Aquamarine Zurich AG 18 Ramistrasse CH-8001 Zurich Switzerland +41 44 210 1900 Aquamarine Capital 152 West 57th Street

25th Floor New York, NY 10019 +1 212 716 1350

Aquamarine Fund 2010 - Q3 Report

Aquamarine Fund - Q3 Report Period Ending October 31, 2010

Year to date, Aquamarine Fund Inc. (off-shore) and Aquamarine Value Fund L.P. (on-shore) increased +13.8% net vs. an increase of +6.1% for the S&P 500. Since inception (Sept. 1997), Aquamarine Fund Inc. has generated net returns of +207%, compared to a return of +28.6% for the S&P 500. Since inception (Oct. 2001), Aquamarine Value Fund L.P. has returned +92%, compared to an increase of 8.6% for the S&P 500. Assets under management now stand at $84.5 million. During the last 4 months, we received $1.5 million in new assets, and we also received one redemption for approximately $100,000.

Fund Statistics Net of All Fees in US$

Fund Cumulative Return Annualized Return Trailing 12-Months Return 207% 9% 19.9%

DJIU 44% 2.8% 14.5%

S&P 500 28.6% 1.9% 14.2%

FT 100 15.8% 1.1% 12.5%

Aquamarine Fund 2010 - Q3 Report

Dear Partners, While in 2008, the instability of the market was a difficult time for most investors, this year and last are perhaps an indication that over time, the market does indeed go up. I recently presented at Aquamarine Funds Partnership Meetings in London (June), Zurich (October), and New York (October.) At those meetings, I explained my investing strategy throughout these last two years, the results as well as the lessons that I learned which I believe have made me a better manager more meticulous manager of your funds. Aquamarine Fund - Annual returns

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

Fund 13.8% 39.3% -46.7% 17.0% 37.1% 7.2% 11.2% 29.5% -1.6% 1.9% 21.4% -6.7% 26.1% 2.5%*

S&P 500 +6.1% 23.5% -38.5% 3.5% 13.6% 3.0% 9.0% 26.4% -23.4% -13.0% -10.1% 19.5% 33.6% 5.5%*

(1997 results are only for the period Sept. 15th through December 31st) And as this table shows, out of the past 13 years, Aquamarine Fund has had only 3 negative years, and underperformed in only 5 out of those 13 years. Aquamarine Fund 2010 - Q3 Report

Part of our drop in assets in 2008 can be explained by the decline in the NAV, but it also reflects redemption by investors with a shorter time horizon. Since then I have been a lot more careful about attracting the right kind of investor for Aquamarine Fund. Much of the answer here is to set the right performance expectations with our investors before they join. The key here is that while I believe that I can outperform the S&P index, I am not sure by how much. My historic rate of outperformance over the last 13 years has been 6% better than the S&P, which is better than 98% or so of all mutual funds and pooled investment vehicles out there, so I believe that you are getting a good deal. For as long as the assets are at the current levels, I would be disappointed if I did not continue to deliver this. How are we invested? At Aquamarine I want to invest our money in productive assets those parts of the global economy that make us wealthier. Below a practical summary of how our money is invested. Allocation of Ideas Best of Breed Global Commodities Global For Profit Universities Other Cash Total Value US$ mm 41.55 9.54 6.14 19.04 7.23 83.5 Total 50% 11% 7% 23% 9% 100%

We hold approximately 25 positions, with new positions entering the portfolio at 2-5% of capital.

Best of breed includes growth at a reasonable price type, higher quality business. This group includes companies such as Berkshire Hathaway, American Express, Heineken and Nestle. However, I fully expect these companies to outperform the S&P index. I have talked about Global Commodities at other shareholder meetings and in other letters. The basic idea behind this investment theme is, in the words of John Burbank, to Buy what China is short. This is now well talked about, and there are few bargains (that I can find) in this space.

Aquamarine Fund 2010 - Q3 Report

Global For profit Universities Some time ago, I became known for my favor of the For Profit education industry in the US as a place to make good investment returns. Indeed, we have made substantial amounts of money in companies such as EVCI Career Colleges, and DeVry. In the United States, this industry is now in turmoil, and may have a much better past than its future. Outside of the US, however, these businesses have tremendous tailwinds with the most salient difference being that in the countries where our investees operate, there is a very, undeveloped consumer finance and education finance sector, which means that all students have to pay in cash for their education. This adds an extra tailwind to what is already a rapidly growing addressable market.

Other The last category, Other, is what Warren Buffett would call, wrinkles. It is in these areas that I expect to make the majority of our returns going forward. It comprises of 10 with position sizes ranging from 1 6% of the portfolio. Companies in this category are there because they are small cap, in an unusual place (e.g. Zimbabwe, Philippines), or because they are going through a transition that makes it hard for many investors to evaluate their future prospects.

A last investing thought on gold At various times in 2009 and 2010, I have flirted with the idea of buying gold as a hedge against inflation and paper currencies in general. While the idea has much appeal, especially to those people who already own it, I have come out against holding it in Aquamarine Fund's portfolio. This is for the simple reason that I believe I have found better ways to hedge against inflation. The key insight regarding inflation is that you want to be in businesses whose expenses are in the past, or will be paid with, largely in old, pre inflationary prices, while on the revenue side, they can raise prices with inflation. Banks, credit card networks, certain real estate companies (who have long term fixed rate debt) and mining companies all have this attribute, as to various other businesses. As you can imagine, this is where I am focusing my efforts. But recently, I came across this following statement by Warren Buffett, which puts it best:

You could take all the gold thats ever been mined, and it would fill a cube 67 feet in each direction. For what thats worth, you could buy all, not some of all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value? Warren Buffett

Aquamarine Fund 2010 - Q3 Report

Our Value Proposition I continue to believe that Aquamarine Fund offers an extraordinary value to its investors. Low/No Management Fees. It is not unheard of in the fund management industry for investors to be charged 2% or even 3-4% of their assets for the privilege of having their assets managed by some bank employee. At Aquamarine Fund, the maximum fixed fee that you would pay is 1%, and many investors have opted for the no management fee option. Spier Family is the largest investor; we eat our own cooking. Your money gets pooled with Spier family assets - I and other members of the Spier family get exactly the same results that you do. No performance fees until fund regains new high. I only get a performance fee if I exceed the last high plus a 6% hurdle. The last time I earned a performance fee was in 2007, and it might be as much as another year or two before I earn a performance fee again. I am fine with that. No leverage, No margin loans, No short positions, No complexity. I want to earn you a return by purchasing part ownership in businesses. In the past, banks have tried to entice me into engaging in complex transactions, and I had no trouble resisting. Businesses are the wealth creation engines of society, not derivatives.

2011 Annual Meetings I plan to hold three annual meetings in London, New York and Zurich. Tentative dates and places are as follows: London: Monday, June 6th New York: Tuesday, September 20th Zurich: Monday, October 24th Please email either Orly Hindi ohindi@aquamarinefund.com, or Oliver Suess osuess@aqfd.ch if you plan to attend. Because the dates are not yet set in stone, please also feel free to propose a different date if this makes a difference for you.

Aquamarine Fund 2010 - Q3 Report

Next opening: December 1st 2010 The next opening of Aquamarine Fund will be on December 1st, 2010. There are two classes of shares that are open with two different fee structures. 1)Management fee of 1% of assets performance fee of 20% of the profits above 4% 2)Management fee of 0% of assets Performance fee of 25% of the profits above 6% For more on this topic feel free to ask us for a documented entitled, "Considerations on investing in Aquamarine Fund" - also available on the website. Thank you and referrals Part of my learning over the past three years has been to discover that I have a phenomenal set of investors - so thank you for investing with me. In connection with this, most of you, my investors, were referred to me by existing investors who were satisfied with my performance. So if you know of someone who you think would benefit from investing in Aquamarine Fund, please dont be shy. Please feel free to call me about referrals, or anything else via phone on +41 44 210 900 or +1 212 716 1352 (Yes, it rings in Zurich!) or via email at gspier@aquamarinefund.com

With warm regards,

Guy Spier CEO

Aquamarine Fund 2010 - Q3 Report