1994 年伯克希尔完整年报

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94-93442 UT ARLINOTON LIS ARIES 3 1334 00927 3083 BERKSHIRE HATHAWAY INC. 1994 ANNUAL REPORT

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Business Activities in a number of diverse business activities. The most important of these is the Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged reinsurance basis through a number of subsidiaries collectively referred to in this casualty insurance business conducted on both a direct and report as the Berkshire Hathaway Insurance Group. ownership percenrages of other publicly traded companies. Such investments at Investment portfolios of insurance subsidiaries include meaningful equity the end of 1994 included approximately 50% of the outstanding capital stock of GEICO Corporation, approximately 13% of the capital stock of Capital Company, Cities/ABC, Inc., approximately 8% of the capital stock of The Coca-Cola Company, approximately 11% of the capital stock of The Gillette approximately 15% of the capital stock of The Washington Post Company, common and convertible preferred stock of Salomon Ine having approximately approximately 13% of the common stock of Wells Fargo & Company, and publicly-owned companies is available, including information released from time 20% of the total voting power of that company. Much information about these to time by the companies themselves. and Sunday newspaper in upstate New York. Other business activities conducted Additionally, Berkshire Hathaway Inc. publishes the Buffalo News, a daily encyclopedias and related educational and instructional material (World Book non-insurance subsidiaries include publication distribution of and Childcraft products), manutacture and marketing of home cleaning systems sale of boxed chocolates and other confectionery products (See's Candies), and related accessories (sold principally under the Kirby name), manufacture and retailing of home furnishings (Nebraska Furniture Mart), manufacture and and distribution of footwear (H.H. Brown Shoe Company, Lowell Shoe, Inc. and distribution of uniforms (Fechheimer Brothers Company), manufacture, import tools and painting systems (Campbell Hausfeld products). Berkshire also owns Dexter Shoe Company) and manufacture and distribution of air compressors, air this report. a number of other businesses engaged in a variety of activities, as identified in managers of the business units. Investment decisions and all other capital Operating decisions for the various Berkshire businesses are made by allocation decisions are made for Berkshire and its subsidiaries by Warren E Buffett, in consultation with Charles T. Munger. Mr. Buffett is Chairman and Mr. Munger is Vice Chairman of Berkshire's Board of Directors.

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BERKSHIRE HATHAWAY INC. 1994 ANNUAL REPORT TABLE OF CONTENTS Business Activities Inside Front Cover Owner-Related Business Principles 2 Corporate Performance vs. the S&P 500 4 Chairman's Letter* 5 Appendix: Acquisition Crieria 21 Independent Auditors' Report .22 Consolidated Financial Statements . 23 Management's Discussion 40 Selected Financial Data For The Past Five Years 49 Shareholder-Designated Contributions 50 Combined Financial Statements — Unaudited — for Berkshire Business Groups . 53 Common Stock Data Directors and Officers of the Company ......... Inside Back Cover *Copyright © 1995 By Warren E. Buffett All Rights Reserved

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Shareholders of Berkshire Hathaway Inc. in the 1983 Annual Report. Because the material remains topical, Certain OWNER-RELATED BUSINESS PRINCIPLES were included in the Chairman's letter* to it is reproduced on this and the following page. that pertain to the manager-owner relationship: With so many new shareholders, it's appropriate to summarize the major business principles we follow shareholders as owner-partners, and of ourselves • Although our form is corporate, our attitude is partnership. Charlie Munger and I think of our shareholdings we also, are, for better or worse, controlling partners.) We do not view the company itself as as managing partners. (Because of the size of our the ultimate owner of our business assets but, instead, view the company as a conduit through which out shareholders own the assets. the case of at least four, over 50% of family net worth is represented by holdings of Berkshire. We eat our own • In line with this owner-orientation, our directors are major shareholders of Berkshire Hathaway. In cooking. average annual rate of gain in intrinsic business value on a per-share basis. We do not measure the economic • Our long-term economic goal (subject to some qualifications mentioned later) is to maximize the significance or performance of Berkshire bylits size; we measure by per-share progress. We are certain that the rate of per-share progress will diminish in the future —a greatly enlarged capital base will see to that. But we will be disappointed if our rate does not exceed that of the average large American corporation. generate cash and consistently earn above-average returns on capital. Our second choice is to own parts of • Our preference would be to reach this goal by directly owning a diversified group of businesses that subsidiaries. The price and availability of businesses and the need for insurance capital determine any given similar businesses, attained primarily through purchases of marketable common stocks by out insurance year's capital allocation. conventional accounting, consolidated reported earnings may reveal relatively little about our true economic Because of this two-pronged approach to business ownership and because of the limitations of However, we will also report to you the earnings of'each major business we control, numbers we consider of performance. Charlie and I, both as owners and managers, virtually ignore such consolidated numbers. should generally aid you in making judgments about them. great importance. These figures, along with other information we will supply about the individual businesses, acquisition costs are similar, we much prefer to purchase S2 of carnings that is not reportable by us under Accounting consequences do not influence our operating or capital-allocation decisions. When standard accounting principles than to purchase $1 of earnings that is reportable. This is precisely the choice the pro-rata price of small portions (whose earnings will be largely unreportable). In aggregate and over time, that often faces us since entire businesses (whose earnings will be fully reportable) frequently sell for double we expect the unreported earnings to be fully reflected in our intrinsic business value through capital gains. We will reject interesting • We rarely use much debt and, when we do, we attempt to structure it on a long-term fixed-rate basis. penalized our results butitis the only behavior that leaves us comfortable, considering our fiduciary obligations opportunities rather than over-leverage our balance sheet. This conservatism has of their net worth to our care. (As one of the Indianapolis "500" winners said: "To finish first, you must first to policyholders, depositors, lenders and the many equity holders who have committed unusually large portions finish.") *Copyrighi & 1984 by Warren E. Buffer A!! Rights Reserved 2

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entire businesses at control prices that ignore long-term economic consequences to our shareholders. We will A managerial "wish list" will not be filled at shareholder expense. We will not diversify by purchasing diversifying your own portfolios through direct purchases in the stock market. only do with your money what we would do with our own, weighing fully the values you can obtain by retaining earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value • We feel noble intentions should be checked periodically against results. We test the wisdom of for each $1 retained. To date, this test has been met. We will continue to apply it on a five-year rolling basis. As our net worth grows, it is more difficult to use retained earnings wisely. applies to all forms of issuance — not only mergers or public stock offerings, but stock-for-debt swaps, stock We will issue common stock only when we receive as much in business value as we give. This rule options, and convertible securities as well. We will not sell small portions of your company — and that is what the issuance of shares amounts to —on a basis inconsistent with the value of the entire enterprise. regardless of price, we have no interest at all in selling any good businesses that Berkshire owns, and are very • You should be fully aware of' one attitude Charlie and I share that hurts our financial performance: reluctant to sell sub-pat businesses as long as we expect them to generate at least some cash and as long as that led us into such sub-par businesses. And we react with great caution to suggestions that our poor we feel good about their managers and labor relations. We hope not to repeat the capital-allocation mistakes businesses can be restored to satisfactory profitability by major capital expenditures. (The projections will be usually is about as rewarding as struggling in quicksand.) Nevertheless, gin rummy managerial behavior

• the advocates will be sincere — but, in the end, major additional investment in a terrible industry

(discard your least promising business at each turn) is not our style. We would rather have our overall results business value. Our guideline is to tell you the business facts that we would want to know if our positions were • We will be candid in our reporting to you, emphasizing the pluses and minuses important in appraising reversed. We owe you no less. Moreover, as a company with a majot communications business, it would be than we would expect our news people to apply when reporting on others. We also believe candor benefits us inexcusable for us to apply lesser standards of accuracy, balance and incisiveness when reporting on ourselves as managers: the CEO who misleads others in public may eventually mislead himself in private. legally required. Good investment ideas are rare, valuable and subject to competitive appropriation just as good • Despite our policy of candor, we will discuss our activities in marketable securities only to the extent product or business acquisition ideas are. Therefore, we normally will not talk about our investment ideas. This incorrectly rumored to be buying. If we deny those reports but say "no comment" on other occasions, the no- ban extends even to securities we have sold (because we may purchase them again) and to stocks we are comments become confirmation.

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BERKSHIRE HATHAWAY INC. To the Shareholders of Berkshire Hathaway Ine.: present management took over) our per-share book value has grown from $19 to $10,083, or at a rate of Our gain in net worth during 1994 was S1.45 billion or 13.9%. Over the last 30 years (that is, since 23% compounded annually. confidently offer, however, is that the future performance of Berkshire won't come close to matching the Charlie Munger, Berkshire's Vice Chairman and my partner, and I make few predictions. One we will performance of the past. we believe that our formula — the purchase at sensible prices of businesses that have good underlying The problem is not that what has worked in the past will cease to work in the future. To the contrary, therefore, to keep on doing well. economics and are run by honest and able people — is certain to produce reasonable success. We expect, of $11.9 billion compared to about $22 million when Charlie and I began to manage the company. Though A fat wallet, however, is the enery of superior investment results. And Berkshire now has a net worth there are as many good businesses as ever, it is useless for us to make purchases that are inconsequential in relation to Berkshire's capital. (As Charlie regularly reminds me, "If something is not worth doing at all, Williams, in The Story of My Life, explains why: "My argument is, to be a good hitter, you've got to get a Nevertheless, we will stick with the approach that got us here and try not to relax our standards. Ted a 344 hitter. I might only be a 250 hitter." Charlie and I agree and will try to wait for opportunities that are good ball to hit. It's the first rule in the book. If I have to bite at stuff that is out of my happy zone, I'm not investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam We will continue to ignore political and economic forecasts, which are an expensive distraction for many War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%. principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. But, surprise — none of these blockbuster events made the slightest dent in Ben Graham's investment capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were if we had let a fear of unknowns cause us to defer or alter the deployment of nor to profit from them. If we can identify businesses similar to those we have purchased in the past, external A different set of major shocks is sure to occur in the next 30 years. We will neither try to predier these surprises will have little effect on our long-term results. you will fare just as Charlie and I do. If you suffer, we will suffer; if we prosper, so will you. And we will not What we promise you — along with more modest gains — is that during your ownership of Berkshire, Than the downside. break this bond by introducing compensation arrangements that give us a greater participation in the upside

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We further promise you that our personal fortunes will remain overwhelmingly concentrated in Berkshire shares: We will not ask you to invest with us and then put our own money elsewhere. In addition, Berkshire belonged to partnerships that Charlie and I ran in the 1960's. We could not be more motivared to do our dominates both the investment portfolios of most members of our families and of a great many friends who companies held securities having a value of $1.7 billion, or about $1,500 per Berkshire share. Leaving aside Luckily, we have a good base from which to work. Ten years ago, in 1984, Berkshire's insurance all income and capital gains from those securities, Berkshire's pre-tax earnings that year were only about $6 almost entirely offset by the combination of underwriting losses in our insurance business, corporate overhead million. We had earnings, yes, from our various manufacturing, retailing and service businesses, but they were and interest expense. income from these securities, our pre-tax carnings in 1994 were about $383 million. During the decade, Now we hold securities worth $18 billion, or over $15,000 per Berkshire share. If you again exclude all employment has grown from 5,000 to 22,000 (including eleven people at World Headquarters). extraordinary results from some ordinary-appearing businesses. Casey Stengel described managing a baseball We achieved our gains through the efforts of a superb corps of operating managers who get team as "getting paid for home runs other fellows hit." That's my formula at Berkshire, also. statistics will illustrate their significance: In 1994, Coca-Cola sold about 280 billion 8-ounce servings and The businesses in which we have partial interests are equally important to Berkshire's success. A few we have an economic interest in 21 billion of its servings, which produce "soft-drink earnings" for us of nearly earned a little less than a penny on each. But pennies add up. Through Berkshire's 7.8% ownership of Coke, $200 million. Similarly, by way of its Gillette stock, Berkshire has close to a 7% share of the worid's razor and blade market (measured by revenues, not by units), a proportion according us about $250 million of sales in 1994. And, at Wells Fargo, a $53 billion bank, our 13% ownership translates into a $7 billion "Berkshire Bank" that earned about $100 million during 1994 ompanies lust mentioned easily qually as rare gems. Best of all, we aren't lunited to simply a tew of thi is far better to own a signiticant portion of the Hope diamond than 100% of a chiuestone, and u breed, but instead possess a growing collection. do so prices i vener, ve o lee at high pretates sharple sort od tis noses ne will hail is ups end increase in value at a satisfactory rate. Book Value and Intrinsic Value Just as regularly, we tell you that what counts is intrinsic value, a number that is impossible to pinpoint but We regularly report our per-share book value, an easily calculable number, though one of limited use. essential to estimate. However, that figure considerably overstated the stock's intrinsic value since all of the company's resources For example, in 1964, we could state with certitude that Berkshire's per-share book value was $19.46. values equal to their carrying vatues. In 1964, then, anyone inquiring into the soundness of Berkshire's balance were tied up in a sub-profitable textile business. Our textile assets had neither going-concern nor liquidation sheet might well have deserved the answer once offered up by a Hollywood mogul of dubious reputation: "Don't worry, the liabilities are solid." their carrying value. (Those we don't control, such as Coca-Cola or Gillette, are carried at current market Today, Berkshire's situation has reversed: Many of the businesses we control are worth far more than values.) We continue to give you book value figures, however, because they serve as a rough, albeit 6

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significantly understated, tracking measure for Berkshire's intrinsic value. Last year, in fact, the two measures moved in concert: Book value gained 13.9%, and that was the approximate gain in intrinsic value also. its remaining life. Anyone calculating intrinsic value necessarily comes up with a highly subjective figure that We define intrinsic value as the discounted value of the cash that can be taken out of a business daring however, intrinsic value is all-important and is the only logical way to evaluate the relative attractiveness of will change both as estimates of future cash flows are revised and as interest rates move. Despite its fuzziness, investments and businesses. another form of investment, a college education. Think of the education's cost as its "book value." If it is to To see how historical input (book value) and future output (intrinsic value) can diverge, let's look at rather than a job. be accurate, the cost should include the earnings that were foregone by the student because he chose college on its economic value. First, we must For this exercise, we will ignore the important non-economic benefits of an education and focus strictly and subtract from that figure an estimate of what he would have earned had he lacked his education. That estimate the earnings that the graduate will receive over his lifetime graduation day. The dollar result equals the intrinsic economic value of the education. gives us an excess earnings figure, which must then be discounted, at an appropriate interest rate, back to that whoever paid for the education didn't get his money's worth. In other cases, the intrinsic value of an Some graduates will find that the book value of their education exceeds its intrinsic value, which means is clear is that book value is meaningless as an indicator of intrinsic value. education will far exceed its book value, a result that proves capital was wisely deployed. In all cases, what account will not only illustrate how the relationship of book value and intrinsic value can change but also will Now let's get less academic and look at Scott Fetzer, an example from Berkshire's own experience. This provide an accounting lesson that I know you have been breathlessly awaiting. Naturally, I've chosen here to talk about an acquisition that has turned out to be a huge winner. of 22 businesses, and today we have exactly the same line-up — no additions and no disposals. Scott Fetzer's Berkshire purchased Scott Fetzer at the beginning of 1986. At the time, the company was a collection main operations are World Book, Kirby, and Campbell Hausfeld, but many other units are important contributors to earnings as well. million premium we handed over indicated our belief that the company's intrinsic value was close to double We paid $315.2 million for Scott Fetzer, which at the time had $172.6 million of book value. The $142.6 its book value. our purchase. In the table below we trace the book value of Scott Fetzer, as well as its earnings and dividends, since (1) Year Book Value Beginning (2) (3) Ending (4) Earnings (In Millions) Dividends Book Value (1)+(2) - (3) 1986 1988 1987 S172.6 87.9 $ 40.3 1989 95.5 48.6 $125.0 199| 1990 •••..•..... 118.5 58.0 41.0 $ 87.9 105.5 58.5 35.0 95.5 133.3 61.3 71.5 118.5 1992 1994 1993 111.2 120.7 61.4 33.5 105.5 70.5 74.0 133.3 90.7 79.3 77.5 98.0 80.0 120.7 111.2 76.0 94.0 90.7 7

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purchased it to virtually no debt at all (except for debt used by its finance subsidiary). Similarly, we have not leverage into Scott Fetzer's balance sheet. In fact, the company has gone from very modest debt when we of $125 million in 1986, though it carned only $40.3 million. I should mention that we have not introduced Because it had excess cash when our deal was made, Scott Fetzer was able to pay Berkshire dividends sold plants and leased them back, nor sold receivables, nor the like. Throughout our years of ownership, Scott Fetzer has operated as a conservatively-financed and liquid enterprise. As you can see, Scott Fetzer's earnings have increased steadily since we bought it, but book value has purchase, has now become truly extraordinary. Just how extraordinary is illustrated by comparing Scott not grown commensurately. Consequently, return on equity, which was exceptional at the time of our company. Fetzer's performance to that of the Fortune 500, a group it would qualify for if it were a stand-alone on equity would have ranked fourth. But that is far from the whole story. The top three companies in return Had Scott Fetzer been on the 1993 500 list — the latest available for inspection — the company's return on equity were Insilco, LTV and Gaylord Container, each of which emerged from bankruptcy in 1993 and debt forgiveness in bankruptcy proceedings. Leaving aside such non-operating windfalls, Scott Fetzer's return none of which achieved meaningful earnings that year except for those they realized when they were accorded return on equity was double that of the company ranking tenth. on equity would have ranked it first on the Fortune 500, well ahead of number two. Indeed, Scott Fetzer's monopolistic position, or leverage. But no such circumstances apply. Rather, the company's success comes You might expect that Scott Fetzer's success could only be explained by a cyclical peak in earnings, a from the managerial expertise of CEO Ralph Schey, of whom I'll tell you more later. for Scott Fetzer, that figure had to be recorded on Berkshire's balance sheet. I'll spare you the details of how First, however, the promised accounting lesson: When we paid a $142.6 million premium over book value this worked (these were laid out in an appendix to our 1986 Annual Report) and get to the bottom line: charges that are shown as costs in the acquiring company's earnings statement. After a premium is initially recorded, it must in almost all cases be written off over time through annual Fetzer acquisition premium and, second, the premium that remains on our books. These charges have no The following table shows, first, the annual charges Berkshire has made to gradually extinguish the Scott effect on cash or the taxes we pay, and are not, in our view, an aconomic cost (though many accountants would disagree with us). They are merely a way for us to reduce the carrying value of Scott Fetzer on our books so that the figure will eventually match the net worth that Scott Fetzer actually employs in its business. Beginning Purchase Purchase-Premium Berkshire Earnings Charge to Purchase Ending Year Premium Premium 1986 $142.6 (In Millions) 1987 131.0 $ 11.6 123.9 7.1 $131.0 1988 1990 115.9 8.0 123.9 1992 1991 101.8 108.9 7.1 7.0 115.9 1989 108.9 1994 1993 94.9 6.9 101.8 59.1 872 28.1 7.7 87.2 94.9 4.9 59.1 54.2 8

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Scott Fetzer's year-end book value of s94 million, the total is $148.2 million, which is the current carrying Note that by the end of 1994 the premium was reduced to $54.2 million. When this figure is added to value of Scott Fetzer on Berkshire's books. That amount is less than half of our carrying value for the intrinsic value of the business has consistently grown, even though we have just as consistently marked down company when it was acquired. Yet Scott Fetzer is now earning about twice what it then did. Clearly, the its carrying value through purchase-premium charges that reduced Berkshire's earnings and net worth. huge. As 1 mentioned earlier — but am delighted to mention again — credit for this agreeable mismatch goes The difference between Scott Fetzer's intrinsic value and its carrying value on Berkshire's books is now to Ralph Schey, a focused, smart and high-grade manager. investing it is not necessary to do extraordinary things to get extraordinary results. In later life, I have been The reasons for Ralph's success are not complicated. Ben Graham taught me 45 years ago that in surprised to find that this statement holds true in business management as well. What a manager must do is handle the basics well and not get diverted. That's precisely Ralph's formula. He establishes the right goals and never forgets what he set out to do. On the personal side, Ralph is a joy to work with. He's forthright about problems and is self-confident without being self-important. he is over 65. At Berkshire, we look to performance, not to the calendar: Charlie and I, at 71 and 64 He is also experienced. Though I don't know Ralph's age, I do know that, like many of our managers, respectively, now keep George Foreman's picture on our desks. You can make book that our scorn for a mandatory retirement age will grow stronger every year. Intrinsic Value and Capital Allocation Understanding intrinsic value is as important for managers as it is for investors. When managers are making capital allocation decisions ways that increase per-share intrinsic value and avoid moves that decrease it. This principle may seem obvious — including decisions to repurchase shares

• it's vital that they act in

but we constantly see it violated. And, when misallocations occur, shareholders are hurt. whether the transaction is immediately dilutive or anti-dilutive to earnings per share (or, at financial For example, in contemplating business mergers and acquisitions, many managers tend to focus on institutions, to per-share book value). An emphasis of'this sort carries great dangers. Going back to our economic interests with those of a 25-year-old day laborer. The MBA student, a non-earner, would find that college-education example, imagine that a 25-year-old first-year MBA student is considering merging his future a "share-for-share" merger of his equity interest in himself with that of the day laborer would enhance his near-term earnings (in a big way!). But what could be sillier for the student than a deal of this kind? the prospective acquiree has either ditterent prospects, a ditterent mix of operating and non-operating assets, In corporate transactions, it's equally silly for the would-be purchaser to focus on current earnings when would have boosted current and near-term earnings but that would have reduced per-share intrinsic value. Our or a ditterent capital structure. At Berkshire, we have rejected many merger and purchase opportunities that approach, rather, has been to follow Wayne Gretzky's advice: "Go to where the puck is going to be, not to if we had used the standard catechism. where it is." As a result, our shareholders are now many billions of dollars richer than they would have been shareholders of the acquiree; they increase the income and status of the acquirer's management; and they The sad fact is that most major acquisitions display an egregious imbalance: They are a bonanza for the are a honey pot for the investment bankers and other professionals on both sides. But, alas, they usually

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acquirer typically gives up more intrinsic value than it receives. Do that enough, says John Medlin, the retired reduce the wealth of the acquirer's shareholders, often to a substantial extent. That happens because the head of Wackovia Corp., and"you are running a chain letter in reverse." enterprise's value. Almost by definition, a really good business generates fat more money (at least after its Over time, the skill with which a company's managers allocate capital has an enormous impact on the carly years) than it can use internally. The company could, of course, distribute the money to shareholders by way of dividends or share repurchases. But often the CEO asks a strategic planning staff, consultants or whether you need a $50,000 rug. investment bankers whether an acquisition or two might make sense. That's like asking your interior decorator in part because they possess an abundance of animal spirits and ego. If an executive is heavily endowed with The acquisition problem is often compounded by a biological bias: Many CEO's attain their positions when he reaches the iop. When such a CEO is encouraged by his advisors to make deals, he responds much these qualities — which, it should be acknowledged, sometimes have their advantages — they won't disappear as would a teenage boy who is encouraged by his father to have a normal sex life. It's not a push he needs. pathology of many big deals. This friend, who ran a property-casualty insurer, was explaining to his directors Some years back, a CEO friend of mine — in jest, it must be said — unintentionally described the why he wanted to acquire a certain life insurance company. After droning rather unpersuasively through the economics and strategic rationale for the acquisition, he abruptly abandoned the script. With an impish look, he simply said: "Aw, fetlas, all the other kids have one." businesses. As a first step, these managers will look for ways to deploy their earnings advantageously in their At Berkshire, our managers will continue to earn extraordinary returns from what appear to be ordinary build per-share intrinsic value. Our goal will be to acquire either part or all of businesses that we believe we admire and trust. understand, that have good, sustainable underlying economics, and that are run by managers whom we like, Compensation compensate Ralph Schey based upon the results of Scott Fetzer rather than those of Berkshire. What could At Berkshire, we try to be as logical about compensation as about capital allocation. For example, we make more sense, since he's responsible for one operation but not the other? A cash bonus or a stock option tied to the fortunes of Berkshire would provide totally capricious rewards to Ralph. He could, for negating his efforts many times over. Conversely, why should option profits or bonuses be heaped upon Ralph example, be hitting home runs at Scott Fetzer while Charlie and 1 rang up mistakes at Berkshire, thereby if good things are occurring in other parts of Berkshire but Scott Fetzer is lagging? is tied directly to results in the area that a manager controls. When capital invested in an operation is In setting compensation, we like to hold out the promise of large carrots, but make sure their delivery significant, we also both charge managers a high rate for incremental capital they employ and credit them at an equally high rate for capital they release. incremental funds at good returns, it pays him to do so: His bonus increases when earnings on additional The product of this money's-not-free approach is definitely visible at Scott Fetzer. If Ralph can employ capital exceed a meaningful hurdle charge. But our bonus calculation is symmetrica: If incremental investment yields sub-standard returns, the shortfall is costly to Ralph as well as to Berkshire. The any cash he can't advantageously use in his business. consequence of this two-way arrangement is that it pays Ralph — and pays him well — to send to Omaha 10

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the interests of management with those of shareholders. In our book, alignment means being a partner in It has become fashionable at publie companies to describe almost every compensation plan as aligning "heads I win, tails you lose." both directions, not just on the upside. Many "alignment" plans flunk this basic test, being artful forms of periodically increase the option price to compensate for the fact that retained earnings are building up the A common form of misalignment occurs in the typical stock option arrangement, which does not interest can provide lush gains to a manager who has done no more than tread water in his job. A cynic wealth of the company. Indeed, the combination of'a ten-year option, a low dividend payout, and compound increases. I have yet to see this vital point spelled out in a proxy statement asking shareholders to approve might even note that when payments to owners are held down, the profit to the option-holding manager an option plan. five minutes, immediately upon our purchase of Scott Fetzer and without the "help" of lawyers or I can't resist mentioning that our compensation arrangement with Ralph Schey was worked out in about favored by consultants who cannot easily send a large bill unless they have established that you have a large compensation consultants. This arrangement embodies a few very simple ideas — not the kind of terms problem (and one, of course, that requires an annual review). Our agreement with Ralph has never been with the managers of all our other units are similarly simple, though the terms of each agreement vary to changed. It made sense to him and to me in 1986, and it makes sense now. Our compensation arrangements the unit by managers, etc. fit the economic characteristics of the business at issue, the existence in some cases of partial ownership of manager's personal accomplishments, may well be welcomed by certain managers. Who, after all, refuses a In all instances, we pursue rationality. Arrangements that pay off in capricious ways, unrelated to a on what should be his real areas of concern. Additionally, irrational behavior at the parent may well free lottery ticket? But such arrangements are wasteful to the company and cause the manager to lose focus encourage imitative behavior at subsidiaries. we are the only parties who should logically be compensated on the basis of what the enterprise does as a AL Berkshire, only Charlie and I have the managerial responsibility for the entire business. Therefore, company and our jobs so that we do things we enjoy with people we like. Equally important, we are forced whole. Even so, that is not a compensation arrangement we desire. We have carefully designed both the to do very few boring or unpleasant tasks. We are the beneficiaries as well of the abundant array of material shareholders to ante up loads of compensation for which we have no possible need. bottom, we subscribe to Ronald Reagan's creed: "It's probably true that hard work never killed anyone, but Indeed, if we were not paid at all, Charlie and I would be delighted with the cushy jobs we hold. At I figure why take the chance." Sources of Reported Earnings purchase-premium charges of the type we discussed in our earlier analysis of Scott Fetzer are not assigned The table on the next page shows the main sources of Berkshire's reported earnings. In this presentation, to the specific businesses to which they apply, but are instead aggregated and shown separately. This procedure lets you view the earnings of our businesses as they would have been reported had we not one utilizing GAAP, which requires purchase premiums to be charged off, business-by-business. The total purchased them. This form of presentation seems to us to be more useful to investors and managers than earnings we show in the table are, of course, identical to the GAAP total in our audited financial statements. 11

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Berkshire's Share of Net Earnings 1994 Pre-Tax Earnings (after taxes and 1993 1994 minority interesis) 1993 (000s omitted) Operating Earnings: Insurance Group: Underwriting Buffalo News. Net Investment Income 129,926 $ 419,422 30,876 $ 80,860 350,453 $ 54,238 375,401 20,156 Fechheimer . . 14,260 50,962 31,685 320,776 Finance Businesses 22,168 13,442 14,593 7,107 29,096 Kirby 42,349 23,240 6,931 Nebraska Furniture Mart 39,435 17,356 21,540 39,147 27,719 25,056 14,706 See's Candies Scott Fetzer Manufacturing Group 85,503 47,539 38,196 24,909 8,652 23,809 10,398 Shoe Group 41,150 World Book (22,595) 24,662 43,755* 55,750 28,247 28,559 24,367 Interest Expense** Purchase-Price Premium Charges 19,915 17,275 (10,419) (60,1 l1) (56,545) (17,033) (37,264) (19,355) (13,996) 13,537 Other Shareholder-Designated Contributions 28,698 (9,448) (6,668) (35,614) 35,632 22,275 (5,994) 15,364 Sales of Secunties Operating Earnings 839,365 Decline in Value of USAir Preferred Stock (268,500) 91,332 643,296 546,422 606,238 (172,579) 61,139 477,751 356,702 Tax Accruals Caused by New Accounting Rules (146.332) Total Earnings - All Entities 662,197 $1,189,718 $494,798 $ 688,121

• Includes Dexter's earnings only from the date it was acquired, November 7, 1993.

** Excludes interest expense of Finance Businesses. find our segment earnings reported on a GAAP basis. In addition, on pages 53-59, we have rearranged A large amount of information about these businesses is given on pages 37-48, where you will also Berkshire's financial data into four segments on a non-GAAP basis, a presentation that corresponds to the we would wish you to give us if'our positions were reversed. way Charlie and I think about the company. Our intent is to supply you with the financial information that "Look-Through" Earnings earnings of Berkshire than does our GAAP result. As we calculate them, look-through earnings consist of: In past reports, we've discussed look-through earnings, which we believe more accurately portray the (1) the operating earnings reported in the previous section, plus; (2) the retained operating earnings of the tax that would be paid by Berkshire if these retained earnings of investees had instead been distributed major investees that, under GAAP accounting, are not reflected in our profits, less; (3) an allowance for to us. The "operating earnings" of which we speak here exclude capital gains, special accounting items and major restructuring charges. also increase at about that pace. When I first explained this concept a few years back, I told you that If our intrinsic value is to grow at our target rate of 15%, our look-through earnings, over time, must 12

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meeting this 15% goal would require us to generate look-through earnings of about S1.8 billion by 2000. Because we've since issued about 3% more shares, that figure has grown to $1.85 billion. because our super-caf insurance business has recently delivered earnings far above trend-line expectancy (an We are now modestly ahead of schedule in meeting our goal, but to a significant degree that is outcome I will discuss in the next section). Giving due weight to that abnormality, we still expect to hit our targei but that, of course, is no sure thing. are necessarily very rough. (The dividends paid to us by these investees have been included in the operating The tollowing table shows how we calculate look-through earnings, though I warn you that the figures earnings itemized on page 12, mostly under "Insurance Group: Net Investment Income.") Berkshire's Major Investees _Ownership at Yearend Berkshire's Approximate m Berkshire's Share of Undistributed _Operating Earnings (in millions) 1994 1993. 1994 Capital Cities/ABC, Inc. American Express Company 5.5% The Coca-Cola Company 13.0% 2.4% Gannett Co., Inc. Federal Home Loan Mortgage Corp. 7.8% 13.0% 2531 1993 $ 16 6.3%'" 7.2% 85 83121 The Gillette Company GEICO Corp. 50.2% 4.9% 6.8%l" 116) 47121 4121 413 94 48.4% 10.9% 51 63130 PNC Bank Corp. 10.8% 76131 The Washington Post Company 8.3% 10121 44 Wells Fargo & Company 15.2% 14.8% 18 - 12.2% 73 5312 15 13.3% Berkshire's share of undistributed earnings of major investees Reported operating earnings of Berkshire Hypothetical tax on these undistributed investee earnings!; $ 492 (68) $422 Total look-through earnings of Berkshire $1,030 606 (59) 478 $ 841 (1) Does not include shares allocable to the minority interest at Wesco (3) Excludes realized capital gains, which have been both recurring and significant (2) Calculated on average ownership for the year (4) The tax rate used is 14%, which is the rate Berkshire pays on the dividends it receives Insurance Operations we develop and, second, its cost to us. Float is money we hold but don't own. In an insurance operation, As we've explained in past reports, what counts in our insurance business is, first, the amount of "float" takes time for an insurer to hear about and resolve loss claims. float arises because most policies require that premiums be prepaid and, more importantly, because it usually That leaves it running an "underwriting loss" — and that loss is the cost of float. Typically, the premiums that an insurer takes in do not cover the losses and expenses it must pay. would otherwise incur to obtain funds. But the business has a negative value if the cost of its float is higher An insurance business is profitable over time if its cost of float is less than the cost the company than market rates for money. winner. For the table, we have compiled our float — which we generate in exceptional amounts relative As the numbers in the following table show, Berkshire's insurance business has been an enormous to our premium volume — by adding loss reserves, loss adjustment reserves, funds held under reinsurance 13

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this business requires far more judgment than, say, the underwriting of auto policies, for which a mass of data Super-cat policies are small in number, large in size and non-standardized. Therefore, the underwriting of are the finest. His value to us is simply enormous. is available. Here Berkshire has a major advantage: Ajit Jain, our super-cat manager, whose underwriting skills strength, which helps us in two ways. First, a prudent insurer will want its protection against true mega- In addition, Berkshire has a special advantage in the super-cat business because of our towering financial California — to be absolutely certain. But that same insurer knows that the disaster making it dependent on a catastrophes -— such as a $50 billion windstorm loss on Long Island or an earthquake of similar cost in in paying premiums for coverage that will evaporate precisely when it is needed. So the certainty that Berkshire large super-cat recovery is also the disaster that could cause many reinsurers to default. There's not much sense for us. will be both solvent and liquid after a catastrophe of unthinkable proportions is a major competitive advantage even consider. For example, during 1994, a primary insurer wished to buy a short-term policy for $400 million The second benefit of our capital strength is that we can write policies for amounts that no one else can of California earthquake coverage, and we wrote the policy immediately. We know of no one else in the world who would take a $400 million risk, or anything close to it, for their own account. small policies. But, at best, coverage of that sort takes considerable time to arrange. In the meantime, the Generally, brokers attempt to place coverage for large amounts by spreading the burden over a number of At Berkshire, on the other hand, we will quote prices for coverage as great as $500 million on the same day that company desiring reinsurance is left holding a risk it doesn't want and that may seriously threaten its well-being we are asked to bid. No one else in the industry will do the same. acceptable to us: Too often, insurers (as well as other businesses) follow sub-optimum strategies in order to By writing coverages in large lumps, we obviously expose Berkshire to lumpy financial results. That's totally "smooth" their reported earnings. By accepting the prospect of volatility, we expect to earn higher long-term difficult to judge what this is, since you could conceivably have a Long Island hurricane, a California earthquake, Given the risks we accept, Ajit and I constantly focus on our "worst case," knowing, of course, that it is and Super Cat X all in the same year. Additionally, insurance losses could be accompanied by non-insurance troubles. For example, were we to have super-cat losses from a large Southern California earthquake, they might well be accompanied by a major drop in the value of our holdings in See's, Wells Fargo and Freddie Mac. after-tax, an amount that would slightly exceed Berkshire's annual earnings from other sources. If you are not All things considered, we believe our worst-case insurance loss from a super-cat is now about 5600 million comfortable with this level of exposure, the time to sell your Berkshire stock is now, not after the inevitable mega-catastrophe. and the torrent of capital that was committed to the reinsurance business a few years ago will be inclined to Our super-cat volume will probably be down in 1995. Prices for garden-variety policies have fallen somewhat, chase premiums, irrespective of their adequacy. Nevertheless, we have strong relations with an important group of clients who will provide us with a substantial amount of business in 1995. Eldred: our workers' compensation business, headed by Brad Kinstler; our credit card operation, managed by Berkshire's other insurance operations had excellent results in 1994. Our homestate operation, led by Rod the Kizer family; National Indemnity's traditional auto and general liability business, led by Don Wurster — all of these generated significant underwriting profits accompanied by substantial float. its results will be highly volatile, this operation possesses an intrinsic value that exceeds its book value by a large We can conclude this section as we did last year: All in all, we have a first-class insurance business. Though amount — larger, in fact, than is the case at any other Berkshire business. 15

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Common Stock Investments investinents belongs to subsidiaries of which Berkshire owns less than 100%. Below we list out common stockholdings having a value of over 8300 million. A small portion of these 12/31/94 Shares Company Cost Market 27,759,941 American Express Company S 723,919 (000s omitted) 20,000,000 Capital Cities/ABC, Inc. 345,000 $ 818,918 100,000,000 The Coca-Cola Company 1,298,888 5,150,000 1,705,000 12,761,200 Federal Home Loan Mortgage Corp. ("Freddie Mac") 6,854,500 Gannett Co., Inc. .. 335,216 270,468 644,441 365,002 34,250,000 24,000,000 The Gillette Company GEICO Corp. 600,000 45,713 1,078,250 19,453,300 PNC Bank Corporation .... 503,046 1,797,000 1,727,765 The Washington Post Company 410,951 6,791,218 Wells Fargo & Company 423,680 9,731 418,983 984,727 Our investments continue to be few in number and simple in concept: The truly big investment idea can usualiy be explained in a short paragraph. We like a business with enduring competitive advantages that at sensible prices, it is hard to go wrong (a challenge we periodically manage to overcome). is run by able and owner-oriented people. When these attributes exist, and when we can make purchases of-difficulty doesn't count.if you are right about a business whose value is largely dependent on a single Investors should remember that their scorecard is not computed using Olympic-diving methods: Degree- analyzed an investment alternative characterized by many constantly shifting and complex variables. key factor that is both easy to understand and enduring, the payoff is the same as if you had correctly outstanding business whose long-term future is predictable, because of short-term worries about an economy We try to price, rather than time, purchases. In our view, it is folly to forego buying shares in an or a stock market that we know to be unpredictable. Why scrap an informed decision because of an uninformed guess? Mart in 1983, and Scott Fetzer in 1986 because those are the years they became available and because we We purchased National Indemnity in 1967, See's in 1972, Buffalo News in 1977, Nebraska Furnitare thought the prices they carried were acceptable. In each case, we pondered what the business was likely to purchase of businesses in their entirety, why should we change tack when we are purchasing small pieces do, not what the Dow, the Fed, or the economy might do. If we see this approach as making sense in the of wonderful businesses in the stock market? to buy once, it may well pay to repeat the process. We would love to increase our economic interest in Before looking at new investments, we consider adding to old ones. If a business is attractive enough an investor frequently gets the chance to increase his economic interest in businesses he knows and likes. See's or Scott Fetzer, but we haven't found a way to add to a 100% holding. In the stock market, however, Last year we went that direction by enlarging our holdings in Coca-Cola and American Express. investment decisions out of past associations. In 1951, for example, GEICO shares comprised 70% of my Our history with American Express goes way back and, in fact, fits the pattern of my pulling current (the sale was 100 shares to my Aunt Alice who, bless her, would have bought anything I suggested). Twenty- personal portfolio and GEICO was also the first stock I sold — 1 was then 20 — as a secunty salesman In another instance, that of the Washington Post, about half of my initial investment funds came from five years later, Berkshire purchased a major stake in GEICO at the time it was threatened with insolvency. delivering the paper in the 1940's. Three decades later Berkshire purchased a large position in the 16

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company two years after it went public. As for Coca-Cola, my first business venture — this was in the before 1 finally got it: The real money was in the syrup.

• Was buying a six-pack of Coke for 25g and selling cach bottle for 5¢. It took only fiity years

battered by the company's infamous salad-oil scandal, we put about 40% of Buffett Partnership Ltd's capital My American Express history includes a couple of episodes: In the mid-1960's, just after the stock was into the stock — the largest investment the partnership had ever made. I should add that this commitment gave us over 5% ownership in Amex at a cost of $13 million. As I write this, we own just under 10%, which has cost us $1.36 billion. (Amex earned $12.5 million in 1964 and $1.4 billion in 1994.) company, goes back even further. I first purchased stock in IDS in 1953 when it was growing rapidly and My history with Amex's IDS unit, which today contributes about a third of the earnings of the selling at a price-earnings ratio of only 3. (There was a lot of low-hanging fruit in those days.) I even ad in the Wall Street Journal. produced a long report - do I ever write a short one? — on the company that I sold for $1 through an different operations today from what they were then. Nevertheless, I find that a long-term familiarity with Obviously American Express and IDS (recently renamed American Express Financial Advisors) are far a company and its products is often helpful in evaluating it. Mistake Du Jour the foolishness of a decision becomes obvious. By this measure, 1994 was a vintage year with keen Mistakes occur at the time of decision. We can only make our mistake-du-jour award, however, when with Charlie. But whenever I try to explain things that way, my nose begins to grow. competition for the gold medal. Here, I would like to tell you that the mistakes I will describe originated And the nominees are... difference is $222.5 million for those of you who wish to avoid the pain of calculating the damage yourself.) Late in 1993 I sold 10 million shares of Cap Cities at $63; at year-end 1994, the price was $85'4. (The holdings at $4.30 per share during 1978-80, and added that I was at a loss to explain my earlier behavior. When we purchased the stock at $17.25 in 1986, I told you that I had previously sold out Cap Cities Now I've become a repeat offender. Maybe it's time to get a guardian appointed. made five years ago that fully ripened in 1994: Our $358 million purchase of USAir preferred stock, on Egregious as it is, the Cap Cities decision earns only a silver medal. Top honors go to a mistake I which the dividend was suspended in September. In the 1990 Annual Report I correctly described this deal making it. Rather, this was a case of sloppy analysis, a lapse that may have been caused by the fact that as an "unforced error," meaning that I was neither pushed into the investment nor misled by anyone when we were buying a senior security or by hubris. Whatever the reason, the mistake was large. whose costs were both high and extremely difficult to lower. In earlier years, these life-threatening costs Before this purchase, I simply failed to focus on the problems that would inevitably beset a carrier posed few problems. Airlines were then protected from competition by regulation, and carriers could absorb high costs because they could pass them along by way of fares that were also high. carriers was so small that the high-cost lines could, in large part, maintain their existing fare structures. When deregulation came along, it did not immediately change the picture: The capacity of low-cost During this period, with the longer-term problems largely invisible but slowly metastasizing, the costs that were non-sustainable became further embedded. cost airlines to cut their own. The day of reckoning for these airlines could be delayed by infusions of As the seat capacity of the low-cost operators expanded, their fares began to force the old-line, high- capital (such as ours into USAir), but eventually a fundamental rule of economics prevailed: In an principle should have been obvious to your Chairman, but I missed it. unregulated commodity business, a company must lower its costs to competitive levels or face extinction. This 17

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to date, has not managed to do so. or part, this is because he has had toys wor a most ne target. the result of certain major carriers having obtained labor concessions and other carriers having benefitted Airlines, has said: "Bankruptcy court for airlines has become a health spa.") Additionally, it should be no from "fresh-start" costs that came out of bankruptcy proceedings. (As Herb Kelleher, CEO of Southwest surprise to anyone that those airline employees who contractually receive above-market salaries will resist any reduction in these as long as their checks continue to clear. viably lo this mitiut is taton, strat willaphieve the cost reductions it needs to maintain its This valuation reflects both a possibility that our preferred will have its value fully or largely restored and Accordingly, we wrote our USA ir investment down to $89.5 million, or 25é on the dollar, at yearend 1994 an opposite possibility that the stock will eventually become worthless. Whatever the outcome, we will heed a prime rule of investing: You don't have to make it back the way that you lost it. stocks at estimated market value. Therefore, at the end of last year's third quarter, we were carrying The accounting effects of our USAir writedown are complicated. On our balance sheet, we carry reflecting a value for USAir that was far below our $358 million cost. our USAir preferred at $89.5 million, or 25% of cost. In other words, our net worth was at that time temporary," and that judgment required us to send the writedown of $268.5 million through our income But in the fourth quarter, we concluded that the decline in value was, in accounting terms, "other than statement. The amount had no other fourth-quarter effect. That is, it did not reduce our net worth, because the diminution of value had already been reflected there. Seth wish to consult with us, however, we will be pleased to be of any help that we can. Charlie and I will not stand for reelection to USAir's board at the upcoming annual meeting. Should Miscellaneous Capital Cities/ABC and Carl Reichardt of Wells Fargo. Dan and Carl encountered very tough industry Two CEO's who have done great things for Berkshire shareholders retired last year: Dan Burke of periods with record earnings, added luster, and bright prospects. Additionally, Dan and Carl prepared well conditions in recent years. But their skill as managers allowed the businesses they ran to emerge from these for their departure and left their companies in outstanding hands. We owe them our gratitude.

program. Contributions made through the program were $10.4 million and 3,330 charities were recipients. About 95.7% of all eligible shares participated in Berkshire's 1994 shareholder-designated contributions Every year a few shareholders miss participating in the program because they either do not have their shares registered in their own names on the prescribed record date or because they tail to get the designation form back to us within the 60-day period allowed for its return. Since we don't make exceptions when requirements aren't met, we urge that both new shareholders and old read the description of our shareholder-designated contributions program that appears on pages 50-51. wner not in the nominee name of a broker, bank or devositorv. Shares not so registered on August 31. 199. › participate in future programs, you must make sure your shares are registered in the name of the actua will be ineligible for the 1995 program.

18

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finding good candidates remains as keen as ever. The criteria we employ tor purchases or mergers is We made only one minor acquisition during 1994 — a small retail shoe chain — but our interest in detailed in the appendix on page 21. Berkshire convertible preferred stock. Though we failed to reach an agreement, this episode made me realize Last spring, we offered to merge with a large, family-controlled business on terms that included a move quickly if a similar acquisition opportunity were to appear. Accordingly, our proxy presents a proposal that we needed to ask our shareholders to authorize preferred shares in case we wanted in the future to that you authorize a large amount of preferred stock, which will be issuable on terms set by the Board of that we are receiving as much in intrinsic value as we are giving. Directors. You can be sure that Charlie and I will not use these shares without being completely satisfied

• * *

overran the Orpheum Theater's seating capacity of 2,750, and therefore we will assemble at 9:30 a.m. on Charlie and I hope you can come to the Annual Meeting - at a new site. Last year, we slightly Monday, May 1, 1995, at the Holiday Convention Centre. The main ballroom at the Centre can handle 3,300, and if need be, we will have audio and video equipment in an adjacent room capable of handling another 1,000 people. pounds of candy, 507 pairs of shoes, and over $12,000 of World Books and related publications. All these Last year we displayed some of Berkshire's products at the meeting: and as a result sold about 800 we must remember that even the saintliest of religions includes the ritual of the collection plate. goods will be available again this year. Though we like to think of the meeting as a spiritual experience, I urge you to wear Husker red to the annual meeting and promise you that at least 50% of your is a salute to Nebraska's footbali coach, Tom Osborne, and his Cornhuskers, the country's top college team managerial duo will be in appropriate attire. Those of you who like to be downtown (about six miles from the Centre) may wish to stay at the Radisson We recommend that you promptly get hotel reservations for the meeting, as we expect a large crowd In the vicinity of the Centre are the Holiday Inn (403 rooms), Homewood Suites (118 rooms) and Hampton Redick Tower, a small (88 rooms) but nice hotel or at the much larger Red Lion Hotel a few blocks away. Inn (136 rooms). Another recommended spot is the Marriott, whose west Omaha location is about 100 yards at 8:30 and 8:45 for the meeting and return after it ends. from Borsheim's and a ten-minute drive from the Centre. There will be buses at the Marriott that will leave to the meeting. A good-sized parking area is available at the Centre, while those who stay at the Holiday An attachment to our proxy material explains how you can obtain the card you will need for admission Inn, Homewood Suites and Hampton Inn will be able to walk to the meeting. meeting and to take you from there to hotels or the airport later. I hope you make a special effort to visit As usual, we will have buses to take you to the Nebraska Furniture Mart and Borsheim's after the the Nebraska Furniture Mart because it has opened the Mega Mart, a true retailing marvel that sells the opening, and you will be amazed by both the variety of products available and their display on the floor. electronics, appliances, computers, CD's, cameras and audio equipment. Sales have been sensational since The Mega Mart, adjacent to NFM's main store, is on our 64-acre site about two miles north of the to 6 p.m. on Sundays. When you're there be sure to say hello to Mrs. B, who, at 101, will be hard at work Centre. The stores are open from 10 a.m. to 9 p.m. on Fridays, 10 a.m. to 6 p.m. on Saturdays and noon in our Mrs. B's Warehouse. She never misses a day at the store — or, for that matter, an hour. to 6 p.m. on Sunday. This is always a special day, and we will try to have a few surprises. Usually this is Borsheim's normally is closed on Sunday but will be open for shareholders and their guests from noon the biggest sales day of the year, so for more reasons than one Charlie and I hope to see you there. 19

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Omaha Royals and the Buffalo Bisons. The Buffalo team is owned by my friends, Mindy and Bob Rich, On Saturday avening, April 29, there will be a baseball game at Rosenblatt Stadium between the Jr., and I'm hoping they will attend. If so, I will try to entice Bob into a one-pitch duel on the mound. Bob early in the season. So I will need plenty of vocal support. is a capitalist's Randy Johnson — young, strong and athletic -— and not the sort of fellow you want to face shareholders attended the event last year. Opening the game that night, l had my stuff and threw a strike The proxy statement will include information about obtaining tickets to the game. About 1,400 that the scoreboard reported at eight miles per hour. What many fans missed was that I shook off the catcher's call for my fast ball and instead delivered my change-up. This year it will be all smoke. Warren E. Buffett March 7, 1995 Chairman of the Board 20

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APPENDIX ACQUISITION CRITERIA We are cager to hear about businesses that meet all of the following criteria: (1) Large purchases (at least SIO million of after-tax earnings), "turnaround" situations), Demonstrated consistent earning power (future projections are of no interest to us. nor are (4) (3) Businesses earning good returns on equity while employing little or no debt. (6) (5) Management in place (we can't supply it), imple businesses (it there's lots of technology, we won't understand il preliminarily, about a transaction when price is unknown). n ofering price (we don't want to waste our time or that of the seller by talking, eve billion range. The larger the company, the greater will be our interest: We would like to make an acquisition in the $2-3 answer — customarily within five minutes —as to whether we're interested. We prefer to buy for cash, but We will not engage in unfriendly takeovers. We can promise complete confidentiality and a very fast will consider issuing stock when we receive as much in intrinsic business value as we give. Our favorite form of Mart, Fechheimer's, Borsheim's and Central States Indemnity. In cases like these, the company's owner- purchase is one fitting the pattern through which we acquired Nebraska Furniture managers wish to generate significant amounts of cash, sometimes for themselves, but often for their families to run their companies just as they have in the past. We think we offer a particularly good fit tor owners with or inactive shareholders. At the same time, these managers wish to remain significant owners who continue business in the past. such objectives and we invite potential sellers to check us out by contacting people with whom we have done We've found that if you advertise an interest in buying collies, a lot of people will call hoping to sell you their Charlie and I frequently get approached about acquisitions that don't come close to meeting our tests: auction-like sales: "When the phone don't ring, you'll know it's me." cocker spaniels. A line from a country song expresses our teeling about new ventures, turnarounds, or negotiated purchase of large, but not controlling, blocks of stock comparable to those we hold in Capital Besides being interested in the purchase of businesses as described above, we are also interested in the Cities, Salomon, Gillette, USAir, and Champion. We are not interested, however, in receiving suggestions about purchases we might make in the general stock market. 21

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Deloitte & Touche LLP 2000 First National Center Omaha, Nebraska 68102-1578 Telephone: (402) 346-7788 Facsimile: (402) 346-0711 (402) 344-0372 INDEPENDENT AUDITORS' REPORT Berkshire Hathaway Inc To the Board of Directors and Shareholders We have audited the accompanying consolidated balance sheets of Berkshire Hathaway Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of earnings, and are the responsibility of the Company's management. Our responsibility is to express an opinion on these cash flows for each of the three years in the period ended December 31, 1994. These financial statements financial statements based on our audits. require that we plan and perform the audit to obtain reasonable assurance about whether the financial We conducted our audits in accordance with generally accepted auditing standards. Those standards supporting the amounts and disclosures in the financial statements. An audit also includes assessing the statements are free of material misstatement. An audit includes examining, on a test basis, evidence accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Berkshire Hathaway Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of conformity with generally accepted accounting principles their operations and their cash flows for each of the three years in the period ended December 31, 1994 in As discussed in Note 1 to the consolidated financial statements, in 1993 the Company changed its method Accounting Standards Board of accounting for income taxes and investments to conform with recent pronouncements of the Financial March 9, 1995 Deloitte Touche Tohmatsu International 22

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BERKSHIRE HATHAWAY INC. CONSOLIDATED BALANCE SHEETS and Subsidiaries (dollars in thomsands except per share amounts) December 31. 1994 1993 Cash and cash equivalents. ASSETS Investments: $ 273,881 1,817,558 Marketable equity securities Securities with fixed maturities 1,820,733 Salomon Inc 15,236,494 1,397,812 Inventories Receivables 1,023,418 12,516,613 580,600 723,584 Properties and equipment 425,431 524,963 Other assets Assets of finance businesses 275,667 378,386 717,082 259,736 984,876 1,029,416 872,401 $21.338,182 $ 19.520,469 Property and casualty insurance policyholder liabilities LIABILITIES AND SHAREHOLDERS' EQUITY Income taxes Accounts payable, accruals and other liabilities .. $ 4,200,813 397,384 $ 3,807,188 Liabilities of finance businesses Borrowings under investment agreements and other debt 3,292,602 370,684 562,443 810,719 3,030,189 972,389 729.366 9.263.961 8,909,816 Minority shareholders' interests 199,339 182,279 Shareholders' equity: Common stock of $5 par value. Authorized 1,500,000 shares; Capital in excess of par value Issued 1,381,308 shares 656,074 6,907 656,074 6,907 Unrealized appreciation of investments, net Retained earnings............ 6,364,362 4,885,173 4.390,375 5,412,652 Less common stock in treasury, at cost (203,558 shares) 11,912,516 37,634 10,460,008 37,634 Total shareholders' equity ....... 11.874,882 10,428.374 $ 21,338,182 $ 19,520,469 See accompanying Noles to Consolidated Financial Statements 23

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BERKSHIRE HATHAWAY INC. CONSOLIDATED STATEMENTS OF EARNINGS and Subsidiaries (dollars in thousands except per share umounts) 1994 Year Ended December 31,_ 1993 1992 Revenues: Insurance premiums earned Sales and service revenues $2,351,918 Income from investment in Salomon Inc Interest and dividend income 923,180 $1,962,862 426,094 650,726 $1,774,436 Income from finance businesses 30,058 354,028 664,293 Realized investment gain 24,885 63,000 364,895 91,332 22,226 20,696 63,000 546,422 89,937 Cost and expenses: 3,847,467 3,599,264 2,977,257 Cost of products and services sold Insurance losses and loss adjustment expenses 1,449,999 565,257 1,180,042 450,659 1,049,721 Selling, general and administrative expenses Insurance underwriting expenses 227,997 Other than temporary decline in value of investment in Interest expense 613,406 169,082 687,625 60,111 552,618 505,023 85,628 56,545 98,643 USAir Group, Inc. Preferred Stock 268,500 3,185,270 2,409,546 2,426,640 Earnings before income taxes, minority interest and Income taxes - cumulative effect of accounting change 662,197 1,189,718 550,617 Other than effect of change in income tax rate on deferred taxes applicable to unrealized Effect of change in income tax rate on deferred appreciation 158,666 345,302 138,089 Minority interest taxes applicable to unrealized appreciation 8,733 75,348 9,963 5,243 Earnings before cumulative effect of accounting change Cumulative effect of change in accounting for income 494,798 759,105 407,285 taxes «... (70,984) Net earnings $ 494,798 $ 688,121 $ 407,285 Average shares outstanding 1,177,750 1,156,243 1,146,492 Earnings per share: Before cumulative effect of accounting change Cumulative effect of change in accounting for income $420 $656 $355 taxes (61) Net earnings $420 $595 $355 See accompanying Notes to Consolidated Financial Statements 24

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BERKSHIRE HATHAWAY INC. CONSOLIDATED STATEMENTS OF CASH FLOWS and Subsidiaries (dollars in thousands) Year Ended December 31, 1994 Cash flows from operating activities: 1993 1992 Adjustments to reconcile net income to cash flows $ 494,798 $ 688,121 $ 407,285 from operating activities: Other than temporary decline in value of investment Realized investment gain ... (91,332) (546,422) (89,937) in USAir Group, Inc. Preferred Stock 268,500 Depreciation and amortization .. Effect of change in income tax rate on deferred taxes 62,547 75,348 50,180 41,074 Changes in assets and liabilities before effects from cumulative ettect ot accounting change . - 70,984 Losses and loss adjustment expenses business acquisitions: Deferred charges re reinsurance assumed 274,123 Receivables Unearned premiums 25,349 (22,798) 10,171 102,789 134,077 83,937 75,274 46.931 (49,829) (8,518) Income taxes Accounts payable, accruals and other liabilities (257,102) 210,495 107,931 34,996 150,615 239,428 Other 77 (5,278) 29,004 33,644 Net cash flows from operating activities 929,108 726,169 997,185 Cash flows from investing activities: Purchases of fixed maturity investments Purchases of marketable equity securities (3,050,025) (2,485,768) (272,249) (858,879) (258,617) Proceeds from sales of fixed maturity investments Proceeds from redemptions and maturities of fixed 1,772,050 (913,037) 284,301 Proceeds from sales of marketable equity securities maturity investments 85,881 1,188,510 318,881 371,514 Loans and investments originated in finance businesses Acquisition of businesses 1,466,775 (119,948) 100,270 Principal collection on loans and investments (246,797) (866,843) (160,261) originated in finance businesses 332,398 (23,160) 269,345 19,578 127,913 (5,294) Net cash flows from investing activities Cash flows from financing activities: 12,148,646) (201,657) (573,159) Proceeds from other borrowings Proceeds from borrowings of finance businesses 1,225,301 208,561 1,264,972 591,853 961,565 38,862 Repayments of borrowings of finance businesses Other Repayments of other borrowings .... (390,506) (1,399,901) (316,318) (1,387,674) (906,964) (84,792) (908) (2,860) (2.334) Net cash flows from financing activities (345.226) 137,746 6,337 Cash and cash equivalents at beginning of year Increase (decrease) in cash and cash equivalents .. (1,564,764) 662,258 430,363 1,854,621 1.192,363 762,000 Cash and cash equivalents at end of year * 289.857 $1.854.021 $1,192,363

• Cashand cash equivalems at end of vear are comprised of the folloning:

Other Finance businesses 273.08L 15.976 37.063 _ 289.852 $ _1.854621 1.817,558 1.127,996 64.367 8 1.192.362 See accompanying Notes to Consolidated Financial Statements 25

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BERKSHIRE HATHAWAY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and Subsidiaries December 31, 1994 (1) Significant accounting policies and practices (a) Basis of consolidation The accompanying Consolidated Financial Statements include the accounts of Berkshire Hathaway Inc. (the "Company" or "Berkshire") consolidated with accounts of all its subsidiaries. Intercompany accounts and have been made when required to conform to the current year presentation. transactions have been eliminated. In the accompanying financial statements for 1993 and 1992, reclassifications (b) Cash equivalents Cash maturity of three months or less when purchased. equivalents consist of funds invested in money market accounts and in investments with (e) Investments Management determines the appropriate classifications of investments in securities with fixed maturities and date. At December 31, 1994, investments in securities with fixed maturities (except for such securities held by marketable equity securities at the time of purchase and reevaluates such designations as of each balance sheet maturities held by finance businesses are classitied as held-to-maturity. At December 31, 1993, all fixed maturity finance businesses) and marketable equity securities, are classified as available-for-sale. Securities with fixed securities were classified as held-to-maturity. Securities with fixed maturities are deemed to be held-to- maturity securities are carried at amortized cost. Available-for-sale securities are stated at fair value, with maturity securities when the Company has the ability and positive intent to hold them to maturity. Held-to- and losses on sales of investments, unrealized gains and losses, net oftax, reported in a separate component of shareholders' equity. Realized gains Consolidated Statements of Earnings. as determined on a specific identification basis, are included in the (d) Goodwill of acquired businesses The difference between purchase cost and the fair value of the net assets of acquired businesses is amortized on a straight line basis over forty years. The net unamortized balance is carried in other assets. (e) Insurance premium acquisition costs For financial reporting certain costs of acquiring insurance premiums are deferred, subject ( Deferred charges re reinsurance assumed The excess of estimated liabilities for claims and claim costs ultimately payable by the Insurance Group over consideration received with respect to retroactive property/casualty reinsurance contracts that provide for inception of such contracts. The deferred charges are subsequently amortized using the interest method over indemnification of insurance risk, other than structured settlements, is established as a deferred charge at the expected settlement periods of the claim liabilities. The unamortized balance of deferred charges is included (g) Property and casualty insurance policyholder liabilities Property and casualty insurance policyholder liabilities are comprised primarily of (i) unpaid losses and loss adjustment expenses, (ii) uncarned premiums, and (ii) funds held under reinsurance assumed. Liability for unpaid losses and loss adjustment expenses represents the aggregate of such obligations of members of the Insurance Group with respect to: (i) prospective property/casualty insurance and reinsurance contracts, (ii) retroactive property/casualty reinsurance contracts that provide for indemnification of insurance risk, other than structured settlements, and (l) reinsurance contracts providing for periodic payments with respect to settled claims ("structured settlements"). Except for structured settlement liabilities which are stated estimated ultimate payment amounts. at discounted present values, the liability for unpaid losses and loss adjustment expenses is at the aggregate of 26

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(1) Significant accounting policies and practices (Continued) (g) Property and casualty insurance policyholder liabilities (Continued) Ultimate payment amounts with respect to prospective contracts are determined from (i) individual case from ceding insurers. estimates, (ii) estimates of incurred but not reported losses, based on past experience, and (iii) reports of losses Ultimate indemnification or insurance risk, other than structured settlements, are established for financial roporing amounts with respect retroactive reinsurance contracts that provide charges re reinsurance assumed.) purposes at maximum limits of indemnification under the contracts. (See also 1(f) above related to deferred Liabilities under structured settlement contracts are established when the contracts are entered into, at the then interest rate. Thereafter, annual accretions to the liabilities are charged to losses incurred present value of the actuarially determined ultimate payment amount discounted at the prevailing market Funds held under reinsurance assumed treaties primarily consist of deposit balances refundable to insureds for by Statement of Financial Accounting Standards No. 113, "Accounting and Reporting for Reinsurance of coverages which the Company believes do not indemnify the ceding company against insurance risk, as defined Short-Duration and Long-Duration Contracts" (h) Insurance premiums Insurance premiums for prospective insurance and non-property catastrophe reinsurance policies are recognized Premiums for catastrophe excess of loss reinsurance coverages are deferred until the earlier of a loss as tevenues ratably over their terms with unearned premiums computed on a monthly or daily pro rata basis. occurrence or policy expiration. Consideration received for indemnification of risk under retroactive reinsurance Premiums earned are stated net of amounts ceded to reinsurers. contracts and structured settlements is accounted for as premiums earned at the inception of the contracts. 0) Provisions for losses and loss adjustment expenses are reported in the accompanying Consolidated Statements of Earnings after deducting estimates of recoveries under reinsurance contracts. Such recoveries totalled $61 relieve the Insurance Group Members of their obligations to indemnify policyholders with respect to the million, $34 million, and $90 million for 1994, 1993 and 1992, respectively. Reinsurance contracts do not reinsurance contracts are included in receivables. underlying insurance and reinsurance contracts. Estimates of losses and loss expenses recoverable under (k) Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards Accounting changes No. 109 "Accounting for Income Taxes" ("SEAS 109"). The adoption of SEAS 109 changed the Company's Previously the Company deferred the past tax effects of timing differences between financial reporting and method of accounting for income taxes from the "deferred method" to the "asset and liability method" taxable income. Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are of existing assets and liabilities and their respective tax bases. The provisions of SFAS 109 require that the recognized for future tax consequences attributable to differences between financial statement carrying amounts enactment date. effect on deferred taxes of a change in tax rates be recognized in income in the period that includes the In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. statement, the Company elected to adopt the statement's provisions as of December 31, 1993. Among its 115 "'Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). As permitted under the insurance entities. Prior to the adoption of SFAS 115, such securities were carried at the lower of aggregate provisions, the statement requires a change in the accounting for marketable equity securities held by non- cost or market. Under the provisions of SFAS 115, these securities are now carried at market and accounted for in the same manner as marketable equity securities held by the Company's insurance subsidiaries. 27

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Notes to Consolidated Financial Statements (Continued) (2) Dexter Shoe Companies merger by reissuing 25,203 shares of its common stock held in treasury in exchange for 100% of the outstanding common stock of On November 7, 1993, the Company consummated a merger with the privately held Dexter Shoe Companies ("Dexter") for by the purchase method of accounting and, accordingly. Dexter's operating results are included in the Company's Dexter. Dexter manufactures and distributes men's and women's dress, casual and athletic shoes. The merger was accounted with operations in 1992, the reported results would not have been materially affected. consolidated results of operations from the effective date of the merger. Had the results of Dexter been included commencing (3) Investments in securities with fixed maturities maturities are as follows (in thousands): The amortized cost and estimated fair values as of December 31, 1994 and 1993, of investments in securities with fixed December 31, 1994 Amortized Gross Cost Unrealized Gross Gains Unrealized Estimated Losses Value Fair U.S. Treasury securities and obligations of Obligations of states, municipalities U.S. government corporations and agencies $ 733,543 - $ (16,721) $ 716,822 Corporate bonds and political subdivisions 601,009 422,923 8,030 22,266 2,463 (3,453) 40,010 15,002 (2) 619,822 Mortgage-backed securities Redeemable preferred stocks 35 12,971) 10,491 (1,401) 434.954 38,644 $ 1,805,515 39,766 _(24,548) $ 1,820,733 December 31, 1993 Amorlized Gross Cost Unrealized Gross Gains Unrealized Estimated Losses Value Fair Bonds: U.S. Treasury securities and obligations of Obligations of states, municipalities U.S. government corporations and agencies $ 9,286 131 (4) 9,413 Mortgage-backed securities Redeemable preferred stocks and political subdivisions 681,882 643,094 49,903 63,550 15,188 (810) 1,635 (90,060) 692,187 (2) 607,010 65,178 $ 1.397,812 65.857 $(90,881) $ 1.373,788 Amounts above exclude securities with fixed maturities held by finance businesses. See note 7. contractual maturity dates. Actual maturities will differ from contractual maturities because issuers of certain of the securities Shown below are the amortized cost and estimated fair values of the above securities at December 31, 1994, by retain early call or prepayment rights. Amounts are in thousands. Amortized Estimated Due in one year or less Cost Fair Value Due after five years through ten years Due after one year through five years $ 904,129 647,401 647,054 199,551 920,960 Due after ten years 14,424 196,918 17,157 $ 1,765,505 $ 1,782,089 Mortgage-backed securities 40,010 38,644 $ 1,805,515 $ 1,820,733 thousands): Gross realized gains and losses on sales and redemptions of securities with fixed maturities were as follows (in 1994 1993 Gross realized gains. 6,808 40,109 1992 80,076 Gross realized losses (4,268) (174) (563) 28

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(4) Investments in marketable equity securities thousands): Aggregaid data with respect to the consolidated investment in marketable equity securities are shown below (in December 31, 1994 Unrealized Common stock of: _Lost Grains Marker The Coca-Cola Company Capital Cities/ABC. Inc. ia) 345,000 GEICO Corporation "1 ............ 1,298.888 $ 1,360,000 The Gillette Company 45,713 3,851,112 $ 1,705.000 All other marketable equity securities .. Wells Fargo & Company " 600,000 1,632,537 5.150,000 2,869.830 423.680 1,197,000 1,678,250 1.051.6874 561,047 1,797,000 3,921,517 984,727 December 31, 1993 $ 5.583,111 3 9.653,383 $ 15.236.494 Cost Unrealized Common stock of: Gains Market The Coca-Cola Company Capital Cities/ABC, Inc. *) 345,000 $ The Gillette Company GEICO Corporation 1,023,920 3,144,055 894,000 $ 1,239,000 45,713 1,713,881 4,167,975 All other marketable equity securities Wells Fargo & Company 1* 600,000 831,000 1,759,594 1,857,809 423.680 1.182,621* 454,934 1,431,000 3,040.430 878.614 $ 4,296,122 $ 8.220,491 $ 12.516.613 (a) Common shares of Capital Cities/ABC, Inc. ("Capital Cities") owned by Berkshire subsidiaries possessed approximately Agreement, the terms of which grant to Capital Cities a right of first refusal to purchase the shares and otherwise govern 13% of the voting rights of all Capital Cities shares outstanding at December 31. 1994. The shares ure held subject to an delivered to Capital Cities irrevocable proxies with respect to these shures in favor of Thomas S. Murphy or Daniel B. until Januury 3, 1997, the manner by which the shares muy be sold or transferred Also, Berkslare and its subsidiaries have of shareholders of Capital Cities. The proxies expire on January 2. 1997, or at the earlier dale when nether of such persons Burke, so long as either shall be the chief executive officer of Capital Cities, to vole the shares ut any and all meetings is chief executive officer of Capital Ciries: Subsidiaries of Berkshire owned shares of common stock of GEICO Corporation that possessed approximately 50% of arrangement for voting of the shares as reguired by Order of GEICO's domiciliary insurance supervisory authority. The the voting rights of all GEICO shares outstanding at December 31. 1994. Berkshire maintains an independent provy causing to change the independent proxy. Also, under the Order, no officer or director of Berkshire or of any affiliate or Order, dating from Berkshire subsidiaries' major purchase of the shares in 1976. prohibits Berkshire from seeking or with respect to the shares, Berkshire does not use the equiry method of accounting for its investment in GEICO. subsidiary of Berkshire is permitted to serve as a director of GEICO. Because the Order divests Berkshire of its voting rights Subsidiaries of Berkshire owned common shares of Wells Fargo & Company ("Wells Fargo") that possessed approximately 13% of the voting rights of all Wells Fargo shares outstanding at December 31, 1994. The shares are held subject to a Reserve Board of San Francisco, from seeking representation on the Board of Directors of Wells Fargo and from disposing Passivity Agreement, the terms of which among other things prohibit Berkshire, without prior approval from the Federal of more than 5% of the Wells Fargo securilies in any single transaction. In connection therewith, Berkshire has granted additional shares of Wells Fargo stock as Berkshire may purchase and hold in the future. a proxyto the Secretary of Wells Fargo, with respect to all Wells Forgo stock presently owned and with respect to such (d) Represents gross unrealized gains $1,187,893, less gross unrealized losses $/36,206. (e) Represents gross unrealized gains $1,275,413, less gross unrealized losses $92,792. Gross realized gains and losses on sales of marketable equity securities were as follows (in thousands): 7994

• 1995

1992 Gross realized gains. $ 185.702 $ 518347* $10,595 Gross realized losses (96,910) (11.860) (171) During the fourth quarter of 1993. a subsidiary of Berkshire sold 10,000.000 common shares of its invesiment in Cupital the sale and since 1986, Berkshire subsidiaries owned 30.000.000 shares of Capital Cities or approximately 18%% of that Cities in connection with that company's offer to buy from its shareholders up to 20,000,000 of its compion shares. Prior to company's outstanding stock. Berkshire's gross realized gain from this transaction was $457.5 million. 29

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Notes to Consolidated Financial Statements (Continued) (5) Investment in Salomon Ine The Company's investment in Salomon ine consists of the following (in thousands): December 31, 1994 December 31, 1993 Lost Value Fair Carrying Value Cost Value Fair Carrying Cumulative Convertible Preferred Stock.. $ 700,000 $ 735,000 $ 735,000 $ 700.000 $ 875,000 700.000 Value Common Stock 324,445 248,760 288,418 21,636 23,584 23,584 $1,024.445 $ 983,760 $1,023.418 $ 121,636 $ 898,584 $ 723,584 Preferred Stock ‹"Preferred Shares"). The Preferred Shares have a redemption value of $1,000 per share and are entitled At both December 31, 1994 and 1993, Berkshire subsidiaries owned 700,000 shares of Cumulative Convertible to receive quarterly dividends at the annual rate of 590 per share. The Preferred Shares can be converted into shares of Salomon Inc common stock at $38 per share and are entitled to one vote per share of common stock into which such Inc will redeem, at cost, 140,000 of the Preferred Shares or such fewer number as are then outstanding. As discussed shares are convertible (18,421,053 at December 31, 1994). Annually on each October 31, commencing in 1995, Salomon at December 31, 1993 in Note 1(c), the Preferred Shares are carried at fair value at December 31, 1994, whereas they were carried at cost of rights attaching to the aforementioned Preferred Shares plus 6,633,600 common shares held at December 31, 1994.) Berkshire subsidiaries possess slightly in excess of 20% of the total voting rights in Salomon. (Such rights consisting Effective April 1, 1994, the Company adopted the equity method of accounting with respect to its investment in Salomon Accordingly, as previously discussed, the Preferred Shares continue to be carried at fair value in accordance with income from the investment in Salomon Inc consists of the following (in thousands): Dividends on Preterred Shares $63,000 1994 1993 Equity in net loss of Salomon attributable to $63,000 $63,000 1992 common stock holdings * (32,942) $30,058 $03,000 $63,000 *Affer giving effectto amortization, over forty years, of the excess of the cost of Salomon common stock over its related book value. (6) Investment in USAir Group, Inc. Preferred Stock Convertible Preferred Stock ("USAir Preferred Shares"). The USAir Preferred Shares were acquired in 1989 for $358 Investments in securities with fixed maturities include 358,000 shares of USAir Group, Inc. Series A Cumulative USA ir Group, Inc. ("USAir") at $1,000 per share ($358 million in the aggregate), plus accrued dividends. million. If not called or converted prior to August 7, 1999, the USAir Preferred Shares are mandatorily redeemable by was deferring the quarterly dividend payment due September 30, 1994, on the USAir Preferred Shares. As of March 7, For the past five years USAir has incurred very significant losses. On September 29, 1994, USAit announced that it publicly stated that its ability to survive in the low fare competitive environment is contingent upon USAir's ability 1995 neither the quarterly dividend due September 30, 1994, or December 31, 1994, had been received. USAir has permanently to reduce its operating costs through reductions in personnel costs and other cost saving initiatives. USAir reducing personnel costs. While USAir's management has stated they are committed to reaching an agreement with the management is currently engaged in discussions with the leadership of its unionized employees to achieve its goal of labor groups, both the timing and the outcome of the negotiations are uncertain. Berkshire management has concluded that an other than temporary decline in the value of the USAir Preferred Shares As a result of the extended period of losses and the uncertainty surrounding the outcome of the labor negotiations, the decline. While the aforementioned charge to earnings was recorded in the fourth quarter of 1994; the charge to has arisen. Accordingly, the 1994 Consolidated Statement of Earnings includes a charge of $268.5 million to reflect shareholders' equity, however, had been recorded in earlier 1994 reporting periods. Effective March 31, 1994, investments in securities with fixed maturities were classified as available-for-sale and carried at fair value with the net after-tax value of the USAir Preferred Shares was adjusted to reflect its then estimated fair value of $179.0 million. At September December 31, 1994. 30

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(7) Finance businesses Assets and liabilities of Berkshire's fiance businesses are summarized below (in thousands): Berkshire's finance businesses are comprised of commercial and consumer finance companies and an annuity business. Dec. 31. 1994 Dec. 31, Assets 1993 Installment loans receivable Cash and cash equivalents $ 15,976 Other Fixed maturity investments 157,985 $ 37,063 538,866 163,827 4,255 667,10l 4,410 Liabilities $717.082 $872.401 8.125% Notes, payable in 1996 Annuity reserves.............. Borrowings under investment agreements " $120,000 369,964 $120,000 Other 41,021 551,909 31.458 52,022 5,435 $562,443 $729,366 Al December 31, 1994 and 1993, mortgage-backed securities of $396,033 and $534,352 respectively were agencies. Estimated fair values and gross unrealized gains and losses as of December 31, 1994 and 1993, are included in this caption. Each of these securities has received the highest rating from at least two rating as follows (in thousands): Unrealized Gross Gross Amortized Cost Gains Unrealized Estimated Losses Value Fair 1994 1993 $538,866 607,101 2,025 655 $(21,091) (1,660) $518,430 667,466 (b) Borrowings under investment agreements are made pursuant lo contracts with terms generally ranging from 2.5% to 7.3% per annum. Payments of amounts outstanding at December 31, 1994, are expected to be required six months to thirty years calling for interest payable, normally semiannually, at fixed rates ranging from no earlier than as follows (in thousands): 1995 1996 $256,270 1997 35,717 1999 1998 3,998 254 After 1999 71,857 1,868 Income from finance businesses for each of the past three years is summarized below (in thousands): Revenues 1994 1993 1992 Interest on loans.. Interest and dividend income $ 37,407 Annuity premiums earned 35,998 34,749 $ 42,671 20,107 $ 51,564 5,615 15,950 Cost and expenses 108,154 68,393 67,514 Interest expense General and administrative expenses Annuity bénefits and underwriting expenses 37,664 31,665 24,204 5,724 25,854 13,940 16,239 20,964 83,269 46,167 46,818 $ 24,885 $ 22.226* $ 20.696*

• Until October 1993, a savings and loan business was also included in this group of businesses.

finance businesses includes earnings of 35,857 and $4,547 in 1993 and 1992 respectively from this business. Income from 31

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Notes to Consolidated Financial Statements (Continued) (8) Other assets Other assets are summarized below (in thousands): Dec. 31, Goodwill Other Deferred charges re reinsurance assumed $ 1994 Dec. 31, 454,633 1993 440,664 467,544 89,579 25,859 466,013 $ 984.876 $ 1.029,416 (9) Property and casualty insurance policyholder liabilities Property and casualty insurance policyholder liabilities are summarized below (in thousands): Dee. 31, 1994 Dec. 31. Unpaid losses and loss adjustment expenses* 1993 Funds held under reinsurance assumed Unearned premiums $ 3,430,028 $ 3,155,905 307,232 315,750 Other 156,266 307,287 215,773 119,760 $ 4,200,813 $ 3,807,188 * Unpaid losses and loss adjustment expenses include liabilities established with respect to retroactive reinsurance contracts that provide for indemnification of insurance risk. These liabilities aggregated $1,295,991 and respect to these contracts and are reported as other assets. Also included in unpaid losses and loss adjustment $1.181,235 al December 31, 1994 and 1993, respectively. Related deferred charges were established with expenses are discounted structured settlement reinsurance liabilities, which totalled $231,255 and $254,325 at December 31, 1994 and 1993, respectively. subsidiaries (in thousands): Supplemental data with respect to unpaid losses and loss adjustment expenses of property/casualty insurance Unpaid losses and loss adjustment expenses: 1994 1993 1992 Less ceded liabilities and deferred charges Balance at beginning of year $3,155,905 597,860 $3,219,441 Incurred losses recorded: Net balance..... 2,558,045 2,564,132 655,309 $2,978,837 2,326,796 652,041 All prior accident years * Current accident year 505,058 Total incurred losses 60,199 439,404 11,255 658,484 29.141 Payments with respect to: 565,257 450,659 687,625 Current accident year Total payments ... All prior accident years. 216,346 50,859 47,029 Unpaid losses and loss adjustment expenses: 267,205 456,746 409,717 53,845 476,750 Plus ceded liabilities and deferred charges Net balance at end of year. 2,856,097 573,931 2,558,045 597,860 2,537,671 652,865 Balance at end of year .................... $3,430,028 $3,155,905 $3,190,536**

• Incurred losses "all prior years" reflects the amount of estimation error charged or credited to earnings in each

year. In addition, this amount includes amortization of deferred charges re reinsurance assumed and accretion of discounted structured settlement liabilities. ** Excludes unpaid liabilities of Central States Indemnity Company of Omaha - acquired by the Company at the end of 1992. 32

[PAGE 35]

(10) Income taxes liabilities as follows (in thousands): The liability for income taxes as reflected in the accompanying Consolidated Balance Sheets represent estimates of Dec. 31, 1994 Dec. 31, Payable currently 1993 Deferred $ 3.230,201 02,401 $ 2,740,503 289,686 $ 3292602 $ 3.030,189 SEAS 109 on the Company's financial statements was to decrease 1993 net income by about $71 million. This amount is As discussed in Note 1(k), the Company adopted SEAS 109 as of January 1, 1993. The cumulative effect of adopting represents the impact of adjusting deferred taxes related to unrealized appreciation of marketable equity securities which arose reflected in the 1993 Consolidated Statement of Earnings as the cumulative effect of change in accounting principle. It primarily prior to 1987 to reflect the then current capital gain tax rate of 34% as opposed to the 28% rate which was in effect when the adjustment was not material. Por year financial statements have not been restated. deferred taxes originated. The eftect of the accounting change on 1993 earnings before income taxes and cumulative effect to January 1, 1993. Accordingly, as required under SFAS 109, the Company recorded a charge to 1993 earnings of During 1993, the federal corporate income and capital gain tax rate was increased from 34% to 35% retroactive appreciation of marketable equity securities. approximately $75 million. Most of this charge relates to the impact of adjusting deferred taxes applicable to unrealized The Consolidated Statements of Earnings reflect charges for income taxes as shown below (in thousands): Federal 1994 1993* 1992 Foreign State 133,443 22,101 $ 320,419 20,857 $ 110,276 3,122 4,026 24,430 3,383 $ 158,666 $ 345,302 $ 138,089 Current Deferred $ 188,482 $ 400.762 (29,816) (55,460) $ 183,248 (45,159) $ 158.666 $ 345,302 $ 138,089 *Excludes the cumulative effect of change in accounting for income taxes ($70.984) and the effect of the change in federal income tax rate on deferred taxes applicable io unrealized appreciation of marketable equity securities ($75,348). liabilities at December 31, 1994 and 1993, are shown below (in thousands): The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax Deferred tax liabilities: 1994 1993 Relating to unrealized appreciation of Other marketable equity securities $ 3,381,328 71,883 $ 2,848,681 73,638 Deferred tax assets 3,453,211 (223,010) 2,922,319 (181.816) Net deferred tax liability $ 3,230,201 $ 2,740,503 shown below (in thousands): Charges for income taxes are reconciled to hypothetical amounts computed at the federal statutory rate in the table 1994 1993 1992 Net earnings before income taxes Hypothetical amounts applicable to above $ 662.197 $ 1,189,718 $ 550,617 Decreases, resulting from: computed at the federal statutory rate $ 231,769 $ 416,401 187,210 Dividends received deduction Tax-exempt interest income.. (81,235) (14,548) (15,020) State income taxes, less federal income tax benefit 14,366 (68.333) (14,727) Net other differences 8.314 13,557 (62,085) (1,303) 11,563 16.128 Total income taxes $ 158.666 345,302* $ 138,089

• Excludes the cumulative effect of change in accounting for income taxes and the effect of the change in federal

income lar rare on deferred laxes applicable to unrealized appreciation of marketable equity securities. 33

[PAGE 36]

Notes to Consolidated Financial Statements (Continued) (11) Borrowings under investment agreements and other debt Liabilities reflected for this balance sheet caption are as follows (in thousands): Dec. 31. 1994 Dec. 31. Borrowings under investment agreements Other debt 754,079 $ 915,079 1993 56,640 $7,310 810.719 $ 972,389 Borrowings under investment agreements are made pursuant to contracts with terms generally ranging from three months = borrowings are senior unsecured debt obligations of the Company. No materally restrictive covenants are included in any to forty years and calling for interest payable, normally semiannually, at fixed rates ranging from 3.0% to 9.0% per annum. The of the various debt agreements. thousands): Payments of amounts outstanding at December 31, 1994, are expected to be required no earlier than as follows (in 1995 1996 $36,148 $15,381 1997 1998 1999 $20,090 $17,018 $44,054 After 1999 $ 678,028 (12) Shareholders' equity accounts except per share amounts): Changes in Shareholders' Equity accounts during the most recent three years were as follows (dollars in thousands Stock of $5 Common in excess Capital Par Value of par value Net Unrealized Retained Appreciation Earnings Treasury Stock Balance December 31, 1991 Increase during 1992 in unrealized appreciation $6,876 $157,377 $3,962,989 $3,294,969 $42,293 securities included in carrying value of marketable equity Change during 1992 in deemed applicable income 1,644,810 Increase in minority shareholders' interest in taxes (559,235) Common stock (2,162 shares) issued upon conversion unrealized appreciation (1,345) Net earnings 1992 of Zero Coupon Convertible Subordinated Notes 24,887 407.285 Common stock (3,944 shares) issued upon conversion Balance December 31, 1992 6,887 182,264 5,047,219 3.702,254 42.293 Common stock (25,203 shares) issued in connection of Zero Coupon Convertible Subordinated Notes 20 45,457 Increase during 1993 in unrealized appreciation with acquisition of Dexter Shoe Companies 428,353 (4,659) securities included in carrying value of markelable equity Change during 1993 in deemed applicable income 316,002 Increase in minority shareholders' interest in laxes (119,843) Nel earnings 1993 unrealized appreciation (2,501) Cumulative effect of adoption on December 31, 1993, of 688,121 SFAS 115 (See note 1[kj) _ 171,775 Balance December 31, 1993 $6,907 $656,074 $5,412.652 $4,390,375 $37,634 Increase during 1994 in unrealized appreciation Change during 1994 in deemed applicable income included in carrying value of investments. 1,481,162 Increase in minority shareholders' interest in taxes (519.514) Net earnings 1994 unrealized appreciation.. (9,938) 494,798 Balance December 31, 1994 $6,907 $656.074 $0.364.362 $4,885,173 $37,634 34

[PAGE 37]

(13) Dividend restrictions - Insurance subsidiaries regulatory approval in 1995, Berkshire can receive up to approximately 5488 million as dividends from insurance subsidiaries. Pavments of dividends by Insurance Group members are restricted by insurance statutes and regulations. Without prior Surplus as Regards Policyholders) was approximately $13.4 billion at December 31, 1994. This amount exceeded by Combined shareholders' equity of insurance subsidiaries determined pursuant to statutory accounting rules (Statutory approximately $2.4 billion the corresponding amount determined on the basis of generally accepted accounting principles; the difference principally represents deferred income tax assets and liabilities and deferred charges re reinsurance assumed recognized for financial reporting purposes but not for statutory reporting purposes. (14) Fair values of financial instruments 107"'), requires certain fair value disclosures. Fair value disclosures are required for most investment securities as well as other Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ('SFAS disclosure requirements due to perceived difficulties in measuring fair value. Accordingly, an estimation of fair value was not contractual assets and liabilities. Certain financial instruments, including insurance contracts, were excluded from SFAS 107 made with respect to unpaid losses and loss adjustment expenses. prices were not available, the Company used independent pricing services or appraisals by the Company's management. Those In determining fair value, the Company used quoted market prices when available. For instruments where quoted market services and appraisals reflected the estimated present values utilizing current risk adjusted market rates of similar instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a Considerable judgement is necessarily required in interpreting market data to develop the estimates of fair value. on the estimated fair value. current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect deemed to be reasonable estimates of their fair values. The estimated fair values of the Company's other financial instruments The carrying values of cash and cash equivalents, receivables and accounts payable, accruals and other liabilities are as of December 31, 1994 and 1993, are as follows (in thousands): 1994 Carrying Value Estimated Fair Value Investments in securities with fixed 1993 1994 1993 Investments in marketable equity securities maturities 1,820,733 Assets of finance businesses Investment in Salomon Inc 15,236,494 1,397,812 1,023,418 12,516,613 15,236,494 1,820,733 $ 1,373,788 Borrowings under investment agreements and 717,082 872,401 723,584 702,858 983,760 12,516,613 891,505 898,584 Liabilities of finance businesses other debt 810,719 562,443 729,366 972,389 768,595 546,667 1,048,623 735,521 (15) Supplemental cash flow information A summary of supplemental cash flow information is presented in the following table (in thousands): Cash paid during the year for: 1994 1993 1992 Interest.• Income taxes......... $ 411,092 Non-cash investing and financing activities: 90,596 $ 235,015 70,629 $ 121,027 95,730 Liabilities assumed in connection with acquisition of businesses Common shares issued upon conversions of Zero Coupon 26,093 45,735 Common shares issued in connection with acquisition of Convertible Subordinated Notes 45,477 24,898 Dexter Shoe Companies ... 433.012 - 35

[PAGE 38]

Notes to Consolidated Financial Statements (Continued) (16) Quarterly data information is unaudited. Dollars are in thousands, except per share amounts. A summary of revenues and earnings by quarter for each of the last two years is presented in the following table. This 1994 1st Quarter Quarter 2nd Quarter 3rd Quarter 4th Revenues $917,963 $868,360 $795,500 $ 1,265,644 Earnings: Excluding realized investment gain Realized investment gain (loss) $ 82,312 50,578 $158,784 5,863 $110,466 (4,646) 82,097* 9,344 Net earnings $132,890 $164,647 $105,820 91,441 Earnings per share: Realized investment gain (loss) Before realized investment gain $ 69.89 42.94 $134.82 4.98 $93.79 (3.94) $69.71* 7.93 Net earnings $112.83 $139.80 $89.85 $77.64

• Includes a nonrecurring charge of $172,579 ($146. 53/share) representing an other than temporary decline in value of'

investment in USAir Group, Inc. Preferred Stock. See note 6. 1993 Quarter lst Quarter 2nd Quarter 3rd Quarter 4th Revenues 5725.827 $703,698 $744,127 $1.425,612 Earnings: Excluding realized investment gain and Cumulative effect of change in accounting Realized investment gain.. cumulative effect of accounting change $ 84,105 16,630 $103,836 8,127 $ 12,389* 10,405 202,073 321,540** for income taxes (70,984) Net earnings $ 29,751 $111,963 $ 22,794 $ 523,613 Earnings per share: Before realized investment gain and Realized investment gain cumulative effect of accounting change $72.97 Cumulative effect of change in accounting 14.43 $90.09 7.05 $10.75* 9.03 $173.10 275.45** for income taxes 16159) Net earnings $25.81 $97.14 $19.78 $448.55

• Includes a nonrecurring charge of $75,348 ($65.38/share) representing the effect of the change in federal income tax rates

on deferred taxes apolicable to unrealized appreciation. See note 10. **Includes $297,375 ($254.75/share), net of taxes, related to sale of 10,000.000 shares of Capital Cities/ABC. Inc. common stock. See note 4. 36

[PAGE 39]

(17) Business Segment Data Accounting Standards No. 14. These include the property and casualty insurance and reinsurance business (The Insurance Berkshire identified eight business segments for purposes of 1994 reporting pursuant to Starement of Financial Segment) plus seven separately conducted non-insurance businesses as follows: identity and headquarters Business See's Candies Product South San Francisco, CA Candy Activity Manufacture and distribution at retai and by catalog solicitation Chicago, IL World Book Encyclopedias and other reference materials ublication and marketin rincipally by the direct sales metho Kirby, Douglas and of The Scott Fetzer Company Cleveland Wood Divisions Cleveland, OH Home cleaning systems Manufacture and sale principally to distribuiors Nebraska Furniture Mart Omaha, NE Home furnishings Retailing Buffalo News Buffalo, NY Newspaper Publication of a daily and Sunday newspaper I. H. Brown Shoe C Dexter Shoe Companies Lowell Shoe, Inc. ano NH and Dexter, ME Greenwich, CT, Hudson Shoes Manufacture, importing and distribution at wholesale and retail Fechheimer Bros. Co. Cincinnati, OH Uniforms Manufacture and distribution at wholesale and retail businesses activities that contributed for 1994, in the aggregate, 16% of Berkshire's consolidated revenues, were as follows: The business segments identified above were responsible in 1994 for 83% of Berkshire's consolidated revenues. Other Business identity Adalet Product Service/Activity BHR Conduit fittings, explosion proof junction boxes, couplings and terminations Berkshire Hathuway Real estate management Berkshire Hathaway Life Credit Corporation Commercial financing Blue Chip Stamps Insurance Co Annuities Borsheim's Marketing motivational services Campbell Hausfeld Retailing fine jewelry France Carefree Sun and shade control products and accessories for RVs Air compressors, air tools, painting systems and pressure washers Halex Appliance controls, ignition and sign transformers Meriam K&W Products Zinc die cast electrical fittings Autometive compounds Northland Pressure and flow measurement devices Precision Powerwinch Fractional horsepower motors oat winches, windlasses and hoist: Scot!Care Quikur Cutlery teel service center Scot Labs Scolt Fetzer Financial Group Cardiopulmonary rehabilitation and monitoring equipment Commercial and consumer finance companies Wayne Stahl Cleaning and maintenance chemicals Custom steel service bodies and tool boxes for trucks Wesco Financial urnace burners; sump, utility and sewage pump Western Enterprises eal estate managemen Western Plasties Molded plastic components Compressed gas fittings and regulators 37

[PAGE 40]

Notes to Consolidated Financial Statements (Continued) (17) Business Segment Data (Continued) follow on this and the following page. Amounts are in thousands. A disaggregation of Berkshire's consolidated data for each of the three most recent years is presented in the tables which 1994 Revenues 1993 1992 Operating profit before taxes Identified Segments: 1994 1993 1992 Insurance Non-insurance businesses $1,436,966 1,771,870 $1,591,226 $1,078,419 1.440,120 1,283,240 $ 639,218 $ 961,397 $ 3,208,836 3,031,346 2,361,659 275,399 — 224,795 209,871 298,715 914.617 1,186,192 508,586 Interest expense * Other than identified segments 638,631 567,918 615,598 (192,309)** (60,111) 60.071 (56,545) 140,674 (98,643) Aggregate consolidated total $3,847,467 $3.599,264 $2,977,257 $ 662,127 $1,189,718 $ 550,617

• Amounts of interest expense represent those for borrowings under investment agreements and other debt exclusive of

that of finance businesses. ** Includes pre-tax charge of $268,500 representing an other than temporary decline in value of investment in USAir Group, Inc. Preferred Stock. Insurance Segment 1994 Revenues 1993 1992 1994 Operating profit before taxes Premiums earned: * 1993 1992 Reinsurance assumed Primary or direct. 281,074 $ Reinsurance ceded 688,537 442,425 249,585 $ 179,441 923,180 (46,431) _ 650,726 (41,284) 530,525 664,293 (45,673) Investment income Underwriting Realized investment gain 421,753 92,033 555,868 384,632 361,517 $ 129,010 $ 30,070 $ (108,961) 52,609 418,175 92,033 _ 555,868 375,459 355,067 52,609 $1,430,966 $1,591,226 § 639,218 $ 961,397 $ 298.715

• Premiums written were as follows:

Reinsurance assumed Primary or direct.. 1994 1993 1992 S 271,151 $ 247,173 $ 153,177 Reinsurance ceded 689,932 (45,562) 528,768 (38,854) (39,762) 626,159 $ 915,521 737,087 $ 739,567 Non-Insurance Business Segments 1994 Revenues 1993 1992 Operating profit before taxes 1994 1993 1992 Encyclopedias, other reference material Candy $ 216,060 S 200,979 197,017 Home furnishings Home cleaning systems 207,567 191,297 40,564 S 208,598 193,891 198,807 190,072 246,107 24,375 40,270 $ 41,382 150,915 145,470 185,596 43,938 19,375 28,228 Newspaper 245,395 609,398 370,211 214,873 139,764 53,666 16.902 40,944 21,094 16,665 37,744 Uniformns Shoes 151,238 122.164 109,811 13,538 76,416 40,003 50,390 25,586 47,291 12,719 12,975 $1,771,870 $1,440,120 $1,283,240 $ 275,399 $ 224,795 $ 202,871 38

[PAGE 41]

(17) Business Segment Data (Continued) Other Than Identified Segments 1994 Revenues 1993 1992 Operating profit before taxes 1994 1993 1992 Not identified with specific businesses: Other businesses $ 607,350 550,754 $ 517,259 $ 59,209 $ 55,185$ 54,321 Realized investment gain (loss) .... Interest and dividend income ...... 31,982 All other except interest expense . .... (701) 26,608 (9,444) 37,328 61,011 31,982 (701) 26,608 (9,444) 61,011 (282,799)* (12,278) (11,986) 37,328 $ 638.631 $ 567918 $ 615,598 $ (192.309) $ 60,071 ≤ 140,674

• Includes pre-tax charge of $268,500 representing an other than temporary decline in value of investment in USAir

Group, Inc. Preferred Stock. 1994 Capital expenditures * Deprec. & amort. 1993 1992 1994 of tangible assets 1993 1992 Insurance Candy $ 4,111 935 $ 1,207 $ Home cleaning systems 130 4,287 1,071 Encyclopedias, other reference material Newspaper Home furnishings 22,633 959 1,470 736 4,167 $ 4,095 908 S 812 $ 1,366 4,116 840 184 6,226 4.208 5,259 1,449 4,06l Shoes 5,156 5,254 769 1,379 Uniforms 17,912 3,602 8,528 10,218 2,181 2,663 4.942 Other 10,698 4,594 1,041 4,407 2,171 3,370 1,855 2,210 17,943 2,491 1,836 5,201 2,373 12,962 8.881 2,660 3,027 17,321 14,692 1,833 67,128 34,966 $ 31,801 49.636 40.512 S 35.357

• Expenditures which were part of business acquisitions are excluded.

Identifiable assets 1094 at year-end 1993 1992 Candy .. Insurance $ 18,494,195 69,442 $16,126,933 75,856 70.201 $14,788,237 Encyclopedias, other reference material 74,676 65,880 Home furnishings Home cleaning systems........... 42,114 48,703 83,778 Shoes Newspaper 128,389 48,443 101,147 $0,692 45,402 88,331 Uniforms 672,704 641,548 43,751 Other 1.712,135 94,904 2,324,313 87,546 208,218

• 1,717,712

85,392 $21,338,182 $19,520,469 $17,131,998 39

[PAGE 42]

Financial Condition and Results of Operations Management's Discussion and Analysis of BERKSHIRE HATHAWAY INC. Results of Operations deducting minority interests and taxes. Net earnings for each of the past three years are disaggregated in the table that follows. Amounts are after (dollars in millions) Property and Casualty Insurance Segment: 1994 1993 1992 Investment income Underwriting $ 79.9 $ 19.2 $ (71.1) Realized investment gain _ 61.6 349.2 362.7 320.9 305.8 36.1 Non-Insurance business segments .... Total - Property and Casualty Insurance Segment . ......... 490.7 165.8 702.8 133.3 123.4 270.8 Realized investment gain (loss) not included above Other busmesses 36.4 (0.5) 33.2 30.7 All other except interest expense 12.3 (6.1) 6.8 21.9 23.4 Interest expense * (37.3) (35.6) (62.9) Earnings before nonrecurring charges Nonrecurring charges and effect of accounting change and effect of accounting change (172.6) 667.4 (146.3) 834.4 407.3 Net earnings $ 494.8 $688.1 $407.3

• Interest expense incurred by finance businesses is not reflected as "Interest expense" but instead is reflecied in amounts shown for

"Other businesses". this report should be read in conjunction with this discussion. The business segment data (Note 17 to the Consolidated Financial Statements) on the preceding pages of Property and Casualty Insurance Underwriting following: The after-tax figures shown above for Property and Casualty Insurance underwriting derive from the

• (dollars in millions).

Underwriting gain (loss): 1994 1993 1992 Reinsurance assumed Primary or direct insurance $ 48.3 80.7 $ 12.7 17.3 $ [117.0) 8.0 Applicable income taxes Underwriting gain (loss) pre-tax ... 129.0 30.0 Applicable minority interest 48.3 0.8 10.2 (109.0) 0.6 (37.7) _(0.2) After-tax underwriting gain (loss) $ 79.9 $ 19.2 $ (711) risks. In its insurance activities, as distinguished from its reinsurance activities, its members assume risks of loss from The Berkshire Hathaway Insurance Group engages in both insurance and reinsurance of property/casualty of similar or dissimilar risks to which other insurers and reinsurers have subjected themselves in their own insuring persons primarily and directly subject to the risks. In its reinsurance activities, the members assume defined portions activities. Over the past three years, reinsurance assumed activities have produced about 75% of the aggregate premiums earned by the property and casualty insurance group average capital strength. Statutory surplus as regards policyholders of the Insurance Group increased to A significant marketing strategy followed by all Insurance Group members is the maintenance of above approximately $13.4 billion at year-end 1994. This extraordinary capital strength creates opportunities for needs of sophisticated insurance and reinsurance buyers. Insurance Group members to negotiate and enter into contracts of insurance specially designed to meet unique 40

[PAGE 43]

Property and Casualty Insurance Underwriting (continued) reinsurance ceded. For purposes of this Discussion, premiums and losses and loss expenses amounts are stated net of Reinsurance Assumed to the reinsurance assumed business for the past three years are summarized in the following table. Underwriting results, stated on the basis of generally accopted accounting principles ("GAAP"), with respect 1994

• (dollars in millions)

1993 Premiums written Amount % Amount Amount 1992 % $ 089.8 $ 528.7 Premiums earned $ 688.4 100.0 $ 442.4 $ 607.2 Underwriting expenses Losses and loss expenses 476.9 130.8 69.3 Total losses and expenses 607.7 19.0 350.9 100.0 74.2 79.3 $ 511.5 100.0 16.7 589.7 38.8 115.3 7.6 88.3 425.1 96.0 628.5 122.9 Underwriting gain (loss) — pre-tax 80.7 17.3 $(117.0) Connecticut. The Insurance Group enters into a variety of types of reinsurance contracts, including excess of loss and Reinsurance assumed operations are conducted from National Indemnity Company's offices in Stamford, quota share contracts. Excess of loss contracts provide indemnification to ceding companies for all or part of covered or an aggregation of occurrences. Quota share contracts provide indemnification to ceding companies in specified losses in excess of specified retentions (or deductibles). Such retentions may apply to either an individual loss occurrence proportion of the ceding companies' own losses. Each type of contract specifies a maximum aggregate amount of indemnification. million (55.6%). This increase was due to higher amounts earned from catastrophe excess of loss reinsurance policies, Premiums earned from reinsurance assumed activities in 1994 exceeded amounts eared in 1993 by $246.0 contracts. (Amounts eared from catastrophe excess of loss policies totalled about $447 million in 1994 vs $152 million offset somewhat by declines in premiums earned under quota share, structured settlement, and retroactive reinsurance in 1993). Management believes that increased levels of capital devoted to the catastrophe reinsurance market by the adequate. Therefore, management anticipates a reduction in the level of catastrophe reinsurance business that may insurance industry in recent years may put pressure on competitors to lower prices below the levels considered be accepted in 1995. decline was primarily attributed to lesser amounts eamed from retroactive reinsurance contracts. Increasing competition Reinsurance premiums earned in 1993 declined by $69.1 million (13.5%) from amounts earned in 1992. The reduced the opportunities to write such business. Minimal amounts of structured settlement reinsurance was written in retroactive reinsurance markets and the effects of new accounting standards for ceding companies have drastically affiliate. in 1994 as a similar type of annuity contract was more heavily marketed through a non-property/casualty insurance from the Insurance Group's catastrophe reinsurance business. The considerable amounts of premiums earned from Underwriting gains of approximately $240 million and $110 million in 1994 and 1993 respectively, resulted this business, coupled with the fact that only the 1994 Northridge earthquake produced a significant catastrophe loss about $125 million (primarily related to Hurricane Andrew) which caused a small underwriting loss for that year. during the period, contributed to the underwriting gains for 1994 and 1993. In 1992, catastrophe losses incurred were 1993 or (b) the current expectation that the early 1995 Kobe, Japan earthquake will not result in a significant loss to Little comfort should be gained from either (a) the magnitude of undervriting gains recorded in 1994 and the Insurance Group. The underwriting gains produced by this business in any given year can be easily exceeded by losses in the next. Thus periodic underwriting results were and are expected to be subject to substantial volatility. long term profitability. Berkshire's management, however, is willing to accept such volatility, provided that there is a reasonable prospect of 41

[PAGE 44]

Management's Discussion (continued) Property and Casualty Insurance Underwriting (continued) Reinsurance Assumed (continued) for 1994, $64 million for 1993 and $66 million for 1992, reflecting principally the amortization of deferred Underwriting losses with respect to retroactive and structured settlement coverages amounted to $78 million to the Consolidated Financial Statements for information charges re reinsurance assumed and accretion of discounted structured settlement liabilities. See Notes 1(f) and (g) amortization and accretion are reported as losses incurred, and thus, because there is no related premium income, with respect to such charges and liabilities. The as underwriting losses. Amortization and accretion charges of about $70 million are expected in 1995. Other non-catastrophe reinsurance business produced underwriting losses of about 580 million, $28 million "tail". This is especially true with respect to reinsurance of certain casualty or liability coverages for which the for these contracts on an undiscounted basis, thus resulting in underwriting losses for financial reporting purposes. This premiums are based in significant part on time discounting of expected losses. Losses and loss expenses are established produces. Underwriting losses in 1994 include charges of about $37 million for adverse development of pre-1994 loss business is accepted, nonetheless, because of the large amounts of investable policyholder funds (or "float") that it occurrences. Underwriting results in 1993 and 1992 reflect relatively minor amounts of loss development. Primary or Direct Insurance Underwriting Hathaway Insurance Group's primary or direct insurance operations. A summary follows of the combined underwriting results, stated on a GAAP basis, of the Berkshire 1994 (dollars are in millions) 1993 1992 Amount Amount % Amount Premiums written $ 225.7 $ 208.4 $ 132.4 Premiums earned $ 234.8 Losses and loss expenses 88.4 100.0 $ 208.3 $ 152.8 100.0 Underwriting expenses 98.1 41.8 37.6 95.8 99.8 98.0 46.8 30.7 64.1 Total losses and expenses 186.5 79.4* 195.6 144.8 94.8* Underwriting gain — pre-lax 48.3 12.7 S 8.0

• Includes favorable loss development credits.

earned were: 1994 - 102.4%, 1993 - - 113.9%, and 1992 - 118.6%. Without such credits, total losses and expenses as a percentage of premiums Primary or direct insurance activities include the "traditional" business, directed from National Indemnity commercial casualty/professional liability/specialty risk operations located in Stamford, Connecticut, enter into insurance Company's Omaha offices. This business represents principally casualty coverages for commercial accounts. The underwrite various commercial coverages for standard risks located predominantly in their home states — Nebraska contracts with insureds presenting risks unusual in nature and/or especially large in amount. The homestate companies competitive market environment in California. Additionally, since 1993 these activities include the underwriting of credit and Colorado. Cypress Insurance Company, a specialty carrier, underwrites workers' compensation risks in a highly ("'CSI"). card credit insurance as a result of Berkshire's 1992 yearend acquisition of Central States Indemnity Co. of Omaha Insurance Group. CST's premiums derive from a high volume of small dollar premium transactions generated through CST's business differs substantially from the insurance business underwritten by the other members of the of the other Insurance Group members. On the other hand CSI's losses and loss expenses incurred, as percentages credit card issuers. CSI's underwriting expenses as a percentage of premiums earned are roughly twice as great as that underwriting results from this business are anticipated to be less volatile than the other primary or direct insurance of premiums earned are substantially lower than for the other primary or direct underwriting units. Overall, periodic underwriting gain was about $4 million for 1994 and $5 million for 1993. operations. CSI produced premiums earned of $72 million and $69 million for 1994 and 1993, respectively. CSI's net 42

[PAGE 45]

Property and Casualty Insurance Underwriting (continued) Primary or Direct Insurance Underwriting (continued) million and $153 million for 1994, 1993 and 1992, respectively. Each of these business units, described on the preceding Premiums earned by Berkshire's other primary or direct insurance businesses totalled $163 million, $140 liability/specialty risks businesses accounted for about half of the increase in premiums earned in 1994 over 1993. This page, reported higher premiums earned in 1994 as compared with 1993. The Group's commercial casualty professional terms of those policies, premium amounts may be adjusted upward or downward after policy expiration based upon increase was due to adjustments on a small number of "retrospectively rated" policies written in prior years. Under the to additional amounts of losses incurred. In addition, premiums earned in 1994 by the worker's compensation insurance changes to losses incurred under the policies. Thus the additional premiums earned in 1994 were largely in response unit exceeded 1993 by about $5 million reflecting increased marketing efforts of that business. However, that business gains may be difficult to sustain in 1995. operates in a highly competitive market which has recently undergone substantial regulatory changes and such revenue compared to gains of about $8 million for both 1993 and 1992. In 1994, all of the other primary or direct insurance Other primary or direct businesses produced a net underwriting gain of about $44 million for 1994 operations had significant net underwriting gains, reflecting increased amounts of credits against losses incurred from the reestimation of loss reserves for prior year loss occurrences. Favorable loss development credits were recorded in to earnings in the year made. The favorable development recorded in 1994 related principally to the traditional each of the last three years. Loss development represents corrections of estimation error and is credited or charged commercial automobile business and to the commercial casualty/professional liability/specialty risks operations. In 1993 the trend of favorable development recognized in recent years is encouraging, there is no certainty that it will continue and 1992, the favorable development credits related primarily to the traditional commercial automobile business. While are reported and settled over lengthy periods of time. In the future, additional information will be revealed, including into future periods. The nature of estimating losses is inherently unprecise, particularly with respect to losses which reports of additional cases of an unknown number and magnitude for pre-1995 losses. have prevailed for the past several years. Group members follow disciplined underwriting approaches which encourage Soft market conditions for most primary or direct casualty insurance coverages continued during 1994, as rejection of underpriced risks without regard to volume considerations. Management does not foresee any significant changes in market conditions which would soon reverse the current trend of low premium volume. Insurance Segment Investment Income Following is a summary of Insurance Group net investment income for the past three years. 1994 -(dollars in millions). 1993 1992 Investment income before taxes Applicable income taxes $418.2 64.3 $375.4 $355.1 Applicable minority interest 4.7 _ 3.3 Investment income after taxes and minority interest $349.2 $320.9 $305.8 approximately $420 million additional capital to the Insurance Group. Reinvested earnings of the Insurance Group Invested assets increased in each of the past three years. In the three year period, Berkshire contributed about a $1.2 billion increase during the past three year period in the amount of "float" from policyholder funds. for that period amounted to approximately $1.0 billion. Contributing to a further increase in invested assets was That tenn denotes the sum of unpaid losses, unpaid loss adjusiment expenses and unearned premiums, and other on paid and unpaid losses, deferred policy acquisition costs, deferred charges re reinsurance assumed and prepaid liabilities to policyholders less the aggregate of agents' balances receivable, amounts recoverable as reinsurance income taxes. The net amount of float was approximately $3.4 billion at the end of 1994. In addition, increased investment income in 1994 was partially attributed to higher dividend rates paid by several of the Insurance Group's charge of $32.9 million which represents the equity in net loss from the Insurance Group's investment in common major equity investees. The amount of pre-tax net investment income for 1994 shown in the table above reflects a investment in Salomon Inc. stock of Salomon Inc. See Note S to the Consolidated Financial Statements for additional information regarding the 43

[PAGE 46]

Management's Discussion (continued) Non-Insurance Business Segments three years. A summary follows of results to Berkshire from these identified business segments for the past 1004 (dollars in millions) 1993 1992 Revenues Amount Cost and expenses $1,771.9 % Income taxes Operating profit 1,496.5 100.0 Amount 275.4 84.5 $1,440.1 1,215.3 100.0 Amount 84.4 $1,283.2 1.073.3 100.0 Minority interest 106.2 15.5 3.4 0.2 6.0 224.8 87.8 15.6 209.9 83.6 3.7 6.1 83.2 16.4 3.3 0.3 6.5 0.3 Contribution to net earnings $ 165.8 9.3 $ 133.3 9.2 $ 123.4 9.0 identifiable non-insurance business segments follows. A comparison of revenues and operating profits between 1994, 1993 and 1992 for each of the seven Segment 1994 Revenues (dollars in millions) 1992 Operating Profits as a % of Revenucs Operating Profit 1993 1994 1993 1992 1994 1993 1992 Candy Encyclopedias, other reference material 216.1 Home furnishings Home cleaning systems 207.6 191.3 201.0 198.8 197.0 190.1 246.1 $ 46.6 $ 40.3 24.4 19.4 $ 41.4 185.6 43.9 40.9 28.2 21.6 139.7 16.9 21.1 37.7 12.8 20.0 21.1 9.8 21.0 Newspaper 245.4 193.9 35.6 6.9 10.1 21.1 11.5 Uniforms Shoes 609.4 150.9 145.5 208.6 109.8 214.9 53.7 76.4 50.4 16.7 19.8 13.5 40.0 47.3 12.5 34.6 9.0 151.2 122.1 370.2 12.7 13.0 25.6 8.9 10.8 33.9 10.4 11.9 11.8 $1.771.9 $1,440.! $1,283.2 $275.4 $224.8 $209.9 1994 compared to 1993 million (23.0%) from the prior year: The overall operating profit from these business segments of $275.4 million Revenues from the seven identifiable non-insurance business segments of $1,771.9 million increased $331.8 increased $50.6 million (22.5%). The following is a discussion of significant matters impacting comparative results for each of the non-insurance business segments. Candy (15.6%) over comparable prior year amounts. The comparative increases in revenues and operating profits are Revenues of the candy segment increased S15.1 million (7.5%) and operating protits increased $6.3 million primarily due to increased volume. Total pounds of candy sold increased about 5.3%. Much of the increase arose from See's mail order and quantity order programs. Beginning in 1993 See's intensified its marketing efforts relative to these programs. Such efforts continued during 1994 and as a result total pounds sold during 1994 resulting from quantity order and mail order programs increased about 15%. Encyclopedias, Other Reference Materials reduced unit sales of printed encyclopedias (World Book and Childcraft) which began in 1989. Somewhat offsetting the Revenues of this segment declined $7.5 million (3.8%) from 1993. This decline continues the trend of decline in World Book and Childerafi sales were sales increases of World Book's current CD-ROM product, Infofinder: with the enhancements of audio, video and animation and marketed as the World Book Multimedia Encyclopedia. In April 1995, the Windows and Maclntosh versions of World Book's CD-ROM product will be available it is anticipated that the industry trend away from printed material and toward electronic media will continue. While Management cannot predict the impact on sales or income that the upgraded CD-ROM product will have. However, management believes that there will continue to be a profitable market for its core printed product, the quantity of 44

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Non-Insurance Business Segments (continued) 1994 compared to /993 (continued) Encyclopedias, Other Relerence Material (continted) home computers equipped with CD-ROMs, increased computer literacy of the general population, and the lower price the printed products which can be sold may, in the future, be limited due to the continued increase in the number of has and will continue to reduce significantly the volume of Annual sales if printed set sales do not return to prior levels. of CD-ROM products in comparison to encyclopedia sets. Additionally, the decline in the unit volume of printed sets anticipated that reductions in printed Annual sales will be somewhat ollset by sales of CD-ROM upgrades. However, the World Book Multimedia Encyclopedia will be offered in annual upgrades to purchasers. Therefore, it is Home Cleaning Systems increased $3.0 million (7.3%). This comparative increase can be attributed primarily to an increase in the average Revenue of the home cleaning systems segment increased $13.7 million (7.0%) and operating profits number of distributors over 1993 and improvements in the structure of the sales organization in foreign markets. Unit sales of Kirbys increased slightly in domestic markets and were up by 14% in foreign markets. Foreign Kirby sales business and combined with more modest growth in domestic markets expects continued successful results from this represent approximately 22% oftotal unit volume. Management anticipates continued significant growth in its foreign segment. Home Furnishings year. Increases were achieved in all major product categories. In November 1994, a 102,000 square foot appliance and Revenues from the home fumishings segment increased in 1994 by $36.8 million (17.6%) over the prior "Mega Mart" has added new products such as music compact discs and an expanded computer software line to NEM'S electronics superstore was opened adjacent to the Nebraska Furniture Mart ('NFM"). This superstore known as the previously large selection of electronics and appliances. from store opening costs in connection with the grand opening of the Mega Mart. In addition, umusual charges of Operating profits of $16.9 million were $4.2 million (19.9%) less than in 1993. Much of the decline resulted Management is optimistic that absent the store opening costs and unusual charges, an improvement in operating profit approximately $2.3 million were recorded in 1994 relating to the write-off of certain fixed assets no longer in use. will be experienced in 1995. It is expected that operating profits as a percentage of revenues will improve during 1995 the anticipated revenue growth, the percentage levels attained will likely be less than experienced by NEM in years as compared to 1994. However, due to the fact that the lower margin Mega Mart business will account for much of prior to the opening of the Mega Mart. Newspaper comparative results are impressive and have been for several recent years, the outlook for 1995 and beyond is not as Operating profits during 1994 of $53.7 million were $3.3 million (6.5%) greater than in 1993. While the increase during 1994 in the newsstand price of the daily newspaper from 35¢ to 50¢. Also an aggressive new subscriber encouraging. During 1994, the Buffalo News experienced a decline in circulation. Part of the decline was caused by an discount program which had been in place a number of years was phased out in 1994, and many subscribers used to circulation. a large discount did not resubscribe. From a dollar volume standpoint, the price increase offset the decline in stable or has declined. This trend has now sharply reversed. New higher costs per metric ton, as well as increased Earnings are expected to decline in 1995. For the past several years the cost of newsprint has either been prices expected during the remainder of 1995, are expected to increase newsprint costs by $7 million or nearly 40% over 1994 costs. Buffalo News' ability to control its other operating costs should help mitigate the impact of the decline in circulation Overall, the newspaper segment faces some signiticant challenges during the next year. However, the and the steep rise in newsprint costs. 45

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Management's Discussion (continued) Non-Insurance Business Segments (continued) 1994 compared to 1993 (continued) Shoes Dexter Shoe Companies ('Dexter'"). These businesses were acquired by Berkshire during the period between June 1991 This segment includes H. H. Brown Shoe Company, Inc. ("H. H. Brown"), Lowell Shoe, Inc. ("Lowell") and and November 1993. H. H. Brown, acquired in 1991, is a manufacturer and distributor of work, safety and casual The acquisition of Dexter occurred in late 1993. Dexter is a manufacturer of men's and women's dress, casual and footwear: Lowell, acquired at the end of 1992, manufactures and markets women's casual, service and nurses' footwear. athletic footwear. Additionally, Dexter operates 77 retail outlet stores. substantial increase was largely due to the inclusion of Dexter's results for the full year in 1994 as compared to just Revenues during 1994 of $609.4 million were greater than the prior year by $239.2 million (64.6%). This (91.0%) increase in comparative operating profits. Management was pleased with Dexter's 1994 performance and under two months during 1993. Dexter's 1994 operating profits account for most of this segments $36.4 million better results are anticipated during 1995. This optimism results from the fact that recent wholesale price adjustments should help mitigate the effects of prior years increases in Dexter's costs. Additionally, operating efficiencies are anticipated in connection with the start-up of Dexter's new computerized distribution center and from advanced manufacturing technologies. of such increase is related to the acquisition during the second half of 1994 of a chain of 11 retail stores. The retail H. H. Brown accounts for most of the remaining comparative revenue increase for this segment. A portion stores, located in Maryland, Pennsylvania and Virginia, carry H. H. Brown manufactured products as well as those of revenues and a slight decline in operating profits. The decline is largely a result of slightly lower gross margins on sales other shoe manufacturers. H. H. Brown's manufacturing and distribution business results reflect a modest increase in and an increased comparative LIFO charge being somewhat offset by the modest revenue increase. were greater in 1994 than during 1993. The improvement largely arises from the fact that during 1993, unusual charges Lowell's revenues were slightly lower in 1994 as compared to 1993. However, comparative operating profits of $3.8 million were recorded in connection with the implementation of more stringent inventory control procedures. Unitorms of the increase arose as a result of a special program begun during 1994 whereby an agreement was entered into with The uniform segment's revenues increased $29.1 million (23.8%) in 1994 as compared to 1993. Almost 60% the New York City Fire Department to supply fire fighters with safety uniforms and related accessories. The initial contractual arrangement is for a period of three years. The remainder of the comparative revenue increase resulted from increases in this segment's core uniform manufacturing operations. additional margin resulting from the aforementioned revenue increases was substantially offset by a) the incurrence Operating profits for 1994 of $13.5 million were slightly above comparable 1993 operating profits. The of certain unplanned start-up costs relative to the implementation of the New York City Fire Department program; b) costs incurred in connection with the scheduled installation of'a new computer system; and c) problems which have arisen related to certain recent retail store acquisitions. long-tenn. The problems being encountered in connection with the retail store acquisitions are being addressed and Management expects that the program with the New York City Fire Department will be successful in the will hopefully be resolved during 1995. Overall, management is cautiously optimistic that 1995's operating profit will exceed the results of the prior two years both in absolute terms and as a percentage of revenues. 1993 compared to 1992 to 1992. The most significant revenue increase arose in the "shoes" segment where revenues increased $155.3 million Revenues from the non-insurance business segments increased $156.9 million (12.2%) in 1993 as compared (72.3%) over the comparable prior year figures. As more fully described in the preceding section of this discussion, 46

[PAGE 49]

Non-Insurance Business Segments (continued) 1993 compared to 1992 (continued, the acquisition of Lowell (in late 1992) and Dexter (in late 1993) account for a substantial portion of the comparative increase in revenues. With the exception of the "encyclopedias, other reference material" segment, all other reportable five segments in 1993 were $871.1 million vs. $822.2 in 1992. Offsetting the increases attributable to the other non- non-insurance business segmenis experienced increases in comparative revenues in 1993 vs. 1992. Revenues from these reference material" segment. This decline was a result of the continuation of a reduction which began in 1989 in insurance business segments was a reduction in revenues of $47.3 million (19.2%) from the "encyclopedias, other printed encyclopedia sales. (See preceding section regarding comparative 1994 vs. 1993 results for a discussion regarding the decline in World Book unit sales.) segment with a comparative increase of $14.4 million (56.3%) was the major contributor to the comparative increase. Operating profits of $224.8 million during 1993 were $14.9 million (7.1%) greater than in 1992. The "shoes" was able to achieve comparative incrcases largely resulting from the popularity of work shoes and reduced demand In addition to the impact that the acquisitions of Lowell and Dexter had on comparative operating profits, H. H. Brown for athletic shoes. The operating profits of the other reportable segments in the aggregate were relatively unchanged Business Other Than Identified Segments 1094 (dollars in mittions)- 1993. 1992 Revenues $607,4 S550.8 S517.3 Operating profit Minority interest Income taxes 22.1 59.2 $ 55.2 0.7 20.8 $ 54.3 1.2 21.8 1.8 Contribution to net earnings $ 36.4 $ 332 30.7 believes that narrative discussion of the results of the constituent businesses would not yield significant benefit to The above represent aggregate data for businesses that numbered 23 in 1994. Berkshire management investors or others, particularly in view of the relative consistency of the year-to-year aggregate data. Interest Expense average outstanding borrowings under investment agreements increased by approximately $82 million during 1994 as The small increase in interest expense in 1994 as compared to 1993 primarily results from the fact that a reduction in the average interest rate on such borrowings from approximately 6.9% in 1993 to 6.0% in 1994. Interest compared to 1993. Somewhat offsetting the effect on interest expense of the increased average level of borrowings was expense for 1992 includes premiums paid of $16.2 million to redeem term debt and a charge of $6.3 million representing the write-off of deferred financing costs related to an issue of Convertibie Subordinated Debentures which was called for redemption in December 1992. Realized Investment Gain Realized investment gain has been a recurring element in Berkshire's net earnings for many years. The a meaningful effect upon Berkshire's consolidated net earnings. But, the amount of realized investment gain for any recorded when appreciated securities are sold-—tends to fluctuate significantly from period to period, with particulariy in view of the unrealized price appreciation now existing in Berkshire's consolidated investment portfolio. given period has no predictive value, and variations in amount from period to period have no practical analytical value, of' its investment in Capital Cities/ABC, Inc. ("Capital Cities") in connection with that company's offer to buy from During the fourth quarter of 1993, an insurance subsidiary of Berkshire sold ten million common shares its shareholders up to twenty million of its common shares. Prior to the sale and since 1986, Berkshire subsidiaries after-tax gain from this transaction was $297.4 million. orned thirty million shares of Capital Cities or approximately 18% of that company's outstanding stock. Berkshire's 47

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Management's Discussion (continued) Nonrecurring charges and accounting changes tax charge of $268.5 million ($172.6 million after-taxes and minority interests) as result of recognizing an other than As more fully described in Vote 6 to the Consolidated Financial Statements, the Company recorded a pre- was recorded in the fourth quarter of 1994, the charge to shareholders' equity had been recorded in earlier 1994 temporary decline in the value of its investment in USAir Group, Inc. Preferred Stock. While the charge to earnings reporting penods. Standards No. 109 "Accounting for Income Taxes" ("SFAS 109"). The cumulative effect of adopting SFAS 109 on the Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Company's 1993 results was to decrease net earings by about $71 million. Additionally, dunng 1993 a charge of $75.. nillion was recorded as a result of the increase in the Federal corporate income tax rate from 34% to 35%. For tax rates, see Notes 1(k) and 10 to the Consolidated Financial Statements. further description of the accounting change and the charge to earnings resulting from the change in Federal income Liquidity and Capital Resources Berkshire's Consolidated Balance Sheet as of December 31, 1994, reflects continuing capital strength. In to approximately $11.9 billion at December 31, 1994. In that three-year period, realized and unrealized securities gains the past three years, Berkshire shareholders' equity has increased from approximately $7.4 billion at December 31, 1991 about S1.1 billion. increased equity capital by approximately $2.9 billion, and reinvested earnings, other than realized securities gains, were 48

[PAGE 51]

BERKSHIRE HATHAWAY INC. Selected Financial Data for the Past Five Years (dollars in thousands, except per share data) 1994 1993 1992 1991 1990 Revenues: Sales and service revenues Insurance premiums carned ...... ... $ 2,351,918 $ 1,962,862 $ 1,774,436 $ 1,651,134 § 1,580,074 Income from investment in Salomon Inc.. Interest and dividend income 923,180 426,094 354,028 650,726 664,293 364,895 347,293 776,413 591,540 30,058 63,000 63,000 63,000 317,095 Income from finance businesses 24,885 22,226 20,696 19,475 13,498 63,000 Realized investment gain 91,332 346,422 89,937 192,478 33,989 Total revenues $ 3.847,467 $ 3,599,264 $ 2,977,257 $ 3,049,793 $ 2,599,196 Earnings: Before realized investment gain and Realized investment gain cumulative effect of accounting change.. $ 433,659' $ 61,139 402,4032 $ 356,702 347,726 59,559 $ 315,753 124,155 $ 370,745 Cumulative effect of change in accounting 23,348 for income taxes (70,984) Net earnings 494,798 688.121 407.285 $ 439.908 $ 394,093 Earnings per share: Before realized investment gain and Realized investment gain cumulative effect of accounting change.. $368.211 51.91 $348.0312 308.50 $303.29 $1.95 $275.42 108.30 $323.39 Cumulative effect of change in accounting 20.36 for income taxes (61.39) Net earnings $420.12 $595.14 $355.24 $383.72 $343.75 Year-end data: Total assets Borrowings under investment agreements $21,338,182 $19,520,469 $17,131,998 $14,461.902 $10,670,423 Shareholders' equity and other debt (3) ... 810,719 Common shares outstanding. 11,874,882 10,428,374 972,389 1,154,697 8,896,331 1,100,464 7,379,918 1,082,265 5,287,454 Shareholders' equity per in thousands . . . • 1,178 1,178 1,149 1,146 1,146 outstanding share 10.083 _ 8,354 $ 7,745 $ 6.437 s 4,612 ''' Includes a charge of $172.579 ($146. 53/share; representing an other than temporary decline in value of investment in USAur Group, Inc. Preferred Stock. ! Includes a charge of $75.348 ($65.38/share) representing the effect of the change in federal income tax rates on deferred taxes applicable to unrealized appreciation. 1) Excludes borrowings of finance businesses. 49

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BERKSHIRE HATHAWAY INC. SHAREHOLDER-DESIGNATED CONTRIBUTIONS October 14, 1981, the Chairman sent to the shareholders a letter* explaining the program. Portions of that letter The Company has conducted this program of corporate giving during each of the past fourteen years. On in most years, should produce a significant benefit for charities of your choice. "On September 30, 1981 Berkshire received a tax ruling from the U.S. Treasury Department that, he owns "Each Berkshire shareholder — on a basis proportional to the number of shares of Berkshire that name the charity; Berkshire will write the check. The ruling states that there will be no personal tax

• will be able to designate recipients of charitable contributions by our company. You'll

consequences to our shareholders from making such designations. "Thus, our approximately 1500 owners now can exercise a perquisite that, although routinely more widely-held businesses. exercised by the owners in closely-held businesses, is almost exclusively exercised by the managers in input at all from shareholders, in two main categories: "In a widely-held corporation the executives ordinarily arrange all charitable donations, with no (1) Donations considered to benefit the corporation directly in an amount (2) Donations considered to benefit the corporation indirectly through hard-to- roughly commensurate with the cost of the donation; and measure, long-delayed feedback effects of various kinds. charitable donations in the first category. However, the aggregate level of giving in such category has "Tand other Berkshire executives have arranged in the past, as we will arrange in the future, all roughly commensurate direct benefits to Berkshire. been quite low, and very likely will remain quite low, because not many gifts can be shown to produce comfortable with ordinary corporate practice and had no better practice to substitute. What bothers "In the second category, Berkshire's charitable gifts have been virtually nil, because I am not asking and how corporate peers are responding than me about ordinary corporate practice is the way gifts tend to be made based more on who does the activities. Conventionality often overpowers rationality. on an objective evaluation of the donee's of the corporate manager, who usually is heavily influenced by specific social pressures on him. "A common result is the use of the stockholder's money to implement the charitable inclinations of the taxpayer's dollar but embrace enthusiastically their own allocation of the shareholder's dollar. Frequently there is an added incongruity; many corporate managers deplore governmental allocation your personal judgments by writing checks on my bank account for charities of your choice, I feel it "For Berkshire, a different model seems appropriate. Just as I wouldn't want you to implement inappropriate to write checks on your corporate "bank account" for charities of my choice. Your charitable preferences are as good as mine and, for both you and me, funds available to foster own hands. charitable interests in a tax-deductible manner reside largely at the corporate level rather than in our larger public companies. If you and 1 each own 50% of a corporation, out charitable decision making "Under such circumstances, I believe Berkshire should imitate more closely-held companies, not on our available charitable funds. Any balance available after the "operations-related" contributions would be simple. Charities very directly related to the operations of the business would have first claim to our ownership interest. If the manager of our company had some suggestions, we would listen would be divided among various charitable interests of the two of us, on a basis roughly proportional business we probably would behave as if we were a partnership. carefully — but the final decision would be ours. Despite our corporate form, in this aspect of the *Copyright © 1981 By Warren E. Buffett All Rights Reserved 50

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partnership-like behavior in this area.. we operate through a large, fairly widely heid corporation. Our Treasury ruling will allow such "Wherever feasible, 1 believe in maintaining such a partnership frame of mind, even though am pleased that Berkshire donations can become owner-directed. Il is ironic, but pursuant to which they will match gifts made by men employees (and brace yourselt for this one understandable, that a large and growing number of major corporations have charitable policies charitable gifts by owners. I say

• many even match gifts made by directors) but none, to my knowledge, has a plan matching

"understandable" because much of the stock of many large horizons, and that lack a long-term owner's perspective.. corporations is owned on a "revolving door" basis by institutions that have short-term investment "Our own shareholders are a different breed. As I mentioned in the 1979 annual report, at the end of each year more than 98% of our shares are owned by people who were shareholders at the as your manager, 1 intend to acknowledge in all feasible ways. The designated contributions policy is beginning of the year. This long-term commitment to the business reflects an owner mentality which, an example of that intent." The history of contributions made pursuant to this program since its inception follows: Year Specified Amount Percent of per share Eligible* Shares Contributed Amount Charities No. of Participating 1982 1981 S2 1984 1983 S1 95.6% $3 95.8% $ 1,783,655 $ 3,066,501 890,948 704 675 1986 1985 $4 $3 97.2% 96.4% 96.8% $ 3,179,049 1,353 97.1% $ 4,006,260 1,519 1987 S4 97.2% 3,996,820 1.724 1989 1988 $5 97.4% 4,937,574 1,934 $5 97.3% 96.9% $ 5,867,254 4,965,665 2,050 1991 1990 $6 $6 2,319 97.7% $ 5,823,672 2,550 1992 $7 97.0% S 6,772,024 2,600 1994 1993 $10 $8 97.3% $ 7,634,784 2,630 95.7% $ 9.448,370 2,810 $11 $ 10,419,497 3,330 3,110

• Shares registered in street name are not eligible to participate.

have made certain contributions pursuant to local level decisions of operating managers of the businesses. In addition to the shareholder-designated contributions summarized above, Berkshire and its subsidiaries substandard or no tax deductions. In other years Berkshire expects to inform shareholders of the amount per The program may not be conducted in the occasional year, if any, when the contributions would produce share that may be designated, and a reply form will accompany the notice allowing shareholders to respond with shareholders of record reflected in our Registrar's records as of the close of business August 31, 1995, and their designations. If the program is conducted in 1995, the notice will be mailed on or about September 15 to shareholders will be given until November 15 to respond. program. To qualify, shares must be registered with our Registrar on August 31 in the owner's individual Shareholders should note the fact that shares held in street name are not eligible to participare in the name(s) or the name of an owning trust, corporation, partnership or estate, as applicable. 51

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BERKSHIRE HATHAWAY INC. COMBINED FINANCIAL STATEMENTS BUSINESS GROUPS Berkshite's consolidated data is rearranged in the presentations on the following six pages into four categories, corresponding to the way Mr. Buffett and Mr. Munger think about Berkshire's businesses. The presentations may be helpful to readers in making estimates of Berkshire's intrinsic value. The presentations in this section do not conform in all respects to generally accepted accounting principles. Principal departures from GAAP relate to accounting treatment for assets acquired in business acquisitions, although students and practitioners of accounting will recognize others. Opinions of Rerkshire's independent auditors were not solicited for this data. The four-category presentations in no way fell within their purview. 53

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BERKSHIRE HATHAWAY INC. INSURANCE GROUP subsidiaries. The members underwrite multiple lines of principally casualty coverages Berkshire's property/casualty insurance business is conducted by 13 separate for primarily commercial accounts, providing, for example, liability coverages for truck and bus operators, and casually coverages for especially large or unusual risks. The Commercial Casualty Division and the Professional Liability and Special Risk in the states of Colorado and Nebraska provide standard multiple-line Division solicit and underwrite the special large risks. Member companies domiciled property/casualty insurance to primaniy "homestate" residents. A California domiciled credit card issuers nationwide. insurers and reinsurers. This division is currently one of the leading providers in the A Reinsurance Division provides treaty reinsurance to other property/casualty reinsurers). world of property/cafastrophe retrocessional protection (ie., reinsurance for unparalleled nigh levels, significanty higher man normal in the industry. This The Berkshire Hathaway Insurance Group maintains capital strength at strength diferentiates Group members from their competitors. For example, the end statutory surpius. That compares to an industry average premiums-to-surplus Group's net premiums written in 1994 were approximately 7.5% of the Group's year- ratio of about 133% (for 1993). The obvious margins of safety thus provided to negotiated insurance and reinsurance contracts. insureds of the Group are particularly persuasive in marketing of individually Combined financial statements of the Insurance Group - unaudited and not presented on the following page. fully adjusted to conform to Generally Accepted Accounting Principles are 54

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BERKSHIRE HATHAWAY INC. INSURANCE GROUP (dollars in millions) Balance Sheets December 31. Assets 1994 1993 Investments: Fixed maturities at market in 1994 and amortized cost in 1993: Preferred stocks Bonds. $ 1,099.0 Equity securities at market: 410.4 715.9 650.9 Coca-Cola Company Capital Cities/ABC, Inc. 1,208.0 GEICO 4,157.3 Wells Fargo & Company Gillette 1,759.6 1,431.0 Saiomion Inc Other 2,873.6 854.6 673.6 Cash and cash equivalents 14,324.5 Other. Deferred costs 1,368.0 490.6 $ 16,473.5 290.4 Liabilities Losses and loss adjustment expenses Funds held under reinsurance assumed Unearned premiums $ 3,155.9 315.8 Income taxes, principally deferred Accounts payable, accruals and other 233.6 215.8 6,865.6 2,944.5 Equity Minority shareholders* Berkshire shareholders 9.483.0 124.9 $ 16,473.5 9,607.9 Statements of Earnings (dollars in millions) Premiums written Premiums earned Losses and loss expenses Underwriting expenses. Underwriting gain (loss) - pre-tax Total losses and expenses Realized investment gain Net investment income* Other than temporary decline in value of investment Earnings before income taxes in USAir Group, Inc. Preferred Stock Income tax expense Minority interest Net earnings 4.3

• Net investment income is stammarized below:

Interest Dividends $362.4 Investment expenses Equity in net loss of Salomon Inc (31.7) 92.2 $419.4 (8.5) These statements do not conform to GAAP in all respects These statements are unaudited 55

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BERKSHIRE HATHAWAY INC. MANUFACTURING, PUBLISHING AND RETAILING BUSINESSES acijusted to conform to Generally Accepted Accounting Principles - are presented on the following page. The operations wilose Combined financial statements of Berkshire's Manufacturing, Publishing and Retailing businesses - unaudited and not fully data have been combined in these presentations include the following: Operation Product/Service/Activity Adalet Conduit fittings, explosion proof junction boxes, couplings and terminations Blue Chip Stamps Marketing motivational services Borsheim's Retailing fine jewelry Buffalo News Daily and Sunday newspaper Campbell Hausfeld Air compressors, air tools, paining systems and pressure washers Carefree Sun and shade control products and accessories for RVs Cleveland Wood Products Vacuum cleaner brushes Dexter Shoe Companies Dress, casual and athletic shoes Douglas Products Hand-held electric and cordless vacuum cleaners Fechheimer Bros. Co. Uniforms and accessories France Appliance controls, ignition and sign transformers H. H. Brown Shoe Co. Work shoes, boots and casual footwear Halex Zine die cast elecirical fittings K&W Products Automotive compounds Kirby Home cleaning systems Lowell Shoe, inc Women's and nurses' shoes Meriam Pressure and flow measurement devices Nebraska Furniture Mart Retailing home furnishings Northland Fractional horsepower motors Powerwinch Boat winches, windlasses and hoists Precision Steel Producis Steel service center Quikut Cutlery ScottCare Cardiopulmonary rehabilitation and monitoring equipment Scot Labs Cieaning and maintenance chemicals See's Candies Boxed chocolates and other confectionery produets Staht Custom steel service bodies and tool boxes for trucks Wavne Furnace burners; sump, utility and sewage pumps Western Enterprises Compressed gas fittings and regulators Western Plastics Molded plastic components World Book Encyclopedias and other reference materials 56

[PAGE 59]

BERKSHIRE HATHAWAY INC. MANUFACTURING, PUBLISHING AND RETAILING BUSINESSES (dollars in mittions) Balance sneets December 31, Assets 1994) 1993 Cash and cash equivalents Inventories Accounts receivable $ 308.8 77.0 90.4 Other Properties and equipment 219.6 398.2 351.0 275.9 1.033.4 29.8 195.9 S 949.3 36.1 Liabilities Income taxes Accounts payable, accruals and other 293.4 30.5 $ 257.2 Term debt and other borrowings 345.6 21.7 38.5 320.4 24.7 Equity Berkshire shareholders* Minority shareholders 647.7 40.1 35.8 $ 1,033.4 687.8 628.9 593.1 949.3 Statements of Earnings (dollars in millions) 1994 1993 1992 Kevenues: Interest income Sales and service revenues S2,352.0 9.0 S1,962.9 Costs and expenses: 2.361.0 1,970.9 8.0 $1,774.4 .1.781.9 7.5 Costs of products and services sold Interest on debt Selling, general and administrative expenses 1,442.9 578.5 1,172.5 3.7 522.2 1,043.6 Incorne tax expense Earnings from operations before income taxes 2,025.1 3.7 481.5 335.9 1.698.4 4.6 213.6 122.3 103.7 272.5 1.529.7 252.2 Minority interest 4.9 168.8 97.4 Net earnings 208.7 164.3 4.5 154.8 150.6 4.2 Dexter's results of operations only for the period subseguent to the acquisition date. Dexter Shoe Company ("Dexter") was acquired effective November 7, 1993. Accordingly this presentation reflects reflected in these statements, but instead are reflected in the statements of non-operating activities at page 59. Purchase-price accounting adjustments, including goodwill, arising from Berkshire's business acquisitions are not These statements do not conform to GAAr in all respects These statements are unaudited 57

[PAGE 60]

BERKSHIRE HATHAWAY INC. FINANCE BUSINESSES Nebraska make up Berkshire's finance businesses. Until October 1993, Mutual Savings and Loan Association was also included Scott Fetzer Financial Group, Inc., Berkshire Hathaway Credit Corporation and Berkshire Hathaway Life Insurance Co. of substantially by real estate loans, cash and certain other assets of Mutual. in this group of businesses. In October 1993, a federal savings bank assumed Mutual's savings account liabilities, offset (dollars in millions) Balance Sheets December 31. Assets 1994 1993 Cash and cash equivalents Installment and other receivables Fixed maturity investments S 538.9 16.0 $ 37.0 Other Deferred tax assets 173.2 667.1 6.2 179.8 1.5 4.2 Liabilities 735.8 889.7 1.6 Accounts payable, accruals and other Borrowings under investment agreements and other debt 601.6 Annuity reserves . 41.0 31.5 S 772.7 52.1 Equity 674.1 830.2 5.4 Berkshire shareholders' 735.8 61.7 889.7 59.5 Statements of Earnings (collars in millions) Revenues: 1994 1993 1992 Interest and fees on loans and financed receivables Annuity premiums earned Interest and dividends on investrent securities S 37.8 35.4 S 36.0 Expenses: 109.2 5.6 Interest expense General and administrative. Annuity benefits and underwriting expenses 37.7 35.5 13.9 5.6 Income tax expense Earnings from onerations before income taxes 87.1 22.1 7.5 23.2 Net earnings Minority interest 14,6 15.5 7.7 6.4 14.6 14.7 0.8 0.7 These statements do not conform to GAAP in all respects These statements are unaudited 58

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BERKSHIRE HATHAWAY INC. NON-OPERATING ACTIVITIES and expenses that were not assigned to any Berkshire operang group in the unaudite, and not fully GAAP - adjusted group These statements reflect the consolidated financial statement values for assets, liabilities, shareholders' equity, revenues financial statements heretofore presented (pages 53 to 58). Statements of Net Assets (dollars in millions) 1994 December 31. Assets 1993 Investments: Cash and cash equivalents 106.2 $ 358.9 Fixed maturities: Bonds.. Equity securities. Preferred stocks 286.8 113.0 75.8 232.5 81.0 Deferred tax assets Unamortized goodwill and property account adjustments * 520.4 541.8 Other 1,296.5 186.3 8,0 S 1,396.8 174.9 7.7 Liabilities Income taxes .. Accounts payable, accruals and other 67.3 62.2 S 59.4 62.8 Borrowings under investinent agreements and other debt 799.0 928.5 1.082.4 960.2 Equity Berkshire shareholders' Minority shareholders* 345.3 22.7 292.8 21.6 1,296.5 368.0 1,396.8 314.4 Statements of Farnings (dollars in millions) Revenues: 1994 1993 1992 Interest and dividend income Realized investment gain (loss) $ 31.1 Experises: 30,4 (0.7) S 24.3 (9.4) S 58.9 14.9 96.2 37.3 Shareholder-designated contributions Corporate administration 5.0 Interest on debt Amortization of goodwill and property account adjustments 22.5 10.4 94 4.9 4.2 17.1 12.0 7.6 Other (income) expense $9.4 Other than temporary decline in value of investment 1.7 34.0 (2.3) 94.5 (2.0) in USAir Group, Inc. Preferred Stock 7.5 Income tax expense (benefit) Loss before income taxes 106.5 (22.8) (76.1) (68.2) 83.1 116.3 (194.0) 125.88* (20.1) Net loss Minority interest (53.3) (29.0) 8.9 (52 8) (0.5) 5(194.6) 0.6 (26.7) (23.

• Property account adjustments and goodwill arose in accounting for business acquisitions.

** Includes nonrecurring charges of S146.3 million related to adoption ofa new rule regarding the accounting for income taxes: These statements do not conform to GAAP in all respects These statements are unaudited 59

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BERKSHIRE HATHAWAY INC. COMMON STOCK Stock Transfer Agent Transfer Agent and Registrar for the Company's common stock. Correspondence with the Division may be The Bank of Boston Shareholder Services Division, P.O. Box 644, Boston, MA 02102-0644 serves as the Transfer Processing Section, Mail Stop 45-01-05. Certificates should not be mailed to the Company. directed to Investor Relations, Mail Stop 45-02-09. Certificates for re-issue or transfer should be directed to Shareholders owners included nominees holding at least 190,000 shares on behalf of beneficial-but-not-of-record owners. The Company had approximately 8,400 record holders of its common stock at March 7, 1995. Record Management believes that the Company has more than 20,000 beneficial owners. Price Range of Common Stock The following table sets forth the high and low sales prices per share, as reported on the New York Stock The Company's Common Stock is listed for trading on the New York Stock Exchange, trading symbol: BRK. Exchange Composite List during the periods indicated: 1994 First Quarter High Low 1993 Third Quarter Second Quarter $16,900 16,700 $15,150 First Quarter High Low Fourth Quarter 20,800 19,750 16,425 15,400 Second Quarter $13,200 19,200 Third Quarter 16,200 $11,350 Fourth Quarter 17,800 .... 17,800 15,100 16,200 Dividends Berkshire has not declared a cash dividend since 1967. 60

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BERKSHIRE HATHAWAY INC. DIRECTORS WARREN E. BUFFETT, Chairman Chief Executive Officer of Berkshire CHARLES T. MUNGER, Vice Chairman of Berkshire SUSAN T. BUFFETT HOWARD G. BUFFETT, Vice President of Archer Daniels Midland Company, engaged principally in the business of processing and merchandising agricultural commodities. MALCOLM G. CHACE, III WALTER SCOTT, JR., Chairman and Chief Executive Officer of Peter Kiewit Sons, Inc., engaged worldwide in construction, mining, packaging and timberlands. OFFICERS WARREN E. BUFFETT, Chairman and CEO CHARLES T. MUNGER, Vice Chairman ROBERT H. BIRD, Vice Presiden MARC D. HAMBURG, Vice President, Treasurer STANFORD LIPSEY, Vice President DANIEL J. JAKSICH, Controller FORREST N. KRUTTER, Secrelary ROBERT M. FITZSIMMONS, Director of Internal Auditing Director of Taxes JERRY W. HUFTON, MARK D. MILLARD, Director of Financial Assets Two compilations of letters from earlier Annual Reports are available upon request. Single copies are furnished without charge in response to requests received by the Company One is from reports for 1977 through 1986, the other, from reports for 1.987 through 1993. at 3555 Farnam St., Suite 1440, Omaha, NE 68131, (402) 346-1400.

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BERKSHIRE HATHAWAY INC. Executive Offices — 1440 Kiewit Plaza, Omaha, Nebraska 68131 Printed on recycled paper