To the Shareholders of Berkshire Hathaway Inc.:

First, a few words about accounting. The merger with Diversified Retailing Company, Inc. at yearend adds two new complications in the presentation of our financial results. After the merger, our ownership of Blue Chip Stamps increased to approximately 58% and, therefore, the accounts of that company must be fully consolidated in the Balance Sheet and Statement of Earnings presentation of Berkshire. In previous reports, our share of the net earnings only of Blue Chip had been included as a single item on Berkshire’s Statement of Earnings, and there had been a similar one-line inclusion on our Balance Sheet of our share of their net assets.

                                                                         Net Earnings
                                   Earnings Before Income Taxes            After Tax
                              --------------------------------------  ------------------
                                    Total          Berkshire Share     Berkshire Share
                              ------------------  ------------------  ------------------
(in thousands of dollars)       1978      1977      1978      1977      1978      1977
                              --------  --------  --------  --------  --------  --------
Total - all entities ......... $66,180   $57,089   $54,350   $42,234   $39,242   $30,393
                              ========  ========  ========  ========  ========  ========
Earnings from operations:
  Insurance Group:
    Underwriting ............. $ 3,001   $ 5,802   $ 3,000   $ 5,802   $ 1,560   $ 3,017
    Net investment income ....  19,705    12,804    19,691    12,804    16,400    11,360
  Berkshire-Waumbec textiles     2,916      (620)    2,916      (620)    1,342      (322)
  Associated Retail 
     Stores, Inc. ............   2,757     2,775     2,757     2,775     1,176     1,429
  See’s Candies ..............  12,482    12,840     7,013     6,598     3,049     2,974
  Buffalo Evening News .......  (2,913)      751    (1,637)      389      (738)      158
  Blue Chip Stamps - Parent ..   2,133     1,091     1,198       566     1,382       892
  Illinois National Bank
     and Trust Company .......   4,822     3,800     4,710     3,706     4,262     3,288
  Wesco Financial
     Corporation - Parent ....   1,771     2,006       777       813       665       419
  Mutual Savings and
     Loan Association ........  10,556     6,779     4,638     2,747     3,042     1,946
  Interest on Debt ...........  (5,566)   (5,302)   (4,546)   (4,255)   (2,349)   (2,129)
  Other ......................     720       165       438       102       261        48
                              --------  --------  --------  --------  --------  --------
    Total Earnings from
       Operations ............ $52,384   $42,891   $40,955   $31,427   $30,052   $23,080
Realized Securities Gain .....  13,796    14,198    13,395    10,807     9,190     7,313
                              --------  --------  --------  --------  --------  --------
    Total Earnings ........... $66,180   $57,089   $54,350   $42,234   $39,242   $30,393
                              ========  ========  ========  ========  ========  ========

    
March 26, 1979

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