Sequoia Fund Semi Annual Report

SEQUOIA FUND, INC.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
With Income Dividends and Capital Gains
Distributions Reinvested 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, 2010. This period was one of widely fluctuating common stock prices. The results shown should not be considered as a representation of the dividend income or capital gain or loss which may be realized from an investment made in the Fund today.

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





July 15, 1970

 

$10,000

$—

$—

$10,000

May 31, 1971

 

11,750

184

11,934

May 31, 1972

 

12,350

706

451

13,507

May 31, 1973

 

9,540

1,118

584

11,242

May 31, 1974

 

7,530

1,696

787

10,013

May 31, 1975

 

9,490

2,137

1,698

13,325

May 31, 1976

 

12,030

2,709

2,654

17,393

May 31, 1977

 

15,400

3,468

3,958

22,826

Dec. 31, 1977

 

18,420

4,617

5,020

28,057

Dec. 31, 1978

 

22,270

5,872

6,629

34,771

Dec. 31, 1979

 

24,300

6,481

8,180

38,961

Dec. 31, 1980

 

25,040

8,848

10,006

43,894

Dec. 31, 1981

 

27,170

13,140

13,019

53,329

Dec. 31, 1982

 

31,960

18,450

19,510

69,920

Dec. 31, 1983

 

37,110

24,919

26,986

89,015

Dec. 31, 1984

 

39,260

33,627

32,594

105,481

Dec. 31, 1985

 

44,010

49,611

41,354

134,975

Dec. 31, 1986

 

39,290

71,954

41,783

153,027

Dec. 31, 1987

 

38,430

76,911

49,020

164,361

Dec. 31, 1988

 

38,810

87,760

55,946

182,516

Dec. 31, 1989

 

46,860

112,979

73,614

233,453

Dec. 31, 1990

 

41,940

110,013

72,633

224,586

Dec. 31, 1991

 

53,310

160,835

100,281

314,426

Dec. 31, 1992

 

56,660

174,775

112,428

343,863

Dec. 31, 1993

 

54,840

213,397

112,682

380,919

Dec. 31, 1994

 

55,590

220,943

117,100

393,633

Dec. 31, 1995

 

78,130

311,266

167,129

556,525

Dec. 31, 1996

 

88,440

397,099

191,967

677,506

Dec. 31, 1997

 

125,630

570,917

273,653

970,200

Dec. 31, 1998

 

160,700

798,314

353,183

1,312,197

Dec. 31, 1999

 

127,270

680,866

286,989

1,095,125

Dec. 31, 2000

 

122,090

903,255

289,505

1,314,850

Dec. 31, 2001

 

130,240

1,002,955

319,980

1,453,175

Dec. 31, 2002

 

126,630

976,920

311,226

1,414,776

Dec. 31, 2003

 

147,610

1,146,523

362,790

1,656,923

Dec. 31, 2004

 

154,270

1,200,687

379,159

1,734,116

Dec. 31, 2005

 

155,450

1,331,529

382,059

1,869,038

Dec. 31, 2006

 

152,750

1,496,788

375,422

2,024,960

Dec. 31, 2007

 

139,120

1,713,258

342,768

2,195,146

Dec. 31, 2008

 

95,270

1,265,238

241,397

1,601,905

Dec. 31, 2009

 

109,900

1,459,533

278,860

1,848,293

June 30, 2010

 

114,310

1,518,100

290,050

1,922,460

The total amount of capital gains distributions reinvested in shares was $1,413,907, the total amount of dividends reinvested was $124,788.

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 2010 are shown below with comparable results for the leading market index:

To June 30, 2010
Sequoia Fund
Standard & Poor's 500*
 

3 Months

 

–3.69%

 

–11.43%

6 Months

 

4.01%

 

–6.65%

1 Year

 

17.46%

 

14.43%

5 Years (Annualized)

 

2.20%

 

–0.79%

10 Years (Annualized)

 

6.06%

 

–1.59%

The performance shown above represents past performance and does not guarantee future results. The table does 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 information shown.

*The S&P 500 Index is an unmanaged, capitalization-weighted index of the common stocks of 500 major US corporations. 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.


Based on activity to the date of this letter, the capital gains distribution will be approximately $3.65 per share and will be distributed in December. We will do our best to keep you informed of any material changes due to sales activity through October 31, 2010. IRS regulations dictate that capital gain distributions are determined by transactions from November 1 of one year to October 31 of the following year.

Sincerely,

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

Vice Chairman

President

Executive Vice President

August 20, 2010

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  
0.05%
   

Total Annual Fund Operating Expenses*  
1.05%
   

* Does not reflect 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. For the year ended December 31, 2009, the Fund's annual operating expenses net of such reimbursement were 1.01%.


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, 2010 to June 30, 2010).

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, 2010

Ending
Account
Value
June 30,
2010

Expenses
Paid During
Period*
January 1, 2010
to
June 30,
2010

   
 
 

Actual

$1,000

$1,040.10

$5.11

Hypothetical
(5% return per year less expenses)

$1,000

$1,019.79

$5.06

* Expenses are equal to the Fund's annualized expense ratio of 1.01%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

SECTOR BREAKDOWN
(UNAUDITED)

As of June 30, 2010

Percent of
Net Assets


 

U.S. Government Obligations

20.64

Retailing

12.69

Diversified Companies

12.37

Aerospace/Defense

8.11

Veterinary Diagnostics

7.28

Industrial & Construction Supplies

5.84

Pharmaceuticals

5.74

Auto Parts

5.31

Flooring Products

4.08

Information Processing

2.00

IT Consulting and Other Services

1.97

Investment Banking and Brokerage  

1.91

Automotive Manufacturing

1.67

Advertising

1.07

Internet Software & Services

1.00

Other

8.32

   

100.00

   

The table below shows the changes of the Fund's major positions for the period ended June 30, 2010:

% of assets

% of assets

Position

6/30/2010

12/31/2009


     
 

Berkshire Hathaway

12.4%

20.2%

Idexx Laboratories

7.3%

6.8%

TJX Companies Inc.

6.9%

6.3%

Fastenal Company

5.8%

5.1%

Valeant Pharmaceuticals International      
5.7%
 
0.0%

Mohawk Industries

4.1%

4.4%

Martin Marietta

0.0%

4.0%

       
 

 

42.2%

46.8%

       
 

SEQUOIA FUND, INC.
Schedule of Investments
June 30, 2010 (Unaudited)

COMMON STOCKS (79.32%)
Shares      
Value
(Note 1)

     

 

 

ADVERTISING (1.07%)

 

 

933,743

Omnicom Group Inc.

$32,027,385

       
         

 

 

AEROSPACE/DEFENSE (8.11%)

 

 

947,406

Precision Castparts Corp.

97,507,026

23,161,200

Qinetiq Group plc (United Kingdom)

40,508,939

12,376,114

Rolls-Royce Group plc (United Kingdom)

103,996,486

       

242,012,451

       

 

 

AUTO PARTS (5.31%)

 

 

1,549,400

Advance Auto Parts, Inc.

77,748,892

1,694,139

O'Reilly Automotive Inc. *

80,573,251

       

158,322,143

       

 

 

AUTOMOTIVE MANUFACTURING (1.67%)

 

 

1,154,660

Porsche Automobil Holding SE (Germany) (a)

49,833,971

       

 

 

CONSTRUCTION EQUIPMENT (0.93%)

 

 

1,520,736

Ritchie Bros. Auctioneers Incorporated

27,707,810

       
    CRUDE OIL & GAS PRODUCTION (0.20%)    
179,508
  Canadian Natural Resources Limited  
5,965,051
       

 

 

DIVERSIFIED COMPANIES (12.37%)

 

 

3,070

Berkshire Hathaway Inc. Class A *

368,400,000

10,500

Berkshire Hathaway Inc. Class B *

836,745

       

369,236,745

       

 

 

DIVERSIFIED MANUFACTURING (0.95%)

 

 

765,664

Danaher Corporation.

28,421,448

       

 

 

ELECTRONIC MANUFACTURING SERVICES (0.07%)

 

 

77,500

Trimble Navigation Limited *

2,170,000

       

 

 

FLOORING PRODUCTS (4.08%)

 

 

2,657,723

Mohawk Industries Inc. *

121,617,404

       

 

 

FREIGHT TRANSPORTATION (0.33%)

 

 

281,300

Expeditors International Inc.

9,707,663

       

 

 

HEALTHCARE (0.95%)

 

 

418,000

Becton, Dickinson and Company

28,265,160

       

 

 

INDUSTRIAL & CONSTRUCTION SUPPLIES (5.84%)

 

 

3,475,384

Fastenal Company

174,429,523

       

 

 

INDUSTRIAL GASES (0.91%)

 

 

359,017

Praxair, Inc.

27,281,702

       

 

 

INFORMATION PROCESSING (2.00%)

 

 

298,457

MasterCard Inc.

59,551,125

       

 

 

INSURANCE BROKERS (0.72%)

 

 

1,124,830

Brown & Brown Inc.

21,529,246

       

 

 

INTERNET SOFTWARE & SERVICES (1.00%)

 

 

67,037

Google Inc. *

29,828,113

       

 

 

INVESTMENT BANKING & BROKERAGE (1.91%)

 

 

435,000

The Goldman Sachs Group Incorporated

57,102,450

       

 

 

IT CONSULTING & OTHER SERVICES (1.97%)

 

 

477,000

International Business Machines Corp.

58,899,960

       

 

 

LABORATORY SUPPLIES (0.07%)

 

 

19,247

Mettler-Toledo International Inc. *

2,148,543

       

 

 

PHARMACEUTICALS (5.74%)

 

 

39,300

Johnson & Johnson

2,321,057

3,230,000

Valeant Pharmaceuticals International *

168,896,700

       

171,217,757

       

 

 

PRINTING (0.91%)

 

 

1,912,072

De La Rue plc (United Kingdom)

27,063,467

       

 

 

PROPERTY AND CASUALTY INSURANCE (0.56%)

 

 

605,000

W. R. Berkley Corporation

16,008,300

21,000

Verisk Analytics, Inc. *

627,900

       

16,636,200

       

 

 

RETAILING (12.69%)

 

 

39,666

Costco Wholesale Corporation

2,174,887

1,368,875

Target Corporation

67,307,584

4,934,190

TJX Companies, Inc.

206,989,271

2,112,783

Walgreen Company

56,411,306

949,032

Wal-Mart Stores, Inc.

45,619,967

       

378,503,015

       

 

 

TRUCK MANUFACTURING (0.80%)

 

 

598,026

PACCAR Inc.

23,843,297

       

 

 

VETERINARY DIAGNOSTICS (7.28%)

 

 

3,569,678

Idexx Laboratories Inc. † *

217,393,390

       

Miscellaneous Securities (0.88%) (b)

26,375,835

       

TOTAL COMMON STOCKS (Cost $1,529,404,179)

$2,367,090,854

       
         
Principal
Amount
       

       

 

 

U.S. GOVERNMENT OBLIGATIONS (20.64%)

 

 

$616,000,000

U.S. Treasury Bills, 0.07% due 7/29/2010 through 8/12/2010

$615,954,119

       

TOTAL U.S. GOVERNMENT OBLIGATIONS

(Cost $615,954,119)

615,954,119

       

TOTAL INVESTMENTS (99.96%) ††

(Cost $2,145,358,298)

2,983,044,973

OTHER ASSETS LESS LIABILITIES (0.04%)

1,274,247

       

NET ASSETS (100.00%)

$2,984,319,220

       

Refer to Note 8.
†† The cost for federal income tax purposes is identical.
* Non-income producing.
(a) The Fund is invested in preference shares of Porsche Automobil Holding SE which possess the same economic interest as Porsche common stock but have no voting rights.
(b) "Miscellaneous Securities" include holdings in their initial period of acquisition that have not previously been publicly disclosed.

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

Level 1 – quoted prices in active markets for identical securities

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

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

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. During the period ended June 30, 2010, there were no significant transfers into and out of Level 1 and 2 measurements in the fair value hierarchy.

The following is a summary of the inputs used to value the Fund's investments as of June 30, 2010:

Valuation Inputs   Common Stocks   U.S. Government
Obligations
  Total

 
 
 

Level 1 – Quoted Prices

  $2,367,090,854    

$2,367,090,854

Level 2 – Other Significant Observable Inputs *

    $615,954,119  

615,954,119

   
 
 

Total

  $2,367,090,854   $615,954,119  

$2,983,044,973

   
 
 

* Represents U.S. Treasury Bills with remaining maturities of 60 days or less which are valued at their amortized cost.

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

SEQUOIA FUND, INC.
Statement of Assets and Liabilities
June 30, 2010 (Unaudited)

ASSETS:  
     Investments in securities, at value (Note 1)  
          Unaffiliated companies (cost $2,055,634,238) $2,765,651,583
          Affiliated companies (cost $89,724,060) (Note 8) 217,393,390
 
     Total investment in securities (cost $2,145,358,298) 2,983,044,973
     Cash on deposit with custodian 3,565,384
     Receivable for capital stock sold 1,138,915
     Dividends receivable 2,023,196
     Other assets 28,964
 
          Total assets 2,989,801,432
 

LIABILITIES:

 

 

    Payable for capital stock repurchased

2,394,102

    Payable for investment securities purchased

371,504

    Accrued investment advisory fee

2,567,451

    Accrued other expenses

149,155

   

        Total liabilities

5,482,212

   

Net assets applicable to 26,107,853 shares of capital stock outstanding (Note 4)

$2,984,319,220

   

Net asset value, offering price and redemption price per share

$114.31

   

NET ASSETS CONSIST OF:

 

 

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

$2,051,013,147

    Undistributed net realized gains on investments (Note 5)

95,619,398

    Unrealized appreciation

837,686,675

   

        Total Net Assets

$2,984,319,220

   

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

SEQUOIA FUND, INC.
Statement of Operations
Six Months Ended June 30, 2010 (Unaudited)

INVESTMENT INCOME:

 

 

    Income:

        Dividends, net of $162,946 foreign tax withheld

$9,431,924

        Interest

214,129

   

                Total income

9,646,053

   

Expenses:

    Investment advisory fee (Note 2)

14,901,381

    Legal and auditing fees

91,918

    Stockholder servicing agent fees

294,628

    Custodian fees

40,000

    Directors fees and expenses (Note 6)

141,684

    Other

73,572

   

                Total expenses

15,543,183

Less expenses reimbursed by Investment Adviser (Note 2)

568,000

              

                Net expenses

14,975,183

   

                Net investment loss

(5,329,130)

   

REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:

 

 

    Realized gain (loss) on:

        Investments:

            Unaffiliated companies

192,003,343

            Affiliated companies (Note 8)

2,855,501

        Foreign currency transactions

(85,965)

   

                Net realized gain on investments and foreign currencies

194,772,879

   

    Net increase (decrease) in unrealized appreciation on:

        Investments:

            Unaffiliated companies

(99,688,054)

            Affiliated companies (Note 8)

24,508,368

   

                Net decrease in unrealized appreciation on investments

(75,179,686)

   

                Net realized and unrealized gain on investments and foreign currencies

119,593,193

   

Net increase in net assets from operations

$114,264,063

   

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

SEQUOIA FUND, INC.
Statements of Changes in Net Assets

    Six Months
Ended 6/30/10
(Unaudited)
  Year Ended
12/31/09
   
 
INCREASE/(DECREASE) IN NET ASSETS:        
    From operations:        
          Net investment income (loss)   $(5,329,130)   $172,532
          Net realized gain on investments and foreign currencies   194,772,879   7,653,549
          Net increase (decrease) in unrealized appreciation on investments   (75,179,686)   370,969,780
   
 
               Net increase in net assets from operations   114,264,063   378,795,861
     Distributions to shareholders from:        
          Net investment income     (582,316)
          Net realized gains     (5,604)
     Capital share transactions (Note 4)   2,283,194   3,371,424
   
 
              Total increase   116,547,257   381,579,365
NET ASSETS:        
     Beginning of period   2,867,771,963   2,486,192,598
   
 
     End of period (including undistributed net investment income of $0 and $0, respectively)   $2,984,319,220   $2,867,771,963
   
 

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

SEQUOIA FUND, INC.
Notes to Financial Statements (Unaudited)

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 the 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 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 contractually 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, 2010 and the Investment Adviser reimbursed the Fund $568,000. Such reimbursement is not subject to recoupment by the Investment Adviser.

For the six months ended June 30, 2010, there were no amounts accrued or paid to interested persons, including officers and directors, other than advisory fees of $14,901,381 to Ruane, Cunniff & Goldfarb Inc. and brokerage commissions of $249,292 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, 2010.

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, 2010 were $364,091,265 and $546,818,566, respectively. Included in proceeds of sales is $36,760,398 representing the value of securities disposed of in payment of redemptions in-kind, resulting in realized gains of $31,383,988.

At June 30, 2010 the aggregate gross tax basis unrealized appreciation and depreciation of securities were $947,227,191 and $109,540,516, respectively.

NOTE 4—CAPITAL STOCK:

At June 30, 2010 there were 100,000,000 shares of $.10 par value capital stock authorized. Transactions in capital stock for the six months ended June 30, 2010 and the year ended December 31, 2009 were as follows:

  2010 2009


  Shares Amount Shares Amount




Shares sold 1,252,091   $146,034,512 3,033,183 $296,063,317
Shares issued to stockholders on reinvestment of:          
     Net investment income   4,351 463,286
     Net realized gains on investments   35 3,490

 


  1,252,091   146,034,512 3,037,569 296,530,093
Shares repurchased 1,239,741   143,751,318 3,039,271 293,158,669

 


Net increase (decrease) 12,350   $2,283,194 (1,702) $3,371,424




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, 2010 permanent differences primarily due to a net investment loss not deductible for tax purposes, realized gains on redemptions in kind not recognized for tax purposes and different book and tax treatment of net realized losses on foreign currency transactions resulted in a net decrease in net accumulated investment loss of $5,329,130 and undistributed net realized gains on investments of $31,275,023 with a corresponding increase in paid in surplus of $25,945,893. These reclassifications had no effect on net assets.

There were no distributions paid during the six months ended June 30, 2010. The tax character of distributions paid during the year ended December 31, 2009 was as follows:

   
2009
   
Distributions paid from:    
Ordinary income  
$583,480
Long-term capital gains  
4,440
   
         Total distributions  
$587,920
   
     
As of June 30, 2010, the components of distributable earnings on a tax basis were as follows:    
     
Undistributed long-term gain  
$95,619,398
Unrealized appreciation  
837,686,675
   
   
$933,306,073
   

As of December 31, 2009, the Fund had $61,261,516 of capital loss carryforwards for federal income tax purposes. These capital loss carryforwards may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders and expire December 31, 2017. The Fund had net realized losses of $6,616,942 during the period November 1, 2009 through December 31, 2009, which are treated for federal income tax purposes as arising during the Fund's tax year ending December 31, 2010. These "post-October" losses may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders. The Fund anticipates currently utilizing all of the above loss carryforwards to offset capital gains.

The Fund recognizes the tax benefits or expenses of uncertain tax positions only when the positions are "more likely than not" to be sustained assuming examination by tax authorities. Management has reviewed the Fund's tax positions taken on federal income tax returns for all open years (tax years ended December 31, 2006 through December 31, 2009) and has concluded that no provision for unrecognized benefits or expenses is required in these 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, 2010 was $141,684.

NOTE 7—INTERIM FINANCIAL STATEMENTS:

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

NOTE 8—AFFILIATED COMPANIES:

Portfolio companies 5% or more of whose outstanding voting securities are held by the Fund are defined in the Investment Company Act of 1940 as "affiliated companies." The total value and cost of the Fund's investment in an affiliated company at June 30, 2010 aggregated $217,393,390 and $89,724,060, respectively. The summary of transactions for the affiliate during the period of its affiliation for the six months ended June 30, 2010 is provided below:

Affiliate

  Purchases   Sales Realized
Gain
  Dividend
Income
 
 
  Shares   Cost   Shares   Cost

 
 
 
 
 
 
Idexx Laboratories Inc.       66,500   $1,432,331   $2,855,501  

NOTE 9—SUBSEQUENT EVENTS:

Accounting principles generally accepted in the United States of America require the Fund to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Fund is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has evaluated subsequent events through the issuance of these financial statements and has noted no such events.

NOTE 10—NEW ACCOUNTING PRONOUNCEMENT:

In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements." ASU No. 2010-06 clarifies existing disclosure and requires additional disclosures regarding fair value measurements. Effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years, entities will need to disclose information about purchases, sales, issuances and settlements of Level 3 securities on a gross basis, rather than as a net number as currently required. Management is currently evaluating the impact ASU No. 2010-06 will have on its financial statement disclosures.

NOTE 11—FINANCIAL HIGHLIGHTS:

Six Months
Ended
June 30, 2010
Year Ended December 31,
(Unaudited) 2009 2008 2007 2006 2005






Per Share Operating Performance (for a share outstanding throughout the period)          
Net asset value, beginning of period $109.90 $95.27 $139.12 $152.75 $155.45 $154.27






Income from investment operations:      
   Net investment income (loss) (0.21) 0.00(a) 0.40 0.46 (0.70) (0.75)
   Net realized and unrealized gains (losses) on investments 4.62 14.65 (37.11) 13.48 13.60 12.57






          Total from investment operations 4.41 14.65 (36.71) 13.94 12.90 11.82






Less distributions:      
   Dividends from net investment income (0.00) (0.02) (0.42) (0.45) (0.00) (0.00)
   Distributions from net realized gains (0.00) (0.00)(a) (6.72) (27.12) (15.60) (10.64)






          Total distributions (0.00) (0.02) (7.14) (27.57) (15.60) (10.64)






Net asset value, end of period $114.31 $109.90 $95.27 $139.12 $152.75 $155.45






Total Return 4.01%† 15.38% –27.03% 8.40% 8.34% 7.78%
Ratios/Supplemental data      
Net assets, end of period (in millions) $2,984.3 $2,867.8 $2,486.2 $3,513.5 $3,599.8 $3,573.3
Ratio of expenses to average net assets:      
   Before expense reimbursement 1.04%†† 1.05% 1.04% 1.03% 1.03% 1.03%
   After expense reimbursement 1.00%†† 1.01% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income (loss) to average net assets –0.35%†† 0.01% 0.33% 0.29% -0.46% –0.47%
Portfolio turnover rate 15%† 15% 12% 13% 14% 8%


  Not annualized
††
  Annualized
(a)
  Represents less than $0.01 per share.

Other information (Unaudited)

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

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

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

DIRECTORS

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

OFFICERS

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

INVESTMENT ADVISER

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

DISTRIBUTOR

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

CUSTODIAN

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

REGISTRAR AND SHAREHOLDER SERVICING AGENT

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

LEGAL COUNSEL

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