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FAIRXFOCIXFAAFX2 0 A N N U AL RE P O RTFAIRHOLMEIgnore the crowd.Beginning March 29, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of each Fund’s annual andsemi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from yourfinancial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Fund’s website (www.fairholmefunds.com),and you will be notified by mail each time a report is posted and provided with a website link to access the report.If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You mayelect to receive shareholder reports and other communications from a Fund or your financial intermediary electronically at any time by contactingyour financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling the Fund at (866) 202-2263.You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financialintermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with a Fund, you can call the Fundat (866) 202-2263. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if youinvest directly, to all funds held with Fairholme Funds, Inc.
This page is not part of the Fairholme Funds, Inc. 20 Annual Report
FAIRHOLMEIgnore the crowd.PORTFOLIO MANAGER’S REPORTFOR EACH SERIES OF FAIRHOLME FUNDS, INC. -DQXDU\ This page is not part of the Fairholme Funds, Inc. 20 Annual Report
FAIRHOLME CAPITAL MANAGEMENT, L.L.C.PORTFOLIO MANAGER’S REPORTFor the Year Ended December 31, 2020Mutual fund investing involves risks, including possible loss of principal. Unless otherwise specified, all information is shown as of December 31,2020. Past performance information quoted below does not guarantee future results. The investment return and principal value of an investment inThe Fairholme Fund (the “Fund”) will fluctuate so that the value of an investor’s shares, when redeemed, may be worth more or less than theiroriginal cost. Current performance may be lower or higher than quoted performance information quoted below. Performance figures reflect thededuction of expenses and assume reinvestment of dividends and capital gains but do not reflect a 2.00% redemption fee imposed by the Fund onshares redeemed or exchanged within 60 calendar days of their purchase. Most recent month-end performance and answers to any questions youmay have can be obtained by calling Shareholder Services at (866) 202-2263. The Fund maintains a focused portfolio of investments in a limitednumber of issuers and does not seek to diversify its investments. This exposes the Fund to the risk of unanticipated industry conditions and risksparticular to a single company or the securities of a single company within its portfolio. Current and future portfolio holdings are subject to changeand risk. The S&P 500 Index (the “S&P 500”) is a widely recognized, unmanaged index of 500 of the largest companies in the United States asmeasured by market capitalization and the performance of the S&P 500 assumes the reinvestment of all dividends and distributions. The S&P 500is used for comparative purposes only, and is not meant to be indicative of the Fund’s performance, asset composition, or volatility. The Fund’sperformance may differ markedly from the performance of the S&P 500 in either up or down market trends. Because an index cannot be invested indirectly, the index returns do not reflect a deduction for fees, expenses, or taxes. The expense ratio for the Fund reflected in the current prospectusdated March 27, 2020, is 1.00%, and may differ from the actual expenses incurred by the Fund for the period covered by the Fund’s Annual Report.Effective January 1, 2018, the Manager agreed to waive, on a voluntary basis, a portion of the management fee of the Fund to the extent necessary to limit themanagement fee paid to the Manager by the Fund to an annual rate of 0.80% of the Fund’s daily average net asset value. This undertaking may be terminated by theManager upon 60 days’ written notice to the Fund.The Portfolio Manager’s Report is not part of The Fairholme Funds, Inc. Annual Report due to forward-looking statements that, by their nature,cannot be attested to, as required by regulation. The Portfolio Manager’s Report is based on calendar-year performance. A more formalManagement Discussion and Analysis is included in the Annual Report. Opinions of the Portfolio Manager are intended as such, and not asstatements of fact requiring attestation.The Fairholme FundTEN FIFTEENYEARSYEARSSINCEINCEPTION(12/29/1999)46.90% 76.17% 88.71% 203.45%18.40% 103.04% 267.00% 311.00%735.77%285.39%ONEYEAR 90,000 80,000 70,000CumulativeThe Fairholme FundS&P 500AnnualizedThe Fairholme FundS&P 8%9.88%TOP HOLDINGS BY ISSUER (% OF NET ASSETS)THE FAIRHOLME FUNDTOTAL RETURN 83,57710.64%6.63%The St. Joe Co.65.6%Cash and Cash Equivalents*21.8%Federal Home Loan Mortgage Corp.5.5%Federal National Mortgage Association5.2%Imperial Metals Corp.1.9% 60,000 50,000S&P 500TOTAL RETURN 38,539 40,000The chart on the left presents the performance of a 10,000investment from inception of The Fairholme Fund (December29, 1999) through December 31, 2020. The top holdings byissuer listed in the chart above are as of December 31, 2020. 30,000 20,000 10,000 THE FAIRHOLME FUND TOTAL RETURN S&P 500 TOTAL RETURN 02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*Includes cash, U.S. Treasury Bills, and Treasury money market funds.This page is not part of the Fairholme Funds, Inc. 2020 Annual Reporti
FAIRHOLME CAPITAL MANAGEMENT, L.L.C.PORTFOLIO MANAGER’S REPORT (continued)For the Year Ended December 31, 2020January 28, 2021Dear Fellow Shareholders:The Fairholme Fund increased 46.9% versus an 18.4% increase for the S&P 500 Index in 2020. The preceding graph and performance tablecompare The Fairholme Fund’s unaudited performance (after expenses) with that of the S&P 500 Index, with dividends and distributions reinvested,for various periods ended December 31, 2020. The value of a 10,000 investment in The Fairholme Fund at its inception was worth 83,577(assumes reinvestment of distributions into additional Fund shares) compared to 38,539 for the S&P 500 Index at December 31, 2020. Focusedinvesting has led to overall performance that is more than twice that of the Index.St. Joe’s common stock price increased last year by 120%. The company is uniquely positioned for decades of profitable growth along NorthwestFlorida’s Emerald Coast. Residential, commercial, and hospitality segments are breaking records. Pricing is robust. Homes sell before completion.Apartments are fully occupied. Clubs by JOE expands. Hotels are in construction at Seagrove Beach, Camp Creek, Beaches International Airport,Pier Park, Panama City Beach’s Sports Complex, and Panama City’s downtown marina. The Powder Room, Watercrest, and WatersoundInsurance opened for business. Latitude Margaritaville Watersound will soon open. Tyndall AFB’s multi-billion dollar expansion will requirethousands of additional homes. St. Joe is only scratching the surface.Homes on Florida’s Emerald Coast, South of SR 98, sell for at least 1,000,000 – and multiples more. North of the highway, at Watersound Origins,homes price about 630,000. East, at Breakfast Point, homes average around 400,000. North of the intra-costal waterway, Latitude prices startabout 250,000. Commercial acreage fronting the highway sells for 200,000 and exceeds 500,000. St. Joe’s entitled lands in Walton, Bay, andGulf Counties may be worth exponentially more than implied by the company’s market value.Fannie Mae and Freddie Mac insure the availability of 30-year fixed-rate mortgages. Home ownership has never been more affordable orsustainable during crises with Fannie and Freddie guarantees. The enterprises have been under federal control since 2008. The U.S. Treasuryonly recently agreed to their retaining the earnings necessary for capital safety and soundness. Treasury still has not agreed that 191 billion of“loans and fees” have been repaid – even after receiving over 300 billion of reimbursements and controlling 80% stakes. I expect The SupremeCourt will recognize the rights of private enterprise and remedy this gating issue to Fannie’s and Freddie’s exit from conservatorship.Copper prices increase with global growth and innovation. Gold rises with monetary expansion that cheapens paper money. Imperial Metals’investment in Red Chris has world-class potential. Huckleberry and Mt. Polley may restart production with higher prices. King Copper drilled 20grams of gold per ton over 3 meters. There are 20 other investments buried across British Columbia. Imperial has great expectations.U.S. Treasury Bills and Treasury money market funds composed 21% of the Fund. I and affiliated entities own 27% of the Fund.Respectfully submitted,Bruce R. BerkowitzChief Investment OfficerThis page is not part of the Fairholme Funds, Inc. 2020 Annual Reportii
FAIRHOLME CAPITAL MANAGEMENT, L.L.C.3257)2/,2 0 1 *(5¶6 5(3257For the Year Ended December 31, 20200XWXDO IXQG LQYHVWLQJ LQYROYHV ULVNV LQFOXGLQJ SRVVLEOH ORVV RI SULQFLSDO 8QOHVV RWKHUZLVH VSHFLILHG DOO LQIRUPDWLRQ LV VKRZQ DV RI 'HFHPEHU 3DVW SHUIRUPDQFH LQIRUPDWLRQ TXRWHG EHORZ GRHV QRW JXDUDQWHH IXWXUH UHVXOWV 7KH LQYHVWPHQW UHWXUQ DQG SULQFLSDO YDOXH RI DQ LQYHVWPHQW LQ7KH )DLUKROPH )RFXVHG ,QFRPH )XQG ಯ7KH ,QFRPH )XQGರ RU WKH ಯ)XQGರ ZLOO IOXFWXDWH VR WKDW WKH YDOXH RI DQ LQYHVWRUಬ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ಯ%ORRPEHUJ %DUFOD\V %RQG,QGH[ರ LV D EURDG EDVHG IODJVKLS EHQFKPDUN WKDW PHDVXUHV WKH LQYHVWPHQW JUDGH 8 6 GROODU GHQRPLQDWHG IL[HG UDWH WD[DEOH ERQG PDUNHW DQGLQFOXGHV 7UHDVXULHV JRYHUQPHQW UHODWHG DQG FRUSRUDWH VHFXULWLHV PRUWJDJH EDFNHG VHFXULWLHV DJHQF\ IL[HG UDWH DQG K\EULG DGMXVWDEOH UDWHPRUWJDJH SDVV WKURXJKV DVVHW EDFNHG VHFXULWLHV DQG FRPPHUFLDO PRUWJDJH EDFNHG VHFXULWLHV DJHQF\ DQG QRQ DJHQF\ 7KH %ORRPEHUJ %DUFOD\V%RQG ,QGH[ LV XVHG IRU FRPSDUDWLYH SXUSRVHV RQO\ DQG LV QRW PHDQW WR EH LQGLFDWLYH RI WKH )XQGಬV SHUIRUPDQFH DVVHW FRPSRVLWLRQ RU YRODWLOLW\ 7KH)XQGಬV SHUIRUPDQFH PD\ GLIIHU PDUNHGO\ IURP WKH SHUIRUPDQFH RI WKH %ORRPEHUJ %DUFOD\V %RQG ,QGH[ LQ HLWKHU XS RU GRZQ PDUNHW WUHQGV %HFDXVHDQ LQGH[ FDQQRW EH LQYHVWHG LQ GLUHFWO\ WKH LQGH[ UHWXUQV GR QRW UHIOHFW D GHGXFWLRQ IRU IHHV H[SHQVHV RU WD[HV 7KH H[SHQVH UDWLR IRU WKH )XQGUHIOHFWHG LQ WKH FXUUHQW SURVSHFWXV GDWHG 0DUFK LV DQG PD\ GLIIHU IURP WKH DFWXDO H[SHQVHV LQFXUUHG E\ WKH )XQG IRU WKH SHULRGFRYHUHG E\ WKH )XQGಬV QQXDO 5HSRUW 7KH H[SHQVH UDWLR LQFOXGHV DQ\ DFTXLUHG IXQG IHHV DQG H[SHQVHV ZKLFK DUH LQFXUUHG LQGLUHFWO\ E\ WKH )XQG DVD UHVXOW RI LQYHVWPHQWV LQ VHFXULWLHV LVVXHG E\ RQH RU PRUH LQYHVWPHQW FRPSDQLHV LQFOXGLQJ PRQH\ PDUNHW IXQGV (IIHFWLYH -DQXDU\ WKH 0DQDJHU DJUHHG WR ZDLYH RQ D YROXQWDU\ EDVLV D SRUWLRQ RI WKH PDQDJHPHQW IHH RI WKH )XQG WR WKH H[WHQW QHFHVVDU\ WR OLPLW WKHPDQDJHPHQW IHH SDLG WR WKH 0DQDJHU E\ WKH )XQG WR DQ DQQXDO UDWH RI RI WKH )XQGಬV GDLO\ DYHUDJH QHW DVVHW YDOXH 7KLV XQGHUWDNLQJ PD\ EH WHUPLQDWHG E\ WKH0DQDJHU XSRQ GD\Vಬ ZULWWHQ QRWLFH WR WKH )XQG 7KH 3RUWIROLR 0DQDJHUಬV 5HSRUW LV QRW SDUW RI 7KH )DLUKROPH )XQGV ,QF QQXDO 5HSRUW GXH WR IRUZDUG ORRNLQJ VWDWHPHQWV WKDW E\ WKHLU QDWXUH FDQQRW EH DWWHVWHG WR DV UHTXLUHG E\ UHJXODWLRQ 7KH 3RUWIROLR 0DQDJHUಬV 5HSRUW LV EDVHG RQ FDOHQGDU \HDU SHUIRUPDQFH PRUH IRUPDO0DQDJHPHQW 'LVFXVVLRQ DQG QDO\VLV LV LQFOXGHG LQ WKH QQXDO 5HSRUW 2SLQLRQV RI WKH 3RUWIROLR 0DQDJHU DUH LQWHQGHG DV VXFK DQG QRW DVVWDWHPHQWV RI IDFW UHTXLULQJ DWWHVWDWLRQ The Fairholme Focused Income Fund 25,000 /2009)CumulativeThe Income Fund0.99%33.00%71.71%90.86%Bloomberg Barclays Bond Index7.51%24.24%45.76%55.29%TOP HOLDINGS BY ISSUER (% OF NET ASSETS)AnnualizedThe Income Fund0.99%5.87%5.56%6.05%Bloomberg Barclays Bond Index7.51%4.44%3.84%4.08%Cash and Cash Equivalents*THE INCOME FUNDTOTAL RETURN 19,086 15,000BLOOMBERG BARCLAYS BOND INDEXTOTAL RETURN 15,529 10,000 THE INCOME FUND TOTAL RETURN BLOOMBERG BARCLAYS BOND INDEX TOTAL RETURN 02147.0%Federal Home Loan Mortgage Corp.6.1%Bank of America Corp.4.8%Western Midstream Partners LP4.6%AT&T Inc.4.5%Canadian Natural Resources Ltd.4.0%CVS Health Corp.3.7%Enbridge Inc.3.7%Old Republic International Corp.3.4%Kinder Morgan Inc.3.3%The Income Fund’s 30-Day SEC Yield at December 31, 2020,was 0.80% (unsubsidized) and 1.01% (subsidized).**The chart on the left presents the performance of a 10,000investment from inception of The Income Fund (December 31,2009) through December 31, 2020. The top holdings by issuerlisted in the chart above are as of December 31, 2020.*Includes cash, U.S. Treasury Bills, and Treasury money market funds.**The 30-Day SEC Yield represents net investment income earned by The Income Fund over the 30-Day period, expressed as an annual percentage rate based on TheIncome )XQG¶V share price at the end of the 30-Day period. The 30-Day unsubsidized SEC Yield does not reflect any fee waivers/reimbursements/limits in effect.This page is not part of the Fairholme Funds, Inc. 2020 Annual Reporti
FAIRHOLME CAPITAL MANAGEMENT, L.L.C.3257)2/,2 0 1 *(5¶6 5(3257 (continued)For the Year Ended December 31, 2020January 28, 2021Dear Fellow Shareholders:The Fairholme Focused Income Fund increased 0.99% versus a 7.51% increase for the Bloomberg Barclays Bond Index in 2020. The precedinggraph and performance table compare The Income )XQG¶V unaudited performance (after expenses) with that of the Bloomberg Barclays BondIndex, with dividends and distributions reinvested, for various periods ended December 31, 2020. The value of a 10,000 investment in The IncomeFund at its inception was worth 19,086 (assumes reinvestment of distributions into additional Income Fund shares) compared to 15,529 for theBloomberg Barclays Bond Index at December 31, 2020. I and affiliates own 31% of the Fund for reasons of past performance, current income, andliquidity.There are opportunities to own a basket of equities and partnership stakes of companies that produce essential products and services, andsubstantial cash distributions. Enbridge, Energy Transfer, Kinder Morgan, and others own energy toll roads impossible to duplicate in WRGD\¶V world.AT&T is vital for high-speed wireless. CVS Health is critical for the distribution of vaccines. Together, these portfolio investments currently yield anaverage 8.1%.Fannie Mae and Freddie Mac insure the availability of 30-year fixed-rate mortgages. Home ownership has never been more affordable orsustainable during crisis with Fannie and Freddie guarantees. The enterprises have been under federal control since 2008. The U.S. Treasury onlyrecently agreed to their retaining the earnings necessary for capital safety and soundness. Treasury still has not agreed that 191 billion of ³ORDQVand IHHV have been repaid even after receiving over 300 billion of reimbursements and controlling 80% stakes. I expect The Supreme Court willrecognize the rights of private enterprise and remedy this gating issue to )DQQLH¶V and )UHGGLH¶V exit from conservatorship. A resumption ofpreferred stock dividends should benefit the )XQG¶V current dividend of 2.0%.U.S. Treasury Bills and Treasury money markets funds composed 47% of the )XQG¶V net assets with COVID-19 uncertainties. They earn nothing,but have the highest safety and liquidity.Respectfully submitted,Bruce R. BerkowitzChief Investment OfficerThis page is not part of the Fairholme Funds, Inc. 2020 Annual Reportii
FAIRHOLME CAPITAL MANAGEMENT, L.L.C.3257)2/,2 0 1 *(5¶6 5(3257For the Year Ended December 31, 20200XWXDO IXQG LQYHVWLQJ LQYROYHV ULVNV LQFOXGLQJ SRVVLEOH ORVV RI SULQFLSDO 8QOHVV RWKHUZLVH VSHFLILHG DOO LQIRUPDWLRQ LV VKRZQ DV RI 'HFHPEHU 3DVW SHUIRUPDQFH LQIRUPDWLRQ TXRWHG EHORZ GRHV QRW JXDUDQWHH IXWXUH UHVXOWV 7KH LQYHVWPHQW UHWXUQ DQG SULQFLSDO YDOXH RI DQ LQYHVWPHQW LQ7KH OORFDWLRQ )XQG ಯ7KH OORFDWLRQ )XQGರ RU WKH ಯ)XQGರ ZLOO IOXFWXDWH VR WKDW WKH YDOXH RI DQ LQYHVWRUಬV VKDUHV ZKHQ UHGHHPHG PD\ EH ZRUWKPRUH RU OHVV WKDQ WKHLU RULJLQDO FRVW &XUUHQW SHUIRUPDQFH PD\ EH ORZHU RU KLJKHU WKDQ WKH SHUIRUPDQFH LQIRUPDWLRQ TXRWHG EHORZ 3HUIRUPDQFHILJXUHV UHIOHFW WKH GHGXFWLRQ RI H[SHQVHV DQG DVVXPH UHLQYHVWPHQW RI GLYLGHQGV DQG FDSLWDO JDLQV EXW GR QRW UHIOHFW D UHGHPSWLRQ IHHLPSRVHG E\ WKH )XQG RQ VKDUHV UHGHHPHG RU H[FKDQJHG ZLWKLQ FDOHQGDU GD\V RI WKHLU SXUFKDVH 0RVW UHFHQW PRQWK HQG SHUIRUPDQFH DQGDQVZHUV WR DQ\ TXHVWLRQV \RX PD\ KDYH FDQ EH REWDLQHG E\ FDOOLQJ 6KDUHKROGHU 6HUYLFHV DW 7KH )XQG PDLQWDLQV D IRFXVHGSRUWIROLR RI LQYHVWPHQWV LQ D OLPLWHG QXPEHU RI LVVXHUV DQG GRHV QRW VHHN WR GLYHUVLI\ LWV LQYHVWPHQWV 7KLV H[SRVHV WKH )XQG WR WKH ULVN RIXQDQWLFLSDWHG LQGXVWU\ FRQGLWLRQV DQG ULVNV SDUWLFXODU WR D VLQJOH FRPSDQ\ RU WKH VHFXULWLHV RI D VLQJOH FRPSDQ\ ZLWKLQ LWV SRUWIROLR &XUUHQW DQG IXWXUHSRUWIROLR KROGLQJV DUH VXEMHFW WR FKDQJH DQG ULVN 7KH 6 3 ,QGH[ WKH ಯ6 3 ರ LV D ZLGHO\ UHFRJQL]HG XQPDQDJHG LQGH[ RI RI WKH ODUJHVWFRPSDQLHV LQ WKH 8QLWHG 6WDWHV DV PHDVXUHG E\ PDUNHW FDSLWDOL]DWLRQ DQG WKH SHUIRUPDQFH RI WKH 6 3 DVVXPHV WKH UHLQYHVWPHQW RI DOOGLYLGHQGV DQG GLVWULEXWLRQV 7KH %ORRPEHUJ %DUFOD\V 8 6 JJUHJDWH %RQG ,QGH[ WKH ಯ%ORRPEHUJ %DUFOD\V %RQG ,QGH[ರ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ಬV SHUIRUPDQFH DVVHW FRPSRVLWLRQ RU YRODWLOLW\ 7KH )XQGಬVSHUIRUPDQFH PD\ GLIIHU PDUNHGO\ IURP WKH SHUIRUPDQFH RI WKH 6 3 RU WKH %ORRPEHUJ %DUFOD\V %RQG ,QGH[ LQ HLWKHU XS RU GRZQ PDUNHW WUHQGV %HFDXVH LQGLFHV FDQQRW EH LQYHVWHG LQ GLUHFWO\ WKHVH LQGH[ UHWXUQV GR QRW UHIOHFW D GHGXFWLRQ IRU IHHV H[SHQVHV RU WD[HV 7KH H[SHQVH UDWLR IRU WKH)XQG UHIOHFWHG LQ WKH FXUUHQW SURVSHFWXV GDWHG 0DUFK LV DQG PD\ GLIIHU IURP WKH DFWXDO H[SHQVHV LQFXUUHG E\ WKH )XQG IRU WKHSHULRG FRYHUHG E\ WKH )XQGಬV QQXDO 5HSRUW 7KH H[SHQVH UDWLR LQFOXGHV DQ\ DFTXLUHG IXQG IHHV DQG H[SHQVHV ZKLFK DUH LQFXUUHG LQGLUHFWO\ E\ WKH)XQG DV D UHVXOW RI LQYHVWPHQWV LQ VHFXULWLHV LVVXHG E\ RQH RU PRUH LQYHVWPHQW FRPSDQLHV LQFOXGLQJ PRQH\ PDUNHW IXQGV (IIHFWLYH -DQXDU\ WKH 0DQDJHU DJUHHG WR ZDLYH RQ D YROXQWDU\ EDVLV D SRUWLRQ RI WKH PDQDJHPHQW IHH RI WKH )XQG WR WKH H[WHQW QHFHVVDU\ WR OLPLW WKHPDQDJHPHQW IHH SDLG WR WKH 0DQDJHU E\ WKH )XQG WR DQ DQQXDO UDWH RI RI WKH )XQGಬV GDLO\ DYHUDJH QHW DVVHW YDOXH 7KLV XQGHUWDNLQJ PD\ EH WHUPLQDWHG E\ WKH0DQDJHU XSRQ GD\Vಬ ZULWWHQ QRWLFH WR WKH )XQG 7KH 3RUWIROLR 0DQDJHUಬV 5HSRUW LV QRW SDUW RI 7KH )DLUKROPH )XQGV ,QF QQXDO 5HSRUW GXH WR IRUZDUG ORRNLQJ VWDWHPHQWV WKDW E\ WKHLU QDWXUH FDQQRW EH DWWHVWHG WR DV UHTXLUHG E\ UHJXODWLRQ 7KH 3RUWIROLR 0DQDJHUಬV 5HSRUW LV EDVHG RQ FDOHQGDU \HDU SHUIRUPDQFH PRUH IRUPDO0DQDJHPHQW 'LVFXVVLRQ DQG QDO\VLV LV LQFOXGHG LQ WKH QQXDO 5HSRUW 2SLQLRQV RI WKH 3RUWIROLR 0DQDJHU DUH LQWHQGHG DV VXFK DQG QRW DVVWDWHPHQWV RI IDFW UHTXLULQJ DWWHVWDWLRQ The Fairholme Allocation FundFIVEYEARSSINCEINCEPTION(10 YEARS)23.06% 23.27%7.51% 24.24%18.40% 103.04%30.85%45.76%267.00%ONEYEAR 40,000 35,000 30,000CumulativeThe Allocation FundBloomberg Barclays Bond IndexS&P 500AnnualizedThe Allocation FundBloomberg Barclays Bond IndexS&P 50023.06%7.51%18.40%4.27%4.44%15.22%S&P 500TOTAL RETURNTOP HOLDINGS BY ISSUER (% OF NET ASSETS) 36,7002.73%3.84%13.88% 25,000 20,000BLOOMBERG BARCLAYS BOND INDEXTOTAL RETURN 14,576 15,000The St. Joe Co.23.7%Cash and Cash Equivalents*15.7%Imperial Metals Corp.14.2%Federal Home Loan Mortgage Corp.6.3%Federal National Mortgage Association6.0%Bank of America Corp.4.9%Western Midstream Partners LP3.7%AT&T Inc.3.6%Canadian Natural Resources Ltd.3.5%Cincinnati Financial Corp.3.1% 10,000 THE ALLOCATION FUND TOTAL RETURN BLOOMBERG BARCLAYS BOND INDEX TOTAL RETURN S&P 500 TOTAL RETURN 5,000 02011THE ALLOCATION FUNDTOTAL RETURN2012201320142015201620172018 13,08520192020The Allocation Fund’s 30-Day SEC Yield at December 31,2020, was 0.32% (unsubsidized) and 0.52% (subsidized).**The chart on the left presents the performance of a 10,000investment from inception of The Allocation Fund (December31, 2010) through December 31, 2020. The top holdings byissuer listed in the chart above are as of December 31, 2020.2021*Includes cash, U.S. Treasury Bills, money market funds, and various commercial paper issuers.**The 30-Day SEC Yield represents net investment income earned by The Allocation Fund over the 30-Day period, expressed as an annual percentage rate based onThe Allocation )XQG¶V share price at the end of the 30-Day period. The 30-Day unsubsidized SEC Yield does not reflect any fee waivers/reimbursements/limits in effect.This page is not part of the Fairholme Funds, Inc. 2020 Annual Reporti
FAIRHOLME CAPITAL MANAGEMENT, L.L.C.3257)2/,2 0 1 *(5¶6 5(3257 FRQWLQXHGFor the Year Ended December 31, 2020January 28, 2021Dear Fellow Shareholders:The Allocation Fund increased 23.06% versus 7.51% for the Bloomberg Barclays Bond Index and 18.40% for the S&P 500 Index in 2020. Thepreceding graph and performance table compares The Allocation )XQG¶V unaudited performance (after expenses) with that of the BloombergBarclays Bond Index and the S&P 500, with distributions reinvested, for various periods ended December 31, 2020. The value of a 10,000investment in The Allocation Fund at its inception was worth 13,085 (assumes reinvestment of distributions into additional Fund shares) comparedto 14,576 and 36,700 for the Bloomberg Barclays Bond Index and the S&P 500, respectively, at December 31, 2020. I and affiliated entities own62% of the Fund because of its focused investing mandate, current yield of 1.4%, and the 0DQDJHU¶V belief of eating RQH¶V own cooking.St. -RH¶V common stock price increased by 120%. St. Joe is uniquely positioned for decades of growth along Northwest )ORULGD¶V Emerald Coast.Residential, commercial, and hospitality segments are breaking records. Pricing is robust. Homes sell before completed. Apartments are fullyoccupied. Clubs by JOE is growing faster than expected. Hotels are in construction at Beaches International Airport, Pier Park, and Panama City%HDFK¶V Sports Complex and Marina. The Powder Room, Watercrest, and Watersound Insurance opened. Latitude Margaritaville Watersoundfollows. St. Joe is only scratching the surface.Imperial Metals common stock priced increased 150% as copper prices advanced with economic growth and gold prices rose with monetarystimulus. Red Chris continues to announce world-class drilling results. Huckleberry and Mt. Polley may restart with current pricing. Giant Copperannounce 20 grams of gold per ton over 3 meters. There are twenty other investments buried across British Columbia. Imperial has greatexpectations with higher metal prices.Fannie Mae and Freddie 0DF¶V businesses are booming while in conservatorships. The U.S. Treasury has finally agreed to allow them to retainearnings for capital safety and soundness. But, Treasury still refuses to acknowledge that ³ORDQV and IHHV were repaid. I expect The SupremeCourt will remedy the rights of two highly successful private enterprises and further their exit from federal control. Until then, preferred shareholdersremain in a volatile purgatory.There are opportunities to buy a basket of large-cap equities with businesses that sell essential services and pay meaningful dividends. Enbridgeand Kinder Morgan own irreplaceable energy toll roads. AT&T is vital for high-speed wireless. CVS Health is critical for the distribution of vaccines.Their current portfolio yield averages 6.5%.Respectfully submitted,Bruce R. BerkowitzChief Investment OfficerThis page is not part of the Fairholme Funds, Inc. 2020 Annual Reportii
FAIRHOLMEIgnore the crowd.FAIRHOLME FUNDS, INC.The Fairholme Fund (FAIRX)Seeking long-term growth of capitalThe Fairholme Focused Income Fund (FOCIX)Seeking current incomeThe Fairholme Allocation Fund (FAAFX)Seeking long-term total returnAnnual Report1RYHPEHU Managed by Fairholme Capital Management(866) 202-2263 fairholmefunds.com
FAIRHOLME FUNDS, INC.TABLE OF CONTENTSNovember 30, 2020PageMANAGEMENT DISCUSSION & ANALYSISFUND PERFORMANCE:THE FAIRHOLME FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3THE FAIRHOLME FOCUSED INCOME FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4THE FAIRHOLME ALLOCATION FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5MANAGEMENT DISCUSSION & ANALYSIS REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6EXPENSE EXAMPLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11THE FAIRHOLME FUND:SCHEDULE OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12STATEMENT OF ASSETS & LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . STATEMENT OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATEMENTS OF CHANGES IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 THE FAIRHOLME FOCUSED INCOME FUND:SCHEDULE OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .STATEMENT OF ASSETS & LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .STATEMENT OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .STATEMENTS OF CHANGES IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 2 2 2 2 THE FAIRHOLME ALLOCATION FUND:SCHEDULE OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 STATEMENT OF ASSETS & LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 STATEMENT OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 STATEMENTS OF CHANGES IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . 4 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Fairholme Funds, Inc.FUND PERFORMANCE (unaudited)November 30, 2010 — November 30, 2020THE FAIRHOLME FUND VS. THE S&P 500 INDEXINITIAL INVESTMENT OF 10,000!(" """ ,- ./01,234- .56789: ("" ;67- !’" """!&) )"&!&" """!%" """!#* #&’!#" """!!"# "% ! !!"# "% !!!!"# "% !%!!"# "% !#!!"# "% !&!!"# "% !’!!"# "% !(!!"# "% !)!!"# "% !*!!"# "% ! !!"# "% % !"The Fairholme Fund (“The Fairholme Fund”) commenced operations on December 29, 1999. The chart above presents theperformance of a 10,000 investment for up to ten years to the latest annual period ending November 30, 2020.The following notes pertain to the chart above as well as to the performance table included in the Management Discussion &Analysis Report. Performance information in
Federal Home Loan Mortgage Corp. 5.5% Federal National Mortgage Association 5.2% Imperial Metals Corp. 1.9% The chart on the left presents the performance of a 10,000 investment from inception of The Fairholme Fund (December 29, 1999) through December 31, 2020. The top holdings by issuer listed in the chart above are as of December 31, 2020.
