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Dear Shareholder,

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Dollars1   Thursday, 08/20/15 11:14:13 AM
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Dear Shareholder,

Fairholme’s effort to cast light on the government’s unlawful actions in imposing the 2012 “Net Worth Sweep” is accelerating.

In the “Public Redacted Motion for Judicial Notice and Supplementation of the Record” (and two accompanying Appendices, Volume 1 and Volume 2) released yesterday, Fairholme informed the United States Court of Appeals for the District of Columbia Circuit that newly discovered evidence reveals the Defendants have (i) “improperly concealed” documents and (ii) submitted materials to the district court that were “incomplete, misleading, and in important respects, outright false.”

Highlights from Fairholme’s Motion include:

“…this Court should hold that the Net Worth Sweep is facially inconsistent with FHFA’s and Treasury’s statutory authorities and order entry of judgment for Plaintiffs as a matter of law. But, even if that were not so, the district court’s decision must be reversed. As the materials attached to this motion demonstrate, the administrative record submitted by Treasury and the ‘Document Compilation’ and declaration submitted by FHFA in lieu of an administrative record are incomplete, misleading, and, in important respects, outright false . . . the Court must at a minimum remand for further proceedings that account for this newly discovered evidence.” (Pages 1-2)

“…the Court should assure that this case is not decided on the basis of a false factual premise and take judicial notice of the existence of the materials in question.” (Page 4)

“Materials that have come to light in the [Court of Federal Claims] since the district court dismissed the complaint on jurisdictional grounds reveal that the Defendants’ jurisdictional arguments are premised on a mischaracterization of the relevant facts.” (Page 6)

“It is now apparent that those materials, which form the heart of Treasury’s administrative record and FHFA’s document compilation, are in certain respects highly misleading and in others outright false.” (Page 7)

“In light of Ms. McFarland’s testimony, Mr. Ugoletti’s sworn statement that neither agency envisioned recognition of the deferred tax assets is not credible.” (Page 9)

“Those projections, included in a presentation dated June 12, 2012, say that they were based in part on “Grant Thornton analyses” that Treasury omitted from its administrative record . . . And by the time of the Net Worth Sweep, those stale financial projections had proven to be woefully unreliable.” (Page 12)

“The Court should take judicial notice of the fact that these materials exist and that Treasury’s administrative record and FHFA’s document compilation do not accurately represent the true record before the agencies when the Net Worth Sweep was announced.” (Page 14)

“The Court should take judicial notice of the existence of documents demonstrating [REDACTED] which Defendants improperly concealed by submitting manifestly incomplete and misleading materials in the district court.” (Pages 16-17)

“Documents produced in discovery also confirm that the central defense of the Net Worth Sweep—a purported concern that the Companies’ cash dividend payments would exhaust the government funding commitment—was based on a false premise.” (Page 17)

“As the foregoing discussion of the materials attached to this motion demonstrates, Treasury’s administrative record and FHFA’s document compilation and declaration were misleading and, in certain important respects, false, and they obscured the true rationale for the Net Worth Sweep and what the Defendants considered and understood when they imposed it. It is difficult to imagine materials that go more directly [to] the heart of the matter in dispute in this case, and ‘it would be inconsistent with this court’s own equitable obligations . . . to pretend that [the materials] do not exist.’” (Page 19)


We are pleased to share these documents and encourage you to review the facts.

Sincerely,

Investor Relations

Fairholme Funds, Inc.
4400 Biscayne Blvd.
9th Floor


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