。 in total our entire string of onerating t $8 2 hillion for ent ir the U.S.,a fact that may surprise those who believe our country lacks investment opportunities.We welcome projects abroad,but the overwhelming majority of Berkshire's future capital commitments to be ese expenditures will agam set a recor Our insurance operations continued their delivery of costless capital that funds a myriad of othe unties.This business produces "float"-money that doesn't belong to us,but that we get invest for Berk re s enehit.And if we pay out less in I expenses than v 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 ities (1)a $5 hillion 6 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 ()63.9 million shares of IBM that cost us $10.9 billion Counting IBM.we now have large owr emany smaller.but in or course We view these holdings as partnership interests in wonderful businesses.not as marketable securities to e bought or d based on their n em prospects.Our s the carnings,however,are far fron se bus the of th nies 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 eamings Had we owned our nt positions throughout last year.our dividends from the "Big Four"would have been$862 million.That's all that would have b n reported in Berkshire's income statement.Ou share of earnings,however,would have far greate Ch and billion that ast that amou alue f the fo their dividends as wellto inerease in 2012 and.for that matter.almost every vear for a long time to I've run out of good news.Here are some developments that hurt us during 2011 A few years back.I spent about billion buying several bond issues of Energy Holdings.an n serving pom m arge measur purchase,the company's ability to pay will soon be exhausted unless gas prices rise substantially.We wrote down our investment by SI billion in 2010 and by an additional S390 million last year. At ve ried the honde at thei ain at levels,we will likely face a further loss.perhaps inan amount that will wipe out our ure mOr8 Cov,.subaanal in吧iS出 ed the gain/loss pro • 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. 4