Sequoia Fund Semi Annual Report

SEQUOIA FUND, INC.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
With Income Dividends Reinvested and Capital Gains
Distributions Accepted in Shares

The table below covers the period from July 15, 1970 (the date Fund shares were first offered to the public) to June 30, 2008. This period was one of widely fluctuating common stock prices. The results shown should not be considered as a representation of the dividend income or capital gain or loss which may be realized from an investment made in the Fund today.

PERIOD ENDED: Value of
Initial
$10,000
Investment
Value of
Cumulative
Capital Gains
Distributions
Value of
Cumulative
Reinvested
Dividends
Total
Value of
Shares





July 15, 1970

 

$10,000

$—

$—

$10,000

May 31, 1971

 

11,750

184

11,934

May 31, 1972

 

12,350

706

451

13,507

May 31, 1973

 

9,540

1,118

584

11,242

May 31, 1974

 

7,530

1,696

787

10,013

May 31, 1975

 

9,490

2,137

1,698

13,325

May 31, 1976

 

12,030

2,709

2,654

17,393

May 31, 1977

 

15,400

3,468

3,958

22,826

Dec. 31, 1977

 

18,420

4,617

5,020

28,057

Dec. 31, 1978

 

22,270

5,872

6,629

34,771

Dec. 31, 1979

 

24,300

6,481

8,180

38,961

Dec. 31, 1980

 

25,040

8,848

10,006

43,894

Dec. 31, 1981

 

27,170

13,140

13,019

53,329

Dec. 31, 1982

 

31,960

18,450

19,510

69,920

Dec. 31, 1983

 

37,110

24,919

26,986

89,015

Dec. 31, 1984

 

39,260

33,627

32,594

105,481

Dec. 31, 1985

 

44,010

49,611

41,354

134,975

Dec. 31, 1986

 

39,290

71,954

41,783

153,027

Dec. 31, 1987

 

38,430

76,911

49,020

164,361

Dec. 31, 1988

 

38,810

87,760

55,946

182,516

Dec. 31, 1989

 

46,860

112,979

73,614

233,453

Dec. 31, 1990

 

41,940

110,013

72,633

224,586

Dec. 31, 1991

 

53,310

160,835

100,281

314,426

Dec. 31, 1992

 

56,660

174,775

112,428

343,863

Dec. 31, 1993

 

54,840

213,397

112,682

380,919

Dec. 31, 1994

 

55,590

220,943

117,100

393,633

Dec. 31, 1995

 

78,130

311,266

167,129

556,525

Dec. 31, 1996

 

88,440

397,099

191,967

677,506

Dec. 31, 1997

 

125,630

570,917

273,653

970,200

Dec. 31, 1998

 

160,700

798,314

353,183

1,312,197

Dec. 31, 1999

 

127,270

680,866

286,989

1,095,125

Dec. 31, 2000

 

122,090

903,255

289,505

1,314,850

Dec. 31, 2001

 

130,240

1,002,955

319,980

1,453,175

Dec. 31, 2002

 

126,630

976,920

311,226

1,414,776

Dec. 31, 2003

 

147,610

1,146,523

362,790

1,656,923

Dec. 31, 2004

 

154,270

1,200,687

379,159

1,734,116

Dec. 31, 2005

 

155,450

1,331,529

382,059

1,869,038

Dec. 31, 2006

 

152,750

1,496,788

375,422

2,024,960

Dec. 31, 2007

 

139,120

1,713,258

342,768

2,195,146

June 30, 2008

 

122,220

1,551,352

301,264

1,974,836

The total amount of capital gains distributions accepted in shares was $1,357,419, the total amount of dividends reinvested was $117,783.

No adjustment has been made for any taxes payable by shareholders on capital gain distributions and dividends reinvested in shares.

To the Shareholders of Sequoia Fund, Inc.

Dear Shareholder:

Sequoia Fund's results for the second quarter of 2008 are shown below with comparable results for the leading market indexes:

To June 30, 2008 Sequoia
Fund
Dow Jones
Industrials
Standard &
Poor's 500



3 Months

–5.39%

–6.85%

–2.73%

6 Months

–10.04%

–13.38%

–11.91%

1 Year

–7.84%

–13.27%

–13.12%

5 Years (Annualized)

6.18%

7.20%

7.58%

10 Years (Annualized)

4.70%

4.50%

2.88%

The performance shown above represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown.

The S&P 500 Index is an unmanaged, capitalization-weighted index of the common stocks of 500 major US corporations. The Dow Jones Industrial Average is an unmanaged, price-weighted index of 30 actively traded blue chip stocks. The performance data quoted represents past performance and assumes reinvestment of dividends. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Year to date performance as of the most recent month end can be obtained by calling DST Systems, Inc. at (800) 686-6884.


We are providing you with a copy of the transcript of the Ruane, Cunniff & Goldfarb Inc./Sequoia Fund, Inc. "Annual Investor Day 2008" meeting which was held on May 16th.

Currently, capital gain distributions will be about $1.00 per share assuming no further gains or losses. The actual capital gains distribution in December will likely vary from this figure depending on sales activity through October 31. We will do our best to keep you informed of any material changes to this amount.

Sincerely,

Richard T. Cunniff
Robert D. Goldfarb
David M. Poppe

Vice Chairman

President

Executive Vice President

August 20, 2008

FEES AND EXPENSES OF THE FUND
(UNAUDITED)

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

The Fund does not impose any sales charges, exchange fees or redemption fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Annual Fund Operating Expenses

Management Fees  
1.00%
Other Expenses  
0.03%
   

Total Annual Fund Operating Expenses  
1.03%
Expense Reimbursement*  
0.03%
   
Net Expenses  
1.00%
   


* Reflects Ruane, Cunniff & Goldfarb Inc.'s ("Ruane, Cunniff & Goldfarb") contractual reimbursement of a portion of the Fund's operating expenses. This reimbursement is a provision of Ruane, Cunniff & Goldfarb's investment advisory agreement with the Fund and the reimbursement will be in effect only so long as that investment advisory agreement is in effect.


Shareholder Expense Example

As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2008 to June 30, 2008).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and will not help you determine the relative total costs of owning different funds.

Beginning
Account
Value
January 1, 2008

Ending
Account
Value
June 30,
2008

Expenses
Paid During
Period*
January 1, 2008
to
June 30, 2008

   
 
 

Actual

$1,000

$899.60

$4.72

Hypothetical
(5% return per year before expenses)

$1,000

$1,019.89

$5.02


* Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).

SECTOR BREAKDOWN
(UNAUDITED)

As of June 30, 2008

Percent of
Net Assets


 

Diversified Companies

23.31

Retailing

18.18

U.S. Government Obligations

9.85

Flooring Products

6.74

Building Materials

6.65

Industrial & Construction Supplies

5.62

Freight Transportation

4.90

Veterinary Diagnostics

4.78

Automotive Manufacturing

4.70

Property and Casualty Insurance

4.15

Aerospace/Defense

2.71

Finance

2.55

Other

5.86

   

100.00

   

The table below shows the changes of the Fund's major positions for the period ended June 30, 2008:

% of assets

% of assets

Position

6/30/2008

12/31/2007


     
 

Berkshire Hathaway

23.3%

24.8%

Mohawk Industries

6.7%

6.9%

Martin Marietta Materials

5.8%

6.6%

Fastenal Company

5.6%

4.7%

TJX Companies Inc.

5.3%

6.2%

Idexx Laboratories

4.8%

5.1%

       
 

Top six positions

51.5%

54.3%

       
 

SEQUOIA FUND, INC.
Schedule of Investments
June 30, 2008 (Unaudited)

COMMON STOCKS (90.95%)
Shares      
Value
(Note 1)

     

 

 

AEROSPACE/DEFENSE (2.71%)

 

 

12,410,000

Rolls-Royce Group plc (United Kingdom)

$84,412,820

       

 

 

AUTO PARTS (1.22%)

 

 

1,698,778

O'Reilly Automotive Inc. *

37,967,688

       

 

 

AUTOMOTIVE MANUFACTURING (4.70%)

 

 

949,760

Porsche Automobil Holding SE (Germany) (a)

146,356,116

       

 

 

BUILDING MATERIALS (6.65%)

 

 

1,756,749

Martin Marietta Materials Inc.

181,981,629

419,772

Vulcan Materials Company

25,093,970

       

207,075,599

       

 

 

BUSINESS SERVICES (1.13%)

 

 

4,200,000

Brambles Ltd. (Australia)

35,145,600

       

 

 

DIVERSIFIED COMPANIES (23.31%)

 

 

6,005

Berkshire Hathaway Inc. ClassA *

725,103,750

161

Berkshire Hathaway Inc. ClassB *

645,932

       

725,749,682

       

 

 

DIVERSIFIED MANUFACTURING (0.95%)

 

 

383,880

Danaher Corporation

29,673,924

       

 

 

FINANCE (2.55%)

 

 

299,274

MasterCard Inc

79,463,232

       

 

 

FLOORING PRODUCTS (6.74%)

 

 

3,272,155

Mohawk Industries Inc. *

209,745,136

       

 

 

FOOD-RETAIL (0.69%)

 

 

906,509

Whole Foods Market Inc

21,475,198

       

 

 

FREIGHT TRANSPORTATION (4.90%)

 

 

2,068,294

Expeditors International Inc.

88,936,642

3,472,000

Knight Transportation Inc. †

63,537,600

       

152,474,242

       

 

 

INDUSTRIAL & CONSTRUCTION SUPPLIES (5.62%)

 

 

4,051,430

Fastenal Company

174,859,719

       

 

 

INSURANCE BROKERS (1.61%)

 

 

2,886,878

Brown & Brown Inc.

50,202,808

       

 

 

PROPERTY AND CASUALTY INSURANCE (4.15%)

 

 

6,893,700

Progressive Corporation

$129,050,064

       

 

 

RETAILING (18.18%)

 

 

3,840,000

Bed Bath & Beyond Inc. *

107,904,000

39,775

Costco Wholesale Corporation

2,789,819

1,839,393

Lowe's Companies, Inc

38,167,405

2,794,000

Target Corporation

129,893,060

5,242,700

TJX Companies, Inc.

164,987,769

2,118,568

Walgreen Company

68,874,646

951,630

Wal-Mart Stores, Inc.

53,481,606

       

566,098,305

       

 

 

TRUCK MANUFACTURING (1.06%)

 

 

785,772

PACCAR Inc.

32,868,843

       

 

 

VETERINARY DIAGNOSTICS (4.78%)

 

 

3,055,834

Idexx Laboratories Inc. * †

148,941,349

       

TOTAL COMMON STOCKS (Cost $1,594,872,283)

$2,831,560,325

       
         
Principal
Amount
       

       

 

 

U.S. GOVERNMENT OBLIGATIONS (9.85%)

 

 

$307,000,000

U.S. Treasury Bills due 7/10/2008 through 8/21/2008

306,562,650

       

TOTAL U.S. GOVERNMENT OBLIGATIONS

(Cost $306,562,650)

306,562,650

       

TOTAL INVESTMENTS (100.80%)

(Cost $1,901,434,933)

3,138,122,975

LIABILITIES LESS OTHER ASSETS (–0.80%)

(24,812,794)

       

NET ASSETS (100.00%)

$3,113,310,181

       

Refer to Note 8.
†† The cost for federal income tax purposes is identical.
* Non-income producing.
(a) The Fund is invested in preference shares of Porsche Automobil Holding SE which possess the same economic interest as Porsche common stock but have no voting rights.

Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund's investments as of June 30, 2008:

Investments in

Valuation Inputs

Securities



Level 1 – Quoted Prices

$2,831,560,325

Level 2 – Other Significant Observable Inputs

306,562,650

 


Total

$3,138,122,975

 


The accompanying notes form an integral part of these Financial Statements.

 SEQUOIA FUND, INC.
 Statement of Assets and Liabilities
June 30, 2008 (Unaudited)

ASSETS:  
     Investments in securities, at value (Note 1)  
          Unaffiliated companies (cost $1,769,563,416) $2,925,644,026
          Affiliated companies (cost $131,871,517) (Note 8) 212,478,949
 
     Total investment in securities (cost $1,901,434,933) 3,138,122,975
     Cash on deposit with custodian 2,782,713
     Receivable for capital stock sold 2,049,855
     Dividends receivable  1,282,107
     Other assets 28,048
 
          Total assets 3,144,265,698
 

LIABILITIES:

 

 

    Payable for capital stock repurchased

28,144,962

    Accrued investment advisory fee

2,663,223

    Accrued other expenses

147,332

   

        Total liabilities

30,955,517

   

Net assets applicable to 25,472,793 shares of capital stock outstanding (Note 4)

$3,113,310,181

   

Net asset value, offering price and redemption price per share

$122.22

   

NET ASSETS CONSIST OF:

 

 

    Capital (par value and paid in surplus) $.10 par value stock, 100,000,000 shares authorized

$1,865,586,901

    Undistributed net realized gains (Note 5)

11,035,238

    Unrealized appreciation

1,236,688,042

   

        Total net assets

$3,113,310,181

   

The accompanying notes form an integral part of these Financial Statements.

 SEQUOIA FUND, INC.
 Statement of Operations
Six Months Ended June 30, 2008 (Unaudited)

INVESTMENT INCOME:

 

 

    Income:

        Dividends:

            Unaffiliated companies, net of $454,861 foreign tax withheld

$12,460,383

            Affiliated companies (Note 8)

273,871

        Interest

2,032,262

        Other income

23,133

   

                Total income

14,789,649

   

Expenses:

    Investment advisory fee (Note 2)

16,514,571

    Legal and auditing fees

73,999

    Stockholder servicing agent fees

257,991

    Custodian fees

40,000

    Directors fees and expenses (Note 6)

128,000

    Other

80,439

   

                Total expenses

17,095,000

Less expenses reimbursed by Investment Adviser (Note 2)

505,000

              

                Net expenses

16,590,000

   

                Net investment loss

(1,800,351)

   

REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:

 

 

    Realized gain (loss) on:

        Investments:

            Unaffiliated companies

142,386,536

            Affiliated companies (Note 8)

(1,372,876)

        Foreign currency transactions

(27,262)

   

                Net realized gain on investments and foreign currencies

140,986,398

    Net decrease in unrealized appreciation on:

        Investments:

            Unaffiliated companies

(477,956,200)

            Affiliated companies (Note 8)

(13,488,898)

   

                Net realized and unrealized loss on investments and foreign currencies

(350,458,700)

   

Net decrease in net assets from operations

$(352,259,051)

   

The accompanying notes form an integral part of these Financial Statements.

SEQUOIA FUND, INC.
Statements of Changes in Net Assets

    Six Months
Ended 6/30/08
(Unaudited)
  Year Ended
12/31/07
   
 
INCREASE/(DECREASE) IN NET ASSETS:        
     From operations:        
          Net investment income (loss)   $(1,800,351)   $10,500,376
          Net realized gain on investments and foreign currencies   140,986,398   580,077,673
          Net decrease in unrealized appreciation   (491,445,098)   (288,632,451)
   
 
               Net increase (decrease) in net assets from operations   (352,259,051)   301,945,598
     Distributions to shareholders from:        
          Net investment income   (232,200)   (10,217,454)
          Net realized gains   (80,065,194)   (617,051,755)
          Capital share transactions (Note 4)   32,380,078   239,000,131
   
 
               Total decrease   (400,176,367)   (86,323,480)
NET ASSETS:        
     Beginning of period   3,513,486,548   3,599,810,028
   
 
     End of period (including undistributed net investment income of $0 and $232,200, respectively)   $3,113,310,181   $3,513,486,548
   
 

The accompanying notes form an integral part of these Financial Statements.

SEQUOIA FUND, INC.
Notes to Financial Statements

NOTE 1—SIGNIFICANT ACCOUNTING POLICIES:

Sequoia Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The investment objective of the Fund is growth of capital from investments primarily in common stocks and securities convertible into or exchangeable for common stock. The following is a summary of significant accounting policies, consistently followed by the Fund in the preparation of its financial statements.

A.

Valuation of investments: Investments are carried at market value or at fair value as determined under the supervision of the Board of Directors. Securities traded on a national securities exchange are valued at the last reported sales price on the principal exchange on which the security is listed on the last business day of the period; securities traded in the over-the-counter market are valued in accordance with NASDAQ Official Closing Price on the last business day of the period; securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the mean between the last reported bid and asked prices.

  Securities traded on a foreign exchange are valued at the last reported sales price on the principal exchange on which the security is primarily traded. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the New York Stock Exchange on that day.
  U.S. Treasury Bills with remaining maturities of 60 days or less are valued at their amortized cost. U.S. Treasury Bills that when purchased have a remaining maturity in excess of sixty days are stated at their discounted value based upon the mean between the bid and asked discount rates until the sixtieth day prior to maturity, at which point they are valued at amortized cost.
  When reliable market quotations are insufficient or not readily available at time of valuation or when the Investment Adviser determines that the prices or values available do not represent the fair value of a security, such security is valued as determined in good faith by the Investment Adviser, in conformity with guidelines adopted by and subject to review by the Board of Directors.
 

Foreign currencies: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of foreign portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities are acquired or sold. Income and expenses are translated into U.S. dollars at the rates of exchange prevailing when accrued. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from the sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.

B.

Accounting for investments: Investment transactions are accounted for on the trade date and dividend income is recorded on the ex-dividend date. Interest income is accrued as earned. Premiums and discounts on fixed income securities are amortized over the life of the respective security. The net realized gain or loss on security transactions is determined for accounting and tax purposes on the specific identification basis.

C.

Federal income taxes: It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its stockholders. Therefore, no federal income tax provision is required.

D.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

E.

General: Dividends and distributions are recorded by the Fund on the ex-dividend date.

F. Indemnification: The Fund's officers, directors and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss thereunder to be remote.

NOTE 2—INVESTMENT ADVISORY CONTRACTS AND PAYMENTS TO INTERESTED PERSONS:

The Fund retains Ruane, Cunniff & Goldfarb Inc., as its investment adviser. Ruane, Cunniff & Goldfarb Inc. (the "Investment Adviser") provides the Fund with investment advice, administrative services and facilities.

Under the terms of the Advisory Agreement, the Investment Adviser receives a management fee equal to 1% per annum of the Fund's average daily net asset values. This percentage will not increase or decrease in relation to increases or decreases in the net asset value of the Fund. Under the Advisory Agreement, the Investment Adviser is obligated to reimburse the Fund for the amount, if any, by which the operating expenses of the Fund (including the investment advisory fee) in any year exceed the sum of 1 1/2% of the average daily net asset values of the Fund during such year up to a maximum of $30,000,000, plus 1% of the average daily net asset values in excess of $30,000,000. The expenses incurred by the Fund exceeded the percentage limitation during the six months ended June 30, 2008 and the Investment Adviser reimbursed the Fund $505,000. Such reimbursement is not subject to recoupment by the Investment Adviser.

For the six months ended June 30, 2008, there were no amounts accrued or paid to interested persons, including officers and directors, other than advisory fees of $16,514,571 to Ruane, Cunniff & Goldfarb Inc. and brokerage commissions of $315,770 to Ruane, Cunniff & Goldfarb LLC, the Fund's distributor. Certain officers of the Fund are also officers of the Investment Adviser and the Fund's distributor. Ruane, Cunniff & Goldfarb LLC received no compensation from the Fund on the sale of the Fund's capital shares during the six months ended June 30, 2008.'

NOTE 3—PORTFOLIO TRANSACTIONS:

The aggregate cost of purchases and the proceeds from the sales of securities, excluding U.S. government obligations, for the six months ended June 30, 2008 were $104,447,555 and $329,222,620, respectively. Included in proceeds of sales is $78,469,333 representing the value of securities disposed of in payment of redemptions in-kind, resulting in realized gains of $65,444,901.

At June 30, 2008 the aggregate gross tax basis unrealized appreciation and depreciation of securities were $1,394,610,089 and $157,922,047, respectively.

NOTE 4—CAPITAL STOCK:

At June 30, 2008 there were 100,000,000 shares of $.10 par value capital stock authorized. Transactions in capital stock for the six months ended June 30, 2008 and the year ended December 31, 2007 were as follows:

  2008 2007


  Shares Amount Shares Amount




Shares sold 1,290,651   $171,434,881 518,372 $80,168,810
Shares issued to stockholders on reinvestment of:          
     Net investment income 1,281   172,215 7,799 1,150,503
     Net realized gains on Investments 460,600   61,886,232 3,264,559 486,651,260

 


  1,752,532   233,493,328 3,790,730 567,970,573
Shares repurchased 1,535,127   201,113,250 2,102,724 328,970,442

 


Net increase 217,405   $32,380,078 1,688,006 $239,000,131




NOTE 5—FEDERAL INCOME TAXES:

Distributions to shareholders are determined in accordance with federal tax regulations and may differ from those determined for financial statement purposes. To the extent these differences are permanent such amounts are reclassified within the capital accounts based on federal tax regulations. During the six months ended June 30, 2008 permanent differences due to a net investment loss not deductible for tax purposes and realized gains on redemptions in kind not recognized for tax purposes resulted in a net decrease in net accumulated investment loss of $1,800,351 and undistributed net realized gains of $65,444,901 with a corresponding increase in paid in surplus of $63,644,550. These reclassifications had no effect on net assets.

The tax character of distributions paid during the six months ended June 30, 2008 and the year ended December 31, 2007 was as follows:

  2008 2007


Distributions paid from:    
Ordinary income $232,200 $11,700,120
Long-term capital gains 80,065,194 615,569,089


          Total distributions $80,297,394 $627,269,209


   
As of June 30, 2008, the components of distributable earnings on a tax basis were as follows:
   
Undistributed long-term gain  
$11,035,238
Unrealized appreciation  
1,236,688,042
 

 
$1,247,723,280
 

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns and requires certain expanded tax disclosures. Management has applied the Interpretation to the Fund during the period ended June 30, 2008. As a result of the application of the Interpretation, there was no material impact on the financial statements.

NOTE 6—DIRECTORS FEES AND EXPENSES:

Directors who are not deemed "interested persons" receive fees of $10,000 per quarter and $2,500 for each meeting attended, and are reimbursed for travel and other out-of-pocket disbursements incurred in connection with attending directors meetings. The total of such fees and expenses paid by the Fund to these directors for the six months ended June 30, 2008 was $128,000.

NOTE 7—INTERIM FINANCIAL STATEMENTS

The interim financial statements have not been examined by the Fund's independent registered public accounting firm and accordingly they do not express an opinion thereon.

NOTE 8—AFFILIATED COMPANIES:

Portfolio companies 5% or more of whose outstanding voting securities are held by the Fund are defined in the Investment Company Act of 1940 as "affiliated companies." The total value and cost of investments in affiliates at June 30 2008 aggregated $212,478,949 and $131,871,517, respectively. The summary of transactions for each affiliate during the period of their affiliation for the six months ended June 30, 2008 is provided below:

 

 

Purchases

 

Sales

 

 

 

 

   
 
 
Realized
 
Dividend

Affiliate

 

Shares

 

Cost

 

Shares

 

Cost

 

Gain (Loss)

 

Income


 
 
 
 
 
 
Idexx Laboratories Inc.
Knight Transportation Inc.
1,325,605
$24,248,231
$(1,372,876)
$273,871

NOTE 9—FINANCIAL HIGHLIGHTS:

Six Months
Ended
June 30, 2008
Year Ended December 31,
(Unaudited) 2007 2006 2005 2004 2003






Per Share Operating Performance (for a share outstanding throughout the period)          
Net asset value, beginning of Period $ 139.12 $ 152.75 $ 155.45 $ 154.27 $147.61 $126.63






Income from investment operations:        
Net investment income (loss)  (0.20) 0.46 (0.70) (0.75) (0.58) (0.62)
Net realized and unrealized gains (losses) on investments (13.47) 13.48 13.60 12.57 7.45 22.21






          Total from investment operations  (13.67) 13.94 12.90 11.82 6.87 21.59






Less distributions:        
Dividends from net investment income (0.01) (0.45) (0.00) (0.00) (0.00) (0.00)
Distributions from net realized gains (3.22) (27.12) (15.60) (10.64) (0.21) (0.61)






          Total distributions (3.23) (27.57) (15.60) (10.64) (0.21) (0.61)






Net asset value, end of period $122.22 $139.12 $152.75 $155.45 $154.27 $147.61






Total Return –10.04%† 8.40% 8.34% 7.78% 4.66% 17.12%
Ratios/Supplemental data        
Net assets, end of period (in millions) $3,113.3 $3,513.5 $3,599.8 $3,573.3 $3,772.4 $3,973.6
Ratio to average net assets:        
     Expenses* 1.0%†† 1.0% 1.0% 1.0% 1.0% 1.0%
     Net investment income (loss) –0.1%†† 0.3% –0.5% –0.5% –0.4% –0.5%
Portfolio turnover rate  3%† 13% 14% 8% 6% 3%


  Not annualized
††
  Annualized
*
  The ratios of expenses to average net assets were not affected by the expense reimbursement by the Investment Adviser.

Other information

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC's web site at http://www.sec.gov. The Fund's Form N-Q may also be reviewed and copied at the SEC's Public Reference Room in Washington, DC. For information regarding the operation of the SEC's Public Reference Room, call 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly, semiannual or annual report on Sequoia Fund's web site at http://www.sequoiafund.com/fund_reports.htm.

You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Visit Sequoia Fund's web site at www.sequoiafund.com and use the "Shareholder Information" link to obtain all proxy information. This information may also be obtained from the Securities and Exchange Commission's web site at www.sec.gov or by calling DST Systems, Inc. at (800) 686-6884.

SEQUOIA FUND, INC.
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798
(800) 686-6884
Website: www.sequoiafund.com

DIRECTORS

Richard T. Cunniff
Robert D. Goldfarb
David M. Poppe
Vinod Ahooja
Roger Lowenstein
Francis P. Matthews
C. William Neuhauser
Sharon Osberg
Robert L. Swiggett, Chairman of the Board

OFFICERS

Richard T. Cunniff Vice Chairman
Robert D. Goldfarb President
David M. Poppe Executive Vice President
Joseph Quinones, Jr. Vice President, Secretary, Treasurer & Chief Compliance Officer
Michael Valenti — Assistant Secretary

INVESTMENT ADVISER

Ruane, Cunniff & Goldfarb Inc.
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798

DISTRIBUTOR

Ruane, Cunniff & Goldfarb LLC
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798

CUSTODIAN

The Bank of New York
MF Custody Administration Department
One Wall Street, 25th Floor
New York, New York 10286

REGISTRAR AND SHAREHOLDER SERVICING AGENT

DST Systems, Inc.
P.O. Box 219477
Kansas City, Missouri 64121

LEGAL COUNSEL

Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004