N-Q 1 d585240dnq.htm FAIRHOLME FUNDS, INC. Fairholme Funds, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number            811-09607                    

                                       Fairholme Funds, Inc.                                     

(Exact name of registrant as specified in charter)

4400 Biscayne Blvd., 9th Floor

                                          Miami, FL 33137                                           

(Address of principal executive offices) (Zip code)

Bruce R. Berkowitz

4400 Biscayne Blvd., 9th Floor

                                          Miami, FL 33137                                           

(Name and address of agent for service)

Registrant’s telephone number, including area code:    1-866-202-2263

Date of fiscal year end: November 30

Date of reporting period: February 28, 2018

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Schedule of Investments.

The Schedule of Investments is attached herewith.

THE FAIRHOLME FUND

 

 

 

SCHEDULE OF INVESTMENTS

February 28, 2018 (unaudited)

 

 

    Shares    

             Value        
 

DOMESTIC EQUITY SECURITIES — 32.7%

 

 

REAL ESTATE INVESTMENT TRUSTS — 5.2%

 

    2,185,580

  

Seritage Growth Properties (a)

   $ 82,614,924  
   

 

 

  
 

REAL ESTATE MANAGEMENT & DEVELOPMENT — 25.1%

 

22,730,687

  

The St. Joe Co. (a)(b)(c)

     400,060,091  
   

 

 

  
 

RETAIL DEPARTMENT STORES — 1.4%

 

9,138,591

  

Sears Holdings Corp. (a)(b)(c)(d)

     21,475,689  
   

 

 

  
 

UTILITIES — 1.0%

  

850,000

  

Vistra Energy Corp. (b)

     16,107,500  
   

 

 

  

TOTAL DOMESTIC EQUITY SECURITIES
(COST $1,185,529,867)

     520,258,204  
   

 

 

  
 

FOREIGN EQUITY SECURITIES — 0.8%

 

 

CANADA — 0.8%

  
 

METALS & MINING — 0.8%

 

7,027,352

  

Imperial Metals Corp. (a)(b)

     12,979,133  
   

 

 

  

TOTAL FOREIGN EQUITY SECURITIES
(COST $65,617,874)

     12,979,133  
   

 

 

  

    Shares    

             Value        
 

DOMESTIC PREFERRED EQUITY
SECURITIES — 21.3%

 

 

MORTGAGE FINANCE — 21.3%

 

 

Federal Home Loan Mortgage Corp.

  

    21,561,768

  

7.875%, Series Z (b)(e)

   $ 152,010,464  

1,277,600

  

6.550%, Series Y (b)

     7,154,560  

546,286

  

5.100%, Series H (b)

     5,572,117  
 

Federal National Mortgage Association

  

23,800,609

  

7.750%, Series S (b)(e)

     167,794,293  

942,060

  

7.625%, Series R (b)

     5,520,472  

310,179

  

6.750%, Series Q (b)

     1,814,547  
   

 

 

  
      339,866,453  
   

 

 

  
 

RETAIL DEPARTMENT STORES — 0.0%

 

15,134

  

Sears Roebuck Acceptance Corp. 7.400% (a)(c)(d)

     146,194  
   

 

 

  

TOTAL DOMESTIC PREFERRED EQUITY SECURITIES
(COST $219,277,199)

     340,012,647  
   

 

 

  
 

 

The accompanying notes are an integral part of the schedule of investments.

 

1

THE FAIRHOLME FUND

 

 

SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

Shares

       Value  
 

WARRANTS — 0.0%

  
 

RETAIL DEPARTMENT STORES — 0.0%

 

218,419  

Sears Holdings Corp.,

  
 

Vested, Strike Price $25.686, Expire 12/15/2019 (a)(b)(c)(d)(f)

  $ 65,526  
   

 

 

  

TOTAL WARRANTS
(COST $3,881,918)

     65,526  
   

 

 

  

Principal

          
 

DOMESTIC CORPORATE BONDS — 6.0%

 

 

CAPITAL GOODS — 2.3%

  
$    38,923,000  

International Wire Group, Inc.

  
 

10.750%, 08/01/2021 (g)

     36,221,744  
   

 

 

  
 

RETAIL DEPARTMENT STORES — 3.7%

 

140,893,000  

Sears Holdings Corp.

  
 

8.000%, 12/15/2019 (a)(c)(d)

     55,779,539  
6,765,000  

Sears Roebuck Acceptance Corp.

  
 

7.500%, 10/15/2027 (a)(c)(d)

     2,821,681  
   

 

 

  
      58,601,220  
   

 

 

  

TOTAL DOMESTIC CORPORATE BONDS
(COST $181,333,260)

     94,822,964  
   

 

 

  
 

FOREIGN CORPORATE BONDS — 8.4%

 

 

CANADA — 8.4%

  
 

METALS & MINING — 8.4%

  
 

Imperial Metals Corp.

  
143,223,000  

7.000%, 03/15/2019 (a)(g)

     133,369,258  
   

 

 

  

TOTAL FOREIGN CORPORATE BONDS
(COST $140,258,030)

     133,369,258  
   

 

 

  

Principal

       Value  
 

COMMERCIAL PAPER — 26.1%

 

 

AUTO MANUFACTURERS — 0.8%

 

$13,000,000  

Ford Motor Credit Co.

  
 

1.621%, 03/05/2018 (g)(h)

   $     12,997,107  
   

 

 

  
 

AUTOMOTIVE RETAIL — 3.5%

 

 

AutoNation, Inc.

  
23,500,000  

2.051%, 03/01/2018 (g)(h)

     23,498,681  
18,000,000  

2.051%, 03/05/2018 (g)(h)

     17,994,900  
15,000,000  

2.051%, 03/06/2018 (g)(h)

     14,994,887  
   

 

 

  
      56,488,468  
   

 

 

  
 

ENERGY SERVICES — 0.9%

 

14,000,000  

Duke Energy Corp.

  
 

1.741%, 03/01/2018 (g)(h)

     13,999,337  
   

 

 

  
 

FOOD PRODUCTS — 4.6%

 

23,000,000  

Conagra Brands, Inc.

  
 

1.841%, 03/09/2018 (g)(h)

     22,988,730  
32,000,000  

Kraft Heinz Co.

  
 

2.003%, 03/27/2018 (g)(h)

     31,947,536  
18,000,000  

Mondelez International, Inc.

  
 

1.702%, 03/08/2018 (g)(h)

     17,992,968  
   

 

 

  
      72,929,234  
   

 

 

  
 

HOME FURNISHINGS — 1.5%

 

 

Mohawk Industries, Inc.

  
14,000,000  

1.751%, 03/06/2018 (g)(h)

     13,995,933  
10,000,000  

1.822%, 03/20/2018 (g)(h)

     9,989,722  
   

 

 

  
      23,985,655  
   

 

 

  
 

MANAGED HEALTH CARE — 0.9%

 

14,795,000  

Humana, Inc.

  
 

1.922%, 03/16/2018 (g)(h)

     14,781,993  
   

 

 

  
 

MULTIMEDIA — 3.0%

 

 

Viacom, Inc.

  
21,000,000  

2.152%, 03/14/2018 (g)(h)

     20,985,284  
27,000,000  

2.203%, 03/21/2018 (g)(h)

     26,970,737  
   

 

 

  
      47,956,021  
   

 

 

  
 

OIL & GAS STORAGE &
TRANSPORTATION — 2.9%

 

 

Energy Transfer Partners

  
38,000,000  

2.203%, 03/06/2018 (g)(h)

     37,987,048  
7,400,000  

2.252%, 03/14/2018 (g)(h)

     7,394,000  
   

 

 

  
      45,381,048  
   

 

 

  
 

 

The accompanying notes are an integral part of the schedule of investments.

 

2

THE FAIRHOLME FUND

 

 

SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

Principal

       Value  
 

COMMERCIAL PAPER (CONTINUED) — 26.1%

 

 

OIL & NATURAL GAS EXPLORATION — 4.4%

 

 

Canadian Natural Resources Ltd.

  
$15,500,000  

1.952%, 03/02/2018 (g)(h)

   $     15,498,360  
20,000,000  

2.082%, 03/08/2018 (g)(h)

     19,991,400  
12,000,000  

2.123%, 03/13/2018 (g)(h)

     11,991,507  
23,000,000  

2.082%, 03/15/2018 (g)(h)

     22,981,121  
   

 

 

  
      70,462,388  
   

 

 

  
 

RAILROADS — 1.8%

 

 

Kansas City Southern

  
7,000,000  

2.002%, 03/07/2018 (g)(h)

     6,997,210  
21,000,000  

2.002%, 03/09/2018 (g)(h)

     20,989,185  
   

 

 

  
      27,986,395  
   

 

 

  
 

TECHNOLOGY HARDWARE &
EQUIPMENT — 1.8%

 

 

Arrow Electronics Co.

  
10,000,000  

2.000%, 03/05/2018 (g)(h)

     9,997,167  
19,000,000  

2.153%, 03/22/2018 (g)(h)

     18,975,083  
   

 

 

  
      28,972,250  
   

 

 

  

TOTAL COMMERCIAL PAPER
(COST $415,957,211)

     415,939,896  
   

 

 

  

Principal

       Value  
 

U.S. GOVERNMENT OBLIGATIONS — 3.1%

 

 

U.S. Treasury Bills

  
$50,000,000  

1.245%, 04/26/2018 (h)

   $ 49,881,195  
   

 

 

  

TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $49,903,322)

     49,881,195  
   

 

 

  

Shares

          
 

MONEY MARKET FUNDS — 1.6%

  
25,278,640  

Fidelity Investments Money Market Treasury Portfolio - Class I, 1.28% (i)

     25,278,640  
   

 

 

  

TOTAL MONEY MARKET FUNDS
(COST $25,278,640)

     25,278,640  
   

 

 

  
 

MISCELLANEOUS
INVESTMENTS — 1.9%(j)

  

(COST $30,045,668)

     30,936,465  
   

 

 

  

TOTAL INVESTMENTS — 101.9%

 

(COST $2,317,082,989)

     1,623,543,928  
 

LIABILITIES IN EXCESS OF OTHER ASSETS — (1.9)%

     (30,149,328 ) 
   
   

 

 

  

NET ASSETS — 100.0%

   $ 1,593,394,600  
   

 

 

  
 

 

(a)  Affiliated Company. See Note 2.
(b)  Non-income producing security.
(c)  Restricted and controlled security under procedures approved by the Directors. The value of these securities totals $480,348,720, which represents 30.15% of The Fairholme Fund’s net assets. Information related to these securities is as follows:

 

Shares/
Principal
Amount		     

Issuer

    Acquisition
Date(s)		      Acquisition
Cost		      02/28/2018
Carrying Value
Per Unit
$ 140,893,000     

Sears Holdings Corp., 8.000%

      09/09/2015-10/30/2015      $ 142,252,083      $39.59
  9,138,591     

Sears Holdings Corp. Common Stock

      01/15/2008-12/11/2015      $ 478,288,940      $  2.35
  218,419     

Sears Holdings Corp., Strike Price $25.686

      09/10/2015-10/20/2015      $ 3,881,918      $  0.30
$ 6,765,000     

Sears Roebuck Acceptance Corp., 7.500%

      09/08/2015-09/23/2015      $ 5,048,220      $41.71
  15,134     

Sears Roebuck Acceptance Corp., 7.400% Preferred Stock

      09/08/2015-09/24/2015      $ 248,912      $  9.66
  22,730,687     

The St. Joe Co.

      12/12/2007-10/13/2010      $ 601,313,309      $17.60

 

The accompanying notes are an integral part of the schedule of investments.

 

3

THE FAIRHOLME FUND

 

 

SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

(d)  Security is deemed an illiquid security pursuant to the Funds’ liquidity guidelines.
(e)  Variable rate security. Rates shown are the effective rates as of February 28, 2018.
(f)  Warrants have terms and conditions based on dividends paid and other events that may lower the strike price and raise the shares per warrant conversion ratio. Reported strike prices and conversion ratios are as of the date of this report. All share-to-warrant conversion ratios are currently 1:1.11.
(g)  Restricted security as defined in Rule 144(a) under the Securities Act of 1933. The Manager has determined that such security is liquid pursuant to the Funds’ liquidity guidelines. The value of these securities totals $585,530,898, which represents 36.75% of The Fairholme Fund’s net assets.
(h)  Rates shown are the effective yields based on the purchase price. The calculation assumes the security is held to maturity.
(i)  Annualized based on the 1-day yield as of February 28, 2018.
(j)  Represents previously undisclosed unrestricted securities, which the Fund has held for less than one year.

 

The accompanying notes are an integral part of the schedule of investments.

 

4

THE FAIRHOLME FOCUSED INCOME FUND

 

 

SCHEDULE OF INVESTMENTS

February 28, 2018 (unaudited)

 

 

Shares

       Value  
 

DOMESTIC EQUITY SECURITIES — 8.3%

  
 

DIVERSIFIED TELECOMMUNICATIONS — 1.1%

 

80,000  

AT&T, Inc.

   $ 2,904,000  
   

 

 

  
 

REAL ESTATE INVESTMENT TRUSTS — 7.2%

 

280,000  

Clipper Realty, Inc.

     2,492,000  
413,000  

Seritage Growth Properties

     15,611,400  
   

 

 

  
   

 

 

 

18,103,400

 

 

   

 

 

  

TOTAL DOMESTIC EQUITY SECURITIES
(COST $21,454,248)

     21,007,400  
   

 

 

  
 

DOMESTIC PREFERRED EQUITY SECURITIES — 12.1%

 

 

CONSUMER FINANCE — 2.7%

  
268,500  

GMAC Capital Trust I, Inc.

  
 

7.624%, Series 2 (a)

     6,927,300  
   

 

 

  
 

MORTGAGE FINANCE — 6.7%

  
 

Federal Home Loan Mortgage Corp.

  
779,724  

6.550%, Series Y (b)

     4,366,454  
396,000  

5.100%, Series H (b)

     4,039,200  
98,355  

6.000%, Series P (b)

     1,063,218  
 

Federal National Mortgage Association

  
418,508  

7.000%, Series O (a)(b)

     4,582,663  
500,000  

6.750%, Series Q (b)

     2,925,000  
   

 

 

  
   

 

 

 

16,976,535

 

 

   

 

 

  
 

OIL & NATURAL GAS EXPLORATION — 1.4%

 

 

Chesapeake Energy Corp.

  
42,416  

5.000%

     2,137,766  
2,000  

5.750%

     1,113,540  
600  

5.750% (c)

     334,062  
100  

5.750% (c)

     56,532  
   

 

 

  
   

 

 

 

3,641,900

 

 

   

 

 

  

Shares

       Value  
 

RETAIL DEPARTMENT STORES — 1.3%

 

 

Sears Roebuck Acceptance Corp.

  
178,106  

7.000% (d)(e)

   $ 1,720,504  
149,931  

7.400% (d)(e)

     1,448,333  
   

 

 

  
   

 

 

 

3,168,837

 

 

   

 

 

  

TOTAL DOMESTIC PREFERRED EQUITY SECURITIES
(COST $29,019,132)

     30,714,572  
   

 

 

  

Principal

          
 

DOMESTIC CORPORATE BONDS — 19.7%

 

 

CAPITAL GOODS — 7.2%

  
$    6,450,000  

HC2 Holdings, Inc.

  
 

11.000%, 12/01/2019 (c)

   $ 6,627,375  
12,500,000  

International Wire Group, Inc.

  
 

10.750%, 08/01/2021 (c)

     11,632,500  
   

 

 

  
   

 

 

 

18,259,875

 

 

   

 

 

  
 

CAPITAL MARKETS — 2.2%

  
5,300,000  

The Goldman Sachs Group, Inc.

  
 

5.700%, Series L (f)(g)

     5,451,580  
   

 

 

  
 

DIVERSIFIED BANKS — 4.4%

  
3,247,000  

Bank of America Corp. (3 mo. LIBOR + 3.630%)

  
 

5.397% (f)(h)

     3,251,871  
5,290,000  

Citigroup, Inc.

  
 

5.800%, Series N (f)(g)

     5,489,433  
2,450,000  

Wells Fargo & Co.

  
 

7.980%, Series K (f)(g)

     2,492,875  
   

 

 

  
   

 

 

 

11,234,179

 

 

   

 

 

  
 

RETAIL DEPARTMENT STORES — 4.7%

 

29,520,500  

Sears Holdings Corp.

  
 

8.000%, 12/15/2019 (d)(e)

     11,687,166  
 

Sears Roebuck Acceptance Corp.

  
95,000  

7.500%, 10/15/2027 (d)(e)

     39,625  
11,000  

6.750%, 01/15/2028 (d)(e)

     4,654  
40,000  

6.500%, 12/01/2028 (d)(e)

     16,952  
50,000  

7.000%, 06/01/2032 (d)(e)

     20,985  
   

 

 

  
   

 

 

 

11,769,382

 

 

   

 

 

  
 

 

The accompanying notes are an integral part of the schedule of investments.

 

5

THE FAIRHOLME FOCUSED INCOME FUND

 

 

SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

Principal

       Value  
 

DOMESTIC CORPORATE BONDS (CONTINUED) — 19.7%

 

 

TELECOMMUNICATION SERVICES — 1.2%

 

$3,000,000  

CenturyLink, Inc.

  
.  

6.750%, 12/01/2023

   $     2,970,000  
   

 

 

  

TOTAL DOMESTIC CORPORATE BONDS
(COST $66,439,578)

     49,685,016  
   

 

 

  
 

FOREIGN CORPORATE BONDS — 9.1%

 

 

CANADA — 9.1%

 

 

METALS & MINING — 9.1%

 

 

Imperial Metals Corp.

 

24,725,000  

7.000%, 03/15/2019 (c)

     23,023,920  
   

 

 

  

TOTAL FOREIGN CORPORATE BONDS
(COST $24,076,121)

     23,023,920  
   

 

 

  
 

MUNICIPAL BONDS — 2.3%

 

 

WISCONSIN — 2.3%

 

 

Public Finance Authority, Industrial Improvements, Refunding Revenue, Taxable Pass Through, Natgasoline LLC

  
5,788,125  

10.000%, 06/30/2021 (c)

     5,803,753  
   

 

 

  

TOTAL MUNICIPAL BONDS
(COST $5,768,657)

     5,803,753  
   

 

 

  
 

FLOATING RATE LOAN INTERESTS — 3.2%

 

 

OIL & NATURAL GAS EXPLORATION — 3.2%

 

 

Chesapeake Energy Corp., Term Loan 1L (3 mo. LIBOR + 7.500%)

  
7,500,000  

8.954%, 08/23/2021 (c)(h)

     7,962,000  
   

 

 

  

TOTAL FLOATING RATE LOAN INTERESTS
(COST $8,075,000)

     7,962,000  
   

 

 

  
 

COMMERCIAL PAPER — 38.5%

 

 

AUTOMOTIVE RETAIL — 4.3%

 

 

AutoNation, Inc.

 

11,000,000  

2.051%, 03/07/2018 (c)(i)

     10,995,615  
   

 

 

  

Principal

       Value  
 

COMMERCIAL PAPER — 38.5%

 

 

DIVERSIFIED TECHNOLOGY — 2.8%

 

 

Suncor Energy, Inc.

  
$7,000,000  

1.842%, 03/09/2018 (c)(i)

   $     6,996,911  
   

 

 

  
 

ENERGY SERVICES — 2.0%

  
 

Duke Energy Corp.

  
5,000,000  

1.741%, 03/01/2018 (c)(i)

     4,999,763  
   

 

 

  
 

FOOD PRODUCTS — 5.5%

  
 

Conagra Brands, Inc.

  
7,000,000  

1.841%, 03/09/2018 (c)(i)

     6,996,570  
 

Mondelez International, Inc.

  
7,000,000  

1.821%, 03/05/2018 (c)(i)

     6,998,313  
   

 

 

  
   

 

 

 

13,994,883

 

 

   

 

 

  
 

HOME FURNISHINGS — 2.7%

 

 

Mohawk Industries, Inc.

  
7,000,000  

1.822%, 03/20/2018 (c)(i)

     6,992,805  
   

 

 

  
 

LODGING — 2.2%

  
 

Wyndham Worldwide Co.

  
5,500,000  

2.151%, 03/06/2018 (c)(i)

     5,498,125  
   

 

 

  
 

MULTIMEDIA — 2.8%

  
 

Viacom, Inc.

  
7,000,000  

2.152%, 03/13/2018 (c)(i)

     6,995,463  
   

 

 

  
 

OIL & GAS STORAGE & TRANSPORTATION — 4.3%

  
 

Energy Transfer Partners

  
11,000,000  

2.203%, 03/06/2018 (c)(i)

     10,996,251  
   

 

 

  
 

OIL & NATURAL GAS EXPLORATION — 6.3%

 

 

Canadian Natural Resources Ltd.

  
4,000,000  

2.081%, 03/05/2018 (c)(i)

     3,998,933  
7,000,000  

2.082%, 03/15/2018 (c)(i)

     6,994,254  
 

Telus Corp.

  
5,000,000  

1.801%, 03/13/2018 (c)(i)

     4,996,759  
   

 

 

  
   

 

 

 

15,989,946

 

 

   

 

 

  
 

RAILROADS — 2.8%

  
 

Kansas City Southern

  
7,000,000  

2.002%, 03/07/2018 (c)(i)

     6,997,210  
   

 

 

  
 

 

The accompanying notes are an integral part of the schedule of investments.

 

6

THE FAIRHOLME FOCUSED INCOME FUND

 

 

SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

Principal

       Value  
 

COMMERCIAL PAPER (CONTINUED) — 38.5%

 

 

TECHNOLOGY HARDWARE &
EQUIPMENT — 2.8%

 

 

Arrow Electronics, Inc.

  
$4,000,000  

2.000%, 03/05/2018 (c)(i)

   $     3,998,867  
3,000,000  

2.203%, 03/09/2018 (c)(i)

     2,998,455  
   

 

 

  
   

 

 

 

6,997,322

 

 

   

 

 

  

TOTAL COMMERCIAL PAPER
(COST $97,458,039)

     97,454,294  
   

 

 

  
 

U.S. GOVERNMENT
OBLIGATIONS — 2.0%

  
 

U.S. Treasury Bills

  
3,000,000  

1.245%, 04/26/2018 (i)

     2,992,872  
2,000,000  

1.365%, 10/11/2018 (i)

     1,977,351  
   

 

 

  

TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $4,977,212)

     4,970,223  
   

 

 

  

 

Shares

       Value  
 

MONEY MARKET FUNDS — 5.3%

  
13,518,251  

Fidelity Investments Money Market Treasury Portfolio - Class I, 1.28% (j)

   $     13,518,251  
   

 

 

  

TOTAL MONEY MARKET FUNDS
(COST $13,518,251)

     13,518,251  
   

 

 

  
 

MISCELLANEOUS
INVESTMENTS — 1.2%(k)

  

(COST $2,905,963)

     2,972,400  
   

 

 

  

TOTAL INVESTMENTS — 101.7%
(COST $273,692,201)

     257,111,829  
 

LIABILITIES IN EXCESS OF OTHER ASSETS — (1.7)%

     (4,243,972 ) 
   

 

 

  

NET ASSETS — 100.0%

   $ 252,867,857  
   

 

 

  
 

 

(a)  Variable rate security. Rates shown are the effective rates as of February 28, 2018.
(b)  Non-income producing security.
(c)  Restricted security as defined in Rule 144(a) under the Securities Act of 1933. The Manager has determined that such security is liquid pursuant to the Funds’ liquidity guidelines. The value of these securities totals $152,894,436, which represents 60.46% of The Income Fund’s net assets.
(d)  Restricted or controlled security under procedures approved by the Directors. The value of these securities totals $14,938,219, which represents 5.91% of The Income Fund’s net assets. Information related to these securities is as follows:

 

Shares/
Principal
Amount		     

Issuer

     

Acquisition

Date

      Acquisition
Cost		      02/28/2018
Carrying Value
Per Unit
  $ 29,520,500     

Sears Holdings Corp., 8.000%

     

08/17/2015-05/25/2017

        $ 27,103,944        $ 39.59
    178,106     

Sears Roebuck Acceptance Corp., 7.000% Preferred Stock

     

08/18/2015-08/28/2015

        $ 2,550,795        $ 9.66
    149,931     

Sears Roebuck Acceptance Corp., 7.400% Preferred Stock

     

08/18/2015-08/26/2015

        $ 2,150,510        $ 9.66
  $ 95,000     

Sears Roebuck Acceptance Corp., 7.500%

     

08/27/2015

        $ 55,613        $ 41.71
  $ 11,000     

Sears Roebuck Acceptance Corp., 6.750%

     

08/27/2015

        $ 6,435        $ 42.31
  $ 40,000     

Sears Roebuck Acceptance Corp., 6.500%

     

08/27/2015

        $ 23,140        $ 42.38
  $ 50,000     

Sears Roebuck Acceptance Corp., 7.000%

     

08/27/2015

        $ 28,775        $ 41.97

 

(e)  Security is deemed an illiquid security pursuant to the Funds’ liquidity guidelines.
(f)  Security is perpetual in nature and has no stated maturity date.
(g)  Security is a fix-to-float security, which carries a fixed coupon until a certain date, upon which it switches to a floating rate. Rate shown is the fixed rate.
(h)  Floating rate security. Rate shown is the effective rate as of February 28, 2018.
(i)  Rates shown are the effective yields based on the purchase price. The calculation assumes the security is held to maturity.
(j)  Annualized based on the 1-day yield as of February 28, 2018.
(k)  Represents previously undisclosed unrestricted securities, which the Fund has held for less than one year.

 

The accompanying notes are an integral part of the schedule of investments.

 

7

THE FAIRHOLME ALLOCATION FUND

 

 

SCHEDULE OF INVESTMENTS

February 28, 2018 (unaudited)

 

 

Shares

       Value  
 

DOMESTIC EQUITY SECURITIES — 17.2%

 

 

REAL ESTATE INVESTMENT TRUSTS — 6.2%

 

175,918  

Seritage Growth Properties

   $ 6,649,700  
   

 

 

  
 

REAL ESTATE MANAGEMENT & DEVELOPMENT — 6.8%

  
426,748  

The St. Joe Co. (a)(b)(c)

     7,322,996  
   

 

 

  
 

RETAIL DEPARTMENT
STORES — 3.1%

  
1,425,398  

Sears Holdings Corp. (a)(b)(c)

     3,349,685  
   

 

 

  
 

UTILITIES — 1.1%

  
60,000  

Vistra Energy Corp. (c)

     1,137,000  
   

 

 

  

TOTAL DOMESTIC EQUITY SECURITIES
(COST $69,767,599)

  
      18,459,381  
   

 

 

  
 

FOREIGN EQUITY
SECURITIES — 4.6%

  
 

CANADA — 4.6%

  
 

METALS & MINING — 4.6%

  
2,686,983  

Imperial Metals Corp. (c)

     4,962,711  
   

 

 

  

TOTAL FOREIGN EQUITY SECURITIES
(COST $27,105,770)

  
      4,962,711  
   

 

 

  
 

DOMESTIC PREFERRED EQUITY SECURITIES — 21.9%

  
 

MORTGAGE FINANCE — 19.2%

  
 

Federal Home Loan Mortgage Corp.

  
2,063,569  

7.875%, Series Z (c)(d)

     14,548,161  
 

Federal National Mortgage Association

  
859,918  

7.750%, Series S (c)(d)

     6,062,422  
   

 

 

  
   

 

 

 

20,610,583

 

 

   

 

 

  
 

OIL & NATURAL GAS
EXPLORATION — 2.7%

  
 

Chesapeake Energy Corp.

  
5,121  

5.750%

     2,851,219  
   

 

 

  

TOTAL DOMESTIC PREFERRED EQUITY SECURITIES
(COST $15,995,319)

         23,461,802  
   

 

 

  

Shares

       Value  
 

WARRANTS — 0.1%

 

 

RETAIL DEPARTMENT STORES — 0.1%

 

404,784  

Sears Holdings Corp.,

  
 

Vested, Strike Price $25.686, Expire 12/15/2019 (a)(b)(c)(f)

   $         121,435  
   

 

 

  

TOTAL WARRANTS
(COST $2,980,056)

     121,435  
   

 

 

  

Principal

          
 

DOMESTIC CORPORATE
BONDS — 4.4%

  
 

CAPITAL GOODS — 4.4%

  
$5,121,000  

International Wire Group, Inc.

  
 

10.750%, 08/01/2021 (e)

     4,765,603  
   

 

 

  

TOTAL DOMESTIC CORPORATE BONDS
(COST $4,747,200)

     4,765,603  
   

 

 

  
 

COMMERCIAL PAPER — 36.4%

  
 

AUTOMOTIVE RETAIL — 3.8%

  
4,000,000  

AutoNation, Inc.

  
 

2.051%, 03/07/2018 (e)(g)

     3,998,406  
   

 

 

  
 

ENERGY SERVICES — 2.8%

  
3,000,000  

Duke Energy Corp.

  
 

1.741%, 03/01/2018 (e)(g)

     2,999,858  
   

 

 

  
 

FOOD PRODUCTS — 5.6%

  
3,000,000  

Conagra Brands, Inc.

  
 

1.781%, 03/07/2018 (e)(g)

     2,998,862  
3,000,000  

Mondelez International, Inc.

  
 

1.821%, 03/05/2018 (e)(g)

     2,999,277  
   

 

 

  
   

 

 

 

5,998,139

 

 

   

 

 

  
 

HOME FURNISHINGS — 2.8%

  
3,000,000  

Mohawk Industries, Inc.

  
 

1.791%, 03/09/2018 (e)(g)

     2,998,676  
   

 

 

  
 

LODGING — 2.8%

  
3,000,000  

Wyndham Worldwide Co.

  
 

2.151%, 03/06/2018 (e)(g)

     2,998,978  
   

 

 

  
 

MULTIMEDIA — 2.8%

  
3,000,000  

Viacom, Inc.

  
 

2.152%, 03/13/2018 (e)(g)

     2,998,055  
   

 

 

  
 

 

The accompanying notes are an integral part of the schedule of investments.

 

8

THE FAIRHOLME ALLOCATION FUND

 

 

SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

Principal

       Value  
 

COMMERCIAL PAPER (CONTINUED) — 36.4%

 

 

OIL & GAS STORAGE &
TRANSPORTATION — 3.7%

 

$4,000,000  

Energy Transfer Partners 2.252%, 03/14/2018 (e)(g)

   $     3,996,757  
   

 

 

  
 

OIL & NATURAL GAS
EXPLORATION — 6.5%

  
4,000,000  

Canadian Natural Resources Ltd. 2.082%, 03/08/2018 (e)(g)

     3,998,280  
3,000,000  

Telus Corp.

  
 

1.801%, 03/13/2018 (e)(g)

     2,998,055  
   

 

 

  
   

 

 

 

6,996,335

 

 

   

 

 

  
 

RAILROADS — 2.8%

  
3,000,000  

Kansas City Southern

  
 

1.951%, 03/02/2018 (e)(g)

     2,999,663  
   

 

 

  
 

TECHNOLOGY HARDWARE & EQUIPMENT — 2.8%

  
3,000,000  

Arrow Electronics Co.

  
 

2.000%, 03/05/2018 (e)(g)

     2,999,150  
   

 

 

  

TOTAL COMMERCIAL PAPER
(COST $38,985,367)

     38,984,017  
   

 

 

  

Principal

       Value  
 

U.S. GOVERNMENT OBLIGATIONS — 4.7%

 

$5,000,000  

U.S. Treasury Bills 1.404%, 05/17/2018 (g)

   $ 4,983,143  
   

 

 

  

TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $4,985,295)

     4,983,143  
   

 

 

  

Shares

          
 

MONEY MARKET FUNDS — 6.4%

  
6,844,358  

Fidelity Investments Money Market Treasury Portfolio - Class I,
1.28% (h)

     6,844,358  
   

 

 

  

TOTAL MONEY MARKET FUNDS
(COST $6,844,358)

     6,844,358  
   

 

 

  
 

MISCELLANEOUS
INVESTMENTS — 3.5%(i)

  

(COST $3,216,940)

   $ 3,704,450  
   

 

 

  

TOTAL INVESTMENTS — 99.2%
(COST $174,627,904)

     106,286,900  
 

OTHER ASSETS IN EXCESS OF LIABILITIES — 0.8%

     872,433  
   

 

 

  

NET ASSETS — 100.0%

   $     107,159,333  
   

 

 

  
 

 

(a)  Restricted and controlled security under procedures approved by the Directors. The value of these securities totals $10,794,116, which represents 10.07% of The Allocation Fund’s net assets. Information related to these securities is as follows:

 

Shares

     

Issuer

     

Acquisition

Date(s)

      Acquisition
Cost		      02/28/2018
Carrying Value
Per Unit
1,425,398     

Sears Holdings Corp.

     

12/16/2011-12/10/2014

        $ 53,325,603        $ 2.35
404,784     

Sears Holdings Corp., Warrants, Vested, Strike Price $25.686, Expire 12/15/2019

     

11/17/2014-11/24/2014

        $ 2,980,056        $ 0.30
426,748     

The St. Joe Co.

     

08/08/2017-09/05/2017

        $ 8,066,747        $ 17.16

 

(b)  Security is deemed an illiquid security pursuant to the Funds’ liquidity guidelines.
(c)  Non-income producing security.
(d)  Variable rate security. Rates shown are the effective rates as of February 28, 2018.
(e)  Restricted security as defined in Rule 144(a) under the Securities Act of 1933. The Manager has determined that such security is liquid pursuant to the Funds’ liquidity guidelines. The value of these securities totals $43,749,620 which represents 40.83% of The Allocation Fund’s net assets.
(f)  Warrants have terms and conditions based on dividends paid and other events that may lower the strike price and raise the shares per warrant conversion ratio. Reported strike prices and conversion ratios are as of the date of this report. All share-to-warrant conversion ratios are currently 1:1.11.
(g)  Rates shown are the effective yields based on the purchase price. The calculation assumes the security is held to maturity.
(h)  Annualized based on the 1-day yield as of February 28, 2018.
(i)  Represents previously undisclosed unrestricted securities, which the Fund has held for less than one year.

 

The accompanying notes are an integral part of the schedule of investments.

 

9

FAIRHOLME FUNDS, INC.

 

 

 

NOTES TO SCHEDULE OF INVESTMENTS

February 28, 2018 (unaudited)

 

Note 1. Significant Accounting Policies

As investment companies, the Funds follow the investment company accounting and reporting guidance, which is part of U.S. generally accepted accounting principles (“U.S. GAAP”). The Funds’ investments are reported at fair value as defined by U.S. GAAP. The Funds calculate their net asset values as soon as practicable following the close of regular trading on the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on each day the New York Stock Exchange is open.

A description of the valuation techniques applied to the Funds’ securities measured at fair value on a recurring basis follows:

Security Valuation:

Equity securities (common and preferred stocks): Securities traded on a national securities exchange or reported on the NASDAQ national market are generally valued at the official closing price, or at the last reported sale price on the exchange or market on which the securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. If these securities are not actively traded, they are classified in Level 2. Fairholme Capital Management, L.L.C. (the “Manager”) may also employ other valuation methods which the Manager believes would provide a more accurate indication of fair value. In these situations, if the inputs are observable, the valuation will be classified in Level 2 of the fair value hierarchy, otherwise they would be classified in Level 3.

Fixed-income securities (U.S. government obligations, corporate bonds, convertible bonds, and asset backed securities): The fair value of fixed-income securities is estimated using market quotations when readily available, but may also be estimated by various methods when no such market quotations exist and when the Manager believes these other methods reflect the fair value of such securities. These methods may consider recently executed transactions in securities of the issuer or comparable issuers and market price valuations from independent pricing services and/or brokers (where observable). Where the Manager deems it appropriate to do so (such as when independent prices are unavailable or not deemed to be representative of fair value) long-term fixed income securities will be fair valued in good faith following consideration by, and conclusion of, the Manager’s Valuation Committee. As of February 28, 2018, fixed-income securities are valued by the Manager utilizing observable market prices on the day of valuation or the average bid of independent broker/dealer quotes and/or the average of valuations from independent pricing services. Although fixed-income securities are classified in Level 2 of the fair value hierarchy at February 28, 2018, in instances where lower relative weight is placed on transaction prices, quotations, or similar observable inputs, they would be classified in Level 3.

Open-end mutual funds: Investments in open-end mutual funds including money market funds are valued at their closing net asset value each business day and are classified in Level 1 of the fair value hierarchy.

Short-term securities: Investments in securities with maturities of less than sixty days when acquired, or which subsequently are within sixty days of maturity, shall be valued at prices supplied by an independent pricing source or by one of the Funds’ pricing agents based on broker or dealer supplied valuations or matrix pricing. To the extent the inputs are observable and timely, the values would be classified in Level 2 of the fair value hierarchy.

Restricted securities: Depending on the relative significance of valuation inputs, these instruments may be classified in any level of the fair value hierarchy. As of December 3, 2015, the Manager was deemed to be an affiliate of Sears Holdings Corporation (“Sears”) for purposes of the Securities Act of 1933 and Rule 144. This determination was made based on a number of factors, including the collective ownership of Sears by the Funds and other investment entities managed by the Manager. The Sears securities are considered control securities under Rule 144 and are treated as restricted securities for purposes of the Company’s valuation and liquidity procedures. Due to the restrictions on resale, the securities are generally valued at a discount to similar publicly traded securities. Depending on the relative significance of valuation inputs, these instruments may be classified in either Level 2 or Level 3 of the fair value hierarchy.

Warrants: The Funds may invest in warrants, which may be acquired either through a direct purchase, included as part of a private placement, or pursuant to corporate actions. Warrants entitle, but do not obligate, the holder to buy equity securities

 

10

FAIRHOLME FUNDS, INC.

 

 

NOTES TO SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

at a specific price for a specific period of time. Warrants may be considered more speculative than certain other types of investments in that they do not entitle a holder to dividends or voting rights with respect to the underlying securities that may be purchased nor do they represent any rights in the assets of the issuing company. Also, the value of a warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to its expiration date. Warrants traded on a security exchange are valued at the official closing price on the valuation date and are classified as Level 1 of the fair value hierarchy. Over the counter (OTC) warrants are valued using simulation models utilizing market value of the underlying security, expiration date of the warrants, volatility of the underlying security, strike price of the warrants, risk-free interest rate at the valuation date, and are classified as Level 2 or Level 3 of the fair value hierarchy depending on the observability of the inputs used.

The Funds use several recognized industry third-party pricing services (TPPS) - approved by the Board and unaffiliated with the Manager - to value some of its securities. It also uses other independent market trade data sources (such as TRACE, the FINRA developed mandatory reporting of over-the-counter secondary market transactions), as well as broker quotes provided by market makers. The data within these feeds is ultimately sourced from major stock exchanges and trading systems where these securities trade. If a price obtained from the pricing source is deemed unreliable, it may be discarded and/or challenged. In these cases the pricing decision is made by reference to the reliable market data from the other market data sources.

Subject to the oversight of the Board, the Manager may determine the fair valuation of a security when market quotations are insufficient or not readily available, when securities are determined to be illiquid or restricted, or when in the judgment of the Manager the prices or values available do not represent the fair value of the instrument. Factors which may cause the Manager to make such a judgment include the following: (a) only a bid price or an asked price is available; (b) the spread between bid and asked prices is substantial; (c) the liquidity of the securities; (d) the frequency of sales; (e) the thinness of the market; (f) the size of reported trades; (g) actions of the securities markets, such as the suspension or limitation of trading; and (h) local market closures. Among the factors to be considered to fair value a security are recent prices of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply.

The Manager reports quarterly to the Board the results of the application of fair valuation policies and procedures.

The inputs and valuation techniques used to measure fair value of the Funds’ investments are summarized into three levels as described in the hierarchy below:

 

  •   Level 1 — quoted prices in active markets for identical securities;

 

  •   Level 2 — other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets for identical securities, interest rates, prepayment speeds, credit risk, etc.); and

 

  •   Level 3 — significant unobservable inputs (including the Manager’s determination as to the fair value of investments).

 

11

FAIRHOLME FUNDS, INC.

 

 

NOTES TO SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

The inputs or methodology used for valuing investments are not necessarily an indication of the level of risk associated with investing in those investments. The summary of the Funds’ investments by inputs used to value the Funds’ investments as of February 28, 2018, is as follows:

     Valuation Inputs             
     Level 1 –
Quoted Prices		                         Level 2 – Other
Significant
Observable Inputs		                         Total
    Fair Value    
at 2/28/18		  

THE FAIRHOLME FUND

             

ASSETS:

             

INVESTMENTS (Fair Value):

             

Domestic Equity Securities

             

Retail Department Stores

    $ —        $ 21,475,689        $ 21,475,689  

Other Industries*

      498,782,515          —          498,782,515  

Foreign Equity Securities*

      12,979,133          —          12,979,133  

Domestic Preferred Equity Securities

             

Mortgage Finance

      339,866,453          —          339,866,453  

Retail Department Stores

      —          146,194          146,194  

Warrants*

      —          65,526          65,526  

Domestic Corporate Bonds*

      —          94,822,964          94,822,964  

Foreign Corporate Bonds*

      —          133,369,258          133,369,258  

Commercial Paper*

      —          415,939,896          415,939,896  

U.S. Government Obligations

      —          49,881,195          49,881,195  

Money Market Funds

      25,278,640          —          25,278,640  

Miscellaneous Investments

      30,936,465          —          30,936,465  
  

 

 

       

 

 

       

 

 

  

TOTAL INVESTMENTS

    $ 907,843,206        $ 715,700,722        $ 1,623,543,928  
  

 

 

       

 

 

       

 

 

  

THE INCOME FUND

             

ASSETS:

             

INVESTMENTS (Fair Value):

             

Domestic Equity Securities*

    $ 21,007,400        $ —        $ 21,007,400  

Domestic Preferred Equity Securities

             

Oil & Natural Gas Exploration

      2,137,766          1,504,134          3,641,900  

Retail Department Stores

      —          3,168,837          3,168,837  

Other Industries*

      23,903,835          —          23,903,835  

Domestic Corporate Bonds*

      —          49,685,016          49,685,016  

Foreign Corporate Bonds*

      —          23,023,920          23,023,920  

Municipal Bonds*

      —          5,803,753          5,803,753  

Floating Rate Loan Interests*

      —          7,962,000          7,962,000  

Commercial Paper*

      —          97,454,294          97,454,294  

U.S. Government Obligations

      —          4,970,223          4,970,223  

Money Market Funds

      13,518,251          —          13,518,251  

Miscellaneous Investments

      —          2,972,400          2,972,400  
  

 

 

       

 

 

       

 

 

  

TOTAL INVESTMENTS

    $ 60,567,252        $ 196,544,577        $ 257,111,829  
  

 

 

       

 

 

       

 

 

  

 

12

FAIRHOLME FUNDS, INC.

 

 

NOTES TO SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

     Valuation Inputs             
     Level 1 –
Quoted Prices		          Level 2 – Other
Significant
Observable Inputs		          Total
    Fair Value    
at 2/28/18		  

THE ALLOCATION FUND

             

ASSETS:

             

INVESTMENTS (Fair Value):

             

Domestic Equity Securities

             

Retail Department Stores

    $ —        $ 3,349,685        $ 3,349,685  

Real Estate Management & Development

      —          7,322,996          7,322,996  

Other Industries*

      7,786,700          —          7,786,700  

Foreign Equity Securities*

      4,962,711          —          4,962,711  

Domestic Preferred Equity Securities

             

Oil & Natural Gas Exploration

      —          2,851,219          2,851,219  

Mortgage Finance

      20,610,583          —          20,610,583  

Warrants*

      —          121,435          121,435  

Domestic Corporate Bonds*

      —          4,765,603          4,765,603  

Commercial Paper*

      —          38,984,017          38,984,017  

U.S. Government Obligations

      —          4,983,143          4,983,143  

Money Market Funds

      6,844,358          —          6,844,358  

Miscellaneous Investments

      3,704,450          —          3,704,450  
  

 

 

       

 

 

       

 

 

  

TOTAL INVESTMENTS

    $ 43,908,802        $ 62,378,098        $ 106,286,900  
  

 

 

       

 

 

       

 

 

  

 

*  Industry classifications for these categories are detailed in the Schedule of Investments.

The Funds had no transfers between Level 1 and Level 2 during the period ended February 28, 2018. The Funds’ policy is to recognize transfers among Levels as of the beginning of the reporting period.

There were no Level 3 investments at February 28, 2018, or November 30, 2017.

Warrants: The Funds’ investments in warrants as of February 28, 2018, are presented within the Schedule of Investments.

The Fairholme Fund’s and The Allocation Fund’s warrant positions during the period ended February 28, 2018, had an average monthly market value of approximately $73,170 and $135,603, respectively.

Note 2. Transactions in Shares of Affiliates

Portfolio companies in which the Fairholme Fund owns 5% or more of the outstanding voting securities of the issuer are considered affiliates of the Fairholme Fund. The aggregate fair value of all securities of affiliates held in the Fairholme Fund as of February 28, 2018, amounted to $709,312,035 representing 44.52% of the Fairholme Fund’s net assets.

 

13

FAIRHOLME FUNDS, INC.

 

 

NOTES TO SCHEDULE OF INVESTMENTS (continued)

February 28, 2018 (unaudited)

 

 

Transactions in The Fairholme Fund during the period ended February 28, 2018, in which the issuer was an affiliate are as follows:

 

    November 30, 2017   Gross Additions   Gross Deductions   February 28, 2018            
    Shares/
Par Value		   Shares/
Par Value		   Shares/
Par Value		   Shares/
Par Value		   Fair Value   Realized
Gain
(Loss)		   Investment
Income		   Change in
Unrealized
Appreciation/
Depreciation

Imperial Metals Corp.

       7,027,352       —       —       7,027,352     $ 12,979,133     $ —     $ —     $ 342,265

Sears Holdings Corp.

       13,535,991       —       4,397,400       9,138,591       21,475,689       (318,744,149)       —       300,256,212

Seritage Growth Properties

       2,185,580       —       —       2,185,580       82,614,924       —       546,395       (6,338,182)

The St. Joe Co.

       22,730,687       —       —       22,730,687       400,060,091       —       —       (27,276,825)

Sears Roebuck Acceptance Corp. 7.400%

       15,134       —       —       15,134       146,194       —       6,999       1,815

Sears Holdings Corp., Vested, Strike Price $25.686, Expire 12/15/2019

       218,419       —       —       218,419       65,526       —       —       (32,763)

Imperial Metals Corp., Expire 12/22/2017(a)

       4,797,852       —       4,797,852       —       —       —       —       —

Imperial Metals Corp. 7.000%, 03/15/2019

     $ 143,223,000       $—     $ —     $ 143,223,000       133,369,258       —       3,156,890       (1,566,640)

Sears Holdings Corp. 6.625%, 10/15/2018(a)

     $ 7,580,000       $—     $ 7,580,000     $ —       —       —       —       —

Sears Holdings Corp. 8.000%, 12/15/2019

     $ 140,893,000       $—     $ —     $ 140,893,000       55,779,539       —       2,703,485       (17,276,977)

Sears Roebuck Acceptance Corp. 7.500%, 10/15/2027

     $ 6,765,000          $—        $ —        $ 6,765,000       2,821,681       —       147,054       (50,694)
                   

 

 

      

 

 

      

 

 

      

 

 

  

Total

                     $ 709,312,035     $ (318,744,149)     $ 6,560,823     $ 248,058,211
                   

 

 

      

 

 

      

 

 

      

 

 

  

(a)  Security is no longer held in the portfolio at February 28, 2018.

For additional information regarding the accounting policies of the Funds and the most recent federal income tax information, refer to the most recent financial statements in the N-CSR filing at www.sec.gov.

 

14

Item 2. Controls and Procedures.

 

  (a)

The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”), (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

  (b)

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits.

Certifications required by Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)                                 Fairholme Funds, Inc.                                                         

 

By (Signature and Title)*           /s/ Bruce R. Berkowitz
          Bruce R. Berkowitz, President
          (principal executive officer)

Date April 25, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)*           /s/ Bruce R. Berkowitz
          Bruce R. Berkowitz, President
          (principal executive officer)

Date April 25, 2018

 

By (Signature and Title)*           /s/ Wayne Kellner
          Wayne Kellner, Treasurer
          (principal financial officer)

Date April 25, 2018

* Print the name and title of each signing officer under his or her signature.