BerkshireHathaway by Lavinia Silvestro - Brendan Hibbert Design

BERKSHIREHATHAWAYBERKSHIRE HATHAWAY INC.Executive Offices — 3555 Farnam Street, Omaha, Nebraska 68131INC. 09

Our gain in net worthduring 2009 was$21.8 billion, whichincreased the persharebook value ofboth our Class A andClass B stock by19.8%Notes: Data are for calendar years with these exceptions: 1965 and1966, year ended 9/30; 1967, 15 months ended 12/31.Starting in 1979, accounting rules required insurance companies tovalue the equity securities they hold at market rather than at the lowerof cost or market, which was previously the requirement. In this table,Berkshire’s results through 1978 have been restated to conform to thechanged rules. In all other respects, the results are calculated using thenumbers originally reported.The S&P 500 numbers are pre-tax whereas the Berkshire numbers areafter-tax. If a corporation such as Berkshire were simply to have ownedthe S&P 500 and accrued the appropriate taxes, its results would havelagged the S&P 500 in years when that index showed a positive return,but would have exceeded the S&P 500 in years when the index showeda negative return. Over the years, the tax costs would have caused theaggregate lag to be substantial.Berkshire’s Corporate Performance vs. the S&P 500Yearin Per-ShareBook Valueof Berkshire(1)Annual Percentage Changein S&P500 withDividendsIncluded(2)RelativeResults(1)-(2)1965 23.8 10.0 13.81966 20.3 (11.7) 32.01967 11.0 30.9 (19.9)1968 19.0 11.0 8.01969 16.2 (8.4) 24.61970 12.0 3.9 8.11971 16.4 14.6 1.81972 21.7 18.9 2.81973 4.7 (14.8) 19.51974 5.5 (26.4) 31.91975t 21.9 37.2 (15.3)1976 59.3 23.6 35.71977 31.9 (7.4) 39.31978 24.0 6.4 17.61979 35.7 18.2 17.51980 19.3 32.3 (13.0)1981 31.4 (5.0) 36.41982 40.0 21.4 18.61983 32.3 22.4 9.91984 13.6 6.1 7.51985 48.2 31.6 16.61986 26.1 18.6 7.51987 19.5 5.1 14.41988 20.1 16.6 3.51989 44.4 31.7 12.71990 7.4 (3.1) 10.51991 39.6 30.5 9.11992 20.3 7.6 12.71993 14.3 10.1 4.21994 13.9 1.3 12.61995 43.1 37.6 5.51996 31.8 23.0 8.81997 34.1 33.4 0.71998 48.3 28.6 19.71999 0.5 21.0 (20.5)2000 6.5 (9.1) 15.62001 (6.2) (11.9) 5.72002 10.0 (22.1) 32.12003 21.0 28.7 (7.7)2004 10.5 10.9 (0.4)2005 6.4 4.9 1.52006 18.4 15.8 2.62007 11.0 5.5 5.52008 (9.6) (37.0) 27.42009 19.8 26.5 (6.7)CompoundedAnnual Gain –1965-2009Overall Gain –1964-200920.3% 9.3% 11.0434,057% 5,430%3

To the Shareholders ofBerkshire Hathaway Inc.:Our gain in net worth during 2009 was $21.8billion, which increased the per-share bookvalue of both our Class A and Class B stockby 19.8%. Over the last 45 years (that is, sincepresent management took over) book valuehas grown from $19 to $84,487, a rate of20.3% compounded annually.*Berkshire’s recent acquisition of BurlingtonNorthern Santa Fe (BNSF) has added atleast 65,000 shareholders to the 500,000 orso already on our books. It’s important toCharlie Munger, my long-time partner, and methat all of our owners understand Berkshire’soperations, goals, limitations and culture. Ineach annual report, consequently, we restatethe economic principles that guide us. Thisyear these principles appear on pages 89-94and I urge all of you – but particularly ournew shareholders – to read them. Berkshirehas adhered to these principles for decadesand will continue to do so long after I’m gone.In this letter we will also review some of thebasics of our business, hoping to provide botha freshman orientation session for our BNSFnewcomers and a refresher course forBerkshire veterans.How We MeasureOurselvesOur metrics for evaluating our managerialperformance are displayed on the facingpage. From the start, Charlie and I havebelieved in having a rational and unbendingstandard for measuring what we have – orhave not – accomplished. That keeps us fromthe temptation of seeing where the arrow ofperformance lands and then painting the bull’seye around it.Selecting the S&P 500 as our bogey was aneasy choice because our shareholders, atvirtually no cost, can match its performanceby holding an index fund. Why should they payus for merely duplicating that result?A more difficult decision for us was how tomeasure the progress of Berkshire versusthe S&P. There are good arguments for simplyusing the change in our stock price. Over anextended period of time, in fact, that is thebest test. But year-to-year market prices canbe extraordinarily erratic. Even evaluationscovering as long as a decade can be greatlydistorted by foolishly high or low prices atthe beginning or end of the measurementperiod. Steve Ballmer, of Microsoft, andJeff Immelt, of GE, can tell you about thatproblem, suffering as they do from thenosebleed prices at which their stocks tradedwhen they were handed the managerial baton.The ideal standard for measuring our yearlyprogress would be the change in Berkshire’sper-share intrinsic value. Alas, that valuecannot be calculated with anything close toprecision, so we instead use a crude proxyfor it: per-share book value. Relying on thisyardstick has its shortcomings, which wediscuss on pages 92 and 93. Additionally,book value at most companies understatesintrinsic value, and that is certainly the caseat Berkshire. In aggregate, our businesses areworth considerably more than the valuesat which they are carried on our books.In our all-important insurance business,moreover, the difference is huge. Even so,Charlie and I believe that our book value –understated though it is – supplies the mostuseful tracking device for changes in intrinsicvalue. By this measurement, as the openingparagraph of this letter states, our book valuesince the start of fiscal 1965 has grown at arate of 20.3% compounded annually.*All per-share figures used in this report apply toBerkshire’s A shares. Figures for the B shares are1/1500th of those shown for A.We should note that had we instead chosenmarket prices as our yardstick, Berkshire’sresults would look better, showing again since the start of fiscal 1965 of 22%compounded annually. Surprisingly, thismodest difference in annual compoundingrate leads to an 801,516% market-value gainfor the entire 45-year period compared tothe book-value gain of 434,057% (shownon page 2). Our market gain is betterbecause in 1965 Berkshire shares sold at anappropriate discount to the book value of itsunderearning textile assets, whereas todayBerkshire shares regularly sell at apremium to the accounting values of itsfirst-class businesses.Summed up, the table on page two conveysthree messages, two positive and one hugelynegative. First, we have never had any five-BERKSHIRE HATHAWAY INC.year period beginning with 1965-69 andending with 2005-09 – and there have been41 of these – during which our gain in bookvalue did not exceed the S&P’s gain. Second,though we have lagged the S&P in someyears that were positive for the market, wehave consistently done better than the S&Pin the eleven years during which it deliverednegative results. In other words, our defensehas been better than our offense, and that’slikely to continue.The big minus is that our performanceadvantage has shrunk dramatically as oursize has grown, an unpleasant trend that iscertain to continue. To be sure, Berkshirehas many outstanding businesses and a cadreof truly great managers, operating within anunusual corporate culture that lets themmaximize their talents. Charlie and I believethese factors will continue to producebetter-than-average results over time. Buthuge sums forge their own anchor andour future advantage, if any, will be a smallfraction of our historical edge.What We Don’t DoLong ago, Charlie laid out his strongestambition: “All I want to know is where I’mgoing to die, so I’ll never go there.” That bitof wisdom was inspired by Jacobi, the greatPrussian mathematician, who counseled“Invert, always invert” as an aid to solvingdifficult problems. (I can report as well thatthis inversion approach works on a lesslofty level: Sing a country song in reverse,and you will quickly recover your car,house and wife.)Here are a few examples of how we applyCharlie’s thinking at Berkshire:•Charlie and I avoid businesses whosefutures we can’t evaluate, no matter howexciting their products may be. In the past,it required no brilliance for people toforesee the fabulous growth that awaitedsuch industries as autos (in 1910), aircraft(in 1930) and television sets (in 1950). Butthe future then also included competitivedynamics that would decimate almost allof the companies entering thoseindustries. Even the survivors tendedto come away bleeding.Just because Charlie and I can clearly seedramatic growth ahead for an industrydoes not mean we can judge what its profitmargins and returns on capital will be as ahost of competitors battle for supremacy.At Berkshire we will stick with businesseswhose profit picture for decades to comeseems reasonably predictable. Even then,we will make plenty of mistakes.• We will never become dependent on thekindness of strangers. Too-big-to-fail is nota fallback position at Berkshire. Instead, wewill always arrange our affairs so that anyrequirements for cash we may conceivablyhave will be dwarfed by our own liquidity.Moreover, that liquidity will be constantlyrefreshed by a gusher of earnings from ourmany and diverse businesses.When the financial system went intocardiac arrest in September 2008, Berkshirewas a supplier of liquidity and capital to thesystem, not a supplicant. At the very peakof the crisis, we poured $15.5 billion into abusiness world that could otherwise lookonly to the federal government for help. Ofthat, $9 billion went to bolster capital atthree highly-regarded and previously-secureAmerican businesses that needed – withoutdelay – our tangible vote of confidence.The remaining $6.5 billion satisfied ourcommitment to help fund the purchase ofWrigley, a deal that was completed withoutpause while, elsewhere, panic reigned.We pay a steep price to maintain ourpremier financial strength. The $20 billionplusof cash-equivalent assets that wecustomarily hold is earning a pittance atpresent. But we sleep well.• We tend to let our many subsidiariesoperate on their own, without oursupervising and monitoring them to anydegree. That means we are sometimeslate in spotting management problems andthat both operating and capital decisionsare occasionally made with which Charlieand I would have disagreed had we beenconsulted. Most of our managers, however,use the independence we grant themmagnificently, rewarding our confidence bymaintaining an owner-oriented attitude thatis invaluable and too seldom found in hugeorganizations. We would rather suffer thevisible costs of a few bad decisions thanincur the many invisible costs that comefrom decisions made too slowly – or not atall – because of a stifling bureaucracy.5

A hugely important event in Berkshire’shistory occurred on a Saturday in 1985. AjitJain came into our office in Omaha – and Iimmediately knew we had found a superstar.(He had been discovered by Mike Goldberg,now elevated to St. Mike.)We immediately put Ajit in charge ofNational Indemnity’s small and strugglingreinsurance operation. Over the years, hehas built this business into a one-of-a-kindgiant in the insurance world.Staffed today by only 30 people, Ajit’soperation has set records for transactionsize in several areas of insurance. Ajit writesbillion-dollar limits – and then keeps everydime of the risk instead of laying it off withother insurers. Three years ago, he tookover huge liabilities from Lloyds, allowingit to clean up its relationship with 27,972participants (“names”) who had writtenproblem-ridden policies that at one pointthreatened the survival of this 322-yearoldinstitution. The premium for that singlecontract was $7.1 billion. During 2009, henegotiated a life reinsurance contract thatcould produce $50 billion of premium for usover the next 50 or so years.Ajit’s business is just the opposite ofGEICO’s. At that company, we have millionsof small policies that largely renew year afteryear. Ajit writes relatively few policies, andthe mix changes significantly from year toyear. Throughout the world, he is known asthe man to call when something both verylarge and unusual needs to be insured.If Charlie, I and Ajit are ever in a sinkingboat – and you can only save one of us –swim to Ajit.•••Our third insurance powerhouse is GeneralRe. Some years back this operation wastroubled; now it is a gleaming jewel in ourinsurance crown.Under the leadership of Tad Montross,General Re had an outstanding underwritingyear in 2009, while also delivering usunusually large amounts of float per dollarof premium volume. Alongside General Re’sP/C business, Tad and his associates havedeveloped a major life reinsurance operationthat has grown increasingly valuable.Last year General Re finally attained 100%ownership of Cologne Re, which since 1995has been a key – though only partially-owned– part of our presence around the world. Tadand I will be visiting Cologne in Septemberto thank its managers for their importantcontribution to Berkshire.Finally, we own a group of smaller companies,most of them specializing in odd cornersof the insurance world. In aggregate, theirresults have consistently been profitableand, as the table below shows, the floatthey provide us is substantial. Charlieand I treasure these companies and theirmanagers. Here is the record of all foursegments of our property-casualty and lifeinsurance businesses:InsuranceOperationsAnd now a painful confession: Last year yourchairman closed the book on a veryexpensive business fiasco entirely of hisown making.For many years I had struggled to thinkof side products that we could offerour millions of loyal GEICO customers.Unfortunately, I finally succeeded, comingup with a brilliant insight that we shouldmarket our own credit card. I reasonedthat GEICO policyholders were likely to begood credit risks and, assuming we offeredan attractive card, would likely favor us withtheir business. We got business all right – butof the wrong type.Our pre-tax losses from credit-cardoperations came to about $6.3 millionbefore I finally woke up. We then sold our$98 million portfolio of troubled receivablesfor 55¢ on the dollar, losing an additional$44 million. GEICO’s managers, it should beemphasized, were never enthusiastic aboutmy idea. They warned me that instead ofgetting the cream of GEICO’s customers wewould get the – well, let’s call it the noncream.I subtly indicated that I was olderand wiser.I was just older.UnderwritingProfitYearendFloat(in millions)2009 2008 2009 2008General Re $ 477 $ 342 $21,014 $21,074BH Reinsurance 349 1,324 26,223 24,221GEICO 649 916 9,613 8,454Other Primary 84 210 5,061 4,739$1,559 $2,792 $61,911 $58,488Regulated UtilityBusinessBerkshire has an 89.5% interest inMidAmerican Energy Holdings, which ownsa wide variety of utility operations. Thelargest of these are (1) Yorkshire Electricityand Northern Electric, whose 3.8 millionend users make it the U.K.’s third largestdistributor of electricity; (2) MidAmericanEnergy, which serves 725,000 electriccustomers, primarily in Iowa; (3) PacificPower and Rocky Mountain Power, servingabout 1.7 million electric customers insix western states; and (4) Kern River andNorthern Natural pipelines, which carryabout 8% of the natural gas consumedin the U.S.MidAmerican has two terrific managers,Dave Sokol and Greg Abel. In addition, mylong-time friend, Walter Scott, along withhis family, has a major ownership position inthe company. Walter brings extraordinarybusiness savvy to any operation. Ten yearsof working with Dave, Greg and Walterhave reinforced my original belief: Berkshirecouldn’t have better partners. They are trulya dream team.Somewhat incongruously, MidAmericanalso owns the second largest real estatebrokerage firm in the U.S., HomeServicesof America. This company operates through21 locally-branded firms that have 16,000agents. Though last year was again a terribleyear for home sales, HomeServices earneda modest sum. It also acquired a firm inChicago and will add other qualitybrokerage operations when they areavailable at sensible prices. A decade fromnow, HomeServices is likely to be muchlarger. Here are some key figures onMidAmerican’s operations:Earnings(in millions)2009 2008U.K. utilities $ 248 $ 339Iowa utility 285 425Western utilities 788 703Pipelines 457 595HomeServices 43 (45)Other (net) 25 186Operating earnings before1,846 2,203corporate interest and taxesConstellation Energy * — 1,092Interest, other than to Berkshire (318) (332)Interest on Berkshire junior debt (58) (111)Income tax (313) (1,002)Net earnings $ 1,157 $ 1,850Earnings applicable to Berkshire ** $ 1,071 $ 1,704Debt owed to others 19,579 19,145Debt owed to Berkshire 353 1,087*Consists of a breakup fee of $175 million and aprofit on our investment of $917 million.**Includes interest earned by Berkshire (netof related income taxes) of $38 in 2009 and$72 in 2008.Our regulated electric utilities, offeringmonopoly service in most cases, operatein a symbiotic manner with the customersin their service areas, with those usersdepending on us to provide first-class serviceand invest for their future needs. Permittingand construction periods for generation andmajor transmission facilities stretch way out,so it is incumbent on us to be far-sighted.We, in turn, look to our utilities’ regulators(acting on behalf of our customers) toallow us an appropriate return on the hugeamounts of capital we must deploy to meetfuture needs. We shouldn’t expect ourregulators to live up to their end of thebargain unless we live up to ours.Dave and Greg make sure we do just that.National research companies consistentlyrank our Iowa and Western utilities at ornear the top of their industry. Similarly,among the 43 U.S. pipelines ranked by a firmnamed Mastio, our Kern River and NorthernNatural properties tied for second place.Moreover, we continue to pour huge sums ofmoney into our operations so as to not onlyprepare for the future but also make theseoperations more environmentally friendly.9

Since we purchased MidAmerican ten yearsago, it has never paid a dividend. We haveinstead used earnings to improve and expandour properties in each of the territorieswe serve. As one dramatic example, in thelast three years our Iowa and Westernutilities have earned $2.5 billion, while in thissame period spending $3 billion on windgeneration facilities.MidAmerican has consistently kept itsend of the bargain with society and, tosociety’s credit, it has reciprocated: With fewexceptions, our regulators have promptlyallowed us to earn a fair return on theeverincreasing sums of capital we mustinvest. Going forward, we will do whatever ittakes to serve our territories in the mannerthey expect. We believe that, in turn, we willbe allowed the return we deserve on thefunds we invest.In earlier days, Charlie and I shunned capitalintensivebusinesses such as public utilities.Indeed, the best businesses by far for ownerscontinue to be those that have high returnson capital and that require little incrementalinvestment to grow. We are fortunate toown a number of such businesses, andwe would love to buy more. Anticipating,however, that Berkshire will generateever-increasing amounts of cash, we aretoday quite willing to enter businesses thatregularly require large capital expenditures.We expect only that these businesses havereasonable expectations of earning decentreturns on the incremental sums they invest.If our expectations are met – and we believethat they will be – Berkshire’s ever-growingcollection of good to great businesses shouldproduce above-average, though certainly notspectacular, returns in the decades ahead.Our BNSF operation, it should be noted, hascertain important economic characteristicsthat resemble those of our electric utilities.In both cases we provide fundamentalservices that are, and will remain, essential tothe economic well-being of our customers,the communities we serve, and indeed thenation. Both will require heavy investmentthat greatly exceeds depreciation allowancesfor decades to come. Both must also plan farahead to satisfy demand that is expected tooutstrip the needs of the past. Finally, bothrequire wise regulators who will providecertainty about allowable returns so that wecan confidently make the huge investmentsrequired to maintain, replace and expandthe plant.We see a “social compact” existing betweenthe public and our railroad business, justas is the case with our utilities. If eitherside shirks its obligations, both sides willinevitably suffer. Therefore, both parties tothe compact should – and we believe will –understand the benefit of behaving in a waythat encourages good behavior by the other.It is inconceivable that our country willrealize anything close to its full economicpotential without its possessing first-classelectricity and railroad systems. We will doour part to see that they exist.Going forward, we will do whateverit takes to serve our territories in themanner they expect.In the future, BNSF results will be includedin this “regulated utility” section. Aside fromthe two businesses having similar underlyingeconomic characteristics, both are logicalusers of substantial amounts of debt thatis not guaranteed by Berkshire. Both willretain most of their earnings. Both will earnand invest large sums in good times or bad,though the railroad will display the greatercyclicality. Overall, we expect this regulatedsector to deliver significantly increasedearnings over time, albeit at the cost of ourinvesting many tens – yes, tens – of billionsof dollars of incremental equity capital.AssetsManufacturing,Service andRetailingOperationsOur activities in this part of Berkshirecover the waterfront. Let’s look, though,at a summary balance sheet and earningsstatement for the entire group.Balance Sheet 12/31/09 (in millions)Liabilities and EquityCash and equivalents $ 3,018 Notes payable $ 1,842Accounts and notes receivable 5,066 Other current liabilities 7,414Inventory 6,147 Total current liabilities 9,256Other current assets 625Total current assets 14,856Goodwill and other intangibles 16,499 Deferred taxes 2,834Fixed assets 15,374 Term debt and other liabilities 6,240Other assets 2,070 Equity 30,469$48,799 $48,799Earnings Statement (in millions)2009 2008 2007Revenues $61,665 $66,099 $59,100Operating expenses (including depreciation of $1,422 59,509 61,937 55,026in 2009, $1,280 in 2008 and $955 in 2007)Interest expense 98 139 127Pre-tax earnings 2,058* 4,023* 3,947*Income taxes and minority interests 945 1,740 1,594Net income $ 1,113 $ 2,283 $ 2,353*Does not include purchase-accounting adjustments.Almost all of the many and widely-diverseoperations in this sector suffered to onedegree or another from 2009’s severerecession. The major exception was McLane,our distributor of groceries, confectionsand non-food items to thousands of retailoutlets, the largest by far Wal-Mart.Grady Rosier led McLane to record pretaxearnings of $344 million, which evenso amounted to only slightly more thanone cent per dollar on its huge sales of$31.2 billion. McLane employs a vast arrayof physical assets – practically all of whichit owns – including 3,242 trailers, 2,309tractors and 55 distribution centers with15.2 million square feet of space. McLane’sprime asset, however, is Grady.We had a number of companies at whichprofits improved even as sales contracted,always an exceptional managerialachievement. Here are the CEOs whoCOMPANYBenjamin Moore (paint)Borsheims (jewelry retailing)H. H. Brown (manufacturingand retailing of shoes)made it happen:CEODenis AbramsSusan JacquesJim IsslerCTB (agricultural equipment) Vic MancinelliDairy QueenJohn GainorNebraska Furniture Mart(furniture retailing)Pampered Chef(direct sales of kitchen tools)See’s (manufacturing andretailing of candy)Star Furniture(furniture retailing)Ron andIrv BlumkinMarlaGottschalkBrad KinstlerBill KimbrellAmong the businesses we own that havemajor exposure to the depressed industrialsector, both Marmon and Iscar turned inrelatively strong performances. FrankPtak’s Marmon delivered a 13.5% pre-taxprofit margin, a record high. Though thecompany’s sales were down 27%, Frank’scost-conscious management mitigated thedecline in earnings.Nothing stops Israel-based Iscar – notwars, recessions or competitors. Theworld’s two other leading suppliers ofsmall cutting tools both had very difficultyears, each operating at a loss throughoutmuch of the year. Though Iscar’s resultswere down significantly from 2008, thecompany regularly reported profits, evenwhile it was integrating and rationalizingTungaloy, the large Japanese acquisitionthat we told you about last year. Whenmanufacturing rebounds, Iscar will set newrecords. Its incredible managerial team ofEitan Wertheimer, Jacob Harpaz and DannyGoldman will see to that.11

Every business we own that is connectedto residential and commercial constructionsuffered severely in 2009. Combined pretaxearnings of Shaw, Johns Manville, AcmeBrick, and MiTek were $227 million, an 82.5%decline from $1.295 billion in 2006, whenconstruction activity was booming. Thesebusinesses continue to bump along thebottom, though their competitive positionsremain undented.The major problem for Berkshire lastyear was NetJets, an aviation operationthat offers fractional ownership of jets.Over the years, it has been enormouslysuccessful in establishing itself as the premiercompany in its industry, with the valueof its fleet far exceeding that of its threemajor competitors combined. Overall, ourdominance in the field remains unchallenged.NetJets’ business operation, however, hasbeen another story. In the eleven years thatwe have owned the company, it has recordedan aggregate pre-tax loss of $157 million.Moreover, the company’s debt has soaredfrom $102 million at the time of purchaseto $1.9 billion in April of last year. WithoutBerkshire’s guarantee of this debt, NetJetswould have been out of business. It’s clearthat I failed you in letting NetJets descendinto this condition. But, luckily, I have beenbailed out.Dave Sokol, the enormously talented builderand operator of MidAmerican Energy,became CEO of NetJets in August. Hisleadership has been transforming: Debthas already been reduced to $1.4 billion,and, after suffering a staggering loss of$711 million in 2009, the company is nowsolidly profitable.Most important, none of the changeswrought by Dave have in any way undercutthe top-of-the-line standards for safetyand service that Rich Santulli, NetJets’previous CEO and the father of thefractionalownership industry, insisted upon.Dave and I have the strongest possiblepersonal interest in maintaining thesestandards because we and our families useNetJets for almost all of our flying, as domany of our directors and managers. Noneof us are assigned special planes nor crews.We receive exactly the same treatment asany other owner, meaning we pay the sameprices as everyone else does when we areusing our personal contracts. In short, we eatour own cooking. In the aviation business, noother testimonial means more.Finance andFinancialProductsOur largest operation in this sector isClayton Homes, the country’s leadingproducer of modular and manufacturedhomes. Clayton was not always numberone: A decade ago the three leadingmanufacturers were Fleetwood, Championand Oakwood, which together accounted for44% of the output of the industry. All havesince gone bankrupt. Total industry output,meanwhile, has fallen from 382,000 units in1999 to 60,000 units in 2009.The industry is in shambles for two reasons,the first of which must be lived with if theU.S. economy is to recover. This reasonconcerns U.S. housing starts (includingapartment units). In 2009, starts were554,000, by far the lowest number in the 50years for which we have data. Paradoxically,this is good news.People thought it was good news a few yearsback when housing starts – the supply sideof the picture – were running about twomillion annually. But household formations– the demand side – only amounted toabout 1.2 million. After a few years of suchimbalances, the country unsurprisingly endedup with far too many houses.There were three ways to cure thisoverhang: (1) blow up a lot of houses, atactic similar to the destruction of autosthat occurred with the “cash-for-clunkers”program; (2) speed up household formationsby, say, encouraging teenagers to cohabitate,a program not likely to suffer from a lackof volunteers or; (3) reduce new housingstarts to a number far below the rate ofhousehold formations.Our country has wisely selected the thirdoption, which means that within a year orso residential housing problems shouldlargely be behind us, the exceptions beingonly high-value houses and those in certainlocalities where overbuilding was particularlyegregious. Prices will remain far below“bubble” levels, of course, but for everyseller (or lender) hurt by this there will bea buyer who benefits. Indeed, many familiesthat couldn’t afford to buy an appropriatehome a few years ago now find it well withintheir means because the bubble burst.The second reason that manufacturedhousing is troubled is specific to the industry:the punitive differential in mortgage ratesbetween factory-built homes and site-builthomes. Before you read further, let meunderscore the obvious: Berkshire has adog in this fight, and you should thereforeassess the commentary that follows withspecial care. That warning made, however, letme explain why the rate differential causesproblems for both large numbers of lowerincomeAmericans and Clayton.The residential mortgage market is shapedby government rules that are expressedby FHA, Freddie Mac and Fannie Mae.Their lending standards are all-powerfulbecause the mortgages they insure cantypically be securitized and turned intowhat, in effect, is an obligation of theU.S. government. Currently buyers ofconventional site-built homes who qualify forthese guarantees can obtain a 30-year loan atabout 51⁄4%. In addition, these are mortgagesthat have recently been purchased in massiveamounts by the Federal Reserve, an actionthat also helped to keep rates at bargainbasementlevels.In contrast, very few factory-built homesqualify for agency-insured mortgages.Therefore, a meritorious buyer of a factorybuilthome must pay about 9% on his loan.For the all-cash buyer, Clayton’s homes offerterrific value. If the buyer needs mortgagefinancing, however – and, of course, mostbuyers do – the difference in financing coststoo often negates the attractive price of afactory-built home.Last year I told you why our buyers– generally people with low incomes –performed so well as credit risks. Theirattitude was all-important: They signed up tolive in the home, not resell or refinance it.Consequently, our buyers usually took outPre-Tax Earnings(in millions)2009 2008Net investment income $ 278 $ 330Life and annuity operation 116 23Leasing operations 14 87Manufactured-housing finance (Clayton) 187 206Other income * 186 141Income before investment and derivatives gains or losses $ 781 $ 787*Includes $116 million in 2009 and $92 million in 2008 of fees that Berkshire chargesClayton for the use of Berkshire’s credit.loans with payments geared to their verifiedincomes (we weren’t making “liar’s loans”)and looked forward to the day they couldburn their mortgage. If they lost their jobs,had health problems or got divorced, wecould of course expect defaults. But theyseldom walked away simply because housevalues had fallen. Even today, though job-losstroubles have grown, Clayton’s delinquenciesand defaults remain reasonable and will notcause us significant problems.We have tried to qualify more of ourcustomers’ loans for treatment similar tothose available on the site-built product.So far we have had only token success.Many families with modest incomes butresponsible habits have therefore had toforego home ownership simply because thefinancing differential attached to the factorybuiltproduct makes monthly payments tooexpensive. If qualifications aren’t broadened,so as to open low-cost financing to all whomeet down-payment and income standards,the manufactured-home industry seemsdestined to struggle and dwindle.Even under these conditions, I believeClayton will operate profitably in comingyears, though well below its potential. Wecouldn’t have a better manager than CEOKevin Clayton, who treats Berkshire’sinterests as if they were his own. Ourproduct is first-class, inexpensive andconstantly being improved. Moreover, we willcontinue to use Berkshire’s credit to supportClayton’s mortgage program, convinced aswe are of its soundness. Even so, Berkshirecan’t borrow at a rate approaching thatavailable to government agencies. Thishandicap will limit sales, hurting both Claytonand a multitude of worthy families who longfor a low-cost home.In the following table, Clayton’s earnings arenet of the company’s payment to Berkshirefor the use of its credit. Offsetting this costto Clayton is an identical amount of incomecredited to Berkshire’s finance operation andincluded in “Other Income.” The cost andincome amount was $116 million in 2009and $92 million in 2008.The table also illustrates how severely ourfurniture (CORT) and trailer (XTRA) leasingoperations have been hit by the recession.Though their competitive positions remainas strong as ever, we have yet to see anybounce in these businesses.13

•••At the end of 2009, we became a 50% ownerof Berkadia Commercial Mortgage (formerlyknown as Capmark), the country’s thirdlargestservicer of commercial mortgages. Inaddition to servicing a $235 billion portfolio,the company is an important originator ofmortgages, having 25 offices spread aroundthe country. Though commercial real estatewill face major problems in the next fewyears, long-term opportunities for Berkadiaare significant.Our partner in this operation is Leucadia,run by Joe Steinberg and Ian Cumming, withwhom we had a terrific experience someyears back when Berkshire joined withthem to purchase Finova, a troubled financebusiness. In resolving that situation, Joe andIan did far more than their share of thework, an arrangement I always encourage.Naturally, I was delighted when they calledme to partner again in the Capmark purchase.Our first venture was also christenedBerkadia. So let’s call this one Son ofBerkadia. Someday I’ll be writing you aboutGrandson of Berkadia.InvestmentsBelow we show our common stockinvestments that at yearend had a marketvalue of more than $1 billion.Shares Company % ofCompanyOwnedCost *12/31/09Market(in millions)151,610,700 American Express Company 12.7 $ 1,287 $ 6,143225,000,000 BYD Company, Ltd 9.9 232 1,986200,000,000 The Coca-Cola Company 8.6 1,299 11,40037,711,330 ConocoPhillips 2.5 2,741 1,92628,530,467 Johnson & Johnson 1.0 1,724 1,838130,272,500 Kraft Foods Inc 8.8 4,330 3,5413,947,554 POSCO 5.2 768 2,09283,128,411 The Procter & Gamble Company 2.9 533 5,04025,108,967 Sanofi-Aventis 1.9 2,027 1,979234,247,373 Tesco plc 3.0 1,367 1,62076,633,426 U.S. Bancorp 4.0 2,371 1,72539,037,142 Wal-Mart Stores, Inc 1.0 1,893 2,087334,235,585 Wells Fargo & Company 6.5 7,394 9,021Others 6,680 8,636Total Common Stocks Carried$34,646 $59,034at Market*This is our actual purchase price and also our tax basis; GAAP “cost” differs in afew cases because of write-ups or write-downs that have been required.In addition, we own positions in non-tradedsecurities of Dow Chemical, General Electric,Goldman Sachs, Swiss Re and Wrigley withan aggregate cost of $21.1 billion and acarrying value of $26.0 billion. We purchasedthese five positions in the last 18 months.Setting aside the significant equity potentialthey provide us, these holdings deliver us anaggregate of $2.1 billion annually in dividendsand interest. Finally, we owned 76,777,029shares (22.5%) of BNSF at yearend, which wethen carried at $85.78 per share, but whichhave subsequently been melded into ourpurchase of the entire company.In 2009, our largest sales were inConocoPhillips, Moody’s, Procter & Gambleand Johnson & Johnson (sales of the latteroccurring after we had built our positionearlier in the year). Charlie and I believethat all of these stocks will likely tradehigher in the future. We made some salesearly in 2009 to raise cash for our Dowand Swiss Re purchases and late in theyear made other sales in anticipation ofour BNSF purchase.We told you last year that very unusualconditions then existed in the corporateand municipal bond markets and that thesesecurities were ridiculously cheap relativeto U.S. Treasuries. We backed this view withsome purchases, but I should have done farmore. Big opportunities come infrequently.When it’s raining gold, reach for a bucket,not a thimble.We entered 2008 with $44.3 billionof cash-equivalents, and we have sinceretained operating earnings of $17 billion.Nevertheless, at yearend 2009, our cashwas down to $30.6 billion (with $8 billionearmarked for the BNSF acquisition). We’veput a lot of money to work during thechaos of the last two years. It’s been an idealperiod for investors: A climate of fear is theirbest friend. Those who invest only whencommentators are upbeat end up paying aheavy price for meaningless reassurance. Inthe end, what counts in investing is what youpay for a business – through the purchase ofa small piece of it in the stock market – andwhat that business earns in the succeedingdecade or two.•••Last year I wrote extensively about ourderivatives contracts, which were thenthe subject of both controversy andmisunderstanding. For that discussion, pleasego to www.berkshirehathaway.com.We have since changed only a few of ourpositions. Some credit contracts have run off.The terms of about 10% of our equity putcontracts have also changed: Maturities havebeen shortened and strike prices materiallyreduced. In these modifications, no moneychanged hands.A few points from last year’s discussion areworth repeating:(1) Though it’s no sure thing, I expect ourcontracts in aggregate to deliver us aprofit over their lifetime, even wheninvestment income on the huge amountof float they provide us is excluded inthe calculation. Our derivatives float –which is not included in the $62 billion ofinsurance float I described earlier – wasabout $6.3 billion at yearend.(2) Only a handful of our contractsrequire us to post collateral under anycircumstances. At last year’s low point inthe stock and credit markets, our postingrequirement was $1.7 billion, a smallfraction of the derivatives-related floatwe held. When we do post collateral,let me add, the securities we put upcontinue to earn money for our account.(3) Finally, you should expect large swingsin the carrying value of these contracts,items that can affect our reportedquarterly earnings in a huge way but thatdo not affect our cash or investmentholdings. That thought certainly fit2009’s circumstances. Here are thepre-tax quarterly gains and losses fromderivatives valuations that were part ofour reported earnings last year:Quarter1 (1.517)2 2.3573 1.7324 1.052$ Gain (Loss) in BillionsAs we’ve explained, these wild swingsneither cheer nor bother Charlie and me.When we report to you, we will continue toseparate out these figures (as we do realizedinvestment gains and losses) so that youcan more clearly view the earnings of ouroperating businesses. We are delighted thatwe hold the derivatives contracts that we do.To date we have significantly profited fromthe float they provide. We expect also toearn further investment income over the lifeof our contracts.We have long invested in derivativescontracts that Charlie and I think aremispriced, just as we try to invest inmispriced stocks and bonds. Indeed, wefirst reported to you that we held suchcontracts in early 1998. The dangers thatderivatives pose for both participants andsociety – dangers of which we’ve longwarned, and that can be dynamite – arisewhen these contracts lead to leverage and/or counterparty risk that is extreme. AtBerkshire nothing like that has occurred –nor will it.It’s my job to keep Berkshire far away fromsuch problems. Charlie and I believe thata CEO must not delegate risk control.It’s simply too important. At Berkshire, Iboth initiate and monitor every derivativescontract on our books, with the exceptionof operations-related contracts at a few ofour subsidiaries, such as MidAmerican, andthe minor runoff contracts at General Re.If Berkshire ever gets in trouble, it willbe my fault. It will not be because ofmisjudgments made by a Risk Committeeor Chief Risk Officer.•••In my view a board of directors of a hugefinancial institution is derelict if it does notinsist that its CEO bear full responsibility forrisk control. If he’s incapable of handling thatjob, he should look for other employment.And if he fails at it – with the governmentthereupon required to step in with funds orguarantees – the financial consequences forhim and his board should be severe.It has not been shareholders who havebotched the operations of some of ourcountry’s largest financial institutions. Yetthey have borne the burden, with 90% ormore of the value of their holdings wipedout in most cases of failure. Collectively, theyhave lost more than $500 billion in just thefour largest financial fiascos of the last twoyears. To say these owners have been “bailedout”is to make a mockery of the term.The CEOs and directors of the failedcompanies, however, have largely goneunscathed. Their fortunes may have been1 5

diminished by the disasters they oversaw, butthey still live in grand style. It is the behaviorof these CEOs and directors that needsto be changed: If their institutions and thecountry are harmed by their recklessness,they should pay a heavy price – one notreimbursable by the companies they’vedamaged nor by insurance. CEOs and, inmany cases, directors have long benefittedfrom oversized financial carrots; somemeaningful sticks now need to be part oftheir employment picture as well.An InconvenientTruthBoardroom OverheatingOur subsidiaries made a few small “bolton”acquisitions last year for cash, but ourblockbuster deal with BNSF required usto issue about 95,000 Berkshire sharesthat amounted to 6.1% of those previouslyoutstanding. Charlie and I enjoy issuingBerkshire stock about as much as we relishprepping for a colonoscopy. The reasonfor our distaste is simple. If we wouldn’tdream of selling Berkshire in its entirety atthe current market price, why in the worldshould we “sell” a significant part of thecompany at that same inadequate price byissuing our stock in a merger?In evaluating a stock-for-stock offer,shareholders of the target company quiteunderstandably focus on the market priceof the acquirer’s shares that are to be giventhem. But they also expect the transactionto deliver them the intrinsic value of theirown shares – the ones they are giving up. Ifshares of a prospective acquirer are sellingbelow their intrinsic value, it’s impossiblefor that buyer to make a sensible deal inan all-stock deal. You simply can’t exchangean undervalued stock for a fully-valued onewithout hurting your shareholders.Imagine, if you will, Company A andCompany B, of equal size and both withbusinesses intrinsically worth $100 pershare. Both of their stocks, however, sellfor $80 per share. The CEO of A, long onconfidence and short on smarts, offers 11⁄4shares of A for each share of B, correctlytelling his directors that B is worth $100 pershare. He will neglect to explain, though, thatwhat he is giving will cost his shareholders$125 in intrinsic value. If the directors aremathematically challenged as well, and a dealis therefore completed, the shareholdersof B will end up owning 55.6% of A & B’scombined assets and A’s shareholders willown 44.4%. Not everyone at A, it shouldbe noted, is a loser from this nonsensicaltransaction. Its CEO now runs a companytwice as large as his original domain, in aworld where size tends to correlate withboth prestige and compensation.If an acquirer’s stock is overvalued, it’sa different story: Using it as a currencyworks to the acquirer’s advantage. That’swhy bubbles in various areas of the stockmarket have invariably led to serial issuancesof stock by sly promoters. Going by themarket value of their stock, they can affordto overpay because they are, in effect, usingcounterfeit money. Periodically, many air-forassetsacquisitions have taken place, the late1960s having been a particularly obsceneperiod for such chicanery. Indeed, certainlarge companies were built in this way.(No one involved, of course, ever publiclyacknowledges the reality of what is going on,though there is plenty of private snickering.)In our BNSF acquisition, the sellingshareholders quite properly evaluated ouroffer at $100 per share. The cost to us,however, was somewhat higher since 40% ofthe $100 was delivered in our shares, whichCharlie and I believed to be worth morethan their market value. Fortunately, we hadlong owned a substantial amount of BNSFstock that we purchased in the market forcash. All told, therefore, only about 30%of our cost overall was paid withBerkshire shares.In the end, Charlie and I decided that thedisadvantage of paying 30% of the pricethrough stock was offset by the opportunitythe acquisition gave us to deploy $22 billionof cash in a business we understood andliked for the long term. It has the additionalvirtue of being run by Matt Rose, whom wetrust and admire. We also like the prospectof investing additional billions over the yearsat reasonable rates of return. But the finaldecision was a close one. If we had neededto use more stock to make the acquisition,it would in fact have made no sense. Wewould have then been giving up more thanwe were getting.•••I have been in dozens of board meetings inwhich acquisitions have been deliberated,often with the directors being instructed byhigh-priced investment bankers (are thereany other kind?). Invariably, the bankersgive the board a detailed assessment of thevalue of the company being purchased, withemphasis on why it is worth far more thanits market price. In more than fifty yearsof board memberships, however, neverhave I heard the investment bankers (ormanagement!) discuss the true value ofwhat is being given. When a deal involvedthe issuance of the acquirer’s stock, theysimply used market value to measure thecost. They did this even though they wouldhave argued that the acquirer’s stock pricewas woefully inadequate – absolutely noindicator of its real value – had a takeoverbid for the acquirer instead been the subjectup for discussion.When stock is the currency beingcontemplated in an acquisition and whendirectors are hearing from an advisor, itappears to me that there is only one wayto get a rational and balanced discussion.Directors should hire a second advisorto make the case against the proposedacquisition, with its fee contingent on thedeal not going through. Absent this drasticremedy, our recommendation in respect tothe use of advisors remains: “Don’t ask thebarber whether you need a haircut.”•••I can’t resist telling you a true story fromlong ago. We owned stock in a large well-runbank that for decades had been statutorilyprevented from acquisitions. Eventually, thelaw was changed and our bank immediatelybegan looking for possible purchases. Itsmanagers – fine people and able bankers– not unexpectedly began to behave liketeenage boys who had just discovered girls.They soon focused on a much smaller bank,also well-run and having similar financialcharacteristics in such areas as return onequity, interest margin, loan quality, etc. Ourbank sold at a modest price (that’s why wehad bought into it), hovering near book valueand possessing a very low price/earningsratio. Alongside, though, the small-bankowner was being wooed by other largebanks in the state and was holding out fora price close to three times book value.Moreover, he wanted stock, not cash.Naturally, our fellows caved in and agreedto this value-destroying deal. “We need toshow that we are in the hunt. Besides, it’sonly a small deal,” they said, as if only majorharm to shareholders would have been alegitimate reason for holding back. Charlie’sreaction at the time: “Are we supposed toapplaud because the dog that fouls our lawnis a Chihuahua rather than a Saint Bernard?”The seller of the smaller bank – no fool– then delivered one final demand in hisnegotiations. “After the merger,” he in effectsaid, perhaps using words that were phrasedmore diplomatically than these, “I’m goingto be a large shareholder of your bank, andit will represent a huge portion of my networth. You have to promise me, therefore,that you’ll never again do a deal this dumb.”Yes, the merger went through. The ownerof the small bank became richer, we becamepoorer, and the managers of the big bank –newly bigger – lived happily ever after.The AnnualMeetingOur best guess is that 35,000 peopleattended the annual meeting last year(up from 12 – no zeros omitted – in 1981).With our shareholder population muchexpanded, we expect even more this year.Therefore, we will have to make a fewchanges in the usual routine. There will beno change, however, in our enthusiasm forhaving you attend. Charlie and I like to meetyou, answer your questions and – bestof all – have you buy lots of goods fromour businesses.The meeting this year will be held onSaturday, May 1st. As always, the doors willopen at the Qwest Center at 7 a.m., and anew Berkshire movie will be shown at 8:30.At 9:30 we will go directly to the questionand-answerperiod, which (with a break forlunch at the Qwest’s stands) will last until3:30. After a short recess, Charlie and I willconvene the annual meeting at 3:45. If youdecide to leave during the day’s questionperiods, please do so while Charlie is talking.(Act fast; he can be terse.)17

The best reason to exit, of course, is toshop. We will help you do that by filling the194,300-squarefoot hall that adjoins themeeting area with products from dozens ofBerkshire subsidiaries. Last year, you did yourpart, and most locations racked up recordsales. But you can do better. (A friendlywarning: If I find sales are lagging, I get testyand lock the exits.)GEICO will have a booth staffed by anumber of its top counselors from aroundthe country, all of them ready to supplyyou with auto insurance quotes. In mostcases, GEICO will be able to give you ashareholder discount (usually 8%). Thisspecial offer is permitted by 44 of the 51jurisdictions in which we operate. (Onesupplemental point: The discount is notadditive if you qualify for another, such asthat given certain groups.) Bring the detailsof your existing insurance and check outwhether we can save you money. For at least50% of you, I believe we can.Be sure to visit the Bookworm. Among themore than 30 books and DVDs it will offerare two new books by my sons: Howard’sFragile, a volume filled with photos andcommentary about lives of struggle aroundthe globe and Peter’s Life Is What You MakeIt. Completing the family trilogy will be thedebut of my sister Doris’s biography, a storyfocusing on her remarkable philanthropicactivities. Also available will be Poor Charlie’sAlmanack, the story of my partner. Thisbook is something of a publishing miracle –never advertised, yet year after year sellingmany thousands of copies from its Internetsite. (Should you need to ship your bookpurchases, a nearby shipping service willbe available.)If you are a big spender – or, for that matter,merely a gawker – visit Elliott Aviation onthe east side of the Omaha airport betweennoon and 5:00 p.m. on Saturday. There wewill have a fleet of NetJets aircraft that willget your pulse racing.An attachment to the proxy material that isenclosed with this report explains how youcan obtain the credential you will need foradmission to the meeting and other events.As for plane, hotel and car reservations, wehave again signed up American Express (800-799-6634) to give you special help. CarolPedersen, who handles these matters, does aterrific job for us each year, and I thank herfor it. Hotel rooms can be hard to find, butwork with Carol and you will get one.At Nebraska Furniture Mart, located ona 77-acre site on 72nd Street betweenDodge and Pacific, we will again be having“Berkshire Weekend” discount pricing. Toobtain the Berkshire discount, you mustmake your purchases between Thursday,April 29th and Monday, May 3rd inclusive,and also present your meeting credential.The period’s special pricing will even applyto the products of several prestigiousmanufacturers that normally have ironcladrules against discounting but which, in thespirit of our shareholder weekend, havemade an exception for you. We appreciatetheir cooperation. NFM is open from 10 a.m.to 9 p.m. Monday through Saturday, and 10a.m. to 6 p.m. on Sunday. On Saturday thisyear, from 5:30 p.m. to 8 p.m., NFM is havinga Berkyville BBQ to which you are all invited.At Borsheims, we will again have twoshareholder-only events. The first will be acocktail reception from 6 p.m. to 10 p.m.on Friday, April 30th. The second, the maingala, will be held on Sunday, May 2nd, from9 a.m. to 4 p.m. On Saturday, we will beopen until 6 p.m.We will have huge crowds at Borsheimsthroughout the weekend. For yourconvenience, therefore, shareholderprices will be available from Monday, April26th through Saturday, May 8th. Duringthat period, please identify yourself as ashareholder by presenting your meetingcredentials or a brokerage statement thatshows you are a Berkshire holder. Enterwith rhinestones; leave with diamonds.My daughter tells me that the more youbuy, the more you save (kids say thedarnedest things).On Sunday, in the mall outside of Borsheims,a blindfolded Patrick Wolff, twice U.S.chess champion, will take on all comers– who will have their eyes wide open –in groups of six. Nearby, Norman Beck,a remarkable magician from Dallas, willbewilder onlookers.Our special treat for shareholders thisyear will be the return of my friend, ArielHsing, the country’s top-ranked juniortable tennis player (and a good bet to winat the Olympics some day). Now 14, Arielcame to the annual meeting four years agoand demolished all comers, including me.(You can witness my humiliating defeat onYouTube; just type in Ariel Hsing Berkshire.)Naturally, I’ve been plotting a comeback andwill take her on outside of Borsheims at 1:00p.m. on Sunday. It will be a three-point match,and after I soften her up, all shareholders areinvited to try their luck at similar three-pointcontests. Winners will be given a box of See’scandy. We will have equipment available, butbring your own paddle if you think it willhelp. (It won’t.)Gorat’s will again be open exclusively forBerkshire shareholders on Sunday, May 2nd,and will be serving from 1 p.m. until 10 p.m.Last year, though, it was overwhelmed bydemand. With many more diners expectedthis year, I’ve asked my friend, DonnaSheehan, at Piccolo’s – another favoriterestaurant of mine – to serve shareholderson Sunday as well. (Piccolo’s giant root beerfloat is mandatory for any fan of fine dining.)I plan to eat at both restaurants: All of theweekend action makes me really hungry,and I have favorite dishes at each spot.Remember: To make a reservation at Gorat’s,call 402-551-3733 on April 1st (but notbefore) and at Piccolo’s call 402-342-9038.Regrettably, we will not be able to have areception for international visitors this year.Our count grew to about 800 last year,and my simply signing one item per persontook about 21⁄2 hours. Since we expecteven more international visitors this year,Charlie and I decided we must drop thisfunction. But be assured, we welcome everyinternational visitor who comes.Last year we changed our method ofdetermining what questions would be askedat the meeting and received many dozensof letters applauding the new arrangement.We will therefore again have the samethree financial journalists lead the questionand-answerperiod, asking Charlie and mequestions that shareholders have submittedto them by e-mail.The journalists and their email addressesare: Carol Loomis, of Fortune, who may beemailed at cloomis@fortunemail.com;Becky Quick, of CNBC, atBerkshireQuestions@cnbc.com,and Andrew Ross Sorkin, of The New YorkTimes, at arsorkin@nytimes.com. Fromthe questions submitted, each journalist willchoose the dozen or so he or she decidesare the most interesting and important. Thejournalists have told me your question hasthe best chance of being selected if you keepit concise and include no more than twoquestions in any e-mail you send them. (Inyour e-mail, let the journalist know if youwould like your name mentioned if yourquestion is selected.)Neither Charlie nor I will get so much asa clue about the questions to be asked. Weknow the journalists will pick some toughones and that’s the way we like it.We will again have a drawing at 8:15 onSaturday at each of 13 microphones forthose shareholders wishing to ask questionsthemselves. At the meeting, I will alternatethe questions asked by the journalists withthose from the winning shareholders. We’veadded 30 minutes to the question timeand will probably have time for about 30questions from each group.•••At 86 and 79, Charlie and I remain luckybeyond our dreams. We were born inAmerica; had terrific parents who sawthat we got good educations; have enjoyedwonderful families and great health; andcame equipped with a “business” gene thatallows us to prosper in a manner hugelydisproportionate to that experienced bymany people who contribute as much ormore to our society’s well-being. Moreover,we have long had jobs that we love, inwhich we are helped in countless ways bytalented and cheerful associates. Indeed,over the years, our work has become evermore fascinating; no wonder we tap-danceto work. If pushed, we would gladly paysubstantial sums to have our jobs (but don’ttell the Comp Committee).Nothing, however, is more fun for us thangetting together with our shareholderpartnersat Berkshire’s annual meeting. Sojoin us on May 1st at the Qwest for ourannual Woodstock for Capitalists. We’ll seeyou there.Warren E. BuffettChairman of the BoardP.S. Come by rail.1 9