Note 6. Other investments

As of September 30, 2013, other investments include various securities of Wm. Wrigley Jr. Company (“Wrigley”), The Dow Chemical Company (“Dow”), Bank of America Corporation (“BAC”) and H.J. Heinz Holding Corporation (“Heinz Holding”), a newly formed holding company that acquired the H.J. Heinz Company (“Heinz”) on June 7, 2013. A summary of other investments follows (in millions).


	Cost Basis		Unrealized Gains		Fair Value		Carrying Value
September 30, 2013
Fixed maturity and equity securities:
Insurance and other	$	7,841	$	3,862	$	11,703	$	11,681
Finance and financial products		3,052		2,223		5,275		5,275
Investments in Heinz Holding		12,250		—		12,250		12,051

	$	23,143	$	6,085	$	29,228	$	29,007

December 31, 2012
Fixed maturity and equity securities:
Insurance and other	$	13,109	$	3,823	$	16,932	$	16,057
Finance and financial products		3,148		1,804		4,952		4,952

	$	16,257	$	5,627	$	21,884	$	21,009

In October 2008, we acquired 50,000 shares of 10% Cumulative Perpetual Preferred Stock of GS (“GS Preferred”) and warrants to purchase 43,478,260 shares of common stock of GS (“GS Warrants”) for a combined cost of $5 billion. In October 2008, we also acquired 30,000 shares of 10% Cumulative Perpetual Preferred Stock of GE (“GE Preferred”) and warrants to purchase 134,831,460 shares of common stock of GE (“GE Warrants”) for a combined cost of $3 billion. The GS Preferred and GE Preferred shares were fully redeemed by GS and GE in 2011.

When originally issued, the GS Warrants were exercisable for an aggregate cost of $5 billion ($115/share), and the GE Warrants were exercisable for an aggregate cost of $3 billion ($22.25/share). In the first quarter of 2013, the GE Warrants and GS Warrants agreements were amended to provide solely for cashless exercises, whereupon we would receive shares of GE and GS based on the excess, if any, of the market prices, as defined, over the exercise prices, without payment of additional consideration. In October 2013, the GS Warrants and GE Warrants were exercised and we received 13,062,594 shares of GS common stock and 10,710,644 shares of GE common stock with an aggregate fair value of approximately $2.4 billion. In the first nine months of 2013, the aggregate gains associated with our investments in the GS Warrants and GE Warrants (approximately $1.4 billion) were included in earnings. As a result of the aforementioned exercises, we included our investments in the GE Warrants and the GS Warrants as components of investments in equity securities (see Note 5) beginning as of September 30, 2013.

In October 2008, we acquired $4.4 billion par amount of 11.45% Wrigley subordinated notes due in 2018 and $2.1 billion of 5% Wrigley preferred stock. These investments were made in conjunction with Mars, Incorporated’s (“Mars”) acquisition of Wrigley. On August 30, 2013, the subordinated note agreement was amended to permit a repurchase of all of the Wrigley subordinated notes on October 1, 2013 at a specified price of 115.45% of par. On September 12, 2013, Wrigley and Mars notified us that they were repurchasing all of the subordinated notes on October 1, 2013 for $5.08 billion, plus accrued interest. As a result, we recognized a pre-tax investment gain of $680 million in earnings in the third quarter of 2013. The amount due from the repurchase is included in receivables of Insurance and Other in our Consolidated Balance Sheet. The Wrigley subordinated notes were previously classified as held-to-maturity and were carried at cost. The Wrigley preferred stock is classified as available-for-sale and recorded in our financial statements at fair value.

In 2009, we also acquired $1.0 billion par amount of Wrigley senior notes due in December 2013 and 2014. We currently own $800 million and an unconsolidated joint venture in which we hold a 50% economic interest owns $200 million of the Wrigley senior notes. The Wrigley senior notes are classified as held-to-maturity and we carry these investments at cost, adjusted for foreign currency exchange rate changes that apply to certain of the senior notes.

In 2009, we acquired 3,000,000 shares of Series A Cumulative Convertible Perpetual Preferred Stock of Dow (“Dow Preferred”) for a cost of $3 billion. Under certain conditions, we can convert each share of the Dow Preferred into 24.201 shares of Dow common stock (equivalent to a conversion price of $41.32 per share). Beginning in April 2014, if Dow’s common stock price exceeds $53.72 per share for any 20 trading days in a consecutive 30-day window, Dow, at its option, at any time, in whole or in part, may convert the Dow Preferred into Dow common stock at the then applicable conversion rate. The Dow Preferred is entitled to dividends at a rate of 8.5% per annum.

On September 1, 2011, we acquired 50,000 shares of 6% Cumulative Perpetual Preferred Stock of BAC (“BAC Preferred”) and warrants to purchase 700,000,000 shares of common stock of BAC (“BAC Warrants”) for a combined cost of $5 billion. The BAC Preferred is redeemable at any time by BAC at a price of $105,000 per share ($5.25 billion in aggregate). The BAC Warrants expire in 2021 and are exercisable for an additional aggregate cost of $5 billion ($7.142857/share).

On February 13, 2013, Berkshire and an affiliate of the global investment firm 3G Capital (such affiliate, “3G”), through a newly formed holding company, Heinz Holding, entered into a definitive merger agreement to acquire Heinz. The transaction to acquire Heinz was completed on June 7, 2013. Under the terms of the merger agreement, Heinz shareholders received $72.50 in cash for each outstanding share of common stock, or approximately $23.25 billion in the aggregate. On June 7, 2013, Berkshire and 3G each made equity investments in Heinz Holding, which, together with debt financing obtained by Heinz Holding, was used to acquire Heinz.

Heinz is one of the world’s leading marketers and producers of healthy, convenient and affordable foods specializing in ketchup, sauces, meals, soups, snacks and infant nutrition. Heinz is a global family of leading branded products, including Heinz^® Ketchup, sauces, soups, beans, pasta and infant foods (representing over one third of Heinz’s total sales), Ore-Ida^® potato products, Weight Watchers^® Smart Ones^® entrées, T.G.I. Friday’s^® snacks, and Plasmon^® infant nutrition.

Berkshire’s investments in Heinz Holding consist of 425 million shares of common stock, warrants to acquire approximately 46 million additional shares of common stock, and cumulative compounding preferred stock (“Preferred Stock”) with a liquidation preference of $8 billion. The aggregate cost of these investments was $12.25 billion. 3G acquired 425 million shares of Heinz Holding common stock for $4.25 billion. In addition, Heinz Holding has reserved 39.6 million shares of common stock for issuance under stock options to management of Heinz.

The Preferred Stock possesses no voting rights except as required by law or for certain matters specified in the Heinz Holding charter. The Preferred Stock is entitled to dividends at 9% per annum whether or not declared, is senior in priority to the common stock and is callable after June 7, 2016 at the liquidation value plus an applicable premium and any accrued and unpaid dividends. Under the Heinz Holding charter and a shareholders’ agreement entered into as of the acquisition date (the “shareholders’ agreement”), after June 7, 2021, Berkshire can cause Heinz Holding to attempt to sell shares of common stock through public offerings or other issuances (“redemption offerings”), the proceeds of which would be required to be used to redeem any outstanding shares of Preferred Stock. The warrants are exercisable for one cent per share and expire on June 7, 2018.

Berkshire and 3G each currently own 50% of the outstanding shares of common stock and possess equal voting interests in Heinz Holding. Under the shareholders’ agreement, unless and until Heinz Holding engages in a public offering, Berkshire and 3G each must approve all significant transactions and governance matters involving Heinz Holding and Heinz so long as Berkshire and 3G each continue to hold at least 66% of their initial common stock investments, except for (i) the declaration and payment of dividends on the Preferred Stock, and actions related to a Heinz Holding call of the Preferred Stock, for which Berkshire does not have a vote or approval right, and (ii) redemption offerings and redemptions resulting therefrom, which may only be triggered by Berkshire. No dividends may be paid on the common stock if there are any unpaid dividends on the Preferred Stock.

We are accounting for our investments in Heinz Holding common stock and common stock warrants on the equity method. Accordingly, we included our proportionate share of net earnings and other comprehensive income available to common stockholders in our Consolidated Statements of Earnings and Other Comprehensive Income beginning as of June 7, 2013. We have concluded that our investment in Preferred Stock represents an equity investment and since it does not have a readily determinable market value, it is carried at cost in our Consolidated Balance Sheet. Dividends earned in connection with the Preferred Stock and our share of Heinz Holding’s net loss attributable to common stockholders for the period from June 7, 2013 through July 28, 2013 are included in interest, dividend and other investment income of Insurance and Other in the Consolidated Statement of Earnings.

Heinz’s most recent fiscal year ended April 28, 2013 and its most recently available financial statements are for the quarterly period ending July 28, 2013. Accordingly, we have reported our proportionate share of net earnings and other comprehensive income on a two month lag basis. Summarized financial information of Heinz Holding follows (in millions).


	As of July 28, 2013
Assets	$	38,464
Liabilities		21,862


	For the period June 7, 2013 through July 28, 2013
Sales	$	1,527
Net earnings (loss)		(76	)