Berkshire Hathaway

To the Stockholders of Berkshire Hathaway Inc.: (2) A copy of our ever-popular "The Ground Rules." It is essential that we see eye-to-eye on the matters covered therein. If you have different views - fine, yours may be better - but you shouldn't be in the partnership. Please particularly note Ground Rule 7. This has been added this year reflecting a moderate shift in my attitude over a period of time. It represents a decidedly unconventional (but logical in my opinion when applied to our operation) approach and is therefore specifically called to your attention. Any withdrawals will be paid January 5th. You may withdraw any amount you desire from $100 up to your entire equity. Similarly, additions can be for any amount and should reach us by January 10th. In the event you are disposing of anything, this will give you a chance to have the transaction in 1966 if that appears to be advantageous for tax reasons. If additions reach us in November, they take on the status of advance payments and draw 6% interest until yearend. This is not true of additions reaching us in December. The partnership owns a controlling interest in Berkshire Hathaway Inc., a publicly-traded security. As mentioned in my midyear letter, asset values and earning power are the dominant factors affecting the valuation of a controlling interest in a business. Market price, which governs valuation of minority interest positions, is of little or no importance in valuing a controlling interest. We will value our position in Berkshire Hathaway at yearend at a price halfway between net current asset value and book value. Because of the nature of our receivables and inventory this, in effect, amounts to valuation of our current assets at 100 cents on the dollar and our fixed assets at 50 cents on the dollar. Such a value in my opinion is fair to both adding and withdrawing partners. It may be either of lower than market value at the time.

To the Stockholders of Berkshire Hathaway Inc.: As one might expect, in a business as highly cyclical as the textile business, the past decade for Berkshire Hathaway has been a recurring story of a period of earnings followed by a period of relatively heavy losses. The past year has been a significant one in this history because, not only was 1966 a year of profitable operations, but, also, it witnessed the restoration of our financial strength to the level that existed at the end of 1960. You will recall that the heavy losses of the years 1957 and 1958 had not yet been fully recouped by the profitable operations of the years 1959 and 1960, when our business was again hit with a three-year period of loss operations.

To the Stockholders of Berkshire Hathaway Inc.: Total sales showed a decline from $49.4 million in fiscal 1966 to $39 million in fiscal 1967. The cause of the drop in dollar volume was a combination of a decrease in yardage demand in all divisions and a sharp drop in prices in all areas except the Home Fabrics Division. Although sales and profits of our Home Fabrics Division were down substantially, this area demonstrated the greatest resistance to the depressed conditions of the textile markets in which we operate. Berkshire Hathaway does not produce coarse goods such as heavy ducks, which is the segment of the textile business that was the strongest in 1967.

To the Stockholders of Berkshire Hathaway Inc.: This policy has proved reasonably successful—particularly when contrasted with results achieved by firms which have continued to commit large sums to textile expansion in the face of totally inadequate returns. We have been able to conclude two major purchases of operating businesses, and their successful operations enabled Berkshire Hathaway to achieve an over-all return of more than 10% on average stockholders equity last year in the face of less than a 5% return from the portion of our capital employed in the textile business. We have liquidated our entire holdings of marketable securities over the last two years at a profit of more than $5 million after taxes. These gains provided important funds to facilitate our major purchase of 1969, when borrowed money to finance acquisitions was generally most difficult to obtain.

To the Shareholders of Berkshire Hathaway Inc.:

To the Shareholders of Berkshire Hathaway Inc.: But because the 1989 disasters left many insurers either actually or possibly bare, and also left most CAT writers licking their wounds, there was an immediate shortage after the earthquake of much-needed catastrophe coverage. Prices instantly became attractive, particularly for the reinsurance that CAT writers themselves buy. Just as instantly, Berkshire Hathaway offered to write up to $250 million of catastrophe coverage, advertising that proposition in trade publications. Though we did not write all the business we sought, we did in a busy ten days book a substantial amount.

To the Shareholders of Berkshire Hathaway Inc.: In 1931, Malcolm went to work for Berkshire Fine Spinning Associates, which merged with Hathaway Manufacturing Co. in 1955 to form our present company. Two years later, Malcolm became Berkshire Hathaway’s Chairman, a position he held as well in early 1965 when he made it possible for Buffett Partnership, Ltd. to buy a key block of Berkshire stock owned by some of his relatives. This purchase gave our partnership effective control of the company. Malcolm’s immediate family meanwhile kept its Berkshire stock and for the last 27 years has had the second-largest holding in the company, trailing only the Buffett family. Malcolm has been a joy to work with and we are delighted that the long-running relationship between the Chace family and Berkshire is continuing to a new generation.

To the Shareholders of Berkshire Hathaway Inc.:

To the Shareholders of Berkshire Hathaway Inc.: Mrs. B’s story is well-known but worth telling again. She came to the United States 77 years ago, unable to speak English and devoid of formal schooling. In 1937, she founded the Nebraska Furniture Mart with $500. Last year the store had sales of $200 million, a larger amount by far than that recorded by any other home furnishings store in the United States. Our part in all of this began ten years ago when Mrs. B sold control of the business to Berkshire Hathaway, a deal we completed without obtaining audited financial statements, checking real estate records, or getting any warranties. In short, her word was good enough for us.

To the Shareholders of Berkshire Hathaway Inc.:

WARREN BUFFETT: Let’s have the — let’s get the business of the meeting out of the way. Then we can get on to more interesting things. I will first introduce the Berkshire Hathaway directors that are present in addition to myself and — First of all, there’s Charlie, who is the vice chairman of Berkshire, and if the rest of you will stand. We have Susan T. Buffett, Howard Buffett, Malcolm Chase III, and Walter Scott Jr. And that’s it. (Applause) AUDIENCE MEMBER: Mr. Buffett, my name is Arthur Coleus (PH) from Canton, Massachusetts. And I’d like to know how you’d respond to the question that my associates ask me when they say that Berkshire Hathaway has been a good investment up to now, but what happens to your investment if, God forbid, something happens to Mr. Warren Buffett?

To the Shareholders of Berkshire Hathaway Inc.:

WARREN BUFFETT: Morning. I’m Warren Buffett, the chairman of Berkshire Hathaway. And on my left is Charlie Munger, the vice chairman and my partner. And we’ll try to get him to say a few words at some point in the proceedings. (Laughter) The format today is going to be just slightly different. We have one item to — normally, we breeze through the meeting pretty fast, and we’ll do that, but we have one item of business on the preferred stock that I could tell caused some confusion with people. So, I’ll discuss that a little bit. And if, before the vote on that, anybody would like to talk about the preferred issue, we’ll have any comments or questions at that time. And then we’ll breeze through the rest of the meeting, and then we’ll open it up. And I’ll have one announcement to make then, too. And then after that, we’ll go for, maybe, close to noon. And feel free, earlier, anybody that would like to leave, you’re free to, obviously, at any time. AUDIENCE MEMBER: You don’t have to come back to the shareholders for a vote, after these shares are authorized, for the terms of it. And you’ve discussed this in terms of buying companies. My question is, you yourself, through Berkshire Hathaway, own the preferred shares of several companies: Salomon, USAir, American Express. Do those shareholders have to vote on the terms of the preferred shares that you bought for those companies? Or is that left at the board of directors’ decision level.

To the Shareholders of Berkshire Hathaway Inc.:

And Charlie and I are delighted to — but we’ll have to break it up at three, no matter what. But we’ll be delighted to stick around. You can leave anytime, obviously. As I’ve explained in the past, it’s much better form to leave while Charlie is talking. (Laughter) But the — feel free to do that. And then at noon you’ll get a chance to do it en masse. We have buses available to take you to — if you have any money left at all after yesterday — to take you to other business establishments of Berkshire, locally. So that will be the plan. I hope everyone does get their questions answered. We’ve got a system where we break this room into six zones. And we have a couple of zones in other rooms. And then this afternoon, everybody will be able to be here in the main room. So, that is the procedure. I’m sure you recognize Charlie Munger, the vice chairman of Berkshire Hathaway, who also had not seen that movie before. (Laughs) And showed — we were — I think Marc was afraid to show it to us. FITZSIMMONS: Yes. I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent by first-class mail to all shareholders of record on March 8, 1996, being the record date for this meeting, there were 1,193,512 shares of Berkshire Hathaway common stock outstanding with each share entitled to one vote on motions considered at the meeting. Of that number, 1,041,567 shares are represented at this meeting by proxies returned through last Friday.

To the Shareholders of Berkshire Hathaway Inc.:

WARREN BUFFETT: Good morning. I’m Warren Buffett, the chairman of Berkshire Hathaway, as you probably have gathered by now. (Laughs) I had a real problem last night. I was losing my voice almost entirely. I don’t want you to think I lost it cheering for myself this morning here. I think I’ll do all right, but we’ve always got Charlie here to — he’s always done the talking. I just move my lips, you know. (Laughter) So I’d like to tell you a little bit about how we’re going to conduct things. And then we’ll go through a script that was written by the speechwriter for Saddam Hussein. It has all the warmth and charm and participatory elements you’d expect. And we’ll get through the business of the meeting as promptly as we can, which is usually about five or six minutes. And then Charlie and I will answer questions, your questions until noon, when we’ll have a break for about a half an hour. There’s food outside all the time. WARREN BUFFETT: I think that’s most of the preliminaries, so I’m going to get into this. We’ll get the meeting over with here promptly with your cooperation. And I will go through this little script that’s been prepared for me, and it says, the meeting will now come to order. I’m Warren Buffett, chairman of the board of directors of the company. I welcome you to this 1997 annual meeting of shareholders. I will first introduce the Berkshire Hathaway directors that are present in addition to myself. I’ve introduced you to Charlie already. And the other directors, I believe, are in the front row here. If they’d stand when I mention their names, you can withhold any applause until finished, and then it’s optional. (Laughter) Howard Buffett, Howie you want to stand up? Susan Buffett. Walter Scott. And Malcolm Chace III, “Kim” Chace. And that is our extensive directorate. (Applause) Give them a lot of applause because they don’t get much else for it. It’s a rather low-paying board.

To the Shareholders of Berkshire Hathaway Inc.: The full line of Berkshire products will be available at Aksarben, and the more popular items will also be at Holiday. Last year we set sales records across-the-board, moving 3,700 pounds of See’s candy, 1,635 pairs of Dexter shoes, 1,150 sets of Quikut knives and 3,104 Berkshire shirts and hats. Additionally, $26,944 of World Book products were purchased as well as more than 2,000 golf balls with the Berkshire Hathaway logo. Charlie and I are pleased but not satisfied with these numbers and confidently predict new records in all categories this year. Our 1999 apparel line will be unveiled at the meeting, so please defer your designer purchases until you view our collection.

WARREN BUFFETT: OK, the meeting will now come to order. I’m Warren Buffett, chairman of the board of directors of the company and I welcome you to this 1998 annual meeting of shareholders. I will first introduce the Berkshire Hathaway directors that are present in addition to myself. So we have — and I can’t see very well with the lights here, but if you’ll stand as I name you. Susan T. Buffett, the vocalist. (Applause) Howard G. Buffett, the non-vocalist. (Applause) Malcolm G. Chace. (Applause) Charlie, you’ve met. And Ron Olson. (Applause) And Walter Scott Junior. (Applause) Also with us today are partners in the firm of Deloitte and Touche, our auditors. They are available to respond to appropriate questions you might have concerning their firm’s audit of the accounts of Berkshire. Mr. Forrest Krutter is secretary of Berkshire. He will make a written record of the proceedings. Miss Becki Amick has been appointed inspect of elections at this meeting. FORREST KRUTTER: Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent by first-class mail to all shareholders of record on March 6, 1998, the record date for this meeting, there were 1,199,680 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at this meeting. And 1,245,081 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to 1/200th of one vote on motions considered at the meeting. Of that number, 1,039,276 Class A shares and 1,080,509 Class B shares are represented at this meeting by proxies returned through last Friday.

To the Shareholders of Berkshire Hathaway Inc.: We have scheduled the meeting in 2002 and 2003 on the customary first Saturday in May. In 2001, however, the Civic is already booked on that Saturday, so we will meet on April 28. The Civic should fit our needs well on any weekend, since there will then be more than ample parking in nearby lots and garages as well as on streets. We will also be able to greatly enlarge the space we give exhibitors. So, overcoming my normal commercial reticence, I will see that you have a wide display of Berkshire products at the Civic that you can purchase. As a benchmark, in 1999 shareholders bought 3,059 pounds of See’s candy, $16,155 of World Book Products, 1,928 pairs of Dexter shoes, 895 sets of Quikut knives, 1,752 golf balls with the Berkshire Hathaway logo and 3,446 items of Berkshire apparel. I know you can do better.

WARREN BUFFETT: Good morning. Really delighted we can have this many people come out for a meeting. It says something, I think, about the way you regard yourself as owners. We’re going to hustle through the business meeting. And then Charlie and I will be here for six hours or until our candy runs out — (laughter) — to answer any questions you have. We have people in a number of remote locations. And we have ways of bringing them into the questions as well. Incidentally, if you hadn’t figured it out already, this hyperkinetic bundle of energy here on my left is Charlie Munger — (laughter) — our vice-chairman. (Applause) And we will now run through the business of the meeting. The meeting will now come to order. I’m Warren Buffett, chairman of the board of directors of the company. I welcome you to this 1999 annual meeting of shareholders. I will first introduce the Berkshire Hathaway directors that are present, in addition to myself. And if you’ll stand up. It’s a little hard for me to see — there, right down here in the front row. We have Susan T. Buffett. FORREST KRUTTER: Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting, that was sent by first-class mail to all shareholders of record on March 5, 1999, being the record date of this meeting, there were 1,343,592 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting. And 5,266,338 shares of Class B Berkshire Hathaway common stock outstanding with each share entitled to 1/200th of one vote on motions considered at the meeting. Of that number, 1,133,684 Class A shares and 3,485,885 Class B shares are represented at this meeting by proxies returned through last Friday.

To the Shareholders of Berkshire Hathaway Inc.:

FORREST KRUTTER: I do. Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent by first-class mail to all shareholders of record on March, 3, 2000, being the record date for this meeting, there are 1,341,174 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting, and 5,385,320 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to 1/200th of one vote on motions considered at the meeting. Of that number, 1,116,151 Class A shares and 4,342,959 Class B shares are represented at this meeting by proxies returned through Thursday evening, April 27th. AUDIENCE MEMBER: Warren and Charlie, good morning. This is Mo Spence (PH), Waterloo, Nebraska. In 1999, Berkshire Hathaway managed to produce a positive gain in net worth of one-half of one percent. That means that since present management took over 35 years ago, Berkshire Hathaway has realized a positive gain each and every year, and produced an average annual gain of 24 percent. Including the years you ran the Buffett Limited Partnership, you have had a run of 48 consecutive years of positive gains and net worth without one single down year, producing a compounded rate of return of almost 26 percent annually. On behalf of the long-term shareholders of Berkshire Hathaway, we want to thank you from the bottom of our pocketbooks. (Applause)

To the Shareholders of Berkshire Hathaway Inc.:

WARREN BUFFETT: And — (laughter) — Andy [Heyward], if you’re here, you could stand up, I think the crowd would like to say thanks. (Applause) We have one other guest, too. After doing an incredible job for all Berkshire shareholders and particularly for Charlie and me, Ralph Schey retired this year. But Ralph and Luci, I believe, are here. And [if] Ralph and Luci would stand up, the shareholders and I would like to say thanks. (Applause) Scott Fetzer was one of the best acquisitions we ever made, but the reason it was among the very best was Ralph. And a great many of the other companies that we own now, our ownership was made possible because of the profit that Ralph delivered over the years. So, thanks very much, Ralph. Now we will come to order. I will go through this fast. I’m Warren Buffett, chairman of the board of directors of the company, and I welcome you to this 2001 annual meeting of shareholders. I will first introduce the Berkshire Hathaway directors that are present in addition to myself. First of all, of course, is Charlie, on my left. FORREST KRUTTER: Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting, that was sent by First-Class Mail to all shareholders of record, on March 2, 2001, being the record date for this meeting, there were 1,343,041 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting and 5,505,791 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to 1/200th of one vote on motions considered at the meeting. Of that number, 1,116,384 Class A shares, and 4,507,896 Class B shares are represented at this meeting by proxies returned through Thursday evening, April 26.

To the Shareholders of Berkshire Hathaway Inc.:

WARREN BUFFETT: We have our directors with us, and I’ll introduce them. We have, if you’ll stand please as I call your name and then you can — it’ll be hard to do — but you can withhold your applause till they’re all standing. Susan T. Buffett, Howard G. Buffett, Malcolm G. Chace, Ronald L. Olson, and Walter Scott Jr., in addition to Charlie. Those are the directors of Berkshire Hathaway. (Applause) As we mentioned in the annual report, we will be adding some directors who meet the four tests that I laid out in the report. We’ll be adding some of those, probably within the next year. When we’re required — whenever we’re required to do so, we will be doing it. And we will have people who have a lot of their own money on the line, just like you do, in Berkshire. And they will prosper or suffer in relation to how Berkshire does, and not in relation to their directors’ fees or other things. So they will be selected for business savvy, which they will have. FORREST KRUTTER: Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent to all shareholders of record on March 5, 2003, being the record date for this meeting, there were 1,309,423 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting. And 6,763,493 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to 1/200th of one vote on motions considered at the meeting. Of that number 1,071,967 Class A shares and 5,228,705 Class B shares are represented at this meeting by proxies returned through Thursday evening, May 1.

To the Shareholders of Berkshire Hathaway Inc.:

And for those of you who want to pick out something good for your children or your grandchildren, I can’t think of a better series to have them watching. And thanks again Andy. And thanks also to Kelly Muchemore who puts this whole production on. (Applause) This is Kelly’s show. She, along with that dog Dudley, who you saw in the movie — Dudley is a regular at Berkshire Hathaway. We don’t count him in the 15.8 [employees at headquarters], but she, along with Dudley, handle everything. I don’t even give a thought to what’s going to happen here, as might become evident during the meeting. (Laughter) She is responsible for putting up that whole exhibition arrangement and really the whole thing. So, Kelly, I don’t know where you are exactly, but in any event, thank you very much. (Applause) WARREN BUFFETT: Now, we’ll go through the business part of the meeting. And it may take a little longer than usual, but please be patient. And I’d like to start out by calling the meeting to order. I’m Warren Buffett, chairman of the board of Berkshire Hathaway, and I welcome you to this meeting. This hyperkinetic fellow next to me is Charlie Munger — (laughter) — the vice chairman. And we will have a good time, and I hope you do, too. We work together because he can hear and I can see. I mean, it’s — (laughter) — there are times where we can’t remember each other’s name, but we have a lot of fun together. Now, any shareholder who wishes to speak regarding the shareholder proposal expected to be presented by Human Life International, or any other matters germane to the shareholder’s meeting, should now go to microphone zone 1, which is in section 121 over on my right. Or section 2, which is at section 221, I believe that’s higher up on my right. And — let me see if I have that right.

To the Shareholders of Berkshire Hathaway Inc.: In New York, Cathy Baron Tamraz read the article, and it struck a chord. On November 21, she sent me a letter that began, “As president of Business Wire, I’d like to introduce you to my company, as I believe it fits the profile of Berkshire Hathaway subsidiary companies as detailed in a recent Wall Street Journal article.”

CHARLIE MUNGER: Yeah. If you have the opportunities of Berkshire Hathaway, averaged out, gold is a dumb investment. AUDIENCE MEMBER: Andrew Noble (PH) from England. Apart from the catastrophic insurance events or Armageddon scenarios that you’ve been talking about earlier, in relation to the operations of Berkshire Hathaway, what are your greatest fears?

To the Shareholders of Berkshire Hathaway Inc.: The highlight of the year, however, was our July 5th acquisition of most of ISCAR, an Israeli company, and our new association with its chairman, Eitan Wertheimer, and CEO, Jacob Harpaz. The story here began on October 25, 2005, when I received a 1¼-page letter from Eitan, of whom I then knew nothing. The letter began, “I am writing to introduce you to ISCAR,” and proceeded to describe a cutting-tool business carried on in 61 countries. Then Eitan wrote, “We have for some time considered the issues of generational transfer and ownership that are typical for large family enterprises, and have given much thought to ISCAR’s future. Our conclusion is that Berkshire Hathaway would be the ideal home for ISCAR. We believe that ISCAR would continue to thrive as a part of your portfolio of businesses.”

And that’s nice, but that’s not terribly important. I mean, five years from now, nobody will remember whether the first quarter or the second quarter was good at Berkshire Hathaway. EITAN WERTHEIMER: Good morning, everybody. It’s Omaha. It’s spring. The fields are green. The days get longer. And we bring a big family into a new home. I’m standing here before you representing 5,869 people, not only the people, but the families, their past and their future. It took us three years to look what to do next. We are successful. We still have a lot of mistakes ahead of us to do. Until we found one day somebody came to us and asked, “Have you heard about Berkshire Hathaway and Mr. Buffett?” We said, “Yes, we heard, but we never thought about it.” And when we started studying about the company, we understood that this is the right combination for us, a family company with a strong culture and a culture we’d love to keep, a young group of people that will love to work, maybe not for very long, but not less than 20, 25 years from today. And we decided, let’s try it.

To the Shareholders of Berkshire Hathaway Inc.:

JIMMY BUFFET: Who were you expecting? My junior partner? (Laughter) For those of you who don’t know, I’m the distant cousin, Jimmy Buffett. This would be a good day to rob a bank in Omaha. Everybody’s here, you know, so — (Applause) I couldn’t be around for the game with LeBron James. I was busy working on my wardrobe for this surprise appearance. This is my first time in the Qwest Center, so I feel very at home in large spaces like this. It’s great to be back in Omaha. (Applause) That’s the good news. The disturbing news is, as a long-time Berkshire Hathaway stockholder and shareholder, the big question is, you know, those guys are getting up in age, you know, Charlie and Warren. Who are they going to leave it to? Well — (laughter) — I got news for you. We did a genetic test, Warren and I did. You won’t see that in your program or in the shareholders report. And somewhere back about 6,000 years ago, in some ancient village in Scandinavia, they were trading Buffett genes, and I got the talent. He got the business. So, later on in life, after Doris [Buffett, Warren’s sister] introduced us — I don’t know, 30 years ago — I started figuring out, so I better get that business thing going as well. So, since blood is thicker than water, I am your new chairman. So, I hope you like that. (Applause) Don’t run out to sell. I’m keeping my mine. (Laughter) So, on the way out here on the plane, I figured — it was an interesting day, if you read The New York Times business section yesterday. There was a lot going on. So, I thought I would — this song has done very well for me, so I thought I would bring this for my first appearance in Omaha at the Qwest Center — I would rewrite a little “Margaritaville” with a little Berkshire — well, actually we’re wasting away in Berkshire Hathaway-ville this — today.

To the Shareholders of Berkshire Hathaway Inc.: Early in 2008, we activated Berkshire Hathaway Assurance Company (“BHAC”) as an insurer of the tax-exempt bonds issued by states, cities and other local entities. BHAC insures these securities for issuers both at the time their bonds are sold to the public (primary transactions) and later, when the bonds are already owned by investors (secondary transactions).

SUSAN LUCCI: Hi, Charlie. I’m Susan Lucci. Oh, haven’t you heard about the deal between Warren and me? He’s going to be a big star in All My Children, and I’m going to be taking over Berkshire Hathaway. WARREN BUFFETT: Susan, my show is Berkshire Hathaway. And my role is to run it. (Takes paper out of jacket pocket and rips it up)

To the Shareholders of Berkshire Hathaway Inc.:

WARREN BUFFETT: But first, even though we’ll have the formal meeting later on, I would like to introduce our directors. And if they would stand as I announce them and then remain standing until the end. And if you’ll just hold your applause until the end or even later if you wish — (laughter) — we’ll recognize them. We’ll have a meeting later on to elect them. But if you’ll stand up. And like I say, you can’t see very well here with the lights, but — There’s me and Charlie, we start off. And then Howard Buffett, Susan Decker, Bill Gates, Sandy Gottesman, Charlotte Guyman , Don Keough, Tom Murphy, Ron Olson, and Walter Scott. Those are the directors of Berkshire Hathaway. (Applause) WARREN BUFFETT: We have with us, the journalists. We have Carol Loomis of Fortune. We have Becky Quick of CNBC. And we have Andrew Ross Sorkin of the New York Times. They have received questions from shareholders all over the country. Andrew told me that he received a couple hundred just this morning. And they have selected what they think are — they’re all Berkshire Hathaway-related questions. We were having a problem in recent annual meetings where we sort of drifted away from Berkshire, into the realm of what people’s children had done in school recently and that sort of thing. (Laughter) So we wanted to bring it back a little bit to Berkshire. So they have selected among the best of the Berkshire-related questions that they’ve received. And we will go from — we will start with Carol Loomis. And we will go then to the audience. We have 13 sections, 12 in this room, one in an overflow room. And we have selected the people in each of the audience sections by a raffle system, half an hour to an hour ago. And we’ll go back and forth.

To the Shareholders of Berkshire Hathaway Inc.: First off is the Berkshire Hathaway Reinsurance Group, run by Ajit Jain. Ajit insures risks that no one else has the desire or the capital to take on. His operation combines capacity, speed, decisiveness and, most importantly, brains in a manner that is unique in the insurance business. Yet he never exposes Berkshire to risks that are inappropriate in relation to our resources. Indeed, we are far more conservative than most large insurers in that respect. In the past year, Ajit has significantly increased his life reinsurance operation, developing annual premium volume of about $2 billion that will repeat for decades.

ACA did it, MBIA did it, AMBEC did it, FGIC did it, FSA did it, and they all got into trouble, every one of them. Now, is there anything wrong with a bond insurer insuring structured credit or something other than municipals? No. But you better know what you’re doing. Now, interestingly enough, Berkshire Hathaway, when these other guys got into trouble, went into the municipal bond insurance business. And we insured things that were almost identical to what ACA or others had insured, the difference being that we thought we knew more about what we were doing. We got paid better than they got paid, and we stayed away from things we didn’t understand. We never insured a CDO; we never insured any kind of a RMBS deal or anything of the sort. But I want to give you an example of something we did insure, because I think it will help you understand better this ABACUS transaction. So if the — if the projectionist would put up slide number 1, I’m going to describe a deal to you. And as you — as you look at this — is it up there yet? Yeah. Somebody came to us a couple of years ago. I’ll tell you the name a little later. But a large investment bank came to us a couple of years ago. Now, we were insuring bonds regularly. We insured bonds here of the Omaha Public Power District that’s familiar to many of you. We insured the bonds of the Nebraska — of the Methodist Hospital, which is six or seven miles from here. We have told people that if the Nebraska Methodist Hospital does not pay its bonds, Berkshire Hathaway will pay them. And we’ve done that to the tune of about $100 million in their case. So we are in the business of insuring bonds. Now, a couple of years ago, somebody came to us, large investment bank, and they said, “Take a look at this portfolio.” And as you can see, it’s got the names of a whole bunch of states. Yeah, it’s up there. And very different amounts. It’s got a billion-one for Florida; it’s only got 200 million for the State of California.

To the Shareholders of Berkshire Hathaway Inc.: First by float size is the Berkshire Hathaway Reinsurance Group, run by Ajit Jain. Ajit insures risks that no one else has the desire or the capital to take on. His operation combines capacity, speed, decisiveness and, most importantly, brains in a manner that is unique in the insurance business. Yet he never exposes Berkshire to risks that are inappropriate in relation to our resources. Indeed, we are far more conservative in that respect than most large insurers. For example, if the insurance industry should experience a $250 billion loss from some mega-catastrophe — a loss about triple anything it has ever faced — Berkshire as a whole would likely record a moderate profit for the year because of its many streams of earnings. Concurrently, all other major insurers and reinsurers would be far in the red, and some would face insolvency.

WARREN BUFFETT: Good morning. I’m Warren. He’s Charlie. I can see, he can hear. That’s why we work together. (Laughter) Have trouble remembering each other’s names from time to time. (Laughs) We’re going to — we’re going to introduce the directors, we’re going to give you some information on the first quarter earnings. We’re going to talk briefly about the David Sokol/Lubrizol situation, and then we’re going to open it up for your questions. Anything as it relates to the Lubrizol matter is going to be transcribed and will be put up on the website — the Berkshire Hathaway website — just as promptly as we can, maybe this evening or this afternoon, maybe tomorrow morning, but very promptly, because we want to be sure that all shareholders hear — or get to read every word of what has been said here about the matter. So I would say that there are plenty of activities in this world that are unsavory that are committed by people with lots of money. So I don’t regard that as, you know, totally puzzling. But I will give you one instance that does make it puzzling. It makes it very puzzling to me. We bought MidAmerican at the end — Berkshire Hathaway bought MidAmerican — at the end of 1999. Berkshire Hathaway bought about 80 percent. Walter Scott, who I just introduced, and his family was the second largest holder, I think something over 10 percent, and then two operating people, Dave Sokol the senior one, owned or had options on a big piece, and Greg Abel, a terrific partner of Dave’s, also had a piece. And Walter Scott — and I’ve told this story privately a few times but not — I don’t think I’ve done it publicly. Walter Scott came to me a year or two after we’d bought it, and Walter said, I think we ought to have some special compensation arrangement for Dave and Greg if they perform in a really outstanding manner. And he said — I think maybe he suggested something involving equity and he saw me turn white.

To the Shareholders of Berkshire Hathaway Inc.: First by float size is the Berkshire Hathaway Reinsurance Group, run by Ajit Jain. Ajit insures risks that no one else has the desire or the capital to take on. His operation combines capacity, speed, decisiveness and, most important, brains in a manner unique in the insurance business. Yet he never exposes Berkshire to risks that are inappropriate in relation to our resources. Indeed, we are far more conservative in avoiding risk than most large insurers. For example, if the insurance industry should experience a $250 billion loss from some mega-catastrophe

CLIFF GALLANT: OK, sorry. Thank you again for the opportunity. The subject, generally, still is mortality. In your 2011 annual report, Berkshire disclosed that Berkshire Hathaway Reinsurance Group made changes in its assumptions for mortality risk, which resulted in a charge, specifically saying that mortality rates had exceeded assumptions in the Swiss Re contract. Conversely in Gen Re’s Life/Health segment, they reported lower than expected mortality, and I believe these trends continued into the first quarter that we saw in the report last night. What was the surprise in the Swiss Re contract? And is there a difference in basic assumptions and trends for things like mortality rates among Berkshire’s different businesses? In the property-casualty businesses, for example, are the same assumptions and reserving philosophies applied companywide? I think with Tad Montross, we’ve got a fellow that — where I feel very good about the way he reserves. But he is not — there’s no coordination between him and Tony [Nicely] at GEICO, nor with Ajit [Jain] at Berkshire Hathaway Reinsurance. They all have, I think, the same mindset, but they don’t — they’re three very different, different businesses. Charlie?

To the Shareholders of Berkshire Hathaway Inc.: First by float size is the Berkshire Hathaway Reinsurance Group, managed by Ajit Jain. Ajit insures risks that no one else has the desire or the capital to take on. His operation combines capacity, speed, decisiveness and, most important, brains in a manner unique in the insurance business. Yet he never exposes Berkshire to risks that are inappropriate in relation to our resources. Indeed, we are far more conservative in avoiding risk than most large insurers. For example, if the insurance industry should experience a $250 billion loss from some mega-catastrophe — a loss about triple anything it has ever experienced — Berkshire as a whole would likely record a significant profit for the year because of its many streams of earnings. And we would remain awash in cash, looking for large opportunities if the catastrophe caused markets to go into shock. All other major insurers and reinsurers would meanwhile be far in the red, with some facing insolvency.

WARREN BUFFETT: OK. Jonathan Brandt, who is a newcomer to the panel, his area is the otherthan-insurance aspects of Berkshire Hathaway. And I can assure you that no one has paid more — I played Jonny in chess when he was about four years old, and, I don’t know, I must have been 40 or something at the time, and he kept insisting during dinner that we play chess afterwards. And we started playing, and, of course, he got me into some impossible position in a few moves, and I told his parents to put him to bed. (Laughter) So, Jonny, I still have kind of comebacks in me, so be careful what you ask. Jon Brandt. (Laughs) CLIFF GALLANT: Thank you. At Berkshire Hathaway Reinsurance group, Mr. Ajit Jain appears to be employing a new strategy recently with some high profile actions. Berkshire signed a portfolio underwriting arrangement with Aon to do business with Lloyd’s. And then last week, there was the hiring of several AIG executives. It appears that Berkshire may be taking a broader share of the market. What is the goal of these moves, and won’t these actions eventually produce more average results?

To the Shareholders of Berkshire Hathaway Inc.: Our “Powerhouse Five” — a collection of Berkshire’s largest non-insurance businesses — had a record $12.4 billion of pre-tax earnings in 2014, up $1.6 billion from 2013.* The companies in this sainted group are Berkshire Hathaway Energy (formerly MidAmerican Energy), BNSF, IMC (I’ve called it Iscar in the past), Lubrizol and Marmon.

WARREN BUFFETT: The company that Greg runs has many subsidiaries. And our gas pipeline subsidiaries move about 8 percent of the gas in the United States. And I think you said you were from Omaha. And the gas that comes into this area comes through a pipeline that we own. And we just renamed the company to Berkshire Hathaway Energy, from MidAmerican Energy. We changed it to Berkshire Hathaway Energy. But, it’s a point of some pride to us that that company, Northern Natural Gas, which originally came from Omaha, when we bought that from Enron a decade or so ago — actually, Dynegy had it in between — but its origin then was Enron. You know, they’d skimped on maintenance, done all kinds of things. And it was ranked number 42 out of the 42 ranked pipelines in the United States at that time. And last year it was ranked number one. So it went from last to first under Greg’s management. And I tip my hat to him. (Applause) And number two was our other pipeline — current pipeline. So we’re running one, two at the moment. WARREN BUFFETT: Yeah. MidAmerican, now renamed Berkshire Hathaway Energy — we’ll call it BH Energy — will have multiple opportunities, I hope, and we’ve seen two of them in the last 12 months, to buy other businesses. And, as you noted, we spent a substantial amount of money on NV Energy and two days ago we agreed to buy transmission lines in Alberta. So, we will — we hope we will — and so far we’ve been able to — come up with really large businesses to buy at BH Energy. That will not — at BNSF, we will spend a lot of money to have the best railroad possible. But we’re not going to be buying other businesses. So, we distribute substantial money out of BNSF and we will continue to do so because it’ll earn substantial money. And it can easily handle the debt that it has and will incur. Whereas, at Berkshire Hathaway Energy, we have pretty much the appropriate level of debt at both the subsidiary and the parent company level. So as we buy things, we need not only the retained earnings that we have, but occasionally we need some money from the shareholders.