83497300 T2 Accredited Fund Letter to Investors Feb 2012

8/2/2019 83497300 T2 Accredited Fund Letter to Investors Feb 2012

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The GM Building, 767 Fifth Avenue, 18 th Floor, New York, NY 10153

Whitney R. Tilson and Glenn H. Tongue phone: 212 386 7160 Managing Partners fax: 240 368 02

www.T2PartnersLLC.com

March 1, 2012

Dear Partner,

Our fund declined 0.9% in February vs. gains of 4.3% for the S&P 500, 2.9% for the Dowand 5.5% for the Nasdaq. Year to date, our fund is up 11.5% vs. 9.0% for the S&P 500, 6.5% forthe Dow and 14.0% for the Nasdaq.

On the long side, winners included Citigroup (8.5%) and SanDisk (7.8%), offset by Netflix(-7.9%), Grupo Prisa (B shares) (-7.4%), and J.C. Penney (-4.7%).

On the short side, we profited from First Solar (-23.6%), which just reported dismal earnings andguidance, Interoil (-10.4%), and Boyd Gaming (-8.7%). These gains were offset bySalesforce.com (22.6%), which is growing rapidly but trades at 8.7x revenues and has a $19.6billion market cap despite being unprofitable. In addition, Green Mountain Coffee Roasters,which we think is likely to be the next Krispy Kreme (for those of you with long memories), rose21.8%.

Berkshire HathawayLast Saturday, Berkshire Hathaway released its latest earnings report , as well as WarrenBuffett s widely anticipated annual letter . Neither disappointed. Here s our quick take:

a) Berkshire has never been stronger. Its balance sheet is awash with cash and the companyhas a diverse and robust collection of exceptional businesses that are collectivelygenerating more than $1 billion per month for Buffett and Munger to allocate.

b) The company is firing on all cylinders. As Buffett writes: Our major businesses did welllast year. In fact, each of our five largest non-insurance companies BNSF, Iscar,Lubrizol, Marmon Group and MidAmerican Energy delivered record operatingearnings. In aggregate these businesses earned more than $9 billion pre-tax in 2011.Contrast that to seven years ago, when we owned only one of the five, MidAmerican,whose pre-tax earnings were $393 million. Unless the economy weakens in 2012, each of our fabulous five should again set a record, with aggregate earnings comfortably topping

$10 billion.

c) We have increased our estimate of intrinsic value to more than $178,000/share, based on$98,366 in investments/share plus applying a 10 multiple to our estimate of normalizedpretax operating earnings of $8,000/share.
http://www.berkshirehathaway.com/2011ar/linksannual11.htmlhttp://www.berkshirehathaway.com/2011ar/linksannual11.htmlhttp://www.berkshirehathaway.com/2011ar/linksannual11.htmlhttp://www.berkshirehathaway.com/letters/2011ltr.pdfhttp://www.berkshirehathaway.com/letters/2011ltr.pdfhttp://www.berkshirehathaway.com/letters/2011ltr.pdfhttp://www.berkshirehathaway.com/letters/2011ltr.pdfhttp://www.berkshirehathaway.com/2011ar/linksannual11.html


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d) Given the diversity of Berkshire s businesses, the company s performance is a goodindicator of the overall strength of the U.S. economy (outside of the housing sector,which Buffett says remains in a depression ).

e) At many points in his letter, Buffett shows the wide gap between book value and intrinsic

value, concluding that book value is a considerably understated proxy for intrinsicvalue. However, we think he is being too conservative when he writes: Over time, thedivergence will likely become ever more substantial in absolute terms, remainingreasonably steady, however, on a percentage basis as both the numerator anddenominator of the business-value/book-value equation increase. As Berkshire s valuehas increasingly shifted in recent years from its investment portfolio, which is valued atmarket (i.e., book value), to operating businesses like GEICO and Burlington Northern,we think Berkshire s intrinsic value is becoming a greater percentage of book value yetthe stock is currently trading near the lowest premium to book value in the past twodecades.

f)

Buffett makes it very clear that he believes that Berkshire s stock is significantlyundervalued and that he s eager to buy it back, up to a price equal to 1.1x book value, or$110,000/A share as of 12/31/11 (Buffett s limit price is likely higher today, as book value has almost certainly risen this year). We think the share repurchase program puts afirm floor on the stock price only a few percentage points below today s level of $118,000.

g) Berkshire is our largest position because of its asymmetric return profile: only a fewpercentage points of downside vs. 50% upside, with intrinsic value growing at roughly10% annually.

h) On the first page of the letter, Buffett did his best to put the succession issue to rest,writing: Your Board is equally enthusiastic about my successor as CEO, an individual towhom they have had a great deal of exposure and whose managerial and human qualitiesthey admire. (We have two superb back-up candidates as well.) When a transfer of responsibility is required, it will be seamless, and Berkshire s prospects will remainbright. We don t have a strong view on who the successor is, but don t care because wethink it s highly likely that Buffett will be running Berkshire for at least five more years,maybe even 10. In addition, our estimate of intrinsic value doesn t include any Buffettpremium.

Since Berkshire reported earnings, the stock is actually down a bit so we took advantage and,though it was already our largest position, we added to it.

Whitney was on CNBC on Monday, commenting on Buffett s letter and how cheap we think Berkshire s stock is (plus a few comments on Dell at the end). To watch the video, click here, and a transcript is attached in Appendix A. We have also updated our Berkshire Hathaway slidedeck, which his posted here and also attached in Appendix B.
http://video.cnbc.com/gallery/?video=3000074897http://video.cnbc.com/gallery/?video=3000074897http://video.cnbc.com/gallery/?video=3000074897http://www.tilsonfunds.com/BRK.pdfhttp://www.tilsonfunds.com/BRK.pdfhttp://www.tilsonfunds.com/BRK.pdfhttp://www.tilsonfunds.com/BRK.pdfhttp://video.cnbc.com/gallery/?video=3000074897


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T2 Accredited Fund Monthly Performance (Net) Since Inception

Note: Returns in 2001, 2003, 2009 and 2012 reflect the benefit of the high-water mark, assuming an investor at inception.

T2 S&P T2 S& P T 2 S&P T2 S&P T2 S& P T 2 S&P T2 S&P T2 S& P T 2 S&P T2 S&P T2 S&P T2 S&P T2 S&P T2 S& PAF 500 AF 500 AF 500 AF 500 AF 500 AF 500 AF 500 AF 500 AF 500 AF 500 AF 500 AF 500 AF 500 AF 500

January 7 .8 4.1 -6.3 -5.0 4.4 3.6 -1.8 -1.5 -5.5 -2.6 4.7 1.8 1.1 -2.4 1.9 2.7 2.4 1.7 1.9 -5.9 -3.6 -8.4 -1.6 -3.6 -2.8 2.4 12.6 4.5

February -2.9 -3.1 6.2 -1.9 -0.6 -9.2 -1.1 -2.0 2.9 -1.6 7.0 1.5 2.1 2.0 -3.1 0.2 -3.3 -2.1 -6.9 -3.3 -8.9 -10.8 7.3 3.1 4.1 3.4 -0.9 4.3

March 4.1 4.0 10.3 9.8 -2.6 -6.4 3.0 3.7 1.4 0.9 3.9 -1.5 3.9 -1.7 3.9 1.3 -0.8 1.1 -2.3 -0.5 2.9 9.0 4.6 6.0 -4.1 0.0

April 2.1 3.7 -5.1 -3.0 5.1 7.8 -0.2 -6.0 10.5 8.2 2.4 -1.5 0.6 -1.9 2.2 1.4 4.4 4.6 -0.9 4.9 20.1 9.6 -2.1 1.6 1.9 3.0

May -5.7 -2.5 -2.8 -2.0 1.8 0.6 0.0 -0.8 6.6 5.3 -1.4 1.4 -2.6 3.2 1.8 -2.9 2.5 3.3 7.9 1.2 8.1 5.5 -2.6 -8.0 -1.9 -1.1

June 2.2 5.8 4.1 2.4 4.6 -2.4 -7.3 -7.1 2.9 1.3 0.1 1.9 -3.1 0.1 -0.2 0.2 -3.0 -1.5 -1.2 -8.4 -5.0 0.2 4.5 -5.2 -2.4 -1.7

July -0.7 -3.2 -3.6 -1.6 -1.1 -1.0 -5.0 -7.9 2.3 1.7 4.6 -3.4 0.5 3.7 -0.9 0.7 -5.4 -3.0 -2.5 -0.9 6.8 7.6 3.5 7.0 -4.6 -2.0

Augus t 4.1 -0.4 5.4 6.1 2.5 -6.3 -4.3 0.5 0.4 1.9 -0.9 0.4 -3.2 -1.0 2.9 2.3 1.7 1.5 -3.3 1.3 6.3 3.6 -1.5 -4.5 -13.9 -5.4

September -3.3 -2.7 -7.2 -5.3 -6.1 -8.1 -5.4 -10.9 1.7 -1.0 -1.6 1.1 -1.5 0.8 5.0 2.6 -1.1 3.6 15.9 -9.1 5.9 3.7 1.7 8.9 -9.3 -7.0

O ct obe r 8 .1 6.4 -4.5 -0.3 -0.8 1.9 2.8 8.8 6.2 5.6 -0.4 1.5 3.5 -1.6 6.3 3.5 8.2 1.7 -12.5 -16.8 -1.9 -1.8 -1.7 3.8 7.0 10.9

November 2.8 2.0 -1.5 -7.9 2.3 7.6 4.1 5.8 2.2 0.8 0.8 4.0 3.1 3.7 1.9 1.7 -3.6 -4.2 -8.9 -7.1 -1.2 6.0 -1.9 0.0 -0.6 -0.2

December 9.8 5.9 2.3 0.5 6.5 0.9 -7.4 -5.8 -0.4 5.3 -0.2 3.4 -1.3 0.0 1.4 1.4 -4.3 -0.7 -4.0 1.1 5.5 1.9 0.5 6.7 0.1 1.0

YTDTOTAL

31.0 21.0 -4.5 -9.1 16.5 -11.9 -22.2 -22.1 35.1 28.6 20.6 10.9 2 .6 4 .9 25.2 15.8 -3.2 5 .5 -18.1 -37.0 37.1 26.5 10.5 15.1 -24.9 2 .1 11.5 9 .0

20121999 2000 2001 2002 2003 2004 20112005 2006 2007 2008 2009 2010


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Appendix A: Transcript of Whitney Tilson s Appearance onCNBC, Discussing Warren Buffett s Annual Letter(http://video.cnbc.com/gallery/?video=3000074897 )

CNBC: Let s get more insight on Buffett one-on-one this morning. Let s welcome in WhitneyTilson. You said you were buying more shares today. Why is that?

Whitney Tilson: We are because we were blown away by the incredible performance of Berkshire Hathaway s business. Intrinsic value went up in our view weve increased ourestimate of intrinsic value from approximately $170,000 to almost $180,000 per A share or about$120 per B share yet the stock s trading down a couple bucks today, the last I looked, and thatmakes no sense to us.

CNBC: Why do you think the value should be 50% higher than today s price?

Whitney Tilson: Well, we value it sort of like we value any company, which is you take the cashand investments and just value that at market prices and that s almost $100,000 per share forBerkshire (keep in mind when I m talking about the stock, I m using A shares) and the stock sat $118,000. So, you re paying $18,000 a share for a collection of 75 operating businesses thatare generating about $8,000 per share of pretax earnings each year, so Berkshire is trading at 2.5times the earnings of its operating businesses. That s insane!

CNBC: But how do you know that you re going close that gap? The underperformance fromBerkshire Hathaway is 10% over the last 12 months relative to the S&P. You re an extremelycapable investor. Why invest via Berkshire Hathaway with the risk of leadership or whatevertheyre discounting the assets for, when you could dive straight in and buy those companies in

the open market?Whitney Tilson: Well, you can t. Only about half of Berkshire s investment portfolio is instocks. We could certainly buy those stocks. But that is less than half of Berkshire Hathaway svalue. We can t buy Burlington Northern anymore. We can t buy Marmon. We can t buy Iscar.All of the operating business, all of the insurance businesses, we can t buy.

CNBC: But wouldn t that discount overhang until, essentially, Warren Buffett goes and theyknow who the successor is going to be? That could be a very long time. That could be a deepvalue trap.

Whitney Tilson: We ve owned Berkshire Hathaway for 13 or 14 years. Consistently, we haveseen the discount widen to today s level. We think it s trading about 65 cents on the dollar today.That means it has 50% upside. And by the way, the share repurchase program we think puts afloor on the price only 8% down. As investors we like asymmetric risk-rewards. Up 50%, down8%. Ill buy that all day long.
http://video.cnbc.com/gallery/?video=3000074897http://video.cnbc.com/gallery/?video=3000074897http://video.cnbc.com/gallery/?video=3000074897http://video.cnbc.com/gallery/?video=3000074897


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We have encountered periods where the stock has traded, for whatever reason, there s noobvious catalyst here, we ll concede that for sure, but we ve always been rewarded if we re justpatient and here we think we re going to be rewarded sooner rather than later.

CNBC: A lack of a dividend might be a difficulty in this market.

Whitney Tilson: I don t want a dividend though because I think that Warren Buffett is at the topof his game and it doesn t make sense to dividend out a dollar in which I have to pay taxes on it,where he can reinvest that dollar either into existing businesses or new investments.

CNBC: Or maybe a share buyback. He has said in the past that he would buy back shares. Youare buying today. He is not buying today. Does that bother you?

Whitney Tilson: He is not, because he has set a limit. He has said the stock is, quote,considerably undervalued (thats Buffett-speak for wildly undervalued ) at 110% of book value. That s about $110,000 per A share today. The stock s at $118,000. Down not that much

further than right now, he s going to be buying that stock very aggressively. And I think that swhy he came out in his annual letter and was the most bullish, pound the table [optimistic],letting his investors know this is the most extraordinary collection of businesses we have here atBerkshire, because he doesn t want to buy the stock from selling shareholders who just get sortof fed up with the stock not moving.

CNBC: You think he can buy enough stock to put a floor in? You said down eight [percent]. If itgets to that, do you think he can maintain a price if he in fact is an aggressive buyer in the stock?

Whitney Tilson: Look at $60 billion of cash in short-term bonds thats his dry powder. He sayshes not going to go below $20 [billion], so he s got $40 billion to buy back the stock. On a$200 billion market cap, he could easily buy back 20% of the outstanding shares. This is not aparticularly liquid stock. It could fall a little bit below that 110% of book value, but I think themore it fell, the more aggressively he d buy.

CNBC: Are you frustrated at all by this anointing of a successor but unwillingness to tell us whoit is?

Whitney Tilson: You know, I m glad, actually, he s not. If I thought Buffett was leaving in thenext year, then I would want to know who the person was.

CNBC: But you don t know when he s leaving.

Whitney Tilson: I don t. But I know as long as mentally he s at the top of his game andphysically he s able to do it, he loves what he does and his board and shareholders want himthere. If you look at an actuarial table, a healthy 81-year-old guy s got another 12 years left tolive (and I d give him the up side on that), so that means I think it s very likely he ll be runningBerkshire for another five years.

CNBC: And that s why you don t want to know who the successor is?


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Whitney Tilson: The thing is, if I think he s going to be there at least five years, maybe ten,things can change over five or ten years and if he anoints someone today and then that personmakes a terrible mistake like David Sokol did or somebody better comes along, can you imagineif he tried to switch horses? All the second guessing it would be a media circus! So, it s much

better for him to have it quietly known [only by the board]. Things can change. Given that I think Buffett s going to be running Berkshire for quite some time, I m not as worried about thesuccession issue as everybody else seems to be.

CNBC: Do you think his call on housing, obviously early, we ll see if it turns out to be right, hasdinged his credibility when he talks about anything macro?

Whitney Tilson: He has 50 years of a track record as the world s greatest investor. Housing willeventually turn. Many times he s been early on particular investments or predictions. Forexample, I noticed on the show a moment ago that his Buy America. I Am. editorial that hewrote in the New York times was in October or November of 08. The stock market proceeded to

fall for another four or five months. A lot of people were saying Buffett was wrong, but it turnsout he was just a few months early.

CNBC: You are making a differentiation between his portfolio as private companies and alsostocks. Are there any stocks that you actually own in your mutual funds or hedge funds that heowns?

Whitney Tilson: Sure. He added to his Wells Fargo position last year, as did we. We made a lotof money on American Express off the bottom, but we have not purchased that recently. Wedont own that currently. By and large we like his stock portfolio. He s limited to only the largestcompanies in the world, of course, to buy whereas we can buy a much wider range of companies.

CNBC: What about the eight European companies that he said this morning that he was buyingor he had bought. When do we get to know what those are?

Whitney Tilson: Interesting. I don t know what the disclosure rules on that are. I m curious whatthat is.

CNBC: Would you be tempted to follow him?

Whitney Tilson: We look very hard at any new position that he buys. When he bought IBM, wetook a fresh look at the company and we just decided it wasn t quite cheap enough for us. Weprefer our Microsoft, our Dell in the tech space. We don t think he s made a bad investmentthere at all [however].

CNBC: Did it rankle you the way he disclosed the IBM purchase?

Whitney Tilson: You mean the delay? No. As a Berkshire shareholder, I m glad that the SECoccasionally gives him some latitude to not disclose what he s buying because obviously he


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moves markets and it runs the stock up. If he decides the stock is cheap, I want him to be able tobuy as much of it as possible at a cheap price before it s disclosed and the stock runs up.

CNBC: Has his willingness to be vocal, to be even a poster child for some doctrine of tax dogmain this country, does that bother you? Is he over his skis in that way?

Whitney Tilson: I asked him that question once at a public forum. I said, W hy do you need thisaggravation? You re already rich and why don t you just focus on investing? I admire you fordoing it and I wish more people engaged in the political process. I think that would make ahealthier democracy. So whether you agree or disagree, I think you should applaud what he sdoing and other people of prominence should be engaging [as well]. So that s my general viewand I don t think it really sucks up too much of his time. He s a man of principle. If he believesstrongly in something, I think in this late stage of his life he s trying to use his stature andinfluence to try and impact the world in a positive way.

CNBC: Back to Berkshire Hathaway. You re buying the shares today. It was already your

biggest position across your portfolios. You re very disciplined [in terms of] it has to be a certainsize, it can t exceed a certain percentage. Are you bumping up against that limit at this point?

Whitney Tilson: That s the main concern. Right now, if I had to go away for five years and itwas just my money, I would be perfectly comfortable having 100% of my net worth inBerkshire.

CNBC: Really? 100%?

Whitney Tilson: Just like Warren Buffett he has 100% of his net worth in the stock.

CNBC: Aside from a little J.P. Morgan.

Whitney Tilson: Yeah, 99%.

CNBC: You re a fiduciary. You re saying just you...

Whitney Tilson: If it was just me and I had to go away for five years.

CNBC: Something we ought to know about? You heading somewhere?

Whitney Tilson: You know, Berkshire is already a low double-digit position. At times in ourportfolio Berkshire has exceeded a 20% position over the last 13 years. It s getting pretty close tothat its that cheap and it s also that safe. Berkshire has never been stronger. Financially, it snever had a more diverse mix of businesses and just fabulous businesses. If you compareBerkshire five years ago to today, it s light years stronger and safer [today] than it was then. Andthe stock s just as cheap.

CNBC: Just quickly, Whitney, we ve got the CEO, Michael Dell, of Dell on later on. You werefairly early in the Dell story, believing that it would be a recovery story, the quarter, obviously,


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was a very disappointing one. What would you ask Michael Dell at this point? Are you losingfaith in this?

Whitney Tilson: Not at all. Our timing was pretty good buying it, around $14. We ve had a nicegain on it, but we re still hanging in there. It s tough for them to grow. They re in very

competitive markets. We think what they re doing, moving out of commodity businesses andinto higher margin businesses make sense. My only quarrel with him and ask him this questionplease when he comes on is, Why aren t you buying back massive amounts of stock? They ve actually been reducing their share repurchases over the last few quarters. In my opinion,they should buy back 25% of their stock in the next two years. That ll increase earnings-per-share by 33% even if earnings are flat thats 17% [I meant 15%] earnings-per-share gain [peryear] over the next two years. They have the balance sheet, they have the cash flow to do it. Thestock s crazy cheap. Why aren t they doing it?

CNBC: Unless they want to make an acquisition.

Whitney Tilson: They can do both, barring a mega-acquisition. They ve been doing little tuck-inacquisitions, bolt-on acquisitions. I m not going to quibble with that. But they re drowning incash and cash flow right now.

CNBC: Whitney, great to see you.

Whitney Tilson: My pleasure.


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An Analysis of Berkshire Hathaway

February 26, 2012

his presentation is posted at:ww.tilsonfunds.com/BRK.pdf

T2 Partners Management L.P.Manages Hedge Funds and Mutual Funds

and is a Registered Investment Advisor

The General Motors Building767 Fifth Avenue, 18 th Floor

New York, NY 10153(212) 386-7160

[email protected] www.T2PartnersLLC.com

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Disclaimer

THIS PRESENTATION IS FOR INFORMATIONAL AND EDUCATIONALPURPOSES ONLY AND SHALL NOT BE CONSTRUED TO CONSTITUTEINVESTMENT ADVICE. NOTHING CONTAINED HEREIN SHALL CONSTITUTE

A SOLICITATION, RECOMMENDATION OR ENDORSEMENT TO BUY ORSELL ANY SECURITY OR OTHER FINANCIAL INSTRUMENT.

INVESTMENT FUNDS MANAGED BY WHITNEY TILSON AND GLENNTONGUE OWN STOCK IN BERKSHIRE HATHAWAY. THEY HAVE NOOBLIGATION TO UPDATE THE INFORMATION CONTAINED HEREIN ANDMAY MAKE INVESTMENT DECISIONS THAT ARE INCONSISTENT WITH THEVIEWS EXPRESSED IN THIS PRESENTATION.

WE MAKE NO REPRESENTATION OR WARRANTIES AS TO THE ACCURACY, COMPLETENESS OR TIMELINESS OF THE INFORMATION,TEXT, GRAPHICS OR OTHER ITEMS CONTAINED IN THIS PRESENTATION.WE EXPRESSLY DISCLAIM ALL LIABILITY FOR ERRORS OR OMISSIONS IN,OR THE MISUSE OR MISINTERPRETATION OF, ANY INFORMATIONCONTAINED IN THIS PRESENTATION.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS ANDFUTURE RETURNS ARE NOT GUARANTEED.

Berkshire Hathaway: A High-Quality,Growing 67-Cent Dollar

History Berkshire Hathaway today does not resemble the company that

Buffett bought into during the 1960s Berkshire was a leading New England-based textile company, with

investment appeal as a classic Ben Graham- style net -net Buffett took control of Berkshire on May 10, 1965 At that time, Berkshire had a market value of about $18 million and

shareholder's equity of about $22 million

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Appendix B: Berkshire Hathaway Slides


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C om pa ny S ha re s P ri ce Val ue ( $B )

Co ca -Co la 200 .0 $6 9.0 0 $ 13. 8

IBM 63.9 $197.76 $12.6

Wel ls F ar go 4 00 .0 $ 3 0. 18 $ 12 .1

American Express 151 .6 $53 .33 $8.1

Proc te r & Gamble 72.4 $66 .71 $4.8

Kraft 79.0 $37.88 $3.0

M un ic h RE 20 .1 $146 .5 5 $2 .9

W al-Mart 39.0 $58.79 $ 2.3

U. S. Ba nc orp 78 .1 $2 8.7 3 $2 .2

C on o co Ph ill ip s 2 9. 1 $7 5. 95 $ 2. 2

Johnson & Johnson 31.4 $64 .46 $2.0

S an o fi- Av en ti s 2 5. 8 $7 1. 59 $ 1. 9

POSCO 3.9 $38,820 $1.5

Tesco 291.6 $5.01 $1.5

The Berkshire Hathaway Empire Today

Stakes in Public CompaniesWorth $1.5+ Billion

Note: Shares as of 12/31/11; Stock prices as of 2/24/12.

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The Basics

Stock price (2/24/12): $120,000 $80.04 for B shares (equivalent to $120,060/A share)

Shares outstanding: 1.65 million Market cap: $198 billion Total assets ( Q4 11): $393 billion Total equity ( Q4 11): $169 billion Book value per share ( Q4 11): $99,860 P/B: 1.20x Float (Q4 11): $70.6 billion

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Earnings of Non-Insurance Businesses Have Soared Thanksto Burlington Northern and the Economic Rebound

* In 2010, Berkshire changed this table from Earnings before income taxes, noncontrolling interests and equity method earnings to Earnings before income taxes. Thus, 2008 -2011reflect the new numbers, and all prior years reflect the old ones.

Earnings before taxes* 2004 2005 2006 2007 2008 2009 2010 2011Insurance Group:GEICO 970 1,221 1,314 1,113 916 649 1,117 576General Re 3 -334 523 555 342 477 452 144Berkshire Re insurance Group 417 -1,069 1 ,658 1 ,427 1 ,222 250 176 -714Berkshire H. Primary Group 161 235 340 279 210 84 268 242Investment Income 2,824 3,480 4,316 4,758 4,896 5,459 5,145 4,725Total Insurance Oper. Inc. 4,375 3,533 8,151 8,132 7,586 6,919 7,158 4,973

Non-Insurance Businesses:

Burlington Northern Santa Fe 3,611 4,741Finance and F inancial products 584 822 1,157 1,006 771 653 689 774Marmon 733 686 813 992McLane Company 228 217 229 232 276 344 369 370MidAmerican/Utilities/Energy 237 523 1,476 1,774 2,963 1,528 1,539 1,659Other Businesses 2,253 2,406 3,297 3,279 2,809 884 3,092 3,675Total Non-Insur. Oper. Inc. 3,302 3,968 6,159 6,291 7,552 4,095 10,113 12,211

Total Ope rating Income 7,677 7,501 14,310 14,423 15,138 11,014 17,271 17,184

Quarterly Earnings of Key Business Units

* In 2010, Berkshire changed this table from Earnings before income taxes, noncontrolling interests and equi ty method earnings to Earnings before income taxes, but a breakdownof Q1-Q3 numbers in 2008- 2010 isnt available, so we use the old numbers for Q1 -Q3 of each year, but to get the Q4 numb ers in 2008-2010, we subtract from the full-year numbe rs,which causes slight anomalies in Q4 08, Q4 09 and Q4 10.

Earnings before taxes* Q 1 0 7 Q2 07 Q3 07 Q4 07 Q1 0 8 Q2 0 8 Q3 0 8 Q 4 0 8 Q 1 0 9 Q2 09 Q3 09 Q4 09 Q1 1 0 Q2 1 0 Q3 1 0 Q4 1 0 Q1 1 1 Q 2 1 1 Q3 11 Q4 11Insurance Group:

GEICO 295 325 335 158 186 298 246 186 148 111 200 190 299 329 289 200 337 159

General Re 30 230 157 138 42 102 54 144 -16 276 186 31 -39 222 201 68 -326 132

Berkshire Reinsurance Group 553 356 183 335 2 9 7 9 -1 66 1 ,2 80 1 77 - 318 1 41 25 0 5 2 11 7 - 23 7 24 4 - 1, 34 3 -3 54 1 ,

Berkshire H. Primary Group 49 63 77 90 25 81 -8 112 4 29 7 44 33 48 52 135 56 54

Investment Income 1,078 1,236 1,217 1,227 1,089 1,204 1,074 1,529 1,354 1,482 1,412 1,211 1,283 1,494 1,218 1,150 1,261 1,404 1,03

Total Insurance Oper. Inc. 2 ,0 05 2 ,2 10 1 ,9 69 1 ,9 48 1 ,3 71 1 ,7 64 1 ,2 00 3 ,2 51 1 ,6 67 1 ,5 80 1 ,9 46 1 ,7 26 1,628 2,210 1,523 1,797 -15 1,395 2,7

Non-Insurance Businesses:

Burlington Northern Santa Fe 476 974 1,127 1,034 965 1,070 1,

Finance and Financial products 242 277 273 214 241 254 163 113 112 115 119 307 111 155 148 275 156 177

Marmon 28 261 247 197 162 170 194 160 190 219 212 192 222 273 2

McLane Company 58 72 50 52 73 68 68 67 143 66 64 71 80 109 89 91 82 105

MidAmerican/Utilities/Energy 513 372 481 408 516 329 526 1,592 303 402 441 382 395 338 416 390 451 320 4

Other Businesses 723 1 ,015 1 ,020 957 744 956 798 516 206 201 350 271 583 860 844 805 675 976

Total Non-Insur. Oper. Inc. 1,5 36 1,7 36 1,8 24 1,63 1 1,60 2 1 ,86 8 1 ,80 2 2 ,48 5 92 6 9 54 1,1 68 1,1 91 1 ,8 35 2 ,6 55 2 ,8 36 2 ,7 87 2 ,5 51 2 ,9 21 3 ,2

Total O pe rati ng Inc ome 3 ,5 41 3 ,9 46 3 ,7 93 3 ,5 79 2 ,9 73 3 ,6 32 3 ,0 02 5 ,7 36 2 ,5 93 2 ,5 34 3 ,1 14 2 ,9 17 3 ,4 63 4 ,8 65 4 ,3 59 4 ,5 84 2 ,5 36 4 ,3 16 5 ,9 50 4 ,3 82

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-9-

Berkshire Is Becoming Less of an InvestmentCompany and More of an Operating Business

Source: 2010 annual letter.

* (10)

(5)

0

5

10

15

20

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Acquisitions Net Stock Purchases

After a Two-Year Hiatus, BerkshireIs Buying Stocks Again

Buffett is doing a good job investing but the cash is coming in so fast! A high-class problem

Markets have a way of presenting big opportunities on short notice Chaos in 2008, junk bonds in 2002 Buffett has reduced average maturity of bond portfolio so he can act quickly

$B

Cash paid, mostly for Burlington Northern

(the total value of the company atacquisition was $34 billion)

Buying stocks again

-11-

Buffett Invested Large Amounts of Capital During the Downturn in 2008

Investment/Commitment Amount (Bn) Comment

Mars/Wrigley $6.5

Auction rate securities $6.5 Q2 event; sold much in Q3

Goldman Sachs $5.0 Plus $5B to exercise warrants

Constellation Energy stockand preferred

$5.7 Sold for a $1.1B gain incl.breakup fee

Marmon $4.5 The remaining 34.6% notowned by BRK will bepurchased from 2011-14

General stock purchases $3.3 Full year; net of sales

Dow/Rohm & Haas $3.0

General Electric $3.0 Plus $3B to exercise warrants

Fed. Home Loan Disc. Notes $2.4 Q2 event; sold much in Q3

Tungaloy $1.0 Iscar acquisiti on

Swiss Re unit $0.8 Plus sharing agreement

ING reinsurance unit $0.4

Other businesses purchased $3.9

TOTAL $46.0 Plus $8B to exercise GS &GE warrants

Note: Does not include capital committed to Berkshires new bond insurance business, Berkshire Assurance

Valuing Berkshire

Over the years we'veattempt[ ed] to increase our marketable investments inwonderful businesses, while simultaneously trying to buy similar businesses in their entirety. 1995 Annual Letter In our last two annual reports, we furnished you a table that Charlie and I believe iscentral to estimating Berkshire's intrinsic value. In the updated version of that table,which follows, we trace our two key components of value. The first column lists our per-share ownership of investments (including cash and equivalents) and the secondcolumn shows our per-share earnings from Berkshire's operating businesses beforetaxes and purchase-accounting adjustments, but after all interest and corporateexpenses. The second column excludes all dividends, interest and capital gains thatwe realized from the investments presented in the first column. 1997 Annual Letter

In effect, the columns show what Berkshire would look like were it split into two parts,with one entity holding our investments and the other operating all of our businesses andbearing all corporate costs. 1997 Annual Letter

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-13-

Buffetts Comments on Berkshires Valuation Lead to an Implied Multiplier of Approximately 12

1996 Annual Letter: Today's price/value relationship is both much different from whatit was a year ago and, as Charlie and I see it, more appropriate.

1997 Annual Letter: Berkshire's intrinsic value grew at nearly the same pace as bookvalue (book +34.1%)

1998 Annual Letter: Though Berkshire's intrinsic value grew very substantially in1998, the gain fell well short of the 48.3% recorded for book value. (Assume a 15 -20% increase in intrinsic value.)

1999 Annual Letter: A repurchase of, say, 2% of a company's shares at a 25%discount from per-share intrinsic value...We will not repurchase shares unless webelieve Berkshire stock is selling well below intrinsic value, conservativelycalculated...Recently, when the A shares fell below $45,000, we considered makingrepurchases.

Pre-tax EPSExcluding All Year-End

Investments Income From Stock Intrinsic ImpliedYear Per Share Investments Price Value Multiplier1996 $28,500 $421 $34,100 $34,100 131997 $38,043 $718 $46,000 $46,000 111998 $47,647 $474 $70,000 $54,000 131999 $47,339 -$458 $56,100 $60,000

Pre-tax EPSExcluding All Subsequent

Investments Income From Intrinsic Value Year Stock Year End Per Share Investments Per Share Price Range

2001 $47,460 -$1,289 $64,000 $59,600-$78,5002002 $52,507 $1,479 $70,000 $60,600-$84,7002003 $62,273 $2,912 $97,000 $81,000-$95,7002004 $66,967 $3,003 $103,000 $78,800-$92,0002005 $74,129 $3,600 $117,300 $85,700-$114,2002006 $80,636 $5,200-$5,400 $143,000-$144,400 $107,200-$151,6502007 $90,343 $5,500-$5,700 $156,300-$158,700 $84,000-$147,0002008 $75,912 $5,727 $121,728 (8 mult iple) $70,050-$108,1002009 $91,091 $3,571 $126,801 (10 mult iple) $97,205-$128,7302010 $94,730 $7,200 $166,730 (10 mult iple) $98,952-$131,4632011 $98,366 $8,000 $178,366 (10 multiple) ?

Estimating Berkshires Value: 2001 2011

1. Unlike Buffett, we include a conservative estimate of normalized earnings from Berkshires insurance businesses: half of the $2 billiof annual profit over the past nine years.

2. Buffett reported $6,990/share in his 2011 annual lett er, but we include half of normalized insurance earnings as well as run-rateearnings for Lubrizol.

Given compressed multiples at the end of 2008, w e used an 8 rather than a 12 multiple.Weve now increased this to a 10 multiple, still below the historical 12 multiple we believe Buffett uses.

1

2

Berkshire Is 33% Below Intrinsic Value,Close to a Multi-Decade Low

Intrinsic value *

* Investments per share plus 12x pre-tax earnings per share (excluding all income from investments) for theprior year, except for YE 2008 (8 multiple) and YE 2009 onward (10 multiple).

Intrinsic value estimate of $178,400 using 10 multiple

33% discount tointrinsic value

-15-

150,000

140,000

130,000

120,000

110,000

100,000

90,000

80,00070,000

60,000

50,000

40,000

30,000

20,000

160,000

170,000

180,000

12-Month Investment Return

Current intrinsic value: $178,400/share Plus 8% growth of intrinsic value of the business Plus cash build over next 12 months: $7,000/share Equals intrinsic value in one year of $200,000 67% above todays price

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14/19

-17-

Catalysts

Continued earnings growth of operating businesses, especiallyas $1+ billion of pre-tax earnings from Lubrizol are incorporated New equity investments Additional cash build Meaningful share repurchases Eventually, Berkshire could win back a AAA rating (not likely in

the near term) Potential for more meaningful acquisitions and investments

If theres a double -dip recession, this becomes more likely

Berkshires New Share Repurchase Program

On September 26th

2011, Berkshire announced the first formal sharerepurchase program in Berkshires history, and only the second timeBuffett has ever offered to buy back stock

Its unusual in three ways: 1. Theres no time limit 2. Theres no dollar cap 3. Buffett set a price: no higher than a 10% premium over the then-

current book value of the shares. In the opinion of our Board andmanagement, the underlying businesses of Berkshire are worthconsiderably more than this amount

Book value at the end of Q4 11 was $99,860 ($66.57/B share) Thus, a 10% premium means that Buffett is willing to buy back stock

up to $109,846 ($73.23/B share), 8.5% below todays price

-19-

The Share Repurchase Program Has Significantly Improvedthe Risk-Reward Equation, So We Bought More Stock

It confirms that Buffett shares our belief that Berkshire stock is deeply undervalued He wouldnt be buying it back at a 10% premium to book value if he thought its intrinsic value

was, say, 20% or even 30% above book Our estimate is nearly $180,000/share, 50% above todays levels

Buffett put a floor on the stock: he was clear in numerous interviews after the programwas announced that he is eager to buy back a lot of stock and he has plenty of drypowder to do so: Berkshire has $33.5 billion of cash (excluding railroads, utilities, energy, finance and financial

products), plus another $31.2 billion in bonds (nearly all of which are short-term, cashequivalents), which totals $64.7 billion

On top of this, the company generated more than $12.3 billion in free cash flow in 2011 inother words, more than $1 billion/month is pouring into Omaha

The press release notes that repurchases will not be made if they would reduce Berkshiresconsolidated cash equivalent holdings below $20 billion, so that leaves $45 billion to deploy(and growing by more than $1 billion/month), equal to 23% of the companys current marketcap

Its unlikely, however, that Buffett would repurchase anything close to this amount, as some of thecash and bonds are held at various insurance subsidiaries, plus Buffett likely wants to keep plenty of dry powder to make acquisitions and investments like the recent $5 billion one into Bank of America

In summary, Buffett could easily buy back $10-20 billion of stock and still have plenty of drypowder for other investments

Berkshire Stock Outperformed the S&P 500 by 83Percentage Points in the Year After the Only OtherTime Buffett Offered to Buy Back Stock

Berkshire Hathaway

S&P 500

March 11, 2000 March 11, 2001

Up 72%

Down 11

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15/19

-21-

Risk: Who Will Replace Buffett?

When Buffett is no longer running Berkshire, his job will be split into two

parts: one CEO, who has not been named, and a small number of CIOs(Chief Investment Officers) Two have been named already, Todd Combs and Ted Weschler, who both appear to be

excellent investors

Nevertheless, Buffett is irreplaceable and it will be a significant loss whenhe no longer runs Berkshire for a number of reasons: There is no investor with Buffetts experience, wisdom and track record, so his successors

decisions regarding the purchases of both stocks and entire business might not be as good Most of the 75+ managers of Berkshires operating subsidiaries are wealthy and dont need

to work, but nevertheless work extremely hard and almost never leave thanks to Buffettshalo and superb managerial skills. Will this remain the case under his successors?

Buffetts reputation is unrivaled so he is offered deals (such as the recent $5 billioninvestment in BofA) on terms that are not offered to any other investor and might not beoffered to his successors

Being offered investment opportunities on terms/prices not available to anyone else alsoapplies to buying companies outright. Theres a high degree of prestige in selling onesbusiness to Buffett (above and beyond the advantages of selling to Berkshire). For example, the owners of Iscar could surely have gotten a higher price had they taken thebusiness public or sold it to an LBO firm

Buffetts Rolodex is unrivaled, so he gets calls (and can make calls that get returned) that

his successors might not

Arent We Concerned About the Uncertaintyof Berkshire After Buffett?

Answer: Not really, for two primary reasons:1. Buffett isnt going anywhere anytime soon. We think its at least80% likely that Buffett will be running Berkshire for five moreyears, and 50% likely hell be doing so for 10 more years Buffett turned 81 on Aug. 30 th, is in excellent health, and loves his job There are no signs that he is slowing down mentally in fact, he appears to be

getting better with age A life expectancy calculator (http://calculator.livingto100.com) shows that

Buffett is likely to live to age 93 (12 more years) and wed bet on the over

2. The stock is very cheap based on our estimate of intrinsic value(nearly $178,400/A share), which does not include any Buffettpremium We simply take investments/share and add the value of the operating

businesses, based on a conservative multiple of their normalized earnings The value of the cash and bonds wont change, and Coke, American Express,

Burlington Northern, GEICO, etc. will continue to generate robust earningseven after Buffetts no longer running Berkshire

-23-

Why Doesnt Buffett Identify His Successor Now?

We think it's wise that Buffett hasn't named his successor for tworeasons:1. It would place enormous pressure and expectations on this

person, which is unnecessary and counterproductive;2. It might be demotivating for the candidates who were not chosen;

and3. Who knows what will happen between now and the time that a

successor takes over (which could be more than a decade)? Maybe the current designee falls ill, leaves Berkshire, performs

poorly, or makes a terrible mistake (like Sokol did)? Or what if another candidate (perhaps one of the two backup

successors today) performs incredibly well, or Berkshire acquires abusiness with a fantastic CEO, and Buffett and the board decide thatanother candidate is better?

In either case, Buffett and the board will be able to switch their choice without the second-guessing and media circus that wouldoccur if the successor had been named

The Real Buffett Risk

Buffett is often asked (as are we): What would happen to thecompany (and stock) if you got hit by a bus (i.e., die suddenly)? If it happened tomorrow, our best guess is that the stock would fall 10-15%

(which would give Berkshire the opportunity to buy back a lot of stock if it wastrading below 110% of book value)

But this isnt likely. Not to be morbid, but most people dont die suddenly fromsomething like an accident or heart attack, but rather die slowly: their bodies(and sometimes minds) break down gradually

A far greater risk to Berkshire shareholders is that Buffett begins to lose itmentally and starts making bad investment decisions, but doesnt recognize it(or refuses to acknowledge it because he loves his work so much) and theboard wont take away the keys, perhaps rationalizing that a diminished Buffettis still better than anyone else

Buffett is aware of this risk and has instructed Berkshires board members, bothpublicly and privately, that their most important job is to take away the keys if they see him losing it

We trust that both Buffett and the board will act rationally, but also view it as our job to independently observe and evaluate Buffett to make sure werecomfortable that hes still at the top of his game. Today, we think hes never been better.

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-25-

An Analogy with Apple & Steve Jobs

The most comparable example of a business that, like Berkshire,is closely associated with its legendary founder and CEO is Apple As Steve Jobss health began to fail, he assumed fewer day-to-day

responsibilities, passing them to top lieutenants Jobs resigned as CEO on Aug. 24, 2011 and died exactly six weeks later Apples stock on the first trading days after his retirement and death were

announced declined less than 1%, as this chart shows:

First day of trading after Steve Jobsannouncesretirement

First day of trading after Steve Jobs dies

Other Risks

A double-dip recession impacts Berkshires earnings materially No catalyst occurs, so the stock sits there and doesnt go up Intrinsic value will likely continue to grow nicely

Berkshires stock portfolio declines Losses in the shorter-duration derivatives such as credit-default

swaps are larger than expected and/or mark-to-market lossesmount among the equity index puts

A major super-cat event occurs that costs Berkshire many billions Berkshire is downgraded

-27-

Conclusion

Cheap stock: 67-cent dollar, giving no value to recentinvestments and immense optionality

Extremely safe: huge cash and other assets provide intrinsicvalue downside protection, while the new share repurchaseprogram provides downside protection on the stock

Strong earnings should eventually act as a catalyst

-16-


17/19

-17-

Appendix C: Privacy Policy

This privacy policy explains the manner in which the Partnership, the General Partner and theInvestment Manager (collectively, the Partnership ) collect, utilize and maintain nonpublicpersonal information about the Partnership s investors, as required under Federal legislation.

Collection of Investor InformationThe Partnership collects nonpublic personal information about its investors mainly through thefollowing sources: Subscription forms, investor questionnaires a nd other information providedby the investor in writing, in person, by telephone, electronically or by any other means. Thisinformation includes name, address, nationality, tax identification number and financial andinvestment qualifications; and transactions within the Partnership, including account balances,investments and withdrawals.

Disclosure of Nonpublic Personal InformationThe Partnership does not sell or rent investor information. The Partnership does not disclosenonpublic personal information about its investors to nonaffiliated third parties or to affiliatedentities, except as permitted by law. For example, the Partnership may share nonpublic personalinformation in the following situations:

To service providers in connection with the administration and servicing of thePartnership, which may include attorneys, accountants, auditors and other professionals.The Partnership may also share information in connection with the servicing orprocessing of Partnership transactions;

To 3 rd party marketing firms who have been engaged by T2 to raise assets for thePartnership. Any information provided to a 3 rd party marketing firm would be limited toname and basic contact information.

To affiliated companies in order to provide you with ongoing personal advice andassistance with respect to the products and services you have purchased through thePartnership and to introduce you to other products and services that may be of value toyou;

To respond to a subpoena or court order, judicial process or regulatory authorities; To protect against fraud, unauthorized transactions (such as money laundering), claims or

other liabilities; and Upon consent of an investor to release such information, including authorization to

disclose such information to persons acting in a fiduciary or representative capacity onbehalf of the investor.

If you elect to opt-out and do not want us to share your non-public personal informationother than when required to perform normal services or when required by law, pleasecontact us at:767 Fifth Avenue, 18th Floor, New York, New York 10153, Ph: (212) 386-7160 or by email: [email protected] .

Protection of Investor InformationThe Partnership s policy is to require that all employees, financial professionals and companiesproviding services on its behalf keep client information confidential.


18/19

-18-

The Partnership maintains safeguards that comply with federal standards to protect investorinformation. The Partnership restricts access to the personal and account information of investorsto those employees who need to know that information in the course of their job responsibilities.Third parties with whom the Partnership shares investor information must agree to followappropriate standards of security and confidentiality.

The Partnership s privacy policy applies to both current and former investors. The Partnershipmay disclose nonpublic personal information about a former investor to the same extent as for acurrent investor.

Changes to Privacy PolicyThe Partnership may make changes to its privacy policy in the future. The Partnership will notmake any change affecting you without first sending you a revised privacy policy describing thechange.


19/19

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T2 Accredited Fund, LP (the Fund) commenced operations on January 1, 1999. The Fund sinvestment objective is to achieve long-term after-tax capital appreciation commensurate withmoderate risk, primarily by investing with a long-term perspective in a concentrated portfolio of U.S. stocks. In carrying out the Partnership s investment objective, the Investment Manager, T2Partners Management, LLC, seeks to buy stocks at a steep discount to intrinsic value such that

there is low risk of capital loss and significant upside potential. The primary focus of theInvestment Manager is on the long-term fortunes of the companies in the Partnership s portfolioor which are otherwise followed by the Investment Manager, relative to the prices of their stocks.

There is no assurance that any securities discussed herein will remain in Fund s portfolio at thetime you receive this report or that securities sold have not been repurchased. The securitiesdiscussed may not represent the Fund s entire portfolio and in the aggregate may represent only asmall percentage of an account s portfolio holdings. It should not be assumed that any of thesecurities transactions, holdings or sectors discussed were or will prove to be profitable, or thatthe investment recommendations or decisions we make in the future will be profitable or willequal the investment performance of the securities discussed herein. All recommendations within

the preceding 12 months or applicable period are available upon request.

Performance results shown are for the T2 Accredited Fund, LP and are presented gross and netof incentive fees. Gross returns reflect the deduction of management fees, brokeragecommissions, administrative expenses, and other operating expenses of the Fund. Gross returnswill be reduced by accrued performance allocation or incentive fees, if any. Gross and netperformance includes the reinvestment of all dividends, interest, and capital gains. Performancefor the most recent month is an estimate.

The fee schedule for the Investment Manager includes a 1.5% annual management fee and a 20%incentive fee allocation. For periods prior to June 1, 2004, the Investment Manager s fee

schedule included a 1% annual management fee and a 20% incentive fee allocation, subject to a10% hurdle rate. In practice, the incentive fee is earned on an annual, not monthly, basis orupon a withdrawal from the Fund. Because some investors may have different fee arrangementsand depending on the timing of a specific investment, net performance for an individual investormay vary from the net performance as stated herein.

The return of the S&P 500 and other indices are included in the presentation. The volatility of these indices may be materially different from the volatility in the Fund. In addition, the Fund sholdings differ significantly from the securities that comprise the indices. The indices have notbeen selected to represent appropriate benchmarks to compare an investor s performance, butrather are disclosed to allow for comparison of the investor s performance to that of certain well-

known and widely recognized indices. You cannot invest directly in these indices.

Past results are no guarantee of future results and no representation is made that an investor willor is likely to achieve results similar to those shown. All investments involve risk including theloss of principal. This document is confidential and may not be distributed without the consentof the Investment Manager and does not constitute an offer to sell or the solicitation of an offerto purchase any security or investment product. Any such offer or solicitation may only be madeby means of delivery of an approved confidential offering memorandum.

Documents

83497300 T2 Accredited Fund Letter to Investors Feb 2012