FAIRHOLME FUNDS INC - Notes to Mutual Funds Financial Statements - 2-2-2009

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					NOTE 1. ORGANIZATION

Fairholme Funds, Inc. (the "Company"), a Maryland corporation, is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end management investment company. The Company's
Articles of Incorporation permit the Board of Directors of the Company (the "Board" or the "Directors") to issue
400,000,000 shares of common stock at $.0001 par value. The Board has the power to designate one or more
separate and distinct series and/or classes of shares of common stock and to classify or reclassify any shares not
issued with the respect to such series. 400,000,000 shares of one series have been allocated, which shares
constitute the interests in the The Fairholme Fund (the "Fund"), a non-diversified fund. The Fund's investment
objective is to provide long-term growth of capital. Under normal circumstances the Fund seeks to achieve its
objective by investing in equity securities of public companies, including but not limited to, common stocks,
partnership interests, business trust shares, convertible securities, and rights and warrants to subscribe for the
purchase of such equity securities without regard to market capitalization or other categorizations; and holding a
focused portfolio of equity securities. The Fund may also invest in "special situations" to achieve its investment
objective. "Special situation" investments may include either equity or fixed income investments such as corporate
debt, which may be in a distressed position as a result of economic or company specific developments. Fairholme
Capital Management, L.L.C. (the "Manager") serves as investment adviser to the Fund.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by the Fund in the preparation of its
financial statements.

SECURITY VALUATION: Securities, which are traded on any exchange or on the NASDAQ over-the-
counter market, are generally valued at the last quoted sale price or using such other valuation methods that the
Manager believes would provide a more accurate indication of fair value. Lacking a last sale price, a security is
valued at its last bid price. All other securities for which over-the-counter market quotations are readily available
are valued at their last bid price. When market quotations are not readily available, when the Manager determines
the last bid price does not accurately reflect the current value or when restricted securities are being valued, such
securities are valued as determined in good faith by the Manager, in conformity with guidelines adopted by and
subject to review of the Directors.

Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices
furnished by a pricing service when the Manager believes such prices accurately reflect the fair market value of
such securities. A pricing service utilizes electronic data processing techniques based on yield spreads

                                                         20
THE FAIRHOLME FUND

                            NOTES TO FINANCIAL STATEMENTS (Continued)
                                         November 30, 2008


relating to securities with similar characteristics to determine prices for normal institutional-size trading units of
debt securities in addition to sale or bid prices. When prices are not readily available from a pricing service, or
when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith
by the Manager, subject to review of the Directors. Short-term investments in fixed income securities with
maturities of less than 60 days when acquired, or long-term securities which are within 60 days of maturity, are
valued by using the amortized cost method of valuation, which the Manager and the Board have determined will
approximate fair value.

FEDERAL INCOME TAXES: The Fund intends to qualify each year as a "Regulated Investment Company"
under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal
income taxes to the extent that it distributes all of its net investment income and any realized capital gains.

DIVIDENDS AND DISTRIBUTIONS: The Fund intends to distribute substantially all of its net investment
income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long-term capital
gains and its net short-term capital gains at least once a year.

FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following basis: (i) fair value of investment
securities, assets and liabilities at the current rate of exchange; and (ii) purchases and sales of investment
securities, income and expenses at the relevant rates of exchange prevailing on the respective dates of such
transactions. The Fund does not isolate that portion of gains and losses on investment securities which is due to
changes in the foreign exchange rates from that which is due to changes in the market prices of such securities.

ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of both contingent assets and liabilities, at the date of the financial
statements; and the reported amounts of revenues and expenses during the reported period. Actual results could
differ from those estimates.

OTHER: The Fund follows industry practice and accounts for security transactions on the trade date for financial
statement purposes. The specific identification method is used for determining gains or losses for financial
statements and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis. Discounts and premiums on securities purchased are amortized over the life of the
respective securities using the constant yield method. Securities denominated in currencies other than U.S. dollars
are subject to changes

                                                           21
THE FAIRHOLME FUND

                            NOTES TO FINANCIAL STATEMENTS (Continued)
                                         November 30, 2008


in value due to fluctuation in exchange rates. The Fund may invest in countries that require governmental approval
for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. In
addition, if there is deterioration in a country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.

NOTE 3. RELATED PARTY TRANSACTIONS

The Manager is a Delaware limited liability company and is registered with the Securities and Exchange
Commission as an investment adviser. The Manager's principal business and occupation is to provide financial
management and advisory services to individuals, corporations, and other institutions throughout the world.
Pursuant to the Investment Management Agreement, the Company pays a management fee to the Manager for its
provision of investment advisory and operating services to the Company. The management fee is paid at an
annual rate equal to 1.00% of the daily average net assets of the Fund. Under the Investment Management
Agreement, the Manager is responsible for paying all Fund expenses including, but are not limited to, expenses
for the following services: transfer agency, fund accounting, fund administration, custody, legal, audit, compliance,
directors' fees, call center, fulfillment, travel, insurance, rent, printing, postage and other office supplies, except for
commissions and other brokerage fees, taxes, interest, litigation expenses, acquired fund fees and related
expenses, and other extraordinary expenses. The Fund paid commissions and other brokerage fees and shared
equally with the Manager, as approved by the Board of Directors, in paying expenses related to the recent proxy,
but did not incur any additional extraordinory expenses during the period. The Manager earned $78,839,088 for
their services during the fiscal year ended November 30, 2008. Certain directors and officers of the Fund are
also members and officers of the Manager or its affiliates.

NOTE 4. INVESTMENTS

For the fiscal year ended November 31, 2008, purchases and sales of investment securities, other than short-
term investments, aggregated $9,824,879,022, and $5,401,023,368, respectively.

NOTE 5. TAX MATTERS

For U.S. federal income tax purposes, the cost of securities owned, gross appreciation, gross depreciation, and
net unrealized appreciation/(depreciation) of investments at November 30, 2008 were as follows:

                                                                       GROSS               GROSS              NET UNREALIZED
                                                                    UNREALIZED           UNREALIZED           APPRECIATION/
                                                  COST             APPRECIATION         DEPRECIATION           DEPRECIATION
                                            ---------------        ------------       ---------------        ---------------
The Fairholme Fund                          $ 9,417,415,058        $ 84,945,458       $(2,796,765,611)       $(2,711,820,153)




                                                            22
THE FAIRHOLME FUND

                          NOTES TO FINANCIAL STATEMENTS (Continued)
                                       November 30, 2008


The difference between book basis and tax basis net unrealized appreciation/ (depreciation) is attributable
primarily to the tax deferral of losses on wash sales.

The Fund's tax basis capital gains are determined only at the end of each fiscal year. As of November 30, 2008,
the components of distributable earnings on a tax basis were as follows:

                                                                              AMOUNT
                                                                        -----------------
                     Undistributed Ordinary Income                      $      28,988,917
                     Undistributed Capital Gain                               137,548,911
                                                                        -----------------
                                                                        $     166,537,828
                                                                        =================




NOTE 6. DISTRIBUTION TO SHAREHOLDERS

Ordinary income and capital gain distributions are determined in accordance with Federal income tax regulations,
which may differ from accounting principles generally accepted in the United States of America.

The tax character of dividends and distributions paid by the Fund was as follows:

                                                               FOR THE FISCAL         FOR THE FISCAL
                                                                 YEAR ENDED             YEAR ENDED
                                                             NOVEMBER 30, 2008      NOVEMBER 30, 2007
                                                             -----------------      -----------------
          Distributions paid from:
             Ordinary Income                                 $      43,541,824      $      31,045,071
             Short-Term Capital Gain                                48,406,084                     --
             Long-Term Capital Gain                                 49,912,708             21,983,878
                                                             -----------------      -----------------
                                                             $     141,860,616      $      53,028,949
                                                             =================      =================




On December 16, 2008, the Fund declared the following distributions, which were payable on December 17,
2008.

                                                                          DECEMBER 2008
                                                                        -----------------
                     Distributions paid from:
                        Ordinary Income                                 $      33,453,841
                        Long-Term Capital Gains                               137,550,970
                                                                        -----------------
                                                                        $     171,004,811
                                                                        =================




NOTE 7. RECLASSIFICATION IN THE CAPITAL ACCOUNT

In accordance with accounting pronouncements, the Fund has recorded a reclassification in the capital account.
This reclassification has no impact on the net asset value of the Fund and is designed generally to present
undistributed income and realized gains on a tax basis which is considered to be more informative to the

                                                        23
THE FAIRHOLME FUND

                           NOTES TO FINANCIAL STATEMENTS (Continued)
                                        November 30, 2008


shareholder. As of November 30, 2008, the Fund recorded the following reclassification to increase (decrease)
the accounts listed below:

                                                   UNDISTRIBUTED        ACCUMULATED      CAPITAL PAID IN
                                                  NET INVESTMENT       NET REALIZED       ON SHARES OF
                                                      INCOME            GAIN/(LOSS)        COMMON STOCK
                                                  --------------       ------------      ---------------
          The Fairholme Fund                      $     (106,276)      $    134,547      $       (28,271)




NOTE 8. RECENT ACCOUNTING PRONOUNCEMENTS

FASB INTERPRETATION 48

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation 48 (FIN 48),
"Accounting for Uncertainty in Income Taxes." This standard defines the threshold for recognizing the benefits of
tax-return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority
and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest
benefit that is more than 50 percent likely to be realized. FIN 48 is effective as of the beginning of the first fiscal
year beginning after December 15, 2006 (December 1, 2007 for the Fund); with early application permitted if no
interim financial statements have been issued. At adoption, companies must adjust their financial statements to
reflect only those tax positions that are more-likely-than-not to be sustained as of the adoption date. The Fund
adopted FIN 48 on December 1, 2007. The effect of adopting FIN 48 for the Fund does not have a material
impact on the Fund's financial statements.

FASB INTERPRETATION 157

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value,
establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The
provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007. The Fund
adopted SFAS No. 157 on December 1, 2007. Adoption of SFAS No. 157 had no material impact on the
Fund's financial statements other than enhanced disclosure.

FAS 157 -- SUMMARY OF FAIR VALUE EXPOSURE AT NOVEMBER 30, 2008

Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the
three broad levels listed below:

Level 1 -- Quoted prices in active markets for identical securities.

Level 2 -- Other significant observable inputs (including quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, etc.)

Level 3 -- Significant unobservable inputs (including the Fund's own assumptions in determining the fair value of
investments)

                                                          24
THE FAIRHOLME FUND

                           NOTES TO FINANCIAL STATEMENTS (Continued)
                                        November 30, 2008


The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in
those securities.

The following is a summary of the inputs used, as of November 30, 2008, in valuing the Fund's investments
carried at fair value:

                                               Level 1 -            Level 2 -         Level 3 -
                                           Quoted prices in        Significant       Significant
                                            active markets      other observable    unobservable
Description                  Total       for identical assets         inputs           inputs
------------------------------------------------------------------------------------------------
Assets:
   Investments
      Affiliated
      Issuers           $2,100,470,043      $ 1,532,664,470     $    567,805,573        $ --
      Unaffiliated
      Issuers            4,605,124,862        4,166,576,312          438,548,550(a)     $ --
                        ------------------------------------------------------------------------
Total                   $6,705,594,905      $ 5,699,240,782     $ 1,006,354,123         $ --




(a) $434,932,452 represents U.S. Treasury Bills.

FASB INTERPRETATION 161

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The provisions are effective for fiscal years beginning after November 15, 2008. SFAS 161 is
intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables
investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how
derivative instruments affect an entity's results of operations and financial position. Management is currently
evaluating the implications of SFAS 161. The impact on the Fund's financial statement disclosures, if any, is
currently being assessed.

NOTE 9. TRANSACTIONS IN SHARES OF AFFILIATES*

Investments representing 5% or more of the outstanding voting securities of a portfolio company result in that
company being considered an affiliated company, as defined in the 1940 Act. The aggregate fair value of all
securities of affiliated companies held in the Fund as of November 30, 2008 amounted to $2,100,470,043
representing 31.37% of net assests. Transactions in the Fund during the fiscal year ended November 30, 2008 in
which the issuer as an "affiliated person" are as follows:

                                                         25
THE FAIRHOLME FUND

                          NOTES TO FINANCIAL STATEMENTS (Continued)
                                       November 30, 2008

                                                                NOVEMBER 30, 2007                        GROSS ADDITION
                                                         --------------------------------        ----------------------
                                                            SHARES/                                 SHARES/
                                                           PAR VALUE           COST                PAR VALUE          C
                                                         --------------   ---------------        -------------   ------
AmeriCredit Corp.(a)(d)                                              --   $            --           16,692,000   $   19
Ensign Energy Services, Inc.                                 12,379,200       222,800,507              409,800
Forest Laboratories, Inc.(a)                                         --                --           16,556,100       54
Hertz Global Holdings, Inc.(a)                                       --                --           18,630,100       12
IDT Corp.(a)(b)(c)                                            1,467,700        16,285,321              461,800
IDT Corp. - Class B(a)(b)(c)                                  5,856,000        68,023,827                    --
Mohawk Industries(b)(c)                                       3,598,953       282,807,216            3,263,700       22
Mueller Water Products - Class A(c)                                  --                --              360,200
Mueller Water Products - Class B                              8,531,000       124,268,214              367,600
Mylan, Inc.(a)(b)(c)                                                 --                --           23,176,200       26
Sears Holdings Corp.(a)                                       3,705,371       474,696,729            8,528,500       72
The St. Joe Co.(a)                                                   --                --           10,977,100       35
United Rentals, Inc.(a)                                              --                --           11,503,300       20
USG Corp.(b)(c)                                               5,038,200       218,731,408            2,079,900        7
WellCare Health Plans, Inc.(a)                                4,067,000       143,334,944               78,200
AmeriCredit Corp.(a)(d)
   8.500%, 7/1/15                                        $             --                   --   $ 152,024,000        11
AmeriCredit Automobile Receivable Trust(a)(d)
   10.750%, 4/6/15                                       $             --                   --   $   50,645,000        4
AmeriCredit Automobile Receivable Trust(a)(d)
   13.150%, 4/6/15                                       $             --                   --   $   72,581,000        6
Sear Roebuck Acceptance Corp.(a)
   6.250%, 5/1/09                                        $             --                   --   $    5,000,000
The Hertz Corp.(a)
   8.875%, 1/1/14                                        $             --                   --   $ 161,075,000        12
United Rentals, Inc.(a)
   7.750%, 11/15/13                                      $             --                   --   $ 248,686,000        20
United Rentals, Inc.(a)
   6.500%, 2/15/12                                       $             --                   --   $   15,100,000        1
WellCare Traunche(a)
   Loan 5.500%, 5/13/09                                  $             --                 --     $   98,964,870        9
                                                                             ---------------                      ------
Total                                                                        $ 1,550,948,166                      $ 3,40
                                                                             ===============                      ======




* As a result of the Fund's beneficial ownership of the voting stock of these companies, it may be deemed that
the Fund is an affiliate of the respective issuers, as required by the 1940 Act.

(a) Company was not an "affiliated company" at November 30, 2007.

(b) Company is no longer an "affiliated company" at November 30, 2008.

                                                       26
THE FAIRHOLME FUND

                          NOTES TO FINANCIAL STATEMENTS (Continued)
                                       November 30, 2008

                                                GROSS
                                              DEDUCTIONS               NOVEMBER 30, 2008
                                           ---------------       ------------------------------
                                                                    SHARES/
                                                COST               PAR VALUE         COST             MARKET VALUE
                                           ---------------       ------------- ---------------      ---------------     --
AmeriCredit Corp.(a)(d)                    $            --          16,692,000 $    199,228,670     $    122,686,200    $
Ensign Energy Services, Inc.                    25,809,184          11,614,700      202,076,265          136,731,672
Forest Laboratories, Inc.(a)                            --          16,556,100      546,918,488          400,326,498
Hertz Global Holdings, Inc.(a)                          --          18,630,100      127,456,844           65,019,049
IDT Corp.(a)(b)(c)                              18,847,958                   --              --                    --
IDT Corp. - Class B(a)(b)(c)                    68,023,827                   --              --                    --
Mohawk Industries(b)(c)                        505,746,236                   --              --                    --
Mueller Water Products - Class A(c)              3,340,390                   --              --                    --
Mueller Water Products - Class B                28,618,991           6,985,900       99,122,823           41,426,387
Mylan, Inc.(a)(b)(c)                           264,156,938                   --              --                    --
Sears Holdings Corp.(a)                        141,066,909          11,239,671    1,056,090,389          407,438,074
The St. Joe Co.(a)                              47,077,577           9,654,700      310,621,238          254,980,627
United Rentals, Inc.(a)                         62,456,796           8,291,818      144,230,328           66,914,971
USG Corp.(b)(c)                                289,640,538                   --              --                    --
WellCare Health Plans, Inc.(a)                          --           4,145,200      146,541,372           37,140,992
AmeriCredit Corp.(a)(d)
   8.500%, 7/1/15                                           --   $ 152,024,000        119,569,020       110,977,520
AmeriCredit Automobile Receivable
   Trust(a)(d)
   10.750%, 4/6/15                                          --   $   50,645,000        44,187,652        44,167,504
AmeriCredit Automobile Receivable
   Trust(a)(d)
   13.150%, 4/6/15                                          --   $   72,581,000        69,039,652        69,024,531
Sear Roebuck Acceptance Corp.(a)
   6.250%, 5/1/09                                           --   $    5,000,000         4,756,825         4,703,525
The Hertz Corp.(a)
   8.875%, 1/1/14                                           --   $ 161,075,000        120,406,979        83,154,969
United Rentals, Inc.(a)
   7.750%, 11/15/13                                         --   $ 248,686,000        205,672,726       149,211,600
United Rentals, Inc.(a)
   6.500%, 2/15/12                                          --   $   15,100,000        11,192,125        10,570,000
WellCare Traunche(a)
   Loan 5.500%, 5/13/09                                 --       $   98,964,870        95,908,576        95,995,924
                                           ---------------                        ---------------   ---------------     --
Total                                      $ 1,454,785,344                        $ 3,503,019,972   $ 2,100,470,043     $
                                           ===============                        ===============   ===============     ==




(c) Security is no longer held in the portfolio at November 30, 2008.

(d) Company is considered an "affiliated company" due to Bruce R. Berkowitz being a member of the company's
Board of Directors.

                                                       27
THE FAIRHOLME FUND

                          NOTES TO FINANCIAL STATEMENTS (Continued)
                                       November 30, 2008


NOTE 10. INDEMNIFICATIONS

Under the Fund's organizational documents, its Officers and Directors are indemnified against certain liabilities
arising out of the performance of their duties to the Fund. In the normal course of business, the Fund enters into
contracts that contain a variety of representations, which provided general indemnifications. The Fund's maximum
exposure under these arrangements is unknown as this would involve future claims that may be made against the
Fund that have not yet occurred. However, based on its experience to date, the Fund expects the risk of loss to
be remote.

                                                       28
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of The Fairholme Fund:

We have audited the accompanying statement of assets and liabilities of The Fairholme Fund (the "Fund"),
including the schedule of investments, as of November 30, 2008, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free of material misstatement. The Fund is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation of securities owned as of
November 30, 2008, by correspondence with the custodian and brokers; where replies were not received from
brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material
respects, the financial position of The Fairholme Fund as of November 30, 2008, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Philadelphia, Pennsylvania
January 16, 2009

                                                          29
THE FAIRHOLME FUND

                                      ADDITIONAL INFORMATION
                                           November 30, 2008


BOARD OF DIRECTORS (UNAUDITED)

The Board of Directors has overall responsibility for conduct of the Company's affairs. The day-to-day
operations of the Fund are managed by the Manager, subject to the Bylaws of the Company and review by the
Board. The Directors, including those Directors who are also officers of the Company, are listed below.

---------------------------------------------------------------------------------------------------------
                          POSITION(S)                               PRINCIPAL           FUNDS
                               HELD      TERM OF OFFICE          OCCUPATION(S)        OVERSEEN
       NAME, AGE            WITH THE       & LENGTH OF             DURING PAST           BY
       & ADDRESS+           COMPANY       TIME SERVED**              5 YEARS          DIRECTOR
---------------------------------------------------------------------------------------------------------
Bruce R. Berkowitz*       Director,     Mr. Berkowitz        Managing Member,            1       Director
Age 50                    President     has served as a      Fairholme Capital                   Group, I
                                        Director of the      Management, LLC, a                  Mountain
                                        Company since        registered investment               Director
                                        its inception on     adviser, since
                                        December 29,         October 1997.
                                        1999.
---------------------------------------------------------------------------------------------------------
Cesar L. Alvarez, Esq.*   Director      Mr. Alvarez has      Chief Executive             1       Chairman
Age 61                                  served as a          Officer of Greenberg                Mednax,
                                        Director of the      Traurig, P.A. since                 Director
                                        Company since        1997.                               Director
                                        May 19, 2008.                                            Director
---------------------------------------------------------------------------------------------------------
Charles M. Fernandez*     Director,     Mr. Fernandez        President, Fairholme        1       Director
Age 46                    Vice          has served as a      Capital Management,                 Systems,
                          President     Director of the      LLC since November
                                        Company since        2008; Chief Operating
                                        November 6, 2008.    Officer, Fairholme
                                                             Capital Management,
                                                             LLC from 2007 to
                                                             2008; President,
                                                             Lakeview Health
                                                             Systems, LLC from
                                                             2003 until 2007.
---------------------------------------------------------------------------------------------------------
Terry L. Baxter           Independent   Mr. Baxter has       Retired. Prior              1       Director
Age 63                    Director      served as a          thereto from 1993 to                Group.
                                        Director of the      2002, President, Fund
                                        Company since        American Enterprises;
                                        May 19, 2008.        Chairman of the
                                                             Board, Source One
                                                             Mortgage Services
                                                             Corp.; and President
                                                             of White Mountain
                                                             Holdings.
---------------------------------------------------------------------------------------------------------




* Mr. Berkowitz, Mr. Fernandez and Mr. Alvarez are each an affiliated person as defined in the 1940 Act of the
Company because of their affiliation with the manager.

** Each Director serves for an indefinite term.

+ Unless otherwise indicated, the address of each Director of the Company is 4400 Biscayne Blvd., 9th Floor,
Miami, FL 33137

                                                      30
THE FAIRHOLME FUND

                               ADDITIONAL INFORMATION (Continued)
                                        November 30, 2008


BOARD OF DIRECTORS (UNAUDITED)

---------------------------------------------------------------------------------------------------------
                         POSITION(S)                                  PRINCIPAL           FUNDS
                             HELD          TERM OF OFFICE           OCCUPATION(S)       OVERSEEN
       NAME, AGE           WITH THE           & LENGTH OF            DURING PAST           BY
       & ADDRESS+          COMPANY          TIME SERVED**              5 YEARS          DIRECTOR
---------------------------------------------------------------------------------------------------------
Howard S. Frank         Independent     Mr. Frank has          Vice Chairman and           1       Direct
Age 67                  Director        served as a            Chief Operating                     Trust;
                                        Director of the        Officer, Carnival                   Sympho
                                        Company since          Corporation & plc.
                                        May 7, 2007.
---------------------------------------------------------------------------------------------------------
Avivith Oppenheim,      Independent     Ms. Oppenheim          Attorney-at-Law.            1       None
Esq.                    Director        has served as a
Age 58                                  Director of the
                                        Company since
                                        its inception on
                                        December 29,
                                        1999.
---------------------------------------------------------------------------------------------------------
Leigh Walters, Esq.     Independent     Mr. Walters has        Vice-President and          1       Direct
Age 62                  Director        served as a            Director, Valcor                    Corpor
                                        Director of the        Engineering
                                        Company since          Corporation.
                                        its inception on       Attorney-at-Law.
                                        December 29,
                                        1999.
---------------------------------------------------------------------------------------------------------




* Mr. Berkowitz, Mr. Fernandez and Mr. Alvarez are each an affiliated person as defined in the 1940 Act of the
Company because of their affiliation with the manager.

** Each Director serves for an indefinite term.

+ Unless otherwise indicated, the address of each Director of the Company is 4400 Biscayne Blvd., 9th Floor,
Miami, FL 33137

                                                      31
THE FAIRHOLME FUND

                                ADDITIONAL INFORMATION (Continued)
                                         November 30, 2008


PROXY VOTING POLICIES, PROCEDURES AND RECORDS (UNAUDITED)

The Company has adopted policies and procedures which provide guidance and set forth parameters for the
voting of proxies relating to securities held in the Fund's portfolio. These policies, procedures and records for the
twelve month period ended June 30, 2008 are available to you upon request and free of charge by writing to the
Fairholme Funds, Inc., c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, WI, 53201-0701, by
calling shareholder services toll free at 1-866-202-2263, or by visiting the Company's website at
www.fairholmefunds.com. The Company's proxy voting policies, procedures, and records may also be obtained
by visiting the Securities and Exchange Commission website at www.sec.gov. The Company shall respond to all
shareholder requests for records within three business days of such request by first-class mail or other means
designed to ensure prompt delivery.

N-Q FILING (UNAUDITED)

The SEC has adopted the requirement that all funds file a complete schedule of investments with the SEC for
their first and third fiscal quarters on Form N-Q. The Fairholme Fund files Form N-Q for the fiscal quarters
ending February 28 (February 29 during leap year) and August 31. The Form N-Q filing must be made within 60
days of the end of the quarter. The Fairholme Fund Forms N-Q will be available on the SEC's website at
http://sec.gov, or they may be reviewed and copied at the SEC's Public Reference Room in Washington, DC
(call 1-800-732-0330 for information on the operation of the Public Reference Room).

SHAREHOLDER TAX INFORMATION (UNAUDITED)

The Fairholme Fund designated $49,907,768 (35.18%) of total distributions paid during the fiscal year ended
November 30, 2008, as net capital gain distributions eligible for long-term capital gain rates for individual
shareholders.

The information below is reported from the Fund's fiscal year and not calendar year, therefore, shareholders
should refer to their Form 1099-DIV or other tax information which will be mailed in 2009 to determine the
calendar year amounts to be included on their 2008 tax returns. Shareholders should consult their own tax
advisors.

Please note that, for the fiscal year ended November 30, 2008, the respective percentages of ordinary income
distributions paid by the Fairholme Fund which consist of qualified dividend income for individuals, are as follows:

                                   DISTRIBUTION PERIOD               PERCENTAGE
                                   -------------------               ----------
                                     December, 2008                     100%




                                                         32
BOARD OF DIRECTORS

CESAR L. ALVAREZ, ESQ.
TERRY L. BAXTER
BRUCE R. BERKOWITZ
CHARLES M. FERNANDEZ
HOWARD S. FRANK
AVIVITH OPPENHEIM, ESQ.
LEIGH WALTERS, ESQ.

OFFICERS

BRUCE R. BERKOWITZ, PRESIDENT
CHARLES M. FERNANDEZ, VICE PRESIDENT
LARRY S. PITKOWSKY, VICE PRESIDENT
CAROLYN M. ZEGEER, ESQ., SECRETARY
TIMOTHY K. BIEDRZYCKI, TREASURER
PAUL R. THOMSON, CHIEF COMPLIANCE OFFICER

INVESTMENT MANAGER

FAIRHOLME CAPITAL MANAGEMENT, L.L.C.
4400 BISCAYNE BLVD.
MIAMI, FL 33137
305-358-3000

DIVIDEND PAYING AGENT
TRANSFER AGENT

US BANCORP FUND SERVICES, LLC
615 EAST MICHIGAN STREET
MILWAUKEE, WI 53202-5207

CUSTODIAN

US BANK, NA
1555 NORTH RIVER CENTER DRIVE, SUITE 302
MILWAUKEE, WI 53212

INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

DELOITTE & TOUCHE LLP
1700 MARKET STREET
PHILADELPHIA, PA 19103

LEGAL COUNSEL

SEWARD & KISSEL, LLP
1200 G STREET, NW
WASHINGTON, DC 20005

THIS REPORT IS PROVIDED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF
THE FAIRHOLME FUND. IT IS NOT INTENDED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS, WHICH CONTAINS MORE INFORMATION ON FEES, CHARGES AND OTHER
EXPENSES AND SHOULD BE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. SHARES OF THE FUND
ARE DISTRIBUTED BY QUASAR DISTRIBUTORS, LLC.
ITEM 2. CODE OF ETHICS.

(a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to
the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these individuals are employed by the registrant or a
third party.

(b) During the period covered by this report, there were no amendments to any provision of the code of ethics.

(c) During the period covered by this report, there were no waivers or implicit waivers of a provision of the code
of ethics.

(d) The registrant's Code of Ethics for Principle Executive and Senior Financial Officers is filed herewith.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The registrant's board of directors has determined that the registrant has at least one audit committee financial
expert serving on its audit committee. Howard Frank is the "audit committee financial expert" and is considered to
be "independent" as each term is defined in Item 3 of Form N-CSR.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services
and other services during the last two fiscal years. "Audit services" refer to performing an audit of the registrant's
annual financial statements or services that are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years. "Audit-related services" refer to the assurance and
related services by the principal accountant that are reasonably related to the performance of the audit. "Tax
services" refer to professional services rendered by the principal accountant for tax compliance, tax advice, and
tax planning. "Other services" provided by the principal accountant were $0. The following table details the
aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees,
tax fees and other fees by the principal accountant.

                        -----------------------------------------------------------
                                                    FYE 11/30/2008   FYE 11/30/2007
                        -----------------------------------------------------------
                        Audit Fees                      $ 42,00         $ 42,500
                        Audit-Related Fees              $     0         $      0
                        Tax Fees                        $ 8,275         $ 7,875
                        All Other Fees                  $     0         $      0
                        -----------------------------------------------------------




The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-
approve all audit and non-audit services to the registrant, including services provided to any entity affiliated with
the registrant. All of the amounts for Audit Fees, Audit-

                                                            1
Related Fees and Tax Fees in the above table are for services pre-approved by the registrant's audit committee.
For the most recent fiscal year, all of the principal accountant's hours expended on auditing the registrant's
financial statements were attributed to work performed by full-time permanent employees of the principal
accountant.

The following table indicates the non-audit fees billed or expected to be billed by the registrant's accountant for
services to the registrant and to the registrant's investment adviser (and any other entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing services to the registrant, not
including any sub-adviser) for the last two fiscal years. The audit committee of the board of directors has
considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is
compatible with maintaining the principal accountant's independence and has concluded that the provision of such
non-audit services by the accountant has not compromised the accountant's independence.

                   ------------------------------------------------------------------
                   Non-Audit Related Fees             FYE 11/30/2008   FYE 11/30/2007
                   ------------------------------------------------------------------
                   Registrant                             $1,063             $0
                   Registrant's Investment Adviser        $    0             $0
                   ------------------------------------------------------------------




ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange
Act of 1934).

ITEM 6. SCHEDULE OF INVESTMENTS.

Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-
END
MANAGEMENT INVESTMENT COMPANIES.

Not applicable to open-end investment companies.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.

Not applicable to open-end investment companies.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.

Not applicable to open-end investment companies.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no material changes to the procedures by which shareholders may recommend nominees to the
registrant's board of trustees.

                                                          2
ITEM 11. 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") are effective, as of a date within 90 days of the
filing of the report that includes the disclosure required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities
Exchange Act of 1934, as amended.

(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) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-
year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.

ITEM 12. EXHIBITS.

(A) (1) ANY CODE OF ETHICS OR AMENDMENT THERETO, THAT IS SUBJECT OF THE
DISCLOSURE REQUIRED BY ITEM 2, TO THE EXTENT THAT THE REGISTRANT INTENDS TO
SATISFY ITEM 2 REQUIREMENTS THROUGH FILING AN EXHIBIT. Not Applicable

(2) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 are
attached hereto.

(3) ANY WRITTEN SOLICITATION TO PURCHASE SECURITIES UNDER RULE 23C-1 UNDER THE
ACT SENT OR GIVEN DURING THE PERIOD COVERED BY THE REPORT BY OR ON BEHALF OF
THE REGISTRANT TO 10 OR MORE PERSONS. Not applicable to open-end investment companies.

(B) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 is
attached hereto.

                                                          3
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.

                                                /s/ Bruce R. Berkowitz
                      By (Signature and Title)*__________________________________
                                                 Bruce R. Berkowitz, President
                                 2/2/2009
                      Date ______________________________________________________




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.

                                                /s/ Bruce R. Berkowitz
                      By (Signature and Title)*__________________________________
                                                 Bruce R. Berkowitz, President
                                2/2/2009
                      Date ______________________________________________________

                                                /s/ Timothy K. Biedrzycki
                      By (Signature and Title)*__________________________________
                                                Timothy K. Biedrzycki, Treasurer
                                2/2/2009
                      Date ______________________________________________________




* PRINT THE NAME AND TITLE OF EACH SIGNING OFFICER UNDER HIS OR HER SIGNATURE.

                                                         4
                                  FAIRHOLME FUNDS, INC.
                        CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
                                SENIOR FINANCIAL OFFICERS

I. COVERED OFFICERS/PURPOSE OF THE CODE

This code of ethics (the "Code") for Fairholme Funds, Inc. (the "Company") applies to the Company's Principal
Executive Officer, Principal Financial Officer and any other officer serving similar functions (the "Covered
Officers," each of whom is set forth in Exhibit A) for the purpose of promoting:

o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between
personal and professional relationships;

o full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with,
or submits to, the U.S. Securities and Exchange Commission ("SEC") and in other public communications made
by the Company;

o compliance with applicable laws and governmental rules and regulations;

o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the
Code; and

o accountability for adherence to the Code.

Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations
that may give rise to actual as well as apparent conflicts of interest.

II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS
OF INTEREST

OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests
of, or his or her service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or
a member of his or her family, receives improper personal benefits as a result of his or her position with the
Company.

Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already
are subject to conflict of interest provisions in the Investment Company Act of 1940 (the "1940 Act") and the
Investment Advisers Act of 1940 ("Advisers Act"). For example, Covered Officers may not individually engage
in certain transactions (such as the purchase or sale of securities or other property) with the Company because of
their status as "affiliated persons" of the Company. The Company's and the investment adviser's compliance
programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This
Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall
outside of the parameters of this Code.

Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result
of, the contractual relationship between the Company and the investment adviser of which the Covered Officers
are also officers or employees. As a result,
this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the
Company or for the adviser, or for both), be involved in establishing policies and implementing decisions that will
have different effects on the adviser and the Company. The participation of the Covered Officers in such activities
is inherent in the contractual relationship between the Company and the adviser and is consistent with the
performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity
with the provisions of the 1940 Act and the Advisers Act, such activities will be deemed to have been handled
ethically. In addition, it is recognized by the Company's Board of Directors (the "Board") that the Covered
Officers may also be officers or employees of one or more other investment companies covered by this or other
codes.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions
in the 1940 Act and the Advisers Act. The following list provides examples of conflicts of interest under the
Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching
principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of
the Company.

****

                                          Each Covered Officer must:

o not use his or her personal influence or personal relationships improperly to influence investment decisions or
financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the
Company;

o not cause the Company to take action, or to fail to take action, for the individual personal benefit of the
Covered Officer rather than the benefit the Company;

o not use material non-public knowledge of portfolio transactions made or contemplated for the Company to
trade personally or cause others to trade personally in contemplation of the market effect of such transactions;

o report at least annually any ownership interest in the Company or its adviser.

There are some conflict of interest situations that should always be discussed with the Compliance Officer, if
material. Examples of these include:

o service as a director on the board of any public or private company;

o the receipt of any gifts other than ones of DE MINIMIS value;

o the receipt of any entertainment from any company with which the Company has current or prospective
business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and
place, and not so frequent as to raise any question of impropriety;

o any ownership interest in, or any consulting or employment relationship with, any of the Company's service
providers, other than its investment adviser, administrator or any affiliated person thereof;

                                                          2
o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for
effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered
Officer's employment, such as compensation or equity ownership.

III. DISCLOSURE AND COMPLIANCE

o Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable
to the Company.

o Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the
Company to others, whether within or outside the Company, including to the Company's directors and auditors,
and to governmental regulators and self-regulatory organizations.

o Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with
other officers and employees of the Company and the adviser with the goal of promoting full, fair, accurate, timely
and understandable disclosure in the reports and documents the Company files with, or submits to, the SEC and
in other public communications made by the Company.

o It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions
imposed by applicable laws, rules and regulations.

IV. REPORTING AND ACCOUNTABILITY

                                          Each Covered Officer must:

o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to
the Board that he or she has received, read, and understands the Code;

o annually thereafter affirm to the Board that he or she has complied with the requirements of the Code;

o not retaliate against any other Covered Officer or any employee of the Company or its affiliated persons for
reports of potential violations that are made in good faith; and

o notify the Compliance Officer promptly if he or she knows of any violation of this Code. Failure to do so is
itself a violation of this Code.

                                                          3
The Compliance Officer is responsible for applying this Code to specific situations in which questions are
presented under it and has the authority to interpret this Code in any particular situation.(1) However, any
approvals or waivers(2) sought by the Principal Executive Officer will be considered by the Board.

The Company will follow these procedures in investigating and enforcing this Code:

o The Compliance Officer will take all appropriate action to investigate any potential violations reported to him or
her;

o if, after such investigation, the Compliance Officer believes that no violation has occurred, the Compliance
Officer is not required to take any further action;

o any matter that the Compliance Officer believes is a violation will be reported to the Board;

o if the Board concurs that a violation has occurred, it will consider appropriate action, which may include: (i)
review of, and appropriate modifications to, applicable policies and procedures;
(ii) notification to appropriate personnel of the investment adviser or its board; or (iii) a recommendation to
dismiss the Covered Officer;

o the Board will be responsible for granting waivers, as appropriate; and

o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

V. OTHER POLICIES AND PROCEDURES

This Code shall be the sole code of ethics adopted by the Company for purposes of Section 406 of the
Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. If other
policies or procedures of the Company, the Company's adviser or other service providers that govern or purport
to govern the behavior or activities of the Covered Officers who are subject to this Code overlap or conflict with
the provisions of this Code, the Compliance Officer will determine whether the provisions of this Code or such
other policy or procedure will apply. The Company's and its investment adviser's codes of ethics under Rule 17j-
1 under the 1940 Act are separate requirements applying to the Covered Officers and others, and are not part of
this Code.


(1) The Compliance Officer is authorized to consult, as appropriate, with the Board and counsel to the Company,
and is encouraged to do so.

(2) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a
provision of the code of ethics" and "implicit waiver," which must also be disclosed, as "the registrant's failure to
take action within a reasonable period of time regarding a material departure from a provision of the code of
ethics that has been made known to an executive officer" of the registrant.

                                                          4
VI. AMENDMENTS

Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority
vote of the Board, including a majority of independent directors.

VII. CONFIDENTIALITY

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be
maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not
be disclosed to anyone other than the Company and its adviser.

VIII. INTERNAL USE

The Code is intended solely for the internal use by the Company and does not constitute an admission, by or on
behalf of the Company, as to any fact, circumstance, or legal conclusion.

Amended: January 22, 2008

                                                        5
EXHIBIT A

            Persons Covered by this Code of Ethics:

                 Bruce R. Berkowitz President

                  Carolyn Zegeer Secretary

                  Tim Biedrzycki Treasurer

                              6
                              CERTIFICATION PURSUANT TO SECTION 302
                                OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce R. Berkowitz, certify that:

1. I have reviewed this report on Form N-CSR of Fairholme Funds, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations, and changes in net assets, of the
registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal
control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the
registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days
prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and
report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.

                     2/2/2009                        /s/ Bruce R. Berkowitz
            Date: _________________________          ____________________________________________
                                                     Bruce R. Berkowitz, President




                              30A-2 CERTIFICATION PURSUANT TO S-OX 1
I, Timothy K. Biedrzycki, certify that:

1. I have reviewed this report on Form N-CSR of Fairholme Funds, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations, and changes in net assets of the
registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal
control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the
registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days
prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and
report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.

                     2/2/2009                        /s/ Timothy K. Biedrzycki
            Date: _________________________          ____________________________________________
                                                     Timothy K. Biedrzycki, Treasurer




                              30A-2 CERTIFICATION PURSUANT TO S-OX 2
                                                EX.99.906CERT

                             CERTIFICATION PURSUANT TO SECTION 906
                               OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of The Fairholme
Fund, does hereby certify, to such officer's knowledge, that the report on Form N-CSR of The Fairholme Fund
for the period ended November 30, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as applicable, and that the information contained in the Form N-CSR fairly
presents, in all material respects, the financial condition and results of operations of The Fairholme Fund for the
stated period.

         /s/ Bruce R. Berkowitz                              /s/ Timothy R. Biedrzycki
         ______________________________________              _______________________________________
          Bruce R. Berkowitz, President                       Timothy K. Biedrzycki, Treasurer

                     2/2/2009
           Dated: ______________________




This statement accompanies this report on Form N-CSR pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 and shall not be deemed as filed by The Fairholme Fund for purposes of Section 18 of the Securities
Exchange Act of 1934.

                                                         3