BERKSHIRE HATHAWAY INC.

B H ERKSHIRE ATHAWAY INC.

2016 ANNUAL REPORT

BERKSHIRE HATHAWAY INC. 2016 ANNUAL REPORT TABLE OF CONTENTS

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

2

Chairman's Letter* ..................................................................................

3

Acquisition Criteria..................................................................................

30

Business Activities ..................................................................................

31

Selected Financial Data for the Past Five Years .............................................

32

Management's Report on Internal Control Over Financial Reporting .................

32

Report of Independent Registered Public Accounting Firm ..............................

33

Consolidated Financial Statements ..............................................................

34

Management's Discussion .........................................................................

78

Owner's Manual...................................................................................... 108

How to Minimize Investment Returns.......................................................... 114

Common Stock Data ................................................................................ 115

Operating Companies ............................................................................... 116

Automobile Dealerships............................................................................ 117

Real Estate Brokerage Businesses ............................................................... 118

Daily Newspapers.................................................................................... 119

Directors and Officers of the Company ......................................... Inside Back Cover

*Copyright? 2017 By Warren E. Buffett All Rights Reserved

Berkshire's Performance vs. the S&P 500

Year

1965 ........................................................................... 1966 ........................................................................... 1967 ........................................................................... 1968 ........................................................................... 1969 ........................................................................... 1970 ........................................................................... 1971 ........................................................................... 1972 ........................................................................... 1973 ........................................................................... 1974 ........................................................................... 1975 ........................................................................... 1976 ........................................................................... 1977 ........................................................................... 1978 ........................................................................... 1979 ........................................................................... 1980 ........................................................................... 1981 ........................................................................... 1982 ........................................................................... 1983 ........................................................................... 1984 ........................................................................... 1985 ........................................................................... 1986 ........................................................................... 1987 ........................................................................... 1988 ........................................................................... 1989 ........................................................................... 1990 ........................................................................... 1991 ........................................................................... 1992 ........................................................................... 1993 ........................................................................... 1994 ........................................................................... 1995 ........................................................................... 1996 ........................................................................... 1997 ........................................................................... 1998 ........................................................................... 1999 ........................................................................... 2000 ........................................................................... 2001 ........................................................................... 2002 ........................................................................... 2003 ........................................................................... 2004 ........................................................................... 2005 ........................................................................... 2006 ........................................................................... 2007 ........................................................................... 2008 ........................................................................... 2009 ........................................................................... 2010 ........................................................................... 2011 ........................................................................... 2012 ........................................................................... 2013 ........................................................................... 2014 ........................................................................... 2015 ........................................................................... 2016 ...........................................................................

in Per-Share Book Value of

Berkshire

23.8 20.3 11.0 19.0 16.2 12.0 16.4 21.7

4.7 5.5 21.9 59.3 31.9 24.0 35.7 19.3 31.4 40.0 32.3 13.6 48.2 26.1 19.5 20.1 44.4 7.4 39.6 20.3 14.3 13.9 43.1 31.8 34.1 48.3 0.5 6.5 (6.2) 10.0 21.0 10.5 6.4 18.4 11.0 (9.6) 19.8 13.0 4.6 14.4 18.2 8.3 6.4 10.7

Annual Percentage Change

in Per-Share Market Value of

Berkshire

49.5 (3.4) 13.3 77.8 19.4 (4.6) 80.5 8.1 (2.5) (48.7) 2.5 129.3 46.8 14.5 102.5 32.8 31.8 38.4 69.0 (2.7) 93.7 14.2 4.6 59.3 84.6 (23.1) 35.6 29.8 38.9 25.0 57.4 6.2 34.9 52.2 (19.9) 26.6 6.5 (3.8) 15.8 4.3 0.8 24.1 28.7 (31.8) 2.7 21.4 (4.7) 16.8 32.7 27.0 (12.5) 23.4

in S&P 500 with Dividends

Included

10.0 (11.7) 30.9 11.0

(8.4) 3.9 14.6 18.9 (14.8) (26.4) 37.2 23.6 (7.4) 6.4 18.2 32.3 (5.0) 21.4 22.4 6.1 31.6 18.6 5.1 16.6 31.7 (3.1) 30.5 7.6 10.1 1.3 37.6 23.0 33.4 28.6 21.0 (9.1) (11.9) (22.1) 28.7 10.9 4.9 15.8 5.5 (37.0) 26.5 15.1 2.1 16.0 32.4 13.7 1.4 12.0

Compounded Annual Gain ? 1965-2016 ............................ Overall Gain ? 1964-2016 ...............................................

19.0% 884,319%

20.8% 1,972,595%

9.7% 12,717%

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.

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BERKSHIRE HATHAWAY INC.

To the Shareholders of Berkshire Hathaway Inc.:

Berkshire's gain in net worth during 2016 was $27.5 billion, which increased the per-share book value of both our Class A and Class B stock by 10.7%. Over the last 52 years (that is, since present management took over), per-share book value has grown from $19 to $172,108, a rate of 19% compounded annually.*

During the first half of those years, Berkshire's net worth was roughly equal to the number that really counts: the intrinsic value of the business. The similarity of the two figures existed then because most of our resources were deployed in marketable securities that were regularly revalued to their quoted prices (less the tax that would be incurred if they were to be sold). In Wall Street parlance, our balance sheet was then in very large part "marked to market."

By the early 1990s, however, our focus was changing to the outright ownership of businesses, a shift that materially diminished the relevance of balance sheet figures. That disconnect occurred because the accounting rules (commonly referred to as "GAAP") that apply to companies we control differ in important ways from those used to value marketable securities. Specifically, the accounting for businesses we own requires that the carrying value of "losers" be written down when their failures become apparent. "Winners," conversely, are never revalued upwards.

We've experienced both outcomes: As is the case in marriage, business acquisitions often deliver surprises after the "I do's." I've made some dumb purchases, paying far too much for the economic goodwill of companies we acquired. That later led to goodwill write-offs and to consequent reductions in Berkshire's book value. We've also had some winners among the businesses we've purchased ? a few of the winners very big ? but have not written those up by a penny.

We have no quarrel with the asymmetrical accounting that applies here. But, over time, it necessarily widens the gap between Berkshire's intrinsic value and its book value. Today, the large ? and growing ? unrecorded gains at our winners produce an intrinsic value for Berkshire's shares that far exceeds their book value. The overage is truly huge in our property/casualty insurance business and significant also in many other operations.

Over time, stock prices gravitate toward intrinsic value. That's what has happened at Berkshire, a fact explaining why the company's 52-year market-price gain ? shown on the facing page ? materially exceeds its book-value gain.

* All per-share figures used in this report apply to Berkshire's A shares. Figures for the B shares are 1/1500th of those shown for A.

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