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

Year		Annual Percentage Change
		in Per-Share Book Value of Berkshire (1)	in S&P 500 with Dividends Included (2)	Relative Results (1)-(2)
1965		23.8	10.0	13.8
1966		20.3	(11.7)	32.0
1967		11.0	30.9	(19.9)
1968		19.0	11.0	8.0
1969		16.2	(8.4)	24.6
1970		12.0	3.9	8.1
1971		16.4	14.6	1.8
1972		21.7	18.9	2.8
1973		4.7	(14.8)	19.5
1974		5.5	(26.4)	31.9
1975		21.9	37.2	(15.3)
1976		59.3	23.6	35.7
1977		31.9	(7.4)	39.3
1978		24.0	6.4	17.6
1979		35.7	18.2	17.5
1980		19.3	32.3	(13.0)
1981		31.4	(5.0)	36.4
1982		40.0	21.4	18.6
1983		32.3	22.4	9.9
1984		13.6	6.1	7.5
1985		48.2	31.6	16.6
1986		26.1	18.6	7.5
1987		19.5	5.1	14.4
1988		20.1	16.6	3.5
1989		44.4	31.7	12.7
1990		7.4	(3.1)	10.5
1991		39.6	30.5	9.1
1992		20.3	7.6	12.7
1993		14.3	10.1	4.2
1994		13.9	1.3	12.6
1995		43.1	37.6	5.5
1996		31.8	23.0	8.8
1997		34.1	33.4	.7
1998		48.3	28.6	19.7
1999		.5	21.0	(20.5)
2000		6.5	(9.1)	15.6
2001		(6.2)	(11.9)	5.7
2002		10.0	(22.1)	32.1
2003		21.0	28.7	(7.7)
2004		10.5	10.9	(.4)
2005		6.4	4.9	1.5
2006		18.4	15.8	2.6
2007		11.0	5.5	5.5
2008		(9.6)	(37.0)	27.4
2009		19.8	26.5	(6.7)
2010		13.0	15.1	(2.1)
2011		4.6	2.1	2.5
Compounded Annual Gain – 1965-2011		19.8%	9.2%	10.6
Overall Gain – 1964-2011		513,055%	6,397%

Notes: Data are for calendar years with these exceptions: 1965 and 1966, year ended 9/30; 1967, 15 months ended 12/31. Starting in 1979, accounting rules required insurance companies to value the equity securities they hold at market rather than at the lower of cost or market, which was previously the requirement. In this table, Berkshire's results through 1978 have been restated to conform to the changed rules. In all other respects, the results are calculated using the numbers originally reported. The S&P 500 numbers are pre-tax whereas the Berkshire numbers are after-tax. If a corporation such as Berkshire were simply to have owned the S&P 500 and accrued the appropriate taxes, its results would have lagged the S&P 500 in years when that index showed a positive return, but would have exceeded the S&P 500 in years when the index showed a negative return. Over the years, the tax costs would have caused the aggregate lag to be substantial.

BERKSHIRE HATHAWAY INC.

To the Shareholders of Berkshire Hathaway Inc.:

The per-share book value of both our Class A and Class B stock increased by 4.6% in 2011. Over the last 47 years (that is, since present management took over), book value has grown from \$19 to \$99,860, a rate of 19.8% compounded annually.*

Charlie Munger, Berkshire's Vice Chairman and my partner, and I feel good about the company's progress during 2011. Here are the highlights:

- The primary job of a Board of Directors is to see that the right people are running the business and to be sure that the next generation of leaders is identified and ready to take over tomorrow. I have been on 19 corporate boards, and Berkshire’s directors are at the top of the list in the time and diligence they have devoted to succession planning. What’s more, their efforts have paid off.

As 2011 started, Todd Combs joined us as an investment manager, and shortly after yearend Ted Weschler came aboard. Both of these men have outstanding investment skills and a deep commitment to Berkshire. Each will be handling a few billion dollars in 2012, but they have the brains, judgment and character to manage our entire portfolio when Charlie and I are no longer running Berkshire.

Your Board is equally enthusiastic about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire. (We have two superb back-up candidates as well.) When a transfer of responsibility is required, it will be seamless, and Berkshire's prospects will remain bright. More than $98\%$ of my net worth is in Berkshire stock, all of which will go to various philanthropies. Being so heavily concentrated in one stock defies conventional wisdom. But I'm fine with this arrangement, knowing both the quality and diversity of the businesses we own and the caliber of the people who manage them. With these assets, my successor will enjoy a running start. Do not, however, infer from this discussion that Charlie and I are going anywhere; we continue to be in excellent health, and we love what we do.

- On September 16 $^{th}$ we acquired Lubrizol, a worldwide producer of additives and other specialty chemicals. The company has had an outstanding record since James Hambrick became CEO in 2004, with pre-tax profits increasing from \$147 million to \$1,085 million. Lubrizol will have many opportunities for “bolt-on” acquisitions in the specialty chemical field. Indeed, we’ve already agreed to three, costing \$493 million. James is a disciplined buyer and a superb operator. Charlie and I are eager to expand his managerial domain.

- Our major businesses did well last year. In fact, each of our five largest non-insurance companies – BNSF, Iscar, Lubrizol, Marmon Group and MidAmerican Energy – delivered record operating earnings. In aggregate these businesses earned more than \$9 billion pre-tax in 2011. Contrast that to seven years ago, when we owned only one of the five, MidAmerican, whose pre-tax earnings were \$393 million. Unless the economy weakens in 2012, each of our fabulous five should again set a record, with aggregate earnings comfortably topping \$10 billion.

- In total, our entire string of operating companies spent \$8.2 billion for property, plant and equipment in 2011, smashing our previous record by more than \$2 billion. About 95% of these outlays were made in the U.S., a fact that may surprise those who believe our country lacks investment opportunities. We welcome projects abroad, but expect the overwhelming majority of Berkshire's future capital commitments to be in America. In 2012, these expenditures will again set a record.

- Our insurance operations continued their delivery of costless capital that funds a myriad of other opportunities. This business produces “float” – money that doesn’t belong to us, but that we get to invest for Berkshire’s benefit. And if we pay out less in losses and expenses than we receive in premiums, we additionally earn an underwriting profit, meaning the float costs us less than nothing. Though we are sure to have underwriting losses from time to time, we’ve now had nine consecutive years of underwriting profits, totaling about \$17 billion. Over the same nine years our float increased from \$41 billion to its current record of \$70 billion. Insurance has been good to us.

- Finally, we made two major investments in marketable securities: (1) a \$5 billion 6% preferred stock of Bank of America that came with warrants allowing us to buy 700 million common shares at \$7.14 per share any time before September 2, 2021; and (2) 63.9 million shares of IBM that cost us \$10.9 billion. Counting IBM, we now have large ownership interests in four exceptional companies: 13.0% of American Express, 8.8% of Coca-Cola, 5.5% of IBM and 7.6% of Wells Fargo. (We also, of course, have many smaller, but important, positions.)

We view these holdings as partnership interests in wonderful businesses, not as marketable securities to be bought or sold based on their near-term prospects. Our share of their earnings, however, are far from fully reflected in our earnings; only the dividends we receive from these businesses show up in our financial reports. Over time, though, the undistributed earnings of these companies that are attributable to our ownership are of huge importance to us. That's because they will be used in a variety of ways to increase future earnings and dividends of the investee. They may also be devoted to stock repurchases, which will increase our share of the company's future earnings.

Had we owned our present positions throughout last year, our dividends from the “Big Four” would have been \$862 million. That’s all that would have been reported in Berkshire’s income statement. Our share of this quartet’s earnings, however, would have been far greater: \$3.3 billion. Charlie and I believe that the \$2.4 billion that goes unreported on our books creates at least that amount of value for Berkshire as it fuels earnings gains in future years. We expect the combined earnings of the four – and their dividends as well – to increase in 2012 and, for that matter, almost every year for a long time to come. A decade from now, our current holdings of the four companies might well account for earnings of \$7 billion, of which \$2 billion in dividends would come to us.

I've run out of good news. Here are some developments that hurt us during 2011:

- A few years back, I spent about \$2 billion buying several bond issues of Energy Future Holdings, an electric utility operation serving portions of Texas. That was a mistake – a big mistake. In large measure, the company’s prospects were tied to the price of natural gas, which tanked shortly after our purchase and remains depressed. Though we have annually received interest payments of about \$102 million since our purchase, the company’s ability to pay will soon be exhausted unless gas prices rise substantially. We wrote down our investment by \$1 billion in 2010 and by an additional \$390 million last year.

At yearend, we carried the bonds at their market value of \$878 million. If gas prices remain at present levels, we will likely face a further loss, perhaps in an amount that will virtually wipe out our current carrying value. Conversely, a substantial increase in gas prices might allow us to recoup some, or even all, of our write-down. However things turn out, I totally miscalculated the gain/loss probabilities when I purchased the bonds. In tennis parlance, this was a major unforced error by your chairman.

• Three large and very attractive fixed-income investments were called away from us by their issuers in 2011. Swiss Re, Goldman Sachs and General Electric paid us an aggregate of \$12.8 billion to redeem securities that were producing about \$1.2 billion of pre-tax earnings for Berkshire. That's a lot of income to replace, though our Lubrizol purchase did offset most of it.
• Last year, I told you that “a housing recovery will probably begin within a year or so.” I was dead wrong. We have five businesses whose results are significantly influenced by housing activity. The connection is direct at Clayton Homes, which is the largest producer of homes in the country, accounting for about 7% of those constructed during 2011.

Additionally, Acme Brick, Shaw (carpet), Johns Manville (insulation) and MiTek (building products, primarily connector plates used in roofing) are all materially affected by construction activity. In aggregate, our five housing-related companies had pre-tax profits of \$513 million in 2011. That's similar to 2010 but down from \$1.8 billion in 2006.

Housing will come back – you can be sure of that. Over time, the number of housing units necessarily matches the number of households (after allowing for a normal level of vacancies). For a period of years prior to 2008, however, America added more housing units than households. Inevitably, we ended up with far too many units and the bubble popped with a violence that shook the entire economy. That created still another problem for housing: Early in a recession, household formations slow, and in 2009 the decrease was dramatic.

That devastating supply/demand equation is now reversed: Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while “doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.

At our current annual pace of 600,000 housing starts – considerably less than the number of new households being formed – buyers and renters are sopping up what’s left of the old oversupply. (This process will run its course at different rates around the country; the supply-demand situation varies widely by locale.) While this healing takes place, however, our housing-related companies sputter, employing only 43,315 people compared to 58,769 in 2006. This hugely important sector of the economy, which includes not only construction but everything that feeds off of it, remains in a depression of its own. I believe this is the major reason a recovery in employment has so severely lagged the steady and substantial comeback we have seen in almost all other sectors of our economy.

Wise monetary and fiscal policies play an important role in tempering recessions, but these tools don't create households nor eliminate excess housing units. Fortunately, demographics and our market system will restore the needed balance – probably before long. When that day comes, we will again build one million or more residential units annually. I believe pundits will be surprised at how far unemployment drops once that happens. They will then reawake to what has been true since 1776: America's best days lie ahead.

Intrinsic Business Value

Charlie and I measure our performance by the rate of gain in Berkshire's per-share intrinsic business value. If our gain over time outstrips the performance of the S&P 500, we have earned our paychecks. If it doesn't, we are overpaid at any price.

We have no way to pinpoint intrinsic value. But we do have a useful, though considerably understated, proxy for it: per-share book value. This yardstick is meaningless at most companies. At Berkshire, however, book value very roughly tracks business values. That's because the amount by which Berkshire's intrinsic value exceeds book value does not swing wildly from year to year, though it increases in most years. Over time, the divergence will likely become ever more substantial in absolute terms, remaining reasonably steady, however, on a percentage basis as both the numerator and denominator of the business-value/book-value equation increase.

We've regularly emphasized that our book-value performance is almost certain to outpace the S&P 500 in a bad year for the stock market and just as certainly will fall short in a strong up-year. The test is how we do over time. Last year's annual report included a table laying out results for the 42 five-year periods since we took over at Berkshire in 1965 (i.e., 1965-69, 1966-70, etc.). All showed our book value beating the S&P, and our string held for 2007-11. It will almost certainly snap, though, if the S&P 500 should put together a five-year winning streak (which it may well be on its way to doing as I write this).

* * * * * * * * * * * *

I also included two tables last year that set forth the key quantitative ingredients that will help you estimate our per-share intrinsic value. I won't repeat the full discussion here; you can find it reproduced on pages 99-100. To update the tables shown there, our per-share investments in 2011 increased 4% to \$98,366, and our pre-tax earnings from businesses other than insurance and investments increased 18% to \$6,990 per share.

Charlie and I like to see gains in both areas, but our primary focus is on building operating earnings. Over time, the businesses we currently own should increase their aggregate earnings, and we hope also to purchase some large operations that will give us a further boost. We now have eight subsidiaries that would each be included in the Fortune 500 were they stand-alone companies. That leaves only 492 to go. My task is clear, and I'm on the prowl.

Share Repurchases

Last September, we announced that Berkshire would repurchase its shares at a price of up to 110% of book value. We were in the market for only a few days – buying \$67 million of stock – before the price advanced beyond our limit. Nonetheless, the general importance of share repurchases suggests I should focus for a bit on the subject.

Charlie and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company's intrinsic business value, conservatively calculated.

We have witnessed many bouts of repurchasing that failed our second test. Sometimes, of course, infractions – even serious ones – are innocent; many CEOs never stop believing their stock is cheap. In other instances, a less benign conclusion seems warranted. It doesn’t suffice to say that repurchases are being made to offset the dilution from stock issuances or simply because a company has excess cash. Continuing shareholders are hurt unless shares are purchased below intrinsic value. The first law of capital allocation – whether the money is slated for acquisitions or share repurchases – is that what is smart at one price is dumb at another. (One CEO who always stresses the price/value factor in repurchase decisions is Jamie Dimon at J.P. Morgan; I recommend that you read his annual letter.)

Charlie and I have mixed emotions when Berkshire shares sell well below intrinsic value. We like making money for continuing shareholders, and there is no surer way to do that than by buying an asset – our own stock – that we know to be worth at least x for less than that – for .9x, .8x or even lower. (As one of our directors says, it’s like shooting fish in a barrel, after the barrel has been drained and the fish have quit flopping.) Nevertheless, we don’t enjoy cashing out partners at a discount, even though our doing so may give the selling shareholders a slightly higher price than they would receive if our bid was absent. When we are buying, therefore, we want those exiting partners to be fully informed about the value of the assets they are selling.

At our limit price of 110% of book value, repurchases clearly increase Berkshire's per-share intrinsic value. And the more and the cheaper we buy, the greater the gain for continuing shareholders. Therefore, if given the opportunity, we will likely repurchase stock aggressively at our price limit or lower. You should know, however, that we have no interest in supporting the stock and that our bids will fade in particularly weak markets. Nor will we buy shares if our cash-equivalent holdings are below \$20 billion. At Berkshire, financial strength that is unquestionable takes precedence over all else.

* * * * * * * * * * * *

This discussion of repurchases offers me the chance to address the irrational reaction of many investors to changes in stock prices. When Berkshire buys stock in a company that is repurchasing shares, we hope for two events: First, we have the normal hope that earnings of the business will increase at a good clip for a long time to come; and second, we also hope that the stock underperforms in the market for a long time as well. A corollary to this second point: “Talking our book” about a stock we own – were that to be effective – would actually be harmful to Berkshire, not helpful as commentators customarily assume.

Let's use IBM as an example. As all business observers know, CEOs Lou Gerstner and Sam Palmisano did a superb job in moving IBM from near-bankruptcy twenty years ago to its prominence today. Their operational accomplishments were truly extraordinary.

But their financial management was equally brilliant, particularly in recent years as the company's financial flexibility improved. Indeed, I can think of no major company that has had better financial management, a skill that has materially increased the gains enjoyed by IBM shareholders. The company has used debt wisely, made value-adding acquisitions almost exclusively for cash and aggressively repurchased its own stock.

Today, IBM has 1.16 billion shares outstanding, of which we own about 63.9 million or $5.5\%$ . Naturally, what happens to the company's earnings over the next five years is of enormous importance to us. Beyond that, the company will likely spend \$50 billion or so in those years to repurchase shares. Our quiz for the day: What should a long-term shareholder, such as Berkshire, cheer for during that period?

I won't keep you in suspense. We should wish for IBM's stock price to languish throughout the five years.

Let's do the math. If IBM's stock price averages, say, \$200 during the period, the company will acquire 250 million shares for its \$50 billion. There would consequently be 910 million shares outstanding, and we would own about 7% of the company. If the stock conversely sells for an average of \$300 during the five-year period, IBM will acquire only 167 million shares. That would leave about 990 million shares outstanding after five years, of which we would own 6.5%.

If IBM were to earn, say, \$20 billion in the fifth year, our share of those earnings would be a full \$100 million greater under the “disappointing” scenario of a lower stock price than they would have been at the higher price. At some later point our shares would be worth perhaps \$1 ½ billion more than if the “high-price” repurchase scenario had taken place.

The logic is simple: If you are going to be a net buyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter: Most people, including those who will be net buyers in the future, take comfort in seeing stock prices advance. These shareholders resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day's supply.

Charlie and I don't expect to win many of you over to our way of thinking – we've observed enough human behavior to know the futility of that – but we do want you to be aware of our personal calculus. And here a confession is in order: In my early days I, too, rejoiced when the market rose. Then I read Chapter Eight of Ben Graham's The Intelligent Investor, the chapter dealing with how investors should view fluctuations in stock prices. Immediately the scales fell from my eyes, and low prices became my friend. Picking up that book was one of the luckiest moments in my life.

In the end, the success of our IBM investment will be determined primarily by its future earnings. But an important secondary factor will be how many shares the company purchases with the substantial sums it is likely to devote to this activity. And if repurchases ever reduce the IBM shares outstanding to 63.9 million, I will abandon my famed frugality and give Berkshire employees a paid holiday.

* * * * * * * * * * * *

Now, let's examine the four major sectors of our operations. Each has vastly different balance sheet and income characteristics from the others. Lumping them together therefore impedes analysis. So we'll present them as four separate businesses, which is how Charlie and I view them. Because we may be repurchasing Berkshire shares from some of you, we will offer our thoughts in each section as to how intrinsic value compares to carrying value.

Insurance

Let's look first at insurance, Berkshire's core operation and the engine that has propelled our expansion over the years.

Property-casualty (“P/C”) insurers receive premiums upfront and pay claims later. In extreme cases, such as those arising from certain workers’ compensation accidents, payments can stretch over decades. This collect-now, pay-later model leaves us holding large sums – money we call “float” – that will eventually go to others. Meanwhile, we get to invest this float for Berkshire’s benefit. Though individual policies and claims come and go, the amount of float we hold remains remarkably stable in relation to premium volume. Consequently, as our business grows, so does our float. And how we have grown, as the following table shows:

Year	Float (in $ millions)
1970	$ 39
1980	237
1990	1,632
2000	27,871
2010	65,832
2011	70,571

It's unlikely that our float will grow much – if at all – from its current level. That's mainly because we already have an outsized amount relative to our premium volume. Were there to be a decline in float, I will add, it would almost certainly be very gradual and therefore impose no unusual demand for funds on us.

If our premiums exceed the total of our expenses and eventual losses, we register an underwriting profit that adds to the investment income our float produces. When such a profit occurs, we enjoy the use of free money – and, better yet, get paid for holding it. Unfortunately, the wish of all insurers to achieve this happy result creates intense competition, so vigorous in most years that it causes the P/C industry as a whole to operate at a significant underwriting loss. For example, State Farm, by far the country’s largest insurer and a well-managed company besides, has incurred an underwriting loss in eight of the last eleven years. There are a lot of ways to lose money in insurance, and the industry is resourceful in creating new ones.

As noted in the first section of this report, we have now operated at an underwriting profit for nine consecutive years, our gain for the period having totaled \$17 billion. I believe it likely that we will continue to underwrite profitably in most – though certainly not all – future years. If we accomplish that, our float will be better than cost-free. We will profit just as we would if some party deposited \$70.6 billion with us, paid us a fee for holding its money and then let us invest its funds for our own benefit.

So how does this attractive float affect intrinsic value calculations? Our float is deducted in full as a liability in calculating Berkshire's book value, just as if we had to pay it out tomorrow and were unable to replenish it. But that's an incorrect way to view float, which should instead be viewed as a revolving fund. If float is both costless and long-enduring, the true value of this liability is far lower than the accounting liability.

Partially offsetting this overstated liability is \$15.5 billion of “goodwill” attributable to our insurance companies that is included in book value as an asset. In effect, this goodwill represents the price we paid for the float-generating capabilities of our insurance operations. The cost of the goodwill, however, has no bearing on its true value. If an insurance business produces large and sustained underwriting losses, any goodwill asset attributable to it should be deemed valueless, whatever its original cost.

Fortunately, that's not the case at Berkshire. Charlie and I believe the true economic value of our insurance goodwill – what we would pay to purchase float of similar quality – to be far in excess of its historic carrying value. The value of our float is one reason – a huge reason – why we believe Berkshire's intrinsic business value substantially exceeds book value.

Let me emphasize once again that cost-free float is not an outcome to be expected for the P/C industry as a whole: We don't think there is much “Berkshire-quality” float existing in the insurance world. In most years, including 2011, the industry’s premiums have been inadequate to cover claims plus expenses. Consequently, the industry's overall return on tangible equity has for many decades fallen far short of the average return realized by American industry, a sorry performance almost certain to continue. Berkshire's outstanding economics exist only because we have some terrific managers running some extraordinary insurance operations. Let me tell you about the major units.

* * * * * * * * * * * *

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.

From a standing start in 1985, Ajit has created an insurance business with float of \$34 billion and significant underwriting profits, a feat that no CEO of any other insurer has come close to matching. By these accomplishments, he has added a great many billions of dollars to the value of Berkshire. Charlie would gladly trade me for a second Ajit. Alas, there is none.

* * * * * * * * * * * *

We have another insurance powerhouse in General Re, managed by Tad Montross.

At bottom, a sound insurance operation needs to adhere to four disciplines. It must (1) understand all exposures that might cause a policy to incur losses; (2) conservatively evaluate the likelihood of any exposure actually causing a loss and the probable cost if it does; (3) set a premium that will deliver a profit, on average, after both prospective loss costs and operating expenses are covered; and (4) be willing to walk away if the appropriate premium can't be obtained.

Many insurers pass the first three tests and flunk the fourth. They simply can't turn their back on business that their competitors are eagerly writing. That old line, “The other guy is doing it so we must as well,” spells trouble in any business, but in none more so than insurance. Indeed, a good underwriter needs an independent mindset akin to that of the senior citizen who received a call from his wife while driving home. “Albert, be careful,” she warned, “I just heard on the radio that there’s a car going the wrong way down the Interstate.” “Mabel, they don’t know the half of it,” replied Albert, “It’s not just one car, there are hundreds of them.”

Tad has observed all four of the insurance commandments, and it shows in his results. General Re's huge float has been better than cost-free under his leadership, and we expect that, on average, it will continue to be. In the first few years after we acquired it, General Re was a major headache. Now it's a treasure.

* * * * * * * * * * * *

Finally, there is GEICO, the insurer on which I cut my teeth 61 years ago. GEICO is run by Tony Nicely, who joined the company at 18 and completed 50 years of service in 2011.

GEICO's much-envied record comes from Tony's brilliant execution of a superb and almost-impossible-to-replicate business model. During Tony's 18-year tenure as CEO, our market share has grown from $2.0\%$ to $9.3\%$ . If it had instead remained static – as it had for more than a decade before he took over – our premium volume would now be \$3.3 billion rather than the \$15.4 billion we attained in 2011. The extra value created by Tony and his associates is a major element in Berkshire's excess of intrinsic value over book value.

There is still more than $90\%$ of the auto-insurance market left for GEICO to rake in. Don't bet against Tony acquiring chunks of it year after year in the future. Our low costs permit low prices, and every day more Americans discover that the Gecko is doing them a favor when he urges them to visit GEICO.com for a quote. (Our lizard has another endearing quality: Unlike human spokesmen or spokeswoman who expensively represent other insurance companies, our little fellow has no agent.)

* * * * * * * * * * * *

In addition to our three major insurance operations, we own a group of smaller companies, most of them plying their trade in odd corners of the insurance world. In aggregate, their results have consistently been profitable and the float they provide us is substantial. Charlie and I treasure these companies and their managers.

At yearend, we acquired Princeton Insurance, a New Jersey writer of medical malpractice policies. This bolt-on transaction expands the managerial domain of Tim Kenesey, the star CEO of Medical Protective, our Indiana-based med-mal insurer. Princeton brings with it more than \$600 million of float, an amount that is included in the following table.

Here is the record of all four segments of our property-casualty and life insurance businesses:

	Underwriting Profit		Yearend Float
	(in millions)
Insurance Operations	2011	2010	2011	2010
BH Reinsurance	$(714)	$176	$33,728	$30,370
General Re	144	452	19,714	20,049
GEICO	576	1,117	11,169	10,272
Other Primary	242	268	5,960	5,141
	$248	$2,013	$70,571	$65,832

Among large insurance operations, Berkshire's impresses me as the best in the world.

Regulated, Capital-Intensive Businesses

We have two very large businesses, BNSF and MidAmerican Energy, that have important common characteristics distinguishing them from our many other businesses. Consequently, we assign them their own sector in this letter and also split out their combined financial statistics in our GAAP balance sheet and income statement.

A key characteristic of both companies is the huge investment they have in very long-lived, regulated assets, with these partially funded by large amounts of long-term debt that is not guaranteed by Berkshire. Our credit is not needed: Both businesses have earning power that even under terrible business conditions amply covers their interest requirements. In a less than robust economy during 2011, for example, BNSF's interest coverage was $9.5\mathrm{x}$ . At MidAmerican, meanwhile, two key factors ensure its ability to service debt under all circumstances: The stability of earnings that is inherent in our exclusively offering an essential service and a diversity of earnings streams, which shield it from the actions of any single regulatory body.

Measured by ton-miles, rail moves $42\%$ of America's inter-city freight, and BNSF moves more than any other railroad - about $37\%$ of the industry total. A little math will tell you that about $15\%$ of all inter-city ton-miles of freight in the U.S. is transported by BNSF. It is no exaggeration to characterize railroads as the circulatory system of our economy. Your railroad is the largest artery.

All of this places a huge responsibility on us. We must, without fail, maintain and improve our 23,000 miles of track along with 13,000 bridges, 80 tunnels, 6,900 locomotives and 78,600 freight cars. This job requires us to have ample financial resources under all economic scenarios and to have the human talent that can instantly and effectively deal with the vicissitudes of nature, such as the widespread flooding BNSF labored under last summer.

To fulfill its societal obligation, BNSF regularly invests far more than its depreciation charge, with the excess amounting to \$1.8 billion in 2011. The three other major U.S. railroads are making similar outlays. Though many people decry our country's inadequate infrastructure spending, that criticism cannot be levied against the railroad industry. It is pouring money – funds from the private sector – into the investment projects needed to provide better and more extensive service in the future. If railroads were not making these huge expenditures, our country's publicly-financed highway system would face even greater congestion and maintenance problems than exist today.

Massive investments of the sort that BNSF is making would be foolish if it could not earn appropriate returns on the incremental sums it commits. But I am confident it will do so because of the value it delivers. Many years ago Ben Franklin counseled, “Keep thy shop, and thy shop will keep thee.” Translating this to our regulated businesses, he might today say, “Take care of your customer, and the regulator – your customer’s representative – will take care of you.” Good behavior by each party begets good behavior in return.

At MidAmerican, we participate in a similar “social compact.” We are expected to put up ever-increasing sums to satisfy the future needs of our customers. If we meanwhile operate reliably and efficiently, we know that we will obtain a fair return on these investments.

MidAmerican, 89.8% owned by Berkshire, supplies 2.5 million customers in the U.S. with electricity, operating as the largest supplier in Iowa, Utah and Wyoming and as an important provider in six other states as well. Our pipelines transport 8% of the country’s natural gas. Obviously, many millions of Americans depend on us every day. They haven’t been disappointed.

When MidAmerican purchased Northern Natural Gas pipeline in 2002, that company's performance as a pipeline was rated dead last, 43 out of 43, by the leading authority in the field. In the most recent report, Northern Natural was ranked second. The top spot was held by our other pipeline, Kern River.

In its electric business, MidAmerican has a comparable record. In the most recent survey of customer satisfaction, MidAmerican's U.S. utilities ranked second among 60 utility groups surveyed. The story was far different not many years back when MidAmerican acquired these properties.

MidAmerican will have 3,316 megawatts of wind generation in operation by the end of 2012, far more than any other regulated electric utility in the country. The total amount that we have invested or committed to wind is a staggering \$6 billion. We can make this sort of investment because MidAmerican retains all of its earnings, unlike other utilities that generally pay out most of what they earn. In addition, late last year we took on two solar projects – one 100%-owned in California and the other 49%-owned in Arizona – that will cost about \$3 billion to construct. Many more wind and solar projects will almost certainly follow.

As you can tell by now, I am proud of what has been accomplished for our society by Matt Rose at BNSF and by Greg Abel at MidAmerican. I am also both proud and grateful for what they have accomplished for Berkshire shareholders. Below are the relevant figures:

MidAmerican	Earnings (in millions)
	2011	2010
U.K. utilities	$469	$333
Iowa utility	279	279
Western utilities	771	783
Pipelines	388	378
HomeServices	39	42
Other (net)	36	47
Operating earnings before corporate interest and taxes	1,982	1,862
Interest, other than to Berkshire	(323)	(323)
Interest on Berkshire junior debt	(13)	(30)
Income tax	(315)	(271)
Net earnings	$1,331	$1,238
Earnings applicable to Berkshire*	$1,204	$1,131

*Includes interest earned by Berkshire (net of related income taxes) of \$8 in 2011 and \$19 in 2010.

BNSF

(Historical accounting through 2/12/10; purchase accounting subsequently)	(in millions)
	2011	2010
Revenues	$19,548	$16,850
Operating earnings	5,310	4,495
Interest (Net)	560	507
Pre-Tax earnings	4,741	3,988
Net earnings	2,972	2,459

In the book value recorded on our balance sheet, BNSF and MidAmerican carry substantial goodwill components totaling \$20 billion. In each instance, however, Charlie and I believe current intrinsic value is far greater than book value.

Manufacturing, Service and Retailing Operations

Our activities in this part of Berkshire cover the waterfront. Let's look, though, at a summary balance sheet and earnings statement for the entire group.

Balance Sheet 12/31/11 (in millions)

Assets		Liabilities and Equity
Cash and equivalents	$4,241	Notes payable	$1,611
Accounts and notes receivable	6,584	Other current liabilities	15,124
Inventory	8,975	Total current liabilities	16,735
Other current assets	631
Total current assets	20,431
		Deferred taxes	4,661
Goodwill and other intangibles	24,755	Term debt and other liabilities	6,214
Fixed assets	17,866	Non-controlling interests	2,410
Other assets	3,661	Berkshire equity	36,693
	$66,713		$66,713

Earnings Statement (in millions)

	2011**	2010	2009
Revenues	$72,406	$66,610	$61,665
Operating expenses (including depreciation of $1,431 in 2011,$1,362 in 2010 and $1,422 in 2009)	67,239	62,225	59,509
Interest expense	130	111	98
Pre-tax earnings	5,037*	4,274*	2,058*
Income taxes and non-controlling interests	1,998	1,812	945
Net earnings	$3,039	$2,462	$1,113

*Does not include purchase-accounting adjustments.
**Includes earnings of Lubrizol from September 16.

This group of companies sells products ranging from lollipops to jet airplanes. Some of the businesses enjoy terrific economics, measured by earnings on unleveraged net tangible assets that run from 25% after-tax to more than 100%. Others produce good returns in the area of 12-20%. A few, however, have very poor returns, a result of some serious mistakes I made in my job of capital allocation. These errors came about because I misjudged either the competitive strength of the business being purchased or the future economics of the industry in which it operated. I try to look out ten or twenty years when making an acquisition, but sometimes my eyesight has been poor. Charlie's has been better; he voted no more than “present” on several of my errant purchases.

Berkshire's newer shareholders may be puzzled over our decision to hold on to my mistakes. After all, their earnings can never be consequential to Berkshire's valuation, and problem companies require more managerial time than winners. Any management consultant or Wall Street advisor would look at our laggards and say “dump them.”

That won't happen. For 29 years, we have regularly laid out Berkshire's economic principles in these reports (pages 93-98) and Number 11 describes our general reluctance to sell poor performers (which, in most cases, lag because of industry factors rather than managerial shortcomings). Our approach is far from Darwinian, and many of you may disapprove of it. I can understand your position. However, we have made – and continue to make – a commitment to the sellers of businesses we buy that we will retain those businesses through thick and thin. So far, the dollar cost of that commitment has not been substantial and may well be offset by the goodwill it builds among prospective sellers looking for the right permanent home for their treasured business and loyal associates. These owners know that what they get with us can't be delivered by others and that our commitments will be good for many decades to come.

Please understand, however, that Charlie and I are neither masochists nor Pollyannas. If either of the failings we set forth in Rule 11 is present – if the business will likely be a cash drain over the longer term, or if labor strife is endemic – we will take prompt and decisive action. Such a situation has happened only a couple of times in our 47-year history, and none of the businesses we now own is in straits requiring us to consider disposing of it.

* * * * * * * * * * * *

The steady and substantial comeback in the U.S. economy since mid-2009 is clear from the earnings shown at the front of this section. This compilation includes 54 of our companies. But one of these, Marmon, is itself the owner of 140 operations in eleven distinct business sectors. In short, when you look at Berkshire, you are looking across corporate America. So let's dig a little deeper to gain a greater insight into what has happened in the last few years.

The four housing-related companies in this section (a group that excludes Clayton, which is carried under Finance and Financial Products) had aggregate pre-tax earnings of \$227 million in 2009, \$362 million in 2010 and \$359 million in 2011. If you subtract these earnings from those in the combined statement, you will see that our multiple and diverse non-housing operations earned \$1,831 million in 2009, \$3,912 million in 2010 and \$4,678 million in 2011. About \$291 million of the 2011 earnings came from the Lubrizol acquisition. The profile of the remaining 2011 earnings – \$4,387 million – illustrates the comeback of much of America from the devastation wrought by the 2008 financial panic. Though housing-related businesses remain in the emergency room, most other businesses have left the hospital with their health fully restored.

* * * * * * * * * * * *

Almost all of our managers delivered outstanding performances last year, among them those managers who run housing-related businesses and were therefore fighting hurricane-force headwinds. Here are a few examples:

• Vic Mancinelli again set a record at CTB, our agricultural equipment operation. We purchased CTB in 2002 for \$139 million. It has subsequently distributed \$180 million to Berkshire, last year earned \$124 million pre-tax and has \$109 million in cash. Vic has made a number of bolt-on acquisitions over the years, including a meaningful one he signed up after yearend.
• TTI, our electric components distributor, increased its sales to a record \$2.1 billion, up 12.4% from 2010. Earnings also hit a record, up 127% from 2007, the year in which we purchased the business. In 2011, TTI performed far better than the large publicly-traded companies in its field. That's no surprise: Paul Andrews and his associates have been besting them for years. Charlie and I are delighted that Paul negotiated a large bolt-on acquisition early in 2012. We hope more follow.
• Iscar, our 80%-owned cutting-tools operation, continues to amaze us. Its sales growth and overall performance are unique in its industry. Iscar's managers – Eitan Wertheimer, Jacob Harpaz and Danny Goldman – are brilliant strategists and operators. When the economic world was cratering in November 2008, they stepped up to buy Tungaloy, a leading Japanese cutting-tool manufacturer. Tungaloy suffered significant damage when the tsunami hit north of Tokyo last spring. But you wouldn't know that now: Tungaloy went on to set a sales record in 2011. I visited the Iwaki plant in November and was inspired by the dedication and enthusiasm of Tungaloy's management, as well as its staff. They are a wonderful group and deserve your admiration and thanks.
• McLane, our huge distribution company that is run by Grady Rosier, added important new customers in 2011 and set a pre-tax earnings record of \$370 million. Since its purchase in 2003 for \$1.5 billion, the company has had pre-tax earnings of \$2.4 billion and also increased its LIFO reserve by \$230 million because the prices of the retail products it distributes (candy, gum, cigarettes, etc.) have risen. Grady runs a logistical machine second to none. You can look for bolt-ons at McLane, particularly in our new wine-and-spirits distribution business.

- Jordan Hansell took over at NetJets in April and delivered 2011 pre-tax earnings of \$227 million. That is a particularly impressive performance because the sale of new planes was slow during most of the year. In December, however, there was an uptick that was more than seasonally normal. How permanent it will be is uncertain.

A few years ago NetJets was my number one worry: Its costs were far out of line with revenues, and cash was hemorrhaging. Without Berkshire's support, NetJets would have gone broke. These problems are behind us, and Jordan is now delivering steady profits from a well-controlled and smoothly-running operation. NetJets is proceeding on a plan to enter China with some first-class partners, a move that will widen our business “moat.” No other fractional-ownership operator has remotely the size and breadth of the NetJets operation, and none ever will. NetJets’ unrelenting focus on safety and service has paid off in the marketplace.

- It's a joy to watch Marmon's progress under Frank Ptak's leadership. In addition to achieving internal growth, Frank regularly makes bolt-on acquisitions that, in aggregate, will materially increase Marmon's earning power. (He did three, costing about \$270 million, in the last few months.) Joint ventures around the world are another opportunity for Marmon. At midyear Marmon partnered with the Kundalia family in an Indian crane operation that is already delivering substantial profits. This is Marmon's second venture with the family, following a successful wire and cable partnership instituted a few years ago.

Of the eleven major sectors in which Marmon operates, ten delivered gains in earnings last year. You can be confident of higher earnings from Marmon in the years ahead.

- “Buy commodities, sell brands” has long been a formula for business success. It has produced enormous and sustained profits for Coca-Cola since 1886 and Wrigley since 1891. On a smaller scale, we have enjoyed good fortune with this approach at See’s Candy since we purchased it 40 years ago.

Last year See’s had record pre-tax earnings of \$83 million, bringing its total since we bought it to \$1.65 billion. Contrast that figure with our purchase price of \$25 million and our yearend carrying-value (net of cash) of less than zero. (Yes, you read that right; capital employed at See’s fluctuates seasonally, hitting a low after Christmas.) Credit Brad Kinstler for taking the company to new heights since he became CEO in 2006.

- Nebraska Furniture Mart (80% owned) set an earnings record in 2011, netting more than ten times what it did in 1983, when we acquired our stake.

But that's not the big news. More important was NFM's acquisition of a 433-acre tract north of Dallas on which we will build what is almost certain to be the highest-volume home-furnishings store in the country. Currently, that title is shared by our two stores in Omaha and Kansas City, each of which had record-setting sales of more than \$400 million in 2011. It will be several years before the Texas store is completed, but I look forward to cutting the ribbon at the opening. (At Berkshire, the managers do the work; I take the bows.)

Our new store, which will offer an unequalled variety of merchandise sold at prices that can't be matched, will bring huge crowds from near and far. This drawing power and our extensive holdings of land at the site should enable us to attract a number of other major stores. (If any high-volume retailers are reading this, contact me.)

Our experience with NFM and the Blumkin family that runs it has been a real joy. The business was built by Rose Blumkin (known to all as “Mrs. B”), who started the company in 1937 with \$500 and a dream. She sold me our interest when she was 89 and worked until she was 103. (After retiring, she died the next year, a sequence I point out to any other Berkshire manager who even thinks of retiring.)

Mrs. B's son, Louie, now 92, helped his mother build the business after he returned from World War II and, along with his wife, Fran, has been my friend for 55 years. In turn, Louie's sons, Ron and Irv, have taken the company to new heights, first opening the Kansas City store and now gearing up for Texas.

The “boys” and I have had many great times together, and I count them among my best friends. The Blumkins are a remarkable family. Never inclined to let an extraordinary gene pool go to waste, I am rejoicing these days because several members of the fourth Blumkin generation have joined NFM.

Overall, the intrinsic value of the businesses in this Berkshire sector significantly exceeds their book value. For many of the smaller companies, however, this is not true. I have made more than my share of mistakes buying small companies. Charlie long ago told me, “If something’s not worth doing at all, it’s not worth doing well,” and I should have listened harder. In any event, our large purchases have generally worked well – extraordinarily well in a few cases – and overall this sector is a winner for us.

* * * * * * * * * * * *

Certain shareholders have told me they hunger for more discussions of accounting arcana. So here's a bit of GAAP-mandated nonsense I hope both of them enjoy.

Common sense would tell you that our varied subsidiaries should be carried on our books at their cost plus the earnings they have retained since our purchase (unless their economic value has materially decreased, in which case an appropriate write-down must be taken). And that's essentially the reality at Berkshire – except for the weird situation at Marmon.

We purchased 64% of the company in 2008 and put this interest on our books at our cost, \$4.8 billion. So far, so good. Then, in early 2011, pursuant to our original contract with the Pritzker family, we purchased an additional 16%, paying \$1.5 billion as called for by a formula that reflected Marmon's increased value. In this instance, however, we were required to immediately write off \$614 million of the purchase price retroactive to the end of 2010. (Don't ask!) Obviously, this write-off had no connection to economic reality. The excess of Marmon's intrinsic value over its carrying value is widened by this meaningless write-down.

Finance and Financial Products

This sector, our smallest, includes two rental companies, XTRA (trailers) and CORT (furniture), and Clayton Homes, the country's leading producer and financer of manufactured homes. Aside from these $100\%$ -owned subsidiaries, we also include in this category a collection of financial assets and our $50\%$ interest in Berkadia Commercial Mortgage.

It's instructive to look at what transpired at our three operating businesses after the economy fell off a cliff in late 2008, because their experiences illuminate the fractured recovery that later came along.

Results at our two leasing companies mirrored the “non-housing” economy. Their combined pre-tax earnings were \$13 million in 2009, \$53 million in 2010 and \$155 million in 2011, an improvement reflecting the steady recovery we have seen in almost all of our non-housing businesses. In contrast, Clayton’s world of manufactured housing (just like site-built housing) has endured a veritable depression, experiencing no recovery to date. Manufactured housing sales in the nation were 49,789 homes in 2009, 50,046 in 2010 and 51,606 in 2011. (When housing was booming in 2005, they were 146,744.)

Despite these difficult times, Clayton has continued to operate profitably, largely because its mortgage portfolio has performed well under trying circumstances. Because we are the largest lender in the manufactured homes sector and are also normally lending to lower-and-middle-income families, you might expect us to suffer heavy losses during a housing meltdown. But by sticking to old-fashioned loan policies – meaningful down payments and monthly payments with a sensible relationship to regular income – Clayton has kept losses to acceptable levels. It has done so even though many of our borrowers have had negative equity for some time.

As is well-known, the U.S. went off the rails in its home-ownership and mortgage-lending policies, and for these mistakes our economy is now paying a huge price. All of us participated in the destructive behavior – government, lenders, borrowers, the media, rating agencies, you name it. At the core of the folly was the almost universal belief that the value of houses was certain to increase over time and that any dips would be inconsequential. The acceptance of this premise justified almost any price and practice in housing transactions. Homeowners everywhere felt richer and rushed to “monetize” the increased value of their homes by refinancings. These massive cash infusions fueled a consumption binge throughout our economy. It all seemed great fun while it lasted. (A largely unnoted fact: Large numbers of people who have “lost” their house through foreclosure have actually realized a profit because they carried out refinancings earlier that gave them cash in excess of their cost. In these cases, the evicted homeowner was the winner, and the victim was the lender.)

In 2007, the bubble burst, just as all bubbles must. We are now in the fourth year of a cure that, though long and painful, is sure to succeed. Today, household formations are consistently exceeding housing starts.

Clayton's earnings should improve materially when the nation's excess housing inventory is worked off. As I see things today, however, I believe the intrinsic value of the three businesses in this sector does not differ materially from their book value.

Investments

Below we show our common stock investments that at yearend had a market value of more than \$1 billion.

Shares	Company	Percentage of Company Owned	12/31/11
			Cost*	Market
			(in millions)
151,610,700	American Express Company	13.0	$ 1,287	$ 7,151
200,000,000	The Coca-Cola Company	8.8	1,299	13,994
29,100,937	ConocoPhillips	2.3	2,027	2,121
63,905,931	International Business Machines Corp.	5.5	10,856	11,751
31,416,127	Johnson & Johnson	1.2	1,880	2,060
79,034,713	Kraft Foods Inc.	4.5	2,589	2,953
20,060,390	Munich Re	11.3	2,990	2,464
3,947,555	POSCO	5.1	768	1,301
72,391,036	The Procter & Gamble Company	2.6	464	4,829
25,848,838	Sanofi	1.9	2,055	1,900
291,577,428	Tesco plc	3.6	1,719	1,827
78,060,769	U.S. Bancorp	4.1	2,401	2,112
39,037,142	Wal-Mart Stores, Inc.	1.1	1,893	2,333
400,015,828	Wells Fargo & Company	7.6	9,086	11,024
	Others		6,895	9,171
	Total Common Stocks Carried at Market		$48,209	$76,991

*This is our actual purchase price and also our tax basis; GAAP “cost” differs in a few cases because of write-ups or write-downs that have been required.

We made few changes in our investment holdings during 2011. But three moves were important: our purchases of IBM and Bank of America and the \$1 billion addition we made to our Wells Fargo position.

The banking industry is back on its feet, and Wells Fargo is prospering. Its earnings are strong, its assets solid and its capital at record levels. At Bank of America, some huge mistakes were made by prior management. Brian Moynihan has made excellent progress in cleaning these up, though the completion of that process will take a number of years. Concurrently, he is nurturing a huge and attractive underlying business that will endure long after today's problems are forgotten. Our warrants to buy 700 million Bank of America shares will likely be of great value before they expire.

As was the case with Coca-Cola in 1988 and the railroads in 2006, I was late to the IBM party. I have been reading the company's annual report for more than 50 years, but it wasn't until a Saturday in March last year that my thinking crystallized. As Thoreau said, "It's not what you look at that matters, it's what you see."

Todd Combs built a \$1.75 billion portfolio (at cost) last year, and Ted Weschler will soon create one of similar size. Each of them receives 80% of his performance compensation from his own results and 20% from his partner's. When our quarterly filings report relatively small holdings, these are not likely to be buys I made (though the media often overlook that point) but rather holdings denoting purchases by Todd or Ted.

One additional point about these two new arrivals. Both Ted and Todd will be helpful to the next CEO of Berkshire in making acquisitions. They have excellent “business minds” that grasp the economic forces likely to determine the future of a wide variety of businesses. They are aided in their thinking by an understanding of what is predictable and what is unknowable.

* * * * * * * * * * * *

There is little new to report on our derivatives positions, which we have described in detail in past reports. (Annual reports since 1977 are available at www.berkshirehathaway.com.) One important industry change, however, must be noted: Though our existing contracts have very minor collateral requirements, the rules have changed for new positions. Consequently, we will not be initiating any major derivatives positions. We shun contracts of any type that could require the instant posting of collateral. The possibility of some sudden and huge posting requirement – arising from an out-of-the-blue event such as a worldwide financial panic or massive terrorist attack – is inconsistent with our primary objectives of redundant liquidity and unquestioned financial strength.

Our insurance-like derivatives contracts, whereby we pay if various issues included in high-yield bond indices default, are coming to a close. The contracts that most exposed us to losses have already expired, and the remainder will terminate soon. In 2011, we paid out \$86 million on two losses, bringing our total payments to \$2.6 billion. We are almost certain to realize a final “underwriting profit” on this portfolio because the premiums we received were \$3.4 billion, and our future losses are apt to be minor. In addition, we will have averaged about \$2 billion of float over the five-year life of these contracts. This successful result during a time of great credit stress underscores the importance of obtaining a premium that is commensurate with the risk.

Charlie and I continue to believe that our equity-put positions will produce a significant profit, considering both the \$4.2 billion of float we will have held for more than fifteen years and the \$222 million profit we’ve already realized on contracts that we repurchased. At yearend, Berkshire’s book value reflected a liability of \$8.5 billion for the remaining contracts; if they had all come due at that time our payment would have been \$6.2 billion.

The Basic Choices for Investors and the One We Strongly Prefer

Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power – after taxes have been paid on nominal gains – in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.

From our definition there flows an important corollary: The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability – the reasoned probability – of that investment causing its owner a loss of purchasing-power over his contemplated holding period. Assets can fluctuate greatly in price and not be risky as long as they are reasonably certain to deliver increased purchasing power over their holding period. And as we will see, a non-fluctuating asset can be laden with risk.

Investment possibilities are both many and varied. There are three major categories, however, and it's important to understand the characteristics of each. So let's survey the field.

- Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge.

Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control.

Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than \$7 today to buy what \$1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as “income.”

For tax-paying investors like you and me, the picture has been far worse. During the same 47-year period, continuous rolling of U.S. Treasury bills produced 5.7% annually. That sounds satisfactory. But if an individual investor paid personal income taxes at a rate averaging 25%, this 5.7% return would have yielded nothing in the way of real income. This investor's visible income tax would have stripped him of 1.4 points of the stated yield, and the invisible inflation tax would have devoured the remaining 4.3 points. It's noteworthy that the implicit inflation “tax” was more than triple the explicit income tax that our investor probably thought of as his main burden. “In God We Trust” may be imprinted on our currency, but the hand that activates our government's printing press has been all too human.

High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based investments – and indeed, rates in the early 1980s did that job nicely. Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label.

Under today's conditions, therefore, I do not like currency-based investments. Even so, Berkshire holds significant amounts of them, primarily of the short-term variety. At Berkshire the need for ample liquidity occupies center stage and will never be slighted, however inadequate rates may be. Accommodating this need, we primarily hold U.S. Treasury bills, the only investment that can be counted on for liquidity under the most chaotic of economic conditions. Our working level for liquidity is \$20 billion; \$10 billion is our absolute minimum.

Beyond the requirements that liquidity and regulators impose on us, we will purchase currency-related securities only if they offer the possibility of unusual gain – either because a particular credit is mispriced, as can occur in periodic junk-bond debacles, or because rates rise to a level that offers the possibility of realizing substantial capital gains on high-grade bonds when rates fall. Though we’ve exploited both opportunities in the past – and may do so again – we are now 180 degrees removed from such prospects. Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago seems apt: “Bonds promoted as offering risk-free returns are now priced to deliver return-free risk.”

- The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer's hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the $17^{\text{th}}$ century.

This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future.

The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.

What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.

Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.”

Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At \$1,750 per ounce – gold's price as I write this – its value would be \$9.6 trillion. Call this cube pile A.

Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about \$200 billion annually), plus 16 Exxon Mobils (the world's most profitable company, one earning more than \$40 billion annually). After these purchases, we would have about \$1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with \$9.6 trillion selecting pile A over pile B?

Beyond the staggering valuation given the existing stock of gold, current prices make today's annual production of gold command about \$160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

Admittedly, when people a century from now are fearful, it's likely many will still rush to gold. I'm confident, however, that the \$9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.

- Our first two categories enjoy maximum popularity at peaks of fear: Terror over economic collapse drives individuals to currency-based assets, most particularly U.S. obligations, and fear of currency collapse fosters movement to sterile assets such as gold. We heard “cash is king” in late 2008, just when cash should have been deployed rather than held. Similarly, we heard “cash is trash” in the early 1980s just when fixed-dollar investments were at their most attractive level in memory. On those occasions, investors who required a supportive crowd paid dearly for that comfort.

My own preference – and you knew this was coming – is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola, IBM and our own See’s Candy meet that double-barreled test. Certain other companies – think of our regulated utilities, for example – fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.

Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See's peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce.

Our country's businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial “cows” will live for centuries and give ever greater quantities of “milk” to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they did during the 20 $^{th}$ century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well). Berkshire’s goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety – but we will also be owners by way of holding sizable amounts of marketable stocks. I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined. More important, it will be by far the safest.

The Annual Meeting

The annual meeting will be held on Saturday, May 5 $^{th}$ at the CenturyLink Center (renamed from “Qwest”). Last year, Carrie Kizer debuted as the ringmaster and earned a lifetime assignment. Everyone loved the job she did – especially me.

Soon after the 7 a.m. opening of the doors, we will have a new activity: The Newspaper Tossing Challenge. Late last year, Berkshire purchased the Omaha World-Herald and, in my meeting with its shareholder-employees, I told of the folding and throwing skills I developed while delivering 500,000 papers as a teenager.

I immediately saw skepticism in the eyes of the audience. That was no surprise to me. After all, the reporters' mantra is: "If your mother says she loves you, check it out." So now I have to back up my claim. At the meeting, I will take on all comers in making 35-foot tosses of the World-Herald to a Clayton porch. Any challenger whose paper lands closer to the doorstep than mine will receive a dilly bar. I've asked Dairy Queen to supply several for the contest, though I doubt that any will be needed. We will have a large stack of papers. Grab one. Fold it (no rubber bands). Take your best shot. Make my day.

At 8:30, a new Berkshire movie will be shown. An hour later, we will start the question-and-answer period, which (with a break for lunch at the CenturyLink's stands) will last until 3:30. After a short recess, Charlie and I will convene the annual meeting at 3:45. If you decide to leave during the day's question periods, please do so while Charlie is talking.

The best reason to exit, of course, is to shop. We will help you do so by filling the 194,300-square-foot hall that adjoins the meeting area with products from dozens of Berkshire subsidiaries. Last year, you did your part, and most locations racked up record sales. In a nine-hour period, we sold 1,249 pairs of Justin boots, 11,254 pounds of See's candy, 8,000 Quikut knives (that's 15 knives per minute) and 6,126 pairs of Wells Lamont gloves, a Marmon product whose very existence was news to me. (The product I focus on is money.) But you can do better. Remember: Anyone who says money can't buy happiness simply hasn't shopped at our meeting.

Among the new exhibitors this year will be Brooks, our running-shoe company. Brooks has been gobbling up market share and in 2011 had a sales gain of 34%, its tenth consecutive year of record volume. Drop by and congratulate Jim Weber, the company's CEO. And be sure to buy a couple of pairs of limited edition “Berkshire Hathaway Running Shoes.”

GEICO will have a booth staffed by a number of its top counselors from around the country, all of them ready to supply you with auto insurance quotes. In most cases, GEICO will be able to give you a shareholder discount (usually 8%). This special offer is permitted by 44 of the 51 jurisdictions in which we operate. (One supplemental point: The discount is not additive if you qualify for another, such as that given certain groups.) Bring the details of your existing insurance and check out whether we can save you money. For at least half of you, I believe we can.

Be sure to visit the Bookworm. It will carry more than 35 books and DVDs, including a couple of new ones. I recommend MiTek, an informative history of one of our very successful subsidiaries. You’ll learn how my interest in the company was originally piqued by my receiving in the mail a hunk of ugly metal whose purpose I couldn’t fathom. Since we bought MiTek in 2001, it has made 33 “tuck-in” acquisitions, almost all successful. I think you’ll also like a short book that Peter Bevelin has put together explaining Berkshire’s investment and operating principles. It sums up what Charlie and I have been saying over the years in annual reports and at annual meetings. Should you need to ship your book purchases, a shipping service will be available nearby.

If you are a big spender – or aspire to become one – visit Elliott Aviation on the east side of the Omaha airport between noon and 5:00 p.m. on Saturday. There we will have a fleet of NetJets aircraft that will get your pulse racing. Come by bus; leave by private jet. I'll OK your credit.

An attachment to the proxy material that is enclosed with this report explains how you can obtain the credential you will need for admission to the meeting and other events. Airlines have sometimes jacked up prices for the Berkshire weekend. If you are coming from far away, compare the cost of flying to Kansas City versus Omaha. The drive between the two cities is about $2\frac{1}{2}$ hours, and it may be that you can save significant money, particularly if you had planned to rent a car in Omaha. Spend the savings with us.

At Nebraska Furniture Mart, located on a 77-acre site on $72^{\text{nd}}$ Street between Dodge and Pacific, we will again be having “Berkshire Weekend” discount pricing. Last year the store did \$32.7 million of business during its annual meeting sale, a volume that exceeds the yearly sales of most furniture stores. To obtain the Berkshire discount, you must make your purchases between Tuesday, May $1^{\text{st}}$ and Monday, May $7^{\text{th}}$ inclusive, and also present your meeting credential. The period’s special pricing will even apply to the products of several prestigious manufacturers that normally have ironclad rules against discounting but which, in the spirit of our shareholder weekend, have made an exception for you. We appreciate their cooperation. NFM is open from 10 a.m. to 9 p.m. Monday through Saturday, and 10 a.m. to 6 p.m. on Sunday. On Saturday this year, from 5:30 p.m. to 8 p.m., NFM is having a picnic to which you are all invited.

At Borsheims, we will again have two shareholder-only events. The first will be a cocktail reception from 6 p.m. to 9 p.m. on Friday, May 4 $^{th}$ . The second, the main gala, will be held on Sunday, May 6 $^{th}$ , from 9 a.m. to 4 p.m. On Saturday, we will be open until 6 p.m. On Sunday, around 2 p.m., I will be clerking at Borsheims, desperate to beat my sales figure from last year. So come take advantage of me. Ask me for my “Crazy Warren” price.

We will have huge crowds at Borsheims throughout the weekend. For your convenience, therefore, shareholder prices will be available from Monday, April 30 $^{th}$ through Saturday, May 12 $^{th}$ . During that period, please identify yourself as a shareholder by presenting your meeting credentials or a brokerage statement that shows you are a Berkshire holder.

On Sunday, in the mall outside of Borsheims, a blindfolded Patrick Wolff, twice U.S. chess champion, will take on all comers – who will have their eyes wide open – in groups of six. Nearby, Norman Beck, a remarkable magician from Dallas, will bewilder onlookers. Additionally, we will have Bob Hamman and Sharon Osberg, two of the world’s top bridge experts, available to play bridge with our shareholders on Sunday afternoon. Two non-experts – Charlie and I – will also be at the tables.

Gorat's and Piccolo's will again be open exclusively for Berkshire shareholders on Sunday, May $6^{\text{th}}$ . Both will be serving until 10 p.m., with Gorat's opening at 1 p.m. and Piccolo's opening at 4 p.m. These restaurants are my favorites, and I will eat at both of them on Sunday evening. (Actuarial tables tell me that I can consume another 12 million calories before my death. I'm terrified at the thought of leaving any of these behind, so will be frontloading on Sunday.) Remember: To make a reservation at Gorat's, call 402-551-3733 on April $1^{\text{st}}$ (but not before) and at Piccolo's, call 402-342-9038. At Piccolo's, show some class and order a giant root beer float for dessert. Only sissies get the small one.

We will again have the same three financial journalists lead the question-and-answer period at the meeting, asking Charlie and me questions that shareholders have submitted to them by e-mail. The journalists and their e-mail addresses are: Carol Loomis, of Fortune, who may be e-mailed at cloomis@fortunemail.com; Becky Quick, of CNBC, at BerkshireQuestions@cnbc.com, and Andrew Ross Sorkin, of The New York Times, at arsorkin@nytimes.com.

From the questions submitted, each journalist will choose the dozen or so he or she decides are the most interesting and important. The journalists have told me your question has the best chance of being selected if you keep it concise, avoid sending it in at the last moment, make it Berkshire-related and include no more than two questions in any e-mail you send them. (In your e-mail, let the journalist know if you would like your name mentioned if your question is selected.)

This year we are adding a second panel of three financial analysts who follow Berkshire. They are Cliff Gallant of KBW, Jay Gelb of Barclays Capital and Gary Ransom of Dowling and Partners. These analysts will bring their own Berkshire-specific questions and alternate with the journalists and the audience.

Charlie and I believe that all shareholders should have access to new Berkshire information simultaneously and should also have adequate time to analyze it, which is why we try to issue financial information after the market close on a Friday. We do not talk one-on-one to large institutional investors or analysts. Our new panel will let analysts ask questions – perhaps even a few technical ones – in a manner that may be helpful to many shareholders.

Neither Charlie nor I will get so much as a clue about the questions to be asked. We know the journalists and analysts will come up with some tough ones, and that's the way we like it. All told, we expect at least 54 questions, which will allow for six from each analyst and journalist and 18 from the audience. If there is some extra time, we will take more from the audience. Audience questioners will be determined by drawings that will take place at 8:15 a.m. at each of the 13 microphones located in the arena and main overflow room.

* * * * * * * * * * * *

For good reason, I regularly extol the accomplishments of our operating managers. They are truly All-Stars, who run their businesses as if they were the only asset owned by their families. I believe their mindset to be as shareholder-oriented as can be found in the universe of large publicly-owned companies. Most have no financial need to work; the joy of hitting business “home runs” means as much to them as their paycheck.

Equally important, however, are the 23 men and women who work with me at our corporate office (all on one floor, which is the way we intend to keep it!).

This group efficiently deals with a multitude of SEC and other regulatory requirements and files a 17,839-page Federal income tax return – hello, Guinness! – as well as state and foreign returns. Additionally, they respond to countless shareholder and media inquiries, get out the annual report, prepare for the country’s largest annual meeting, coordinate the Board’s activities – and the list goes on and on.

They handle all of these business tasks cheerfully and with unbelievable efficiency, making my life easy and pleasant. Their efforts go beyond activities strictly related to Berkshire: They deal with 48 universities (selected from 200 applicants) who will send students to Omaha this school year for a day with me and also handle all kinds of requests that I receive, arrange my travel, and even get me hamburgers for lunch. No CEO has it better.

This home office crew, along with our operating managers, has my deepest thanks and deserves yours as well. Come to Omaha – the cradle of capitalism – on May 5 $^{th}$ and tell them so.

February 25, 2012

Warren E. Buffett

Chairman of the Board

伯克希尔业绩 vs. 标普500

年份		每股账面价值年变化率(1)	标普500含股息年变化率(2)	相对业绩(1)-(2)
1965		23.8	10.0	13.8
1966		20.3	(11.7)	32.0
1967		11.0	30.9	(19.9)
1968		19.0	11.0	8.0
1969		16.2	(8.4)	24.6
1970		12.0	3.9	8.1
1971		16.4	14.6	1.8
1972		21.7	18.9	2.8
1973		4.7	(14.8)	19.5
1974		5.5	(26.4)	31.9
1975		21.9	37.2	(15.3)
1976		59.3	23.6	35.7
1977		31.9	(7.4)	39.3
1978		24.0	6.4	17.6
1979		35.7	18.2	17.5
1980		19.3	32.3	(13.0)
1981		31.4	(5.0)	36.4
1982		40.0	21.4	18.6
1983		32.3	22.4	9.9
1984		13.6	6.1	7.5
1985		48.2	31.6	16.6
1986		26.1	18.6	7.5
1987		19.5	5.1	14.4
1988		20.1	16.6	3.5
1989		44.4	31.7	12.7
1990		7.4	(3.1)	10.5
1991		39.6	30.5	9.1
1992		20.3	7.6	12.7
1993		14.3	10.1	4.2
1994		13.9	1.3	12.6
1995		43.1	37.6	5.5
1996		31.8	23.0	8.8
1997		34.1	33.4	.7
1998		48.3	28.6	19.7
1999		.5	21.0	(20.5)
2000		6.5	(9.1)	15.6
2001		(6.2)	(11.9)	5.7
2002		10.0	(22.1)	32.1
2003		21.0	28.7	(7.7)
2004		10.5	10.9	(.4)
2005		6.4	4.9	1.5
2006		18.4	15.8	2.6
2007		11.0	5.5	5.5
2008		(9.6)	(37.0)	27.4
2009		19.8	26.5	(6.7)
2010		13.0	15.1	(2.1)
2011		4.6	2.1	2.5
1965-2011年复合年收益		19.8%	9.2%	10.6
1964-2011年整体收益		513,055%	6,397%
注释：数据按日历年度列示，以下情况除外：1965年和1966年，截至9月30日的年度；1967年，截至12月31日的15个月。自1979年起，会计准则要求保险公司将其持有的股权证券按市价而非此前要求的成本与市价孰低法估值。本表中，伯克希尔截至1978年的结果已按变更后的规则重新列示。除此之外，所有结果均按最初报告的数字计算。标普500数据为税前，而伯克希尔数据为税后。如果像伯克希尔这样的公司仅持有标普500并累计缴纳相应税款，则在指数显示正回报的年份，其业绩将落后于标普500；在指数显示负回报的年份，其业绩将超过标普500。多年来，税负成本将导致累计差距相当大。

BERKSHIRE HATHAWAY INC.

致Berkshire Hathaway Inc.（伯克希尔·哈撒韦公司）的股东：

2011年，我们A类股和B类股的每股账面价值均增长了4.6%。过去47年（即自现任管理层接手以来），账面价值从19美元增长至99,860美元，年复合增长率为19.8%。*

伯克希尔副董事长兼我的合伙人Charlie Munger与我，对公司在2011年的进展感到满意。以下是一些亮点：

• 董事会的主要职责是确保合适的人在经营企业，并确保下一代领导者得到识别并准备好明天接班。我曾担任19家公司的董事，而在接班规划上投入的时间和精力方面，伯克希尔的董事们位居前列。更重要的是，他们的努力已见成效。

2011年初，Todd Combs加入我们担任投资经理，而就在年底后，Ted Weschler也加盟了。这两位都具备卓越的投资技能和对伯克希尔的深厚承诺。2012年，每人将管理数十亿美元，但他们的才智、判断力和品格，足以在Charlie和我不再掌管伯克希尔时，管理我们的整个投资组合。

你们的董事会对我的CEO继任者同样充满热情，他们对该人选有大量了解，并钦佩其管理能力和人文素质。（我们还有两位出色的后备人选。）当责任交接需要发生时，这将是无缝的，伯克希尔的前景将依然光明。我个人净资产的98%以上都持有伯克希尔股票，这些股票将全部捐赠给各类慈善机构。如此高度集中于一只股票，违背了传统智慧。但我对此安排感到满意，因为我知道我们拥有企业的质量和多样性，以及管理这些企业的人的才干。有了这些资产，我的继任者将拥有一个良好的开局。不过，请不要从这一讨论中推断Charlie和我要离开；我们依然健康状况极佳，并且热爱我们所做的事。

• 9月16日，我们收购了Lubrizol（路博润），一家全球性的添加剂及其他特种化学品生产商。自James Hambrick于2004年担任CEO以来，该公司业绩卓越，税前利润从1.47亿美元增长至10.85亿美元。Lubrizol在特种化学品领域将有许多“补强型”收购机会。事实上，我们已经同意了三项收购，耗资4.93亿美元。James是一位纪律严明的买家和卓越的经营者。Charlie和我渴望拓展他的管理领域。

• 我们的主要业务去年表现出色。事实上，我们旗下五家最大的非保险公司——BNSF（伯灵顿北方圣塔菲铁路公司）、Iscar（伊斯卡）、Lubrizol（路博润）、Marmon Group（玛蒙集团）和MidAmerican Energy（中美能源）——均创下了经营利润纪录。2011年，这些公司合计实现税前利润超过90亿美元。相比之下，七年前我们只拥有其中一家（中美能源），其税前利润为3.93亿美元。除非2012年经济走弱，否则我们这五大巨头应能再次刷新纪录，总利润轻松突破100亿美元。

• 总体而言，我们的整个运营公司群在2011年投入了82亿美元用于不动产、厂房及设备，比之前的历史纪录高出20多亿美元。这些支出中约95%投在美国——这一事实可能会让那些认为美国缺乏投资机会的人感到惊讶。我们欢迎海外项目，但预计伯克希尔未来绝大多数的资本承诺将落在美国。2012年，这些支出将再次创下纪录。

• 我们的保险业务持续提供无成本资本，为大量其他机会提供资金。这个行业产生“浮存金”——不属于我们、但我们可以为伯克希尔利益进行投资的资金。如果我们支付的理赔和费用低于收取的保费，我们还能额外获得承销利润，这意味着浮存金的成本实际上低于零。尽管我们偶尔肯定会出现承销亏损，但我们已经连续九年实现承销盈利，总计约170亿美元。在同一九年期间，我们的浮存金从410亿美元增长到当前创纪录的700亿美元。保险业务对我们一直很好。

• 最后，我们在市场证券上进行了两项重大投资：（1）购买美国银行50亿美元、利率6%的优先股，附带认股权证，允许我们在2021年9月2日前随时以每股7.14美元的价格购买7亿股普通股；（2）以109亿美元购买6390万股IBM股票。包括IBM在内，我们现在对四家卓越公司持有大量权益：美国运通13.0%、可口可乐8.8%、IBM 5.5%和富国银行7.6%。（当然，我们还有许多较小但重要的持仓。）

我们将这些持股视为优秀企业的合伙权益，而非根据短期前景买卖的市场证券。然而，我们应占的这些公司利润远没有完全反映在我们的盈利中；只有我们从这些公司收到的股息体现在财务报表里。不过，随着时间的推移，这些公司归属于我们所有权的未分配利润对我们至关重要。因为它们将以多种方式用于增加被投资方的未来盈利和股息，也可能用于股份回购，从而提高我们在公司未来盈利中的份额。

假设去年全年我们持有现有仓位，我们从“四大巨头”获得的股息将是8.62亿美元——这将是伯克希尔利润表中报告的全部金额。然而，我们在这四家公司中的应占利润将远高于此：33亿美元。查理和我认为，未在我们的账面上报告的24亿美元至少为伯克希尔创造了同等价值，因为它推动了未来几年的盈利增长。我们预计这四家公司的合计盈利及其股息将在2012年以及未来很长一段时间内几乎每年都增长。十年后，我们现在对这四家公司的持仓很可能贡献70亿美元的盈利，其中20亿美元的股息将归我们所有。

好消息说完了。以下是一些在2011年对我们造成损害的情况：
几年前，我花了约20亿美元买入Energy Future Holdings（一家服务于德克萨斯部分地区电力公用事业公司）的几笔债券。这是一个错误——一个大错误。很大程度上，该公司前景与天然气价格挂钩，而天然气在我们买入后不久就暴跌，至今仍低位徘徊。虽然自买入以来，我们每年收到约1.02亿美元的利息，但除非天然气价格大幅上涨，否则该公司偿付能力很快将枯竭。我们在2010年将这笔投资减值10亿美元，去年又额外减值3.9亿美元。

年末时，我们按债券市价8.78亿美元入账。如果天然气价格维持在当前水平，我们可能面临进一步亏损，金额也许足以将当前账面价值几乎全部抹去。反过来，天然气价格大幅上涨或许能让我们收回部分甚至全部减值。无论结果如何，我在买入这些债券时完全误判了盈亏概率。用网球术语说，这是你们董事长的一次重大非受迫性失误。

2011年，我们持有的三项规模庞大且极具吸引力的固定收益投资被发行人赎回。Swiss Re（瑞士再保险）、Goldman Sachs（高盛）和General Electric（通用电气）向我们支付了总计128亿美元，赎回了原本为伯克希尔带来约12亿美元税前收益的证券。这是一大笔需要填补的收入，不过我们收购路博润（Lubrizol）在很大程度上抵消了这部分缺口。

去年，我告诉你们“楼市复苏可能会在一年左右开始。”我完全错了。我们有五家企业的业绩受住房活动显著影响。Clayton Homes（克莱顿家园）与住房市场的联系最为直接，它是全美最大的住宅建造商，在2011年新建住宅中约占7%。

此外，Acme Brick（阿克米砖）、Shaw（地毯，即萧氏地毯）、Johns Manville（约翰斯·曼维尔，保温材料）和MiTek（建筑产品，主要用于屋顶的连接板）都受到建筑活动的重大影响。总体而言，我们的五家住房相关企业在2011年的税前利润为5.13亿美元。这与2010年相近，但远低于2006年的18亿美元。

住房市场终将复苏——这一点你可以确定。随着时间的推移，住房单元数量必然与家庭户数相匹配（考虑到正常的空置水平）。然而，在2008年之前的数年里，美国增加的住房单元超过了家庭户数。不可避免地，我们最终出现了大量过剩单元，泡沫以撼动整个经济的猛烈方式破裂。这给住房带来了另一个问题：经济衰退初期，家庭组建放缓，而在2009年降幅尤为惊人。

这种破坏性的供需关系现在已经逆转：我们每天新增的家庭户数都超过住房单元数量。人们在不确定时期可能会推迟结婚，但荷尔蒙最终会起作用。虽然在衰退期间，有些人最初会选择“合住”，但与姻亲同住的吸引力很快就会消失。

按照我们目前每年60万套的住房开工量（远低于新增家庭户数），买房者和租房者正在消化剩下的旧库存过剩。（这个过程在全国各地的速度不同；供应-需求状况因地区而异很大。）然而，在复苏进行的同时，我们的住房相关企业却举步维艰，仅雇用了43,315名员工，而2006年为58,769名。这个极其重要的经济部门——不仅包括建筑本身，还包括所有为其提供支撑的行业——仍处于它自己的衰退之中。我认为，这就是就业复苏严重滞后于经济其他几乎所有领域所看到的稳步大幅反弹的主要原因。
明智的货币与财政政策在缓解衰退中扮演着重要角色，但这些工具无法创造家庭，也无法消除过剩的住房单元。幸运的是，人口结构变化和我们的市场体系将恢复所需的平衡——可能用不了多久。当那一天到来时，我们将再次每年建造100万套或更多的住宅单元。我相信，一旦发生这种情况，专家们会对失业率下降幅度之大感到惊讶。随后他们会重新意识到一个自1776年以来一直成立的事实：美国最美好的日子就在前方。

内在商业价值

查理和我以伯克希尔每股内在商业价值的增长率来衡量我们的业绩。如果我们的长期收益超过标普500指数的表现，那么我们赚取的报酬就是应得的。如果达不到，那么任何价格都算过高。

我们无法精确估算内在价值。但我们有一个有用、尽管明显保守的替代指标：每股账面价值。这个标尺对大多数公司毫无意义。然而，在伯克希尔，账面价值大致上能够追踪商业价值。这是因为伯克希尔内在价值超过账面价值的幅度，每年不会剧烈波动，尽管在大多数年份都会增加。随着时间的推移，两者之间的差值绝对值可能变得越来越大，但在百分比基础上保持相对稳定，因为商业价值/账面价值方程式的分子和分母都在增长。

我们一直强调，在股市表现糟糕的年份，我们的账面价值表现几乎肯定会跑赢标普500指数；同样，在强劲上涨的年份，也几乎肯定会落后。真正的考验是长期表现。去年的年报中有一张表格，列出了自1965年我们接管伯克希尔以来的42个五年期业绩（即1965-69年、1966-70年等）。所有时期我们的账面价值都跑赢了标普500指数，而2007-11年这个五年期也延续了这一纪录。不过，如果标普500指数能够连续五年上涨（在我写这封信时，它很可能正朝着这个方向前进），那么我们的纪录几乎肯定会终结。

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去年我还附了两张表格，列出了帮助您估算我们每股内在价值的关键定量要素。这里不再重复完整讨论；您可以在第99-100页找到重现的内容。更新之后的表格显示，2011年我们的每股投资增长了4%，达到98,366美元；非保险和非投资业务的税前每股收益增长了18%，达到6,990美元。

查理和我喜欢看到这两个领域的增长，但我们的主要焦点是建立运营收益。随着时间的推移，我们目前拥有的企业总收益应该会增加，并且我们也希望收购一些大型业务，从而进一步推动增长。我们现在拥有八家子公司，如果它们是独立公司，每家都可以入选财富500强。这样还剩下492个位置。我的任务很明确，我正在四处寻找猎物。

股份回购

去年9月，我们宣布伯克希尔将在股价不超过账面价值110%的情况下回购股票。我们只进行了几天的市场操作——买入了6700万美元的股票——股价就超过了我们的上限。尽管如此，股份回购的普遍重要性表明我应该花点时间讨论这个话题。

查理和我赞成回购须满足两个条件：第一，公司拥有充足的资金来满足其业务运营和流动性需求；第二，股票价格相对于公司保守计算的内在商业价值有显著折让。
我们见过许多回购案例未能通过第二项测试。有时候，违规行为——即便是严重的——也是无心之过：许多CEO始终坚信自家股票被低估。但另一些时候，似乎有理由得出不那么善意的结论。"回购是为了抵消股权稀释"或者"只是因为公司有闲钱"这类说法根本站不住脚。除非回购价格低于内在价值，否则持续持股的股东就会受损。资本配置的第一条法则——无论是用于收购还是回购——就是：在这个价格上是明智之举，在另一个价格上就是蠢行。（在回购决策中始终强调价格/价值因素的CEO之一是摩根大通的Jamie Dimon；我建议你去读读他的年度致股东信。）

查理和我在伯克希尔股价远低于内在价值时心情复杂。我们乐于为持续持股的股东赚钱，而最稳妥的方式莫过于买入一项资产——我们自己的股票——我们知道它至少值x，却用低于它的价格——0.9x、0.8x甚至更低——买到手。（正如我们一位董事所说，这好比是桶里捞鱼，而且那桶里的水已经放干，鱼也不扑腾了。）尽管如此，我们并不乐见以折扣价套现合伙人，尽管我们的出价可能让卖出股票的股东比没有我们出价时拿到稍高一点的价格。因此，当我们回购时，我们希望退出的合伙人充分了解他们正在出售的资产的价值。

在我们的限价——即账面价值的110%——以内回购，无疑会提高伯克希尔每股内在价值。而且我们买得越多、越便宜，持续持股的股东获益就越大。因此，只要有机会，我们很可能在我们的价格上限或更低水平上积极回购股票。不过你们要知道，我们对托市毫无兴趣，在特别疲弱的市场中，我们的出价会减少。另外，如果我们的现金等价物持有量低于200亿美元，我们也不会回购股票。在伯克希尔，毋庸置疑的财务实力高于一切。

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这次关于回购的讨论，让我有机会谈谈许多投资者对股价变化的不理性反应。当伯克希尔买入一家正在回购股票的公司时，我们希望看到两件事：第一，我们通常希望这家企业的盈利在未来很长一段时间内保持良好增长；第二，我们也希望这只股票在市场上长期表现不佳。第二个要点的推论是："吹捧我们持有的股票"——如果那真的有效——实际上对伯克希尔有害，而不是像评论人士通常以为的那样有益。

我们以IBM为例。所有商业观察者都知道，CEO Lou Gerstner 和 Sam Palmisano 在二十年前将IBM从濒临破产带到今天的辉煌，做得极为出色。他们的经营成就确实非同凡响。

但他们的财务管理同样卓越，尤其是在近年公司财务灵活性改善之后。事实上，我想不出还有哪家大型公司拥有比这更好的财务管理——这种能力大大增加了IBM股东所获得的收益。公司明智地利用债务，几乎全部以现金进行增值收购，并积极回购自己的股票。

如今，IBM共有11.6亿股流通股，我们持有其中约6390万股，占比5.5%。当然，未来五年这家公司的盈利情况对我们至关重要。除此之外，在这五年期间，公司很可能会花费约500亿美元回购股票。我们今天的考题是：像伯克希尔这样的长期股东，在这段时期里应该为哪种情况叫好？
我就不吊你们胃口了。我们应当希望IBM的股价在未来五年里持续低迷。

来算笔账。如果IBM这五年间的平均股价是200美元，公司用500亿美元就能回购2.5亿股。这样，流通股将降至9.1亿股，我们持有约7%。反过来，如果五年平均股价是300美元，IBM只能回购1.67亿股。五年后流通股约有9.9亿股，我们持有6.5%。

假设IBM第五年盈利200亿美元，那么在股价较低的"令人失望"情景下，我们分得的利润会比高价回购情景足足多出1亿美元。到了某个时点，我们的持股价值也会比"高价回购"情景高出约15亿美元。

逻辑很简单：如果你未来是股票的净买家——不管是拿自己的钱直接买，还是通过你持股的公司回购间接买——股价上涨对你有害，股价下跌对你有利。但情绪往往把水搅浑：大多数人，包括未来会是净买家的人，看到股价上涨就安心。这些股东就像一位通勤者，油箱里还有一天的油，却因为油价上涨而兴高采烈。

查理和我并不指望能说服你们中的多少人认同我们的思维方式——我们观察了足够多的人类行为，知道那是徒劳——但我们确实想让你们了解我们的个人算盘。这里得坦白一下：早年的时候，市场上涨我也很高兴。后来我读了本·格雷厄姆《聪明的投资者》第八章，这一章讲的是投资者应该如何看待股价波动。刹那间我茅塞顿开，低价成了我的朋友。翻开那本书是我一生中最幸运的时刻之一。

最终，我们IBM投资是否成功，主要取决于它未来的盈利。但一个重要的次要因素将是：公司用可能投入回购的大量资金，到底能回购多少股份。而如果回购最终能让IBM流通股降到6390万股，我将放弃我出了名的节俭，给伯克希尔的员工放一天带薪假。

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现在，来看看我们四个主要业务板块。每个板块的资产负债表和损益表特征都截然不同。把它们混在一起反而妨碍分析。所以，我们将其作为四个独立业务来呈现——查理和我就是这么看待的。由于我们可能从你们中的一些人手中回购伯克希尔股票，我们会在每个板块中聊聊我们对内在价值与账面价值的看法。

保险

先看保险，这是伯克希尔的核心业务，也是多年来推动我们扩张的引擎。

财产/意外险公司先收保费，后赔款。极端情况下——比如某些工伤事故——赔款可能延续数十年。这种先收后付的模式让我们手上握有大笔资金——我们称之为"浮存金"——这些钱最终要还给别人。但同时，我们可以拿这些浮存金为伯克希尔投资。虽然单个保单和赔款来了又走，但浮存金总额相对于保费规模一直非常稳定。因此，随着业务增长，浮存金也在增长。我们增长得有多快，请看下表：
TABLE_BLOCK

我们的浮存金不太可能从当前水平大幅增长——即便有增长，幅度也微乎其微。这主要是因为相对保费规模而言，我们已有的浮存金规模已经过大。需要补充的是，即便浮存金出现下降，也几乎肯定会是渐进的，因此不会对我们造成异常的资金需求。

如果保费收入超过费用和最终损失的总和，我们就会实现承销利润，从而为浮存金带来的投资收益锦上添花。当这种利润出现时，我们享受的是免费资金的便利——而且更妙的是，持有这些资金还能获得报酬。遗憾的是，所有保险公司都渴望实现这一美好结果，这导致了激烈的竞争，以至于在大多数年份里，整个财产/意外险行业都处于显著的承销亏损状态。例如，美国最大的保险公司、同时管理有方的State Farm，在过去十一年中有八年都出现了承销亏损。保险行业里亏钱的门道多得很，而业界又擅长不断发明新花样。

如本报告第一部分所述，我们已连续九年实现承销盈利，期间累计收益达170亿美元。我相信，在未来的大多数年份——当然不是所有年份——我们很可能继续实现承销盈利。若能如此，我们的浮存金将比免费更好。我们获利的方式，就好比有人将706亿美元存入我们这里，付钱让我们保管，还允许我们用这笔钱进行投资并独享收益。

那么，这种诱人的浮存金如何影响内在价值的计算呢？在计算伯克希尔的账面价值时，浮存金被全额列为负债，就好比第二天就必须偿还且无法补充。但这种看法并不正确，浮存金应被视为一种循环基金。如果浮存金既无成本又长期存在，那么这项负债的真实价值远低于会计负债。

部分抵消这项被高估的负债的，是账面价值中作为资产列示的、归属于我们保险公司的155亿美元"商誉"。实际上，这笔商誉代表了我们为获取保险业务浮存金生成能力所支付的价格。然而，商誉的成本与其真实价值无关。如果一家保险公司持续产生巨额承销亏损，那么其相关商誉资产无论原始成本多少，都应被视为一文不值。

幸运的是，伯克希尔并非如此。查理和我认为，我们保险商誉的真实经济价值——即我们为购买同等质量的浮存金所愿意支付的价格——远高于其历史账面价值。浮存金的价值是我们认为伯克希尔内在商业价值显著超过账面价值的原因之一——而且是极其重要的原因。

请允许我再次强调，无成本浮存金并非整个财产/意外险行业能够预期的结果：我们并不认为保险界存在多少"伯克希尔品质"的浮存金。在大多数年份（包括2011年），行业的保费都不足以覆盖理赔和费用。因此，几十年来，整个财产/意外险行业的有形净资产收益率一直远低于美国工业企业的平均回报水平，这种糟糕的表现几乎肯定还会持续。伯克希尔之所以拥有卓越的经济效益，仅仅是因为我们有一些出色的管理者在运营着一些非凡的保险业务。下面我来介绍一下主要业务单元。

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首先按浮存金规模排序的是伯克希尔·哈撒韦再保险集团，由Ajit Jain管理。Ajit承保那些其他公司既无意愿也无资本去承担的风险。他的运作将承保能力、速度、决断力，以及最重要的——智慧——以一种在保险业独一无二的方式结合起来。然而，他从不把伯克希尔暴露在与我们资源不相称的风险之下。事实上，在这一方面，我们比大多数大型保险公司要保守得多。例如，如果保险行业因某次超级巨灾遭受2500亿美元的损失——这个数字大约是它们曾经历过的最大损失的三倍——伯克希尔整体上仍可能录得适度的年度利润，因为我们有多条盈利来源。与此同时，其他所有大型保险公司和再保险公司都将严重亏损，有些甚至会面临资不抵债。

Ajit从1985年白手起家，打造了一个拥有340亿美元浮存金和可观承销利润的保险业务，这一成就是任何其他保险公司的CEO都无法企及的。凭借这些功绩，他为伯克希尔的价值增添了数十亿美元。查理会乐意拿我去换第二个Ajit。可惜，没有。

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我们还有另一家保险巨头——通用再保险，由Tad Montross管理。

归根结底，一个稳健的保险业务需要遵守四项纪律。它必须：（1）理解所有可能导致保单产生损失的风险暴露；（2）保守地评估任何风险暴露实际导致损失的可能性，以及一旦发生损失的可能成本；（3）设定一个能够在平均意义上产生利润的保费——即在覆盖预期损失成本和运营费用之后仍有盈利；（4）如果无法获得合理的保费，愿意放弃这笔生意。

许多保险公司通过了前三项测试，却在第四项上栽了跟头。他们就是无法拒绝那些竞争对手正在争先恐后承保的业务。那句老话——"别人都在做，所以我们也得做"——在任何行业都会惹来麻烦，但没有哪个行业比保险业更甚。事实上，一个优秀的核保人需要一种独立思维，就像那位开车回家的老人接到妻子电话时一样："阿尔伯特，小心点，"她警告说，"我刚听广播说，州际公路上有辆车在逆行。"阿尔伯特回答说："梅布尔，他们只知道一半情况，不是一辆车，有几百辆。"

Tad遵守了这全部四条保险戒律，他的业绩也证明了这一点。在他的领导下，通用再保险的巨额浮存金已经比零成本还要好，我们预计平均来看，这一趋势将持续下去。在收购后的头几年，通用再保险是个大麻烦。现在它是一笔财富。

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最后是GEICO，一家61年前我入行时就接触过的保险公司。GEICO由Tony Nicely管理，他18岁加入公司，到2011年已服务满50年。

GEICO令人羡慕的业绩来自Tony对一个卓越且几乎不可复制的商业模式的出色执行。在Tony担任CEO的18年间，我们的市场份额从2.0%增长到9.3%。如果它保持不变——就像他接手前十多年那样——我们的保费收入现在将是33亿美元，而不是我们在2011年取得的154亿美元。Tony和他的同事创造出的额外价值，是伯克希尔内在价值超过账面价值的主要组成部分。
汽车保险市场还有超过90%的份额等待GEICO去开拓。别打赌托尼（Tony Nicely）未来年复一年拿不下其中一大块。我们的低成本允许低价格，而每天都有更多美国人发现，当那只壁虎敦促他们上GEICO.com获取报价时，是在帮他们忙。（我们的蜥蜴还有另一个讨人喜欢的特质：不像那些花费不菲代言其他保险公司的人类男女发言人，我们的小家伙没有代理人。）

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除了我们的三大保险业务，我们还拥有一批较小的公司，它们大多在保险业的偏门角落经营。总体来看，它们一直持续盈利，且为我们提供了相当可观的浮存金。查理和我珍视这些公司及其经理人。

年底，我们收购了普林斯顿保险公司（Princeton Insurance），一家新泽西州的医疗事故险承保商。这次增购交易扩展了蒂姆·肯尼西（Tim Kenesey）的管理领域，他是我所在印第安纳州的医疗事故险公司Medical Protective的明星CEO。普林斯顿带来了超过6亿美元的浮存金，该金额已纳入下表。

以下是我们的财产-伤亡险和人寿险四个分部的业绩记录：

保险业务分部	承保利润	承保利润	年末浮存金	年末浮存金
	（单位：百万美元）
	2011年	2010年	2011年	2010年
BH再保险	$(714)	$176	$33,728	$30,370
通用再保险	144	452	19,714	20,049
GEICO	576	1,117	11,169	10,272
其他主要保险	242	268	5,960	5,141
	$248	$2,013	$70,571	$65,832

在大型保险运营中，伯克希尔在我眼中是世界最佳。

受监管、资本密集型业务

我们有两项规模极大的业务——BNSF（北伯林顿铁路公司）和MidAmerican Energy（中美能源）——它们具有重要的共同特征，使其有别于我们的众多其他业务。因此，我们在本信中为其单独设立一个板块，并在我们的GAAP资产负债表和利润表中单独列示它们的合并财务数据。

这两家公司的一个关键特征是：它们在期限极长的受监管资产上投入了巨额资金，这些资金部分由伯克希尔不提供担保的大额长期债务融资。我们的信用并非必需：两家公司都拥有即使在极其糟糕的商业环境下也足以充分覆盖利息支出的盈利能力。例如，在2011年经济不太强劲的情况下，BNSF的利息覆盖倍数为9.5倍。与此同时，中美能源有两个关键因素确保其在任何情况下都有能力偿还债务：我们仅提供必要服务的固有收益稳定性，以及多元化的收益流，这使其免受任何单一监管机构行动的影响。

以吨英里计，铁路运输占美国城际货运量的42%，而BNSF的运输量超过任何其他铁路公司——约占行业总量的37%。稍作计算你就会发现，美国所有城际货运吨英里中约15%由BNSF承运。将铁路描述为我们经济的循环系统毫不夸张。你的铁路就是最大的动脉。
这一切赋予我们巨大的责任。我们必须不折不扣地维护并改善我们拥有的23,000英里铁路、13,000座桥梁、80条隧道、6,900台机车和78,600节车厢。这项工作要求我们在任何经济环境下都拥有充足的财力，并拥有能够即时有效应对自然变迁的人力——比如去年夏天BNSF在应对大面积洪灾时表现出的能力。

为了履行其社会责任，BNSF的长期投资规模远超其折旧费用，2011年的超额部分达到18亿美元。美国其他三大主要铁路公司也在进行类似的投入。尽管许多人批评我们国家基础设施投资不足，但这种批评绝不能加诸铁路行业。它们正将资金——来自私营部门的资金——倾注于投资项目，以便未来提供更好、更广泛的服务。如果铁路没有进行这些巨额支出，我国由政府出资建设的公路系统将面临比今天更严重的拥堵和维护问题。

像BNSF这样的大规模投资，如果无法在新投入的增量资本上获得合理回报，那将是愚蠢的。但我确信它能做到，因为它提供的价值。许多年前，本·富兰克林曾告诫：“管好你的店铺，你的店铺也会管好你。”如果将其套用到我们的受监管业务中，他今天可能会说：“照顾好你的客户，监管机构——你客户的代表——也会照顾好你。”每一方的良好行为都会换来对方的良好回报。

在中美能源（MidAmerican），我们也参与了一个类似的“社会契约”。我们被期待不断增加投入，以满足客户未来的需求。如果我们同时可靠、高效地运营，我们知道这些投资将获得公平的回报。

中美能源由伯克希尔持有89.8%的股份，为美国250万客户供电，是爱荷华州、犹他州和怀俄明州最大的电力供应商，并在其他六个州也是重要的提供商。我们的管道输送了全美8%的天然气。显然，每天有数以百万计的美国人依赖我们。他们从未失望过。

2002年中美能源收购北天然气管线公司（Northern Natural Gas pipeline）时，该公司的管道运营表现在该领域权威机构的排名中垫底，在43家中排第43。而在最新报告中，北天然气排名第二。占据榜首的是我们的另一条管道——科恩河（Kern River）。

在电力业务方面，中美能源拥有可比的记录。在最新的客户满意度调查中，中美能源的美国公用事业公司在接受调查的60家公用事业集团中排名第二。而就在几年前中美能源收购这些资产时，情况远非如此。

到2012年底，中美能源的风力发电装机容量将达到3,316兆瓦，远超国内其他任何受监管的电力公司。我们在风电上的总投资或承诺金额已高达60亿美元。我们之所以能进行此类投资，是因为中美能源保留了全部收益——不像其他公用事业公司通常会将大部分盈利派发出去。此外，去年年底我们承接了两个太阳能项目——一个在加利福尼亚州，100%持股；另一个在亚利桑那州，持股49%——建设成本约30亿美元。未来几乎肯定还会有更多风能和太阳能项目跟进。

至此你应该能看出，我为BNSF的马特·罗斯（Matt Rose）和中美能源的格雷格·阿贝尔（Greg Abel）为社会所做的贡献感到自豪。同时，我也为他们为伯克希尔股东所取得的成就感到自豪和感激。以下是相关数据：

中美能源	收益（单位：百万美元）
	2011年	2010年
英国公用事业	469美元	333美元
爱荷华州公用事业	279	279
西部公用事业	771	783
管道业务	388	378
HomeServices	39	42
其他（净额）	36	47
扣除公司利息和税项前的经营利润	1,982	1,862
利息（非应付伯克希尔部分）	(323)	(323)
伯克希尔次级债务利息	(13)	(30)
所得税	(315)	(271)
净利润	1,331美元	1,238美元
归属于伯克希尔的收益*	1,204美元	1,131美元

*包括伯克希尔赚取的利息（扣除相关所得税）2011年8美元、2010年19美元。

BNSF（伯灵顿北圣塔菲铁路公司）

（2010年2月12日前按历史会计法；此后按购买会计法）	（单位：百万美元）
	2011年	2010年
营业收入	19,548美元	16,850美元
经营利润	5,310	4,495
利息（净额）	560	507
税前利润	4,741	3,988
净利润	2,972	2,459

在资产负债表记录的账面价值中，BNSF和中美能源各包含了大量商誉，合计达200亿美元。不过，在这两家公司身上，查理和我都认为当前的内在价值远高于账面价值。

制造、服务与零售业务

伯克希尔这一块业务覆盖了各行各业。不过，我们先看看整个集团的简要资产负债表和利润表。

资产负债表（2011年12月31日，单位：百万美元）

资产		负债与权益
现金及现金等价物	4,241美元	应付票据	1,611美元
应收账款及应收票据	6,584	其他流动负债	15,124
存货	8,975	流动负债合计	16,735
其他流动资产	631
流动资产合计	20,431
		递延税项	4,661
商誉及其他无形资产	24,755	定期债务及其他负债	6,214
固定资产	17,866	非控制性权益	2,410
其他资产	3,661	伯克希尔权益	36,693
	66,713美元		66,713美元

利润表（单位：百万美元）

	2011年**	2010年	2009年
营业收入	72,406美元	66,610美元	61,665美元
经营费用（含折旧：2011年1,431美元，2010年1,362美元，2009年1,422美元）	67,239	62,225	59,509
利息费用	130	111	98
税前利润	5,037美元*	4,274美元*	2,058美元*
所得税及非控制性权益	1,998	1,812	945
净利润	3,039美元	2,462美元	1,113美元

未包含购买会计法调整。
*包含路博润自9月16日起的收益。
这一组公司销售的产品从棒棒糖到喷气式飞机，应有尽有。其中一些企业拥有极佳的经济特性——以无杠杆有形净资产收益率衡量，税后回报率从25%到超过100%不等。另一些则表现不错，回报率在12%到20%之间。然而，也有少数几家企业回报率很低，这是我在资本配置工作中犯下的几个严重错误所致。这些错误发生，是因为我错误判断了所购企业的竞争实力，或是对其所在行业的未来经济前景看走了眼。做收购决策时，我努力放眼未来十年或二十年，但有时我的视力不佳。查理的眼力更好；我那些有问题的收购案，他投的只是“出席”票，而不是赞成票。

伯克希尔的新股东可能会对我们持有这些错误决策的“果实”感到困惑。毕竟，这些企业的盈利对伯克希尔的估值来说永远无足轻重，而且问题公司比赢家更耗费管理层时间。任何管理咨询师或华尔街顾问看到我们这些落后企业，都会说：“甩掉它们。”

但我们不会这么做。29年来，我们一直在这份报告（第93-98页）中定期阐述伯克希尔的经济原则，其中第11条原则描述了我们通常不愿出售表现不佳的企业（大多数情况下，表现不佳是行业因素所致，而非管理层能力不足）。我们的做法远非达尔文式，你们中许多人可能不赞同。我能理解你们的立场。然而，我们已经——并且将继续——向我们所购企业的卖方做出承诺：无论顺境逆境，我们都会保留这些企业。到目前为止，这一承诺的金钱代价并不大，而且很可能被它在潜在卖方中积累的商誉所抵消——这些卖方正在为心爱的企业和忠诚的伙伴寻找合适的永久归宿。这些所有者知道，他们从我们这里得到的东西是别人无法给予的，而且我们的承诺将在未来几十年里持续有效。

不过，请理解，查理和我既不是受虐狂，也不是盲目乐观的波莉安娜。如果我们在原则11中列出的两种问题——即企业长期来看可能成为现金消耗黑洞，或是劳资冲突根深蒂固——出现了任何一种，我们都会果断采取行动。在47年的历史中，这种情况只发生过屈指可数的几次，而我们目前拥有的所有企业都没有陷入需要考虑出售的困境。

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自2009年中期以来，美国经济持续显著复苏——这一点在本节开头列出的盈利数据中清晰可见。这份汇总包含了我们54家公司。但其中一家——Marmon——本身拥有11个不同业务领域的140个运营实体。简而言之，当你审视伯克希尔时，你就是在审视整个美国企业。所以，让我们更深入地挖掘，以更透彻地了解过去几年发生了什么。

本节中四家与住房相关的公司（不包括Clayton，它归入金融及金融产品板块）2009年税前总盈利为2.27亿美元，2010年为3.62亿美元，2011年为3.59亿美元。如果将这些盈利从合并报表的盈利中减去，你会看到我们多元化的非住房业务在2009年盈利18.31亿美元，2010年盈利39.12亿美元，2011年盈利46.78亿美元。2011年盈利中约有2.91亿美元来自路博润收购。2011年剩余盈利——43.87亿美元——反映出美国大部分地区从2008年金融恐慌造成的破坏中复苏的轮廓。尽管住房相关业务仍在“急救室”，但大多数其他业务已完全康复出院。

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去年我们旗下几乎所有的经理人都交出了出色的成绩单，其中也包括那些经营住房相关业务、正与飓风级逆风对抗的经理人。这里举几个例子：

• Vic Mancinelli 再次在 CTB（我们的农业设备业务）创下纪录。我们在2002年以1.39亿美元收购了CTB。此后，CTB向伯克希尔分红了1.8亿美元，去年税前盈利1.24亿美元，并持有1.09亿美元现金。多年来Vic完成了一系列补强收购，其中一笔重要的交易是在年底后签署的。
• TTI（我们的电子元件分销商）销售额创纪录地达到21亿美元，较2010年增长12.4%。盈利也创下纪录，比我们收购该业务的2007年高出127%。2011年，TTI的表现远超其领域内的大型上市公司。这不足为奇：Paul Andrews 和他的团队多年来一直胜过他们。Charlie 和我很高兴 Paul 在2012年初谈成一笔大型补强收购。我们希望后续还有更多。
• Iscar（我们持股80%的切削刀具业务）继续让我们惊叹。其销售增长和整体表现在业内独一无二。Iscar的经理人——Eitan Wertheimer、Jacob Harpaz 和 Danny Goldman——是杰出的战略家和运营者。2008年11月经济世界崩溃时，他们果断出手收购了日本领先的切削刀具制造商 Tungaloy。去年春天海啸袭击东京北部时，Tungaloy 遭受了严重损失。但你此刻看不出来：Tungaloy 在2011年创下了销售纪录。我11月参观了 Iwaki 工厂，被 Tungaloy 管理层和员工的奉献精神与热情所鼓舞。他们是一个出色的团队，值得你们的钦佩和感谢。

• McLane（我们的大型分销公司，由 Grady Rosier 管理）在2011年新增了重要客户，并创下税前盈利纪录3.7亿美元。自2003年以15亿美元收购以来，该公司已实现税前盈利24亿美元，同时因其所分销的零售产品（糖果、口香糖、香烟等）价格上涨，后进先出（LIFO）储备增加了2.3亿美元。Grady 经营的物流机器无与伦比。你们可以期待 McLane 的补强收购，尤其是在我们新开展的葡萄酒与烈酒分销业务中。

• Jordan Hansell 在4月份接管了 NetJets（公务机公司），并交出了2011年税前盈利2.27亿美元的成绩单。这一表现尤为引人注目，因为全年大部分时间新飞机的销售都很缓慢。然而12月份出现了超出季节性常态的增长。这种增长能否持续尚不确定。

几年前，NetJets 曾是我最担心的问题：其成本远高于收入，现金在流失。没有伯克希尔的支撑，NetJets 早已破产。这些问题已成为过去，Jordan 现在从一家受控良好、运转顺畅的企业中带来稳定的利润。NetJets 正计划与一些一流的合作伙伴进入中国，此举将拓宽我们的商业“护城河”。没有其他分时所有权运营商能望其项背，永远也不会有。NetJets 对安全和服务的持续关注已经在市场上得到了回报。

• 看着 Frank Ptak 领导下 Marmon（玛蒙集团）的进步令人愉悦。除了实现内部增长，Frank 还定期进行补强收购，这些收购总体上将显著提升 Marmon 的盈利能力。（在过去的几个月里，他完成了三笔，耗资约2.7亿美元。）在全球建立合资企业是 Marmon 的另一个机遇。年中，Marmon 与 Kundalia 家族在印度合资成立了一家起重机业务，目前已经带来可观的利润。这是 Marmon 与该家族的第二次合作，此前几年前成功建立了一家电线电缆合资企业。
  马蒙旗下11个主要业务板块中，去年有10个实现了利润增长。未来几年，马蒙的利润将继续增长，这一点你们尽可放心。

——“买大宗商品，卖品牌”一直是商业成功的法宝。自1886年以来，可口可乐凭借这一策略取得了巨大而持久的利润；自1891年以来，箭牌也是如此。在较小规模上，我们自40年前收购喜诗糖果以来，也通过这一方法收获了丰硕成果。

去年，喜诗的税前利润达到创纪录的8300万美元，自我们收购以来的总利润累计达16.5亿美元。对比一下我们的收购价——2500万美元，以及年末的账面价值（扣除现金后）为负。（是的，你没看错；喜诗占用的资本随季节波动，圣诞节后降至最低点。）自2006年布拉德·金斯特勒出任CEO以来，他将公司带到了新高度，这一点值得称赞。

——内布拉斯加家具卖场（我们持股80%）2011年利润创下纪录，净利润是我们1983年入股时的十倍多。

但这还不是最大的新闻。更重要的是，NFM收购了达拉斯北部一片433英亩的土地，我们将在那里建造一家几乎肯定是全国家居用品销量最高的门店。目前，这个称号由我们在奥马哈和堪萨斯城的两家门店共享，这两家店2011年的销售额均超过4亿美元，创历史新高。德州门店还需几年才能建成，但我期待为开业剪彩。（在伯克希尔，经理们干活，我接受掌声。）

我们的新店将提供无与伦比的商品种类，价格无人能敌，这将吸引远近顾客蜂拥而至。这种吸引力加上我们在该地块持有的大量土地，应能吸引其他一些大型零售商入驻。（如果有高客流零售商读到这段文字，请联系我。）

我们与NFM及其经营家族布朗金一家的合作经历真正令人愉快。这家企业由萝丝·布朗金（大家叫她“B夫人”）创立，她于1937年用500美元和一个梦想创办了公司。她在89岁时将股权卖给了我，一直工作到103岁。（退休后第二年她就去世了——我把这个顺序提醒给任何哪怕动过退休念头的伯克希尔经理人。）

B夫人的儿子路易现年92岁，二战回来后帮助母亲发展业务，他和妻子弗朗已与我有55年的友谊。而路易的儿子罗恩和欧文又将公司带到了新高度，先是开设了堪萨斯城门店，现在正为进军德州做准备。

我和“小伙子们”一起度过了许多美好时光，我把他们视为我最好的朋友。布朗金一家是了不起的家族。我从不舍得让超凡的基因池白白浪费，最近我非常高兴，因为布朗金家族的第四代已有几位成员加入了NFM。

总体而言，伯克希尔这个板块中企业的内在价值显著高于账面价值。然而，对于其中许多较小的公司来说，情况并非如此。我在收购小公司方面犯的错误已经太多了。查理很久以前就告诉我：“如果一件事根本不值得做，那它也不值得做好。”我当时真该更用心地听。无论如何，我们的大型收购通常效果很好——少数几个案例中甚至异常出色——总体而言，这个板块对我们来说是赢家。

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有些股东告诉我，他们渴望了解更多会计深奥话题。所以这里讲一点GAAP强制规定的胡言乱语，希望他们两位会喜欢。
常理来说，我们旗下那些五花八门的子公司，应该以购入成本加上购入后留存收益（除非其经济价值已大幅缩水，此时必须做适当减值处理）计入账簿。这在伯克希尔基本属实——除了Marmon那个古怪的情况。

2008年我们买下Marmon 64%的股权，按成本48亿美元入账。到这儿还没问题。接着，2011年初，根据与Pritzker家族的原始合同，我们又买了16%，按一个反映Marmon增值的公式，支付了15亿美元。但这回，我们被要求立即核销6.14亿美元的购买价款，且追溯至2010年底。（别问为什么！）显然，这笔核销与经济现实毫无关联。Marmon内在价值超出账面价值的部分，反而因这毫无意义的减记被拉大了。

金融与金融产品

这个部门是我们最小的板块，包含两家租赁公司：XTRA（拖车）和CORT（家具），以及Clayton Homes——全美最大的活动房屋生产商和融资商。除了这些全资子公司，我们还将一批金融资产以及Berkadia商业抵押贷款50%的权益归入此列。

回顾2008年底经济断崖式下跌后我们这三家运营企业的经历，颇有启发——它们后来的表现，恰好折射出那场分裂式的复苏。

两家租赁公司的业绩映射了"非住房"经济。它们2009年合并税前利润为1300万美元，2010年5300万美元，2011年1.55亿美元，这改善反映了我们几乎所有非住房业务都出现了稳步复苏。反观Clayton所在的活动房屋世界（就像现场建造的住房一样），经历了一场名副其实的萧条，至今未见复苏。全美活动房屋销量2009年为49,789套，2010年50,046套，2011年51,606套。（住房市场火爆的2005年，这一数字是146,744套。）

尽管时局艰难，Clayton仍在持续盈利，主要原因是其抵押贷款组合在艰难环境下表现良好。作为活动房屋领域最大的贷款机构，且通常面向中低收入家庭放贷，你可能以为我们在房市崩盘中会遭受重创。但坚持老派的贷款政策——足额首付、月供与常规收入保持合理比例——使Clayton将损失控制在可接受水平。即便许多借款人已长期处于负资产状态，它也做到了这一点。

众所周知，美国在住房拥有权和抵押贷款政策上偏离了正轨，我们的经济正为这些错误付出巨大代价。所有人都参与了这场破坏行为——政府、贷款机构、借款人、媒体、评级机构，你能想到的都有份。这场愚蠢行为的核心，是几乎普遍相信房价一定会随时间上涨，任何下跌都无关紧要。接受这个前提，就为住房交易中几乎所有价格和行为找到了借口。各地的房主都觉得更富有了，纷纷通过再融资来"变现"房产增值。这些巨额现金注入推动了我们整个经济中的消费狂欢。狂欢持续时，一切似乎都很有趣。（一个很大程度上被忽略的事实：许多因止赎而"失去"房子的人，实际上实现了利润——因为他们之前进行的再融资让他们拿到了超出购房成本的现金。在这种情况下，被驱逐的房主是赢家，而受害者是贷款机构。）
2007年，泡沫破灭了——所有泡沫都逃不过这个结局。如今，我们正在经历这场疗愈的第四年，过程虽漫长而痛苦，但终将成功。眼下，新增家庭数量已持续超过新建住房数量。

等到全国过剩的住房库存被消化完毕后，Clayton的盈利应该会显著改善。不过以我目前所见，我认为该领域这三家企业的内在价值与其账面价值之间并无重大差异。

投资

下表列出我们在年末市值超过10亿美元的普通股投资。

持股数量	公司	持股比例	2011年12月31日
			成本*	市值
			（单位：百万美元）
151,610,700	American Express Company	13.0%	1,287	7,151
200,000,000	The Coca-Cola Company	8.8%	1,299	13,994
29,100,937	ConocoPhillips	2.3%	2,027	2,121
63,905,931	International Business Machines Corp.	5.5%	10,856	11,751
31,416,127	Johnson & Johnson	1.2%	1,880	2,060
79,034,713	Kraft Foods Inc.	4.5%	2,589	2,953
20,060,390	Munich Re	11.3%	2,990	2,464
3,947,555	POSCO	5.1%	768	1,301
72,391,036	The Procter & Gamble Company	2.6%	464	4,829
25,848,838	Sanofi	1.9%	2,055	1,900
291,577,428	Tesco plc	3.6%	1,719	1,827
78,060,769	U.S. Bancorp	4.1%	2,401	2,112
39,037,142	Wal-Mart Stores, Inc.	1.1%	1,893	2,333
400,015,828	Wells Fargo & Company	7.6%	9,086	11,024
	其他		6,895	9,171
	按市值计价的普通股合计		48,209	76,991

*此为我们实际购买价格，也是我们的计税基础；由于部分资产曾按会计准则要求计提增值或减值，GAAP口径的“成本”在少数情况下有所不同。

2011年我们对投资组合的调整不多。但有三笔操作意义重大：买入IBM和美国银行，以及对富国银行加仓10亿美元。

银行业已重新站稳脚跟，富国银行更是蒸蒸日上。其盈利强劲，资产稳健，资本金达到历史最高水平。至于美国银行，前任管理层犯下了一些大错。Brian Moynihan在清理这些烂摊子方面取得了出色进展，尽管彻底完成仍需数年。与此同时，他正在培育一个庞大而富有吸引力的核心业务——即便今天的问题被人遗忘，它依然屹立不倒。我们认购7亿股美国银行的认股权证，在到期前很可能具有重大价值。

就像1988年买入可口可乐、2006年买铁路股一样，我在IBM这波行情上又迟到了。我读IBM年报已有50多年，但直到去年3月的一个星期六，我的想法才变得清晰。正如梭罗所说：“重要的不是你看到了什么，而是你从中发现了什么。”
Todd Combs去年构建了17.5亿美元（成本价）的投资组合，Ted Weschler很快也将创建规模类似的组合。他们每人从自己的业绩中获得绩效薪酬的80%，从搭档的业绩中获得20%。当我们的季度持仓报告显示持股金额较小时，那些很可能不是我买入的（尽管媒体常常忽略这一点），而是Todd或Ted买入的。

关于这两位新成员还有一点要补充。Ted和Todd都会在并购方面对伯克希尔的下一任CEO有所帮助。他们拥有出色的“商业头脑”，能够把握决定各类企业未来走向的经济力量。他们的思考还受益于对什么是可预测、什么是不可知的理解。

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关于我们的衍生品头寸，没什么新东西要报告，我们已在过去的报告中详细描述过。（1977年以来的年报可在www.berkshirehathaway.com查阅。）不过，行业有一项重要变化必须指出：虽然我们现有合约的抵押品要求很低，但新头寸的规则已经改变。因此，我们将不再开立任何重大的衍生品头寸。我们规避任何可能要求立即追加抵押品的合约。那种可能因突发意外事件（如全球金融恐慌或大规模恐怖袭击）而突然产生的巨额追加抵押品要求，与我们保持冗余流动性和绝对财务实力的首要目标相悖。

我们那些类似保险的衍生品合约——即如果高收益债券指数中的某些品种出现违约，我们须支付款项——正在接近尾声。让我们暴露于最大损失风险的合约已经到期，剩余部分也将很快终止。2011年，我们为两起损失支付了8600万美元，使我们的总支付额达到26亿美元。我们几乎可以肯定该组合最终会实现“承保利润”，因为我们收到的保费是34亿美元，而未来的损失很可能是小额的。此外，在这五年合约期内，我们平均每年持有约20亿美元的浮存金。在信用压力巨大的时期取得这一成功结果，凸显了获得与风险相称的保费的重要性。

Charlie和我仍然相信，我们的股权看跌期权头寸将产生可观的利润——考虑到我们持有超过十五年的42亿美元浮存金，以及我们已经通过回购部分合约实现的2.22亿美元利润。年末，伯克希尔的账面价值为剩余合约反映了85亿美元的负债；如果它们当时全部到期，我们的支付额将是62亿美元。

投资者的基本选择以及我们强烈偏好的那一种

投资常被描述为现在投入资金，期望未来获得更多现金的过程。在伯克希尔，我们采取更严格的方法，将投资定义为：现在将购买力转移给他人，基于理性的期望在未来——在名义收益已缴税后——获得更多的购买力。更简洁地说，投资是放弃现在的消费，以便将来有能力进行更多消费。

从我们的定义中衍生出一个重要的推论：一项投资的风险并非由贝塔值（华尔街用来衡量波动性并常用于度量风险的术语）来衡量，而是由该投资在其预期持有期间使其所有者损失购买力的概率——理性的概率——来决定。资产的价格可能大幅波动，但只要合理地确定它们在持有期内能带来增加的购买力，就不算有风险。我们将会看到，一项非波动资产反而可能充满风险。
投资机会既多又杂，但主要可分为三大类，理解每类的特征至关重要。下面我们来盘点一下。

以特定货币计价的投资，包括货币市场基金、债券、抵押贷款、银行存款及其他工具。这类货币相关投资大多被认为“安全”，但实际上它们是最危险的资产之一。它们的贝塔系数可能为零，但风险却巨大。

过去一个世纪里，这些工具摧毁了许多国家投资者的购买力，即使持有者持续按时收到利息和本金。更糟的是，这种丑陋的结果将永远重演。政府决定了货币的最终价值，而系统性力量有时会促使他们倾向于制造通胀的政策。这类政策时不时会失控。

即便在美国——一个对稳定货币有着强烈愿望的国家——自1965年我接管伯克希尔管理以来，美元的价值已惊人地贬值了86%。如今买1美元的东西至少需要7美元。因此，一家免税机构在那段时期只需每年从债券投资中获得4.3%的利息，就能勉强维持购买力。其经理人若是将其中任何一部分利息视为“收入”，那便是在自欺欺人。

对于像你我这样的纳税投资者，情况则糟得多。同样的47年间，持续滚动投资美国国库券的年化收益为5.7%。这听起来不错。但如果一位个人投资者按平均25%的税率缴纳个人所得税，这5.7%的回报实际上会让他得不到任何真实收入。他明面上的所得税会吞噬掉名义收益中的1.4个百分点，而隐性的通胀税则会吞噬掉剩余的4.3个百分点。值得注意的是，这位投资者可能认为所得税是主要负担，但隐性通胀“税”却是明面所得税的三倍多。“我们信仰上帝”或许印在我们的货币上，但启动政府印钞机的那只手，却太过人性化。

当然，高利率可以补偿货币相关投资者面临的通胀风险——事实上，1980年代初的利率就出色地完成了这个任务。但当前的利率远不足以抵消投资者承担的购买力风险。如今，债券应该贴上警示标签。

因此，在当前条件下，我不喜欢货币相关投资。即便如此，伯克希尔仍持有大量此类资产，主要是短期品种。在伯克希尔，充足的流动性始终占据核心地位，无论利率多低，这一点绝不会被忽视。为满足这一需求，我们主要持有美国国库券——这是唯一在最混乱的经济条件下也能保证流动性的投资。我们的流动性工作水平为200亿美元；100亿美元是我们的绝对下限。

除了流动性需求和监管要求之外，我们只会购买那些存在非寻常获利可能的货币相关证券——要么是因为特定信用被错误定价（如同垃圾债券定期崩盘时那样），要么是因为利率上升到某个水平，当利率下降时，高品质债券有实现可观资本收益的可能。尽管我们过去利用过这两种机会——未来也可能再次利用——但如今我们与这类前景已背道而驰。华尔街的Shelby Cullom Davis很久以前的一句讽刺评论如今恰如其分：“被吹捧为提供无风险回报的债券，如今定价成了提供无回报的风险。”
- 第二大类投资涉及那些永远不会产出任何东西的资产，但买家买入是希望未来会有其他人——同样知道这些资产永远不会有产出——愿意出更高的价钱。在17世纪，郁金香（Tulips）曾短暂成为这类买家的最爱。
这类投资需要买家群体不断扩张，而新买家之所以被吸引，是因为他们相信这个购买群体会进一步扩大。持有者并非受资产本身所能产出之物所激励——它永远死气沉沉——而是相信未来会有更多人渴望拥有它。

这类资产中的大头是黄金，目前深受那些几乎恐惧所有其他资产、尤其是纸币（正如上文所指，他们对纸币价值的恐惧确有道理）的投资者的青睐。然而，黄金有两个显著缺点：既没什么大用，也不会繁衍增值。诚然，黄金有一些工业和装饰用途，但这些需求有限，不足以消化新增产量。同时，如果你永远持有一盎司黄金，到世界末日你还是只有一盎司。

多数黄金买家的动机是相信恐惧者的队伍会壮大。过去十年证明这一信念是正确的。此外，上涨的价格本身又催生了额外的购买热情，吸引那些视价格上涨为投资逻辑有效验证的买家。随着“随大流”的投资者加入任何一场盛宴，他们便自己制造了真理——至少暂时如此。

过去15年里，互联网股票和房地产已经展示出：一个最初合理的论点，加上充分曝光的价格上涨，能制造出多么极端的泡沫。在这些泡沫中，大批原本持怀疑态度的投资者被市场提供的“证据”所征服，买家群体——一度——扩张到足以让这辆大篷车继续滚动。但吹得足够大的泡沫终究会破灭。于是那句老话再次被印证：“智者始，愚者终。”

今天全球黄金存量约为17万吨。如果把这些黄金全部熔化在一起，会形成一个边长约68英尺的立方体（想象一下，它恰好能放在一个棒球内场里）。按每盎司1750美元——我写这句话时的金价——它的价值为9.6万亿美元。我们把这个立方体称为A堆。

现在让我们创建一个价值相等的B堆。用这些钱，我们可以买下美国所有的农田（4亿英亩，年产值约2000亿美元），再加上16个埃克森美孚（Exxon Mobil）——全球最赚钱的公司，年利润超过400亿美元。买完这些之后，我们还能剩下约1万亿美元作为零花钱（这种扫货之后，可别觉得手头拮据）。你能想象一位拥有9.6万亿美元的投资者会选择A堆而不是B堆吗？

除了现有黄金存量估值之高令人咋舌，当前价格还使得每年新产的黄金价值约1600亿美元。买家——无论是珠宝和工业用户、恐慌的个人，还是投机者——必须不断吸收这些额外供应，才能勉强维持当前价格下的平衡。

一百年后，那4亿英亩农田将生产出惊人数量的玉米、小麦、棉花及其他作物——并且无论货币如何变化，仍将继续产出这些宝贵的财富。埃克森美孚大概已经向它的所有者派发了数万亿美元的股息，并且还持有价值数万亿美元的资产（记住，你拥有16个埃克森）。而那17万吨黄金，大小不变，仍然什么也生产不出来。你可以抚摸那个立方体，但它不会回应你。
诚然，一百年后的人们在恐惧时，很可能仍有许多人会冲向黄金。但我确信，当前估值9.6万亿的A堆资产，在一个世纪内的复合增长率将远逊于B堆资产。

——我们的前两类资产在恐惧顶峰时最受欢迎：对经济崩溃的恐惧驱使个人转向货币型资产，尤其是美国国债；而对货币崩溃的恐惧则促使其转向不育资产（如黄金）。2008年底我们听到"现金为王"，那恰恰是应当动用现金而非持有现金的时候。同样，20世纪80年代初我们听到"现金是垃圾"，那时固定美元投资正处于记忆中最具吸引力的水平。在那些时刻，需要大众支持的投资者为那份心安付出了高昂代价。

我个人偏好——你猜到了——是我们的第三类：生产性资产的投资，无论是企业、农场还是房地产。理想情况下，这些资产应当在通胀时期能够以最低的新资本投入，产出能保持购买力价值的产品。农场、房地产以及许多企业（如可口可乐、IBM和我们自己的喜诗糖果）都符合这双重考验。某些其他公司——比如我们的受监管公用事业——则未能通过，因为通胀给它们带来了沉重的资本需求。要赚更多，所有者必须投入更多。即便如此，这些投资仍将优于不育资产或货币型资产。

无论一百年后的货币是基于黄金、贝壳、鲨鱼牙齿还是一张纸（如今天），人们都会愿意用每天几分钟的劳动来换取一杯可口可乐或一些喜诗花生糖。未来，美国人口将比现在运输更多的商品、消费更多的食物、需要更多的居住空间。人们将永远用自己的产出交换他人的产出。

我国的企业将继续高效地交付公民所需的产品和服务。打个比方，这些商业"奶牛"将存活数世纪，并产出越来越多的"牛奶"。它们的价值不取决于交换媒介，而取决于它们产奶的能力。卖牛奶的收入将为奶牛的主人实现复利，正如20世纪道琼斯指数从66点涨至11,497点（同时还有大量股息）一样。伯克希尔的目标将是增加对一流企业的所有权。我们的首选是整体拥有它们——但也会通过持有大量可流通股票的方式成为所有者。我相信，在任何较长的时间段内，这类投资都将是三者中遥遥领先的赢家。更重要的是，它也将是最安全的。

年会

年会将于5月5日星期六在世纪互联中心（原"奎斯特"更名）举行。去年，Carrie Kizer首次担任主持人，并赢得了终身聘用。每个人都喜欢她的工作——尤其是我。

早上7点开门后不久，我们将有一项新活动："投掷报纸挑战赛"。去年年底，伯克希尔收购了《奥马哈世界先驱报》，在我与该报股东兼员工的会议中，我谈到了十几岁时投递50万份报纸所练就的折叠和投掷技巧。
我立刻看到听众眼中闪现的怀疑。这我并不意外。毕竟，记者们的信条是："就算你妈说她爱你，也得去核实一下。"所以现在我得用行动来证明我的说法。年会上，我将接受所有人的挑战，把《世界先驱报》扔到35英尺外克莱顿房屋的门廊上。任何挑战者，只要报纸落点比我的更靠近门口，就能获得一个Dilly bar（冰雪皇后冰淇淋）。我已经让Dairy Queen（冰雪皇后）为这次比赛准备了一些，不过我估计一个都用不上。我们会有一大摞报纸，拿一张，折好（别用橡皮筋），使出你的最佳投法，让我开心开心。

早上8点30分，将播放一部新的伯克希尔电影。一小时后开始问答环节（期间在CenturyLink看台休息午餐），一直持续到下午3点30分。短暂休息后，下午3点45分，查理和我将召开年度股东大会。如果你决定在白天问答环节中途离场，请趁查理发言时再走。

当然，离场的最佳理由是去购物。我们会帮你实现这一点——在紧邻会场的194,300平方英尺大厅里，摆满了几十家伯克希尔子公司的产品。去年你们很给力，大部分摊位都创下了销售纪录。在9小时内，我们卖出了1,249双Justin靴子、11,254磅See's糖果、8,000把Quikut刀（每分钟15把）和6,126双Wells Lamont手套——这是Marmon的一款产品，它的存在对我来说都是新闻（我关注的产品是钱）。但你们还能做得更好。记住：凡是说金钱买不到快乐的人，只是没在我们这儿购过物。

今年新参展商包括我们的跑鞋公司Brooks。Brooks一直在抢占市场份额，2011年销售额增长了34%，创下连续第十年销量纪录。去打个招呼，祝贺公司CEO Jim Weber。别忘了买几双限量版"伯克希尔·哈撒韦跑鞋"。

GEICO将设一个展位，由来自全国各地的顶尖顾问坐镇，随时准备为你提供车险报价。在大多数情况下，GEICO可以给你股东折扣（通常8%）。这项特别优惠在我们运营的51个司法管辖区中，有44个允许提供。（补充一点：如果你已符合其他折扣条件，比如某些团体的折扣，这个折扣不可累加。）带上你现有保险的详细信息，看看我们能否帮你省钱。我相信至少有一半的人能省下钱。

一定要去逛逛Bookworm书店。那里有超过35种书籍和DVD，包括几本新书。我推荐《MiTek》——一本关于我们一家非常成功的子公司的发展史。你会了解到，我最初是如何被一块寄到手上的丑陋金属勾起兴趣的，当时我完全搞不懂它的用途。自从2001年收购MiTek以来，它已完成了33次"补强型"收购，几乎都很成功。我想你也会喜欢Peter Bevelin编写的一本小书，它解释了伯克希尔的投资和运营原则，总结了查理和我在多年年报和年会上说过的话。如果你需要邮寄所购书籍，附近有邮寄服务。

如果你是个大买家——或者想成为大买家——周六中午到下午5点之间，去奥马哈机场东侧的Elliott Aviation。那里会有一队NetJets飞机，保证让你心跳加速。坐巴士来，乘私人飞机走。我批准你的信用额度。
随本报告附上的股东委托书材料中有一份附件，说明了如何获取参会凭证及其他活动入场券。航空公司有时会在伯克希尔周末抬高票价。如果你从远方来，不妨比较一下飞往堪萨斯城和奥马哈的成本。两城之间车程约2½小时，如果你原本打算在奥马哈租车，说不定能省下一大笔钱。省下来的钱到我们这儿花。

位于多奇街和太平洋街之间的72街上、占地77英亩的内布拉斯加家具城（Nebraska Furniture Mart），将再次推出“伯克希尔周末”折扣价。去年该店在股东大会期间销售额达3,270万美元，超过大多数家具店的年销售额。要享受伯克希尔折扣，你必须在5月1日（周二）至5月7日（周一）之间购物，并出示参会凭证。期间的特价甚至适用于几家知名制造商的产品，它们通常有铁律禁止打折，但为了我们股东周末的精神，破例为你提供优惠。我们感谢它们的配合。NFM周一至周六上午10点至晚上9点营业，周日上午10点至下午6点营业。今年周六下午5:30至8:00，NFM将举办野餐会，诚邀各位参加。

在波仙珠宝（Borsheims），我们将再次举办两场股东专属活动。第一场是5月4日（周五）下午6点至晚上9点的鸡尾酒招待会。第二场主盛会将于5月6日（周日）上午9点至下午4点举行。周六我们将营业至下午6点。周日下午2点左右，我将在波仙珠宝当店员，拼命想超过去年的销售额。所以，快来占我便宜吧。向我索要“疯狂沃伦”特价。

整个周末波仙珠宝都将人潮涌动。为方便起见，股东价格将从4月30日（周一）持续到5月12日（周六）。在此期间，请出示参会凭证或显示你持有伯克希尔股票的券商对账单，以证明股东身份。

周日，在波仙珠宝外的商场里，两届美国国际象棋冠军Patrick Wolff将蒙眼与来者（眼睛睁得大大的）进行六对一车轮战。附近，来自达拉斯的杰出魔术师Norman Beck将让旁观者眼花缭乱。此外，我们还邀请了世界顶尖桥牌专家Bob Hamman和Sharon Osberg，他们将在周日下午与股东们打桥牌。两位非专家——Charlie和我——也会坐在牌桌旁。

戈拉特牛排馆（Gorat's）和皮科洛牛排馆（Piccolo's）将再次在5月6日（周日）专为伯克希尔股东开放。两家餐厅均营业至晚上10点，戈拉特牛排馆下午1点开门，皮科洛牛排馆下午4点开门。这些是我最喜欢的餐厅，周日晚上我会去两家都吃。（精算表告诉我，我在死前还能再摄入1,200万卡路里。一想到有这些卡路里没吃完我就害怕，所以周日我会提前开吃。）记住：在戈拉特牛排馆订位，请在4月1日（不能更早）拨打402-551-3733；在皮科洛牛排馆，拨打402-342-9038。在皮科洛，要有点品位，点一份超大份的根汁汽水冰淇淋作为甜点。只有娘娘腔才会点小份的。

我们将再次邀请同三位财经记者主持股东大会的问答环节，由他们向Charlie和我提问，问题由股东通过电子邮件提交。这三位记者及其电子邮箱如下：来自《财富》杂志的Carol Loomis，邮箱：cloomis@fortunemail.com；来自CNBC的Becky Quick，邮箱：BerkshireQuestions@cnbc.com；以及来自《纽约时报》的Andrew Ross Sorkin，邮箱：arsorkin@nytimes.com。
根据记者们提交的问题，每位记者会从中挑出十几条他们认为最有趣、最重要的问题。记者们告诉我，如果你把问题写得简洁、避免在最后一刻提交、让问题与伯克希尔相关、并且每封邮件不超过两个问题，你的问题被选中的几率最大。（在邮件里，你可以告诉记者，如果问题被选中，你是否希望提及你的姓名。）

今年我们增加了一个由三位跟踪伯克希尔的分析师组成的第二组。他们是KBW的Cliff Gallant、巴克莱资本的Jay Gelb和道林合伙公司的Gary Ransom。这些分析师会提出他们自己关于伯克希尔的问题，并与记者和观众轮流提问。

查理和我认为，所有股东应该同时获取伯克希尔的新信息，并且应该有足够的时间分析这些信息，所以我们通常会在周五收盘后发布财务信息。我们不会与大型机构投资者或分析师进行一对一会谈。新设立的分析师小组可以让分析师们以可能对许多股东有用的方式提问——甚至可能是一些技术性问题。

查理和我对即将被问到的问题一无所知。我们知道记者和分析师会提出一些尖锐的问题，而这正是我们喜欢的。总的来说，我们预计至少有54个问题，每位分析师和记者各提6个，观众提18个。如果有富余时间，我们会让观众多提一些问题。观众提问者将通过抽签决定，抽签于上午8:15在主会场和主要备用房间内的13个麦克风位置进行。

* * * * * * * * * * * *

我经常夸赞我们运营经理的成就，这是有充分理由的。他们真是全明星人物，经营企业就像那是他们家族拥有的唯一资产。我相信，在大型上市公司中，他们的股东导向心态是无与伦比的。大多数人没有经济上的工作需求；打出商业“全垒打”的喜悦对他们来说和薪水一样重要。

然而，同样重要的是与我一起在公司总部办公室工作的23位男女同事（都在同一层楼，我们打算一直保持这样！）。

这个团队高效地处理大量SEC（美国证券交易委员会）和其他监管要求，提交一份17,839页的联邦所得税申报表——你好，吉尼斯！——以及州和外国申报表。此外，他们还回应无数股东和媒体的询问，发布年报，筹备全国最大的年会，协调董事会活动——任务清单远不止这些。

他们以令人难以置信的高效愉快地处理所有这些业务，让我的生活轻松愉快。他们的努力超出了严格与伯克希尔相关的活动：他们与48所大学（从200名申请者中选出）打交道，这些大学本学年将派学生来奥马哈与我共度一天；他们还处理我收到的各种请求，安排我的出行，甚至给我买午餐汉堡。没有哪个CEO比我更幸运了。

这个总部办公室团队，连同我们的运营经理，得到了我最深的感谢，也值得你们的感谢。5月5日来奥马哈——资本主义的摇篮——当面告诉他们吧。

2012年2月25日

Warren E. Buffett

董事会主席