warren buffet shareholder letter year 2000

8/13/2019 Warren Buffet Shareholder letter Year 2000

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Note: The following table appears in the printed Annual Report on thefacing page of the Chairman's Letter and is referred to in that letter.

Berkshire's Corporate Performance vs. the S&P 500

Annual Percentage Change

Year

in Per!hare "oo# $alue of

"er#shire %&

in !(P )** with

+i,idends -ncluded

%

Relati,e Results %&%

&/0) 1.2 &*.* &1.2

&/00 *.1 %&&.3 1.*

&/03 &&.* 1*./ %&/./

&/02 &/.* &&.* 2.*

&/0/ &0. %2.4 4.0

&/3* &.* 1./ 2.&

&/3& &0.4 &4.0 &.2

&/3 &.3 &2./ .2

&/31 4.3 %&4.2 &/.)

&/34 ).) %0.4 1&./

&/3) &./ 13. %&).1

&/30 )/.1 1.0 1).3

&/33 1&./ %3.4 1/.1

&/32 4.* 0.4 &3.0

&/3/ 1).3 &2. &3.)

&/2* &/.1 1.1 %&1.*

&/2& 1&.4 %).* 10.4


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&/2 4*.* &.4 &2.0

&/21 1.1 .4 /./

&/24 &1.0 0.& 3.)

&/2) 42. 1&.0 &0.0

&/20 0.& &2.0 3.)

&/23 &/.) ).& &4.4

&/22 *.& &0.0 1.)

&/2/ 44.4 1&.3 &.3

&//* 3.4 %1.& &*.)

&//& 1/.0 1*.) /.&

&// *.1 3.0 &.3

&//1 &4.1 &*.& 4.

&//4 &1./ &.1 &.0

&//) 41.& 13.0 ).)

&//0 1&.2 1.* 2.2

&//3 14.& 11.4 .3

&//2 42.1 2.0 &/.3

&/// .) &.* %*.)

*** 0.) %/.& &).0

A,erage Annual 5ain

&/0)***

1.06 &&.26 &&.26

7,erall 5ain &/04

***

*382&6 )81216 *84126

Notes:+ata are for calendar 9ears with these eceptions: &/0) and &/008 9ear ended /;1*< &/038 &)months ended &;1&.


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!tarting in &/3/8 accounting rules re=uired insurance companies to ,alue the e=uit9 securitiesthe9 hold at mar#et rather than at the lower of cost or mar#et8 which was pre,iousl9 there=uirement. -n this table8 "er#shire's results through &/32 ha,e been restated to conform tothe changed rules. -n all other respects8 the results are calculated using the numbers originall9reported.

The !(P )** numbers are pre-taxwhereas the "er#shire numbers are after-tax. -f acorporation such as "er#shire were simpl9 to ha,e owned the !(P )** and accrued theappropriate taes8 its results would ha,e lagged the !(P )** in 9ears when that inde showeda positi,e return8 but would ha,e eceeded the !(P in 9ears when the inde showed anegati,e return. 7,er the 9ears8 the ta costs would ha,e caused the aggregate lag to besubstantial.

BERKSHRE H!"H!#!$ %C.

"o the Sharehoers of Berkshire Hatha(a) nc.*

7ur gain in net worth during *** was >1./0 billion8 which increased the pershareboo# ,alue of both our Class A and Class " stoc# b9 0.)6. 7,er the last 10 9ears%that is8 since present management too# o,er pershare boo# ,alue has grown from>&/ to >4*8448 a gain of 1.06 compounded annuall9.?

? All figures used in this report appl9 to "er#shire's A shares8 the successor to theonl9 stoc# that the compan9 had outstanding before &//0. The " shares ha,e aneconomic interest e=ual to &;1*th that of the A.

7,erall8 we had a decent 9ear8 our boo#,alue gain ha,ing outpaced theperformance of the !(P )**. And8 though this @udgment is necessaril9 sub@ecti,e8 webelie,e "er#shires gain in pershare intrinsic ,alue moderatel9 eceeded its gain inboo# ,alue. %-ntrinsic ,alue8 as well as other #e9 in,estment and accounting terms andconcepts8 are eplained in our 7wners Banual on pages )/00. -ntrinsic ,alue isdiscussed on page 04.

urthermore8 we completed two significant ac=uisitions that we negotiated in &///and initiated si more. All told8 these purchases ha,e cost us about >2 billion8 with/36 of that amount paid in cash and 16 in stoc#. The eight businesses we,eac=uired ha,e aggregate sales of about >&1 billion and emplo9 )28*** people. !till8we incurred no debt in ma#ing these purchases8 and our shares outstanding ha,eincreased onl9 &;1of &6. "etter 9et8 we remain awash in li=uid assets and are botheager and read9 for e,en larger ac=uisitions.

- will detail our purchases in the net section of the report. "ut - will tell 9ou nowthat we ha,e embraced the &stcentur9 b9 entering such cuttingedge industries as

bric#8 carpet8 insulation and paint. Tr9 to control 9our ecitement.

7n the minus side8 polic9holder growth at 5D-C7 slowed to a halt as the 9ear

progressed. -t has become much more epensi,e to obtain new business. - told 9ou


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last 9ear that we would get our mone9s worth from steppedup ad,ertising at 5D-C7in ***8 but - was wrong. Eell eamine the reasons later in the report.

Another negati,e which has persisted for se,eral 9ears is that we see our

e=uit9 portfolio as onl9 mildl9 attracti,e. Ee own stoc#s of some ecellent

businesses8 but most of our holdings are full9 priced and are unli#el9 to deli,er morethan moderate returns in the future. Eere not alone in facing this problem: The longterm prospect for e=uities in general is far from eciting.

inall98 there is the negati,e that recurs annuall9: Charlie Bunger8 "er#shires$ice Chairman and m9 partner8 and - are a 9ear older than when we last reported to9ou. Bitigating this ad,erse de,elopment is the indisputable fact that the age of 9our

top managers is increasing at a considerabl9 lower rate percentage-wisethan is

the case at almost all other ma@or corporations. "etter 9et8 this differential will widenin the future.

Charlie and - continue to aim at increasing "er#shires pershare ,alue at a ratethat8 o,er time8 will modestl9 eceed the gain from owning the !(P )**. As the tableon the facing page shows8 a small annual ad,antage in our fa,or can8 if sustained8

produce an an9thingbutsmall longterm ad,antage. To reach our goal we will needto add a few good businesses to "er#shires stable each 9ear8 ha,e the businesses weown generall9 gain in ,alue8 and a,oid an9 material increase in our outstandingshares. Ee are confident about meeting the last two ob@ecti,es< the first will re=uiresome luc#.

-ts appropriate here to than# two groups that made m9 @ob both eas9 and fun last

9ear

@ust as the9 do e,er9 9ear. irst8 our operating managers continue to run theirbusinesses in splendid fashion8 which allows me to spend m9 time allocating capitalrather than super,ising them. %- wouldnt be good at that an9wa9.

7ur managers are a ,er9 special breed. At most large companies8 the trul9 talenteddi,isional managers seldom ha,e the @ob the9 reall9 want. -nstead the9 9earn to

become CD7s8 either at their present emplo9er or elsewhere. -ndeed8 if the9 sta9 put8the9 and their colleagues are li#el9 to feel the9 ha,e failed.

At "er#shire8 our allstars ha,e exactlythe @obs the9 want8 ones that the9 hope andepect to #eep throughout their business lifetimes. The9 therefore concentrate solel9

on maimiFing the longterm ,alue of the businesses that the9 GownG and lo,e. -f thebusinesses succeed8 the9 ha,e succeeded. And the9 stic# with us: -n our last 10 9ears8"er#shire has ne,er had a manager of a significant subsidiar9 ,oluntaril9 lea,e to @oinanother business.

The other group to which - owe enormous than#s is the homeoffice staff. After theeight ac=uisitions more than doubled our worldwide wor#force to about &&8***8Charlie and - went soft last 9ear and added one more person at head=uarters. %Charlie8

bless him8 ne,er lets me forget "en ran#lins ad,ice: GA small lea# can sin# a greatship.G Now we ha,e &1.2 people.

This tin9 band wor#s miracles. -n *** it handled all of the details connected withour eight ac=uisitions8 processed etensi,e regulator9 and ta filings %our ta return


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co,ers 482/0 pages8 smoothl9 produced an annual meeting to which )8*** tic#etswere issued8 and accuratel9 dispensed chec#s to 1800* charities designated b9 ourshareholders. -n addition8 the group dealt with all the routine tas#s ser,ed up b9 acompan9 with a re,enue runrate of >4* billion and more than 1**8*** owners. And8to add to all of this8 the other &.2 are a delight to be around.

- should pa9 to ha,e m9 @ob.

!c+,isitions of 000

7ur ac=uisition techni=ue at "er#shire is simplicit9 itself: Ee answer the phone.-m also glad to report that it rings a bit more often now8 because owners and;ormanagers increasingl9 wish to @oin their companies with "er#shire. 7ur ac=uisitioncriteria are set forth on page 18 and the number to call is 4*140&4**.

Let me tell 9ou a bit about the businesses we ha,e purchased during the past &4

months8 starting with the two transactions that were initiated in &///8 but closed in***. %This list ecludes some smaller purchases that were made b9 the managers ofour subsidiaries and that8 in most cases8 will be integrated into their operations.

- described the first purchase 306 of i!merican Ener/)in last

9ears report. "ecause of regulator9 constraints on our ,oting pri,ileges8 weperform onl9 a GonelineG consolidation of BidAmericans earnings ande=uit9 in our financial statements. -f we instead full9 consolidated thecompan9s figures8 our re,enues in *** would ha,e been >) billion greaterthan we reported8 though net income would remain the same.

7n No,ember 18 &///8 - recei,ed a onepage fa from "ruce Cort thatappended a WashingtonPostarticle describing an aborted bu9out of CR"B,siness Services. +espite his name8 "ruce has no connection with C7RT.Rather8 he is an airplane bro#er who had sold "er#shire a @et in &/20 and who8

before the fa8 had not been in touch with me for about ten 9ears.

- #new nothing about C7RT8 but - immediatel9 printed out its !DC filings andli#ed what - saw. That same da9 - told "ruce - had a possible interest andas#ed him to arrange a meeting with Paul Arnold8 C7RTs CD7. Paul and -got together on No,ember /8 and - #new at once that we had the rightingredients for a purchase: a fine though unglamorous business8 an

outstanding manager8 and a price %going b9 that on the failed deal that madesense.

7perating out of &&3 showrooms8 C7RT is the national leader in GrenttorentGfurniture8 primaril9 used in offices but also b9 temporar9 occupants ofapartments. This business8 it should be noted8 has no similarit9 to GrenttoownG operations8 which usuall9 in,ol,e the sale of home furnishings andelectronics to people ha,ing limited income and poor credit.

Ee =uic#l9 purchased C7RT for Eesco8 our 2*6owned subsidiar98 pa9ingabout >120 million in cash. You will find more details about C7RTs

operations in Eescos &/// and *** annual reports. "oth Charlie and - en@o9


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wor#ing with Paul8 and C7RT loo#s li#e a good bet to beat our originalepectations.

Darl9 last 9ear8 Ron erguson of 5eneral Re put me in contact with "ob

"err98 whose famil9 had owned 1.S. 2ia3iit)for 4/ 9ears. This insurer8

along with two sister companies8 is a mediumsiFed8 highl9respected writer ofunusual ris#s Gecess and surplus linesG in insurance @argon. After "ob and

- got in touch8 we agreed b9 phone on a halfstoc#8 halfcash deal.

-n recent 9ears8 Tom Nerne9 has managed the operation for the "err9 famil9and has achie,ed a rare combination of ecellent growth and unusual

profitabilit9. Tom is a powerhouse in other wa9s as well. -n addition to ha,ingfour adopted children %two from Russia8 he has an etended famil9: thePhiladelphia "elles8 a 9oungteen girls bas#etball team that Tom coaches. Theteam had a 04 record last 9ear and finished second in the AAH nationaltournament.

ew propert9casualt9 companies are outstanding businesses. Ee ha,e farmore than our share8 and H.!. Liabilit9 adds luster to the collection.

Ben Bri/e 4e(eerwas another purchase we made b9 phone8 prior to an9

facetoface meeting between me and the management. Dd "ridge8 who withhis cousin8 Ion8 manages this 0)store Eest Coast retailer8 is a friend of"arnett JelFberg8 from whom we bought JelFberg +iamonds in &//). Hponlearning that the "ridge famil9 proposed to sell its compan98 "arnett ga,e"er#shire a strong recommendation. Dd then called and eplained his business

to me8 also sending some figures8 and we made a deal8 again half for cash andhalf for stoc#.

Dd and Ion are fourth generation ownermanagers of a business started 2/

9ears ago in !eattle. "oth the business and the famil9 including Jerb and

"ob8 the fathers of Ion and Dd en@o9 etraordinar9 reputations. !amestore

sales ha,e increased b9 /68 &&68 &168 &*68 &68 &6 and 36 o,er the pastse,en 9ears8 a trul9 remar#able record.

-t was ,ital to the famil9 that the compan9 operate in the future as in the past.No one wanted another @ewelr9 chain to come in and decimate the

organiFation with ideas about s9nerg9 and cost sa,ing %which8 though the9would ne,er wor#8 were certain to be tried. - told Dd and Ion that the9 would

be in charge8 and the9 #new - could be belie,ed: After all8 its ob,ious that9our Chairman would be a disaster at actuall9 running a store or selling

@ewelr9 %though there are members of his famil9 who ha,e earned blac# beltsas purchasers.

-n their t9picall9 class9 wa98 the "ridges allocated a substantial portion of theproceeds from their sale to the hundreds of cowor#ers who had helped thecompan9 achie,e its success. Eere proud to be associated with both thefamil9 and the compan9.


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-n Iul9 we ac=uired 4,stin n,stries8 the leading ma#er of Eestern boots

including the Iustin8 Ton9 Lama8 Nocona8 and Chippewa brands and the

premier producer of bric# in Teas and fi,e neighboring states.

Jere again8 our ac=uisition in,ol,ed serendipit9. 7n Ba9 4th8 - recei,ed a fa

from Bar# Iones8 a stranger to me8 proposing that "er#shire @oin a group toac=uire an unnamed compan9. - faed him bac#8 eplaining that with rareeceptions we dont in,est with others8 but would happil9 pa9 him acommission if he sent details and we later made a purchase. Je replied that theGm9ster9 compan9G was Iustin. - then went to ort Eorth to meet Iohn Roach8chairman of the compan9 and Iohn Iustin8 who had built the business and wasits ma@or shareholder. !oon after8 we bought Iustin for >)3* million in cash.

Iohn Iustin lo,ed Iustin -ndustries but had been forced to retire because ofse,ere health problems %which sadl9 led to his death in late ebruar9. Iohn

was a class act

as a citiFen8 businessman and human being. ortunatel98 hehad groomed two outstanding managers8 Jarrold Belton at Acme and Rand9Eatson at Iustin "oot8 each of whom runs his compan9 autonomousl9.

Acme8 the larger of the two operations8 produces more than one billion bric#sper 9ear at its plants8 about &&.36 of the industr9s national output. Thebric# business8 howe,er8 is necessaril9 regional8 and in its territor9 Acmeen@o9s un=uestioned leadership. Ehen Teans are as#ed to name a brand of

bric#8 3)6 respond Acme8 compared to &06 for the runnerup. %"efore ourpurchase8 - couldnt ha,e named a brand of bric#. Could 9ou ha,eK Thisbrand recognition is not onl9 due to Acmes product =ualit98 but also reflects

man9 decades of etraordinar9 communit9 ser,ice b9 both the compan9 andIohn Iustin.

- cant resist pointing out that "er#shire whose top management has long

been mired in the &/ thcentur9 is now one of the ,er9 few authentic Gclic#s

andbric#sG businesses around. Ee went into *** with 5D-C7 doingsignificant business on the -nternet8 and then we added Acme. You can bet thismo,e b9 "er#shire is ma#ing themsweatin !ilicon $alle9.

-n Iune8 "ob !haw8 CD7 of Sha( n,stries8 the worlds largest carpet

manufacturer8 came to see me with his partner8 Iulian !aul8 and the CD7 of asecond compan9 with which !haw was mulling a merger. The potential

partner8 howe,er8 faced huge asbestos liabilities from past acti,ities8 and an9deal depended on these being eliminated through insurance.

The eecuti,es ,isiting me wanted "er#shire to pro,ide a polic9 that wouldpa9 allfuture asbestos costs. - eplained that though we could write an

eceptionall9 large polic9 far larger than an9 other insurer would e,er thin#

of offering we would ne,er issue a polic9 that lac#ed a cap.

"ob and Iulian decided that if we didnt want to bet the ranch on the etent of

the ac=uirees liabilit98 neither did the9. !o their deal died. "ut m9 interest in!haw was spar#ed8 and a few months later Charlie and - met with "ob to wor#


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out a purchase b9 "er#shire. A #e9 feature of the deal was that both "ob andIulian were to continue owning at least )6 of !haw. This lea,es us associatedwith the best in the business as shown b9 "ob and Iulians record: Dach built alarge8 successful carpet business before @oining forces in &//2.

!haw has annual sales of about >4 billion8 and we own 23.16 of the compan9.Lea,ing aside our insurance operation8 !haw is b9 far our largest business.

Now8 if people wal# all o,er us8 we wont mind.

-n Iul98 "ob Bundheim8 a director of Benamin oore Paint8 called to as# if

"er#shire might be interested in ac=uiring it. - #new "ob from !alomon8where he was general counsel during some difficult times8 and held him in,er9 high regard. !o m9 answer was GTell me more.G

-n late August8 Charlie and - met with Richard Roob and Y,an +upu98 pastand present CD7s of "en@amin Boore. Ee li#ed them< we li#ed the business& billion cash offer on the spot. -n 7ctober8 their boardappro,ed the transaction8 and we completed it in +ecember. "en@amin Boorehas been ma#ing paint for &&3 9ears and has thousands of independent dealersthat are a ,ital asset to its business. Ba#e sure 9ou specif9 our product for9our net paint @ob.

inall98 in late +ecember8 we agreed to bu9 4ohns anvie Corp.for about

>&.2 billion. This compan9s incredible od9sse9 o,er the last few decades

too multifaceted to be chronicled here was shaped b9 its long histor9 as a

manufacturer of asbestos products. The muchpubliciFed health problems that

affected man9 people eposed to asbestos led to IBs declaring ban#ruptc9 in&/2.

!ubse=uentl98 the ban#ruptc9 court established a trust for ,ictims8 the ma@orasset of which was a controlling interest in IB. The trust8 which sensibl9wanted to di,ersif9 its assets8 agreed last Iune to sell the business to an L"7

bu9er. -n the end8 though8 the L"7 group was unable to obtain financing.

Conse=uentl98 the deal was called off on rida98 +ecember 2th. The followingBonda98 Charlie and - called "ob elise8 chairman of the trust8 and made anallcash offer with no financing contingencies. The net da9 the trustees ,oted

tentati,el9 to accept our offer8 and a wee# later we signed a contract.

IB is the nations leading producer of commercial and industrial insulationand also has ma@or positions in roofing s9stems and a ,ariet9 of engineered

products. The compan9s sales eceed > billion and the business has earnedgood8 if c9clical8 returns. Ierr9 Jenr98 IBs CD78 had announced hisretirement plans a 9ear ago8 but -m happ9 to report that Charlie and - ha,econ,inced him to stic# around.

? ? ? ? ? ? ? ? ? ? ? ?

Two economic factors probabl9 contributed to the rush of ac=uisition acti,it9 weeperienced last 9ear. irst8 man9 managers and owners foresaw nearterm


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slowdowns in their businesses and8 in fact8 we purchased se,eral companies whose

earnings will almost certainl9 decline this 9ear from pea#s the9 reached in &/// or***. The declines ma#e no difference to us8 gi,en that we epect all of our

businesses to now and then ha,e ups and downs. %7nl9 in the sales presentations ofin,estment ban#s do earnings mo,e fore,er upward. Ee dont care about the bumps&843* > 281/

**8***8***

The CocaCola Compan9 &8// &8&22

/08***8*** The 5illette Compan9 0** 18402

&833830) The Eashington Post Compan9 && &8*00

))8*3&812* Eells argo ( Compan9 1&/ 18*03

7thers 083*1

/8)*&

Total Common !toc#s >&*84* >1380&/

OOOOOO OOOOOO

-n ***8 we sold nearl9 all of our reddie Bac and annie Bae shares8 established&)6 positions in se,eral midsiFed companies8 bought the high9ield bonds of a few

issuers %,er9 few the categor9 is not labeled @un# without reason and added to our

holdings of highgrade8 mortgagebac#ed securities. There are no GbargainsG amongour current holdings: Eere content with what we own but far from ecited b9 it.

Ban9 people assume that mar#etable securities are "er#shires first choice whenallocating capital8 but thats not true: D,er since we first published our economic

principles in &/218 we ha,e consistentl9 stated that we would rather purchasebusinesses than stoc#s. %!ee number 4 on page 0*. 7ne reason for that preference is

personal8 in that - lo,e wor#ing with our managers. The9 are highgrade8 talented andlo9al. And8 fran#l98 - find their business beha,ior to be more rational and owneroriented than that pre,ailing at man9 public companies.

"ut theres also a powerful financial reason behind the preference8 and that has todo with taes. The ta code ma#es "er#shires owning 2*6 or more of a business farmore profitable for us8 proportionatel98 than our owning a smaller share. Ehen acompan9 we own all of earns >& million after ta8 the entire amount inures to our

benefit. -f the >& million is upstreamed to "er#shire8 we owe no ta on the di,idend.

And8 if the earnings are retained and we were to sell the subsidiar9 not li#el9 at

"er#shire for >& million more than we paid for it8 we would owe no capital gains

ta. Thats because our Gta costG upon sale would include both what we paid for thebusiness and all earnings it subse=uentl9 retained.


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Contrast that situation to what happens when we own an in,estment in amar#etable securit9. There8 if we own a &*6 sta#e in a business earning >&* millionafter ta8 our >& million share of the earnings is sub@ect to a&&itionalstate and federaltaes of %& about >&4*8*** if it is distributed to us %our ta rate on most di,idends is&46< or % no less than >1)*8*** if the >& million is retained and subse=uentl9

captured b9 us in the form of a capital gain %on which our ta rate is usuall9 about1)68 though it sometimes approaches 4*6. Ee ma9 defer pa9ing the >1)*8*** b9not immediatel9 realiFing our gain8 but e,entuall9 we must pa9 the ta. -n effect8 thego,ernment is our GpartnerG twice when we own part of a business through a stoc#in,estment8 but onl9 once when we own at least 2*6.

Lea,ing aside ta factors8 the formula we use for e,aluating stoc#s and businessesis identical. -ndeed8 the formula for ,aluing allassets that are purchased for financialgain has been unchanged since it was first laid out b9 a ,er9 smart man in about 0**".C. %though he wasnt smart enough to #now it was 0** ".C..

The oracle was Aesop and his enduring8 though somewhat incomplete8 in,estmentinsight was Ga bird in the hand is worth two in the bush.G To flesh out this principle89ou must answer onl9 three =uestions. Jow certain are 9ou that there are indeed birdsin the bushK Ehen will the9 emerge and how man9 will there beK Ehat is the ris#free interest rate %which we consider to be the 9ield on longterm H.!. bondsK -f 9ou

can answer these three =uestions8 9ou will #now the maimum ,alue of the bush

and the maimum number of the birds 9ou now possess that should be offered for it.And8 of course8 dont literall9 thin# birds. Thin# dollars.

Aesops in,estment aiom8 thus epanded and con,erted into dollars8 is

immutable. -t applies to outla9s for farms8 oil ro9alties8 bonds8 stoc#s8 lotter9 tic#ets8and manufacturing plants. And neither the ad,ent of the steam engine8 the harnessing

of electricit9 nor the creation of the automobile changed the formula one iota nor

will the -nternet. Iust insert the correct numbers8 and 9ou can ran# the attracti,enessof all possible uses of capital throughout the uni,erse.

Common 9ardstic#s such as di,idend 9ield8 the ratio of price to earnings or to boo#,alue8 and e,en growth rates ha,e nothingto do with ,aluation ecept to the etentthe9 pro,ide clues to the amount and timing of cash flows into and from the business.-ndeed8 growth can destro9 ,alue if it re=uires cash inputs in the earl9 9ears of a

pro@ect or enterprise that eceed the discounted ,alue of the cash that those assets will

generate in later 9ears. Bar#et commentators and in,estment managers who glibl9refer to GgrowthG and G,alueG st9les as contrasting approaches to in,estment are

displa9ing their ignorance8 not their sophistication. 5rowth is simpl9 a component

usuall9 a plus8 sometimes a minus in the ,alue e=uation.

Alas8 though Aesops proposition and the third ,ariable that is8 interest rates

are simple8 plugging in numbers for the other two ,ariables is a difficult tas#. Hsingprecise numbers is8 in fact8 foolish< wor#ing with a range of possibilities is the betterapproach.

Hsuall98 the range must be so wide that no useful conclusion can be reached.7ccasionall98 though8 e,en ,er9 conser,ati,e estimates about the future emergence of


19/31

birds re,eal that the price =uoted is startlingl9 low in relation to ,alue. %Lets call this

phenomenon the -"T -nefficient "ush Theor9. To be sure8 an in,estor needs some

general understanding of business economics as well as the abilit9 to thin#independentl9 to reach a wellfounded positi,e conclusion. "ut the in,estor does notneed brilliance nor blinding insights.

At the other etreme8 there are man9 times when the mostbrilliant of in,estorscant muster a con,iction about the birds to emerge8 not e,en when a ,er9 broad rangeof estimates is emplo9ed. This #ind of uncertaint9 fre=uentl9 occurs when new

businesses and rapidl9 changing industries are under eamination. -n cases of thissort8 anycapital commitment must be labeled speculati,e.

Now8 speculation in which the focus is not on what an asset will produce but

rather on what the net fellow will pa9 for it is neither illegal8 immoral nor un

American. "ut it is not a game in which Charlie and - wish to pla9. Ee bring nothing

to the part98 so wh9 should we epect to ta#e an9thing homeK

The line separating in,estment and speculation8 which is ne,er bright and clear8becomes blurred still further when most mar#et participants ha,e recentl9 en@o9edtriumphs. Nothing sedates rationalit9 li#e large doses of effortless mone9. After ahead9 eperience of that #ind8 normall9 sensible people drift into beha,ior a#in to that

of Cinderella at the ball. The9 #now that o,ersta9ing the festi,ities that is8

continuing to speculate in companies that ha,e gigantic ,aluations relati,e to the cash

the9 are li#el9 to generate in the future will e,entuall9 bring on pump#ins and

mice. "ut the9 ne,ertheless hate to miss a single minute of what is one hellu,a part9.Therefore8 the gidd9 participants all plan to lea,e @ust seconds before midnight.

Theres a problem8 though: The9 are dancing in a room in which the cloc#s ha,e nohands.

Last 9ear8 we commented on the euberance and8 9es8 it was irrational that

pre,ailed8 noting that in,estor epectations had grown to be se,eral multiples ofprobable returns. 7ne piece of e,idence came from a Paine Eebber5allup sur,e9 ofin,estors conducted in +ecember &///8 in which the participants were as#ed theiropinion about the annual returns in,estors could epect to realiFe o,er the decadeahead. Their answers a,eraged &/6. That8 for sure8 was an irrational epectation: orAmerican business as a whole8 there couldnt possibl9 be enough birds in the **/

bush to deli,er such a return.

ar more irrational still were the huge ,aluations that mar#et participants werethen putting on businesses almost certain to end up being of modest or no ,alue. Yetin,estors8 mesmeriFed b9 soaring stoc# prices and ignoring all else8 piled into theseenterprises. -t was as if some ,irus8 racing wildl9 among in,estment professionals aswell as amateurs8 induced hallucinations in which the ,alues of stoc#s in certainsectors became decoupled from the ,alues of the businesses that underla9 them.

This surreal scene was accompanied b9 much loose tal# about G,alue creation.GEe readil9 ac#nowledge that there has been a huge amount of true ,alue created in

the past decade b9 new or 9oung businesses8 and that there is much more to come. "ut


20/31

,alue is destro9ed8 not created8 b9 an9 business that loses mone9 o,er its lifetime8 nomatter how high its interim ,aluation ma9 get.

Ehat actuall9 occurs in these cases is wealth transfer8 often on a massi,e scale. "9shamelessl9 merchandising birdless bushes8 promoters ha,e in recent 9ears mo,ed

billions of dollars from the poc#ets of the public to their own purses %and to those oftheir friends and associates. The fact is that a bubble mar#et has allowed the creationof bubble companies8 entities designed more with an e9e to ma#ing mone9 offin,estors rather thanforthem. Too often8 an -P78 not profits8 was the primar9 goal ofa compan9s promoters. At bottom8 the Gbusiness modelG for these companies has

been the oldfashioned chain letter8 for which man9 feehungr9 in,estment ban#ersacted as eager postmen.

"ut a pin lies in wait for e,er9 bubble. And when the two e,entuall9 meet8 a new

wa,e of in,estors learns some ,er9 old lessons: irst8 man9 in Eall !treet a

communit9 in which =ualit9 control is not priFed will sell in,estors an9thing the9

will bu9. !econd8 speculation is most dangerous when it loo#s easiest.

At "er#shire8 we ma#e noattempt to pic# the few winners that will emerge froman ocean of unpro,en enterprises. Eere not smart enough to do that8 and we #now it.-nstead8 we tr9 to appl9 Aesops 80**9earold e=uation to opportunities in which weha,e reasonable confidence as to how man9 birds are in the bush and when the9 willemerge %a formulation that m9 grandsons would probabl9 update to GA girl in acon,ertible is worth fi,e in the phoneboo#.G. 7b,iousl98 we can ne,er precisel9

predict the timing of cash flows in and out of a business or their eact amount. Eetr98 therefore8 to #eep our estimates conser,ati,e and to focus on industries where

business surprises are unli#el9 to wrea# ha,oc on owners. D,en so8 we ma#e man9mista#es: -m the fellow8 remember8 who thought he understood the future economicsof trading stamps8 tetiles8 shoes and secondtier department stores.

Latel98 the most promising GbushesG ha,e been negotiated transactions for entirebusinesses8 and that pleases us. You should clearl9 understand8 howe,er8 that theseac=uisitions will at best pro,ide us onl9 reasonable returns. Reall9 @uic9 results fromnegotiated deals can be anticipated onl9 when capital mar#ets are se,erel9constrained and the whole business world is pessimistic. Ee are &2* degrees fromthat point.

So,rces of Reporte Earnin/s

The table that follows shows the main sources of "er#shire's reported earnings. -nthis presentation8 purchaseaccounting ad@ustments are not assigned to the specific

businesses to which the9 appl98 but are instead aggregated and shown separatel9. Thisprocedure lets 9ou ,iew the earnings of our businesses as the9 would ha,e beenreported had we not purchased them. or the reasons discussed on page 0)8 this formof presentation seems to us to be more useful to in,estors and managers than oneutiliFing generall9 accepted accounting principles %5AAP8 which re=uire purchase

premiums to be charged off businessb9business. The total net earnings we show inthe table are8 of course8 identical to the 5AAP total in our audited financial

statements.


21/31

%in millions'

Pre-Tax (arnings

)er$shire*s "hare

of +et (arnings%after taxes an&

minority interests'

2!!! 1,,, 2!!! 1,,,

7perating Darnings:

-nsurance 5roup:

Hnderwriting Reinsurance >%&81//

>%&844*

>%2// >%/3

Hnderwriting 5D-C7 %4 4 %&40 &0

Hnderwriting 7ther Primar9 12 4 &4

Net -n,estment -ncome 8343 842 &8// &8304

inance and inancial Products"usiness

))0 &) 10* 20

light !er,ices &1 ) &0 &1

BidAmerican Dnerg9 %306owned

&/3 &*/

Retail 7perations &3) &1* &*4 33

!cott etFer %ecluding financeoperation

& &43 2* /

7ther "usinesses ) &* &14 &1&

PurchaseAccountingAd@ustments

%22& %31/ %241 %042

Corporate -nterest Dpense %/ %&*/ %0& %3*


22/31


23/31

depreciation charge simpl9 to sta9 in the same economic place and then spend

additional sums to grow. And growth is in prospect for !- as far as the e9e can see.

D,en faster growth awaits DIA %whose fractionalownership program is calledNetIetsQ. Rich !antulli is the d9namo behind this business.

Last 9ear - told 9ou that DIAs recurring re,enue from monthl9 management feesand hourl9 usage grew b9 406 in &///. -n *** the growth was 4/6. - also told 9outhat this was a lowmargin business8 in which sur,i,ors will be few. Bargins wereindeed slim at DIA last 9ear8 in part because of the ma@or costs we are incurring inde,eloping our business in Durope.

Regardless of the cost8 9ou can be sure that DIAs spending on safet9 will bewhate,er is needed. 7b,iousl98 we would follow this polic9 under an9 circumstances8

but theres some selfinterest here as well: -8 m9 wife8 m9 children8 m9 sisters8 m9 /49earold aunt8 all but one of our directors8 and at least nine "er#shire managersregularl9 fl9 in the NetIets program. 5i,en that cargo8 - applaud Richs insistence onunusuall9 high amounts of pilot training %an a,erage of 1 da9s a 9ear. -n addition8our pilots cement their s#ills b9 fl9ing 2** or so hours a 9ear. inall98 each flies onl9one model of aircraft8 which means our crews do no switching around among planeswith different coc#pit and flight characteristics.

DIAs business continues to be constrained b9 the a,ailabilit9 of new aircraft. !till8our customers will ta#e deli,er9 of more than )* new @ets in **&8 36 of worldoutput. Ee are confident we will remain the world leader in fractional ownership8 inrespect to number of planes fl9ing8 =ualit9 of ser,ice8 and standards of safet9.

? ? ? ? ? ? ? ? ? ?

Additional information about our ,arious businesses is gi,en on pages 4)28where 9ou will also find our segment earnings reported on a 5AAP basis. -n addition8on pages 03318 we ha,e rearranged "er#shires financial data into four segments on anon5AAP basis8 a presentation that corresponds to the wa9 Charlie and - thin# aboutthe compan9.

2ook-"hro,/h Earnin/s

Reported earnings are an inade=uate measure of economic progress at "er#shire8in part because the numbers shown in the table on page &) include onl9 the di,idends

we recei,e from in,estees though these di,idends t9picall9 represent onl9 a small

fraction of the earnings attributable to our ownership. To depict something closer toeconomic realit9 at "er#shire than reported earnings8 though8 we emplo9 the conceptof Gloo#throughG earnings. As we calculate these8 the9 consist of: %& the operatingearnings reported on page &)< plus< % our share of the retained operating earnings ofma@or in,estees that8 under 5AAP accounting8 are not reflected in our profits8 less< %1an allowance for the ta that would be paid b9 "er#shire if these retained earnings ofin,estees had instead been distributed to us. Ehen tabulating Goperating earningsGhere8 we eclude purchaseaccounting ad@ustments as well as capital gains and other

ma@or nonrecurring items.


24/31

The following table sets forth our *** loo#through earnings8 though - warn 9outhat the figures can be no more than approimate8 since the9 are based on a number of

@udgment calls. %The di,idends paid to us b9 these in,estees ha,e been included in theoperating earnings itemiFed on page &)8 mostl9 under G-nsurance 5roup: Net-n,estment -ncome.G

"er#shire's Ba@or-n,estees

"er#shire'sApproimate

7wnership at Yearend%&

"er#shire's !hare ofHndistributed

7perating Darnings %inmillions%

American DpressCompan9 &&.46 >0)

The CocaColaCompan9 2.&6 &0*

reddie Bac *.16 &*0

The 5illette Compan9 /.&6 )&

B(T "an# 3.6 1

The Eashington PostCompan9 &2.16 &2

Eells argo (Compan9 1.6 &&3

"er#shire's share of undistributed earnings of

ma@or in,estees 34*

J9pothetical ta on these undistributed in,esteeearnings%1 %&*4

Reported operating earnings of "er#shire &833/

Total loo#through earnings of "er#shire > 84&)

OOOOO

%& +oes not include shares allocable to minorit9 interests

% Calculated on a,erage ownership for the 9ear

%1 The ta rate used is &468 which is the rate "er#shire pa9s on most di,idends itrecei,es

@, an @air Reportin/

At "er#shire8 full reporting means gi,ing 9ou the information that we would wish9ou to gi,e to us if our positions were re,ersed. Ehat Charlie and - would want underthat circumstance would be all the important facts about current operations as well as

the CD7s fran# ,iew of the longterm economic characteristics of the business. Ee


25/31

would epect both a lot of financial details and a discussion of an9 significant data wewould need to interpret what was presented.

Ehen Charlie and - read reports8 we ha,e no interest in pictures of personnel8

plants or products. References to D"-T+A ma#e us shudder does management

thin# the tooth fair9 pa9s for capital ependituresK Eere ,er9 suspicious ofaccounting methodolog9 that is ,ague or unclear8 since too often that meansmanagement wishes to hide something. And we dont want to read messages that a

public relations department or consultant has turned out. -nstead8 we epect acompan9s CD7 to eplain in his or her own words whats happening.

or us8 fair reporting means getting information to our 1**8*** GpartnersGsimultaneousl98 or as close to that mar# as possible. Ee therefore put our annual and=uarterl9 financials on the -nternet between the close of the mar#et on a rida9 andthe following morning. "9 our doing that8 shareholders and other interested in,estorsha,e timel9 access to these important releases and also ha,e a reasonable amount oftime to digest the information the9 include before the mar#ets open on Bonda9. This9ear our =uarterl9 information will be a,ailable on the !aturda9s of Ba9 &8 August&&8 and No,ember &*. The **& annual report will be posted on Barch /.

Ee applaud the wor# that Arthur Le,itt8 Ir.8 until recentl9 Chairman of the !DC8has done in crac#ing down on the corporate practice of Gselecti,e disclosureG that hadspread li#e cancer in recent 9ears. -ndeed8 it had become ,irtuall9 standard practicefor ma@or corporations to GguideG anal9sts or large holders to earnings epectationsthat were intended either to be on the nose or a tin9 bit below what the compan9 trul9epected to earn. Through the selecti,el9 dispersed hints8 win#s and nods that

companies engaged in8 speculati,el9minded institutions and ad,isors were gi,en aninformation edge o,er in,estmentoriented indi,iduals. This was corrupt beha,ior8unfortunatel9 embraced b9 both Eall !treet and corporate America.

Than#s to Chairman Le,itt8 whose general efforts on behalf of in,estors were bothtireless and effecti,e8 corporations are now re=uired to treat all of their ownerse=uall9. The fact that this reform came about because of coercion rather thanconscience should be a matter of shame for CD7s and their in,estor relationsdepartments.

7ne further thought while -m on m9 soapbo: Charlie and - thin# it is both

decepti,e and dangerous for CD7s to predict growth rates for their companies. The9are8 of course8 fre=uentl9 egged on to do so b9 both anal9sts and their own in,estorrelations departments. The9 should resist8 howe,er8 because too often these

predictions lead to trouble.

-ts fine for a CD7 to ha,e his own internal goals and8 in our ,iew8 its e,enappropriate for the CD7 to publicl9 epress some hopes about the future8 if theseepectations are accompanied b9 sensible ca,eats. "ut for a ma@or corporation to

predict that its pershare earnings will grow o,er the long term at8 sa98 &)6 annuall9is to court trouble.

Thats true because a growth rate of that magnitude can onl9 be maintained b9 a,er9 small percentage of large businesses. Jeres a test: Damine the record of8 sa98


26/31

the ** highest earning companies from &/3* or &/2* and tabulate how man9 ha,eincreased pershare earnings b9 &)6 annuall9 since those dates. You will find thatonl9 a handful ha,e. - would wager 9ou a ,er9 significant sum that fewer than &* ofthe ** most profitable companies in *** will attain &)6 annual growth in earnings

pershare o,er the net * 9ears.

The problem arising from loft9 predictions is not @ust that the9 spread unwarrantedoptimism. D,en more troublesome is the fact that the9 corrode CD7 beha,ior. 7,erthe 9ears8 Charlie and - ha,e obser,ed man9 instances in which CD7s engaged inuneconomic operating maneu,ers so that the9 could meet earnings targets the9 hadannounced. Eorse still8 after ehausting all that operating acrobatics would do8 the9sometimes pla9ed a wide ,ariet9 of accounting games to Gma#e the numbers.G Theseaccounting shenanigans ha,e a wa9 of snowballing: 7nce a compan9 mo,es earningsfrom one period to another8 operating shortfalls that occur thereafter re=uire it toengage in further accounting maneu,ers that must be e,en more Gheroic.G These canturn fudging into fraud. %Bore mone98 it has been noted8 has been stolen with the

point of a pen than at the point of a gun.

Charlie and - tend to be leer9 of companies run b9 CD7s who woo in,estors with

fanc9 predictions. A few of these managers will pro,e prophetic but others will

turn out to be congenital optimists8 or e,en charlatans. Hnfortunatel98 its not eas9 forin,estors to #now in ad,ance which species the9 are dealing with.

? ? ? ? ? ? ? ? ? ? ? ?

-,e warned 9ou in the past that 9ou should not belie,e e,er9thing 9ou read or hear

about "er#shire

e,en when it is published or broadcast b9 a prestigious newsorganiFation. -ndeed8 erroneous reports are particularl9 dangerous when the9 arecirculated b9 highl9respected members of the media8 simpl9 because most readersand listeners #now these outlets to be generall9 credible and therefore belie,e whatthe9 sa9.

An eample is a glaring error about "er#shires acti,ities that appeared in the+ecember / issue of The Wall "treet ournal8 a generall9 ecellent paper that - ha,efor all of m9 life found useful. 7n the front page %and abo,e the fold8 as the9 sa9 The

ournalpublished a news brief that said8 in une=ui,ocal terms8 that we were bu9ingbonds of Conseco and ino,a. This item directed the reader to the lead stor9 of the

Bone9 and -n,esting section. There8 in the second paragraph of the stor98 Theournalreported8 againwithout any qualification8 that "er#shire was bu9ing Consecoand ino,a bonds8 adding that "er#shire had in,ested Gse,eral hundred milliondollarsG in each. 7nl9 in the &2thparagraph of the stor9 %which b9 that point had

@umped to an inside page did the paper hedge a bit8 sa9ing that our Consecopurchases had been disclosed b9 Gpeople familiar with the matter.G

Eell8 not thatfamiliar. True8 we had purchased bonds and ban# debt of ino,a

though the report was wildl9 inaccurate as to the amount. "ut to this da9 neither"er#shire nor - ha,e everbought a share of stoc# or a bond of Conseco.

"er#shire is normall9 co,ered b9 aournal reporter in Chicago who is bothaccurate and conscientious. -n this case8 howe,er8 the GscoopG was the product of a


27/31

New Yor# reporter for the paper. -ndeed8 the / thwas a bus9 da9 for him: "9 earl9afternoon8 he had repeated the stor9 on CN"C. -mmediatel98 in lemmingli#e manner8other respected news organiFations8 rel9ing solel9 on theournal8 began relating thesame Gfacts.G The result: Conseco stoc# ad,anced sharpl9 during the da9 oneceptional ,olume that placed it ninth on the NY!D mostacti,e list.

+uring all of the stor9s iterations8 - ne,er heard or read the word Grumor.GApparentl9 reporters and editors8 who generall9 pride themsel,es on their careful useof language8 @ust cant bring themsel,es to attach this word to their accounts. "ut whatdescription would fit more precisel9K Certainl9 not the usual Gsources sa9G or Git has

been reported.G

A column entitled GToda9s Rumors8G howe,er8 would not e=uate with the selfimage of the man9 news organiFations that thin# themsel,es abo,e such stuff. Thesemembers of the media would feel that publishing such ac#nowledged fluff would bea#in to.0sservatore omanoinitiating a gossip column. "ut rumors are what these

organiFations often publish and broadcast8 whate,er euphemism the9 duc# behind. Ata minimum8 readers deser,e honest terminolog9 a warning label that will protect

their financial health in the same wa9 that smo#ers whose ph9sical health is at ris# aregi,en a warning.

The Constitutions irst Amendment allows the media to print or sa9 almostan9thing. Iournalisms irst Principle should re=uire that the media be scrupulous indeciding what that will be.

isceaneo,s

-n last 9ears report we eamined the battle then raging o,er the use of GpoolingGin accounting for mergers. -t seemed to us that both sides were ,oicing arguments thatwere strong in certain respects and seriousl9 flawed in others. Ee are pleased that theinancial Accounting !tandards "oard has since gone to an alternati,e approach thatstri#es us as ,er9 sound.

-f the proposed rule becomes final8 we will no longer incur a large annual chargefor amortiFation of intangibles. Conse=uentl98 our reported earnings will more closel9reflect economic realit9. %!ee page 0). None of this will ha,e an effect on"er#shires intrinsic ,alue. Your Chairman8 howe,er8 will personall9 benefit in that

there will be one less item to eplain in these letters.

? ? ? ? ? ? ? ? ? ? ? ?

-m enclosing a report generousl9 supplied b9 0utstan&ing nvestor 3igest

of Charlies remar#s at last Ba9s Eesco annual meeting. Charlie thin#s aboutbusiness economics and in,estment matters better than an9one - #now8 and -,elearned a lot o,er the 9ears b9 listening to him. Reading his comments will impro,e9our understanding of "er#shire.

? ? ? ? ? ? ? ? ? ? ? ?


28/31

-n &/2)8 we purchased !cott etFer8 ac=uiring not onl9 a fine business but theser,ices of Ralph !che98 a trul9 outstanding CD78 as well. Ralph was then 0&. Bostcompanies8 focused on the calendar rather than abilit98 would ha,e benefited fromRalphs talents for onl9 a few 9ears.

At "er#shire8 in contrast8 Ralph ran !cott etFer for &) 9ears until his retirement atthe end of ***. Hnder his leadership8 the compan9 distributed >&.*1 billion to"er#shire against our net purchase price of >1* million. Ee used these funds8 inturn8 to purchase other businesses. All told8 Ralphs contributions to "er#shires

present ,alue etend well into the billions of dollars.

As a manager8 Ralph belongs in "er#shires Jall of ame8 and Charlie and -welcome him to it.

? ? ? ? ? ? ? ? ? ? ? ?

A bit of nostalgia: -t was eactl9 )* 9ears ago that - entered "en 5rahams class atColumbia. +uring the decade before8 - had en@o9ed ma#e that love&anal9Fing8

bu9ing and selling stoc#s. "ut m9 results were no better than a,erage.

"eginning in &/)& m9 performance impro,ed. No8 - hadnt changed m9 diet orta#en up eercise. The onl9 new ingredient was "ens ideas. uite simpl98 a fewhours spent at the feet of the master pro,ed far more ,aluable to me than had ten 9earsof supposedl9 original thin#ing.

-n addition to being a great teacher8 "en was a wonderful friend. B9 debt to him is

incalculable.

Sharehoer-Aesi/nate Contri3,tions

About /36 of all eligible shares participated in "er#shire's *** shareholderdesignated contributions program8 with contributions totaling >&0./ million. A fulldescription of the program appears on pages 343).

Cumulati,el98 o,er the * 9ears of the program8 "er#shire has made contributionsof >&04 million pursuant to the instructions of our shareholders. The rest of"er#shire's gi,ing is done b9 our subsidiaries8 which stic# to the philanthropic

patterns that pre,ailed before the9 were ac=uired %ecept that their former ownersthemsel,es ta#e on the responsibilit9 for their personal charities. -n aggregate8 oursubsidiaries made contributions of >&2.1 million in ***8 including in#ind donationsof >1 million.

To participate in future programs4 you must own #lass 5 shares that are

registere& in the name of the actual owner4 not the nominee name of a 6ro$er4 6an$

or &epository7 "hares not so registere& on 5ugust 14 2!!1 will 6e ineligi6le for the

2!!1 program7 When you get the contri6utions form from us4 return it promptly so

that it &oes not get put asi&e or forgotten7 3esignations receive& after the &ue &ate

will not 6e honore&7

"he !nn,a eetin/


29/31

Last 9ear we mo,ed the annual meeting to the Ci,ic Auditorium8 and it wor#ed,er9 well for us. Ee will meet there again on !aturda98 April 2. The doors will openat 3 a.m.8 the mo,ie will begin at 2:1*8 and the meeting itself will commence at /:1*.There will be a short brea# at noon for food8 with sandwiches a,ailable at the Ci,icsconcession stands. Dcept for that interlude8 Charlie and - will answer =uestions until

1:1*.

or the net couple of 9ears8 the Ci,ic is our onl9 choice. Ee must therefore holdthe meeting on either !aturda9 or !unda9 to a,oid the traffic and par#ing nightmarethat would occur on a wee#da9. !hortl98 howe,er8 7maha will ha,e a newCon,ention Center with ample par#ing. Assuming that the Center is then a,ailable tous8 - will poll shareholders to see whether 9ou wish to return to a Bonda9 meeting.Ee will decide that ,ote based on the wishes of a ma@orit9 of shareholders8 not shares.

An attachment to the pro9 material that is enclosed with this report eplains how9ou can obtain the credential 9ou will need for admission to this 9ears meeting and

other e,ents. As for plane8 hotel and car reser,ations8 we ha,e again signed upAmerican Dpress %2**3//0014 to gi,e 9ou special help. -n our normal fashion8 wewill run buses from the larger hotels to the meeting. After the meeting8 the buses willma#e trips bac# to the hotels and to Nebras#a urniture Bart8 "orsheim's and theairport. D,en so8 9ou are li#el9 to find a car useful.

Ee ha,e added so man9 new companies to "er#shire this 9ear that -m not goingto detail all of the products that we will besellingat the meeting. "ut come preparedto carr9 home e,er9thing from bric#s to cand9. 7ne new product8 howe,er8 deser,esspecial note: "ob !haw has designed a 1 ) rug featuring an ecellent li#eness of

Charlie. 7b,iousl98 it would be embarrassing for Charlie

ma#e that humiliating

if slow sales forced us to slash the rugs price8 so step up and do 9our part.

5D-C7 will ha,e a booth staffed b9 a number of its top counselors from aroundthe countr98 all of them read9 to suppl9 9ou with auto insurance =uotes. -n most cases85D-C7 will be able to offer 9ou a special shareholder's discount %usuall9 26. "ringthe details of 9our eisting insurance and chec# out whether we can sa,e 9ou somemone9.

At the 7maha airport on !aturda98 we will ha,e the usual arra9 of aircraft fromDecuti,e Iet a,ailable for 9our inspection. Iust as# an DIA representati,e at the Ci,ic

about ,iewing an9 of these planes. -f 9ou bu9 what we consider an appropriatenumber of items during the wee#end8 9ou ma9 well need 9our own plane to ta#e themhome.

At Nebras#a urniture Bart8 located on a 3)acre site on 3nd!treet between+odge and Pacific8 we will again be ha,ing G"er#shire Eee#endG pricing8 whichmeans we will be offering our shareholders a discount that is customaril9 gi,en onl9to emplo9ees. Ee initiated this special pricing at NB four 9ears ago and salesduring the GEee#endG grew from >).1 million in &//3 to >/.& million in ***.

To get the discount8 9ou must ma#e 9our purchases between Eednesda98 April )

and Bonda98 April 1* and also present 9our meeting credential. The periods specialpricing will e,en appl9 to the products of se,eral prestige manufacturers that normall9


30/31

ha,e ironclad rules against discounting but that8 in the spirit of our shareholderwee#end8 ha,e made an eception for 9ou. Ee appreciate their cooperation. NB isopen from &* a.m. to / p.m. on wee#da9s and &* a.m. to 0 p.m. on !aturda9s and!unda9s.

"orsheim's the largest @ewelr9 store in the countr9 ecept for Tiffan9'sBanhattan store will ha,e two shareholderonl9 e,ents. The first will be a coc#tail

reception from 0 p.m. to &* p.m. on rida98 April 3. The second8 the main gala8 willbe from / a.m. to ) p.m. on !unda98 April /. !hareholder prices will be a,ailableThursda9 through Bonda98 so if 9ou wish to a,oid the large crowds that willassemble on rida9 e,ening and !unda98 come at other times and identif9 9ourself asa shareholder. 7n !aturda98 we will be open until 0 p.m. "orsheim's operates on agross margin that is full9 twent9 percentage points below that of its ma@or ri,als8 sothe more 9ou bu98 the more 9ou sa,e %or at least thats what m9 famil9 alwa9s tellsme.

-n the mall outside of "orsheim's8 we will ha,e local bridge eperts a,ailable topla9 with our shareholders on !unda9. "ob Jamman8 who normall9 is with us8 willbe in Africa this 9ear. Je has promised8 howe,er8 to be on hand in **. Patric#

Eolff8 twice H.!. chess champion8 will also be in the mall8 ta#ing on all comers

blindfolded Last 9ear8 Patric# pla9ed as man9 as si games simultaneousl9 with

his blindfold securel9 in place and demolished his opponents.

As if all this isnt enough to test 9our s#ills8 our "orsheims 7l9mpiad this 9earwill also include "ill Robertie8 one of onl9 two pla9ers to twice win the bac#gammonworld championship. "ac#gammon can be a big mone9 game8 so bring along 9our

stoc# certificates.

5orat's m9 fa,orite stea#house will again be open eclusi,el9 for "er#shire

shareholders on !unda98 April /8 and will be ser,ing from 4 p.m. until &* p.m.Please remember that 9ou can't come to 5orat's on !unda9 without a reser,ation. Toma#e one8 call 4*))&1311 on April %6ut not 6efore. -f !unda9 is sold out8 tr95orat's on one of the other e,enings 9ou will be in town. -f 9ou order a rare Tbonewith a double order of hash browns8 9ou will establish 9our credentials as an epicure.

The usual baseball game will be held at Rosenblatt !tadium at 3 p.m. on !aturda9

night. This 9ear the 7maha 5olden !pi#es will pla9 the New 7rleans Meph9rs. Drnie"an#s is again going to be on hand to bra,el9 face m9 fastball %once cloc#ed at

/) mpm miles per month.

B9 performance last 9ear was not m9 best: -t too# me fi,e pitches to throwan9thing resembling a stri#e. And8 belie,e me8 it gets lonel9 on the mound when 9oucant find the plate. inall98 - got one o,er8 and Drnie lashed a line dri,e to left field.After - was 9an#ed from the game8 the man9 sports writers present as#ed what - hadser,ed up to Drnie. - =uoted what Earren !pahn said after Eillie Ba9s hit one of his

pitches for a home run %Eillies first in the ma@ors: G-t was a hellu,a pitch for thefirst sit9 feet.G


31/31

-t will be a different stor9 this 9ear. - dont want to tip m9 hand8 so lets @ust sa9Drnie will ha,e to deal with a pitch he has ne,er seen before.

7ur pro9 statement contains instructions about obtaining tic#ets to the game andalso a large =uantit9 of other information that should help 9ou en@o9 9our ,isit in

7maha. There will be plent9 of action in town. !o come for Eoodstoc# Eee#end and@oin our Celebration of Capitalism at the Ci,ic.

ebruar9 28 **&Earren D. "uffettChairman of the "oard

warren buffet shareholder letter year 2000

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