March 16, 2012

Dear Unitholders of Chou Associates Fund,
After the distribution of $1.28, the net asset value (“NAVPU” or “NAV”) of a Series A unit of Chou Associates Fund at December 31, 2011 was $65.94 compared to $80.89 at December 31, 2010, a decrease of 16.9%; during the same period, the S&P 500 Total Return Index increased 4.4% in Canadian dollars. In $US, a Series A unit of Chou Associates Fund decreased 18.8% while the S&P 500 Total Return Index increased 2.1%.

The table shows our 1 year, 3 year, 5 year, 10 year and 15 year annual compound rates of return.

Factors Influencing the 2011 Results
The majority of the losses incurred by the Fund were related to our investments in the retail and financial sectors. 2011 was a year in which macro events, such as concerns about the sustainability of the economic recovery in the U.S., uncertainty in Europe, and growing concerns of a slowdown in China, made stocks that we still believe are undervalued go down further.

Positive contributors to the Fund’s performance were equity securities of Sanofi, Watson Pharmaceuticals, Valeant Pharmaceuticals, and the debt securities of Level 3 Communications.

Securities that declined the most in 2011 were equity securities of Sears Holdings, Sprint Nextel, Overstock.com, AbitibiBowater, and Class A warrants of Bank of America.

In 2011, we identified a number of equities and non-investment grade debt securities that we view as undervalued.

 In equities, we believe the financial, retail and pharmaceutical sectors are undervalued. Thus, as the prices of financial and retail sector equities fell during 2011, we added to our positions. We favour a basket approach versus concentrating on one or two stocks in any sector.

Investing in U.S. Financial Institutions
We continue to believe that most financial institutions are undervalued and present excellent, longterm investment opportunities.
Since 2010, we have invested in the common stocks of banks and in their TARP warrants. The latter are stock warrants that were issued to the U.S. Treasury by the banks when they received funds under TARP. These stock warrants give the holder the right to buy the bank’s stock at a specific price. When the banks repaid TARP funds to the U.S. Treasury, the U.S. Treasury either sold the stock warrants back to the banks or auctioned them to the public.
AR11