Our Funds: Chou Opportunity Fund || Chou Income Fund

Chou Opportunity Fund

Investment Objective

The investment objective of the Chou Opportunity Fund (the “Opportunity Fund”) is long-term growth of capital.

Principal Investment Strategies

The Opportunity Fund seeks to invest primarily in the equity securities of companies located in developed and emerging markets throughout the world that Chou believes are available at market prices less than their value. The Opportunity Fund will focus its investments in areas where it finds the most compelling opportunities at any given moment and on situations that, in Chou’s opinion, have the potential for long-term growth of capital. Once an investment is made, the Opportunity Fund expects to be a patient, long-term investor. Portfolio holdings are typically concentrated in 10 to 35 securities without limits as to the size of an issuer, the issuer’s earnings or the industry in which it operates. The equity securities in which the Opportunity Fund invests include common and preferred stock, convertible securities, American Depositary Receipts (“ADRs”), pooled investment vehicles, including private equity and hedge funds, rights and warrants. The Opportunity Fund may sell a security if Chou believes that: (1) the market has recognized the security’s full potential value; (2) the security’s fundamentals have deteriorated; or (3) alternative investments have become more attractive.

The Opportunity Fund also may invest globally in debt securities, including government and corporate bonds, high yield bonds, commercial paper, mortgage or asset-backed securities and repurchase agreements. Chou may decide to invest the Opportunity Fund’s debt investments in short-term fixed-income securities during periods deemed by Chou to be of high market valuations and volatility. Such short-term fixed-income securities may include money market funds that invest principally in U.S. Treasury bills, notes and bonds and repurchase agreements backed by such securities and bank deposits. This strategy may permit Chou to preserve capital while awaiting more favorable market conditions.

The Opportunity Fund may invest in income trusts, bank debt and deposits, lower-rated, distressed or defaulted debt securities, comparable unrated debt securities or other indebtedness (or participations in the indebtedness) of such companies. The debt securities which the Opportunity Fund may purchase may either be unrated, or rated in any rating category established by one or more independent rating organizations, such as Standard & Poor’s Ratings Group (“S&P”) or Moody’s Investors Service (“Moody’s”). The Opportunity Fund may invest in debt securities that are of any credit quality and maturity, and rated below investment grade (i.e., “junk bonds”) and thus rated below “Baa3” or lower by Moody’s or “BBB-” or lower by S&P or unrated, and securities in default or distressed.

The Opportunity Fund may use financial instruments (including derivatives) as part of its principal investment strategies, as more fully described in the prospectus. The Opportunity Fund may also lend securities in its portfolio in order to earn additional income and manage its portfolio.

 

Principal Risks

The Opportunity Fund’s net asset value (“NAV”) and investment return will fluctuate based upon changes in the value of its portfolio securities. You could lose money on your investment in the Opportunity Fund or the Opportunity Fund could underperform other investments. An investment in the Opportunity Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. For the primary risk details, please read our Prospectus.

Fees & Expenses

Shareholder Fees (fees paid directly from your investment)  
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of the sale price) None
Maximum Deferred Sales Charge (Load) Imposed on Reinvested Dividends and Other Distributions (as a percentage of the offering price) None
Redemption Fee (as a percentage of amount redeemed within 120 days of purchase, if applicable) 2.00%
Exchange Fee None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)  
Management Fees 1.00%
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.28%
Total Annual Fund Operating Expenses 1.28%
Waivers and Reimbursements (0.08)%
Total Annual Fund Operating Expenses After Waivers and Reimbursements(1) 1.20%

(1) Chou America Management Inc. (“Chou” or the “Adviser”) has contractually agreed to waive a portion of its fee and/or reimburse Opportunity Fund expenses to limit Total Annual Fund Operating Expenses (excluding other expenses, taxes, leverage interest, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions, and extraordinary expenses such as litigation) to 1.20% through at least May 1, 2017 (“Expense Cap”). The Expense Cap may be changed or eliminated at any time with the consent of the Board of Trustees of Chou America Mutual Funds (the “Board”). Net Annual Fund Operating Expenses will increase if exclusions from the Expense Cap apply.

Top Holdings

As of March 31, 2017
Ranking Security Name Security Type Percentage of Assets
1
EXCO RESOURCES 1.75L (12.5% CASH-15.0% PIK Oct-26-2020) Term Loan
23.47%
2
UNION BANK INSTL TR DEPO Cash
16.74%
3
RESOLUTE FOREST PRODUCTS Common Stock
14.39%
4
SEARS HOLDINGS CORP Common Stock
6.84%
5
VALEANT PHARMACEUTICALS Common Stock
5.89%
6
ENDO INTERNATIONAL PLC Common Stock
5.00%
7
GENERAL MOTORS COMPANY Warrants
4.22%
8
JPMORGAN CHASE Warrants
3.93%
9
BANK OF AMERICA Warrants
3.73%
10
ASCENT CAPITAL GROUP (CLASS A) Common Stock
3.62%
  TOTAL TOP 10 HOLDINGS  
87.83%