-----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, DMTI22975hBGrzm7BmNPRN1JacUOyzFKtmOfsDDWApf6PCbi1I74W5M1FwfSqUzp jyBQhG296kqcrRVrHsQcng== 0000919574-04-001340.txt : 20040429 0000919574-04-001340.hdr.sgml : 20040429 20040428173210 ACCESSION NUMBER: 0000919574-04-001340 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20040429 EFFECTIVENESS DATE: 20040429 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: 04761718 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: 1933 Act SEC FILE NUMBER: 002-35566 FILM NUMBER: 04761719 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 d465299_485-b.txt As filed with the Securities and Exchange Commission on April 28, 2004 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. 50 ---------------------- /x/ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / / Amendment No. 28 ---------------------- /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, 2004 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 [SEQUOIA FUND LOGO] MAY 1, 2004 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 7 PURCHASE AND SALE OF SHARES 7 HOW THE FUND VALUES ITS SHARES 7 HOW TO BUY SHARES 7 HOW TO REDEEM SHARES 8 DIVIDENDS, DISTRIBUTIONS AND TAXES 9 FINANCIAL HIGHLIGHTS 10
2 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 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 & Poor's 500 Index ("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. [CHART] BAR CHART 1994 3.34% 1995 41.38% 1996 21.74% 1997 43.20% 1998 35.25% 1999 -16.54% 2000 20.06% 2001 10.52% 2002 -2.64% 2003 17.12%
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). 3 PERFORMANCE TABLE
1 YEAR 5 YEARS 10 YEARS - ---------------------------------------------------------------------------------------------------------- SEQUOIA FUND Return Before Taxes 17.12% 4.78% 15.84% Return After Taxes on Distributions only(1) 17.03% 3.42% 14.59% Return After Taxes on Distributions and Redemption of Fund Shares(1) 10.62% 3.55% 13.41% S&P 5002 (reflects no deduction for fees, expenses or taxes) 28.69% -0.57% 11.07%
(1) 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 investor's 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. (2) The S&P 500 is composed of 500 widely held common stocks. One cannot invest directly in the S&P 500. 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 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. 4 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 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 2003 was 17.12%, including reinvestment of dividends. This compares to the return of the S&P 500, 28.69%. The Fund lagged behind the S&P 500 for several reasons. Sequoia's large cash position, 14% of assets at year-end, produced virtually no return for the period. Moreover, economically-sensitive issues, including technology stocks, powered much of the advances in the broader market last year. Sequoia has a relatively small percentage of its assets in such companies. Most importantly, the Fund's investment philosophy is to make concentrated investments in a limited number of companies that have superior long-term economic prospects and that sell at what we deem are attractive prices. Thus, the performance of the Fund is more likely to track the price movements of the individual stocks in the portfolio than the fluctuations of the general stock market. The table below shows the stock price performance of the Fund's major positions for 2003.
% OF ASSETS PRICE % OF ASSETS POSITION 12/31/02 CHANGE 12/31/03 - ----------------------------------------------------- Berkshire Hathaway 35.0% 16% 34.7% Progressive Corp. 8.8% 68% 12.8% Fifth Third Bancorp 12.5% 1% 10.8% TJX 7.5% 13% 7.2% Mohawk Industries 6.3% 24% 6.6% Fastenal 3.3% 33% 2.9% Top six positions 73.4% 75.0%
During 2003, Berkshire Hathaway continued the improvement that became apparent at the end of 2002. Berkshire's insurance businesses produced $1.7 billion in underwriting profits for the year versus an underwriting loss of $398 million underwriting insurance 5 in 2002. Overall sales and earnings in the non-insurance piece of the company were up, thanks in large part to acquisitions. At the end of 2003, Berkshire had about $31 billion in cash and equivalents and another $26 billion in fixed-income securities. Some of the cash and fixed-income holdings are in foreign currencies, which have performed extremely well. But management rolled some of the longer-dated or much lower-rated fixed-income securities into very short-term investments. The yield on the cash and equivalents is very low. The low yield together with the challenge that the insurance businesses face to match last year's extraordinary results will exert some pressure on 2004 comparisons. These two factors, however, should be offset by improvements in the company's more economically sensitive businesses and by acquisitions. Operating results at Progressive Corporation were very strong. Net premiums earned rose 28% for the year. Earnings per share increased 90%, and the company's underwriting margin was outstanding - 12.7%. The company was among the first in its industry to acknowledge that the current market is softening. This pricing pressure may weigh on earnings somewhat, but we believe that margins will remain outstanding in 2004. Premium growth may slow from the twenties into the teens, but that growth rate will still be strong both in an absolute sense and relative to the competition. The net result should be solid growth in profits. Fifth Third Bancorp had modest growth in earnings last year by the company's historical standards. Fully diluted earnings per share grew just 9.8% for the year. Growth in lending was excellent, but unusually low interest rates compressed margins. Larger than historic provisions for loan losses and below trend growth in Fifth Third's investment advisory and data processing businesses also slowed earnings increases. The company recently received approval from federal regulators to acquire a small bank in Tennessee, and we expect higher rates of organic growth as interest rates begin to rise and the company's other businesses improve. TJX had a good 2003. Gross margins for the year were strong and earnings per share rose 19%. Profits at the flagship Marmaxx segment increased 8% for the year, while TJX's Canadian businesses, Winners and HomeSense, booked sales of over $1 billion for the first time, and increased profits 25%. The company's other retail formats boosted collective profits 69%. Mohawk Industries turned in solid performance in a difficult environment. Cost pressures were unusually tough especially from oil, the main raw material for carpet, and business was sluggish. Demand began to pick up as the year wound down, however. Sales rose 14% in the fourth quarter to $1.4 billion, and net earnings increased 21% to $102 million. For the year, revenues increased 11% and net income rose 9%. Also in the fourth quarter, Mohawk completed its acquisition of Lees Carpet, one of the strongest brands in the carpet business. The deal significantly improves Mohawk's market position in the commercial carpet segment. This year, the torrid pace of new home construction is likely to cool somewhat, but we believe that builders should still see very healthy demand for new houses and the carpet and tile that Mohawk produces. We made a mistake with Fastenal. Concerned about the valuation of the stock, we sold a small portion of the position in the second half of the year. Like Mohawk, Fastenal managed its way through tough conditions in its market. The company continued its expansion, opening 151 new stores during the year and ended 2003 with 1,314 locations. In the fourth quarter (after we sold of course!), Fastenal finally saw business begin to pick up steam. Earnings for the year rose 12%. In 2004, the company plans to continue to increase the number of its locations and hopes to boost its store count by 10% to 15%. Moreover, fastener manufacturers have raised prices recently. The price hikes will hit Mom and Pop operators harder than they will Fastenal, which has far more buying power. That will likely create some opportunities for the company to further increase its market share. As the economy continues to pick up momentum, we believe that Fastenal will return to the higher rates of growth its price earnings multiple suggests are in the offing. The share prices of some of the Fund's smaller positions increased substantially in 2003. The stock price of Tiffany rose 89% for the year, and Danaher's share price increased 39%. Prices for other companies in the Fund rose strongly, but still lagged behind the general market. Share prices for Ethan Allen, Expeditors International, and Walgreen rose 22%, 15% and 25% respectively. The stock price of Costco, however, dropped 15%. 6 During the year, the Fund sold its remaining shares of Dover and disposed of its holding in Cintas. The Fund also established a few new small positions, which are reported under Miscellaneous Securities at year-end. At the end of 2003, the Fund held 86% of assets in equities and the remainder in cash. At December 31, 2002, Sequoia's cash position was 18% of assets. Equities accounted for 82%. 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. Ruane Cunniff, LLC, its wholly-owned subsidiary, is a registered broker-dealer and a member 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, 2003. This payment amounted to .98% of the Fund's average daily net assets for the fiscal year ended December 31, 2003, 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. 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. Market quotations may not be readily available (a) in the event a portfolio investment's shares are not actively traded, (b) sales prices are not reflective of market price, or (c) if there is a significant event that would affect the value of the Fund's investments but has not been reflected in their share price. In such cases, the Fund will, to the extent required by the 1940 Act, make a good faith determination of the market value of such investments or take such other action as the directors deem appropriate. 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 and their families, 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 7 - - 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 - - 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 APPROXIMATE NUMBER AND VALUE OF THE PORTFOLIO SECURITIES THAT YOU WILL RECEIVE. 8 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. 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. A portion of the Fund's distributions may be treated as "qualified dividend income," taxable to individuals at a maximum federal tax rate of 15% (5% for individuals in lower tax brackets). A distribution is treated as qualified dividend income to the extent that the Fund receives dividend income from taxable domestic corporations and certain qualified foreign corporations, provided that holding period and other requirements are met. 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, 2003, THE NET UNREALIZED APPRECIATION OF THE FUND'S PORTFOLIO WAS APPROXIMATELY 61.7% 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. 9 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 auditors, PricewaterhouseCoopers, LLP, whose report, along with the Fund's financial statements, is included in the Fund's Annual Report, which is available upon request.
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 ------------ ------------ ------------ ------------ ------------ Per Share Operating Performance (for a share outstanding throughout each year): Net asset value, beginning of year $ 126.63 $ 130.24 $ 122.09 $ 127.27 $ 160.70 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (0.62) (0.41) 0.97 1.66 0.84 Net realized and unrealized gains (losses) on investments 22.21 (3.03) 11.52 23.33 (26.83) ------------ ------------ ------------ ------------ ------------ Total from investment operations 21.59 (3.44) 12.49 24.99 (25.99) ------------ ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS: Dividends from net investment income (0.00) (0.01) (0.97) (1.66) (0.85) Distributions from net realized gains (0.61) (0.16) (3.37) (28.51) (6.59) ------------ ------------ ------------ ------------ ------------ Total distributions (0.61) (0.17) (4.34) (30.17) (7.44) ------------ ------------ ------------ ------------ ------------ Net asset value, end of year $ 147.61 $ 126.63 $ 130.24 $ 122.09 $ 127.27 ============ ============ ============ ============ ============ TOTAL RETURN 17.12% (2.64)% 10.52% 20.06% (16.54)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (in millions) $ 3,973.6 $ 3,905.1 $ 4,230.1 $ 3,943.9 $ 3,896.9 Ratio to average net assets: Expenses 1.0% 1.0% 1.0% 1.0% 1.0% Net investment income (0.5)% (0.3)% 0.8% 1.2% 0.6% Portfolio turnover rate 3% 8% 7% 36% 12%
10 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 11 SEQUOIA FUND, INC. [SEQUOIA FUND LOGO] PROSPECTUS May 1, 2004 SEQUOIA FUND, INC. 767 Fifth Avenue New York, New York 10153 (Telephone 800-686-6884) STATEMENT OF ADDITIONAL INFORMATION May 1, 2004 --------------------- 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, 2004 (the "Prospectus"). This SAI contains 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.................................................................. 7 Investment Adviser and Investment Advisory Contract.........................12 Distributor and Distribution Agreement......................................16 Allocation of Portfolio Brokerage...........................................16 Individual Retirement Accounts..............................................17 Roth IRAs...................................................................18 Keogh Plans.................................................................19 Net Asset Value.............................................................19 Redemption of Shares........................................................20 Tax Considerations..........................................................20 Common Stock................................................................23 Custodian, Counsel and Independent Auditors.................................23 Financial Statements and Report of Independent Auditors....................................................................24 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, 2003, 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 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, 2003, 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 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, with respect to 75% of its total assets, 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 20. 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 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. 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 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. 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.
Dollar Range of Equity Securities Principal of the Position(s) Years of Occupation(s) Other Corporation Name, Address* Held with Service as During Past Directorships as of and Age the Fund a Director 5 Years Held by Director December 31, 2003 - ------------- ----------- ---------- ------------- -------------- ----------------- INTERESTED DIRECTORS** None Over $100,000 William J. Ruane, Chairman of 34 Chairman of the (1)(2) 78 the Board of Board of Directors Directors and and Director Director, Ruane, Cunniff & Co., Inc., with which he has been associated for more than five years, and Ruane Cunniff, LLC, since January 1, 2004. Richard T. Cunniff, Vice Chairman 34 Vice Chairman and Sturm, Ruger & Over $100,000 81 and Director Director, Ruane, Company, Inc. (2)(3) Cunniff & Co., Inc., with which he has been associated for more than five years, and Ruane Cunniff, LLC, since January 1, 2004. Robert D. Goldfarb, President and 23 President and None Over $100,000 59 Director Director, Ruane, (2)(4) Cunniff & Co., Inc., with which he has been associated for more than five years, and Ruane Cunniff, LLC, since January 1, 2004. David M. Poppe, 39 Executive Vice Research Analyst None None President and of Ruane, Cunniff Director & Co., Inc. since April 1999. DISINTERESTED DIRECTORS Vinod Ahooja, 52, Director 3 Currently None None ***, + retired. Mr. Ahooja was a Partner with Goldman Sachs & Co. from 1990 to 1993. Roger Lowenstein, Director 5 A writer who None Over $100,000 (5) 50, ***, + 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. Director 31 Currently None Over $100,000 (6) Matthews, 82, ***, retired. Mr. + Matthews was Of Counsel to Matthews & Cannon, P.C. (law firm) from 1986 to 1990. C. William Director 29 Currently None Over $100,000 (7) Neuhauser, 78, retired. Mr. ***, + Neuhauser was Executive Secretary of National Maritime Council from 1979 to 1981. Robert L. Swiggett, Director 33 Currently None Over $100,000 82, ***, + retired. 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.
- ----------------------- * 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) 178,711 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 257,620 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 and Goldfarb are officers, directors and voting stockholders of the Investment Adviser, which is the owner of 26,811 shares of the Fund's Common Stock. (See "Investment Adviser and Investment Advisory Contract" below). In addition, Messrs. Ruane, Cunniff and Goldfarb are trustees and beneficiaries of the Profit-Sharing and Money Purchase Plans of the Investment Adviser, which own 179,411 shares of the Fund's Common Stock. (3) In addition, 88,275 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, 52,324 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, 37 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. (6) In addition, 1,700 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. (7) In addition, 1,075 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. OFFICER INFORMATION Certain information concerning the Fund's officers is set forth below. Occupation Position(s) - (Month Principal during Name, Address and Age and Year First Elected) the past 5 years - --------------------- ------------------- ----------------------- Robert D. Goldfarb (59) President (7/98) See biography above. David M. Poppe (39) Executive Vice President See biography above. (1/03) Joseph Quinones, Jr. (58) Vice President, Vice President, Secretary Secretary and Treasurer and Treasurer, Ruane (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. As of the close of business on April 1, 2004, the directors and officers of the Fund collectively owned approximately 1.01%, or, including shares owned by their respective relatives and affiliates, approximately 4.11%, 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 twice during the Fund's most recently completed fiscal year. 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 did not meet during the Fund's most recently completed fiscal year. 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, 2003 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 Benefits Annual Aggregate Accrued as Benefits Total Compensation Part of 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 Robert D. Goldfarb $ 0 -0- -0- $ 0 David M. Poppe $ 0 -0- -0- $ 0 Vinod Ahooja $34,000 -0- -0- $34,000 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 The Fund, the Investment Adviser and Ruane Cunniff, LLC, the Fund's distributor (the "Distributor"), have each adopted a Code of Ethics that permits their 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. The Fund has adopted the Investment Adviser's Proxy Voting Policies and Procedures ("Procedures"), which are designed to ensure that the Investment Adviser votes proxies, with respect to securities held by the Fund, in the best interests of the Fund. The Procedures require the Investment Adviser to identify and address conflicts of interest between the Investment Adviser or the Distributor (or any affiliated person of the Investment Adviser, the Distributor or the Fund) and the shareholders of the Fund. If a material conflict of interest exists, the Investment Adviser will determine whether voting in accordance with the guidelines set forth in the Procedures is in the best interests of the shareholders of the Fund or take some other appropriate action. The Investment Adviser, on behalf of the Fund, generally votes in favor of routine corporate housekeeping proposals including the election of directors (where no corporate governance issues are implicated). The Investment Adviser, on behalf of the Fund, generally votes against poison pills and proposals for compensation plans deemed to be excessive. For all other proposals, the Investment Adviser will determine whether a proposal is in the best interests of the shareholders of the Fund and may take into account the following factors, among others: (i) whether the proposal was recommended by management and the Investment Adviser's opinion of management; (ii) whether the proposal acts to entrench existing management; and (iii) whether the proposal fairly compensates management for past and future performance. 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, 2004 was so approved by the Board of Directors and by the disinterested directors at a meeting of the Board of Directors on December 8, 2003 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, 2004, 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, 2003, and of the portfolio brokerage commissions paid by the Fund to Ruane Cunniff 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 8, 2003, 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 reviewed 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, 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 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. During the fiscal year ended December 31, 2003, the Fund incurred operating expenses of $37,779,050 of which the Investment Adviser reimbursed the Fund $869,000. The amount of operating expenses incurred by the Fund during the fiscal year ended December 31, 2002, was $42,560,900 of which the Investment Adviser reimbursed the Fund $793,000. During the fiscal year ended December 31, 2001, the fund incurred operating expenses of $40,506,200 of which the Investment Adviser reimbursed the Fund $836,000 pursuant to the expense limitation described above. 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 member corporation of the Exchange. Until January 1, 2004, the Investment Adviser was the Fund's regular broker. As of January 1, 2004, the Distributor, which is a wholly owned subsidiary of the Investment Adviser, began serving as the Fund's regular broker. Mr. William J. Ruane, Mr. Richard T. Cunniff and Mr. Robert D. Goldfarb 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 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, 2001 $39,520,181 $836,000 $38,684,181 December 31, 2002 $41,617,894 $793,000 $40,824,894 December 31, 2003 $36,760,026 $869,000 $35,891,026 DISTRIBUTOR AND DISTRIBUTION AGREEMENT Effective January 1, 2004, Ruanne Cunniff, LLC, a wholly owned subsidiary of the Investment Adviser, became the Distributor for the Fund. Previously, the Investment Adviser also served as the Fund's distributor. Pursuant to the agreement between the Fund and the Distributor (the "Distribution Agreement"), the Distributor serves as the Fund's distributor and principal underwriter 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. The Distribution Agreement continues in effect so long as such continuance is specifically approved at least annually (1) by the Directors of the Fund and by vote of a majority of the Directors of the Fund who are not parties to the Distribution Agreement or affiliated persons, as defined in the Investment Company Act of 1940 (the "1940 Act"), of any such party (other than as directors of the Fund), or (2) by vote of the holders of a majority of the outstanding voting securities (as defined in the 1940 Act). The Distribution Agreement was approved for an initial annual term by a vote, cast in person, of the Directors, including a majority of the Directors who are not "interested persons", as defined in the 1940 Act, at their meeting held on December 8, 2003. The Fund has paid no underwriting commissions to the Investment Adviser for the past three fiscal years. 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 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: Total Brokerage Brokerage Commissions Commissions Paid to the Year Ended Paid Investment Adviser - ---------- ---- ------------------ December 31, 2001 $230,029 $178,290 December 31, 2002 $450,458 $447,773 December 31, 2003 $186,821 $186,821 During the year ended December 31, 2003, the brokerage commissions paid to the Investment Adviser represented approximately 100% 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 100% of the aggregate dollar value of all portfolio transactions of the Fund during such year for which commissions were paid. As of January 1, 2004, the Fund began paying brokerage commissions to the Distributor. INDIVIDUAL RETIREMENT ACCOUNTS Individuals generally may make regular contributions to a traditional IRA of up to $3,000 (which amount is scheduled to increase to $4,000 in 2005) 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 2004, if an individual is an active participant, the deduction will not be available if, (i) the individual has adjusted gross income above $55,000, (ii) the individual files a joint return with his or her spouse and they have adjusted gross income above $75,000, 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 generally may establish a separate IRA for the spouse and annually contribute a total of up to $6,000 ($8,000 in 2005) to the two IRAs, provided that generally no more than $3,000 ($4,000 in 2005) 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. ROTH IRAS Eligible individuals also may elect to make contributions to a Roth IRA of up to $3,000 (which amount is scheduled to increase to $4,000 in 2005) 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 ($4,000 in 2005). The total amount contributed by an individual to all IRAs (both traditional and Roth) in a year may not exceed $3,000 ($4,000 in 2005). Contributions to a Roth IRA may generally 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 $41,000. 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 the Exchange 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 closing bid and asked prices on such day. If no bid and asked prices are quoted on the 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 traded on the Nasdaq Stock Market, Inc. ("NASDAQ") are valued in accordance with NASDAQ Official Closing 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. 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 5-6) 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, 2003 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 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, 2003, no net ordinary taxable income eligible for such deduction by corporate stockholders was distributed by the Fund. A portion of the Fund's distributions may be treated as "qualified dividend income," taxable to individuals at a maximum federal tax rate of 15% (5% for individuals in lower tax brackets). A distribution is treated as qualified dividend income to the extent that the Fund receives dividend income from taxable domestic corporations and certain qualified foreign corporations, provided that both the Fund and the individual satisfy certain holding period and other requirements. To the extent the Fund's distributions are attributable to other sources, such as interest or capital gains, the distributions are not treated as qualified dividend income. For federal income tax purposes, dividends declared and payable to shareholders of record as of a date in October, November or December of a given year but actually paid during the immediately following January will be treated as if paid by the Fund on December 31 of that calendar year and will be taxable to such shareholders for the year declared and not for the year in which the shareholders actually receive the dividend. 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 the close of business on April 1, 2004, Bankers Trust Company as Trustee for the Walt Disney Company Employees Master Retirement Plan (300 S. Grand Avenue, Los Angeles, CA 90071-3109) 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 41015-1999) together beneficially owned 2,732,930 shares of the Fund (representing 10.33% of the 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 AUDITORS The Bank of New York, MF Custody Administration Department, 100 Church Street, 10th 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. Seward & Kissel LLP, One Battery Park Plaza, New York, New York 10004, serves as counsel to the Fund. PricewaterhouseCoopers, LLP, 1177 Avenue of the Americas, New York, New York 10036 has been appointed independent auditors for the Fund. FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS The financial statements of the Fund and the report of PricewaterhouseCoopers, LLP are incorporated herein by reference to the Fund's annual report. The annual report dated December 31, 2003 was filed on Form N-CSR with the Securities and Exchange Commission on February 27, 2004. It is available without charge upon request by contacting the Fund at 1-800-686-6884. 69900.0020 #465304v5 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 - Incorporated by reference to Exhibit (a)(6) of Post-Effective Amendment No. 48 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 29, 2002. (b) By-Laws - Incorporated by reference to Exhibit (b) of Post-Effective Amendment No. 48 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 29, 2002. (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, LLC - Filed herewith. (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 Data-Sys-Tance, 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 Exhibit (p) of Post-Effective Amendment No. 49 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 28, 2003. 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. ---------------------- The investment advisory clients of Ruane, Cunniff & Co., Inc., the Registrant's investment adviser 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,LLC. The principal business address of each of these persons is767 Fifth Avenue, New York, New York 10153. (1) (2) (3) Positions and Positions and Offices Offices with Name with Underwriter 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 David M. Poppe 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. 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 28th day of April, 2004. SEQUOIA FUND, INC. By /s/ Robert D. Goldfarb ---------------------- 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 April 28, 2004 ----------------------- Director Robert D. Goldfarb (2) Principal Financial and Accounting Officer /s/ Joseph Quinones, Jr. Treasurer April 28, 2004 ------------------------- Joseph Quinones, Jr. (3) All of the Directors /s/ William J. Ruane April 28, 2004 --------------------- William J. Ruane /s/ Richard T. Cunniff April 28, 2004 ----------------------- Richard T. Cunniff /s/ David M. Poppe April 28, 2004 ------------------- David M. Poppe /s/ Robert D. Goldfarb April 28, 2004 ----------------------- Robert D. Goldfarb Vinod Ahooja Roger Lowenstein Francis P. Matthews C. William Neuhauser Robert L. Swiggett By /s/ Robert D. Goldfarb April 28, 2004 ----------------------- Robert D. Goldfarb Attorney-in-Fact INDEX TO EXHIBITS ----------------- (e) Distribution Agreement between the Registrant and Ruane Cunniff, LLC. (i) Opinion and Consent of Seward & Kissel LLP (j) Consent of PricewaterhouseCoopers LLP 69900.0020 #465299v3 EX-99 2 d481692_ex99-e.txt Sequoia Fund, Inc. 767 Fifth Avenue New York, N.Y. 10153 January 1, 2004 Ruane Cunniff, LLC 767 Fifth Avenue New York, New York 10153 Subj: Distribution Agreement This is to confirm that, in consideration of the agreements on your part herein contained and on the terms and conditions set forth herein, we have agreed that you shall be, for the period of this agreement, the exclusive distributor, as our agent, for the unsold portion of such number of shares of our Common Stock (par value $.10 per share) as may from time to time be effectively registered under the Securities Act of 1933, as amended (hereinafter referred to as the "Act"). 1. We hereby agree to offer through you as our agent, and to solicit through you as our agent, offers to subscribe to, the unsold balance of shares of our Common Stock as shall then be effectively registered under the Act, and you are appointed our agent for such purpose. All subscriptions for our shares obtained by you shall be directed to us for acceptance and shall not be binding on us until accepted by us. You shall have no authority to make binding subscriptions on our behalf. We reserve the right to sell our shares directly to investors, whether or not such sales shall have been solicited by us. The right given to you under this agreement shall not apply to shares issued in connection with (a) the merger or consolidation of any other investment company with us, (b) our acquisition by purchase or otherwise of all or substantially all of the assets or stock of any other investment company, or (c) the reinvestment in our shares by our stockholders of dividends or other distributions or any other offering of shares to our stockholders. 2. You will use your best efforts to obtain subscriptions to our shares upon the terms and conditions contained herein and in the then current Prospectus, including the offering price. You will send to us promptly all subscriptions placed with you. We shall advise you of the net asset value per share as of the close of business of the New York Stock Exchange on the last day of each month and at such other times as it shall have been determined by us. We shall furnish you from time to time, for use in connection with the offering of our shares, such other information with respect to us and our shares as you may reasonably request. We shall supply you with such copies of our current Prospectus in effect from time to time as you may request. You are not authorized to give any information or to make any representations, other than those contained in the Registration Statement or Prospectus, as then in effect, filed under the Act covering our shares or which we may authorize in writing. You may use employees and agents at your cost and expense to assist you in carrying out your obligations hereunder but no such employee or agent shall be deemed to be our agent or have any rights under this agreement. 3. We reserve the right to suspend the offering of our shares at any time, in the absolute discretion of our Board of Directors, and upon notice of such suspension you shall cease to offer our shares hereunder. 4. Both of us will cooperate with each other in taking such action as may be necessary to qualify our shares for sale under the securities laws of such states as we may designate, provided that, unless required by law, regulation or other authority, you shall not be required to register as a broker-dealer or file a consent to service of process in any such state. Pursuant to our Investment Advisory Contract, Ruane, Cunniff & Co., Inc., our investment adviser, shall pay all expenses of the qualification of our shares and our qualification under such laws and all expenses of registration of our shares under the Act. You shall pay all expenses relating to your broker-dealer qualification. 5. We represent to you that our Registration Statement and Prospectus (as in effect from time to time) under the Act have been or will be, as the case may be, carefully prepared in conformity with the requirements of the Act and the rules and regulations of the Securities and Exchange Commission (the "SEC") thereunder. We represent and warrant to you that our Registration Statement and Prospectus contain or will contain all statements required to be stated therein in accordance with the Act and the rules and regulations of the SEC, and that all statements of fact contained or to be contained therein are or will be true and correct at the time indicated or the effective date as the case may be; that neither our Registration Statement nor our Prospectus, when it shall become effective or be authorized for use, will include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading to a purchaser of our shares. We will from time to time file such amendment or amendments to our Registration Statement and Prospectus as, in the light of future developments, shall, in the opinion of our counsel, be necessary in order to have our Registration Statement and Prospectus at all times contain all material facts required to be stated therein or necessary to make any statements therein not misleading to a purchaser of our shares, but, if we shall not file such amendment or amendments within fifteen days after receipt by us of a written request from you to do so, you may, at your option, terminate this agreement immediately. We shall not file any amendment to our Registration Statement or Prospectus without giving you reasonable notice thereof in advance; provided, however, that nothing in this agreement contained shall in any way limit our right to file at any time such amendments to our Registration Statement and/or Prospectus, of whatever character, as we may deem advisable, such right being in all respects absolute and unconditional. We represent and warrant to you that any amendment to our Registration Statement or Prospectus hereafter filed by us will, when it becomes effective, contain all statements required to be stated therein in accordance with the Act and the rules and regulations of the SEC, that all statements of fact contained therein will, when the same shall become effective, be true and correct and that no such amendment, when it becomes effective, will include an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading to a purchaser of our shares. 6. We agree to indemnify, defend and hold you, and any person who controls you within the meaning of Section 15 of the Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which you or any such controlling person may incur, under the Act, or under common law or otherwise, arising out of or based upon any alleged untrue statement of a material fact contained in our Registration Statement or Prospectus in effect from time to time under the Act or arising out of or based upon any alleged omission to state a material fact required to be stated in either thereof or necessary to make the statements in either thereof not misleading; provided, however, that in no event shall anything herein contained be so construed as to protect you against any liability to us or our security holders to which you would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence, in the performance of your duties, or by reason of your reckless disregard of your obligations and duties under this agreement. Our agreement to indemnify you and any such controlling person as aforesaid is expressly conditioned upon our being notified of any action brought against you or any such controlling person, such notification to be given by letter or by telegram addressed to us at our principal office in New York, N.Y., and sent to us by the person against whom such action is brought, within ten days after the summons or other first legal process shall have been served. The failure so to notify us of any such action shall not relieve us from any liability which we may have to the person against whom such action is brought by reason of any such alleged untrue statement or omission otherwise than on account of our indemnity agreement contained in this paragraph 6. We will be entitled to assume the defense of any suit brought to enforce any such claim, demand or liability, but, in such case, such defense shall be conducted by counsel of good standing chosen by us and approved by you. In the event we do elect to assume the defense of any such suit and retain counsel of good standing approved by you, the defendant or defendants in such suit shall bear the fees and expenses of any additional counsel retained by any of them; but in case we do not elect to assume the defense of any such suit, or in case you do not approve of counsel chosen by us, we will reimburse you or the controlling person or persons named as defendant or defendants in such suit, for the [reasonable] fees and expenses of any counsel retained by you or them. Our indemnification agreement contained in this paragraph numbered 6 and our representations and warranties in this agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of you or any controlling person and shall survive the sale of any of our shares made pursuant to subscriptions obtained by you. This agreement of indemnity will inure exclusively to your benefit, to the benefit of your successors and assigns, and to the benefit of any controlling persons and their successors and assigns. We agree promptly to notify you of the commencement of any litigation or proceedings against us in connection with the issue and sale of any of our common stock. 7. You agree to indemnify, defend and hold us, our several officers and directors, and any person who controls us within the meaning of Section 15 of the Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which we, our officers or directors, or any such controlling person may incur under the Act or under common law or otherwise, but only to the extent that such liability or expense incurred by us, our officers or directors or such controlling person resulting from such claims or demands shall arise out of or be based upon any alleged untrue statement of a material fact contained in information furnished in writing by you to us for use in our Registration Statement or Prospectus in effect from time to time under the Act, or shall arise out of or be based upon any alleged omission to state a material fact in connection with such information required to be stated in the Registration Statement or Prospectus or necessary to make such information not misleading. Your agreement to indemnify us, our officers and directors, and any such controlling person as aforesaid is expressly conditioned upon your being notified of any action brought against us, our officers or directors or any such controlling person, such notification to be given by letter or telegram addressed to you at your principal office in New York, New York, and sent to you by the person against whom such action is brought, within ten days after the summons or other first legal process shall have be served. You shall have a right to control the defense of such action, with counsel of your own choosing, satisfactory to us, if such action is based solely upon such alleged misstatement or omission on your part, and in any other event you or such controlling person shall each have the right to participate in the defense or preparation of the defense of any such action. The failure so to notify you of any such action shall not relieve you from any liability which you may have to us, our officers or directors, or to such controlling person by reason of any such untrue statement of omission on your part otherwise than on account of your indemnity agreement contained in this paragraph 7. 8. We agree to advise you immediately: (a) of any request by the SEC for amendments to our Registration Statement or Prospectus or for additional information. (b) in the event of the issuance by the SEC of any stop order suspending the effectiveness of our Registration Statement or Prospectus or the initiation of any proceedings for that purpose, (c) of the happening of any material event which makes untrue any statement made in our Registration Statement or Prospectus or which requires the making of a change in either thereof in order to make the statements therein not misleading, and (d) of all action of the SEC with respect to any amendments to our Registration Statement or Prospectus which may from time to time be filed with the SEC under the Act. 9. This agreement shall become effective on January 1, 2004, and shall remain in effect until December 31, 2004, and thereafter automatically for successive twelve-month periods (computed from each January 1), provided that such continuance is specifically approved at least annually by our Board of Directors, including a majority of our directors who are not parties to this agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, or by vote of a majority of our outstanding voting securities. This agreement may be terminated at any time, without the payment of any penalty, by vote of a majority of outstanding voting securities, or by a vote of a majority of our entire Board of Directors, on sixty days' written notice to you, or by you on sixty days' written notice to us. 10. This agreement may not be transferred, assigned, sold or in any manner hypothecated or pledged by you and this agreement shall terminate automatically in the event of any such transfer, assignment, sale, hypothecation or pledge. The terms "transfer, "assignment" and "sale" as used in this paragraph shall have the meanings ascribed thereto by governing law and any interpretation thereof contained in rules or regulations promulgated by the SEC thereunder. 11. Except to the extent necessary to perform your obligations hereunder, nothing herein shall be deemed to limit or restrict your right, or the right of any of your officers, directors or employees who may also be a director, officer or employee of ours, or persons otherwise affiliated with us (within the meaning of the Investment Company Act of 1940), to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, firm, individual or association. If you accept the terms of this Distribution Agreement, please sign and return the enclosed copy. Very truly yours, SEQUOIA FUND, INC. By /s/ William J. Ruane ----------------------- William J. Ruane Chairman ACCEPTED: January 1, 2004 RUANE CUNNIFF, LLC By /s/ Robert D. Goldfarb ----------------------- Robert D. Goldfarb President 69900.0020 #481692 EX-99 3 d465322_ex99-i.txt SEWARD & KISSEL LLP ONE BATTERY PARK PLAZA NEW YORK, NEW YORK 10004 Telephone: (212) 574-1200 Facsimile: (212) 480-8421 April 28, 2004 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. 50 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 69900.0020 #465322v2 EX-99.J 4 d465299_ex99-j.txt CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of our report dated February 6, 2004, relating to the financial statements and financial highlights which appears in the December 31, 2003 Annual Report to Shareholders of Sequoia Fund, Inc. which is also incorporated by references to us under the headings "Financial Highlights", "Custodian, Counsel and Independent Auditors" and "Financial Statements and Report of Independent Auditors" in such Registration Statement. PricewaterhouseCoopers LLP New York, New York April 26, 2004 -----END PRIVACY-ENHANCED MESSAGE-----