al"cha haamost ertainly rise further as we acqure more compns you the current sta tus of our intangible assets.We now have e ne ry dollar ofn costs be sentirely ch ed off.Whe n that ha s in true eamings are flat Depreciation charges,we want to emphasize,are different:Every dime of depreciation expense we report To get back to our many manufacturing. service and retailing operations,they sell products ranging from returns in the area of 12% 1o20% poor returns,the result of some serious mistakes e company or the on.I wa simply was wrong in my evaluation of the economic atively small either businesses or stocks.Not everything works out as planned Viewed as a single entity the comnanies in this grour are an excellent husiness the ploved an average of $24 billion of net tangible assets during 201 and,despite their holding large quantities of excesscash and using ittle leverage,earned 18.7%after-tax on that capita ave paee cponme can eaitor Po rice.We prem al we have der ed this sector.Furthermore,the intrinsic value of these busi in aggregate,exceeds their arry ing value by a good the difter carrying value in ry segments is far greate epetowobohmtoaor ose what is required.You can find a good bit of detail about many of our operations 5 In the GAAP-compliant figures we show on page 49, amortization charges of $1.15 billion have been deducted as expenses. We would call about 20% of these “real,” the rest not. The “non-real” charges, once non￾existent at Berkshire, have become significant because of the many acquisitions we have made. Non-real amortization charges will almost certainly rise further as we acquire more companies. The GAAP-compliant table on page 67 gives you the current status of our intangible assets. We now have $7.4 billion left to amortize, of which $4.1 billion will be charged over the next five years. Eventually, of course, every dollar of non-real costs becomes entirely charged off. When that happens, reported earnings increase even if true earnings are flat. Depreciation charges, we want to emphasize, are different: Every dime of depreciation expense we report is a real cost. That’s true, moreover, at most other companies. When CEOs tout EBITDA as a valuation guide, wire them up for a polygraph test. Our public reports of earnings will, of course, continue to conform to GAAP. To embrace reality, however, you should remember to add back most of the amortization charges we report. ************ To get back to our many manufacturing, service and retailing operations, they sell products ranging from lollipops to jet airplanes. Some of this sector’s businesses, measured by earnings on unleveraged net tangible assets, enjoy terrific economics, producing profits that run from 25% after-tax to far more than 100%. Others generate good returns in the area of 12% to 20%. A few, however, have very poor returns, the result of some serious mistakes I made in my job of capital allocation. I was not misled: I simply was wrong in my evaluation of the economic dynamics of the company or the industry in which it operates. Fortunately, my blunders normally involved relatively small acquisitions. Our large buys have generally worked out well and, in a few cases, more than well. I have not, nonetheless, made my last mistake in purchasing either businesses or stocks. Not everything works out as planned. Viewed as a single entity, the companies in this group are an excellent business. They employed an average of $24 billion of net tangible assets during 2014 and, despite their holding large quantities of excess cash and using little leverage, earned 18.7% after-tax on that capital. Of course, a business with terrific economics can be a bad investment if it is bought for too high a price. We have paid substantial premiums to net tangible assets for most of our businesses, a cost that is reflected in the large figure we show for goodwill. Overall, however, we are getting a decent return on the capital we have deployed in this sector. Furthermore, the intrinsic value of these businesses, in aggregate, exceeds their carrying value by a good margin, and that premium is likely to widen. Even so, the difference between intrinsic value and carrying value in both the insurance and regulated-industry segments is far greater. It is there that the truly big winners reside. ************ We have far too many companies in this group to comment on them individually. Moreover, their competitors – both current and potential – read this report. In a few of our businesses we might be disadvantaged if others knew our numbers. In some of our operations that are not of a size material to an evaluation of Berkshire, therefore, we only disclose what is required. You can find a good bit of detail about many of our operations, however, on pages 97-100. 15