CONSOLIDATED BALANCE SHEETS
(dollars in millions except share amounts)

BERKSHIRE HATHAWAY INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in millions except per share amounts)

BERKSHIRE HATHAWAY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)

The accompanying unaudited consolidated financial statements include the accounts of Berkshire consolidated with the accounts of all its subsidiaries. Reference is made to Berkshire's most recently issued Annual Report that included information necessary or useful to understanding of Berkshire's businesses and financial statement presentations. In particular, Berkshire's significant accounting policies and practices were presented as Note 1 to the Consolidated Financial Statements included in that Report.

Financial information in this Report reflects any adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with generally accepted accounting principles. Certain amounts for 1997 have been reclassified to conform with the 1998 presentation.

For a number of reasons, Berkshire's results for interim periods are not normally indicative of results to be expected for the year. The timing and magnitude of catastrophe losses incurred by insurance subsidiaries and the estimation error inherent to the process of determining liabilities for unpaid losses of insurance subsidiaries can be more significant to results of interim periods than to results for a full year. Realized investment gains/losses are recorded when investments are sold, other-than-temporarily impaired or in certain situations, as required by GAAP, when investments are marked-to-market with the corresponding gain or loss included in earnings. Variations in amount and timing of realized investment gains/losses can cause significant variations in periodic net earnings.

During 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 131 -"Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 establishes new standards for reporting information about operating segments in interim and annual financial statements. SFAS No. 131 is effective for periods beginning after December 15, 1997 and will be adopted by the Company as of December 31, 1998.

During 1998, the FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.

Berkshire does not anticipate that adoption of these standards will have a material effect on its financial position, results of operations, or disclosures within the financial statements.

On January 7, 1998, the previously announced merger of International Dairy Queen, Inc. ("Dairy Queen") with and into a wholly owned subsidiary of Berkshire was completed. Owners of Dairy Queen shares outstanding received merger consideration of approximately $588 million, consisting of $265 million in cash and the remainder in Class A and Class B Common Stock.

Dairy Queen develops, licenses and services a system of approximately 5,800 Dairy Queen stores located throughout the United States, Canada, and other foreign countries, which feature hamburgers, hot dogs, various dairy desserts and beverages. Dairy Queen also develops, licenses and services other stores and shops operating under the names of Orange Julius and Karmelkorn, which feature blended fruit drinks, popcorn and other snacks.

On July 23, 1998, Berkshire announced that it had signed a merger agreement with Executive Jet, Inc. ("Executive Jet"). On August 7, 1998, the merger was consummated. Under the terms of the agreement, shareholders of Executive Jet received total consideration of $701 million, consisting of $350 million in cash and $351 million in Class A and Class B Common Stock.

Executive Jet is the world's leading provider of fractional ownership programs for general aviation aircraft. Executive Jet currently operates its NetJetsÒ fractional ownership programs in the United States and Europe. In addition, Executive Jet is pursuing other international activities. The fractional ownership concept was first introduced in 1986. Since then the NetJets program has grown to include nine aircraft types with plans to introduce several more models in the next two years.

The purchase method was used to account for each of the mergers. The excess of the purchase prices over the fair values of net assets acquired was recorded as goodwill of acquired businesses and is being amortized ratably over forty years. Berkshire's results of operations include the results of Dairy Queen beginning on January 7, 1998 and Executive Jet beginning on August 7, 1998.

On June 19, 1998, Berkshire announced that it had signed a merger agreement with General Re Corporation ("General Re"). The merger was approved by Berkshire shareholders on September 16, 1998 and by General Re shareholders on September 18, 1998. As of October 30, 1998, all necessary regulatory approvals have been received. Under the terms of the agreement, General Re shareholders will receive at their election either 0.0035 shares of Berkshire Class A Common Stock or 0.105 shares of Berkshire Class B Common Stock for each share of General Re common stock they own at the time the transaction is consummated.

The merger agreement provides that Berkshire and General Re must receive certain tax rulings from the Internal Revenue Service prior to February 19, 1999 or an alternative form of transaction can be elected by Berkshire. Under the alternative transaction, shareholders of General Re will receive the same aggregate value in consideration as stated in the prior paragraph, but will receive 3% of the consideration in cash rather than stock. It is expected that the transaction will be completed during 1998's fourth quarter after receipt of the tax rulings. The total consideration for the transaction, based upon the closing price of Berkshire Class A Common Stock on October 30, 1998 is approximately $17.5 billion.

General Re is a holding company for global reinsurance and related risk management operations. It owns General Reinsurance Corporation and National Reinsurance Corporation, the largest professional property/casualty reinsurance group domiciled in the United States, and also holds a controlling interest in Kölnische Rückversicherungs-Gesellschaft AG (Cologne Re), a major international reinsurer. Together, General Re and Cologne Re transact reinsurance business as "General & Cologne Re".

In addition, General Re writes excess and surplus lines insurance through General Star Management Company, provides alternative risk solutions through Genesis Underwriting Management Company, provides reinsurance brokerage services through Herbert Clough, Inc., manages aviation insurance risks through United States Aviation Underwriters, Inc., and acts as a business development consultant and reinsurance intermediary through Ardent Risk Services, Inc. General Re also operates as a dealer in the swap and derivatives market through General Re Financial Products Corporation, and provides specialized investment services to the insurance industry through General Re-New England Asset Management, Inc.

Data with respect to investments in securities with fixed maturities (other than securities with fixed maturities held by finance businesses) are shown in the tabulation below (in millions).

Data with respect to investments in equity securities and other investments are shown in the tabulation below (in millions). Individual investments whose fair values exceed ten percent of consolidated shareholders' equity at September 30, 1998 are listed separately.

The Company adopted SFAS No. 130 "Reporting of Comprehensive Income", as of the beginning of 1998. SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components. Other comprehensive income of the Company consists of unrealized gains and losses on investments. SFAS No. 130 does not affect the measurement of the items included in other comprehensive income; it affects only where those items are displayed and how they are described.

Comprehensive income for the third quarter and first nine months of 1998 and 1997 is as follows (in millions):

Net earnings for the third quarter and first nine months of the current and prior year are summarized in the following table. Amounts are in millions and each figure is income tax effected.

The after tax figures shown above for Insurance Group earnings, except realized investment gain, are detailed in the following table. Amounts are in millions.

In direct insurance activities, Insurance Group members assume risks of loss from parties who are directly subject to the risks. In reinsurance activities, the members assume defined portions of similar or dissimilar risks to which other insurers or reinsurers have subjected themselves in their own insuring activities.

Direct insurance activities are conducted by GEICO, which became a wholly owned subsidiary of Berkshire in January 1996, and, to a lesser degree, by several other Berkshire subsidiaries. GEICO, through its subsidiaries, provides primarily private passenger automobile insurance to insureds in 48 states and the District of Columbia. GEICO policies are marketed mainly through direct response methods, in which insureds apply for coverage directly to the company over the telephone or through the mail. This is a significant element in GEICO's strategy to be a low cost provider of such coverages. Other direct insurance activities are conducted through 14 other Berkshire affiliates. These businesses offer a wide variety of commercial and personal insurance coverage to insureds located principally in the United States.

Insurance premiums earned during the third quarter by GEICO totaled $1,035 million in 1998 and $887 million in 1997. For the first nine months, premiums earned by GEICO were $2,957 million in 1998 and $2,557 million in 1997. The growth in premiums earned largely derived from significant increases in voluntary auto policies in-force, partially offset by declines in residual market auto and homeowners insurance business. Voluntary auto premiums earned for the first nine months of 1998 exceeded 1997 by 17.6%, reflecting a 19.1% increase in policies in-force offset slightly by the effects of certain premium rate reductions. Policy growth over the past twelve months was 15.7% in the preferred-risk auto business and 38.6% in the standard and non-standard auto lines. The in-force policy growth resulted from GEICO's ongoing marketing efforts and competitive prices. It is expected that voluntary policies in-force will continue to grow at the same or greater annual rates over the remainder of 1998 and into 1999. Premium rate reductions were taken in certain states during 1998 with the intention of better aligning premium rates with profit targets. Such reductions will be fully reflected in premiums earned over the next twelve months and are expected to reduce profit margins.

GEICO produced net underwriting gains during the third quarter totaling approximately $102 million in both 1998 and 1997. For the first nine months, GEICO's net underwriting gains were $256 million in 1998 and $220 million in 1997. GEICO's net underwriting results in 1998 and 1997 benefitted from lower than expected claim losses and claim handling expenses. For the first nine months, losses and loss adjustment expenses incurred, as a percentage of earned premiums, were 73.0% in 1998 compared to 75.2% in 1997. The lower than expected ratios in both years reflect declining severity of auto liability claims, reduced frequency of physical damage claims resulting from generally mild weather conditions, and relatively minor amounts of catastrophe losses. The 1998 periods reflect higher levels of underwriting expenses related to advertising and other costs associated with the in-force policy growth and significantly increased accruals for profit sharing costs.

For the third quarter of 1998, premiums earned from Berkshire's other diverse direct insurance activities were $81 million, unchanged from the third quarter of 1997. For the first nine months, premiums earned by these direct insurance businesses were $247 million in 1998 and $229 million in 1997. In each period, Central States' credit card credit insurance business was the largest contributor (approximately 40%) of the total premiums earned by these businesses. During 1998, other direct insurance businesses collectively produced net underwriting losses of $5 million for the third quarter and $10 million for the first nine months compared to net underwriting gains in 1997 of $10 million for the third quarter and $27 million for the first nine months. The decline in comparative net underwriting results during 1998 periods primarily reflects the effects of increased underwriting losses from international auto insurance, increased claim costs associated with traditional commercial motor vehicle insurance, and lower underwriting profits from specialty risk insurance.

Reinsurance premiums earned during the first nine months of 1998 and 1997 included $335 million and $142 million, respectively, from retroactive reinsurance and structured settlement contracts. Such contracts provide for the indemnification of insurance risks associated with past loss events or periodic payments on settled claims. Retroactive reinsurance and structured settlement contracts generated third quarter underwriting losses of $22 million in 1998 and $18 million in 1997. For the first nine months, these contracts produced underwriting losses of $68 million in 1998 and $58 million in 1997. Claims related to these contracts are expected to be paid over lengthy time periods. Accordingly, the premiums charged for such policies are based in part on time discounting of such loss payments. Underwriting losses related to retroactive reinsurance and structured settlement contracts represent the recurring recognition of time value of money concepts, the accretion of discounted structured settlement liabilities and amortization of deferred charges re reinsurance assumed. The accretion and amortization charges are recorded as losses incurred and, because there is no offsetting premiums, as underwriting losses. Nevertheless, this business is accepted because of the large amounts of investable policyholder funds ("float") generated.

Reinsurance premiums earned other than from retroactive reinsurance and structured settlement contracts were $201 million in the third quarter of 1998 as compared to $121 million in the comparable prior year period. For the first nine months, such premiums earned were $444 million in 1998 as compared to $404 million in 1997. The increases in other reinsurance premiums earned during the third quarter and first nine months of 1998 were principally attributable to higher amounts earned from property catastrophe reinsurance policies, and for the first nine months was partially offset by lower amounts earned from non-catastrophe policies. While eroding market prices for catastrophe reinsurance in recent years has significantly reduced Berkshire's opportunities to write the business at acceptable prices, the Insurance Group's superior capital strength permits it to offer and accept coverages of exceptionally large risks. Consequently, the occasional acceptance of a catastrophe risk can produce significant premium volume. The decline in premiums earned during the first nine months from non-catastrophe policies mainly related to the expiration and non-renewal of a single large excess of loss contract at the end of 1997.

During the third quarter, other reinsurance activities produced net underwriting gains of $6 million in 1998 compared to net losses of $25 million in 1997. For the first nine months, these activities contributed net underwriting gains of $39 million in 1998 and $44 million in 1997. Catastrophe reinsurance policies produced net underwriting gains during the first nine months of $116 million in 1998 and $107 million in 1997. Exposure to risks assumed from catastrophe reinsurance policies remain significant, particularly with respect to hurricane and earthquake perils in the United States. So, underwriting results from such contracts remain subject to extreme volatility. Underwriting losses from non-catastrophe reinsurance for the first nine months of 1998 and 1997 were $77 million and $63 million, respectively.

Net investment income earned by the Insurance Group during the first nine months of 1998 exceeded amounts earned during the corresponding 1997 period by $69 million (10.9%). Increased amounts of taxable interest earned in 1998 more than offset the comparative declines in dividends and tax exempt interest income earned. For the first nine months, dividends earned from investments in US Airways Preferred shares were $6 million in 1998 compared to $70 million in 1997. In March 1998, all preferred shares of US Airways were converted into common shares of that company. US Airways has not paid dividends on its common stock for the past several years.

The Insurance Group continues to maintain substantial levels of investments derived from shareholder capital, as well as large amounts of float produced by the insurance and reinsurance underwriting activities. Aggregate float, an estimate of the level of policyholder funds available for investment, was approximately $7.6 billion at September 30, 1998.

Income tax expense as a percentage of earnings before income taxes was 27.4% for the first nine months of 1998 and 24.8% for the first nine months of 1997. Changes in these ratios reflect changes in the relative mix of underwriting gains or losses and taxable interest income to tax exempt interest and dividend income, which are taxed at rates below the full statutory federal income tax rate.

Results of operations of Berkshire's diverse non insurance businesses are shown in the following table. Dollar amounts are in millions.

Revenues from these diverse business activities during 1998's third quarter and first nine months were greater by $284 million (32.6%) and $671 million (26.4%) respectively, than revenues during the corresponding 1997 periods. A significant portion of the increases both for the third quarter and first nine months relates to three business acquisitions. On August 7, 1998, the acquisition of Executive Jet, Inc. ("Executive Jet") was completed. Executive Jet is the world's leading provider of fractional ownership programs for general aviation aircraft. On January 7, 1998, the acquisition of International Dairy Queen Inc. ("Dairy Queen") was completed. Dairy Queen develops, licenses and services a system of approximately 5,800 Dairy Queen stores located throughout the United States, Canada and other foreign countries, which feature hamburgers, hot dogs, various dairy desserts and beverages. (See Notes to Interim Consolidated Financial Statements for additional information regarding these acquisitions.) A smaller acquisition occurred on July 1, 1997, when Berkshire acquired Star Furniture Company ("Star"). Star is headquartered in Houston, Texas and is a major retailer of home furnishings in that market.

Net earnings from this group of businesses were greater by $13 million (22.4%) during 1998's third quarter and $42 million (23.5%) for the first nine months of 1998. The inclusion of Executive Jet's and Dairy Queen's results accounted for about 65% of the increase in 1998's third quarter and along with Star accounted for about 62% of the increase for the first nine months. Several of Berkshire's other non insurance businesses also reported comparative increases in earnings during these periods with the most significant reported by FlightSafety. Earnings of the shoe businesses, however, declined.

Realized investment gain/loss has been a recurring element in Berkshire's net earnings for many years. Such amounts - recorded when investments are sold, other than temporarily impaired or in certain situations, as required under GAAP, when investments are marked-to-market with a corresponding gain or loss included in earnings - may fluctuate significantly from period to period, resulting in a meaningful effect on reported net earnings. The Consolidated Statements of Earnings include after-tax realized investment gains of $1,435 million for the first nine months of 1998 versus $163 million in the comparative prior year period.

While the amount of the realized investment gain had a material impact on reported net earnings for the 1998 periods, the effect on the changes in the Company's total shareholders' equity was much less significant. This is due to the fact that Berkshire carries most of its investments at market value, with the unrealized gains, net of tax, reported as a separate component of shareholders' equity.

Berkshire's consolidated shareholders' equity at September 30, 1998 was $31.0 billion, compared to $36.9 billion at June 30, 1998, and $31.5 billion at December 31, 1997. The balance of consolidated shareholders' equity includes the after-tax net unrealized gains associated with Berkshire's investment portfolio, of which a significant portion is represented by equity securities. The fair values of equity investments, and, therefore, the related unrealized appreciation of such investments, has been and remains subject to considerable volatility due to market price changes in equity markets.

During the first nine months of 1998, borrowings under investment agreements and other debt declined from $2.3 billion at December 31, 1997 to $1.8 billion at September 30, 1998. The decline primarily reflects the reduction of outstanding 1% Senior Exchangeable Notes due to elections exercised by the holders to convert the notes into common shares of Travelers Group, as well as a decline in the contingent value associated with the outstanding Exchange Notes at September 30, 1998.

Many computer systems in use today may be unable to correctly process data or may not operate at all after December 31, 1999 because those systems recognize the year within a date only by the last two digits. Some computer programs may interpret the year "00" as 1900, instead of as 2000, causing errors in calculations or the value "00" may be considered invalid by the computer program, causing the system to fail. Year 2000 issues affect: (1) Information Technology (IT) utilized in the Company's widely diversified business information systems, including mainframe and client server hardware and software applications (2) non-IT systems utilized by the Company, such as communications, facilities management, and manufacturing and service equipment containing embedded computer chips, and (3) IT and non-IT systems of significant customers, suppliers, business partners and equity investees.

Berkshire and its subsidiaries could be adversely affected if Year 2000 issues are not resolved by Berkshire or its significant customers, suppliers, business partners or equity investees before the Year 2000. Possible adverse consequences include but are not limited to: (1) the inability to obtain products or services used in business operations, (2) the inability to transact business with key customers, (3) the inability to execute transactions through the financial markets, (4) the inability to manufacture or deliver goods or services sold to customers, (5) the decline in economic value of one or more of Berkshire's significant equity investees and (6) the occurrence of Year 2000 related losses under property and casualty insurance and reinsurance contracts entered into by subsidiaries. Berkshire's management believes that at least some minor disruptions due to Year 2000 issues will occur. On a worst case basis, if Berkshire, one or more of its significant business partners, or key governmental bodies are unable to implement timely and effective solutions to the Year 2000 issues, Berkshire could suffer material adverse effects. The financial impact of such effects cannot currently be estimated.

Although Berkshire's business operations are diverse, they all rely on computers to conduct daily business activities. Because of the diversity of those operations, Year 2000 issues are independently managed at each of the Company's operating units. Berkshire and its subsidiaries have been working on Year 2000 readiness issues in varying degrees for several years.

Generally, the stages involved in managing Year 2000 issues include (a) identifying the IT and non-IT systems that are non-compliant, (b) formulating strategies to remedying the problems, (c) making the changes necessary through purchasing compliant systems or fixing existing systems, and (d) testing the changes. The identification and formulation stages are nearly complete at all significant operating units. Many systems have been purchased, upgraded or corrected to make them Year 2000 compliant. In certain instances the Company has obtained certifications of Year 2000 compliance from the manufacturers of systems used by the Company. Management expects that by the end of 1999, all critical systems that are not currently Year 2000 compliant will be corrected or replaced.

The Company has begun the testing of several systems that are believed to be Year 2000 compliant. Significant levels of testing will continue over the remainder of 1998 and throughout 1999. In addition, Berkshire has contacted a large number of its business partners to obtain information regarding their own progress on Year 2000 issues. While all business partners have not fully completed their own Year 2000 projects, Berkshire is currently not aware of any significant business partner whose Year 2000 issues will not be resolved in a timely manner. However, there is no assurance that significant Year 2000 related problems will not ultimately arise with its business partners.

Berkshire and its subsidiaries expect to ultimately incur about $45 million in identification, remediation and testing of Year 2000 issues. Approximately $20 million of this amount was already incurred as of September 30, 1998. Year 2000 related costs are expensed as incurred. The Company does not believe that any significant IT projects have been delayed due to Year 2000 efforts.

Berkshire and its subsidiaries have begun consideration of contingency plans to deal with certain Year 2000 issues in the event that remediation efforts are unsuccessful. Such plans will be more fully developed in 1999 to address specific areas of need.

Investors are cautioned that certain statements contained in this document, including but not limited to those under the caption Year 2000 Issues as well as some statements by the Company in periodic press releases and some oral statements of Company officials during presentations about the Company, are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future Company actions, which may be provided by management are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about the Company, economic and market factors and the industries in which the Company does business, among other things. These statements are not guaranties of future performance and the Company has no specific intention to update these statements.

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause the Company's actual performance and future events and actions to differ materially from such forward-looking statements, include, but are not limited to, changes in market prices of Berkshire's significant equity investees, the ability of the Company and its significant business partners and equity investees to successfully implement timely year 2000 solutions, the occurrence of one or more catastrophic events, such as an earthquake or hurricane that causes losses insured by members of Berkshire's Insurance Group, changes in insurance laws or regulations, changes in Federal income tax laws, and changes in general economic and market factors that affect the prices of securities or the industries in which Berkshire and its affiliates do business, especially those affecting the property and casualty insurance industry.

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