-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L+PFMgnnj2PTLXdzPWcfB766TW5XWoTPTwy8V9c37yDJjUiy0vtlWV5p+RLzst4O H+mCRe4aHinC+DTmXAzH5w== 0000919574-02-000914.txt : 20020430 0000919574-02-000914.hdr.sgml : 20020430 ACCESSION NUMBER: 0000919574-02-000914 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20020429 EFFECTIVENESS DATE: 20020501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEQUOIA FUND INC CENTRAL INDEX KEY: 0000089043 IRS NUMBER: 132663968 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-35566 FILM NUMBER: 02624946 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVE STREET 2: SUITE 4701 CITY: NEW YORK STATE: NY ZIP: 10153-4798 BUSINESS PHONE: 2128325280 MAIL ADDRESS: STREET 1: 767 FIFTH AVE STREET 2: SUITE 4701 CITY: NEW YORK STATE: NY ZIP: 10153-4798 FORMER COMPANY: FORMER CONFORMED NAME: CIMARRON FUND INC DATE OF NAME CHANGE: 19700625 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEQUOIA FUND INC CENTRAL INDEX KEY: 0000089043 IRS NUMBER: 132663968 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-01976 FILM NUMBER: 02624948 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVE STREET 2: SUITE 4701 CITY: NEW YORK STATE: NY ZIP: 10153-4798 BUSINESS PHONE: 2128325280 MAIL ADDRESS: STREET 1: 767 FIFTH AVE STREET 2: SUITE 4701 CITY: NEW YORK STATE: NY ZIP: 10153-4798 FORMER COMPANY: FORMER CONFORMED NAME: CIMARRON FUND INC DATE OF NAME CHANGE: 19700625 485BPOS 1 se485bpos69900020bh0.txt As filed with the Securities and Exchange Commission on April 29, 2002 File No. 2-35566 811-1976 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / / Pre-Effective Amendment No._______________________ / / Post-Effective Amendment No. 48 /x / and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / / Amendment No. 26 /x / Sequoia Fund, Inc. _________________________________________________________ (Exact Name of Registrant as Specified in Charter) 767 Fifth Avenue, New York, New York 10153 _________________________________________________________ (Address of Principal Executive Office) (Zip Code) Registrant's Telephone Number including Area Code: (800) 686-6884 Robert D. Goldfarb c/o Ruane, Cunniff & Co., Inc. 767 Fifth Avenue New York, New York 10153 (Name and Address of Agent for Service) It is proposed that this filing will become effective (check appropriate box) / / immediately upon filing pursuant to paragraph (b) / X/ on May 1, 2002 pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a)(1) / / on pursuant to paragraph (a)(1) / / 75 days after filing pursuant to paragraph (a)(2) / / on (date) pursuant to paragraph (a)(2) of Rule 485. If appropriate, check the following box: / / This post-effective amendment designates a new effective date for a previously filed post-effective amendment. PROSPECTUS May 1, 2002 Sequoia Fund, Inc. 767 Fifth Avenue New York, N.Y. 10153 (800) 686-6884 THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRE- SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS PAGE RISK/RETURN SUMMARY 3 FEES AND EXPENSES OF THE FUND 4 DESCRIPTION OF THE FUND 5 Investment Objective and Strategies 5 Risk Considerations for the Fund 5 MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE 5 MANAGEMENT OF THE FUND 6 PURCHASE AND SALE OF SHARES 6 How the Fund Values its Shares 6 How to Buy Shares 6 How to Redeem Shares 7 DIVIDENDS, DISTRIBUTIONS AND TAXES 8 FINANCIAL HIGHLIGHTS 9 RISK/RETURN SUMMARY The following is a summary of certain key information about the Fund. You will find additional information about the Fund, including a description of the principal risks of an investment in the Fund, after this summary. Objective: The Fund's investment objective is long-term growth of capital. Principal Investment Strategy: The Fund invests primarily in common stocks. The Fund invests in the securities of a limited number of companies that it believes have attractive long-term economic prospects relative to their market price. While the Fund normally invests in U.S. companies, it also may make limited investments in foreign securities (typically the Fund does not hold any significant investment in foreign securities and in no event will it invest more than 15% of the Fund's assets in 1 foreign securities). The Fund usually invests cash reserves in U.S. Government securities. Principal Risks: The principal risks of investing in the Fund are: - -- Market Risk. This is the risk that the value of the Fund's investments will fluctuate as the stock markets fluctuate and that prices overall will decline, perhaps severely, over short or longer-term periods. You may lose money by investing in the Fund. - -- Focused Portfolio Risk. The Fund is "non-diversified" meaning that it invests its assets in a smaller number of companies than many other funds. As a result, your investment has the risk that changes in the value of a single security may have a significant effect, either negative or positive, on the Fund's net asset value. Bar Chart and Performance Information The bar chart and the table shown below provide an indication of the historical risk of an investment in the Fund by showing changes in the Fund's performance from year to year over a 10- year period and by showing how the Fund's average annual returns for 1, 5, and 10 years and over the life of the Fund compare to the Standard & Poors 500 ("S&P 500"), a broad-based securities market index. The Fund's past performance, of course, does not necessarily indicate how it will perform in the future. Bar Chart 1992 9.36% 1993 10.78% 1994 3.34% 1995 41.38% 1996 21.74% 1997 43.20% 1998 35.25% 1999 -16.54% 2000 20.06% 2001 10.52% During the period shown in the bar chart, the highest return for a quarter was 21.49% (quarter ending 6/97) and the lowest return for a quarter was -14.38% (quarter ending 9/99). 2 Performance Table 1 Year 5 Years 10 Years Sequoia Fund Return Before Taxes 10.52% 16.49% 16.54% Return After Taxes on Distributions Only* 9.51% 14.68% 14.77% Return After Taxes on Distributions and Redemption of Fund Shares* 6.83% 13.52% 13.72% S&P 500** (reflects no deduction for fees, expenses or taxes) -11.91% 10.68% 12.92% ____________________ * After-tax returns are an estimate, which is calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an individual investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. ** The S&P 500 Index is composed of 500 widely held common stocks. One cannot invest directly in the Index. FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Shareholder Fees (fees paid directly from your investment) The Fund does not impose any sales charges, exchange fees or redemption fees. Annual Fund Operating Expenses (expenses that are deducted from Fund assets) and Example 3 Annual Fund Operating Expenses Management Fees 1.00% Other Expenses 0.02% Total Annual Fund Operating Expenses 1.02% Expense reimbursement* 0.02% Net expenses 1.00% _____________________ * Reflects Ruane, Cunniff & Co., Inc.'s ("Ruane Cunniff") contractual reimbursement of a portion of the Fund's operating expenses. This reimbursement is a provision of Ruane Cunniff's investment advisory agreement with the Fund, and the reimbursement will be in effect only so long as that investment advisory agreement is in effect. The Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 in the Fund for the periods indicated and then redeem all your shares at the end of those periods. It also assumes that your investment has a 5% return each year and that the Fund's operating expenses stay the same. Your actual costs may be higher or lower. 1 Year* 3 Years 5 Years 10 Years $104 $325 $563 $1,248 * The Board of Directors must approve Ruane Cunniff's investment advisory agreement each year. These examples assume that Ruane Cunniff's agreement to reimburse operating expenses is not extended beyond the first year. DESCRIPTION OF THE FUND This section of the Prospectus provides a more complete description of the Fund's investment objective and principal strategies and risks. There can, of course, be no assurance that the Fund will achieve its investment objectives. Investment Objective and Strategies The Fund's investment objective is long-term growth of capital. In pursuing this objective the Fund focuses principally on common stocks that it believes are undervalued at the time of purchase and have the potential for growth. A guiding principle is the consideration of common stocks as units of ownership of a business and the purchase of them when the price appears low in relation to the value of the total enterprise. No weight is given to technical stock market studies. The balance sheet and earnings 4 history and prospects of each investment are extensively studied to appraise fundamental value. While the Fund normally invests in U.S. companies, it also may invest in foreign securities (typically the Fund does not hold any significant investment in foreign securities and in no event will it invest more than 15% of the Fund's assets in foreign securities). The Fund is not required to be fully invested in common stocks. Risk Considerations for the Fund Market Risk - The value of the Fund's investments may change, and possibly decrease, perhaps severely, in response to fluctuations in the stock markets generally. Focused Portfolio Risk - The Fund is non-diversified and invests in the securities of a limited number of issuers. As a result, changes in the market value of a single issuer could cause greater fluctuations in the value of the Fund's shares than would occur in a more diversified fund. Other Investment Information - Ordinarily, the Fund's portfolio will be invested primarily in common stocks. However, the Fund is not required to be fully invested in common stocks and, in fact, usually maintains certain cash reserves. Depending upon market conditions, cash reserves may be a significant percentage of the Fund's net assets. The Fund usually invests its cash reserves principally in U.S. Government securities. Portfolio Turnover Rate - The portfolio turnover rate for the Fund is included in the Financial Highlights section. Normally, the Fund purchases and holds securities for sufficient periods to realize long-term capital appreciation and to qualify for long- term capital gain tax treatment. This means that the Fund's portfolio turnover rate is usually lower than many other funds. Portfolio turnover, however, will not be a limiting factor when management deems changes appropriate and the Fund's portfolio turnover in such cases may exceed 50%. A higher rate of portfolio turnover increases brokerage and other expenses and may affect the Fund's returns. A higher portfolio turnover rate also may result in the realization of net short-term capital gains, which, when distributed, are taxable to the Fund's shareholders. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE The Fund's total return for the year 2001, including the reinvestment of dividends, was 10.52%, compared to a decline of 11.91% for the Standard & Poor's Index. 5 The Fund's investment philosophy is to make concentrated investments in a limited number of companies whose long-term economic prospects, relative to the acquisition price of their stocks, are deemed to be attractive. As a result of this portfolio concentration, the performance of the Fund over time should correlate more closely with the specific financial performance of its limited number of portfolio companies than with price movements in the stock market in general. Many of the Fund's holdings were impacted to some degree by the weak economic conditions that prevailed in 2001, as well as the economic disruptions that followed the September 11 terrorist attacks. The market prices of the four largest positions in the Fund, which accounted for 60% of total assets at the beginning of 2001, rose during the year, contributing almost three quarters of the Fund's total return for the year. Progressive Corporation and TJX Companies posted particularly strong gains, with market price increases of 44.1% and 43.6%, respectively. The performance of Progressive shares reflected dramatic improvement in earnings, as the company raised rates and tightened its underwriting standards to restore its underwriting profitability to targeted levels. The rise in TJX's market price reflected the company's relatively strong results in a year when many competing retailers experienced sharp declines in revenues and earnings. Berkshire Hathaway's share price rose by 6.5% in 2001. The company's earnings dropped sharply in 2001, primarily as a result of large losses in the company's property/casualty insurance and reinsurance businesses related to the September 11 attack on the World Trade Center, as well as additions to reserves for prior years' business. Since September 11, rates in the property/casualty insurance and reinsurance businesses have risen substantially. This should result in improved underwriting profitability for Berkshire Hathaway in 2002. Fifth Third Bancorp's share price rose by 2.6% in 2001. During the year, Fifth Third completed a highly successful acquisition of Old Kent Bancorp and reported a 13% increase in operating earnings per share. The position that made the largest negative contribution to the Fund's 2001 performance was Dover Corporation. Dover's share price declined by 8.6% during the year. The company's earnings per share from continuing operations declined by 67%, as a sharp contraction in the electronics industry reduced sales and earnings in the Dover Technologies segment and general weakness in industrial markets hurt the results of Dover's other business segments. 6 During 2001, the Fund initiated new positions in Fastenal and Molex, as well as other positions that were included in miscellaneous securities at year-end. During the year, the Fund sold its holdings of Illinois Tool Works, MacDermid and National Commerce Financial, and reduced its holdings of Harley Davidson and Molex. Equity investments accounted for 80% of Sequoia's net assets at year-end 2001 compared to 75% at year-end 2000. MANAGEMENT OF THE FUND Investment Adviser The Fund's investment adviser is Ruane, Cunniff & Co., Inc., 767 Fifth Avenue, New York, New York 10153. Ruane Cunniff is a registered investment adviser and a registered broker-dealer and member corporation of the New York Stock Exchange, Inc. (the "Exchange"). Ruane Cunniff furnishes investment advisory services for the Fund. For these services, the Fund paid Ruane Cunniff 1% of the Fund's average daily net assets for the fiscal year ended December 31, 2001. This payment amounted to .98% of the Fund's average daily net assets for the fiscal year ended December 31, 2001, after subtracting certain Fund operating expenses that Ruane Cunniff reimbursed to the Fund. Portfolio Manager The following individuals serve as portfolio managers for the Fund and are primarily responsible for the day-to-day management of the Fund's portfolio: - -- William J. Ruane, Chairman. Mr. Ruane has been the Chairman of the Board of Directors and a Director of Ruane Cunniff for more than 30 years. - -- Richard T. Cunniff, Vice Chairman. Mr. Cunniff is a Director of Ruane Cunniff and, prior to 1998, was President of Ruane Cunniff for more than 30 years. - -- Robert D. Goldfarb, President. Mr. Goldfarb is President and CEO of Ruane Cunniff with which he has been associated for more than 25 years. 7 PURCHASE AND SALE OF SHARES How the Fund Values Its Shares The Fund calculates its net asset value or NAV at the close of the Exchange (normally 4:00 p.m. New York time) each day the Exchange is open for business. Generally this means any weekday exclusive of New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and Good Friday. To calculate NAV, the Fund's assets are valued and totaled, liabilities are subtracted, and the balance, called net assets, is divided by the number of shares outstanding. The Fund values its assets at their current market value determined on the basis of market quotations, or if such quotations are not readily available, such other methods as the Fund's directors believe accurately reflect fair market value. Your order for purchase of shares is priced at the next NAV per share calculated after your order is received by the Fund. If you purchase or redeem shares on a day when the Exchange is closed, the net asset value will be determined as of the close of business on the next following day that the Exchange is open for trading. The Fund reserves the right to reject any order to purchase shares (including additional investments by existing stockholders). How to Buy Shares The Fund has discontinued indefinitely the sale of its shares to new investors. The Fund will continue to accept additional investments from existing stockholders, and will continue to reinvest dividends and capital gains distributions for the accounts of existing stockholders who have elected those options. The decision to discontinue sales to new investors reflects management's belief that unrestrained growth in the Fund's net assets might impair investment flexibility and would not be in the best interests of existing stockholders. When deemed to be in the Fund's best interests, the Fund reserves the right in appropriate cases to extend the offering of the Fund's shares to other persons including employees and clients of the Adviser, to restrict sales further, or to withdraw the offering altogether, all without notice. Additional Investments - -- Minimum Amounts (except if waived for IRA and Keogh accounts): $50.00 8 - -- Forward orders to: DST Systems, Inc. Post Office Box 219477 Kansas City, Missouri 64121 - -- Orders are accepted for fractional shares. - -- The Fund will not accept third-party checks (i.e., any checks which are not made payable to the order of the Fund, DST or a retirement account custodian). - -- You may make fixed, periodic investments into the Fund by means of automatic money transfers from your bank checking accounts. To establish automatic money transfers, you may contact the Fund. Individual Retirement Accounts You also may purchase shares for an individual retirement account, or IRA, including a Roth IRA. IRA investments are available for regular contributions as well as for qualified rollover contributions of distributions received from certain employer-sponsored pension and profit-sharing plans and from other IRAs. All assets in the IRA are automatically invested in Fund shares, including all dividends and capital gain distributions paid on Fund shares held in the IRA. There is an annual fee of $12.00 for an IRA account. Keogh Plans If you are self-employed, you may purchase Fund shares through a self-employment retirement plan (often referred to as a Keogh or HR-10 plan) covering yourself and your eligible employees. How to Redeem Shares You may redeem your shares (i.e., sell your shares to the Fund) on any day the Exchange is open. Your redemption price is the next NAV per share calculated after your order is received by the Fund. There is no redemption charge. By Mail - -- You may send a written request for redemption to: DST Systems, Inc. Post Office Box 219477 Kansas City, Missouri 64121 9 - -- If you chose to have your shares issued in certificate form, your request must be accompanied by the outstanding certificates representing such shares together with a standard form of stock power signed by the registered owner or owners of such shares. - -- If your shares are represented by a Stockholder's Open Account, your redemption request must include a signature guaranteed by a national or state bank or by a member firm of a national stock exchange. - -- If your shares are represented by stock certificates, the signature on the stock power must be guaranteed as above. An acknowledgment by a notary public is not acceptable. By Telephone You may make an oral redemption request of $25,000 or less, which does not require a signature guarantee unless your address has changed within the 60 days prior to the request. All other redemption requests must have signature guarantees. Certain shareholders, such as corporations, trusts and estates, may be required to submit additional documents. Payment - -- The Fund, at the discretion of the Board of Directors, may pay the redemption price to you in cash or in portfolio securities, or partly in cash and partly in portfolio securities. - -- It is possible that the Fund's management will pay you in securities or partly in securities if the amount of shares you redeem is significant (e.g., $250,000 or more). - -- It is highly likely that the Fund's management will pay you in securities or partly in securities if you make a redemption (or series of redemptions) in the amount of $1 million or greater. - -- If the Fund pays your redemption wholly or partly in portfolio securities, you will need a brokerage account in which to receive the securities and you will incur brokerage costs in converting the securities to cash. - -- You should understand that, as a result of subsequent market volatility, the net proceeds from the ultimate sale of any securities that you receive upon a redemption may vary, either positively or negatively, and perhaps significantly, from the redemption value of your shares. If provided with notice in advance of your chosen redemption date, the Fund's management will assist you to the extent possible to minimize this potential market exposure by providing you in advance with a list of the 10 approximate number and value of the portfolio securities that you will receive. Automatic Withdrawal Plan - -- You may elect a Withdrawal Plan, at no cost, if you own or purchase shares of the Fund valued at $10,000 or more. - -- Under the Plan, you may designate fixed payment amounts that you will receive monthly or quarterly from a Withdrawal Plan Account consisting of shares of the Fund that you deposit. - -- Any cash dividends and capital gains distributions on shares held in a Withdrawal Plan Account are automatically reinvested. - -- Sufficient shares will be redeemed at NAV to provide the cash necessary for each withdrawal payment. - -- Redemptions for the purpose of withdrawals are made on or about the 15th day of the month at that day's NAV, and checks are mailed promptly thereafter. - -- If shares are registered in the name of a trustee or other fiduciary, payment will be made only to the fiduciary. - -- As withdrawal payments may include a return of principal, they cannot be considered a guaranteed annuity or actual yield of income to the investor. Continued withdrawals in excess of income will reduce and possibly exhaust invested principal, especially in the event of a market decline. Consult your own financial advisers about whether the Withdrawal Plan is appropriate for you. DIVIDENDS, DISTRIBUTIONS AND TAXES Dividends and capital gains distributions, if any, declared by the Fund on its outstanding shares will, at the election of each stockholder, be paid in cash or in additional whole or fractional shares of the Fund. If paid in additional shares, the shares will have an aggregate NAV equal to the cash amount of the dividend or distribution. You may elect to receive dividends and distributions in cash or in shares at the time you order shares. You may change your election at any time prior to the record date for a particular dividend or distribution by written request to the Fund's Dividend Disbursing Agent, DST Systems, Inc., Post Office Box 219477, Kansas City, Missouri 64121. There is no sales or other charge in connection with the reinvestment of dividends and capital gains distributions. 11 For federal income tax purposes, distributions of net income (including any short-term capital gains) by the Fund are taxable to you as ordinary income. Distributions of long-term capital gains are taxable to you as long-term capital gains. The Fund's distributions also may be subject to state and local taxes. The Fund holds portfolio securities longer than most other funds typically hold securities. As a result, unrealized capital gains represent a significant portion of the value of your investment in the Fund. As of December 31, 2001, the net unrealized appreciation of the Fund's portfolio was approximately 57% of the Fund's net asset value. If the Fund sells appreciated securities and distributes the profit, the distributed appreciation may be taxable to you as capital gains. You should carefully consider the tax effect of the Fund's substantial unrealized capital gains on your investment in the Fund. Dividends and distributions are taxable to you whether you receive the amount in cash or reinvest the amount in additional shares of the Fund. In addition, the redemption of Fund shares is a taxable transaction for federal income tax purposes whether paid in cash or in kind. If you buy shares just before the Fund deducts a distribution from its NAV, you will pay the full price for the shares and then receive a portion of the price back as a taxable distribution. Each year shortly after December 31, the Fund will send you tax information stating the amount and type of all its distributions for the year. You should consult your tax adviser about the federal, state and local tax consequences of an investment in the Fund in your particular situation. FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single share of the Fund. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by the Fund's independent accountants, PricewaterhouseCoopers, LLP, for fiscal years 2001, 2000 and 1999 and by McGladrey & Pullen, LLP for prior fiscal years. The report of PricewaterhouseCoopers, LLP, along with the Fund's financial statements, is included in the Fund's Annual Report, which is available upon request. 12
Year Ended December 31, 2001 2000 1999 1998 1997 Per Share Operating Performance (for a share outstanding throughout each year) Net asset value, beginning of year ......... $122.09 $127.27 $160.70 $125.63 $88.44 -------- -------- -------- -------- -------- Income from investment operations: Net investment income...... 0.97 1.66 0.84 0.39 0.08 Net realized and unrealized gains (losses) on investments ............... 11.52 23.33 (26.83) 43.07 38.10 -------- -------- -------- -------- -------- Total from investment operations ................ 12.49 24.99 (25.99) 43.46 38.18 -------- -------- -------- -------- -------- Less distributions: Dividends from net investment income.......... (0.97) (1.66) (0.85) (0.37) (0.08) Distributions from net realized gains ............ 3.37) (28.51) (6.59) (8.02) (0.91) -------- -------- -------- -------- -------- Total distributions........ (4.34) (30.17) (7.44) (8.39) (0.99) -------- -------- -------- -------- -------- Net asset value, end of year.................... $130.24 $122.09 $127.27 $160.70 $125.63 ========= ========= ========== ========= ========= Total Return............... 10.52% 120.06% (16.54)% 35.25% 43.20% Ratios/Supplemental data: Net assets, end of year (in millions).................. $4,230.1 $3,943.9 $3,896.9 $5,001.9 $3,672.6 Ratio to average net assets: Expenses................... 1.0% 1.0% 1.0% 1.0% 1.0% Net investment income...... 0.8% 1.2% 0.6% 0.3% 0.1% Portfolio turnover rate ... 7% 36% 12% 21% 8%
13 For more information about the Fund, the following documents are available upon request: Annual/Semi-Annual Reports to Stockholders The Fund's annual and semi-annual reports to stockholders contain additional information on the Fund's investments. The Fund's current annual/semi-annual and quarterly reports are available on the Fund's website: http://www.sequoiafund.com. Statement of Additional Information (SAI) The Fund has an SAI, which contains more detailed information about the Fund, including its operations and investment policies. The Fund's SAI is incorporated by reference into (and is legally part of) this Prospectus. You may request a free copy of the current annual/semi-annual report or the SAI, by contacting your broker or other financial intermediary, or by contacting the Fund: By mail: Sequoia Fund, Inc. 767 Fifth Avenue New York, N.Y. 10153 By phone: (800) 686-6884 Or you may view or obtain these documents from the Securities and Exchange Commission ("Commission"): - -- Call the Commission at 1-202-942-8090 for information on the operation of the Public Reference Room. - -- Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at http://www.sec.gov - -- Copies of the information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Commission's Public Reference Section, Washington, DC 20549-0102 14 Sequoia Fund, Inc. PROSPECTUS May 1, 2002 SEQUOIA FUND, INC. 767 Fifth Avenue New York, New York 10153 (Telephone 800-686-6884) STATEMENT OF ADDITIONAL INFORMATION May 1, 2002 _____________________ Sequoia Fund, Inc. (the "Fund") is a no-load, non- diversified, open-end investment company seeking long-term growth of capital. Ordinarily the Fund's portfolio will be primarily invested in common stocks and securities convertible into or exchangeable for common stocks. The Fund may invest to limited extents in foreign securities, restricted securities and special situations. _____________________ This Statement of Additional Information ("SAI") is not a prospectus and is only authorized for distribution when preceded or accompanied by the Fund's Prospectus dated May 1, 2002 (the "Prospectus"). This SAIcontains additional and more detailed information than that set forth in the Prospectus and should be read in conjunction with the Prospectus, additional copies of which may be obtained without charge by writing or telephoning the Fund at the address and telephone number set forth above or on the Fund's website: http:///www.sequoiafund.com. _____________________ Table of Contents Investment Policies 2 Management 6 Investment Adviser and Investment Advisory Contract 10 Allocation of Portfolio Brokerage 14 Net Asset Value 16 Redemption of Shares 17 Tax Considerations 17 Common Stock 19 Custodian, Counsel and Independent Accountants 19 Financial Statements and Report of Independent Accountants 19 INVESTMENT POLICIES (a) Foreign Securities Investments may be made in both domestic and foreign companies. While the Fund has no present intention to invest any significant portion of its assets in foreign securities, it reserves the right to invest not more than 15% of the value of its net assets (at the time of purchase and after giving effect thereto) in the securities of foreign issuers and obligors. Investors should recognize that investments in foreign companies involve certain considerations which are not typically associated with investing in domestic companies. An investment may be affected by changes in currency rates and in exchange control regulations. There may be less publicly available information about a foreign company than about a domestic company. Foreign companies are not generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to domestic companies. Foreign stock markets have substantially less volume than the New York Stock Exchange, Inc. (the "Exchange") and securities of some foreign companies may be less liquid and more volatile than securities of comparable domestic companies. There is generally less government regulation of stock exchanges, brokers and listed companies than in the United States. In addition, with respect to certain foreign countries there is a possibility of expropriation or confiscatory taxation, political or social instability or diplomatic developments which could affect investments in those countries. Individual foreign economies may differ favorably or unfavorably from the United States' economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. As of December 31, 2001, no foreign securities were held by the Fund. (b) Restricted or Not Readily Marketable Securities The Fund may invest in securities acquired in a privately negotiated transaction from the issuer or a holder of the issuer's securities and which may not be distributed publicly without registration under the Securities Act of 1933 ("Securities Act"). Such restricted securities may not thereafter ordinarily be sold by the Fund except in another private placement or under an effective registration statement filed pursuant to the Securities Act. The Fund will not invest in any restricted securities which will cause the then aggregate value of all of such restricted securities, as valued on the books of the Fund, to exceed 10% of the value of the Fund's net assets (at the time of such investment and after giving effect thereto). Restricted securities are valued in such manner as the 2 Board of Directors in good faith deems appropriate to reflect their fair value. The purchase price and subsequent valuations of restricted securities normally reflect a discount from the price at which such securities trade when they are not restricted, since the restriction makes them less liquid. The amount of the discount from the prevailing market price is expected to vary depending upon the type of security, the character of the issuer, the party who will bear the expenses of registering the restricted securities and prevailing supply and demand conditions. The Fund may not make loans or invest in any restricted securities or other illiquid assets which will cause the then aggregate value of all such restricted securities and other illiquid assets to exceed 10% of the value of the Fund's net assets (at the time of such investment and after giving effect thereto). As of December 31, 2001, no such securities were held by the Fund. If, pursuant to the foregoing policy, the Fund were to assume substantial positions in particular securities with a limited trading market, the activities of the Fund could have an adverse effect on the liquidity and marketability of such securities, and the Fund may not be able to dispose of its holdings in these securities at reasonable price levels. There are other investment companies and other investment media engaged in operations similar to those of the Fund, and, to the extent that these organizations trade in the same securities, the Fund may be forced to dispose of its holdings at prices lower than otherwise would be obtained. (c) Special Situations The Fund intends to invest in special situations from time to time. A special situation arises when, in the opinion of the Fund's management, the securities of a particular company will, within a reasonably estimable period of time, be accorded market recognition at an appreciated value solely by reason of a development particularly or uniquely applicable to that company and regardless of general business conditions or movements of the market as a whole. Developments creating special situations might include, among others, the following: liquidations, reorganizations, recapitalizations or mergers; material litigation; technological breakthroughs; and new management or management policies. Although large and well-known companies may be involved, special situations often involve much greater risk than is inherent in ordinary investment securities. The Fund will not, however, purchase securities of any company with a record of less than three years' continuous operation (including 3 that of predecessors) if such purchase would cause the Fund's investments in all such companies to exceed 25% of the value of the Fund's total assets. (d) Other Investment Policies The Fund will not seek to realize profits by anticipating short-term market movements and intends to purchase securities for growth of capital, in particular long-term capital appreciation. In any event, under ordinary circumstances, securities will be held for sufficient periods to qualify for long-term capital gain treatment for tax purposes. While the rate of portfolio turnover will not be a limiting factor when management deems changes appropriate, it is anticipated that given the Fund's investment objectives, its annual portfolio turnover generally should not exceed 75%. (Portfolio turnover is calculated by dividing the lesser of the Fund's purchases and sales of portfolio securities during the period in question by the monthly average of the value of the Fund's portfolio securities during that period. Excluded from consideration in the calculation are U.S. Government securities and all other securities with maturities of one year or less when purchased by the Fund.) A diversified investment company may not invest more than 5% of its total assets in the securities of any one issuer and may not own more than 10% of the outstanding voting securities of any one issuer. While the Fund is a non- diversified investment company and therefore is not subject to any statutory diversification requirements, it will be required to meet certain diversification tests each year in order to qualify as a regulated investment company under the Internal Revenue Code, as it intends to do. See "Tax Considerations, page 15. The Fund will not acquire more than 25% of any class of the securities of any issuer. The Fund reserves the right, without stockholder action, to diversify its investments to any extent it deems advisable or to become a diversified company, but once the Fund becomes a diversified company, it could not thereafter change its status to that of a non-diversified company without the approval of its stockholders. The Fund has adopted certain investment restrictions as a matter of fundamental investment policy, which may not be changed without a stockholder vote of a majority of the outstanding voting securities as defined in Section 2(a)(42) of the Investment Company Act of 1940 ("1940 Act"). The Fund may not: 1. Underwrite the securities of other issuers, except the Fund may, as indicated above (see "Restricted or Not Readily Marketable Securities," page 2), acquire restricted 4 securities under circumstances where, if such securities are sold, the Fund might be deemed to be an underwriter for purposes of the Securities Act. 2. Purchase or sell real estate or interests in real estate, but the Fund may purchase marketable securities of companies holding real estate or interests in real estate. 3. Purchase or sell commodities or commodity contracts. 4. Make loans to other persons except by the purchase of a portion of an issue of publicly distributed bonds, debentures or other debt securities, except that the Fund may purchase privately sold bonds, debentures or other debt securities immediately convertible into equity securities subject to the restrictions applicable to the purchase of not readily marketable securities. (See "Restricted or Not Readily Marketable Securities," page 2.) 5. Borrow money except for temporary or emergency purposes and then only from banks and in an aggregate amount not exceeding 5% of the value of the Fund's total assets at the time any borrowing is made, provided that the term "borrow" shall not include the short-term credits referred to in paragraph 6 below. 6. Purchase securities on margin, but it may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities. 7. Make short sales of securities. 8. Purchase or sell puts and calls on securities. 9. Participate on a joint or joint and several basis in any securities trading account. 10. Purchase the securities of any other investment company except (1) in the open market where to the best information of the Fund no commission, profit or sales charge to a sponsor or dealer (other than the customary broker's commission) results from such purchase, or (2) if such purchase is part of a merger, consolidation or acquisition of assets. 11. Invest in companies for the purpose of exercising management or control. 5 12. Invest more than 25% of the value of its net assets (at the time of purchase and after giving effect thereto) in the securities of any one issuer. 13. Issue senior securities, except as permitted by the 1940 Act. In connection with the qualification or registration of the Fund's shares for sale under the State securities laws of certain States, the Fund has agreed, in addition to the investment restrictions set forth above, that it will not (i) purchase material amounts of restricted securities, (ii) invest more than 5% of the value of its total assets in securities of unseasoned issuers (including their predecessors) which have been in operation for less than three years, and equity securities of issuers which are not readily marketable, (iii) invest any part of its assets in interests in oil, gas or other mineral or exploration or development programs (excluding readily marketable securities), (iv) purchase or retain any securities of another issuer of which those persons affiliated with the Fund or Ruane, Cunniff & Co., Inc., the Fund's investment adviser ("the Investment Adviser"), owning, individually, more than one-half of one percent of said issuer's outstanding stock (or securities convertible into stock) own, in the aggregate, more than five percent of said issuer's outstanding stock (or securities convertible into stock) and (v) invest in warrants (other than warrants acquired by the Fund as a part of a unit or attached to securities at the time of purchase), if as a result such warrants valued at the lower of cost or market, would exceed 5% of the value of the Fund's assets at the time of purchase provided that not more than 2% of the Fund's net assets at the time of purchase may be invested in warrants not listed on the Exchange or the American Stock Exchange. The Fund may from time to time agree to additional investment restrictions for purposes of compliance with the securities laws of those States where the Fund intends to sell or offer for sale its shares. Any such additional restrictions that would have a material bearing on the Fund's operations will be reflected in supplements to this SAI or related Prospectus. MANAGEMENT BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Board of Directors is set forth below. 6
Dollar Range of Equity Securities Of the Principal Corporation Position(s) Years of Occupation(s) Other Director- as of Held with Service as During Past ships Held December 31, Name, Address* and Age the Fund a Director 5 Years by Director 2001 - --------------------- ----------- ---------- ------------- --------------- ----------- INTERESTED DIRECTORS** William J. Ruane, 76 Chairman of 32 Chairman of the None Over $100,000 the Board of Board of Directors (1)(2) Directors and Director, Ruane, and Director Cunniff & Co., Inc. (member firm of the New York Stock Exchange, Inc.), with which he has been associated for more than five years. Richard T. Cunniff, 79 Vice Chairman 32 Vice Chairman and Sturm, Ruger & Over $100,000 and Director Director, Ruane, Company, Inc. (2)(3) Cunniff & Co., Inc., with which he has been associated for more than five years. Robert D. Goldfarb, 57 President and 21 President and None Over $100,000 Director Director, Ruane, (2)(4) Cunniff & Co., Inc., with which he has been associated for more than five years. Carol L. Cunniff, 51 Executive Vice 3 Executive Vice None Over $100,000 President and President and (2)(5) Director Director, Ruane, Cunniff & Co., Inc., with which she has been associated for 7 more than five years. DISINTERESTED DIRECTORS Vinod Ahooja, 50, ***, + Director 1 Currently retired. None None Mr. Ahooja was a Partner with Goldman Sachs & Co. from 1990 to 1993. Roger Lowenstein, 48, Director 3 A writer who None Over $100,000 (6) ***, + regularly contributes to major financial and news publications; he was a writer for the Wall Street Journal from 1979 to 1991 and 1995 to 1997. Francis P. Matthews, 80, Director 29 Currently retired. None Over $100,000 (7) ***, + Mr. Matthews was Of Counsel to Matthews & Cannon, P.C. (law firm) from 1986 to 1990. C. William Neuhauser, 76, Director 27 Currently retired. None Over $100,000 (8) ***, + Mr. Neuhauser was Executive Secretary of National Maritime Council from 1979 to 1981. Robert L. Swiggett, 80, Director 31 Currently retired. UNUM Corporation Over $100,000 ***, + Mr. Swiggett was Chairman of the Board of Directors and Director of Kollmorgen Corporation (electro-optical instruments, direct- drive motor and control devices and systems) from 1983 to 1990. 8 - ------------------------------------------------------------------------------------------------- * The address for each of the Fund's Directors is 767 Fifth Avenue, New York, New York 10153. ** "Interested person," as defined in the 1940 Act, of the Fund because of an affiliation with the Fund's investment adviser. *** Member of the Audit Committee + Member of the Nominating Committee of the Fund. (1) In addition, (a) 179,708 shares of such stock are owned by Mr. Ruane's relatives or by trusts in which Mr. Ruane's relatives have beneficial interests and (b) Mr. Ruane is Trustee of the Carmel Hill Fund, the assets of which include 256,075 shares of such stock; however, beneficial ownership by Mr. Ruane of such shares shall not be deemed to be hereby admitted. (2) Messrs. Ruane, Cunniff, Goldfarb and Ms. Cunniff are officers, directors and voting stockholders of Ruane, Cunniff & Co., Inc., which is the owner of 26,650 shares of the Fund's Common Stock. (See "Certain Information as to Directors and Officers of the Fund and its Investment Adviser," below). In addition, Messrs. Ruane and Cunniff are trustees and beneficiaries of the Profit-Sharing and Money Purchase Plans of Ruane, Cunniff & Co., Inc., which own 184,975 shares of the Fund's Common Stock. (3) In addition, 48,493 shares of such stock are owned by Mr. Cunniff's relatives, but beneficial ownership by Mr. Cunniff of such shares shall not be deemed to be hereby admitted. (4) In addition, 48,746 shares of such stock are owned by Mr. Goldfarb's relatives, but beneficial ownership by Mr. Goldfarb of such shares shall not be deemed to be hereby admitted. (5) In addition, 14,145 shares of such stock are owned by Ms. Cunniff's relatives, but beneficial ownership by Ms. Cunniff of such shares shall not be deemed to be hereby admitted. (6) In addition, 347 shares of such stock are owned by Mr. Lowenstein's relatives, but beneficial ownership by Mr. Lowenstein of such shares shall not be deemed to be hereby admitted. (7) In addition, 1,692 shares of such stock are owned by Mr. Matthews' relatives, but beneficial ownership by Mr. Matthews of such shares shall not be deemed to be hereby admitted. (8) In addition, 1,125 shares of such stock are owned by Mr. Neuhauser's relatives, but beneficial ownership by Mr. Neuhauser of such shares shall not be deemed to be hereby admitted.
9 OFFICER INFORMATION Certain information concerning the Fund's officers is set below. Position(s) - (Month and Year Principal Occupation Name, Address* and Age First Elected) during the past 5 years - ---------------------- ---------------- ----------------------- Robert D. Goldfarb (57) President (7/98) See biography above. Carol L. Cunniff (51) Executive Vice See biography above. President (4/98) Joseph Quinones, Jr. (56) Vice President, Vice President, Secretary Secretary and and Treasurer, Ruane Treasurer (6/95) Cunniff & Co., Inc., with which he has been associated for more than five years. - ------------------------------------------------------------------------------ * The address for each of the Fund's officers is 767 Fifth Avenue, New York, New York 10153. On April 1, 2002, the directors and officers of the Fund collectively owned approximately .93%, or, including shares owned by their respective relatives and affiliates, approximately 3.39%, of the total number of the outstanding shares of the Fund's Common Stock. Each of the directors and officers disclaims beneficial ownership of the shares owned by such relatives and affiliates. The Fund's Board of Directors has two standing committees of the board - an Audit Committee and a Nominating Committee. The members of the Audit and Nominating Committees are identified above. The function of the Audit Committee is to assist the Board of Directors in its oversight of the Fund's financial reporting process. The Audit Committee met one time during the Fund's most recently completed fiscal year, on June 4, 2001. The function of the Nominating Committee is to nominate persons to fill any vacancies on the Board of Directors. The Nominating Committee will consider for nomination candidates proposed by shareholders for election as Directors. The Nominating Committee met one time during the Fund's most recently completed fiscal year, on May 8, 2001, to consider the appointment of Mr. Vinod Ahooja to the Board of Directors to replace Mr. John M. Harding. 10 The Fund does not pay any fees to, or reimburse expenses of, its Directors who are considered "interested persons" of the Fund. The aggregate compensation for the fiscal year ended December 31, 2001 paid by the Fund to each of the Directors is set forth below. The Investment Adviser does not provide investment advisory services to any investment companies registered under the 1940 Act other than the Fund. Pension or Retirement Estimated Aggregate Benefits Accrued Annual Total Compensation As Part of Benefits Upon Compensation Name of Director from Fund Fund Expenses Retirement From Fund ________________ ____________ ________________ _____________ ____________ William J. Ruane $0 $-0- $-0- $0 Richard T. Cunniff $0 -0- -0- $0 Carol L. Cunniff $0 -0- -0- $0 Robert D. Goldfarb $0 -0- -0- $0 John M. Harding* $14,500 -0- -0- $14,500 Vinod Ahooja $19,500 -0- -0- $19,500 Roger Lowenstein $34,000 -0- -0- $34,000 Francis P. Matthews $34,000 -0- -0- $34,000 C. William Neuhauser $34,000 -0- -0- $34,000 Robert L. Swiggett $34,000 -0- -0- $34,000 * Mr. Harding resigned as a Director for the Fund effective May 8, 2001. The Investment Adviser and the Fund have adopted a Code of Ethics that permits the Investment Adviser's employees and Fund personnel to invest in securities, including securities that may be held or purchased by the Fund. The Code of Ethics contains trading restrictions, pre-clearance procedures and reporting procedures designed to detect and prevent potential conflicts of interest. 11 INVESTMENT ADVISER AND INVESTMENT ADVISORY CONTRACT The terms of the Investment Advisory Contract (the "Contract") provide that it is to remain in force until December 31, 1993 and thereafter for successive twelve-month periods computed from each January 1, provided that such continuance is specifically approved annually by vote of a majority of the Fund's outstanding voting securities or by the Fund's Board of Directors; and by a majority of the Fund's Board of Directors who are not parties to the Contract or interested persons of any such party, by vote cast in person at a meeting called for the purpose of voting on such approval. Renewal of the Contract through December 31, 2002 was so approved by the Board of Directors and by the disinterested directors at a meeting of the Board of Directors on December 10, 2001 at which meeting the Board of Directors also approved the submission to stockholders of the Fund of the renewal of the Contract for the period commencing January 1, 2002, pursuant to the provisions of the 1940 Act and the terms of the Contract described above. In approving the renewal of the Contract, the Directors considered all information they deemed reasonably necessary to evaluate the terms of the Contract. The Directors' evaluation of the quality of the Investment Adviser's services took into account written analyses of the profitability of the Fund for the ten-month period ended October 31, 2001, and of the portfolio brokerage commissions paid by the Fund to Ruane Cuniff during the first ten months of the fiscal year. In addition, the Board of Directors considered written calculations of the Fund's net asset value per share at December 7, 2001, the cost and market value of the Fund's investments and a survey prepared by management of the Fund of open-end, no load mutual funds currently paying investment advisory fees of 1% or more. The income and expenses of the Fund and the profitability of the Fund to the Investment Adviser were considered by the Directors in their analysis. The performance of the Fund was also considered, in light of the Investment Adviser's compliance with investment policies and applicable laws and regulations and of related reports by management and the Fund's independent auditors in periodic meetings with the Fund's Audit Committee. The Directors also reveiwed the fees payable under the Contract, comparing the fees and overall expense level of the Fund to those of competitive funds and other funds with similar investment objectives. Pursuant to the terms of the Contract, the Investment Adviser furnishes advice and recommendations with respect to the Fund's portfolio of securities and investments and provides persons satisfactory to the Fund's Board of Directors to act as officers and employees of the Fund. Such officers and employees, as well as certain directors of the Fund, may be directors, 12 officers or employees of the Investment Adviser or its affiliates. In addition, the Investment Adviser is obligated under the Contract to pay or reimburse the Fund for the following expenses incurred by the Fund: (i) the compensation of any of the Fund's directors, officers and employees who are interested persons of the Investment Adviser or its affiliates (other than by reason of being directors, officers or employees of the Fund), (ii) fees and expenses of registering the Fund's shares under the appropriate federal securities laws and of qualifying its shares under applicable State Blue Sky laws, including expenses attendant upon renewing and increasing such registrations and qualifications, and (iii) expenses of printing and distributing the Fund's prospectuses and sales and advertising materials. The Fund is responsible and has assumed the obligation for payment of all of its other expenses including (a) brokerage and commission expenses, (b) Federal, State or local taxes, including issue and transfer taxes, incurred by or levied on the Fund, (c) interest charges on borrowings, (d) compensation of any of the Fund's directors, officers or employees who are not interested persons of the Investment Adviser or its affiliates (other than by reason of being directors, officers or employees of the Fund), (e) charges and expenses of the Fund's custodian, transfer agent and registrar, (f) costs of proxy solicitations, (g) legal and auditing expenses, and (h) payment of all investment advisory fees (including the fee payable to the Investment Adviser under the Contract). The Contract is terminable on 60 days' written notice by vote of a majority of the Fund's outstanding shares or by vote of majority of the Fund's entire Board of Directors, or by the Investment Adviser on 60 days' written notice and automatically terminates in the event of its assignment. The Contract provides that in the absence of willful misfeasance, bad faith or gross negligence on the part of the Investment Adviser, or of reckless disregard of its obligations thereunder, the Investment Adviser is not liable for any action or failure to act in accordance with its duties thereunder. For the services provided by the Investment Adviser under the Contract, the Investment Adviser receives from the Fund a management fee equal to 1% per annum of the Fund's average daily net asset values. The management fee is accrued daily in computing the net asset value of a share for the purpose of determining the offering and redemption price per share, and is paid to the Investment Adviser at the end of each month. However, under the terms of the Contract, the Investment Adviser will reimburse the Fund for the amount, if any, by which the operating expenses of the Fund in any year, including the 13 management fee, exceed 1-1/2% of the average daily net asset values of the Fund during such year up to a maximum of $30,000,000, plus 1% of the average daily net asset values in excess of $30,000,000. Operating expenses for the purposes of the Contract do not include the expenses listed in clauses (a), (b) and (c) above. Computation of this limitation is made monthly during the Fund's fiscal year, on the basis of the average daily net asset values and operating expenses to that point during such year, and the amount of the excess, if any, over the prorated amount of the expense limitation is paid by the Investment Adviser to the Fund (or, where such amount of the excess is less than the monthly payment by the Fund to the Investment Adviser of the management fee, is deducted from such monthly payment of the management fee), after taking into account, however, any previous monthly payments under the operating expense limitation during such fiscal year. The amount of operating expenses incurred by the Fund during the fiscal year ended December 31, 2001 was $40,506,200 of which the Investment Adviser reimbursed the Fund $836,000 pursuant to the expense limitation described above. During the fiscal year ended December 31, 2000, the Fund incurred operating expenses of $37,528,400 of which the Investment Adviser reimbursed the Fund $691,000. During the fiscal year ended December 31, 1999, the Fund incurred operating expenses of $46,159,200 of which the Investment Adviser reimbursed the Fund $729,000. The Investment Adviser may act as an investment adviser to other persons, firms or corporations (including investment companies), and has numerous advisory clients besides the Fund, none of which, however, is a registered investment company. The Investment Adviser is a registered investment adviser and a registered broker-dealer and member corporation of the Exchange. The Investment Adviser has also been and may in the future be the Fund's regular broker. The Investment Adviser also serves without compensation as the Fund's distributor and as such is authorized to solicit orders from the public to purchase shares of the Fund's common stock. The distributor acts in this capacity merely as the Fund's agent, and all subscriptions must be accepted by the Fund as principal. Mr. William J. Ruane and Mr. Richard T. Cunniff are the controlling shareholders of the Investment Adviser. Management Fee The following chart sets forth, for each of the last three years, (i) the management fee which was received by the Investment Adviser, (ii) the portion, if any, of such fee 14 reimbursed to the Fund pursuant to the expense limitation described above and (iii) the net amount received by the Investment Adviser from the Fund. Management Amount Net Amount Year Ended Fee Reimbursed Received __________ __________ __________ __________ December 31, 1999 $45,280,173 $729,000 $44,551,173 December 31, 2000 $36,687,368 $691,000 $35,996,368 December 31, 2001 $39,520,181 $836,000 $38,684,181 ________________________________________________________________ ALLOCATION OF PORTFOLIO BROKERAGE The Fund and the Investment Adviser generally do not direct the Fund's portfolio transactions to persons or firms because of research services provided by such person or firm. While neither the Fund nor the Investment Adviser has a present intention of doing so, the Investment Adviser may execute transactions in the Fund's portfolio securities through persons or firms which supply investment information to the Fund or the Investment Adviser, but only when consistent with the Fund's policy to seek the most favorable markets, prices and executions in its securities transactions. The Fund may invest in some instances in securities which are not listed on a national securities exchange but are traded in the over-the-counter market or the third market. It may also execute transactions in listed securities through the third market. Where transactions are executed in the over-the- counter market or the third market, the Investment Adviser seeks to deal with primary market makers and to execute transactions on the Fund's own behalf, except in those circumstances where, in the opinion of management, better prices and executions may be available elsewhere. The Fund does not allocate brokerage business in return for sales of the Fund's shares. The following chart sets forth figures pertaining to the Fund's brokerage during the last three years: 15 Brokerage Commissions Total Paid to Brokerage Ruane, Year Commissions Cunniff Ended Paid & Co., Inc. _____ ___________ ___________ December 31, 1999 $ 167,850 $ 131,970 December 31, 2000 $1,826,430 $1,804,650 December 31, 2001 $ 230,029 $ 178,290 ___________________________________________________________ During the year ended December 31, 2001, the brokerage commissions paid to the Investment Adviser represented approximately 77.5% of the total brokerage commissions paid by the Fund during such year and were paid on account of transactions having an aggregate dollar value equal to approximately 74.1% of the aggregate dollar value of all portfolio transactions of the Fund during such year for which commissions were paid. INDIVIDUAL RETIREMENT ACCOUNTS Individuals generally may make regular contributions to a traditional IRA of up to $3,000 annually. Individuals age 50 or over may make an additional contribution of $500. The deductibility for Federal income tax purposes of such contributions may be reduced if the individual is an active participant in an employer-sponsored retirement plan. For 2001, if an individual is an active participant, the deduction will not be available if, (i) the individual has adjusted gross income above $44,000, (ii) the individual files a joint return with his or her spouse and they have adjusted gross income above $64,000, or (iii) the individual is married, files separately and has adjusted gross income above $10,000. Further, in the case of a married individual who is not an active participant but whose spouse is an active participant, the deduction will not be available if the couple files a joint return and has adjusted gross income above $160,000 (or, if such individual files separately and has adjusted gross income above $10,000). Below these income levels, some or all of the contributions may be deductible. In addition, an individual with a non-working spouse may establish a separate IRA for the spouse and annually contribute a total of up to $6,000 to the two IRAs, provided that no more than $3,000 may be contributed to the IRA of either spouse. As noted above, the deductibility of contributions may be reduced if either spouse is an active participant in an employer-sponsored retirement plan. No regular contribution may be made to a traditional IRA for any year if by the end of such year the IRA owner has attained the age 70 1/2. 16 ROTH IRAS Eligible individuals also may elect to make contributions to a Roth IRA of up to $3,000 annually. Individuals age 50 or over may make an additional contribution of $500. Contributions to a Roth IRA are not deductible for Federal income tax purposes. Investment earnings accumulate in a Roth IRA tax-free, and if certain criteria are met, distributions from the account will not be taxed. Contributions may not be made to a Roth IRA by an individual with adjusted gross income above $110,000, a married couple filing a joint return with adjusted gross income above $160,000, or a married individual filing separately with adjusted gross income above $10,000. Below these income levels, a taxpayer may make contributions to a Roth IRA, although the allowable contribution may be less than $3,000. The total amount contributed by an individual to all IRAs (both traditional and Roth) in a year may not exceed $3,000. Contributions to a Roth IRA may be made even if the IRA owner has attained the age 70 1/2. KEOGH PLANS Generally, the annual amount which a self-employed individual may deduct for contributions to his own account under a self-employment retirement plan (often referred to as a Keogh or HR-10 plan) may be up to 100% of his or her net earnings from self-employment (depending on the particular type of plan or plans involved), up to a maximum contribution of $40,000. The Fund does not have a form of Keogh plan available for adoption. NET ASSET VALUE The net asset value of each share of the Fund's Common Stock on which the subscription and redemption prices are based is determined once each Fund Business Day as of the close of the Exchange by the value of the securities and other assets owned by the Fund less its liabilities, computed in accordance with the Articles of Incorporation and By-Laws of the Fund. Fund Business Day for this purpose means any weekday exclusive of New Year's Day, Martin Luther King, Jr. Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and Good Friday. The net asset value of a share is the quotient obtained by dividing the net assets of the Fund (i.e., the value of the assets of the Fund less its liabilities, including expenses payable or accrued but excluding capital stock and surplus) by the total number of shares of Common Stock outstanding. For purposes of this computation, readily marketable portfolio securities listed on the Exchange are valued at the last sales price on theExchange on the business day as of which such value is being determined. If there has been no sale on the Exchange on such day, the security is valued at the mean of the 17 closing bid and asked prices on such day. If no bid and asked prices are quoted on such Exchange on such day, then the security is valued by such method as the Board of Directors of the Fund shall determine in good faith to reflect its fair market value. Readily marketable securities not listed on the Exchange but listed on other national securities exchanges are valued in like manner. Securities which are listed on the NASDAQ National Market System shall be valued at the last sale price prior to the time of the determination of value; or if no sales are reported on that date at the mean of the current bid and asked price. Treasury Bills with remaining maturities of 60 days or less are valued at their amortized cost. Under the amortized cost method of valuation, an instrument is valued at cost and the interest payable at maturity upon the instrument is accrued as income, on a daily basis, over the remaining life of the instrument. A Treasury Bill that when purchased had a remaining maturity in excess of sixty days is valued on the basis of market quotations and estimates as described above until the sixtieth day prior to maturity, at which point it is valued at amortized cost. In that event, the "cost" of the security is deemed to be the security's stated market value on the sixty-first day prior to maturity. All other assets of the Fund, including restricted and not readily marketable securities, are valued in such manner as the Board of Directors of the Fund in good faith deems appropriate to reflect their fair value. The net asset value for each share of Common Stock on which the subscription and redemption prices are based is determined as of the close of business on the Exchange next following the receipt by the Fund of the subscription or request for redemption. REDEMPTION OF SHARES The right of redemption may not be suspended or (other than by reason of a stockholder's delay in furnishing the required documentation following certain oral redemption requests) the date of payment upon redemption postponed for more than seven days after a stockholder's redemption request in accordance with the procedures set forth in the Prospectus, except for any period during which the Exchange is closed (other than customary week-end and holiday closings) or during which the Securities and Exchange Commission determines that trading thereon is restricted, or for any period during which an emergency (as determined by the Securities and Exchange Commission) exists as a result of which disposal by the Fund of securities owned by it is not reasonably practicable or as a result of which it is not reasonably practicable for the Fund fairly to determine the value of its net assets, or for such other period as the Securities and Exchange Commission may by order permit for the protection of security holders of the Fund. 18 TAX CONSIDERATIONS The Fund is a "non-diversified" investment company, which means the Fund is not limited (subject to the investment restrictions set forth on pages 4-5) in the proportion of its assets that may be invested in the securities of a single issuer. However, for the fiscal year ended December 31, 2001 the Fund has qualified, and for each fiscal year thereafter, the Fund intends to conduct its operations so as to qualify to be taxed as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended, which will relieve the Fund of any liability for Federal income tax on that part of its net ordinary taxable income and net realized long-term capital gain which it distributes to stockholders. Such qualification does not involve supervision of management or investment practices or policies by any government agency. To so qualify, among other requirements, the Fund will limit its investments so that, at the close of each quarter of the taxable year, (i) not more than 25 percent of the market value of the Fund's total assets will be invested in the securities of a single issuer ("the 25% test"), and (ii) with respect to 50 percent of the market value of its total assets, not more than five percent of the market value of its total assets will be invested in the securities of a single issuer and the Fund will not own more than 10 percent of the outstanding voting securities of a single issuer ("the 50% test"). The Fund's investments in U.S. Government securities are not subject to these limitations. The Fund will not lose its status as a regulated investment company if the Fund fails to meet the 25% test or the 50% test at the close of a particular quarter due to fluctuations in the market values of its securities. Investors should consult their own counsel for a complete understanding of the requirements the Fund must meet to qualify as a regulated investment company. The following discussion relates solely to the Federal income tax treatment of dividends and distributions by the Fund and assumes the Fund qualifies as a regulated investment company. Investors should consult their own counsel for further details and for the application of state and local tax laws to their particular situation. Distributions of net ordinary taxable income (including any realized short-term capital gain) by the Fund to its stockholders are taxable to the recipient stockholders as ordinary income and, to the extent determined each year, are eligible, in the case of corporate stockholders, for the 70 percent dividends-received deduction, subject to reduction of the amount eligible for deduction if the aggregate qualifying dividends received by the Fund from domestic corporations in any year are less than 100% of its gross income (excluding long-term capital gains from securities transactions). Under provisions of the current tax law, a corporation's dividends-received deduction 19 will be disallowed, however, unless the corporation holds shares in the Fund at least 46 days during the 90-day period beginning 45 days before the date on which the corporation becomes entitled to receive the dividend. Furthermore, the dividends-received deduction will be disallowed to the extent a corporation's investment in shares of the Fund is financed with indebtedness. In view of the Fund's investment policies, dividends from domestic corporations may be a large part of the Fund's ordinary taxable income and, accordingly, a large part of such distributions by the Fund may be eligible for the dividends- received deduction; however, this is largely dependent on the Fund's investment policy for a particular year and therefore cannot be predicted with certainty. For the year ended December 31, 2001, 19.7% of the net ordinary taxable income distributed by the Fund was eligible for such deduction by corporate stockholders. COMMON STOCK The Articles of Incorporation of the Fund give the Fund the right to purchase for cash the shares of Common Stock evidenced by any stock certificate presented for transfer at a purchase price equal to the aggregate net asset value per share determined as of the next close of business of the Exchange after such certificate is presented for transfer, computed as in the case of a redemption of shares. The Fund's shares have non-cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of directors can elect 100% of the directors if they choose to do so, and in such event the holders of the remaining less than 50% of the shares voting for such election of directors will not be able to elect any person or persons to the Board of Directors. As of April 1, 2002, Trustees of Grinnell College (Grinnell, Iowa 50112) beneficially owned 4,530,218 shares of the Fund on such date (representing 13.93% of the outstanding Common Stock of the Fund). Bankers Trust Company as Trustee for the Walt Disney Company Employees Master Retirement Plan (280 Park Avenue, New York, New York 10022) and Fidelity Management Trust Company as Trustee of the Walt Disney Company Employees Benefit Plan Trust Employees Profit Sharing Plan Trust (100 Magellan Way, Covington, Kentucky 41015-1987) together beneficially owned 2,548,699 shares of the Fund (representing 7.83% of the outstanding Common Stock of the Fund). The Northern Trust Company as Custodian for FMC Corporation Master Retirement Trust (P. O. Box 92956, Chicago, Illinois 60675-2956) and Fidelity Management Trust Company as Trustee for the FMC Corporation Plans (100 Magellan Way, Covington, Kentucky 41015-1987) together owned 1,936,020 shares of the Fund (representing 5.95% of the 20 outstanding common stock of the Fund). No other person beneficially owned five percent or more of the Fund's Common Stock on such date. CUSTODIAN, COUNSEL AND INDEPENDENT ACCOUNTANTS The Bank of New York, Mutual Funds Relationship Management, 15 Broad Street, 7th Floor, New York, New York 10286, acts as custodian for the Fund's securities portfolio and cash. Subject to the supervision of the Board of Directors, The Bank of New York may enter into sub-custodial agreements for the holding of the Fund's foreign securities. Legal matters in connection with the issuance of the shares of Common Stock offered hereby are passed upon by Seward & Kissel LLP, One Battery Park Plaza, New York, New York 10004. PricewaterhouseCoopers, LLP, 1177 Avenue of the Americas, New York, New York 10036 has been appointed independent accountants for the Fund. FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS The financial statements and the report of PricewaterhouseCoopers, LLP of the Fund are incorporated herein by reference to its annual report filing made with the Securities and Exchange Commission pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder. The annual report is dated December 31, 2001 and was filed on March 1, 2002. It is available without charge upon request by contacting the Fund at 1-800-686-6884. 21 SEQUOIA FUND, INC. PART C - OTHER INFORMATION Item 23. Exhibits The following Exhibits are filed as part of this Post-Effective Amendment to Registrant's Registration Statement: (a) (1) Articles of Incorporation - Incorporated by reference to Exhibit (1)(a) of Post- Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998. (2) Articles of Amendment - Incorporated by reference to Exhibit (1)(b) of Post- Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998. (3) Articles of Amendment - Incorporated by reference to Exhibit (1)(c) of Post- Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998. (4) Articles of Amendment - Incorporated by reference to Exhibit (1)(d) of Post- Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998. (5) Articles of Amendment - Incorporated by reference to Exhibit (1)(e) of Post- Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998. (6) Articles Supplementary - Filed herewith. C-1 (b) By-Laws - Filed herewith. (d) Advisory Agreement between the Registrant and Ruane, Cunniff & Co., Inc. - Incorporated by reference to Exhibit (5) of Post-Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998. (e) Distribution Agreement between the Registrant and Ruane, Cunniff & Stires, Inc. - Incorporated by reference to Exhibit (6) of Post-Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998. (g) Custody Agreement between the Registrant and The Bank of New York - Incorporated by reference to Exhibit (8) of Post-Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998. (h) Services Agreement between the Registrant and DST Systems, Inc. - Incorporated by reference to Exhibit (9) of Post-Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998. (i) Opinion and Consent of Seward & Kissel LLP - Filed herewith. (j) Consent of PricewaterhouseCoopers, LLP - Filed herewith. (p) Code of Ethics - Incorporated by reference to Other Exhibits of Post-Effective Amendment No. 47 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 20, 2001. C-2 Other Exhibits: Powers of Attorney of Messrs. Harding, Matthews, Neuhauser and Swiggett - Incorporated by reference to Other Exhibits of Post-Effective Amendment No. 43 of the Registrant's Registration Statement on Form N-1A (File Nos. 2- 35566 and 811-1976) filed with the Securities and Exchange Commission on April 17, 1998; Power of Attorney for Mr. Lowenstein - Incorporated by reference to Other Exhibits of Post- Effective Amendment No. 47 of the Registrant's Registration Statement on Form N-1A (File Nos. 2-35566 and 811-1976) filed with the Securities and Exchange Commission on April 20, 2001. Item 24. Persons Controlled by or Under Common Control with Registrant. No such persons. Item 25. Indemnification. The Registrant incorporates herein by reference the response to "Item 19. Indemnification of Directors and Officers" of Registrant's Form N-8B-1 Registration Statement under the Investment Company Act of 1940 (File No. 811-1976) and its response to Item 27 of Post-Effective Amendment No. 30 to this Registration Statement. Item 26. Business and Other Connections of Investment Adviser. Ruane, Cunniff & Co., Inc., the Registrant's investment adviser and the distributor of the Registrant's shares, is a registered broker-dealer and member corporation of the New York Stock Exchange, Inc. Its investment advisory clients besides the Registrant include pension and profit-sharing trusts, corporations and individuals. Item 27. Principal Underwriters. (a) No such investment company. (b) The following are the directors and officers of Ruane, Cunniff & Co., Inc. The principal business address of each of these persons is 767 Fifth Avenue, New York, New York 10153. C-3 (1) (2) (3) Positions and Positions and Offices Offices with Name with Underwriters Registrant ____ _____________________ _____________ William J. Ruane Chairman of the Chairman of the Board of Directors Board of Directors and Director and Director Richard T. Cunniff Vice Chairman and Vice Chairman and Director Director Robert D. Goldfarb President and President Director and Director Carol L. Cunniff Executive Executive Vice Vice President President and and Director Director Joseph Quinones, Jr. Vice President, Vice President, Secretary and Secretary and Treasurer Treasurer (c) Not applicable. Item 28. Location of Accounts and Records. Accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder are maintained in the physical possession of (i) the Registrant, (ii) The Bank of New York, 100 Church Street, 10th Floor, New York, New York 10286, the Registrant's custodian, or (iii) DST Systems, Inc., 21 West 10th Street, Kansas City, Missouri 64105, the Registrant's transfer agent and dividend disbursing agent. Item 29. Management Services. No such management-related service contracts. Item 30. Undertakings. Not applicable. C-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, and State of New York, on the 20th day of April, 2001. SEQUOIA FUND, INC. By /s/ Robert D. Goldfarb ______________________ President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registrant's Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Capacity Date _________ ________ ______ (1) Principal Executive Officer /s/ Robert D. Goldfarb President and 4/29/02 ________________________ Director Robert D. Goldfarb (2) Principal Financial and Accounting Officer /s/ Joseph Quinones, Jr. Treasurer 4/29/02 ________________________ Joseph Quinones, Jr. C-5 (3) All of the Directors /s/ William J. Ruane 4/29/02 ________________________ William J. Ruane /s/ Richard T. Cunniff 4/29/02 ________________________ Richard T. Cunniff /s/ Carol L. Cunniff 4/29/02 ________________________ Carol L. Cunniff /s/ Robert D. Goldfarb 4/29/02 ________________________ Robert D. Goldfarb Vinod Ahooja Roger Lowenstein Francis P. Matthews C. William Neuhauser Robert L. Swiggett By /s/ Robert D. Goldfarb 4/29/02 ______________________ Robert D. Goldfarb Attorney-in-Fact C-6 INDEX TO EXHIBITS (a) Articles Supplementary (b) By-Laws (i) Opinion and Consent of Seward & Kissel LLP (j) Consent of PricewaterhouseCoopers LLP C-7 69900020.BH0 EX-99.A CHARTER 3 a69900020bg8.txt SEQUOIA FUND, INC. ARTICLES SUPPLEMENTARY Sequoia Fund, Inc., a Maryland corporation having its principal office in the State of Maryland in the City of Baltimore (hereinafter called the "Corporation"), certifies that: FIRST: The Board of Directors of the Corporation hereby increases the aggregate number of shares of capital stock that the Corporation has authority to issue by 60,000,000 shares, all of which shall be shares of Common Stock. SECOND: A. Immediately before the increase in authorized capital stock provided for herein, the total number of shares of capital stock which the Corporation had authority to issue was 40,000,000 shares of Common Stock, the par value of such shares being $.10 per share, with an aggregate par value of $4,000,000. B. Immediately after the increase in authorized capital stock provided for herein, the total number of shares of capital stock which the Corporation has authority to issue is 100,000,000 shares of Common Stock, the par value of such shares being $.10 per share, with an aggregate par value of $10,000,000. THIRD: The Corporation is registered as an open-end company under the Investment Company Act of 1940. FOURTH: The total number of shares that the Corporation has authority to issue has been increased by the Board of Directors of the Corporation in accordance with Section 2-105(c) of the Maryland General Corporation Law. FIFTH: The shares aforesaid have been duly classified by the Corporation's Board of Directors pursuant to authority and power contained in the Corporation's Charter. IN WITNESS WHEREOF, Sequoia Fund, Inc. has caused these Articles Supplementary to be executed by the Chairman of the Board of Directors of the Corporation and witnessed by its Secretary as of this day of June, 1998. The Chairman of the Board of Directors of the Corporation who signed these Articles Supplementary acknowledges them to be the act of the Corporation and states under the penalties of perjury that, to the best of his knowledge, information and belief, the matters and facts set forth herein relating to authorization and approval hereof are true in all material respects. SEQUOIA FUND, INC. By:____________________ William J. Ruane Chairman WITNESS: Joseph Quinones, Jr. Secretary 2 69900020.BG8 EX-99.B BYLAWS 4 b69900020bh5.txt BY-LAWS OF SEQUOIA FUND, INC. ARTICLE I Offices Section 1. Principal Office in Maryland. The principal office shall be in the City of Baltimore, State of Maryland. Section 2. Other Offices. The Corporation may have offices also at such other places within and without the State of Maryland as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II Meetings of Stockholders Section 1. Place of Meeting. Meetings of stockholders shall be held at such place, either within the State of Maryland or at such other place within the United States, as shall be fixed from time to time by the Board of Directors. Section 2. Annual Meetings. Annual meetings of stockholders shall be held on a date fixed from time to time by the Board of Directors within 120 days after the close of each fiscal year of the Corporation, for the election of directors and the transaction of any other business within the powers of the Corporation; provided, however, that the Corporation shall not be required to hold an annual meeting in any year in which the election of directors is not required to be acted on by stockholders under the Investment Company Act of 1940 (the "1940 Act"). Section 3. Notice of Annual Meeting. Written or printed notice of the annual meeting, stating the place, date and hour thereof, shall be given to each stockholder entitled to vote thereat not less than ten or more than ninety days before the date of the meeting. Section 4. Special Meetings. Special meetings of stockholders may be called by the chairman of the Board of Directors or the president and shall be called by the secretary upon the written request of holders of shares entitled to cast not less than twenty-five per cent of all the votes entitled to be cast at such meeting. Such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on thereat. In the case of such request for a special meeting, upon payment by such stockholders to the Corporation of the estimated reasonable cost of preparing and mailing a notice of such meeting, the secretary shall give the notice of such meeting. The secretary shall not be required to call a special meeting to consider any matter which is substantially the same as a matter acted upon at any special meeting of stockholders held within the preceding twelve months unless requested to do so by holders of shares entitled to cast not less than a majority of all votes entitled to be cast at such meeting. Section 5. Notice of Special Meeting. Written or printed notice of a special meeting of stockholders, stating the place, date, hour and purpose thereof, shall be given by the secretary to each stockholder entitled to vote thereat not less than ten nor more than ninety days before the date fixed for the meeting. Section 6. Business of Special Meetings. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice thereof. Section 7. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. Section 8. Voting. When a quorum is present at any meeting, the affirmative vote of a majority of the votes cast shall decide any question brought before such meeting, unless the question is one upon which by express provision of the 1940 Act, as from time to time in effect, or other statutes or rules or orders of the Securities and Exchange Commission or any successor thereto or of the Articles of Incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Proxies. Each stockholder shall at every meeting of stockholders be entitled to one vote in person or by proxy for each share of the Common Stock having voting power held by such stockholder, but no proxy shall be voted after three years from its date, unless otherwise provided in the proxy. Section 10. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date which shall be not more than ninety days and, in the case of a meeting of stockholders, not less than ten days prior to the date on which the particular action requiring such determination of stockholders is to be taken. In lieu of fixing a record date, the Board of Directors 2 may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, twenty days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days immediately preceding such meeting. If no record date is fixed and the stock transfer books are not closed for the determination of stockholders: (1) The record date for the determination of stockholders entitled to notice of, or to vote at, a meeting of stockholders shall be at the close of business on the day on which notice of the meeting of stockholders is mailed or the day thirty days before the meeting, whichever is the closer date to the meeting and (2) The record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any rights shall be at the close of business on the day on which the resolution of the Board of Directors, declaring the dividend or allotment of rights, is adopted, provided that the payment or allotment date shall not be more than sixty days after the date of the adoption of such resolution. Section 11. Inspectors of Election. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consent determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting or any stockholder, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. Section 12. Informal Action by Stockholders. Except to the extent prohibited by the 1940 Act, as from time to time in effect, or rules or orders of the Securities and Exchange Commission or any successor thereto, any action required or permitted to be taken at any meeting of stockholders may be taken 3 without a meeting if a consent in writing, setting forth such action, is signed by all the stockholders entitled to vote on the subject matter thereof and any other stockholders entitled to notice of a meeting of stockholders (but not to vote thereat) have waived in writing any rights which they may have to dissent from such action, and such consent and waiver are filed with the records of the Corporation. ARTICLE III Board of Directors Section 1. Number of Directors. The number of directors which shall constitute the entire Board of Directors shall be seven (9/12/80). By amendment of this By-Law the number may be increased or decreased from time to time by the vote of a majority of the entire Board of Directors within the limits permitted by law but at no time may be more than twenty, but the tenure of office of a director in office at the time of any decrease in the number of directors shall not be affected as a result thereof. The directors shall be elected to hold office at the annual meeting of stockholders, except as provided in Section 2 of this Article, and each director shall hold office until the next annual meeting of stockholders or until his successor is elected and qualified. Any director may resign at any time upon written notice to the Corporation. Any director may be removed, either with or without cause, at any meeting of stockholders duly called and at which a quorum is present by the affirmative vote of the majority of the votes entitled to be cast thereon, and the vacancy in the Board of Directors caused by such removal may be filled by the stockholders at the time of such removal. Directors need not be stockholders. Section 2. Vacancies and Newly-created Directorships. Any vacancy occurring in the Board of Directors for any cause other than by reason of an increase in the number of directors may be filled by a majority of the remaining members of the Board of Directors although such majority is less than a quorum. Any vacancy occurring by reason of an increase in the number of directors may be filled by a majority of the directors then in office, though less than a quorum. A director elected by the Board of Directors to fill a vacancy shall be elected to hold office until the next annual meeting of stockholders or until his successor is elected and qualifies. Section 3. Powers. The business and affairs of the Corporation shall be managed by the Board of Directors which shall exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-Laws conferred upon or reserved to the stockholders. 4 Section 4. Annual Meeting. The first meeting of each newly elected Board of Directors shall be held immediately following the adjournment of the annual meeting of stockholders and at the place thereof. No notice of such meeting to the directors shall be necessary in order legally to constitute the meeting, provided a quorum shall be present. In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. Section 5. Other Meetings. The Board of Directors of the Corporation or any committee thereof may hold meetings, both regular and special, either within or without the State of Maryland. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the chairman of the Board of Directors or the president and shall be called by the secretary on the written request of two or more directors. Notice of special meetings of the Board of Directors shall be given by the secretary to each director at least three days before the meeting if by mail or at least 24 hours before the meeting if given in person or by telephone or by telegraph. The notice need not specify the business to be transacted. Section 5. Quorum and Voting. At meetings of the Board of Directors, two of the directors in office at the time, but in no event less than one-third of the entire Board of Directors, shall constitute a quorum for the transaction of business. The action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 6. Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, appoint from among its members an executive committee and other committees of the Board of Directors, each committee to be composed of two or more of the directors of the Corporation. The Board of Directors may, to the extent provided in the resolution, delegate to such committees, in the intervals between meetings of the Board of Directors, any or all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, except the power to declare dividends, to issue stock or to recommend to stockholders any action requiring stockholders' approval. Such committee or committees shall have the name or names as may be determined from time to time by resolution adopted by the Board of Directors. Unless the Board of Directors designates one or more directors as alternate members 5 of any committee, who may replace an absent or disqualified member at any meeting of the committee, the members of any such committee present at any meeting and not disqualified from voting may, whether or not they constitute a quorum, unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member of such committee. At meetings of any such committee, a majority of the members or alternate members of such committee shall constitute a quorum for the transaction of business and the act of a majority of the members or alternate members present at any meeting at which a quorum is present shall be the act of the committee. Section 7. Minutes of Committee Meetings. The committees shall keep regular minutes of their proceedings. Section 8. Informal Action by Board of Directors and Committees. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or committee. Section 9. Meetings by Conference Telephone. The members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and such participation shall constitute presence in person at such meeting. Section 10. Fees and Expenses. The directors may be paid their expenses of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like reimbursement and compensation for attending committee meetings. ARTICLE IV Notices Section 1. General. Notices to directors and stock-holders mailed to them at their post office addresses appearing on the books of the Corporation shall be deemed to be given at the time when deposited in the United States mail. 6 Section 2. Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes, of the Articles of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent of notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE V Officers Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders and shall be a chairman of the Board of Directors, a president, a secretary and a treasurer. The chairman of the Board of Directors shall be chosen from among the directors of the Corporation. The Board of Directors may choose also such vice presidents and additional officers or assistant officers as it may deem advisable. Any number of offices, except the offices of president and vice president, may be held by the same person. No officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law to be executed, acknowledged or verified by two or more officers. Section 2. Other Officers and Agents. The Board of Directors may appoint such other officers and agents as it desires who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 3. Tenure of Officers. The officers of the Corporation shall hold office at the pleasure of the Board of Directors. Each officer shall hold his office until his successor is elected and qualifies or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors when, in its judgment, the best interests of the Corporation will be served thereby. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors. Section 4. Chairman of the Board of Directors. The chairman of the Board of Directors shall be the chief executive officer of the Corporation, shall preside at all meetings of the stockholders and the Board of Directors, shall have general and 7 active management of the business of the Corporation, shall have such other powers and perform such other duties as are usually incident to the chief executive officer of a corporation, shall have such other powers and perform such other duties as may be assigned to him by the Board of Directors from time to time, and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall execute on behalf of the Corporation, and may affix the seal of the Corporation to all instruments requiring such execution, except where such instruments are required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. Section 5. President. In the absence or inability to act of the chairman of the Board of Directors, the president shall perform all of the duties and may exercise all of the powers of the chairman of the Board of Directors. He also shall have such other powers and shall perform such other duties as may be assigned to him by the Board of Directors or the chairman of the Board of Directors from time to time. Section 6. Vice Presidents. The vice presidents shall act under the direction of the president and in the absence or disability of the president shall perform the duties and exercise the powers of the president. They shall perform such other duties and have such other powers as the president or the Board of Directors may from time to time prescribe. The Board of Directors may designate one or more executive vice presidents or may otherwise specify the order of seniority of the vice presidents and, in that event, the duties and powers of the president shall descend to the vice presidents in the specified order of seniority. Section 7. Secretary. The secretary shall act under the direction of the chairman of the Board of Directors. Subject to the direction of the president he shall attend all meetings of the Board of Directors and all meetings of stockholders and record the proceedings in a book to be kept for that purpose and shall perform like duties for the committees designated by the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the president or the Board of Directors. He shall keep in safe custody the seal of the Corporation and shall affix the seal or cause it to be affixed to any instrument requiring it. Section 8. Assistant Secretaries. The assistant secretaries in the order of their seniority, unless otherwise determined by the president or the Board of Directors, shall, in the absence or 8 disability of the secretary, perform the duties and exercise the powers of the secretary. They shall perform such other duties and have such other powers as the president or the Board of Directors may from time to time prescribe. Section 9. Treasurer. The treasurer shall act under the direction of the chairman of the Board of Directors. Subject to the direction of the chairman of the Board of Directors he shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the president or the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation. Section 10. Assistant Treasurers. The assistant treasurers in the order of their seniority, unless otherwise determined by the president or the Board of Directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. They shall perform such other duties and have such other powers as the president or the Board of Directors may from time to time prescribe. ARTICLE VI Capital Stock Section 1. General. Every holder of Common Stock of the Corporation who has made full payment of the consideration for such stock shall be entitled upon request to have a certificate, signed by, or in the name of the Corporation by, the chairman of the Board of Directors, the president or a vice president and countersigned by the treasurer or an assistant treasurer or the secretary or an assistant secretary of the Corporation, certifying the number of whole shares of Common Stock owned by him in the Corporation. Section 2. Fractional Share Interests or Scrip. The Corporation may, but shall not be obliged to, issue fractions of a share of Common Stock, arrange for the disposition of fractional interests by those entitled thereto, pay in cash the fair value of fractions of a share of Common Stock as of the time when those entitled to receive such fractions are determined, or issue scrip or other evidence of ownership which shall entitle the holder to receive a certificate for a full share of Common 9 Stock upon the surrender of such scrip or other evidence of ownership aggregating a full share. Fractional shares of Common Stock shall have proportionately to the respective fractions represented thereby all the rights of whole shares, including the right to vote, the right to receive dividends and distributions and the right to participate upon liquidation of the Corporation, excluding however the right to receive a stock certificate representing such fractional shares. The Board of Directors may cause such scrip or evidence of ownership to be issued subject to the condition that it shall become void if not exchanged for certificates representing full shares of Common Stock before a specified date or subject to the condition that the shares of Common Stock for which such scrip or evidence of ownership is exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of such script or evidence of ownership, or subject to any other reasonable conditions which the Board of Directors shall deem advisable, including provision for forfeiture of such proceeds to the Corporation if not claimed within a period of not less than three years after the date of the original issuance of scrip certificates. Section 3. Signatures on Certificates. Any of or all the signatures on a certificate may be a facsimile. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall cease to be such officer before such certificate is issued, it may be issued with the same effect as if he were such officer at the date of issue. The seal of the Corporation or a facsimile thereof may, but need not, be affixed to certificates of stock. Section 4. Lost, Stolen or Destroyed Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of any affidavit of that fact by the person claiming the certificate or certificates to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost, stolen or destroyed. Section 5. Transfer of Shares. Upon request by the registered owner of shares, and if a certificate has been issued to represent such shares upon surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares of Common Stock duly endorsed or accompanied by proper evidence of 10 succession, assignment or authority to transfer, subject to the Corporation's rights to purchase such shares, it shall be the duty of the Corporation, if it is satisfied that all provisions of the Articles of Incorporation, of the By-Laws and of the law regarding the transfer of shares have been duly complied with, to record the transaction upon thereto upon request for such certificate, and cancel the old certificate, if any. Section 6. Registered Owners. The Corporation shall be entitled to recognize the person registered on its books as the owner of shares to be the exclusive owner for all purposes including redemption, voting and dividends, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Maryland. Section 7. Right of Corporation to Purchase Shares. (a) The Board of Directors in its sole and absolute discretion upon presentation for transfer of any certificate evidencing Common Stock of the Corporation, may purchase for the Corporation, without prior notice, the share or shares of Common Stock represented by such certificate by paying therefor a sum in cash equal to the net asset value of such share or shares, computed in accordance with the Articles of Incorporation and these By-laws, as of the close of business of the New York Stock Exchange on the day the certificate for such share or shares is received for transfer, provided such share is received by the Corporation prior to such close of business; if such share is received by the Corporation after such close of business or on a day on which the New York Stock Exchange is not open for unrestricted trading, the net asset value shall be determined as of the close of business of said Exchange on the first business day on which said Exchange is open for unrestricted trading next succeeding such day of receipt; provided, however, that written advice to the transferor and proposed transferee of such share or shares of such purchase must be given within seven days following the date of the receipt of the certificate representing such share or shares and payment of the purchase price shall be made as soon as is reasonably practicable thereafter. (b) The Board of Directors may authorize one or more officers of the Corporation to exercise its right to purchase any Common Stock of the Corporation in specific cases or generally. ARTICLE VII Net Asset Value For the purposes of the computation of net asset value, as referred to in the Articles of Incorporation or these By-Laws, the following rules shall apply: 11 (a) The net asset value of each share of Common Stock of the Corporation for the purpose of the issue or sale of such Common Stock at its net asset value shall be determined as of the close of business of the New York Stock Exchange on the date on which the subscription for such Common Stock is accepted provided such subscription is accepted prior to such close of business; if such subscription is accepted after such close of business or if such date of acceptance is a day on which the New York Stock Exchange is not open for unrestricted trading, the net asset value shall be determined as of the close of business of said Exchange on the first business day thereafter on which subscriptions for Common Stock are accepted by the Corporation and on which said Exchange is open for unrestricted trading. (b) The net asset value of each share of Common Stock of the Corporation surrendered to the Corporation for redemption pursuant to the Articles of Incorporation or these By-Laws shall be determined as of the close of business of the New York Stock Exchange on the date on which such Common Stock is so surrendered, provided such share is received by the Corporation prior to such close of business; if such share is received by the Corporation after such close of business or on a day on which the New York Stock Exchange is not open for unrestricted trading, the net asset value shall be determined as of the close of business of said Exchange on the first business day on which said Exchange is open for unrestricted trading next succeeding such date of receipt. (c) The net asset value of each share of Common Stock of the Corporation as of the close of business of the New York Stock Exchange on any day shall be the quotient obtained by dividing the value, as at such close, of the net assets of the Corporation (i.e., the value of the assets of the Corporation less its liabilities exclusive of capital stock and surplus) by the total number of shares of Common Stock outstanding at such close, all determined and computed as follows: (1) The assets of the Corporation shall be deemed to include (A) all cash on hand, on deposit, or on call, (B) all bills and notes and accounts receivable, (C) all shares of stock and subscription rights and other securities owned or contracted for 12 by the Corporation, other than shares of its own Common Stock, (D) all stock and cash dividends and cash distributions to be received by the Corporation and not yet received by it but declared to stockholders of record on or before the time at which the net asset value is being determined, (E) all interest accrued on any interest bearing securities owned by the Corporation and (F) all other property of every kind and nature including prepaid expenses; the value of such assets to be determined as follows: (a) Securities listed or admitted to trading an a national securities exchange shall be valued at their last sale price prior to the time of the determination of value; or if no sales are reported on that date at the mean of the current bid and asked price. Securities listed or admitted to trading on more than one national securities exchange shall be valued at the last sale price or at the mean of the last quoted bid and asked price, whichever is appropriate, on the exchange which in the opinion of the Board of Directors represents the principal market for such securities. Unlisted securities shall be valued at the mean of the current bid and asked price as obtained from at least two dealers regularly making a market in such securities, provided that when a bid and asked price can be obtained from only one such dealer such securities shall be valued at the mean of the bid and asked price obtained from such dealer. Securities and other assets for which market quotations are not readily available shall be valued at their fair value, as determined by or under the authority of the Board of Directors. (2) The liabilities of the Corporation shall include (A) all bills and notes and accounts payable, 13 (B) all administrative expenses payable and/or accrued (including management and advisory fees payable and/or accrued, including in the case of any contingent feature thereof, an estimate based on the facts existing at the time), (C) all contractual obligations for the payment of money or property, including the amount of any unpaid dividend declared upon the Corporation's Common Stock and payable to stockholders of record on or before the time at which net asset value is being determined, (D) all reserves, if any, authorized or approved by the Board of Directors for taxes, including reserves for taxes at current rates based on any unrealized appreciation in the value of the assets of the Corporation and (E) all other liabilities of the Corporation of whatsoever kind and nature except liabilities represented by outstanding capital stock and surplus of the Corporation. (3) For the purposes hereof: (A) Common Stock subscribed for shall not be deemed to be outstanding until immediately after the time as of which its net asset value is determined as provided in the Articles of Incorporation next following the acceptance of the subscription therefor and the subscription price thereof shall not be deemed to be an asset of the Corporation until such time, but immediately thereafter such capital stock shall be deemed to be outstanding and until paid the subscription price thereof shall be deemed to be an asset of the Corporation. (B) Common Stock surrendered for redemption by the Corporation pursuant to the provisions of the Articles of Incorporation or purchased by the Corporation pursuant to the provisions of the Articles of Incorporation or these By-Laws shall be deemed to be outstanding to and including the time as of which its net asset value is determined as provided in the Articles of Incorporation but not thereafter, and thereupon and until paid the redemption or 14 purchase price thereof shall be deemed to be a liability of the Corporation. (C) Changes in the holdings of the Corporation's portfolio securities shall be accounted for on a trade date basis. (D) Expenses, including management and advisory fees, shall be included to date of calculation. In addition to the foregoing, the Board of Directors is empowered subject to applicable legal requirements, in its absolute discretion, to establish other methods for determining the net asset value of each share of Common Stock of the Corporation and to determine other times within which not asset value shall be in effect for purposes of computing the price at which stock shall be issued, redeemed or repurchased. ARTICLE VIII Miscellaneous Section 1. Reserves. There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for repairing or maintaining any property of the Corporation, or for the purchase of additional property, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve. Section 2. Dividends. Dividends upon the Common Stock of the Corporation may, subject to the provisions of the Articles of Incorporation and of the provisions of applicable law, be declared by the Board of Directors at any time. Dividends may be paid in cash, in property or in shares of the Corporation's Common Stock, subject to the provisions of the statute and of the Articles of Incorporation and of applicable law. Section 3. Capital Gains Distributions. The amount and number of capital gains distributions paid to the stockholders during each fiscal year shall be determined by the Board of Directors. Each such payment shall be accompanied by a statement as to the source of such payment, to the extent required by law. Section 4. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or 15 such other person or persons as the Board of Directors may from time to time designate. Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 6. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Maryland". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in another manner reproduced. Section 7. Filing of By-Laws. A certified copy of the By- Laws, including all amendments, shall be kept at the principal office of the Corporation in the State of Maryland. Section 8. Annual Report. The books of account of the Corporation shall be examined by an independent firm of public accountants at the close of each annual fiscal period of the Corporation and at such other times, if any, as may be directed by the Board of Directors of the Corporation. Within 120 days of the close of each annual fiscal period a report based upon such examination at the close of that fiscal period shall be mailed to each stockholder of the Corporation of record at the close of such annual fiscal period, unless the Board of Directors shall set another record date, at his address as the same appears on the books of the Corporation. Each such report shall contain such information as is required to be set forth therein by the 1940 Act and the rules and regulations promulgated by the Securities and Exchange Commission thereunder. Such report shall also be submitted at the annual meeting of the stockholders and filed within twenty days thereafter at the principal office of the Corporation in the State of Maryland. In any year in which the Corporation is not required to hold an annual meeting, the report shall be placed on file at the Corporation's principal office in the State of Maryland within 120 days after the end of the fiscal year. Section 9. Stock Ledger. The Corporation shall maintain at its principal office outside of the State of Maryland an original or duplicate stock ledger containing the names and addresses of all stockholders and the number of shares of stock held by each stockholder. Such stock ledger may be in written form or in any other form capable of being converted into written form within a reasonable time for visual inspection. Section 10. Custodian. All securities and similar investments owned by the Corporation shall be held by a custodian which shall be either a trust company or a national bank of good standing, having a capital surplus and undivided profit aggregating not less than two million dollars ($2,000,000), or a member firm of 16 the New York Stock Exchange. The terms of custody of such securities and cash shall include such provisions required to be contained therein by the 1940 Act and the rules and regulations promulgated thereunder by the Securities and Exchange Commission. Upon the resignation or inability to serve of any such custodian the Corporation shall: (a) use its best efforts to obtain a successor custodian, (b) require the cash and securities of the Corporation held by the custodian to be delivered directly to the successor custodian, and (c) in the event that no successor custodian can be found, submit to the stockholders of the Corporation, before permitting delivery of such cash and securities to anyone other than a successor custodian, the question whether the Corporation shall be dissolved or shall function without a custodian; provided, however, that nothing herein contained shall prevent the termination of any agreement between the Corporation and any such custodian by the affirmative vote of the holders of a majority of all the capital stock of the Corporation at the time outstanding and entitled to vote. Upon its resignation or inability to serve and pending action by the Corporation as set forth in this section, the custodian may deliver any assets of the Corporation held by it to a qualified bank or trust company in the City of New York, or to a member firm of the New York Stock Exchange selected by it, such assets to be held subject to the terms of custody which governed such retiring custodian. Section 11. Investment Adviser. The Corporation may enter into a management or advisory, underwriting, distribution or administration contract with any person, firm, partnership, association or corporation but such contract or contracts shall continue in effect only so long as such continuance is specifically approved annually by a majority of the Board of Directors or by vote of the holders of a majority of the voting Securities of the Corporation, and in either case by vote of a majority of the directors who are not parties to such contract or interested persons (as defined in the 1940 Act) of any such party cast in person at a meeting called for the purpose of voting on such approval. 17 ARTICLE IX Amendments The Board of Directors shall have the power, by a majority vote of the entire Board of Directors at any meeting thereof, to make, alter and repeal by-laws of the Corporation. 18 69900020.BH5 EX-99.I LEGAL OPININ 5 i69900020bh8.txt SEWARD & KISSEL LLP ONE BATTERY PARK PLAZA NEW YORK, NEW YORK 10004 Telephone: (212) 574-1200 Facsimile: (212) 480-8421 April 29, 2002 Sequoia Fund, Inc. 767 Fifth Avenue New York, New York 10153 Dear Sirs: We have acted as counsel for Sequoia Fund, Inc., a Maryland corporation (the "Company"), in connection with the registration of an indefinite number of shares of the Company's common stock, par value $.10 per share (the "Common Stock"), under the Securities Act of 1933, as amended. As counsel for the Company we have participated in the preparation of Post-Effective Amendment No. 48 to the Company's Registration Statement on Form N-1A relating to such shares (File Nos. 2-35566 and 811-1976) (the "Registration Statement"). We have examined the Charter and By-Laws of the Company and have examined and relied upon such corporate records of the Company and such other documents as we have deemed to be necessary to render the opinion expressed herein. Based on such examination, we are of the opinion that the shares of Common Stock of the Company to be offered for sale pursuant to the Registration Statement are, to the extent of the number of shares authorized to be issued by the Company in its Charter, duly authorized and, when sold, issued and paid for as contemplated by the Registration Statement, will have been validly issued and will be fully paid and nonassessable shares of Common Stock of the Company under the laws of the State of Maryland. We do not express an opinion with respect to any laws other than the laws of Maryland applicable to the issuance of shares of common stock of a domestic business corporation. Accordingly, our opinion does not extend to, among other laws, the federal securities laws or the securities or "blue sky" laws of Maryland or any other jurisdiction. Members of this firm are admitted to the bar in the State of New York and the District of Columbia. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement and to the reference to our firm in the Statements of Additional Information included therein. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. Very truly yours, /s/ Seward & Kissel LLP 69900020.BH8 2 EX-99.J OTHER OPININ 6 j69900020bh6.txt CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference to this Registration Statement on Form N-1A of our report dated January 18, 2002, relating to the financial statements and financial highlights which appears in the December 31, 2001 Annual Report to Shareholders of Sequoia Fund, Inc. which is also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings Financial Highlights, Custodian, Counsel and Independent Accountants and Financial Statements and Report of Independent Accountants in such Registration Statement. PricewaterhouseCoopers LLP New York, New York April 25, 2002 69900.0020.BH6 -----END PRIVACY-ENHANCED MESSAGE-----