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As filed with the Securities and Exchange
Commission on April 30, 1999
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. 45 /x /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 / /
Amendment No. 23 /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, 1999 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:
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/ / This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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SEQUOIA FUND, INC.
PROSPECTUS - May 1, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON
THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Table of Contents
Page
Risk/Return Summary 3
Fees and Expenses of the Fund 4
Description of the Fund 5
Investment Objectives and Policies 5
Primary Strategies 5
Risk Considerations for the Fund 5
Management's Discussion of the Fund Performance 5
Management of the Fund 6
Purchase and Sale of Shares 6
How the Fund Values its Shares 6
How to Buy Shares 6
How to Redeem Shares 7
Dividends, Distributions and Taxes 8
Financial Highlights 9
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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
Market Risks
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 that 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 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 a
broad-based securities market index. A Fund's past performance,
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of course, does not necessarily indicate how it will perform in
the future.
During the period shown in the bar chart, the highest return for
a quarter was 21.5% (quarter ending June 97) and the lowest
return for a quarter was -14.0% (quarter ending September 90).
Performance Table
1 Year 5 Years 10 Years Since Inception
Sequoia Fund 35.3% 28.1% 21.8% 18.7%
S&P 500 28.6% 24.1% 19.2% 14.3%
FEES AND EXPENSES 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
Operating Expenses
Management Fees 1.00%
Other Expenses 0.02%
Total Fund Operating Expenses 1.02%
Expense reimbursement* -0.02%
Net expenses 1.00%
* Reflects Ruane Cunniff's contractual reimbursement of a
portion of the Fund's operating expenses.
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
$102 $319 $552 $1,225
DESCRIPTION OF THE FUND
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Investment Objectives and Policies
This section of the Prospectus provides a more complete
description of the Fund's investment objectives and principal
strategies and risks. There can, of course, be no assurance that
the Fund will achieve its investment objectives.
Primary Strategies
The Fund's investment objectives 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 or
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
possibility decrease, perhaps severely, it 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 is the Fund's shares than would occur
in a more diversified fund.
Temporary Defensive Positions
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
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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 limited 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.
Year 2000
Information technology experts are concerned about
computer systems' ability to process date related information on
and after January 1, 2000. This situation commonly known as the
"Year 2000" issue could have an adverse effect on the Fund. The
Fund and Ruane Cunniff are addressing the Year 2000 issue for
their systems. The Fund has been informed by its other service
providers that they are taking similar measures. The Year 2000
problem, if not corrected, may adversely affected services
provided to the Fund, or may affect companies in which the Fund
may invest and, therefore, may lower the value of your share.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
During 1998, the Fund gained 35.3% compared to a total
return on the Standard & Poor's 500 Index of 28.6%. The Fund's
investment philosophy is to make concentrated investments in a
limited number of companies whose long term economic prospects,
relative to the acquisition price of their stocks, are deemed to
be attractive. As a result of this portfolio concentration, the
performance of the fund over time should correlate more closely
with the specific financial performance of its limited number of
portfolio companies than with price movements in the stock market
in general. At year end 1998, total equity investments comprised
approximately 79% of net assets as compared to 96% at the prior
year end. The decline in the percentage of the Fund's assets
invested in equities principally reflects sales by the Fund
during the year of a number of its long term holdings. The Fund
did not make any major new equity investments during 1998. The
equity investments of the Fund at year 1998 include a
particularly heavy portfolio concentration in selected financial
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services companies, as has been the case for several years. The
price performance of these financial services companies in the
aggregate was principally responsible for the Fund's strong
results relative to the S$P 500 Index. However, Fund management
cautions that 1998's performance substantially exceeded
management's original expectations and, in its judgment, much of
the Fund's 1998 appreciation was effectively borrowed from future
years' performance. Sequoia shareholders should also be aware
that the Fund has a significant portfolio concentration in the
stock of a single issuer, Berkshire Hathaway, Inc. (over 29% of
net assets at year end 1998). As a result, short term price
movements in Berkshire's common stock - which may be
disproportionate to the company's underlying economic progress -
will have a particularly important effect on the periodic results
of Sequoia. Berkshire Hathaway's stock price increased 52% in
1998. The 1998 price performance of other major holdings was as
follows: Freddie Mac +54%; Progressive Corporation +41%; Fifth
Third Bancorp +31%; Harley Davidson, Inc. +73% and U.S. Bancorp
- -5%. Including the Berkshire Hathaway position, these six
holdings representing 97% of the Fund's total equity investments
at year end 1998.
MANAGEMENT OF THE FUND
Investment Adviser
The Fund's investment adviser is Ruane, Cunniff & Co.,
767 Fifth Avenue, New York, New York 10153. Ruane Cunniff is a
registered investment adviser and a registered broker-dealer and
member corporation of the New York Stock Exchange, Inc.
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, 1998. This payment amounted to .98% of the Fund's
average daily net assets for the fiscal year ended December 31,
1998, 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.
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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 form more than 20 years.
PURCHASE AND SALE OF SHARES
How the Fund Values its Shares
The Fund calculates its net asset value of NAV at the
close of the New York Stock Exchange, Inc. (normally 4:00 p.m.
New York time) each day the Exchange is open for business.
Generally, this means any weekday exclusive of New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day and
Good Friday. To calculate NAV, the Fund's assets are valued and
totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. The Fund
values its assets at their current market value determined on the
basis of market quotations, or if such quotations are not readily
available, such other methods as the Fund's directors believe
accurately reflect fair market value.
Your order for purchase of shares is priced at the next
NAV per share calculated after your order is received by the
Fund. If you purchase or redeem shares on a day when the New
York Stock Exchange, Inc. is closed, the net asset value will be
determined as of the close of business on the next following day
that the New York Stock Exchange, Inc. 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 sales of its
shares to new investors, including investments by IRA and Keogh
plans. The Fund will continue to accept additional investments
[Bfrom existing stockholders, and will continue to reinvest
dividends and capital gains distributions for the accounts of
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. The Fund may recommence at any time the
sale of shares to new investors, if, in the Board of Directors'
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opinion, doing so would be in the best interests of the Fund and
its stockholders.
Additional Investments
Minimum Amounts. (except if waived for IRA and Keogh
accounts): $50.00
Forward Orders to:
DST Systems Inc.
Post Office Box 419477
Kansas City, Missouri 64141
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 may also 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 you 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.
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By Mail
You may send a written request for redemption to:
DST Systems, Inc.
Post Office Box 419477
Kansas City, Missouri 64141
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 of 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.
If the Fund pays your redemption wholly or partly in
portfolio securities, you may incur brokerage costs in converting
the securities to cash.
The Fund's management believes that it would be highly
likely that a redemption (or series of redemptions) in the amount
of $5 million or greater will be paid in portfolio securities
instead of cash.
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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 by 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 with 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 419477, Kansas City, Missouri
64141.
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
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taxable to you as ordinary income. Distributions of long-term
capital gains are taxable to you as long-term capital gains. The
Fund's distributions also may be subject to state and local
taxes.
The Fund holds portfolio securities longer than most
other funds typically hold securities. As a result, unrealized
capital gains represented a significant portion of the value of
your investment in the Fund. As of December 31, 1998, the net
unrealized appreciation of the Fund's portfolio was approximately
67% 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. If you buy shares just before the Fund deducts a
distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back as a taxable
distribution.
Each year shortly after December 31, the Fund will send
you tax information stating the amount and type of all its
distributions for the year. You should consult your tax adviser
about the federal, state and local tax consequences of an
investment in the Fund in your particular situation.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you
understand the Fund's financial performance of 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 McGladrey &
Pullen, LLP, the independent accountants for the Fund, whose
report, along with the Fund's financial statements, is included
in the SAI, which is available upon request.
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Year Ended December 31,
Net asset value, 1998 1997 1996 1995 1994
beginning of year $125.63 $ 88.44 $ 78.13 $ 55.59 $ 54.84
Income from investment
operations:
Net investment income 0.39 0.08 0.38 0.31 0.42
Net realized and unrealized
gains on investments 43.07 38.10 16.41 22.62 1.41
Total from investment
operations 43.36 38.18 16.79 22.93 1.83
Less distributions:
Dividends from net invest-
ment gains (0.37) (0.08) (0.38) (0.31) (0.42)
Distributions from net
realized gains (8.02) (0.91) (6.10) (0.08) (0.66)
Total distributions (8.39) (0.99) (6.48) (0.39) (1.08)
Net asset value,
end of year $160.70 $125.63 $ 88.44 $ 78.13 $ 55.59
Total Return 35.3% 42.3% 21.7% 41.4% 3.3%
Ratio/Supplemental data:
Net assets, end of year
(in millions) $5,001.9 $3,672.6 $2,185.0 $2,185.5 $1,548.3
Ratio to average net assets:
Expenses 1.0% 1.0% 1.0% 1.0% 1.0%
Net investment income 0.3% 0.1% 0.4% 0.5% 0.8%
Portfolio turnover rate 21% 8% 23% 15% 32%
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 stock-
holders contain additional information on the Fund's investments.
Statement of Additional Information
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
referenced into (and is legally part of) this Prospectus.
You may request a free copy of the current annual/semi-
annual report of the SAI, by contacting your broker or other
financial intermediary, or by contacting the Fund:
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By Mail: Sequoia Fund, Inc.
767 Fifth Avenue
New York, NY 10153
By Phone: (800)686-6884
Or you may view or obtain these documents from the SEC:
In person: Documents may be copied or reviewed at the SEC's
Public Reference Room in Washington, D.C.
By phone: (800) SEC-0330
By mail: Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
(Duplicating fee required)
On the Internet: www.sec.gov
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SEQUOIA FUND, INC.
767 Fifth Avenue
New York, New York 10153
(Telephone 800-686-6884)
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
_____________________
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 is not a
prospectus and is only authorized for distribution when preceded
or accompanied by the Fund's Prospectus dated May 1, 1999 (the
"Prospectus"). This Statement of Additional Information 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.
_____________________
Table of Contents
Investment Policies 1 Redemption of Shares 12
Management 5 Common Stock 13
Investment Adviser and 8 Custodian, Counsel and 13
Investment Advisory Independent Accountants
Contract Independent Accountant's
Allocation of Portfolio 10 Report 15
Brokerage
Net Asset Value 11
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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. 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,
1998, 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. 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 of 1933. 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.
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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, 1998 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.
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(d) Other Investment Policies
The Fund will not seek to realize profits by antic-
ipating 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.)
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 "Dividends, Distributions and Taxes," page 8 of the
Prospectus. 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. 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 of 1933.
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
<PAGE>
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.
In connection with the qualification or registration of
the Fund's shares for sale under the State securities laws of
certain States, the Fund has agreed, in addition to the
investment restrictions set forth above, that it will not
(i) purchase material amounts of restricted securities,
(ii) invest more than 5% of the value of its total assets in
securities of unseasoned issuers (including their predecessors)
which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable,
5
<PAGE>
(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 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), (v) invest any part
of its total assets in interests in oil, gas, or other mineral
exploration or development programs and (vi) 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 as 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
New York Stock Exchange or the American Stock Exchange. The Fund
may from time to time agree to additional investment restrictions
for purposes of compliance with the securities laws of those
States where the Fund intends to sell or offer for sale its
shares. Any such additional restrictions that would have a
material bearing on the Fund's operations will be reflected in
supplements to this Statement of Additional Information or
related Prospectus.
MANAGEMENT
The directors and officers of the Fund and their
principal occupations during the past five years are set forth
below. Unless otherwise specified, the address of each of the
following persons is 767 Fifth Avenue, New York, New York 10153.
William J. Ruane* ,73, Chairman of the Board and
Director, is and has been Chairman of the Board and Director of
Ruane, Cunniff & Co., Inc. (member firm of the New York Stock
Exchange, Inc. and the Fund's investment adviser and distributor)
for more than five years. Mr. Ruane is also a Director of The
Washington Post Company.
Richard T. Cunniff*, 76, Vice Chairman and Director, is
and has been a Director, and prior to 1998 was also President, of
Ruane, Cunniff & Co., Inc. for more than five years. Mr. Cunniff
is also a Director of Sturm, Ruger & Company, Inc. He is the
father of Carol L. Cunniff, Executive Vice President and Director
of the Fund.
____________________
* Such persons are "interested persons" of the Fund within
the meaning of Section 2(a)(19)(A) of the Investment
Company Act of 1940.
6
<PAGE>
Robert D. Goldfarb*, 54, President and Director, is a
President of Ruane, Cunniff & Co., Inc. with which he has been
associated for more than five years.
Carol L. Cunniff*, 48, Executive Vice President and
Director, is an Executive Vice President and Director of Ruane,
Cunniff & Co., Inc. with which she has been associated for more
than five years. She is the daughter of Richard T. Cunniff, Vice
Chairman and Director of the Fund.
John M. Harding, 77, Director, is currently retired.
From 1975 to 1989, Mr. Harding was Associate Professor of
Business at Albers School of Business, Seattle University. His
address is 2159 38th Avenue East, Seattle, Washington 98112.
Roger Lowenstein, 45, Director, is a writer who
regularly contributes to major financial and news publications.
From 1979 to 1991, Mr. Lowenstein was a writer for the Wall
Street Journal. His address is 411 Harrison Avenue, Westfield,
New Jersey 07090.
Francis P. Matthews, 77, Director, is currently retired.
From 1986 to 1990 Mr. Matthews was of counsel to Matthews &
Cannon (law firm), Omaha, Nebraska. His address is 220 Trails
End Road, Elkhorn, Nebraska 68022.
C. William Neuhauser, 73, Director, is currently
retired. From January 1979 to November 1981, Mr. Neuhauser was
Executive Secretary of National Maritime Council (association of
U.S. flag ocean carriers, maritime unions and shipyards). His
address is Sumac Lane, Gloucester, Massachusetts 01930.
Robert L. Swiggett, 77, Director, is currently retired.
Mr. Swiggett was Chairman of the Board of Directors of Kollmorgen
Corporation (electro-optical instruments and direct-drive motor
and control devices and systems), Hartford, Connecticut from 1983
to 1990. His address is 8 Birchwood Farm Lane, P.O. Box 1070,
New London, New Hampshire 03257.
Joseph Quinones, Jr.**, 53, Vice President, Secretary
and Treasurer, is a Vice President, Secretary and Treasurer of
Ruane, Cunniff & Co., Inc. Previously, Mr. Quinones had been a
vice president of Weiss Peck & Greer (a money management firm),
the chief financial officer of Woodward & Associates (a money
management firm).
On February 12, 1999, the directors and officers of the
Fund collectively owned approximately 0.76%, or, including shares
owned by their respective relatives and affiliates, approximately
2.33%, of the total number of the outstanding shares of the
Fund's Common Stock. Each of the directors and officers
7
<PAGE>
disclaims beneficial ownership of the shares owned by such
relatives and affiliates.
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, 1998 paid by the Fund to each of the Directors is
set forth below. Ruane, Cunniff & Co., Inc. does not provide
investment advisory services to any investment companies
registered under the Investment Company Act of 1940, as amended,
other than the Fund.
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual
Compensation As Part of Benefits Upon Total Compensation
Name of Director from Fund Fund Expenses Retirement From Fund
________________ ____________ ________________ ________________ __________________
<S> <C> <C> <C> <C>
William J. Ruane $0 $-0- $-0- $0
Richard T. Cunniff $0 -0- -0- $0
Carol L. Cunniff $0 -0- -0- $0
Robert D. Goldfarb $0 -0- -0- $0
John M. Harding $34,000 -0- -0- $34,000
Roger Lowenstein $7,166 -0- -0- $7,166
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
</TABLE>
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
8
<PAGE>
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. Continuance
of the Contract through December 31, 1999 was so approved at a
meeting of the Board of Directors on December 7, 1998 at which
meeting the Board of Directors also approved the submission to
stockholders of the Fund of the renewal of the Investment
Advisory Contract for the period commencing January 1, 1999,
pursuant to the provisions of the Investment Company Act of 1940
and the terms of the Investment Advisory Contract described
above.
Under 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 responsible 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).
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. Such fee is in excess of the management
fees paid by most similar registered investment companies. The
9
<PAGE>
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, 1998, the Fund incurred operating
expenses of $44,907,600 of which the Investment Adviser
reimbursed the Fund $721,000 pursuant to the expense limitation
described above. The amount of operating expenses incurred by
the Fund during the fiscal year ended December 31, 1997 was
$31,679,100 of which the Investment Adviser reimbursed the Fund
$514,000. During the fiscal year ended December 31, 1996, the
Fund incurred operating expenses of $24,720,270 of which the
Investment Adviser reimbursed the Fund $544,000 pursuant to the
expense limitation described above.
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.
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.
10
<PAGE>
The Investment Adviser is a registered investment
adviser and a registered broker-dealer and member corporation of
the New York Stock Exchange, Inc. The Investment Adviser has
also been and may in the future be the Fund's regular broker.
The Investment Adviser also serves, without
compensation, as the Fund's distributor and as such is authorized
to solicit orders from the public to purchase shares of the
Fund's common stock. The distributor acts in this capacity
merely as the Fund's agent, and all subscriptions must be
accepted by the Fund as principal.
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, 1996 $24,026,121 $544,000 $23,482,121
December 31, 1997 $31,015,090 $514,000 $30,501,090
December 31, 1998 $44,036,642 $721,000 $43,315,642
_________________________________________________________________
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 deal 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
11
<PAGE>
with primary market makers and to execute transactions on the
Fund's own behalf, except in those circumstances where, in the
opinion of management, better prices and executions may be
available elsewhere. The Fund does not allocate brokerage
business in return for sales of the Fund's shares.
The following chart sets forth figures pertaining to the
Fund's brokerage during the last three years:
Brokerage
Commissions
Total Paid to
Brokerage Ruane,
Year Commissions Cunniff
Ended Paid & Co., Inc.
_____ ___________ ___________
December 31, 1996 $767,867 $309,715
December 31, 1997 $300,573 $180,425
December 31, 1998 $673,384 $362,856
_________________________________________________________
During the year ended December 31, 1998, the brokerage
commissions paid to the Investment Adviser represented
approximately 54% 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 70% of
the aggregate dollar value of all portfolio transactions of the
Fund during such year for which commissions were paid.
INDIVIDUAL RETIREMENT ACCOUNTS
Individuals generally may make regular contributions to
a traditional IRA of up to $2,000 annually 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 1999, if an individual
is an active participant, the deduction will not be available if.
(i) the individual has adjusted gross income above $41,000, (ii)
the individual files a joint return with his or her spouse and
they have adjusted gross income above $61,000, 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,
12
<PAGE>
some or all of the contributions may be deductible. In addition,
an individual with a non-working spouse may establish a separate
IRA for the spouse and annually contribute a total of up to
$4,000 to the two IRAs, provided that no more than $2,000 may be
contributed to the IRA of either spouse. As noted above, the
deductibility of contributions may be reduced if either spouse is
an active participant in an employer-sponsored retirement plan.
No regular contribution may be made to a traditional IRA for any
year if by the end of such year the IRA owner has attained the
age 70 1/2.
Roth IRAs
Eligible individuals also may elect to make
contributions to a Roth IRA of up to $2,000 annually
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 $2,000. The
total amount contributed by an individual to all IRAs (both
traditional and Roth) in a year may not exceed $2,000.
Contributions to a Roth IRA may be made even if the IRA owner has
attained the age 70 1/2.
Keogh Plans
Generally, the annual amount which a self-employed
individual may deduct for contributions to his own account under
a self-employment retirement plan (often referred to as a Keogh
or HR-10 plan) may be up to 25% 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 $30,000. 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
New York Stock Exchange, Inc. 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
13
<PAGE>
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 New York Stock Exchange, Inc. are valued at the last sales
price on such Exchange on the business day as of which such value
is being determined. If there has been no sale on such 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 such Exchange on such day, then the security is valued
by such method as the Board of Directors of the Fund shall
determine in good faith to reflect its fair market value. Readily
marketable securities not listed on the New York Stock Exchange,
Inc. but listed on other national securities exchanges are valued
in like manner. Securities which are listed on the NASDAQ
National Market System shall be valued at the last sale price
prior to the time of the determination of value; or if no sales
are reported on that date at the mean of the current bid and
asked price. Treasury Bills with remaining maturities of 60 days
or less are valued at their amortized cost. Under the amortized
cost method of valuation, an instrument is valued at cost and the
interest payable at maturity upon the instrument is accrued as
income, on a daily basis, over the remaining life of the
instrument. A Treasury Bill that when purchased had a remaining
maturity in excess of sixty days is valued on the basis of market
quotations and estimates as described above until the sixtieth
day prior to maturity, at which point it is valued at amortized
cost. In that event, the "cost" of the security is deemed to be
the security's stated market value on the sixty-first day prior
to maturity. All other assets of the Fund, including restricted
and not readily marketable securities, are valued in such manner
as the Board of Directors of the Fund in good faith deems
appropriate to reflect their fair value.
The net asset value for each share of Common Stock on
which the subscription and redemption prices are based is
determined as of the close of business on the New York Stock
Exchange, Inc. 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
14
<PAGE>
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 New York Stock Exchange,
Inc. 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, page _) 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, 1998 the Fund has qualified, and
for each fiscal year thereafter, the Fund intends to conduct its
operations so as to qualify 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
15
<PAGE>
company Investors should consult their own counsel for further
details and for the application of state and local tax laws to
his or her 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, 1998, 40.7% of the net ordinary taxable income
distributed by the Fund was eligible for such deduction by
corporate stockholders.
COMMON STOCK
The Articles of Incorporation of the Fund give the Fund
the right to purchase for cash the shares of Common Stock
evidenced by any stock certificate presented for transfer at a
purchase price equal to the aggregate net asset value per share
determined as of the next close of business of the New York Stock
Exchange, Inc. 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.
16
<PAGE>
As of February 12, 1999, Trustees of Grinnell College
(Grinnell, Iowa 50112) beneficially owned 4,071,186 shares of the
Fund on such date (representing 13.04% of the outstanding Common
Stock of the Fund). Bankers Trust Company as Trustee for FMC
Corporation Master Retirement Trust (280 Park Avenue, New York,
New York 10022) and Fidelity Management Trust Company as Trustee
for the FMC Corporation Plans (82 Devonshire Street, Boston,
Massachusetts 02109) together owned 2,084,799 shares of the Fund
(representing 6.68% of the outstanding common stock of the Fund).
Bankers Trust Company as Trustee for the Walt Disney Company
Employees Master Retirement Plan (280 Park Avenue, New York, New
York 10022) and Fidelity Management Trust Company as Trustee for
the Capital Cities/ABC, Inc. Employees Profit Sharing Plan Trust
(subsidiary of the Walt Disney Company) (62 Devonshire Street,
Boston, MA 02109) together beneficially owned 1,821,710 shares of
the Fund (representing 5.83% 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 ACCOUNTANTS
The Bank of New York, 90 Washington Street, New York,
New York 10286, acts as custodian for the Fund's securities
portfolio and cash. Subject to the supervision of the Board of
Directors, The Bank of New York may enter into sub-custodial
agreements for the holding of the Fund's foreign securities.
Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Messrs.
Seward & Kissel LLP, One Battery Park Plaza, New York, New York
10004.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New
York 10017 has been appointed independent accountants for the
Fund.
17
<PAGE>
SEQUOIA FUND, INC.
Statement of Investments
December 31, 1998
COMMON STOCKS (79.66%)
Value
Shares Cost (Note 1)
- ------ ---- --------
BANK HOLDING COMPANIES (12.53%)
6,145,462 Fifth Third Bancorp $ 91,846,680 $ 438,248,259
333,800 Mercantile Bankshares
Corporation 3,439,242 12,851,300
1,181,800 National Commerce Bancorp 7,329,000 22,232,613
4,272,300 U. S. Bancorp 53,895,274 151,666,650
-------------- --------------
156,510,196 624,998,822
-------------- --------------
CONSUMER PRODUCTS (.08%)
335,500 Sturm, Ruger & Company, Inc. 359,850 4,005,031
-------------- --------------
DIVERSIFIED COMPANIES (29.19%)
20,807 Berkshire Hathaway Inc.
Class A* 164,569,540 1,456,490,000
-------------- --------------
INSURANCE (14.77%)
4,352,500 Progressive Corporation-Ohio+ 148,581,862 737,204,688
-------------- --------------
MANUFACTURING - MOTORCYCLES (4.68%)
4,927,400 Harley Davidson, Inc. 66,047,062 233,435,575
-------------- --------------
PERSONAL CREDIT (1.45%)
1,820,300 Household International Inc. 22,866,842 72,129,387
-------------- --------------
SERVICES (16.83%)
13,029,100 Freddie Mac 53,842,460 839,562,631
-------------- --------------
Miscellaneous Securities
(0.13%) 7,965,049 6,672,688
-------------- --------------
TOTAL COMMON STOCKS $ 620,742,861 $3,974,498,822
-------------- --------------
1
<PAGE>
SEQUOIA FUND, INC.
Statement of Investments
December 31, 1998
(continued)
Value
Shares Cost (Note 1)
- ------ ---- --------
U.S. GOVERNMENT OBLIGATIONS(20.34%)
$ 44,500,000 U.S. Treasury Bills due
2/4/99 through 2/18/99 $ 44,290,916 $ 44,290,916
316,000,000 U.S. Treasury Notes,
5 7/8% due 8/31/99 316,499,740 318,567,500
271,000,000 U.S. Treasury Notes,
5 5/8% due 12/31/99 271,771,235 273,794,688
259,000,000 U.S. Treasury Notes,
5 5/8% due 4/30/2000 261,278,140 262,197,031
115,000,000 U.S. Treasury Notes,
5 3/8% due 7/31/2000 116,261,639 116,347,656
-------------- --------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 1,010,101,670 1,015,197,791
-------------- --------------
TOTAL INVESTMENTS (100%)++ $1,630,844,531 $4,989,696,613
============== ==============
++ The cost for federal income tax purposes is identical.
* Non-income producing.
+ Refer to Note 6.
2
<PAGE>
SEQUOIA FUND, INC.
Statement of Assets and Liabilities
December 31, 1998
ASSETS:
Investments in securities, at value
(cost $1,630,844,531) (Note 1) $4,989,696,613
Cash on deposit with custodian 2,007,749
Receivable for capital stock sold 2,723,706
Dividends and interest receivable 13,040,768
Other assets 46,985
--------------
Total assets 5,007,515,821
==============
LIABILITIES:
Payable for capital stock repurchased 1,373,560
Accrued expenses 4,250,825
--------------
Total liabilities 5,624,385
--------------
Net assets applicable to 31,125,890
shares of capital stock outstanding
(Note 4) $5,001,891,436
==============
Net asset value, offering price and
redemption price per share $160.70
=======
See Notes to Financial Statements.
3
<PAGE>
SEQUOIA FUND, INC.
Statement of Operations
Year Ended December 31, 1998
INVESTMENT INCOME:
Income:
Dividends:
Unaffiliated companies $ 21,089,059
Affiliated companies (Note 6) 1,667,490
Interest 33,166,783
--------------
Total income 55,923,332
--------------
Expenses:
Investment advisory fee (Note 2) 44,036,642
Legal and auditing fees 92,994
Stockholder servicing agent fees 363,448
Custodian fees 81,667
Directors fees and expenses (Note 5) 158,587
Other 174,262
--------------
Total expenses 44,907,600
Less expenses reimbursed by Investment
Adviser (Note 2) 721,000
--------------
Net expenses 44,186,600
--------------
Net investment income 11,736,732
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on investments:
Unaffiliated companies 415,002,340
Affiliated companies (Note 6) 16,379,603
--------------
Net realized gain on investments 431,381,943
Net increase in unrealized appreciation on:
Investments 859,089,190
Net realized and unrealized gain on
investments 1,290,471,133
--------------
4
<PAGE>
Increase in net assets from operations $1,302,207,865
==============
See Notes to Financial Statements.
5
<PAGE>
SEQUOIA FUND, INC.
Statements of Changes in Net Assets
Year Ended December 31,
-----------------------------
1998 1997
--------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 11,736,732 $ 2,366,846
Net realized gains 431,381,943 26,323,106
Net increase in unrealized
appreciation 859,089,190 1,081,383,714
-------------- --------------
Net increase in net assets from
operations 1,302,207,865 1,110,073,666
Distributions to shareholders from:
Net investment income (10,988,302) (2,474,076)
Net realized gains (238,181,010) ( 26,264,675)
Capital share transactions (Note 4) 276,288,024 10,231,447
-------------- --------------
Total increase 1,329,326,577 1,091,566,362
NET ASSETS:
Beginning of year 3,672,564,859 2,580,998,497
-------------- --------------
End of year $5,001,891,436 $3,672,564,859
============== ==============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) $1,483,849,808 $1,172,455,159
Undistributed net investment income 748,430 0
Undistributed net realized gains 158,441,116 346,808
Unrealized appreciation 3,358,852,082 2,499,762,892
-------------- --------------
Total Net Assets $5,001,891,436 $3,672,564,859
============== ==============
See Notes to Financial Statements.
6
<PAGE>
SEQUOIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Sequoia Fund Inc. is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, open-end
management 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 by 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 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; 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.
B. Accounting for investments: Investment transactions are
accounted for on the trade date and dividend income is
recorded on the ex-dividend date. 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 generally accepted accounting principles
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
7
<PAGE>
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. Interest income is accrued as
earned.
8
<PAGE>
NOTE 2--INVESTMENT ADVISORY CONTRACTS AND PAYMENTS TO INTERESTED
PERSONS:
The Fund retains Ruane, Cunniff & Co., Inc., as its
investment adviser. Ruane, Cunniff & Co., Inc. (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 management 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 year ended December 31, 1998 and the
Investment Adviser reimbursed the Fund $721,000.
For the year ended December 31, 1998, there were no
amounts accrued to interested persons, including officers and
directors, other than advisory fees of $44,036,642 and brokerage
commissions of $362,856 to Ruane, Cunniff & Co., Inc. Certain
officers of the Fund are also officers of the Investment Adviser
and the Fund's distributor. Ruane, Cunniff & Co., Inc., the
Fund's distributor, received no compensation from the Fund on the
sale of the Fund's capital shares during the year ended
December 31, 1998.
NOTE 3--PORTFOLIO TRANSACTIONS:
The aggregate cost of purchases and the proceeds from
the sales of securities, excluding U.S. government obligations,
for the year ended December 31, 1998 were $30,733,847 and
$866,479,651,respectively. Included in proceeds of sales is
$41,930,713 representing the value of securities disposed of in
payment of redemptions in-kind resulting in realized gains of
$35,106,625. As a result of the redemptions in-kind net realized
gains differ for financial statement and tax purposes. These
realized gains have been reclassified from undistributed realized
gains to paid in surplus in the accompanying financial
statements.
At December 31, 1998 the aggregate gross unrealized
appreciation and depreciation of securities were $3,360,144,444
and $1,292,362, respectively.
9
<PAGE>
NOTE 4--CAPITAL STOCK:
At December 31, 1998 there were 100,000,000 shares of
$.10 par value capital stock authorized. Transactions in capital
stock were as follows:
1998 1997
---- ----
Shares Amount Shares Amount
Shares sold 2,164,908 $ 319,175,918 1,872,099 $ 199,979,993
Shares issued to
stockholders on
reinvestment of:
Net investment income 54,399 7,959,038 21,191 2,331,456
Net realized gain on
investments 1,470,593 215,201,334 188,981 23,446,469
---------- ------------- ---------- -------------
3,689,900 542,336,290 2,082,271 225,757,918
Shares repurchased 1,796,644 266,048,266 2,034,693 215,526,471
---------- ------------- ---------- -------------
Net Increase 1,893,256 $ 276,288,024 47,578 $ 10,231,447
========== ============= ========== =============
NOTE 5--DIRECTORS FEES AND EXPENSES:
Directors who are not deemed "interested persons"
receive fees of $6,000 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 year ended December 31, 1998 was
$158,587.
10
<PAGE>
NOTE 6--AFFILIATED COMPANIES:
Investment in 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 investments in affiliates at
December 31, 1998 aggregated $737,204,688 and $148,581,862,
respectively. The summary of transactions for each affiliate
during the period of their affiliation for the year ended
December 31, 1998 is provided below:
Purchases Sales
----------------------------
Realized Dividend
Affiliate Shares Cost Shares Cost Gain Income
- --------- ------ ---- ------ ---- -------- --------
Progressive Corp -
Ohio -- -- 47,500 $ 1,510,500 $ 5,165,813 $1,095,192
Wallace Computer
Services, Inc. -- -- 3,191,600 98,833,184 11,213,790 572,298
----------- ----------
$16,379,603 $1,667,490
=========== ==========
11
<PAGE>
NOTE 7--SELECTED FINANCIAL INFORMATION:
Year Ended December 31,
-----------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Per Share Operating Performance
(for a share outstanding
throughout the year)
Net asset value, beginning
of year $125.63 $ 88.44 $ 78.13 $ 55.59 $54.84
------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.39 0.38 0.38 0.31 0.42
Net realized and unrealized
gains on investments 43.07 38.10 16.41 22.62 1.41
------- ------- ------- ------- -------
Total from investment
operations 43.46 38.18 16.79 22.93 1.83
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income (0.37) (0.08) (0.38) (0.31) (0.42)
Distributions from net
realized gains (8.02) (0.91) (6.10) (0.08) (0.66)
------- ------- ------- ------- -------
Total distributions (8.39) (0.99) (6.48) (0.39) (1.08)
------- ------- ------- ------- -------
Net asset value, end of
year $160.70 $125.63 $ 88.44 $ 78.13 $ 55.59
======= ======= ======= ======= =======
Total Return 35.3% 43.2% 21.7% 41.4% 3.3%
Ratios/Supplemental data
Net assets, end of year
(in millions) $5,001.9 $3,672.6 $2,581.0 $2,185.5 $1,548.3
Ratio to average net assets:
Expenses 1.0% 1.0% 1.0% 1.0% 1.0%
Net investment income 0.3% 0.1% 0.4% 0.5% 0.8%
Portfolio turnover rate 21% 8% 23% 15% 32%
12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Sequoia Fund, Inc.
We have audited the accompanying statement of assets and
liabilities, including the statement of investments, of Sequoia
Fund, Inc. as of December 31, 1998, and the related statements of
operations for the year then ended, changes in net assets for
each of the two years in the period then ended, and the selected
financial information for each of the five years in the period
then ended. These financial statements and the selected
financial information are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the selected financial information based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and the selected financial
information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by
correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and the
selected financial information referred to above present fairly,
in all material respects, the financial position of the Sequoia
Fund, Inc. as of December 31, 1998, the results of its
operations, the changes in its net assets and the selected
financial information for the periods indicated, in conformity
with generally accepted accounting principles.
New York, New York
January 15, 1999
13
<PAGE>
SEQUOIA FUND, INC.
PART C - OTHER INFORMATION
Item 23. Exhibits
Registrant incorporates herein by reference the exhibits, other
than those filed herewith, that have previously been filed as
part of Registrant's Registration Statement under the Investment
Company Act of 1940. The following Exhibits are filed as part of
this Post-Effective Amendment to Registrant's Registration
Statement:
(a) (1) Articles of Incorporation
(2) Articles of Amendment
(3) Articles of Amendment
(4) Articles of Amendment
(5) Articles of Amendment
(b) By-Laws
(d) Advisory Agreement between the Registrant and
Ruane, Cunniff & Co., Inc.
(e) Distribution Agreement between the Registrant and
Ruane, Cunniff & Stires, Inc.
(g) Custody Agreement between the Registrant and The
Bank of New York
(h) Services Agreement between the Registrant and DST
Systems, Inc.
(i) Opinion of Seward & Kissel LLP - Filed herewith.
(j) Consent of McGladrey & Pullen, LLP - Filed
herewith.
(n) Financial Data Schedule - Filed herewith.
Other Exhibits: Powers of Attorney of Messrs. Harding,
Lowenstein, Matthews, Neuhauser and Swiggett - Incorporated by
reference.
C-1
<PAGE>
Item 24. Persons Controlled by or Under Common
Control with Registrant.
No such persons.
Item 25. Indemnification.
The Registrant incorporates herein by reference
the response to "Item 19. Indemnification of
Directors and Officers" of Registrant's Form N-8B-1
Registration Statement under the Investment Company
Act of 1940 (File No. 811-1976) and its response to
Item 27 of Post-Effective Amendment No. 30 to this
Registration Statement.
Item 26. Business and Other Connections
of Investment Adviser.
Ruane, Cunniff & Co., Inc., the Registrant's
investment adviser and the distributor of the
Registrant's shares, is a registered broker-dealer and
member corporation of the New York Stock Exchange,
Inc. Its investment advisory clients besides the
Registrant include pension and profit-sharing trusts,
corporations and individuals.
Item 27. Principal Underwriters.
(a) No such investment company.
(b) The following are the directors and officers of
Ruane, Cunniff & Co., Inc. The principal business
address of each of these persons is 767 Fifth Avenue,
New York, New York 10153.
(1) (2) (3)
Positions and
Positions and Offices Offices with
Name with Underwriters Registrant
____ _____________________ _____________
William J. Ruane Chairman of the Chairman of the
Board of Directors Board of Directors
and Director and Director
Richard T. Cunniff Vice Chairman and Vice Chairman and
Director Director
Robert D. Goldfarb President and President
Director and Director
C-2
<PAGE>
Carol L. Cunniff Executive Executive Vice
Vice President President and
and Director Director
Joseph Quinones, Jr. Vice President, Vice President,
Secretary and Secretary and
Treasurer Treasurer
(c) Not applicable.
Item 28. Location of Accounts and Records.
Accounts, books and other documents required to
be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules
promulgated thereunder are maintained in the physical
possession of (i) the Registrant, (ii) The Bank of New
York, 90 Washington Street, New York, New York 10286,
the Registrant's custodian, or (iii) DST Systems,
Inc., 21 West 10th Street, Kansas City, Missouri
64105, the Registrant's transfer agent and dividend
disbursing agent.
Item 29. Management Services.
No such management-related service contracts.
Item 30. Undertakings.
Not applicable.
C-3
<PAGE>
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 30th day of April,
1999.
SEQUOIA FUND, INC.
By /s/ Robert D. Goldfarb
______________________
President
Pursuant to the requirements of the Securities Act of
1933, this Amendment to the Registrant's Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated.
Signature Capacity Date
_________ ________ ______
(1) Principal Executive
Officer
/s/ Robert D. Goldfarb President and 4/30/99
________________________ Director
Robert D. Goldfarb
(2) Principal Financial and
Accounting Officer
/s/ Joseph Quinones, Jr. Treasurer 4/30/99
________________________
Joseph Quinones, Jr.
C-4
<PAGE>
(3) All of the Directors
/s/ William J. Ruane 4/30/99
________________________
William J. Ruane
/s/ Richard T. Cunniff 4/30/99
________________________
Richard T. Cunniff
/s/ Carol L. Cunniff 4/30/99
________________________
Carol L. Cunniff
/s/ Robert D. Goldfarb 4/30/99
________________________
Robert D. Goldfarb
John M. Harding
Roger Lowenstein
Francis P. Matthews
C. William Neuhauser
Robert L. Swiggett
By /s/ Robert D. Goldfarb 4/30/99
______________________
Robert D. Goldfarb
Attorney-in-Fact
C-5
<PAGE>
INDEX TO EXHIBITS
(a)(1) Articles of Incorporation - Incorporated by
reference.
(a)(2) Articles of Amendment - Incorporated by reference.
(a)(3) Articles of Amendment - Incorporated by reference.
(a)(4) Articles of Amendment - Incorporated by reference.
(a)(5) Articles of Amendment - Incorporated by reference.
(b) By-Laws - Incorporated by reference.
(d) Advisory Agreement - Incorporated by reference.
(e) Distribution Agreement - Incorporated by reference.
(g) Custody Agreement - Incorporated by reference.
(h) Services Agreement - Incorporated by reference.
(i) Opinion of Seward & Kissel LLP
(j) Consent of McGladrey & Pullen, LLP
(n) Financial Data Schedule
Other Exhibits: Powers of Attorney of Messrs.
Harding, Lowenstein, Matthews, Neuhauser and Swiggett -
Incorporated by reference.
C-6
69900020.BA5
<PAGE>
SEWARD & KISSEL LLP
ONE BATTERY PARK PLAZA
NEW YORK, NY 10004
TELEPHONE: (212) 574-1200
FACSIMILE: (212) 480-8421
April 28, 1999
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. 45 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 Articles of Incorporation and By-Laws of the
Company and have relied upon a certificate of the Secretary of
the Company certifying the resolutions of the Board of Directors
of the Company authorizing the issuance of the classes and series
of Common Stock. We have also examined and relied upon such
corporate records of the Company and such other documents and
certificates as to factual matters 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.
<PAGE>
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.
Very truly yours,
/s/ Seward & Kissel LLP
69900020.BA8
2
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated
January 15, 1999 on the financial statements of Sequoia Fund,
Inc. referred to therein in Post-Effective Amendment No. 45 to
the Registration Statement on Form N-1A, File No. 2-35566, as
filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the
Prospectus under the caption Financial Highlights and in the
Statement of Additional Information under the caption Custodian,
Counsel and Independent Accountants.
McGladrey & Pullen, LLP
New York, New York
April 27, 1999
69900020.BA7
<PAGE>
[ARTICLE]
The schedule contains financial
information extracted from the
financial statements and
supporting schedules as of the
end of the most current period
and is qualified in its
entirety by reference to such
financial statements.
[CIK] 0000089043
[NAME] SEQUOIA FUND INC
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 1,630,844,531
[INVESTMENTS-AT-VALUE] 4,989,696,613
[RECEIVABLES] 2,723,706
[ASSETS-OTHER] 2,007,749
[OTHER-ITEMS-ASSETS] 13,040,768
[TOTAL-ASSETS] 5,007,515,821
[PAYABLE-FOR-SECURITIES] 1,373,560
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 4,250,825
[TOTAL-LIABILITIES] 5,624,385
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1,483,849,808
[SHARES-COMMON-STOCK] 31,125,890
[SHARES-COMMON-PRIOR] 29,232,634
<ACCUMULATED-NET-CURRENT> 748,430
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 158,441,116
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3,358,852,082
[NET-ASSETS] 5,001,891,436
[DIVIDEND-INCOME] 22,756,549
[INTEREST-INCOME] 33,166,783
[OTHER-INCOME] 0
[EXPENSES-NET] (44,186,600)
[NET-INVESTMENT-INCOME] 11,736,732
[REALIZED-GAINS-CURRENT] 431,381,943
[APPREC-INCREASE-CURRENT] 859,089,190
[NET-CHANGE-FROM-OPS] 1,302,207,865
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (10,988,302)
[DISTRIBUTIONS-OF-GAINS] (238,181,010)
[DISTRIBUTIONS-OTHER] 0
<PAGE>
[NUMBER-OF-SHARES-SOLD] 2,164,908
[NUMBER-OF-SHARES-REDEEMED] (1,796,644)
[SHARES-REINVESTED] 1,524,992
[NET-CHANGE-IN-ASSETS] 1,329,326,577
<ACCUMULATED-NET-PRIOR> 0
[ACCUMULATED-GAINS-PRIOR] 346,808
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 44,036,642
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 44,907,600
[AVERAGE-NET-ASSETS] 4,368,920,000
[PER-SHARE-NAV-BEGIN] 125.63
<PER-SHARE-NET> 0.39
[PER-SHARE-GAIN-APPREC] 43.07
[PER-SHARE-DIVIDEND] (0.37)
[PER-SHARE-DISTRIBUTIONS] (8.02)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 160.70
[EXPENSE-RATIO] 1.0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
69900020.BA9
