Berkshire Hathaway Inc

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.: