In the second quarter of 2026, the Sequoia Fund recorded an overall return of 11.67% after all charges, which was less than the 15.20% achieved by the Standard and Poor's 500 Index. Over the period from the start of the year through June 30, the Sequoia Fund showed a negative return of 0.64% after fees, while the S&P 500 Index grew by 10.21%. The fund made several strategic adjustments to its investment portfolio, moderately increasing its holdings in Bio-Techne, SAP, and ICON Plc. Additionally, a new investment position was initiated, details of which will be disclosed in the upcoming year-end letter. These new acquisitions and increases in existing positions were financed by reducing holdings in Sunbelt Rentals and Elevance Health, as well as by completely divesting from Amentum Holdings, Liberty Broadband, and Credit Acceptance Corp. Further details regarding these portfolio changes are available in the fund's second-quarter video commentary on its official website.

Looking ahead, the fund is moving forward with its intention to transform the existing mutual fund into an actively managed Exchange Traded Fund (ETF) later this year. Shareholders have received proxy voting materials for a decisive vote scheduled for July 27, 2026. Assuming the vote is successful, the conversion to an ETF is expected to take place in mid-October. It is important for all shareholders who directly hold the fund through its transfer agent to transfer their shares to a qualified brokerage account by September 15, 2026. Comprehensive information about the upcoming ETF is accessible on the Sequoia Fund website, or shareholders can reach out to the investor relations team for assistance.

Quarterly Performance and Strategic Portfolio Adjustments

During the second quarter of 2026, the Sequoia Fund achieved an 11.67% total return, after expenses, a figure that was outpaced by the S&P 500 Index's 15.20% gain. For the entire year to date through June 30, the fund posted a negative return of 0.64% net of fees, contrasting with the Index's robust 10.21% increase. In response to market dynamics and investment opportunities, the fund's management committee undertook deliberate portfolio adjustments. These included augmenting existing stakes in Bio-Techne, SAP, and ICON Plc, signaling increased confidence in these sectors or individual companies. Concurrently, new investment was made, though its specifics remain under wraps until the year-end letter. To finance these strategic moves, the fund scaled back its exposure to Sunbelt Rentals and Elevance Health. Furthermore, the fund completely exited its positions in Amentum Holdings, Liberty Broadband, and Credit Acceptance Corp, indicating a shift away from these investments. These actions reflect a proactive management approach aimed at optimizing the fund's composition in light of its long-term investment philosophy.

The management committee's decisions to modify the portfolio were guided by an ongoing assessment of market conditions and the intrinsic value of its holdings. The measured increase in investments in Bio-Techne, SAP, and ICON Plc suggests a belief in their future growth prospects or an attractive valuation at the time of purchase. Conversely, the reduction or elimination of positions in Sunbelt Rentals, Elevance Health, Amentum Holdings, Liberty Broadband, and Credit Acceptance Corp points to a strategic reallocation of capital. This could be due to factors such as these companies reaching their target valuations, changing industry outlooks, or the identification of more compelling opportunities elsewhere. Such rebalancing is a common practice in actively managed funds, allowing them to adapt to evolving market environments and pursue their objectives effectively. Shareholders are encouraged to review the fund's Q2 video commentary for an in-depth discussion of these changes and the rationale behind them, providing greater transparency into the fund's investment strategy and decision-making process.

Transition to Actively Managed ETF and Shareholder Directives

The Sequoia Fund is embarking on a significant strategic shift, transitioning from its current mutual fund structure to an actively managed Exchange Traded Fund (ETF) later this year. This move, pending shareholder approval, aims to offer potential benefits such as increased liquidity, transparency, and tax efficiency, which are characteristic of the ETF format. To facilitate this transformation, shareholders have been provided with proxy voting materials for an important vote scheduled for July 27, 2026. This vote is crucial for greenlighting the reorganization. If approved, the conversion process is slated to conclude by mid-October. A key directive for shareholders is the requirement to transfer any shares held directly with the fund's transfer agent into an eligible brokerage account. This transfer must be completed by September 15, 2026, to ensure a seamless transition to the new ETF structure. Failure to comply with this deadline may impact shareholders' ability to hold their investment in the new ETF.

This reorganization represents a pivotal moment for the Sequoia Fund and its investors. The shift to an actively managed ETF structure signifies an evolution in how the fund operates and provides access to its investment strategy. By adopting the ETF wrapper, the fund expects to attract a broader investor base while maintaining its core investment principles of identifying undervalued, high-quality businesses. Shareholders are urged to carefully review the proxy materials and actively participate in the upcoming vote to ensure their voices are heard regarding this important change. For any questions or further clarifications regarding the ETF conversion, including details about eligible brokerage accounts or the transition timeline, the fund's investor relations team is available to provide support. Information is also available on the dedicated section of the Sequoia Fund website, which outlines the benefits and procedures associated with the upcoming ETF.