November 9, 1965

To the Stockholders of Berkshire Hathaway Inc.:

The fiscal year ended October 2, 1965 resulted in net earnings of $2,279,206 as compared to net earnings of $125,586 for the prior year. These net earnings do not reflect any nonrecurring losses incurred on the disposal of assets due to the permanent closing of the King Philip Plants A and E in Fall River, Massachusetts, as such losses have been charged to a reserve previously established for such purpose.

Because of loss carryovers, no federal income taxes were payable by the Corporation with respect to either of these years; however, to prevent any misleading interpretation of future earnings when loss carryovers shall not be available, the Corporation has included in computing net earnings for 1965 and 1964 a charge substantially equal to the federal income taxes that would have been payable with respect to results of operations during each of these years.

The Corporation is continuing to operate King Philip Plant D in Warren, Rhode Island, and the Hathaway Synthetic, Box Loom and Home Fabrics Divisions in New Bedford, Massachusetts.

During 1965 raw material, stock in process and cloth inventories were decreased by $1,411,967 and bank loans of $2,500,000 were paid off. Also, during the year the Corporation purchased 120,231 of its own shares, leaving a total of 1,017,547 shares outstanding at the end of the fiscal year.

The Corporation made a substantial reduction in its overhead costs during the fiscal year just ended. Approximately $811,812 was invested by the Corporation during the year in the purchase of new machinery in a continuing effort to reduce costs and to improve quality. This program will continue during the current fiscal year.

A major portion of the machinery at King Philip Plant E Division has been sold. We expect to dispose of the remaining portion of this plant during the current fiscal year. This will complete the liquidation of our unprofitable plants. The proposed sale of the King Philip E Division will make it necessary to provide storage for raw cotton and grey cloth for the King Philip D Division at the Hathaway Division Plant C (former Langshaw Mill). Plans are under way to accomplish this within the current fiscal year.

After more than fifty years of service, Mr. Seabury Stanton resigned as a director and as President and Mr. Kenneth V. Chace was elected to succeed him. At the same time, Mr. John K. Stanton resigned as a director and as Treasurer and Clerk. Mr. Harold V. Banks was elected to succeed him as Treasurer and Clerk.

All divisions of the Corporation currently have substantial backlogs of unfilled orders and we presently anticipate that operations for the coming year will continue to be profitable.

We wish to express our thanks to all the employees of the Corporation whose loyal cooperation and efforts have helped to make this year successful.

Malcolm G. Chace, Jr. Chairman of the Board

Kenneth V. Chace President

[Letter written by Warren E. Buffett]

All letters are written and copyrighted by Warren E. Buffett and is reproduced here with his permission. The letter must not be reproduced, copied, sold, or otherwise distributed without the permission of Warren E. Buffett.