SEQUOIA FUND,
INC.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF
$10,000
With Income Dividends Reinvested and Capital
Gains
Distributions Accepted in
Shares
The table below covers the period from July 15, 1970 (the date Fund shares were first offered to the public) to June 30, 2009. This period was one of widely fluctuating common stock prices. The results shown should not be considered as a representation of the dividend income or capital gain or loss which may be realized from an investment made in the Fund today.
| PERIOD ENDED | Value
of Initial $10,000 Investment |
Value
of Cumulative Capital Gains Distributions |
Value
of Cumulative Reinvested Dividends |
Total Value of Shares | ||||
|
|
|
|
| |||||
|
July 15, 1970 |
$ 10,000 |
$ — |
$ — |
$ 10,000 | ||||
|
May 31, 1971 |
11,750 |
— |
184 |
11,934 | ||||
|
May 31, 1972 |
12,350 |
706 |
451 |
13,507 | ||||
|
May 31, 1973 |
9,540 |
1,118 |
584 |
11,242 | ||||
|
May 31, 1974 |
7,530 |
1,696 |
787 |
10,013 | ||||
|
May 31, 1975 |
9,490 |
2,137 |
1,698 |
13,325 | ||||
|
May 31, 1976 |
12,030 |
2,709 |
2,654 |
17,393 | ||||
|
May 31, 1977 |
15,400 |
3,468 |
3,958 |
22,826 | ||||
|
Dec. 31, 1977 |
18,420 |
4,617 |
5,020 |
28,057 | ||||
|
Dec. 31, 1978 |
22,270 |
5,872 |
6,629 |
34,771 | ||||
|
Dec. 31, 1979 |
24,300 |
6,481 |
8,180 |
38,961 | ||||
|
Dec. 31, 1980 |
25,040 |
8,848 |
10,006 |
43,894 | ||||
|
Dec. 31, 1981 |
27,170 |
13,140 |
13,019 |
53,329 | ||||
|
Dec. 31, 1982 |
31,960 |
18,450 |
19,510 |
69,920 | ||||
|
Dec. 31, 1983 |
37,110 |
24,919 |
26,986 |
89,015 | ||||
|
Dec. 31, 1984 |
39,260 |
33,627 |
32,594 |
105,481 | ||||
|
Dec. 31, 1985 |
44,010 |
49,611 |
41,354 |
134,975 | ||||
|
Dec. 31, 1986 |
39,290 |
71,954 |
41,783 |
153,027 | ||||
|
Dec. 31, 1987 |
38,430 |
76,911 |
49,020 |
164,361 | ||||
|
Dec. 31, 1988 |
38,810 |
87,760 |
55,946 |
182,516 | ||||
|
Dec. 31, 1989 |
46,860 |
112,979 |
73,614 |
233,453 | ||||
|
Dec. 31, 1990 |
41,940 |
110,013 |
72,633 |
224,586 | ||||
|
Dec. 31, 1991 |
53,310 |
160,835 |
100,281 |
314,426 | ||||
|
Dec. 31, 1992 |
56,660 |
174,775 |
112,428 |
343,863 | ||||
|
Dec. 31, 1993 |
54,840 |
213,397 |
112,682 |
380,919 | ||||
|
Dec. 31, 1994 |
55,590 |
220,943 |
117,100 |
393,633 | ||||
|
Dec. 31, 1995 |
78,130 |
311,266 |
167,129 |
556,525 | ||||
|
Dec. 31, 1996 |
88,440 |
397,099 |
191,967 |
677,506 | ||||
|
Dec. 31, 1997 |
125,630 |
570,917 |
273,653 |
970,200 | ||||
|
Dec. 31, 1998 |
160,700 |
798,314 |
353,183 |
1,312,197 | ||||
|
Dec. 31, 1999 |
127,270 |
680,866 |
286,989 |
1,095,125 | ||||
|
Dec. 31, 2000 |
122,090 |
903,255 |
289,505 |
1,314,850 | ||||
|
Dec. 31, 2001 |
130,240 |
1,002,955 |
319,980 |
1,453,175 | ||||
|
Dec. 31, 2002 |
126,630 |
976,920 |
311,226 |
1,414,776 | ||||
|
Dec. 31, 2003 |
147,610 |
1,146,523 |
362,790 |
1,656,923 | ||||
|
Dec. 31, 2004 |
154,270 |
1,200,687 |
379,159 |
1,734,116 | ||||
|
Dec. 31, 2005 |
155,450 |
1,331,529 |
382,059 |
1,869,038 | ||||
|
Dec. 31, 2006 |
152,750 |
1,496,788 |
375,422 |
2,024,960 | ||||
|
Dec. 31, 2007 |
139,120 |
1,713,258 |
342,768 |
2,195,146 | ||||
Dec. 31, 2008 |
95,270 |
1,265,238 |
241,397 |
1,601,905 |
||||
|
June 30, 2009 |
97,330 |
1,292,596 |
246,739 |
1,636,665 |
The total amount of capital gains distributions accepted in shares was $1,413,907, the total amount of dividends reinvested was $124,531.
No adjustment has been made for any taxes payable by shareholders on capital gain distributions and dividends reinvested in shares.
Dear Shareholder:
Sequoia Fund's results for the second quarter of 2009 are shown below with comparable results for the leading market indexes:
| To June 30, 2009 | Sequoia Fund |
Dow
Jones Industrials |
Standard & Poor's 500 |
|||
3 Months |
11.50% |
11.96% |
15.93% |
|||
6 Months |
2.17% |
–2.01% |
3.16% |
|||
1 Year |
–17.12% |
–23.00% |
–26.21% |
|||
5 Years (Annualized) |
–0.87% |
–1.68% |
–2.24% |
|||
10 Years (Annualized) |
2.63% |
–0.41% |
–2.22% |
The performance shown above represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown.
The S&P 500 Index is an unmanaged, capitalization-weighted index of the common stocks of 500 major US corporations. The Dow Jones Industrial Average is an unmanaged, price-weighted index of 30 actively traded blue chip stocks. The performance data quoted represents past performance and assumes reinvestment of dividends. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Year to date performance as of the most recent month end can be obtained by calling DST Systems, Inc. at (800) 686-6884.
We are providing you with a copy of the transcript of the Ruane, Cunniff & Goldfarb Inc./Sequoia Fund, Inc. "Annual Investor Day 2009" meeting which was held on May 15th.
As a result of net realized capital losses through the date of this letter, it is possible that we may not have a capital gains distribution during the year ended December 31, 2009. We will do our best to keep you informed of any material changes due to sales activity through October 31, 2009. IRS regulations dictate that capital gain distributions are determined by transactions from November 1 of one year to October 31 of the following year. There may be a modest income distribution in the fourth quarter.
Sincerely,
|
Richard T. Cunniff |
Robert D. Goldfarb |
David M. Poppe | ||
|
Vice Chairman |
President |
Executive Vice President |
August 20, 2009
FEES AND EXPENSES OF THE
FUND
(UNAUDITED)
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)
Annual Fund Operating Expenses
| Management Fees |
1.00% | |
| Other Expenses |
0.04% | |
|
| ||
| Total Annual Fund Operating Expenses |
1.04% | |
| Expense Reimbursement* |
0.04% | |
|
| ||
| Net Expenses |
1.00% | |
|
|
* Reflects Ruane, Cunniff & Goldfarb Inc.'s ("Ruane, Cunniff & Goldfarb") contractual reimbursement of a portion of the Fund's operating expenses. This reimbursement is a provision of Ruane, Cunniff & Goldfarb'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.
Shareholder Expense Example
As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2009 to June 30, 2009).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and will not help you determine the relative total costs of owning different funds.
|
Beginning |
Ending |
Expenses | ||||
|
|
|
| ||||
|
Actual |
$1,000 |
$1,021.70 |
$5.01 | |||
|
Hypothetical |
$1,000 |
$1,019.84 |
$5.01 |
* Expenses are equal to the Fund’s annualized expense ratio of 1.00%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
SECTOR
BREAKDOWN
(UNAUDITED)
|
As of June 30, 2009 |
Percent of | |
|
|
| |
|
Diversified Companies |
20.76 | |
U.S. Government Obligations |
20.24 |
|
|
Retailing |
12.59 | |
Veterinary Diagnostics |
6.63 |
|
|
Building Materials |
6.16 | |
Automotive Manufacturing |
4.58 |
|
|
Industrial & Construction Supplies |
4.55 | |
Flooring Products |
3.74 |
|
Aerospace/Defense |
2.90 |
|
|
Miscellaneous Securities |
2.79 | |
Freight Transportation |
2.63 |
|
| Auto Parts | 2.55 |
|
|
Construction Equipment |
2.36 | |
|
Other |
7.52 | |
|
| ||
|
100.00 | ||
|
|
The table below shows the changes of the Fund's major positions for the period ended June 30, 2009:
|
% of assets |
% of assets | |||||
|
Position |
6/30/2009 |
12/31/2008 | ||||
|
|
|
| ||||
|
Berkshire Hathaway |
20.8% |
22.8% | ||||
Idexx Laboratories |
6.6% |
5.3% |
||||
TJX Companies Inc. |
6.1% |
4.1% |
||||
Martin Marietta Materials |
5.4% |
6.9% |
||||
| Porsche | 4.6% |
5.3% |
||||
Fastenal Company |
4.5% |
5.7% |
||||
|
Mohawk Industries |
3.7% |
5.7% | ||||
|
|
51.7% |
55.8% | ||||
|
|
|
| COMMON STOCKS (79.58%) | ||||
| Shares |
Value (Note 1) | |||
|
|
| |||
|
|
ADVERTISING (1.16%) |
|
|
936,300 |
Omnicom Group Inc. |
$29,568,354 |
||
|
|
|
AEROSPACE/DEFENSE (2.90%) |
|
|
|
12,410,000 |
Rolls-Royce Group plc (United Kingdom) |
73,814,680 | ||
|
| ||||
|
|
|
AUTO PARTS (2.55%) |
|
|
|
1,698,778 |
O'Reilly Automotive Inc. * |
64,689,466 | ||
|
| ||||
|
|
|
AUTOMOTIVE MANUFACTURING (4.58%) |
|
|
|
1,734,393 |
Porsche Automobil Holding SE (Germany) (a) |
116,306,660 | ||
|
| ||||
|
|
|
BUILDING MATERIALS (6.16%) |
|
|
|
1,754,749 |
Martin Marietta Materials Inc. |
138,414,601 | ||
|
419,772 |
Vulcan Materials Company |
18,092,173 | ||
|
| ||||
|
156,506,774 | ||||
|
| ||||
|
|
|
CONSTRUCTION EQUIPMENT (2.36%) |
|
|
730,000 |
Caterpillar Inc. |
24,119,200 |
||
|
1,524,900 |
Ritchie Bros. Auctioneers Incorporated |
35,758,905 | ||
|
| ||||
59,878,105 |
||||
| CRUDE OIL & GAS PRODUCTION (0.19%) | ||||
90,000 |
Canadian Natural Resources Limited | 4,724,100 |
||
|
|
|
DIVERSIFIED COMPANIES (20.76%) |
|
|
|
5,799 |
Berkshire Hathaway Inc. Class A * |
521,910,000 | ||
|
2,011 |
Berkshire Hathaway Inc. Class B * |
5,823,253 | ||
|
| ||||
|
527,733,253 | ||||
|
| ||||
|
|
|
DIVERSIFIED MANUFACTURING (0.93%) |
|
|
|
383,880 |
Danaher Corporation |
23,700,751 | ||
|
| ||||
|
|
|
FLOORING PRODUCTS (3.74%) |
|
|
|
2,665,000 |
Mohawk Industries Inc. * |
95,087,200 | ||
|
| ||||
|
|
|
FREIGHT TRANSPORTATION (2.63%) |
|
|
|
2,007,294 |
Expeditors International Inc. |
66,923,182 | ||
|
| ||||
|
|
|
INDUSTRIAL & CONSTRUCTION SUPPLIES (4.55%) |
|
|
|
3,484,900 |
Fastenal Company |
115,594,133 | ||
|
| ||||
|
|
|
INFORMATION PROCESSING (1.97%) |
|
|
|
299,274 |
MasterCard Inc. |
50,071,533 | ||
|
| ||||
|
|
INSURANCE BROKERS (0.88%) |
|
|
1,127,910 |
Brown & Brown Inc. |
22,479,246 |
||
|
|
|
PRINTING (1.13%) |
|
|
|
1,917,307 |
De La Rue plc (United Kingdom) |
28,742,349 | ||
|
| ||||
|
|
|
RETAILING (12.59%) |
|
|
|
39,775 |
Costco Wholesale Corporation |
1,817,718 | ||
|
1,372,623 |
Target Corporation |
54,177,430 | ||
|
4,947,700 |
TJX Companies, Inc. |
155,654,642 | ||
|
2,118,568 |
Walgreen Company |
62,285,899 | ||
|
951,630 |
Wal-Mart Stores, Inc. |
46,096,957 | ||
|
| ||||
|
320,032,646 | ||||
|
| ||||
|
|
|
TRUCK MANUFACTURING (1.08%) |
|
|
|
840,572 |
PACCAR Inc. |
27,326,996 | ||
|
| ||||
|
|
|
VETERINARY DIAGNOSTICS (6.63%) |
|
|
|
3,646,134 |
Idexx Laboratories Inc. †* |
168,451,391 | ||
Miscellaneous Securities (2.79%) (b) |
70,867,495 |
|||
|
| ||||
|
TOTAL COMMON STOCKS (Cost $1,442,724,252) |
$2,022,498,314 | |||
|
| ||||
| Principal Amount |
||||
|
|
||||
|
|
|
U.S. GOVERNMENT OBLIGATIONS (20.24%) |
|
|
|
$514,500,000 |
U.S. Treasury Bills due 7/2/2009 through 8/20/2009 |
514,477,148 | ||
|
| ||||
|
TOTAL U.S. GOVERNMENT OBLIGATIONS |
||||
|
(Cost $514,477,148) |
514,477,148 | |||
|
| ||||
|
TOTAL INVESTMENTS (99.82%) †† |
||||
|
(Cost $1,957,201,400) |
2,536,975,462 | |||
|
OTHER ASSETS LESS LIABILITIES (0.18%) |
4,537,334 | |||
|
| ||||
|
NET ASSETS (100.00%) |
$2,541,512,796 | |||
|
| ||||
| † | Refer to Note 8. |
| †† | The cost for federal income tax purposes is identical. |
| * | Non-income producing. |
| (a) | The Fund is invested in preference shares of Porsche Automobil Holding SE which possess the same economic interest as Porsche common stock but have no voting rights. |
| (b) | "Miscellaneous Securities" include holdings in their initial period of acquisition that have not previously been publicly disclosed. |
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 – quoted prices in active markets for identical securities
Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
|
Investments in | ||
|
Valuation Inputs |
Securities | |
|
|
| |
|
Level 1 – Quoted Prices |
$2,022,498,314 | |
|
Level 2 – Other Significant Observable Inputs * |
514,477,148 | |
|
| ||
|
Total |
$2,536,975,462 | |
|
|
* Represents U.S. Treasury Bills with remaining maturities of 60 days or less which are valued at their amortized cost.
The accompanying notes are an integral part of these Financial Statements.
| ASSETS | ||
| Investments in securities, at value (Note 1) | ||
| Unaffiliated companies (cost $1,865,831,878) | $2,368,524,071 | |
| Affiliated companies (cost $91,369,522) (Note 8) | 168,451,391 | |
|
| ||
| Total investment in securities (cost $1,957,201,400) | 2,536,975,462 | |
| Cash on deposit with custodian | 2,800,653 | |
| Receivable for capital stock sold | 2,850,416 | |
| Dividends receivable | 1,911,242 | |
| Other assets | 28,672 | |
|
| ||
| Total assets | 2,544,566,445 | |
|
| ||
|
LIABILITIES |
|
|
|
Payable for capital stock repurchased |
725,341 | |
|
Accrued investment advisory fee |
2,116,495 | |
|
Accrued other expenses |
211,813 | |
|
| ||
|
Total liabilities |
3,053,649 | |
|
| ||
|
Net assets applicable to 26,113,652 shares of capital stock outstanding (Note 4) |
$2,541,512,796 | |
|
| ||
|
Net asset value, offering price and redemption price per share |
$97.33 | |
|
| ||
|
NET ASSETS CONSIST OF |
|
|
|
Capital (par value and paid in surplus) $.10 par value stock, 100,000,000 shares authorized |
$2,012,994,472 | |
|
Undistributed net investment income (Note 5) |
3,362,311 | |
Accumulated net realized losses on investments (Note 5) |
(54,618,049) |
|
|
Unrealized appreciation |
579,774,062 | |
|
| ||
|
Total net assets |
$2,541,512,796 | |
|
|
The accompanying notes are an integral part of these Financial Statements.
|
INVESTMENT INCOME |
|
|
|
Income |
||
|
Dividends, net of $1,659,278 foreign tax withheld |
$14,699,702 | |
|
Interest |
398,932 | |
|
| ||
|
Total income |
15,098,634 | |
|
| ||
|
Expenses |
||
|
Investment advisory fee (Note 2) |
11,658,958 | |
|
Legal and auditing fees |
115,084 | |
|
Stockholder servicing agent fees |
259,999 | |
|
Custodian fees |
40,000 | |
|
Directors fees and expenses (Note 6) |
118,314 | |
|
Other |
92,645 | |
|
| ||
|
Total expenses |
12,285,000 | |
|
Less expenses reimbursed by Investment Adviser (Note 2) |
552,000 | |
|
| ||
|
Net expenses |
11,733,000 | |
|
| ||
|
Net investment income |
3,365,634 | |
|
| ||
|
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS |
|
|
|
Realized gain/(loss) on |
||
|
Investments |
5,773,456 | |
|
Foreign currency transactions |
221,268 | |
|
| ||
|
Net realized gain on investments and foreign currencies |
5,994,724 | |
|
Net increase in unrealized appreciation on |
||
|
Investments |
||
|
Unaffiliated companies |
978,605 | |
|
Affiliated companies (Note 8) |
36,898,876 | |
|
| ||
|
Net increase in unrealized appreciation on investments |
37,877,481 | |
|
| ||
Net realized and unrealized gain on investments and foreign currencies |
43,872,205 |
|
|
Net increase in net assets from operations |
$47,237,839 | |
|
|
The accompanying notes are an integral part of these Financial Statements.
| Six Months
Ended 6/30/09 (Unaudited) |
Year
Ended 12/31/08 |
|||
|
|
| |||
| INCREASE/(DECREASE) IN NET ASSETS | ||||
| From operations | ||||
| Net investment income | $3,365,634 | $10,236,582 | ||
| Net realized gain on investments and foreign currencies | 5,994,724 | 239,644,000 | ||
| Net increase (decrease) in unrealized appreciation on investments | 37,877,481 | (1,186,236,559) | ||
|
|
| |||
| Net increase (decrease) in net assets from operations | 47,237,839 | (936,355,977) | ||
| Distributions to shareholders from | ||||
| Net investment income | (184,248) | (10,628,918) | ||
| Net realized gains | (4,440) | (168,718,205) | ||
| Capital share transactions (Note 4) | 8,271,047 | 88,409,150 | ||
|
|
| |||
| Total increase (decrease) | 55,320,198 | (1,027,293,950) | ||
| NET ASSETS | ||||
| Beginning of period | 2,486,192,598 | 3,513,486,548 | ||
|
|
| |||
| End of period (including undistributed net investment income of $3,362,311 and $180,925, respectively) | $2,541,512,796 | $2,486,192,598 | ||
|
|
|
The accompanying notes are an integral part of these Financial Statements.
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES
Sequoia Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The investment objective of the Fund is growth of capital from investments primarily in common stocks and securities convertible into or exchangeable for common stock. The following is a summary of significant accounting policies, consistently followed by the Fund in the preparation of its financial statements.
|
A. |
Valuation of investments: Investments are carried at market value or at fair value as determined under the supervision of the Board of Directors. Securities traded on a national securities exchange are valued at the last reported sales price on the principal exchange on which the security is listed on the last business day of the period; securities traded in the over-the-counter market are valued in accordance with NASDAQ Official Closing Price on the last business day of the period; securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the mean between the last reported bid and asked prices. |
| Securities traded on a foreign exchange are valued at the last reported sales price on the principal exchange on which the security is primarily traded. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the New York Stock Exchange on that day. | |
| U.S. Treasury Bills with remaining maturities of 60 days or less are valued at their amortized cost. U.S. Treasury Bills that when purchased have a remaining maturity in excess of sixty days are stated at their discounted value based upon the mean between the bid and asked discount rates until the sixtieth day prior to maturity, at which point they are valued at amortized cost. | |
| When reliable market quotations are insufficient or not readily available at time of valuation or when the Investment Adviser determines that the prices or values available do not represent the fair value of a security, such security is valued as determined in good faith by the Investment Adviser, in conformity with guidelines adopted by and subject to review by the Board of Directors. | |
|
Foreign currencies:Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of foreign portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities are acquired or sold. Income and expenses are translated into U.S. dollars at the rates of exchange prevailing when accrued. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from the sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
|
B. |
Accounting for investments: Investment transactions are accounted for on the trade date and dividend income is recorded on the ex-dividend date. Interest income is accrued as earned. Premiums and discounts on fixed income securities are amortized over the life of the respective security. The net realized gain or loss on security transactions is determined for accounting and tax purposes on the specific identification basis. |
|
C. |
Federal income taxes: It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its stockholders. Therefore, no federal income tax provision is required. |
|
D. |
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. |
|
E. |
General: Dividends and distributions are recorded by the Fund on the ex-dividend date. |
| F. | Indemnification: The Fund's officers, directors and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss thereunder to be remote. |
NOTE 2—INVESTMENT ADVISORY CONTRACTS AND PAYMENTS TO INTERESTED PERSONS
The Fund retains Ruane, Cunniff & Goldfarb Inc. as its investment adviser. Ruane, Cunniff & Goldfarb Inc. (the "Investment Adviser") provides the Fund with investment advice, administrative services and facilities.
Under the terms of the Advisory Agreement, the Investment Adviser receives a management fee equal to 1% per annum of the Fund's average daily net asset values. This percentage will not increase or decrease in relation to increases or decreases in the net asset value of the Fund. Under the Advisory Agreement, the Investment Adviser is obligated to reimburse the Fund for the amount, if any, by which the operating expenses of the Fund (including the investment advisory fee) in any year exceed the sum of 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. The expenses incurred by the Fund exceeded the percentage limitation during the six months ended June 30, 2009 and the Investment Adviser reimbursed the Fund $552,000. Such reimbursement is not subject to recoupment by the Investment Adviser.
For the six months ended June 30, 2009, there were no amounts accrued or paid to interested persons, including officers and directors, other than advisory fees of $11,658,958 to Ruane, Cunniff & Goldfarb Inc. and brokerage commissions of $265,431 to Ruane, Cunniff & Goldfarb LLC, the Fund's distributor. Certain officers of the Fund are also officers of the Investment Adviser and the Fund's distributor. Ruane, Cunniff & Goldfarb LLC received no compensation from the Fund on the sale of the Fund's capital shares during the six months ended June 30, 2009.
NOTE 3—PORTFOLIO TRANSACTIONS
The aggregate cost of purchases and the proceeds from the sales of securities, excluding U.S. government obligations, for the six months ended June 30, 2009 were $146,800,792 and $211,220,253, respectively. Included in proceeds of sales is $55,160,636 representing the value of securities disposed of in payment of redemptions in-kind, resulting in realized gains of $41,986,090.
At June 30, 2009 the aggregate gross tax basis unrealized appreciation and depreciation of securities were $838,541,357 and $258,767,295, respectively.
NOTE 4—CAPITAL STOCK
At June 30, 2009 there were 100,000,000 shares of $.10 par value capital stock authorized. Transactions in capital stock for the six months ended June 30, 2009 and the year ended December 31, 2008 were as follows:
| 2009 | 2008 | |||||||
|
|
| |||||||
| Shares | Amount | Shares | Amount | |||||
|
|
|
|
| |||||
| Shares sold | 1,872,646 | $174,421,048 | 2,890,902 | $341,191,851 | ||||
| Shares issued to stockholders on reinvestment of | ||||||||
| Net investment income | 1,473 | 144,858 | 81,004 | 7,832,313 | ||||
| Net realized gains on Investments | 35 | 3,490 | 1,157,417 | 128,898,150 | ||||
|
|
|
|
| |||||
| 1,874,154 | 174,569,396 | 4,129,323 | 477,922,314 | |||||
| Shares repurchased | 1,857,707 | 166,298,349 | 3,287,506 | 389,513,164 | ||||
|
|
|
|
| |||||
| Net increase | 16,447 | $ 8,271,047 | 841,817 | $ 88,409,150 | ||||
|
|
|
|
| |||||
NOTE 5—FEDERAL INCOME TAXES
Distributions to shareholders are determined in accordance with federal tax regulations and may differ from those determined for financial statement purposes. To the extent these differences are permanent such amounts are reclassified within the capital accounts based on federal tax regulations. During the six months ended June 30, 2009 permanent differences primarily due to realized gains on redemptions in kind not recognized for tax purposes resulted in a net increase in accumulated net realized losses of $41,986,091 with a corresponding increase in paid in surplus. These reclassifications had no effect on net assets.
The tax character of distributions paid during the six months ended June 30, 2009 and the year ended December 31, 2008 was as follows:
| 2009 | 2008 | |||
|
|
| |||
| Distributions paid from | ||||
| Ordinary income | $184,248 | $ 10,628,918 | ||
| Long-term capital gains | 4,440 | 168,718,205 | ||
|
|
| |||
| Total distributions | $188,688 | $179,347,123 | ||
|
|
| |||
| As of June 30, 2009, the components of distributable earnings on a tax basis were as follows: | ||||
| Undistributed ordinary income |
$ 3,362,311 | |||
| Accumulated net realized losses | (54,618,049) |
|||
| Unrealized appreciation |
579,774,062 | |||
|
| ||||
|
$528,518,324 | ||||
|
| ||||
In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns and requires certain expanded tax disclosures. Management has applied the Interpretation to the Fund during the period ended June 30, 2009. As a result of the application of the Interpretation, there was no material impact on the financial statements. The Fund's Federal tax returns filed in the three-year period ended December 31, 2008 remain subject to examination by the IRS.
NOTE 6—DIRECTORS FEES AND EXPENSES
Directors who are not deemed "interested persons" receive fees of $10,000 per quarter and $2,500 for each meeting attended, and are reimbursed for travel and other out-of-pocket disbursements incurred in connection with attending directors meetings. The total of such fees and expenses paid by the Fund to these directors for the six months ended June 30, 2009 was $118,314.
NOTE 7—INTERIM FINANCIAL STATEMENTS
The interim financial statements have not been examined by the Fund's independent registered public accounting firm and accordingly they do not express an opinion thereon.
NOTE 8—AFFILIATED COMPANIES
Portfolio companies 5% or more of whose outstanding voting securities are held by the Fund are defined in the Investment Company Act of 1940 as "affiliated companies." The total value and cost of the Fund's investment in an affiliated company at June 30 2009 aggregated $168,451,391 and $91,369,522, respectively. There were no transactions for the affiliated company during the period of its affiliation for the six months ended June 30, 2009.
NOTE 9—FINANCIAL HIGHLIGHTS
| Six Months Ended June 30, 2009 |
Year Ended December 31,
| |||||||||||
| (Unaudited) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||
|
|
|
|
|
|
| |||||||
| Per Share Operating Performance (for a share outstanding throughout the period) | ||||||||||||
| Net asset value, beginning of period | $ 95.27 | $ 139.12 | $ 152.75 | $ 155.45 | $ 154.27 | $ 147.61 | ||||||
|
|
||||||||||||
| Income from investment operations | ||||||||||||
| Net investment income (loss) | 0.13 | 0.40 | 0.46 | (0.70) | (0.75) | (0.58) | ||||||
| Net realized and unrealized gains (losses) on investments | 1.94 | (37.11) | 13.48 | 13.60 | 12.57 | 7.45 | ||||||
|
|
||||||||||||
| Total from investment operations | 2.07 | (36.71) | 13.94 | 12.90 | 11.82 | 6.87 | ||||||
|
|
||||||||||||
| Less distributions | ||||||||||||
| Dividends from net investment income | (0.01) | (0.42) | (0.45) | (0.00) | (0.00) | (0.00) | ||||||
| Distributions from net realized gains | (0.00)(a) | (6.72) | (27.12) | (15.60) | (10.64) | (0.21) | ||||||
|
|
||||||||||||
| Total distributions | (0.01) | (7.14) | (27.57) | (15.60) | (10.64) | (0.21) | ||||||
|
|
||||||||||||
| Net asset value, end of period | $ 97.33 | $ 95.27 | $ 139.12 | $ 152.75 | $ 155.45 | $ 154.27 | ||||||
|
|
||||||||||||
| Total Return | 2.17%† | –27.03% | 8.40% | 8.34% | 7.78% | 4.66% | ||||||
| Ratios/Supplemental data | ||||||||||||
| Net assets, end of period (in millions) | $2,541.5 | $2,486.2 | $3,513.5 | $3,599.8 | $3,573.3 | $3,772.4 | ||||||
| Ratio of expenses to average net assets | ||||||||||||
| Before expense reimbursement | 1.05%†† | 1.04% | 1.03% | 1.03% | 1.03% | 1.02% | ||||||
| After expense reimbursement | 1.00%†† | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | ||||||
| Ratio of net investment income (loss) to average net assets | 0.3%†† | 0.3% | 0.3% | –0.5% | –0.5% | –0.4% | ||||||
| Portfolio turnover rate | 8%† | 12% | 13% | 14% | 8% | 6% | ||||||
| † |
Not
annualized |
| †† |
Annualized |
| (a) |
Represents less than $0.01 per share. |
Other information (Unaudited)
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the SEC's Public Reference Room in Washington, DC. For information regarding the operation of the SEC's Public Reference Room, call 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly, semiannual or annual report on Sequoia Fund's web site at http://www.sequoiafund.com/fund_reports.htm.
You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Visit Sequoia Fund's web site at www.sequoiafund.com and use the "Shareholder Information" link to obtain all proxy information. This information may also be obtained from the Securities and Exchange Commission's web site at www.sec.gov or by calling DST Systems, Inc. at (800) 686-6884.
SEQUOIA FUND, INC.
767 Fifth Avenue, Suite
4701
New York, New York 10153-4798
(800) 686-6884
Website:
www.sequoiafund.com
DIRECTORS
Richard T. Cunniff
Robert D. Goldfarb
David M. Poppe
Vinod Ahooja, Chairman of the Board
Roger Lowenstein
C. William Neuhauser
Sharon Osberg
Robert L. Swiggett
OFFICERS
Richard T. Cunniff — Vice Chairman Robert D. Goldfarb — President David M. Poppe — Executive Vice President Joseph Quinones, Jr. — Vice President, Secretary, Treasurer & Chief Compliance Officer Michael Valenti — Assistant Secretary
INVESTMENT ADVISER
Ruane, Cunniff & Goldfarb Inc.
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798
DISTRIBUTOR
Ruane, Cunniff & Goldfarb LLC
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798
CUSTODIAN
The Bank of New York
MF Custody Administration Department
One Wall Street, 25th Floor
New York, New York 10286
REGISTRAR AND SHAREHOLDER SERVICING AGENT
DST Systems, Inc.
P.O. Box 219477
Kansas City, Missouri 64121
LEGAL COUNSEL
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004