of us would need to quit his day job and run the Partnership full time if we truly wanted it to

grow. In January 2010, I quit my job as the Assistant Director of State Economic Competitiveness in the

Louisiana Department of Economic Development to devote 100% of my time to the Partnership.

Around this time, we found an obscure company called HQ Sustainable Maritime Industries (HQS),

a company headquartered in Seattle with its primary operations in China. HQS was a vertically integrated

tilapia producer and specialty healthcare product manufacturer. This time period was before the fraud

prevalent in Chinese companies trading on western exchanges came to light. Unlike those frauds, however,

HQS was headquartered in Seattle, had Canadian leadership, and was audited by a Canadian firm that was

2

itself under the supervision of the SEC’s audit and accounting regulator, the Public Company Accounting

Oversight Board (“PCAOB”). The PCAOB had thoroughly reviewed and approved this Canadian audit

firm, giving us false comfort. We had spoken to the VP of Finance at HQS numerous times and even called

the auditor to verify that they conducted appropriate audit procedures.

With the stock as cheap as it was compared to the net cash on its balance sheet and the free cash

flow it was realizing, we invested up to 20% of the portfolio into HQS. The signs were there that the

company’s financials might not be accurate, particularly when the company issued stock at below the

current price to investment banks and private equity firms in the United States despite supposedly having a

great deal of cash already and no debt. But the company provided an elaborate reason that seemed

legitimate, and we swallowed it hook, line, and sinker.

The rising accounts receivable balance was another major red flag, which is what prompted us to

call the auditor. Even the auditor explained away the high accounts receivable balance. We were both

fooled. In April 2011, the chair of HQS’s audit committee resigned from the Board of Directors and issued

a press release accusing management of fraud. It took another two months for the Canadian auditor to

finally throw in the towel and admit they too were fooled. We did not wait for the auditor to quit before

writing off the entire investment in HQS. The information provided by the former Audit Committee Chair

was too damning for us to ignore. We wrote off the investment the next day, immediately taking a roughly

20% hit to our portfolio.

We did not hide from the HQS disaster. We sent an e-mail to our investors the very next day

explaining everything. Not one investor asked for his or her money back. Our investors still believed in

us. We like to think we have rewarded that belief.

Since that time, our assets under management have grown 2,750%, mostly from contributions from

new and existing investors. We have in turn put that money to good use. The Partnership’s return over the

last 3.5 years since writing off HQS, starting July 1, 2011 through December 31, 2014, was 84.2%, or an

annualized rate of 19.1%, versus the S&P 500’s return over that time of 66.9%, or 15.1% annualized.

The HQS affair was painful, but it made us better investors. It served to make us infinitely more

skeptical, a requisite for sustained success in investing. We have heard it said that good decision making

stems from bad experience, which stems from bad decision making. We think we can attest to this

sentiment.

Please do not mistake this reflection on how far we have come to date as a sign of complacency.

On the contrary, we approach each day with renewed vigor to learn and improve constantly as investors

and as a firm. As you know, we lowered our management fee and increased our hurdle rate in 2014. We

document every decision we make and periodically review the thought process behind past decisions to see

where we were right and where we were wrong. Our goal is perfection, and we will continue to strive for

it. We look forward to the next 70+ years of running the Partnership. Centenarian CEO has a nice ring to

it.

III. Review of 2014

The story of 2014 for the Partnership was one of taking advantage of opportunities presented in our

existing holdings, bucking the fear of new technology to find new investments, and avoiding major pitfalls.

We also saw a number of our investments reach our previously determined exit price and received a first-

hand look at why we generally avoid commodity stocks.

The year 2014 started off rough for the Partnership, primarily due to a 10% drop in Apple’s stock,

which was exacerbated for the Partnership due to call options we held on Apple stock, as well as drops in

3

GM and in Lear. The Partnership was down 8% at the end of January, starting off well behind the market.

At the mid-year update, the Partnership was back into positive territory but still trailing the market by over

6 percentage points. Thanks to investments we made in the first half of the year, we were able to overcome

a decline in our auto stocks to nearly catch the market by year end.

Apple

We have been invested in Apple for two full years now. Given its exceptional brand, cash flow,

margins, management, and balance sheet, we consider it to be a stock we will hold for a long time. We are

happy to add to the stock when the opportunity presents itself, as it so wonderfully did in January of last

year. Below is an excerpt from last year’s annual letter, which was written shortly after the 10% drop in

Apple’s stock at the beginning of the year:

In January 2014, Apple announced its first quarter earnings and, despite beating revenue and

earnings estimates, the stock dropped 10% because the market expected more units sold and did not like

the guidance for the second quarter. We first analyzed Apple over a year ago and projected revenue,

margins, and free cash flows at that time. Apple’s actual performance exceeded our expectations in all

three areas by a fair margin. The most important metric is free cash flow, and Apple exceeded our

projections by 43% in 2013. Further, 2014 is already on pace to exceed our conservative projections once

again. I should note that we could not care less about the two metrics so often quoted in the media - market

share or units sold; we only care about revenue and cash flow. After the stock dropped in late January

2014 on the earnings announcement and pushed the free-cash-flow yield, net of cash, to a very attractive

12.5% at the new stock price, we took the opportunity to add to our position once again. For comparative

purposes, 12.5% free-cash-flow yield is more often found with companies dwelling in obscurity or facing a

specific major issue. We are ready to add substantially more should the stock again drop a sufficient

amount.

We added to the position at the time by putting 5% of the Partnership’s portfolio into deep-in-the-

money Apple call options that did not expire for another 2 years from the time of the investment. The stock

was trading for $510 at the time, or a split-adjusted $72.86. Apple went on to report exceptional earnings

throughout the year, which again exceeded our expectations. The company also unveiled two iPhones with

larger screen sizes and announced the Apple Watch and Apple Pay, as well as updates to other products.

We wrote at length about Apple in the Q3 newsletter we put out in early October. By that point, Apple had

increased 40% from the price it dipped to in January. By October we had sold all of our options on Apple

but still retained the stock. By year end, Apple’s stock had appreciated a further 10% to $110 from the date

of the Q3 newsletter and was our largest holding.

Apple announced the results of its latest quarter on January 28, 2015. The company decimated

even the loftiest analyst expectations, realizing a 30% growth in revenue and a 50% growth in free cash

flow. Despite continuing to buy back stock and, to a lesser extent, issue dividends to the tune of over $100

billion over the last two years, Apple’s cash balance net of debt remains an amazing $145 billion. Its free

cash flow of $30 billion in its latest quarter is roughly 67% of what we projected for the entire year, so

Apple clearly is well on its way to shattering our expectations yet again. The market reacted positively to

the earnings release as the stock rose to $120. Even so, the stock is just now reaching our calculation of its

fair value - clearly a conservative calculation given the fact that the company continues to exceed our free

cash flow projections.

Companies like Apple are rare and special – strong management, great culture, premium products,

high and sustainable margins, exceptional brand value, incredible cash generative powers, numerous growth

opportunities, and, above all, still available at reasonable prices. We will not sell any of our stock in Apple

unless the price offered is outrageously high or the fundamentals change. We will add opportunistically

4

via stock or options as we did in January 2014. The options available at any given time at best expire in a

little over two years, so we have to sell those at pre-determined prices and lock in gains, as we have done

so far. We are very selective on when to buy options, generally demanding limited downside against very

high upside before the options expire. As a result, we are unlikely to utilize options on Apple unless the

market panics irrationally once again and the stock price drops materially.

Contrarian Investing in 2014

We are, by nature, contrarian investors. We look for deals the market is missing either due to

uncertainty or fear, misunderstanding, or obscurity. In a sense, we are treasure hunters. With the U.S. stock

market continuing its multi-year climb in 2014, our treasure hunting took us to those stocks being discarded

for fear of the threat of new technology. Our three major new investments in 2014 all fell into this category:

Weight Watchers, Outerwall, and Bed Bath & Beyond.

Weight Watchers

Weight Watchers first came to our attention in February 2014 when it dropped 30% in one day

after announcing Q4 2013 results. In total, the stock was down approximately 75% from its high of over

$80 in 2012, to $20 when it came to our attention. We had heard of Weight Watchers the company but had

never analyzed the stock. We immediately forged ahead with our analysis, even attending a Weight

Watchers meeting and posing questions to the leaders and the customers.

Weight Watchers had seen its membership decline for 2 years, coinciding with the avalanche of

fitness devices like Fitbit and Nike Fuel Band, as well as free apps. The market feared that these free apps

and devices would render Weight Watchers obsolete. Our analysis told us a different story. The type of

customer who succeeds with do-it-yourself tools, like these devices and apps, is not the typical Weight

Watchers customer.

What impressed us most about Weight Watchers, outside of its exceptional cash flow, was that the

program worked very well and had deeply loyal customers. The average retention for Weight Watchers

customers had remained steady at 8-9 months for years, even as membership declined. What was occurring

was the natural attrition of customers rolling off the program who were not being replaced by customers

new to Weight Watchers as in years past. Many of the customers who otherwise would give Weight

Watchers a try instead were trying out these highly popular devices and apps.

Weight Watchers has been around since the early 1960s and has weathered every storm, including

the wave of no or low carb diets about a decade ago. Ultimately, many of these customers find their way

to Weight Watchers. It simply takes time for them to cycle through the latest fad. Those devices and apps

currently stealing market share have a fairly high rate of abandonment, similar to a new gym membership.

The secret of Weight Watchers is the meetings and its leaders, every one of whom was once a successful

Weight Watchers customer who was then recruited to become a leader. The U.S. News and World Report

began naming the best weight loss program 5 years ago. So far, Weight Watchers is five for five in that

category. Weight Watchers has been clinically proven by over 80 studies in the last 20 years. We were

very impressed by the group meetings, which have a church-like feel to them - a sentiment supported by

feedback from actual long-time members.

So while the market saw declining membership at Weight Watchers and ignored everything else,

we saw a company with incredibly high margins and cash flows that could be supported on far lower

revenue due to the highly variable cost structure and elevated IT expenses, which should decline materially

fairly soon. Weight Watchers also has an opportunity in the healthcare industry as a preventive-loss

measure that the company only recently initiated and quickly grew to $75 million in revenue by selling

entirely to self-insured businesses. This year, 2015, will be the first year Weight Watchers is reimbursable

5

by insurance as a wellness program, with one insurance company signed up and many more likely to come.

The long-term opportunity in healthcare is promising, especially if the company’s efforts to get approved

by Medicare succeed.

So we not only bought the Weight Watchers stock at average cost basis of $21, we also bought

some long-term call options similar to the options we bought on Apple. After we invested, Weight

Watchers fluctuated but stayed around $20 for 6 months before other investors caught on, and the stock

began climbing. After the stock shot up to $29 in a relatively short time period, we sold all of our options

and a sizable percentage of our stock. We took Weight Watchers down from close to 20% of our portfolio

to 11% by year-end. We decided to downsize the position because the stock climb was driven more by

hope than by exceptional quarterly results. Hope can be a fickle thing, so we were content to reduce the

position with the understanding that we would add back should the stock drop again.

Over the last few days of trading in 2014, after we had already downsized the position, Weight

Watchers suddenly began dropping from the high $28s to finish the year at around $25. The stock continued

dropping in January 2015, all the way down to high teens. At first, analysts and pundits were confused as

to why the stock was dropping, as no news had come out. The sentiment we saw expressed numerous

places was that investors were not happy with the new marketing the company had rolled out heading into

the new year. We attended another Weight Watchers meeting in early January 2015 and confirmed that the

marketing is not having the impact the company hoped, at least not at the Baton Rouge location we visited.

While the meeting was well attended, as it usually is right after the year-end holidays, we learned that

attendance was down from the previous year.

We think the market is missing out on the fact that even at lower membership levels, the company

still generates a substantial amount of free cash flow. Going back 10 years, free cash flow has not dropped

below $200M one time, not even at the worst point of the recession and not even on 33% lower revenue

ten years ago than in 2014. The company should once again exceed $200M for 2014 – it was at $190M

through the first three quarters. Taking a conservative stance, our upside valuation assumes that free cash

flow gets cut in half, yet we concluded the stock still is significantly undervalued. The stock is selling for

a sustainable free cash flow yield of 20+% in January. That is generally reserved for when the market

thinks that free cash flow will decline very drastically very quickly. The company’s history, highly variable

cost structure, and high margins indicate otherwise.

We added back into Weight Watchers after the drop, including more long-term call options that are

deep in-the-money and do not expire until 2017. We think the stock is back to the peek negativity it reached

when we first invested. As with Apple in January 2014, we believe that we will be happy with the

opportunity the market has provided us.

Outerwall

Outerwall was our best idea discussed at the July 2014 annual meeting when it was trading for

around $55. We started to buy in the $60s in June 2014 and continued adding all the way to as low as $53.

Outerwall closed the year over $75.

Outerwall is the U.S. leader in automated retail, focusing on self-service, stand-alone kiosks in high

traffic areas. The kiosk concepts they own include Redbox, Coinstar, ecoATM, and SampleIt. While the

company began with Coinstar, Redbox has become the lion’s share of revenue. As a result, Redbox has

become the face of the company. Because many analysts saw Redbox as becoming as obsolete as

Blockbuster very quickly, Outerwall stock suffered. We pointed out in our slides from the annual meeting,

available on our website, why we believed the analysts were wrong. Slowly, the market began to agree

with us, and the stock climbed back up to the $60s.

6

We also felt that the company had room to raise prices, given the large and sustainable price gap

between Redbox and digital streaming. The company had not mentioned a potential price increase for

years, but our analysis indicated they could and should raise prices. The company subsequently announced

a 25% price increase in November, to go into effect in December, and the stock reacted very positively,

shooting up to $75 by year end. As with Weight Watchers, we took the opportunity to downsize the position

as it rose because the rise in stock price was driven more by the price increase announcement than by

quarterly earnings results. Outerwall ended the year equaling approximately 10% of the Partnership’s net

assets, from the nearly 20% it was at its peak.

Outerwall continued to climb in January to above $77 when the CEO was fired without any

warning. The reaction to that type of news when a stock is doing well usually is the same – severe

punishment to the stock price. The stock dropped from $77 to $61 that day. The company released

narrowed guidance for 2014, as well as first-time guidance for 2015 in the same press release as the

announcement of the firing to show it was not due to an unexpectedly poor 2015. While we never were

overly impressed with the CEO, we were impressed with the operations and with the heads of the various

divisions. This sort of move is rarely expected when the stock has just reached a 52-week high, but perhaps

the CEO was as unimpressive inside the building as he appeared to us as outsiders.

A couple of weeks later on February 5, 2015, the company released fourth quarter earnings. The

free cash flow for 2014 exceeded our upside expectations by a full 20%. Further, despite the market’s fear

that Redbox will become obsolete very quickly, same store sales decline in the fourth quarter was a mere

1%. More encouragingly, the week of December 29th was the best rental week in Redbox’s history. Also,

the company guided to revenue growth and continued strong margins in 2015. Growth in their Coinstar,

Coinstar Exchange, and new concept ecoATM kiosks is expected to offset any decline in Redbox with

ecoATM finally breaking even by year-end after further ramping up to scale. The quarterly results proved

our investment thesis still holds. Free cash flow should benefit from drastically reduced capital

expenditures in the future as kiosk rollouts slow down and eventually stop, unless a new profitable kiosk

concept is introduced. Capital expenditures in 2014 were over 40% lower than 2013 and, while rising in

2015 as ecoATM and Coinstar Exchange continue to ramp up, still will be 20-40% lower than in 2013. At

current prices, free cash flow yield is nearly 20%.

Even more importantly, management announced its first dividend in company history at a current

yield of 2.0%, increased its stock buyback program, and confirmed that the company is managing Redbox

to maximize free cash flow rather than for unrealistic growth. We rarely prefer dividends to buybacks, but

Redbox is a cash cow that is very slowly declining over time. Therefore, we are happy to receive that cash

directly in the form of dividends. The stock buyback authorization was increased an additional $250 million

to bring the existing authorization to over $400 million, or over 33% of the market capitalization on the

earnings release date. This buyback authorization is on top of the over $500 million the company used to

buy back shares in 2014.

One reason the stock dropped as it did upon the firing of the previous CEO is new fear that a

difference in vision between the CEO and the Board of Directors arose. Specifically, the market feared the

Board wanted to regain their glory days of high growth instead of the more recent approach of managing

the company for profit and free cash flow over growth. Management confirmed on the earnings call that

the company’s capital allocation plans remain unchanged and that they are still managing the company to

maximize profit and free cash flow.

The market reacted positively to the news, sending the stock back above $65 the day after the

earnings release. Outerwall likely will need to prove to wary investors that the company is indeed

committed to maximizing profits rather than jumpstarting growth. We remain confident that the stock will

eventually reach our valuation north of $80.

7

Bed Bath & Beyond

We first discussed Bed Bath & Beyond in depth in our Q2 2014 newsletter released in early July.

While it took a few weeks to get comfortable with Outerwall, it took a couple of days to get comfortable

with Bed Bath & Beyond. We have a good track record of spotting great management and a well-run

company with a great culture. We always have done well in those instances when the quality of

management and the company leap off of the page from the start. Bed Bath & Beyond is one of those

companies.

Traditional brick-and-mortar retail has been an out-of-favor industry for a while, as the threat of e-

commerce has scared off investors. Bed Bath & Beyond was selling for a 52-week low of $59 when we

invested. The stock dropped to $55 just 2 days later when it reported quarterly results and missed earnings

by a couple of pennies. Nothing in the quarterly results changed our analysis, so we bought more of it.

Less than a week after we released our Q2 newsletter, the company announced it would issue debt for the

first time in at least 20 years and would use the proceeds to buy back stock at these very low prices. We

applauded the move heartily. By year end, the entire $1.2B raised from the debt issuance had already been

used fully to buy back stock. The company also surprised analysts with a strong quarter ending in August.

By year end, the stock price was up to $76. Bed Bath & Beyond fits into the category of companies, like

Apple, that we are willing to hold for a very long time in the absence of an outrageously high price or a

change in the fundamentals. As a result, we have not sold any of the stock we purchased in June and will

add opportunistically over the coming years.

Long-term holdings

We entered the year with a number of longer-term holdings, most of which we have discussed in

years past. We sold some of the holdings that reached our exit price, simply held onto others, and added to

a few that presented opportunities.

1. The Hartford Group. We finally sold insurer, The Hartford Group, and The Hartford Group TARP

warrants in October. We first invested in April 2012, when the stock was priced for bankruptcy at 35%

of net book value. We valued the company conservatively at twice that, or 70% of net book value. As

time passed, and the company unloaded the riskiest aspects of the business and proved out our analysis

on the remaining segments, our valuation increased. We sold at approximately 90% of net book value

for a final gain of 226% on the TARP Warrants and 101% on the stock. We also benefited from

dividends at approximately 3% annual yield while we held Hartford’s stock.

2. Lear. Lear, a leading auto parts supplier, was a post-bankruptcy opportunity in which we first invested

in May 2012. Over time, the stigma of bankruptcy faded as the company’s exceptional results won

back investors, aided by a significant stock buyback program. It finally reached our exit price of $80,

and we sold in February for a realized gain of 97% plus an annual 1.7% dividend yield.

3. Aspen Insurance. Aspen Insurance, a property and casualty reinsurance and primary insurance

provider, was another early 2012 find. The reinsurance industry was out of favor, and we were able to

pick up a profitable, risk-focused insurance company for less than book value. Aspen reported strong

earnings performance for the two years we held it, and its stock appreciate as a result. In April 2014,

the company received an unsolicited, and unwanted, buyout offer at a premium to its previous day

trading price. Given the issues we saw coming down the pike for the reinsurance business, with surplus

capacity flooding the market, we were content to take the opportunity to sell. Our realized gain was

60% in a little over two years, plus an annual 1% dividend yield.

8

4. Compass Minerals. Finally, we sold Compass Minerals, a leading provider of salt and sulfate of potash

in the United States. While we generally avoid commodity-based companies, as discussed below,

Compass Minerals operates in an oligopoly, which results in steady prices for its product. We first

invested in the company in September 2011 and added materially over the ensuing year as the

opportunity presented itself. Compass Minerals’ primary source of revenue is the sale of de-icing salt

used by municipalities to salt icy or frost-prone roads to improve driving conditions. We happened to

hold the company through mild winters, which resulted in a glut of inventory, but the market

appreciated the strength of the company and never gave us the opportunity we wanted to add big at a

reduced price. We finally sold in February 2014, after a very strong winter season. We realized a gain

of 18% in approximately 2.5 years, plus a 3% annual dividend yield. We still think highly of the

company and keep an eye out for an opportunity to make it a major holding again.

5. W.R. Berkley. We continue to hold W.R. Berkley, one of the best run property and casualty insurance

companies we have encountered. Our longest tenured holding, we first invested in W.R. Berkley in

2010. We plan to hold the company indefinitely, unless presented with a price we cannot pass up or

the fundamentals change. We saw an opportunity to add to the investment in January 2014 and were

rewarded with a 20+% gain on the year from that add price. The company is a steady gainer with a

solid dividend and the occasional large special dividend. Our total gain on W.R. Berkley to date is over

45% on an average holding period of 2 years, plus a regular dividend yield of over 1%. We also

received a special dividend in two of the last three years, equal to 3+% of our cost basis. We have set

all W.R. Berkley dividends to automatically reinvest.

6. America’s Car-Mart. We also continue to hold America’s Car-Mart, the largest buy-here/pay-here used

car dealership in the country. We first invested in April 2011 and have added over the last four years

as the opportunity has presented itself. The company had approximately 100 dealerships in the

Southeast when we first invested. Today they have over 130 dealerships and are still growing. The

company also had bought back over 20% of stock outstanding over the last few years. Headquartered

in Arkansas, the company’s CEO and CFO presented at our inaugural Booth-Laird Equity Conference

held in April 2013. We had already communicated with the CFO on a number of occasions and have

kept in touch since the conference. We know our investment is in very good hands. Our first investment

was at $24, and the stock quickly shot up to nearly $50 over the next year. The company’s market was

flooded with excess capacity, primarily from specialty finance funds searching for yield, and the stock

was impacted as a result. We took the opportunity to increase the investment size substantially when

it dipped into the $30s. Our trust was rewarded in time as the stock ended the year above $50. Similar

to Apple, W.R. Berkley, and Bed Bath & Beyond, we will hold America’s Car-Mart until the stock

price is unreasonably high or the fundamentals change.

Auto Holdings

After an exceptional 2013, our auto holdings – Volkswagen (VOW), Porsche (PAH), and General

Motors (GM) – had a reversal of fortune. Volkswagen/Porsche was the best idea we presented at the

inaugural Booth-Laird Equity Conference in April 2013. Porsche is a shell company that owns 32% of

VOW, and PAH was available at a 25% discount to the market value of its VOW shares. Thus, effectively,

we were able to buy VOW stock at a 25% discount to the current stock price. We invested in both VOW

and PAH (separately) in April 2013, but considered the purchase as one investment. The fears over the

European auto market slowly receded throughout the year, and we benefitted from the rising stock prices

that resulted. Our net time-weighted return on the VOW/PAH investment was 42% in 2013. Volkswagen

performed well in 2014 by reaching its goal of 10 million vehicles sold in one year, a full four years ahead

of the target year of 2018, by growing market share in key markets, by announcing a 5 billion euros cost-

savings plan, and by maintaining a strong balance sheet and high profitability. However, VOW’s and

9

PAH’s stock prices were heavily impacted by geopolitical fears stemming from the perceived threat from

nearby Russia, by unfounded fears that Volkswagen wanted to buy Fiat, by negative headlines (without

much material implications) regarding after-market parts sold in China, and by union-driven fears that are

generally meaningless in German culture, but which are strongly negatively perceived in the U.S. We took

the opportunity to add a small amount to VOW. VOW and PAH rebounded from their low points but both

still ended the year down from the year before. We are still up on VOW and PAH and continue to believe

them to be substantially undervalued. We think continued positive results reported by the company will

win out in the end, though the timing is always uncertain.

We also invested in General Motors stock and TARP Warrants around the same time as

Volkswagen/Porsche. We were attracted to General Motors because it presented a post-reorganization

equity opportunity that still carried the stigma of the government’s aid. We also felt that GM’s stock was

suppressed by concerns over the European auto market. As the year progressed, the stigma and the fears

receded, and we benefitted from a rising stock price once again. Primarily due to the TARP Warrants, our

net time-weighted return on the position was 57% in 2013. Then recall-gate happened – GM recalled 30

million vehicles, stemming from issues known internally to lower level employees as far back as 10 years

prior to the recalls, over malfunctions that possibly caused up to 50 deaths. The stock already was down

because the market did not fully appreciate that, for once, terrible weather was truly a legitimate reason for

lower than expected sales. Recall-gate exacerbated and prolonged the decline in GM’s stock. We have

discussed GM in great detail in each of our newsletters issued in 2014, especially the Q1 newsletter. As a

reminder, we took the opportunity to sell some stock and used the funds to purchase TARP Warrants, which

had greater upside than the stock with the benefit, in our opinion, of limited downside. Slowly, the stock

recovered over the year, nearly getting back to beginning of the year stock price before it missed earnings

by two pennies, and we saw its stock decline again. We have discussed before how ridiculous it is that

missing earnings by a penny or two can cause a stock to drop materially. We have profited from that

irrational behavior more than once. On February 4, 2015, GM announced fourth quarter 2014 earnings that

beat expectations handily. Proving our theory that was explained in our first quarter 2014 newsletter,

customers had short memories regarding the recalls unless directly impacted. Revenue actually increased

in 2014 over 2013, and GM maintained global market share. Management also increased the dividend 20%

and indicated an even greater return of capital to shareholders in the second half of the year. The news was

received positively by the market, and the stock climbed over 10% in a few days to over $36. We still think

the fundamentals and upside at GM are strong and continue to hold the stock and the TARP Warrants.

Avoiding Pitfalls

Successful investing is equal parts finding good investments and avoiding bad ones. We were able

to avoid some exceptionally bad investments (based on the subsequent substantial drop in the stock price)

in 2014. As we noted above, we are treasure hunters, and we sift through the piles of unloved stocks for

the hidden gems. Below are examples of our successful sifting.

1. In early 2014, we came across a compelling analysis of RadioShack and decided to delve into it. The

stock was down substantially to approximately $2.50 from as high as $22 as recently as 2010. While

free cash flow had been negative the previous 2 years, it was positive the 8 years before that and at

levels nearly equal to the entire company’s market cap when we began analyzing the company. Further,

free cash flow was improving and nearly back to break even. However, deeper analysis revealed that

the cash flow actually was worsening. It only appeared to be improving because the company was

reducing working capital, primarily by allowing liabilities to grow - obviously not a sustainable

strategy. What sealed the deal was the hour spent at a RadioShack in a prime location in Baton Rouge.

We saw nothing unique or proprietary, the shopping experience was terrible, the employees were totally

disinterested and unknowledgeable, and the inventory selection and placement seemed odd. Clearly,

RadioShack was no longer a viable business in its current state. With the debt levels where they were

10

and negative cash flow, we had little doubt the company eventually would be forced to declare

bankruptcy. The market came to the same conclusion, and the stock dropped a further 70% to $0.75.

At that time, a prominent hedge fund that was a major investor in RadioShack put together a rescue

package to save the company by providing a substantial amount of liquidity. The stock doubled back

to $1.50 on the news. We considered this new information but still felt RadioShack had little chance

of surviving and passed once again. Fast forward to February 2015 - Radioshack finally filed for

bankruptcy. We avoided a massive loss with our due diligence.

2. In June 2014 we also looked into LeapFrog when it was trading for around $8, which was down

substantially from its recent high. LeapFrog is a leading manufacturer of educational toy products,

such as the LeapPad, the LeapReader, and My Pal Scout. The company was selling for a very low

multiple of free cash flow, which always piques our interest. We spent a lot of time developing an

understanding of the toy industry, including spending hours walking every inch of Toys R Us, as well

as the toy sections at Wal-Mart and Target. We fully analyzed competitors Vtech, Mattel, and Hasbro.

We even spoke to LeapFrog management and looked back over the last 10 years of annual reports to

get a better understanding of the evolution of the company. We came to the conclusion that LeapFrog

was well ahead of the curve for much of its history. However, revenue peaked in 2003, and the

competition caught up to LeapFrog by 2014. In addition, kids today outgrow LeapFrog’s products

much more quickly. Four year olds are getting iPads instead of Leap pads. As Mattel put it, “Kids are

getting older faster.” We felt LeapFrog fundamentally misunderstood this fact. Also, LeapFrog had

only just recently became free cash flow positive after years of negative free cash flow, and our analysis

indicated they were slipping back into negative territory, though able to hide it by taking down working

capital. The stock declined further from $8 when we passed in June to around $4.50 by Christmas time,

so we once again visited Toys R Us, Wal-Mart, and Target over multiple days to get an idea of what

was selling, what was prominently placed, what kids were interested in, etc. Our analysis revealed that

LeapFrog had fallen even further behind in just 6 months. We were content to pass on the stock once

again. It has continued dropping and is now around $2.50. All told, we avoided a loss of nearly 70%.

LeapFrog might make a comeback, but the risk simply is too high when the company can so easily slip

back to negative free cash flow

3. After the fears of Russia annexing part of the Ukraine broke in the news, and the Russian stock market

tanked as a result of the sanctions placed on the country, we actively looked for opportunities in the

Russian stock market. Someone we respect wrote about a Russian stock idea – CTC Media. The stock

was selling for $9.60 at the time, down 30% from its recent high hit just a few months before. CTC

Media operates three Russian television networks. Thus, we spent a great deal of time analyzing the

Russian regulatory section. CTC Media owned and operated the only top five TV channel in Russia

not owned by the Russian government. Rules recently had been implemented to provide benefits to the

largest TV channels, but for some reason CTC Media was not big enough to qualify for certain benefits,

while smaller TV channels owned by the Russian government were considered big enough. We deemed

the political risk far too high for our taste after discovering that fact and walked away. The stock

declined over time after we passed but was impacted the most when the Russian government declared

that foreign ownership of a company like CTC Media could only equal 20% of shares outstanding.

That forced a fire sale, and the stock is unlikely to recover anytime soon as a result. The stock now

trades for under $4. We avoided a loss of 60%.

Avoiding Commodities

The events of 2014 were a prime example of why we generally avoid commodity-based companies.

By definition, a commodity is interchangeable regardless of who sells it. Therefore, the sellers of the

commodity are price takers. The commodity price is subject to the vagaries of the commodity market and

11

the many outside influences in today’s global economy that impact the commodity price. In 2014, oil

producers saw the price of their product drop 50%, and they could do little outside of hope and pray that

the dip in price would not outlast their derivative contracts.

We refer often to the Warren Buffett quote: “If you have to have a prayer session before raising the

price by 10 percent, then you’ve got a terrible business.” A commodity-based company likely will lose a

lot of business if it raises its price above a competitor. Obviously exceptions to Buffett’s quote exist. The

lowest cost operator has a distinct advantage over an entire industry cycle and should emerge the most

profitable. However, from our point of view, commodity-based companies are a headache because of how

incredibly difficult it is to predict future revenues.

We project some form of earnings in order to value most businesses – usually free cash flow, but

sometimes net income. On occasion, we focus more on the balance sheet, generally reserved for financial

companies. However, projecting free cash flow or net income is very difficult when the price the company

charges for its product can drop 50% in 3 months and is entirely outside the control of the company. Our

projections are deeply thought out, after much research and analysis, and are generally fairly accurate on

the conservative side. Rarely do we overestimate the free cash flow or earnings of a company in any given

year. When you have a good idea of what price the company can charge for its product and the margins it

can earn based on that price and related volume, projecting free cash flow or net income is much easier.

Of all of the companies discussed above, only Compass Minerals is a commodity-based company.

However, that particular commodity, primarily de-icing salt, is unique in that the cost of transportation is

high, relative to the cost of the product itself. As a result, a producer must have its salt mine located close

to the customer. This means that only a small number of producers can service a particular area, and the

competition exhibits an oligopoly behavior. The price for Compass Minerals de-icing salt increases 3%

nearly every year. Even after a recent very mild winter, when its customers had large inventory overages

(which are usually used up entirely by winter’s end), the price was constant for the next bidding season

compared to the previous year.

Many have made a lot of money investing in oil & gas companies over the years. We certainly are

not knocking anyone who specializes in that industry. We simply understand our skillset, which is

analyzing a company’s competitive prospects and determining its value with a fairly high degree of

accuracy. Our skillset is not projecting what a commodity price will be in either the near term or the long

term, such as oil & gas or gold. The result was that we were not directly impacted by the severe drop in oil

prices at year end. Further, given the significance of oil & gas to the Louisiana economy and to many of

our investors, the Partnership offers an option to carve out a piece of one’s portfolio to diversify away from

any significant oil & gas exposure.

Most Important Lesson Learned in 2014

We introduced this section in the 2012 Letter and thought it would be a good idea to re-visit every

year. We constantly look back at past decisions to determine what we did right and what we did wrong.

Sometimes those lessons get driven home more deeply than others.

The lesson discussed internally the most often is holding on to companies we consider to be “pillar

stocks.” As you know, we view our investments as either pillar stocks or work-outs. Examples of pillar

stocks included in this letter are Apple, Bed Bath & Beyond, W.R. Berkley, and America’s Car-Mart.

Companies like these are rare. They are guided by their shareholders’ best interests. They have great

management with good track records, good processes and culture, solid margins, strong assets and balance

sheets, and opportunities and proven ability to continue growing revenue profitability. Rarer still is finding

one of these companies at deep discounts to their fair value. We still talk wistfully of the ones we let go.

12

Sherwin Williams, Amerisafe, and CCL come foremost to mind. All have clear competitive advantages,

management we trust with long track records, etc. We nearly doubled our money in Sherwin Williams

before selling, but the company increased another 350% after we sold. We realized a profit of over 50%

on Amerisafe during a rough period for the worker’s comp insurance industry, and the stock has nearly

doubled since we sold it. We made a nice but not out-of-this-world profit on CCL. The stock has increased

370% from there. These are the most painful lessons because our analysis was right on the money. We

failed to see how right we were about how wonderful these companies were and continue to be.

IV. Outlook for the Partnership in 2015 and Beyond

We begin this section with the same caveat as last year and the year before and the year before that.

We are neither capable of, nor do we try, predicting what our actual performance will be in any year.

Similarly, we are equally incapable of predicting how the market in general will perform. This shortcoming

certainly is not unique to your managers. No one in the world can predict with any degree of consistency

or confidence how the market will perform in any particular year. Those who say they can are fooling both

you and themselves.

Nevertheless, we still feel confident that the carefully derived valuations we assign to investments

should be realized by the market over the long term. Naturally, we would prefer if the market price rose to

match what we think is the true value of a company sooner rather than later. However, we realize that will

not always be the case. Regardless, we believe that the margin of safety we require for all investments (that

is, significant difference between value and price), as well as our patience and conviction, will allow Booth-

Laird to increase in value consistently and continue to outperform the market over time. So when we

discuss Booth-Laird’s outlook for 2015 and beyond, we are referring to the investments we expect to

analyze and pursue and believe will provide the outsized return we just described.

Our focus for 2015 and beyond will be exactly what it always has been – seeking out the unloved

and out-of-favor companies. We will continue to attempt to identify securities mispriced due to fear,

uncertainty, or obscurity; perform sufficient due diligence to overcome those obstacles; and invest at a

significant discount to our valuation. If overall market values continue to rise in the U.S., we will look

increasingly to other countries for opportunities, as we have in the recent past.

While we came into 2015 with 36% of our portfolio in cash, already we have put more than half of

that to use in January. We expect to continue receiving funds from new and existing investors and have a

long list of opportunities we are making our way through and are excited about. Even considering our

remaining cash balance, we believe our current portfolio has over 50% upside to our valuations/exit prices.

The timing of when our valuation will be reached is always uncertain, but it will be reached eventually, if

our valuation is correct. Further, given the fact that we project future earnings and discount those earnings

to present value, our valuation grows for each investment with the passage of time due to the time value of

money at our discount rate – generally 10-15%.

Finally, we come to our preferred investment, which remains a controlling interest in a privately-

held business. As we have discussed on a number of occasions, a few years ago we kept a substantial

amount of cash in reserve in the hopes of buying a controlling interest in a private business. In the beginning

of 2011, we decided to put that cash to use in the stock market while we waited for the right opportunity to

come along. Long term, we expect cash to comprise 10-15% of our portfolio on average. We like cash

and the security and the opportunities it affords. We also have a mechanical need for cash for potential

withdrawals, a trait shared by all investment funds. More importantly, however, is having the flexibility to

take advantage of opportunities when they arise without having to liquidate other positions. The percentage

held in cash will increase materially if we believe the market is overpriced and are having difficulty finding

13

investments with a sufficient margin of safety meeting all of our criteria. We would rather wait for the best

opportunities than invest your funds in stocks for which we do not have a strong conviction.

Our approach has been simplified. We will not buy a controlling interest in a privately-held

business until we can buy a company of sufficient size and stability using only a portion of the Partnership’s

funds, without having to join forces with other funds to do so. Given the size of the typical acquisition

target we have in mind, we do not anticipate having sufficient funds in 2015 to acquire a private business.

Therefore, we will continue to focus on publicly-traded instruments until an acquisition becomes a more

realistic possibility.

V. Booth-Laird’s 6th Annual Investor Meeting

As we did last year, we are holding our 6th Annual Meeting during the summer. Allowing for a

reasonable time to pass between when you receive the Annual Report and when we hold the Annual

Meeting should make the Annual Meeting more meaningful. We felt that moving the meeting back to mid-

year in 2012 improved interest and attendance. By then, we will be able to provide an update on how 2015

is unfolding and our expectations for the remainder of the year. We plan to send out invitations at least a

month in advance. As always, we encourage you to attend and to bring along anyone you think might be

interested. We look forward to seeing you there.

VI. Closing Remarks

Managing your funds continues to be a very gratifying endeavor, and we look forward each and

every morning to working hard to improve the value of your investment. We have a great deal of faith in

our current portfolio of assets and perceive a number of potentially great opportunities. We fully expect

2015 to be a great year for the Partnership. We are pleased with the current state of the Partnership, but are

never satisfied.

As always, we are grateful for your trust in our abilities and we look forward to being your partners

and managers for many years to come.

February 9, 2015

Jonathan P. Booth

Chief Executive Officer

14

This annual letter has been distributed for informational purposes only. Neither the information nor any

opinions expressed constitute a recommendation to buy or sell the securities or assets mentioned, or to

invest in any investment product or strategy related to such securities or assets. It is not intended to provide

personal investment advice, and it does not take into account the specific investment objectives, financial

situation or particular needs of any person or entity that may receive this newsletter. Persons reading this

annual letter should seek professional financial advice regarding the appropriateness of investing in any

securities or assets discussed in this newsletter. The author’s opinions are subject to change without notice.

Forecasts, estimates, and certain information contained herein are based upon proprietary research, and the

information used in such process was obtained from publicly available resources. Information contained

herein has been obtained from sources believed to be reliable, but such reliability is not guaranteed.

Investment accounts managed by Booth-Laird Capital Management, LLC may have a position in the

securities or assets discussed in this article. Booth-Laird Capital Management, LLC may re-evaluate its

holdings in such positions and sell or cover certain positions without notice. No part of this annual letter

may be reproduced in any form, or referred to in any other publication, without express written permission

of Booth-Laird Capital Management, LLC.