Annual Report December 31, 2020
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ANNUAL REPORT DECEMBER 31, 2020 As of February 12, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports are no longer sent by mail, unless you have specifically requested paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports are made available on the Fund’s website (www.sequoiafund.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically through your financial intermediary, you will not be affected by this change andyou need not take any action. You may elect to receive shareholder reports and other communications electronically at any time by contacting your financial intermediary. You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you may contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you may inform the Fund that you wish to continue receiving paper copies of your shareholder reports by calling 1-800-686-6884. Sequoia Fund December 31, 2020 Table of Contents Page Illustration of an Assumed Investment of $10,000 . ................................................... 3 Shareholder Letter . ...................................................................... 4 Management’s Discussion of Fund Performance . ....................................................... 8 Annual Fund Operating Expenses . ..................................................................... 11 Fees and Expenses of the Fund . ....................................................................... 11 Schedule of Investments . .................................................................. 12 Statement of Assets and Liabilities. .............................................................. 15 StatementofOperations.............................................................................. 16 Statements of Changes in Net Assets. ................................................................. 17 Financial Highlights . ........................................................................ 18 NotestoFinancialStatements......................................................................... 19 Report of Independent Registered Public Accounting Firm . ............................................... 25 ApprovalofAdvisoryContract......................................................................... 26 Results of Stockholder Meeting . ...................................................................... 27 OtherInformation................................................................................... 27 DirectorsandOfficers................................................................................ 28 Sequoia Fund December 31, 2020 Illustration of an Assumed Investment of $10,000 (Unaudited) The graph below covers the period from July 15, 1970 (the date Sequoia Fund, Inc. (the ”Fund“) shares were first offered to the public) through December 31, 2020. Sequoia Fund Investment Comparison $ 6,726,420 Growth of $10,000 Since Inception (July 15, 1970) S&P 500 Index $ 2,108,145 $10,000 0 5 85 80 75 70 99 99 9 9 9 9 1 1 2000 2005 2010 2015 2020 1 1 1 1 Sequoia Fund’s results as of December 31, 2020 appear below with results of the S&P 500 Index for the same periods: Year ended December 31, 2020 Sequoia Fund S&P 500 Index* 1 Year 23.33% 18.40% 5 Years (Annualized) 11.63% 15.22% 10 Years (Annualized) 11.78% 13.88% Since inception (Annualized)** 13.77% 11.19% The results shown in the graph and table, which assume reinvestment of distributions, represent past performance and do not guarantee future results.The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance may be lower or higher than the performance shown. Investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. *The S&P 500 Index is an unmanaged, capitalization-weighted index of the common stocks of 500 major U.S. corporations. The Index does not incur expenses. It is not possible to invest directly in the Index. **Inception Date: July 15, 1970. Please consider the investment objectives, risks and charges and expenses of the Fund carefully before investing. The Fund’s prospectus and summary prospectus contain this and other information about the Fund. You may obtain year to date performance as of the most recent quarter end, and copies of the prospectus and summary prospectus, by calling 1-800-686-6884, or on the Fund’s website at www.sequoiafund.com. Please read the prospectus and summary prospectus carefully before investing. Shares of the Fund are distributed by Foreside Financial Services, LLC (Member of FINRA). An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. 3 Sequoia Fund December 31, 2020 Shareholder Letter Dear Shareholder: Sequoia Fund returned 23.33% in 2020, versus 18.40% for the S&P 500. Since June 2016, the team presently managing the Fund has now overseen a cumulative total return of 100%, versus 96% for the Index. While we hope and expect that the lead we have opened will widen in coming years, we are pleased that the Fund has outperformed a remarkably ebullient and resilient stock market— particularly during a past year punctuated by extraordinary events and increasingly extraordinary equity valuations in many areas. Companies that have demonstrated either an ability to dependably outgrow a plodding global economy or an exposure to areas of excitement like cloud software and electrified transportation now trade for valuations we have not seen since the late-90s dot-com bubble. If ever there was a year that illustrated the humbling nature of our profession, this was it. Recognizing that for many of you we are not just “a” money manager but “the” money manager, we have always considered a wide range of outcomes when evaluating potential investments and have tried to construct portfolios capable of compounding value come rain or shine. We have also always assumed that the world’s population of black swans is far larger than textbooks and conventional wisdom would have you believe— and that trying to predict where they will reveal themselves is a fruitless endeavor.Yet we readily admit that we were completely blindsided— dumbfounded, frankly— by the events that have transpired over the past year. More importantly in many ways, if we had somehow seen them coming, we still wouldn’t have guessed the reactions they elicited from markets and many businesses. Answering questions about the future turns out to be a sobering challenge even if you own a crystal ball. Which is why we try to answer as few of these questions as possible— and why we try to confine ourselves to the easier ones rather than the harder ones. We have always thought of forecasting the near-term direction of the economy or the stock market as akin to trying to predict the next month’s weather. We feel the same way about handicapping the probability of “tail risks” like nuclear wars, terrorist incidents, solar flares and, yes, viral pandemics. By contrast, we do think that with enough research and thoughtful debate, it is sometimes possible— but by no means easy— to make useful predictions about the future performance of an individual business. The task gets a little more manageable if you focus on advantaged businesses, because they’re naturally easier to assess. And still more manageable if you focus on gifted business managers, because they’re more likely to navigate the potholes you’ll inevitably overlook. And still more manageable if you focus on businesses that can grow independently of economic circumstances, because then you can ignore the weather, so to speak, and enjoy the luxury of only having to worry about if you’re right and not when you’re right. It also helps to purchase your holdings at prices that incorporate a margin of safety, because then when you’re wrong, you’re less likely to be very wrong, and when you’re right, every so often you’ll be really right. Sadly, even when you seek out the easier questions, you’re still bound to answer a portion of them incorrectly, which is why we try to construct our portfolios with a prudent balance of concentration and diversification. Because it takes time to research a business carefully enough to maximize the odds of analyzing it correctly, we focus our efforts on a narrow group of holdings. But not so narrow that we raise the stakes associated with being wrong to unacceptable levels, since one of the very few things you can know with complete certainty as an investor is that the world is full of surprises. A curious flu in China can turn into a global pandemic, driving the stock market down 30% in a monthѧand then up 15% for the year, to all-time highsѧwith some businesses ultimately doubling, tripling and quadrupling in value during a year many would understandably describe as the worst in living memory. The twists and turns of fate can be staggeringly unpredictable, but as we wrote during the peak of the pandemic, fifty years of history have taught us